FT Opening Quote

Hargreaves Lansdown’s assets under management have risen to a record despite difficult markets for investors, ChemChina is set to acquire Syngenta for $43bn, Luxembourg is seeking to acquire minerals from asteroids. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

Further reading

Elsewhere on Wednesday,

- Larry Fink, secret clubs of investors, and the buyback debate.

- Goldman: “there are broader questions to be asked about the efficacy of capitalism.”

- The Fed wants to know how banks would handle neg rates.

- “We have two distinct spaces here. Market space and central bank space and they are diverging at the fastest pace I have seen in a while.”

- Muppet investors… literally.  Read more

FirstFT – The UK’s new EU deal, US fortifies eastern Europe against Putin and Luxembourg’s asteroid mining plan

David Cameron releases the outline of a long-awaited reform deal he said would deliver the ‘substantial change’ he wants for the UK’s relationship with the bloc Read more

Markets Live: Tuesday, 2nd February, 2016

Live markets commentary from FT.com 

Sloppy spreaders

The FCA has posted one of its “Dear CFO” letters to the UK spreadbetting/CFD sector. It follows a review across ten firms which (surprise, surprise) found various areas of concern.

Would-be investors in CMC Markets, whose float closes on Thursday, might take particular note. They are, after all, being invited to help Peter Cruddas and his wife Fiona, along with Goldman Sachs, take more than £200m off the table…

Click to read.  Read more

Why humanity’s Rorke’s Drift falling to computer Zulus matters

Right, get your affairs in order, tell your family you love them and take a long walk in a peaceful park, because surely the End of Days is nearly upon us.

Go, an ancient Chinese board game and pretty much the last one to resist the onslaught of computers that have already thrashed us at chess, Super Mario and Jeopardy, has finally succumbed. Google’s artificial intelligence outfit DeepMind has developed a computer that last year in secret beat a professional Go player, according to a Nature article released last week. Here’s Deepmind’s Demis Hassabis crowing over his machine’s triumph: Read more

Corporate bond yields and the cold pull of negativity

With a h/t to Tracy Alloway…

Here’s the dark — once implausible, now almost inevitable — future of European corporate yields from Deutsche’s Jim Reid, with our emphasis:

Incentives are a great thing in life and there is starting to be chatter as to what the incentive is to buy Euro corporate bonds at a negative yield if it ever happens. It may well be tested very soon as one consequence of the recent ECB/BoJ hint/action has been the strong rally in global fixed income.

 Read more

FT Opening Quote

BP profits have halved due to the slump in oil prices, Sainsbury and Home Retail Group say they have a deal, TalkTalk has put the cost of the cyber attack it suffered at up to £60m. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

“The Donald Trump Candidacy” and moderate myths

Donald Trump didn’t win Iowa, and it’s anybody’s guess whether his strength in the national polls will translate into actual victories throughout the primary season. Whatever does happen, his candidacy has been fascinating even beyond his manic, hyperbolic utterances and his peculiar mix of toxic and centrist policy ideas.

Can anything be learned from his emergence and the surprising resilience of his popularity with a sizable share of Republicans, regardless of whether it continues? Read more

Negativity all the way down

Not sure how many more pixels you’ll tolerate us spilling on the BoJ’s move negative, but this from Simon Derrick at Bank of New York Mellon seems worth your time. With our emphasis, and pars broken up for online readability:

Whether or not the BOJ’s decision was a direct reaction to the ECB’s decision to potentially push even further into negative territory doesn’t really matter. Indeed, it doesn’t even really matter whether or not the BOJ was trying to weaken the JPY by their move (in our opinion plausible deniability remains a key tool for central bankers).

What does matter is that four of the eight members of G8 (France, Germany, Italy and Japan) now have an official negative deposit rate while Canada continues to suffer the impact of collapsing oil prices (Russia, which has had its membership suspended, suffers from the same issue of course).

 Read more

Further reading

Elsewhere on Tuesday,

- Interest rates in wonderland.

- Dark pools are murky shocker.

- China’s ‘hidden’ current account deficit.

- Minxin Pei on the myth of China’s competent autocrats.

- Looking slightly less appropriate now but, still, good read on how Trump did itRead more

FirstFT – Alphabet to become world’s most valuable company, the 500 euro question and Germany’s refugee entrepreneurs

Shares in Alphabet rose more than 6 per cent, pointing to a market capitalisation of about $550bn, topping Apple’s $540bn Read more

RTGS, and the story of collateralised risk instead of credit risk

Craig Pirrong of the University of Houston has been concerned about CCPs concentrating risk for a very long time. But, as it turns out, he is also concerned about the role being played in system risk creation by real-time gross settlement systems.

Following up on FT Alphaville’s piece on RTGS last week — in which we broke down the connection between the shift towards a real-time gross settlement system, central banks’ fear of netting risks, liquidity sacrifices and general collateral abuse — Pirrong adds some extremely worthwhile points to the conversation. Read more

What might the next US recession look like?

Stocks and corporate bonds haven’t been doing so well lately, while the market-implied probability of four Fed rate hikes by the end of this year — the median expectation of policymakers as of December — has plunged below 1 per cent (according to Bloomberg’s WIRP function, anyway). Reasonable people are now starting to wonder whether another downturn is imminent.

Changes in prices could be signalling weakness yet to be captured by the official statistics on employment, output, and incomes. Even if you don’t believe asset prices contain useful information, it’s possible the hit to net wealth could encourage households and businesses to cut spending, thereby leading to recession and job losses.

