July, 2011
Correlation is back (with a vengence)
ConvergeEx Group’s Nicholas Colas has noted something “remarkable” this month when it comes to correlation:
…the rally in the S&P 500 of 3.8% over the past four weeks has come with HIGHER industry sector correlations.
Suing the Murdoch ‘family candy jar’
A crisis is a terrible thing to waste — even in litigation.
Amalgamated Bank of New York and Central Laborers Pension Fund in March filed a writ against News Corp, alleging that its purchase of Elisabeth Murdoch’s Shine company was “nepotistic”.
Time to increase the buyback Mr Murdoch?
You won’t be needing the News Corp cash pile for BSkyB.
RTRS-UK GOVT WILL SUPPORT OPPOSITION MOTION ASKING NEWS CORP <NWSA.O> TO WITHDRAW BSKYB BID-PM SPOKESMAN
No, the ECB can’t prop up Italy
We won’t know if it really did happen, not until next week’s figures on Securities Markets Programme purchases. (Current total: €74bn)
But since there was plenty of rumour on Tuesday that the European Central Bank (via the Bank of Italy) intervened to buy Italian bonds from a terrified secondary market,
US trade gap widens, meaning unclear
The news on Tuesday that the US trade gap in May widened to its largest point in more than two years won’t alleviate concerns about an expected disappointment in Q2 GDP, but the news isn’t quite as bad as the headline number would suggest.
The fiscal union put
Is nothing sacred anymore?
Yields on 10-year German Bunds are rising on Tuesday (up to 2.704 at pixel time, from 2.523 at 8am London time) as those on 10-year Italian government retreat from over 6 per cent.
Not bad for an octogenarian
Rupert Murdoch has taken action to prop up the News Corp share price.
A $5bn buyback.
Wow.
Before News Corp announced its plans to buy the 60 per cent of BSkyB it did not own, the company was under pressure to return more cash to shareholders,
Eurozone CDO – we have a mezzanine problem
The EFSF is like a CDO. So is the entire eurozone — an analogy which has been made ad nauseum.
The point being that the eurozone is now all about sharing and portioning its members’ debt.
So if you think the eurozone saga has suddenly turned to Italy’s current debt dynamics — think again.
Presenting… the ESM Treaty
Remember November 29, 2010 — the time before July 2011 that Italian debt was massively sold by long-only investors? Germany probably triggered it a bit by calling for the creation of the European Stability Mechanism (ESM),
Markets Live transcript 12 Jul 2011
Markets Live chat transcript for the chat ending at 11:15 on 12 Jul 2011. Participants in this chat were: Neil Hume, FT bryce.elder NHHola NHor should I say NHBuon giorno
How quickly things change, Italy edition
Remember when investors used to think German debt was riskier than Italian debt?
Bank of America Merrill Lynch does:
Between 1995 and 2000, Italy’s public debt was 118ppt of GDP, 63ppt higher than Germany’s.
Doing the right thing in the eurozone
What was it Winston Churchill said about the Americans? They could always be counted on to do the right thing after they exhausted all the other options.
Could same could be said about Eurozone finance ministers,
The Italian panic — rationalisation del giorno
This one from Credit Suisse’s Andrew Garthwaite:
We believe that the reasons investors have targeted Italy are: (a) last week’s fiscal proposals were a bit disappointing (€40bn of tightening but mostly post March 2013 elections);
Is fiscal union the only answer?
It’s panic stations in the eurozone again on Tuesday.
But this time a new theme is emerging when it comes to potential resolution.
It’s fiscal union.
George Soros said as much in the FT on Monday,
Sterling vs gilts
Compare and contrast.
The yield on the UK 10-year gilt falls below 3 per cent for the first time since November on Tuesday morning…
… while cable falls to its lowest level since January.
Are we to assume nervous UK-based investors are buying gilts,
China pressure points (or lack thereof)
After the weekend’s Chinese data indicating both slowing imports and rising inflation, came this on Tuesday:
BEIJING, July 12 (Xinhua) — China’s foreign exchange reserves rose 30.3 percent year-on-year to hit 3.1975 trillion U.S.
Eurocrashing again [updated]
Euro at a four month low against the dollar (chart via Reuters)…
The Eurostoxx 600 banking index tanking…
(Unicredit already suspended after hurtling through trading limits, Credit Agricole down 4 per cent,
Further reading
Elsewhere on Tuesday,
- Europe’s ‘smartest man’ is gloomy.
- Learning to live with eurozone differentials.
- The high value of immunity.
- Another tax loophole target?
- Economists finally admit…
Pink picks
Comment, analysis and other offerings from Tuesday’s FT,
Greg Dyke: Murdoch’s BSkyB deal is dead in the water
From the moment it was revealed that the News of the World had hacked into Milly Dowler’s phone,
Snap news
Breaking pre-market news on Tuesday,
- Thomas Cook warns on profits – statement.
- PSA Peugeot reports rise in sales — statement.
- Microsoft and Yell announce strategic alliance — statement.
A Greek debt buyback?
Monday’s very late statement from the Eurogroup.
Related link:
EU considers change of strategy over Greece – FT
Further further reading
For the commute home,
- This defies description; just watch it.
- Today was most definitely risk off.
- Happy World Population Day.
- Earnings season expectations: will the beat rate for Q2 be as bad as for Q1?
- “…
How do you say risk-off in Italian?
The benchmark yield on an Italian 10-year reached 5.718 after the largest one-day fall in the bond’s value since 1994.
Meanwhile the yield on 10-year US Treasuries pushed back under 3 per cent. So much for that post-QE2 price drop.
Hoping history doesn’t repeat itself, US GDP edition
This chart from Dave Altig of the Atlanta Fed is disturbing …
… and here’s why:
The bottom line of this chart is that there has been a pretty reliable relationship between sustained bouts of sub-2 percent growth and U.S.
If (when) China slows down
Earlier on Monday we looked at China’s pork-led inflation and declining imports, only the latest data that would seem to reinforce increasing concern among market observers about the potential impact of a Chinese slowdown on global growth.
Italy as the single point of failure
A bit odd how everyone focuses only on whether or when Italian bond yields will rise 200bps. Isn’t the real problem why a 200bps move would send everything in Europe overboard in the first place?
It’s a single point of failure,
The BSkyB can kicked into the long grass
This must be the fastest moving corporate story of recent times.
Just hours after Jeremy Hunt, UK culture secretary, fired off a letter to media regulator Ofcom asking them to help kick the buyout into the long grass,
Carnage with Consob
Earlier on Monday — Italy’s financial regulator hits the shorts:
Later on Monday:
(Oh and trading in Unicredit has already gone through one suspension.)