The 6am London Cut

Markets: Asian bourses were generally higher ahead of the expected conclusion of the Federal Reserve’s asset purchase programme, with shares in Japan fuelled by better than anticipated industrial output data. The S&P 500 climbed 1.2 per cent to 1,985 in the New York trading session, with news that US consumer confidence had hit its highest level in seven years adding to the positive mood. According to S&P Capital IQ, aggregate expected third-quarter S&P 500 earnings now stand at $29.26, representing 6.3 per cent quarterly earnings growth. The latest gain for the S&P 500 took it back above its 50-day moving average for the first time in nearly a month. (FT’s Global Markets OverviewRead more

The Closer


- Bridging the divide between finance and technologyRead more

Now that that’s over…

Mario Draghi probably wasn’t expecting that his July 2012 comment that “the ECB is ready to do whatever it takes to preserve the euro” would coincide with the start of a relentless drop in bank lending to nonfinancial businesses far worse than what occurred during the first wave of the recession:

At least some of this decline can be explained by the lack of demand for credit in an environment of stagnant growth and relatively high real interest rates. But the robust growth of the euro-denominated corporate bond market — up by more than half since the start of 2009 — suggests that problems within the banks are also to blame. Read more

If you monetise it, they will leave

The Twitter paradox in chart form:

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Markets Live: Tuesday, 28th October, 2014

Live markets commentary from 

The (early) Lunch Wrap

UBC takes $2bn charge || Profits down at Standard Chartered || BP hit by oil price || Swedish rates go to zero || Lloyds cuts jobs, branches || Profits drop at BG || Sanofi profits up as CEO fights for job || Stocks steady ahead of Fed Read more

Building the SNB a cross of gold (or an SWF?)

Tbh, we thought this one would just go away.

But no, on November 30 there’s to be a vote in Switzerland which, if won, would shackle the Swiss National Bank by forcing it, amongst other things, to hold at least 20 per cent of its assets in gold; to repatriate any gold stored abroad; and to refrain from selling any gold in future.

From SocGen’s Sebastian Galy:

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What ails StanChart — spot the difference

In the first quarter:

By the third quarter… Read more

Abusing the Li Keqiang index?

A sad demise or just an over-hyped concept from its Wikileaks conception? Either way, the below is sensible stuff from Gavekal’s Chen Long and Andrew Batson on analysts’ favourite growth proxy for waning Chinese growth. Read more

Further reading

Elsewhere on Tuesday,

- When Piketty met Graeber.

- Magicians, mafiosos and tigers.

- Manipulating the LME copper market: Matt Levine versus The Streetwise Prof.

- How the oligarchs ruined Greece
.  Read more

The 6am London Cut

Markets: Most Asian markets declined, with caution evident ahead of a crucial meeting where the US Federal Reserve is expected to end the quantitative easing programme that has supported global asset prices for half a decade. The S&P 500 finished the New York session 0.2 per cent lower. While the move was not more pronounced because the end of QE has been widely trailed, analysts warned that investors would probably steer away from riskier assets for now. In commodities markets, the price of Brent crude oil fell 0.7 per cent to $85.25 a barrel. The global oil marker has declined almost 25 per cent so far this year. (FT’s Global Markets OverviewRead more

The Closer


- Gavyn Davies on the European stress tests Read more

Still waiting for the Great Rotation? Stop

Mark Schofield and his team of macro strategists at Citi have a new watchword: diversification. The bank has a major new paper on the matter (one of its occasional Citi GPS series), arguing that we’ve all been wrong to sit about expecting, at some point, a sudden rush for the exit in bond markets and a consequent rebalancing of equity allocations. Read more

Why Saudi Arabia’s best bet may be to increase output

In their latest oil note, Goldman Sachs describe the oil market as having a “dominant firm/competitive fringe” structure, in contrast to say a monopolistic or perfect competition structure.

This is basically the description of an oligopoly, in which a dominant firm (for decades, Saudi Arabia) only differs from a monopolist in one key aspect… Read more

ERP derp

Or McCrum smackdown watch…

Here is an extract from a recent FT Short View that looked at predictions for stasis implied by different market measures:

European stock prices provide further perspective. The equity risk premium is the return that investors demand over and above that available from safe government bonds. Over time, the average equity risk premium has been 3.5 per cent, and Goldman Sachs uses that figure to estimate the long term rate of earnings growth embedded in stock prices. Historically, earnings grew by 5 per cent a year, but the implied rate of real growth for earnings has fallen steadily, and is now negative. On that basis, stock prices imply that earnings for European companies will decline substantially over the long term.