We can’t answer whether a recession is around the corner, although the probability of another downturn necessarily rises with time since the last one. Instead, we want to lay out some of the main arguments and think through what various downside scenarios might look like. Read more

Markets Live: Monday, 1st February, 2016

Live markets commentary from FT.com 

We need to talk about Metro Bank’s weird balance sheet

It’s not quite the coming out party typically associated with a stock market listing.

Metro Bank’s grand arrival onto the London Stock Exchange will be an unusual operation, with the bank raising money privately from existing backers instead of going out to persuade new investors for money. After the funding round, the bank will try to float through an ‘introduction’, otherwise known as getting your shares stuck up on the board without having a sale*. Read more

FT Opening Quote

Smith & Nephew says its CEO has a “highly treatable” form of cancer, BT is reshaping itself following its EE acquisition. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

Er, what lower bound? And $5.5tn worth of negative nuts

ICYMI, and on the back of the BoJ going negative, “the universe of DM government bonds trading with a negative yield rose to a record high of $5.5tr, or 24% of the JPM Global Government Bond Index,” according to JPM.

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China bezzle watch, 1,200 account books buried deep below ground edition

From the FT’s Tom Mitchell:

Chinese police have arrested more than 20 people associated with “a complete Ponzi scheme” that took in more than Rmb50bn ($7.6bn) from investors, according to the official Xinhua news agency.

It is the biggest scam yet to emerge from China’s unruly and largely unregulated peer-to-peer lending sector, part of the country’s shadow banking sector. Police had to use two excavators to uncover some 1,200 account books that had been buried deep below ground, according to Xinhua.

 Read more

Further reading

Elsewhere on Monday,

- Gavyn Davies on the BoJ’s new found negativity.

- “Central banks that have slipped into negative nominal interest rate territory don’t tend to get any closer to their inflation targets.”

- The anti-Fed two-step.

- India’s women battle to work. “They are powerful,” she said. “They are stronger. They beat us up like dogs.” Read more

FirstFT – Hopes rise for EU deal, the world’s best chef dies and why conspiracy theories just don’t add up

David Cameron’s hopes on Brexit deal rise after Donald Tusk meeting Read more

Thought for the weekend

We wanted to create a modern hub for consumers to share social and immersive experiences that were anchored in the exploration of our cola’s artisanal craft and flavor,” shared Seth Kaufman, Chief Marketing Officer, PepsiCo North America Beverages.

From Pepsi Unveils New Hospitality Venture with Launch of Kola House — an NYC “Experiential [sic] Lounge and Event Space” designed in partnership with “Renaissance man and legendary music icon Lenny Kravitz” that will offer “specialty plates inspired by the kola nut”.

 Read more

Novo Banco: Fixing the Bank of Portugal’s mistake

The ECB, we guess, is still getting to grips with its new(ish) role as bank regulator-in-chief across Europe. But in the case of Portugal’s Novo Banco, the phoenix-like entity created out of the collapsed Banco Espirito Santo, there’s no evidence the ECB has any handle whatsoever.

A strange re-resolution of Novo Banco, announced between Christmas and New Year, has been left entirely to the Bank of Portugal, whose bungling plan to protect local retail investors at the expense of foreign bond holders (notably Blackrock and Pimco) now looks to be headed for the courts.

Indeed, as Bloomberg reported this week, Clifford Chance in London and PLMJ in Lisbon have now been hired to sue the Portuguese central bank.

Yet all this could be avoided, if only the Bank of Portugal would lose a little of its bloody-mindedness. Read more

Maputo or bust?

Move over Tchenquiz.

Paul Murphy is going quids in on a grand design in Mozambique.

 Read more

Alphachat: Mauboussin on short-termism; millenials staying put; Perella vs Kramer

Alphachat is available on Acast, iTunes, and Stitcher. Read more

Markets Live: Friday, 29th January, 2016

Live markets commentary from FT.com 

How much yen can you fit in a cubic metre?

If the BoJ and Mr Kuroda are thinking about storage costs – after taking interest rates to minus 0.1 per cent and saying they “will cut the interest rate further into negative territory if judged necessary” — this might be useful.

From Oxford Econ’s Gabriel Stein & Ben May:

 Read more

RTGS, and the story of batches instead of blocks

Here begins a tale of how the Bank of England’s settlement system got broken without anyone really noticing…

On October 20 2014, the BoE suffered an embarrassing collapse of its real-time gross settlements (RTGS) system, forcing it to revert to manual processing for large payments such as CHAPs for about a day.

At the time, Bank personnel, bankers and the market in general passed the incident off as largely a technical issue, like a site falling down or a regular IT fail. Nothing to lose sleep over.

But the incident was arguably much graver than that. A long-standing RTGS collapse would have constituted nothing less than a systemic collapse of the sterling monetary market with potentially catastrophic consequences for the UK economy. Think human sacrifice, dogs and cats living together, mass hysteria. That sort of thing.

Also never pointed out at the time was how the events of 20 October 2014 linked back to the banking crisis of 2008. Read more

Further reading

Elsewhere on Friday,

- Balancing.

- Why is Martin Shkreli still talking?

- Shocking news: Trader Sarao might not have caused the flash crash.

- Will Hillary rein in Wall St?

- China’s slowdown, not that complicated.

- Why Chinese capital controls aren’t a good idea. Read more

FirstFT – Japan adopts negative interest rates, Zika’s ‘explosive’ spread and history’s most audacious scam

The Bank of Japan has slashed interest rates to minus 0.1 per cent, highlighting its concerns about the economic slowdown in China and a rise in the yen Read more