May, 2010
A ride on Big Thunder Euro Mountain
Here’s the roller coaster action in EURUSD on Wednesday:
The post lunch swings in the euro-dollar cross-rate were seemingly being fueled by a series of unsubstantiated rumours.
First, that the ECB was ready to intervene in the market;
US CPI – the good and bad news
Wednesday’s US inflation data is something of curate’s egg.
Here, via Reuters, are the headlines:
U.S. APRIL CPI -0.1 PCT -0.0689; CONSENSUS +0.1), EXFOOD/ENERGY UNCH (+0.0471; CONS +0.1 PCT)
U.S.
The ECB’s ICO-nic bond purchases
The latest Barclays Capital’s AAA Investor research looks at the ECB’s recent foray into the sovereign bond market.
The bank’s analysts conclude that compared to the ECB’s entry into the covered bond market,
Was naked shorting of German financials really an issue?
We know it’s hard to assess the scale of naked shorting in any particular security.
However, it does make sense to look to the scale of conventional ‘borrowed-stock’ shorting activity for an indication.
Euro Bingo
A new diversion brought to you by BaFin, Merkel and BNY Mellon.*
Tuesday’s key currency levels according to the US bank:
And Wednesday’s:
All eyes on that 1.2130 support level now. And possibly even that 1.1800.
Japan’s banks in fund-raising frenzy
While Europe grapples with internal politics, regulatory rows and sovereign debt problems, Japanese banks are quietly continuing their fund-raising frenzy.
According to figures compiled for FT Alphaville by data provider Dealogic, Japanese banks raised a whopping Y3,530bn,
France fights back on BaFin ban
Germany’s midnight move to ban naked shorting hasn’t quite led to an outbreak of European unity, it’s safe to say — with France lining up to attack first.
As Reuters reports, French economy minister Christine Lagarde is none too happy:
Markets Live transcript 19 May 2010
Markets Live chat transcript for the chat ending at 11:18 on 19 May 2010. Participants in this chat were: Neil Hume, FT Bryce Elder NHgood morning NHIt’s 11.03am NHand welcome to Markets Live
Witz des Tages
That’s joke du jour for non-Germanaphone readers. And here it is:
Related links:
Zwei linke Füße – FT Alphaville
Quants back England to win World Cup – FT
Germany’s plan to deal with budget transgressors
Forget the short-selling ban, Germany’s plan to tackle budget transgressors (as outlined in Wednesday’s Handelsblatt), is what we should be REALLY worried about, according to RBS.
Before we get to that,
Prudential’s Asian cash challenge
As we await CEO Tidjane Thiam’s answers to our eight questions, Paul J Davies, the FT’s insurance correspondent, has been methodically working his way through Prudential’s mammoth rights issue prospectus.
CDS bid-offer spreads you could drive a BMW through
In light of BaFin’s ban on naked credit default swaps on Tuesday, here are the latest CDS quotes for European peripheral sovereigns, courtesy of Markit:
Greece 530 basis points (-89)
Portugal 220bps (-50)
Ireland 165bps (-35)
Spain 155bps (-25)
And a quick description of Wednesday’s action from Markit’s Gavin Nolan:
Oops, Goldman didn’t do it for their clients again
Hot on the heels of news that Goldman Sachs did not have a single day of trading losses in the first quarter, is this gem of a story from Bloomberg on Wednesday:
May 19 (Bloomberg) — Goldman Sachs Group Inc.
What’s with Hannover and Generali De?
The (very) early price action in most of the financials in the BaFin naked shorts ban:
Related link:
How the Wolf Pack is (already) playing the BaFin ban – FT Alphaville
Zwei linke Füße
That’s two left feet, for non-Germanophone readers.
In what’s probably an effort to justify German’s short selling ban, Chancellor Angela Merkel has been getting all apocalyptic about the euro on Wednesday morning.
Markets react to German naked shorts ban
It’s the morning after Germany banned naked short sales of key financial stocks — and markets seem not to have liked it one bit.
First, reaction in Germany, as the protected stocks took a hit. Flashes,
‘How can a [CDS] market be made?’
We’ve had bans on the naked short-selling of equities many times before.
But we don’t think we’ve ever seen a ban on naked shorting of credit default swaps (CDS).
That means BaFin’s latest move is a bit of an experiment.
Italy suspends mark-to-market accounting on eurozone bonds
Forget the BaFin naked short-selling ban (for a second).
Tuesday’s other desperate European regulatory act took place in Italy:
MILAN (Dow Jones)–The Bank of Italy Tuesday said Italian lenders holding European government bonds in their available-for-sale portfolio don’t have to take into account possible capital gains or losses on them,
How the Wolf Pack is (already) playing the BaFin ban
How do you say “law of unintended consequences” in German?
With the naked short-selling of eurozone bonds, credit default swaps and 10 financial companies out of the picture, all thanks to a BaFin ban,
Further reading
Elsewhere on Wednesday,
- Prepare for the volatility.
- George meet Mervyn.
- The return of the bond vigilantes.
- Lessons from Greece, collector’s edition.
- Is volatility necessarily a bad thing?
- Bloomberg’s bank conspiracy,
Pink picks
Comment, analysis and other offerings from Wednesday’s FT,
Martin Wolf: Single currency bloc plays ‘beggar-my-neighbour’
Might the eurozone break up? Until recently I would have answered: absolutely no.
Snap news
Breaking pre-market news on Wednesday,
- Icap says it made a good start to new financial year, to pay dividend of 17.55p – statement.
- Land Securities says net asset value rose 16.5 per cent to 691p a share in past year – statement.
Regulators decline to blame terrorists, fat fingers or hackers for ‘flash crash’
The joint SEC-CFTC taskforce commissioned by the freshly-minted ‘advisory committee on emerging regulatory issues’ on Tuesday released a 151-page report of its preliminary findings regarding the ‘flash crash’ of May 6 2010.
BaFin statement on Germany’s naked short selling ban
Here’s the FT Alphaville translation of the statement by the German financial regulator on its move to temporarily ban certain naked shorts:
The Federal Financial Supervisory Authority has on Tuesday temporarily banned naked short sales of debt securities issued by eurozone countries for trading on domestic stock exchanges in the regulated market.
CDS report: No news = good news?
European credit markets continued to take their cue from equities, the rally that started yesterday extending into today. A lack of negative headlines around sovereigns helped support spreads, as did a recovery in the euro.
Die Leerverkäufer sind kaputt (updated)
As of midnight on Tuesday, the German breed of short-seller (Leerverkäufer) is set to become a rare species, according to Dow Jones:
Germany will ban so-called naked short-selling from midnight, a lawmaker with the ruling Christian Democratic Union told Dow Jones Newswires Tuesday.
Biggest stocks to get circuit-breakers, Reuters says
The first tangible exchange response to the Flash Crash may be imminent, Reuters reported on Tuesday, citing ‘sources’ on plans to set up circuit-breakers to prevent sudden slides in key stocks.
Flashes (excuse the pun) via Reuters:
Any decision to invest in Prudential or the Rights Issue Shares…
…should be based on consideration of the prospectus as a whole by the investor.
They’re joking, right?
Still, it will keep a few printing firms in business. The Royal Mail will also be pleased.