 Read more

Markets Live: Monday, 27th October, 2014

Live markets commentary from 

The (early) Lunch Wrap

Monte dei Paschi shares suspended after sinking 15% || Divided Brazil awaits Rousseff after poll win || Exit polls signal Ukraine’s westward shift || China set to invest £105bn in UK infrastructure by 2025 || London warned against losing out over UK devolution || US Federal Reserve set to halt asset purchases || Markets Read more

Goldman’s new improved view on the oil sell-off

Earlier this month Goldman Sachs put out a note arguing that whilst their overall view was still bearish, the oil price sell-off thus far had been too much too soon.

The spot market fundamentals, they noted, were in balance — meaning that if anything was driving a “change” in demand it was curve repositioning, mostly by overly anxious speculators who had decided an exit was warranted despite the balanced fundamentals.

This, however, is no longer Goldman’s view. Read more

Stressed, tested, rested

The results of the ECB’s Asset Quality Review are in. As ever it was the taking part that counted, we’re all winners here. Were you minded to look for losers, however, here’s the FT:

Italy’s central bank was thrown on the defensive on Sunday as its banking sector emerged as the standout loser in health checks aimed at restoring confidence in the euro area’s financial sector.

Nine Italian lenders fell short, out of 25 banks mainly in Europe’s periphery and Germany that need more capital following the stress tests. The general reaction, however, seems to be that the whole exercise is credible, without unpleasant surprises, and that we really need to talk about lending. Read more

Further reading

Elsewhere on Monday,

- Why the eurozone suffers from a Germany problem.

- “The slowdown in long run growth in the developed economies therefore seems to have become a permanent fact of life…”

- The history of China’s Cultural Revolution is not yet complete.

- “Just as some plants thrive in arid conditions, so Russell Brand thrives in our intellectual desert.”  Read more

The 6am London Cut

Markets: Asia-Pacific bourses were mostly higher after a major test of the health of European banks allayed concerns over the fragility of the region’s economy. Markets were supported by a rally in US on Friday. The S&P 500 rose 0.7 per cent to close at 1,964, giving it a weekly gain of 4.1 per cent – the biggest five-day increase since January 2013. However, bourses in China and Hong Kong fell in response to an apparent delay in the launch of a highly anticipated scheme for Hong Kong and Shanghai investors to trade stocks on each other’s markets. (FT’s Global Markets OverviewRead more

When will the SNB end FX intervention and start raising rates?

According to Goldman, the answer is sooner than the market thinks. A new note argues that the Swiss franc is already overvalued against the euro, which should give the Swiss National Bank cover to raise rates in response to a vibrant domestic economy and an overheating housing market.

Thanks to a history of low inflation, institutional stability, and (until recently) a long tradition of banking secrecy, money tends to flow into Switzerland when people are worried, and it flows out when investors are looking to take more risk. Between the 2007 low and the peak in the summer of 2011, the trade-weighted franc appreciated by nearly a third as savers in the euro area worried about the collapse of the single currency. Read more

Now showing: last ever episode of Barroso TV

Catch it now:

 Read more

The case for quotas in the British judiciary

This guest post is from Jessica Learmond-Criqui, a founder and partner in specialist employment law boutique Learmond Criqui Sokel.

There are three kinds of lies: lies, damned lies, and statistics. While the origination of this phrase is unclear and ranges from Benjamin Disraeli to Arthur James Balfour, 1st Earl of Balfour, there is nothing false about the Council of Europe’s recent figures which demonstrate that the UK courts have fewer female judges than almost anywhere in Europe. Read more

For some European banks, Monday can’t come soon enough

Some perspective amidst the angst:

And proving perspective and angst aren’t mutually exclusive, some words from Alberto Gallo of RBS (our emphasis): Read more

Markets Live: Friday, 24th October, 2014

Live markets commentary from 

The (early) Lunch Wrap

Good morning New York,


Don’t get your marijuana investment advice from Twitter (or anywhere else)

The newest issue of Men’s Journal contains an amazing story about people desperate to get rich by buying stock in companies exposed to the rapidly-growing legal US marijuana industry. (Hat tip to @modestproposal1 for alerting us to it.)

Written by Erik Hedegaard, the piece focuses on three characters: Read more

Further reading

Elsewhere on Friday,

- Why Google’s autonomous car may never actually happen.

- We can clone your dog for you wholesale.

- Also, cows.

- Asimov: “How do people get new ideas?”  Read more

The 6am London Cut

Markets: Bourses in Asia-Pacific were buoyed by Wall Street’s rally even as property data from China painted a dreary picture of the region’s largest economy. New home prices fell across the country in September with prices falling in 69 of 70 cities surveyed in September, compared with 68 in August and 64 in July. The overall price decline was 1.3 per cent compared to last September, according to a Reuters analysis of the data released by the National Bureau of Statistics. The S&P 500 equity index closed 1.2 per cent higher at 1,950, leaving it 7.1 per cent up from the six-month intraday low struck during last week’s bout of market turbulence. (FT’s Global Markts OverviewRead more