The 6am London Cut

Markets: Asia-Pacific equities were on track to finish the week with their biggest weekly jump since March. The laggard was Japan, where the Nikkei 225 average lost 0.1 per cent, although other markets are buoyant. For the week so far, the MSCI Asia Pacific Index has gained 2.6 per cent, rebounding from last week’s 2.4 per cent tumble. Barclays analysts said that this week’s gains in emerging markets were a relief rally “without a catalyst”. (FT’s Global Markets OverviewRead more

The Closer


- Alan Beattie on RussiaRead more

Oil and the prospect of a Chinese shale boom

Russia geopolitical risk? Check. Middle East geopolitical risk? Check.

But commodity prices, and in particular oil prices, are doing nothing: Read more

Barclays, the banking and serial defendant combine

The Group faces legal, competition and regulatory challenges, many of which are beyond the Group’s control. The extent of the impact on the Group of these matters cannot always be predicted but may materially impact the Group’s results of operations, financial results, condition and prospects…

There’s not much that’s actually new in a base prospectus published by Barclays on Thursday, covering a future $60bn debt programme. But what the document does offer is a compendium of all the litigation and regulatory action the bank faces around the world. Read more

Best keep an eye on @courtneymoscow…

Here’s some Tina Fordham while we await developments… Read more

The (early) Lunch Wrap

US rows back on need for international rescue mission in Iraq || German benchmark bond yield slips below 1% || Bill Ackman plans to raise $4bn by listing new investment vehicle || || Gold loses its shine as Chinese curb jewellery purchases || European companies slam Chinese antitrust probes || Eurozone economy fails to grow in second quarter  Read more

Germany joins the 1 per cent club



Trading ever so slightly above 1 per cent at pixel time, but near as dammit to 1 per cent for anyone not inclined to multiple decimal places. Read more

Eurozone stops, waits for ECB

Germany shrank, and France stagnated in the second quarter. Italy we’ve all agreed not to talk about until Matteo Renzi waves his magic liberalisation wand, right? Here’s the FT:

The data from the currency bloc’s two largest economies came as the embattled French government said the disappointing growth meant it would miss its budget deficit this year and halved its gross domestic product forecast for 2014.

Germany’s economy, which provides more than a quarter of the euro area’s output, shrank 0.2 per cent between April and June, according to official figures. The French economy recorded zero growth during the period.

 Read more

Further reading

Elsewhere on Thursday,

- Inequality and the common pool problem.

- Through the seasons in a village in India’s Melghat.

- The economics of pricelessness.

- Smithers on the Scottish questionRead more

The situation in Ferguson, MO

A departure from the usual Alphaville fare…

The tense standoff between protesters and the police in Ferguson, Missouri worsened dramatically on Wednesday, while the arrest of two journalists focused attention on the extent to which the city’s police force has become militarised.

Throughout the day, images of armed police officers perched on tanks and aiming weapons at protesters spread throughout social media. The police also issued a statement requesting that crowds assemble only during daylight hours. Read more

The 6am London Cut

Markets: Asia-Pacific markets advanced following the release of strong earnings from Australian companies, and the first rate cut in 15 months from the Bank of Korea. (FT’s Global Markets OverviewRead more

The Closer


- Investors pay for hedge fund illusionsRead more

The (early) Lunch Wrap

Good morning New York,


China’s credit dive: probably a freak occurence

From UBS’s Wang Tao on the sharp slowdown in Chinese credit creation last month (with our emphasis):

China’s July credit data came in sharply weaker than expected. July new RMB lending declined to 385 billion from 1.1 trillion in June. More importantly, new total social financing (TSF) was only RMB 273 billion, led by the drop in new bank lending and a 400 billion shrinkage of bank bill acceptances. As a result, credit growth slowed visibly and our credit impulse plummeted (Figure 1).

Given recent signs of further policy easing and persistently low interbank rates, the market has been expecting additional monetary and credit support. Today’s credit data are therefore a negative surprise. However, we do not believe these data reflect a credit tightening by the PBC – as evidenced by recent policy intentions expressed by the Politburo and the central bank, as well as ample interbank liquidity and strong credit growth in June which surprised on the upside.

 Read more

US regional inequality

Readers should check out this fascinating piece by the FT’s Anjli Raval on the growing gap in average incomes and home values across the 100 largest US metro areas. The key point:

US Commerce and Labor Department data for the 100 largest metropolitan areas by population, analysed for the Financial Times by property website Trulia, found the income disparity between the 10th most expensive region and the 90th by home prices in 2013 hit its widest since records began in 1969.

The research shows Boston – ranked at 10 – reporting a per-capita income 1.61 times that of Cincinnati ranked at 90. At its low point in 1976, the gap was 1.36 times, between San Francisco and El Paso.

 Read more

Further reading

Elsewhere on Wednesday,

- Biotech firm really didn’t enjoy its six days as a public company.

- Time for another recession?

- Of Sexy Business Funding and Ca$handra.

- Policy based evidence making.

 Read more

The 6am London Cut

Markets: Asian markets shrugged off the worst quarterly economic report from Japan in more than three years, but Chinese equities fell after credit growth in the world’s second-largest economy grew by its slowest pace in six years. (FT’s Global Markets OverviewRead more

The Closer


- The deep design thinking behind MIT’s incredible origami robotRead more

On the art of creating value from nothing

Bitcoin does it. Dogecoin does it. Gold miners do it. And now Kinder Morgan does it too.

What we’re talking about is the amazing ability to create value out of nothing.

The Kinder Morgan self-acquisition deal, which effectively found $12bn of shareholder value from a paperwork reshuffle, is probably the most high-profile example of mining shareholder value from good old fashioned financial ingenuity, even when it involves some finance reverse-engineering. Read more

Government spending booms not so great for long-term growth

Most of the world’s population lives in countries that aren’t rich, so it makes sense that economists and policymakers spend a lot of time trying to figure out how poorer countries can develop into wealthy ones.

One old idea that remains popular is the “big push“: getting an activist government to spend a lot of money on infrastructure projects in the hope that the new roads, bridges, etc. will boost long-term productivity. A new working paper from the IMF suggests these investment booms do more harm than good:

It is difficult to find a clear-cut example that fits the oft-repeated narrative of a public investment boom followed by acceleration in GDP growth. If anything the cases of clear-cut booms illustrate the opposite – major drives in the past have been followed by slumps rather than booms.

 Read more

Video: James Sweeney on where the US economy is headed

A brief chat on the US economy with James Sweeney, chief economist of Credit Suisse investment bank and the co-author of some influential strategy notes on shadow banking and collateral. His latest note considers the labour market slack issue and the likely impact on asset markets once financial conditions begin to tighten.

On the concerns facing directors of a major Russian energy company, right now…

The agenda of the Board of Directors meeting includes the following items:

1. Participation of Inter RAO in other organizations.

2. Liquidation (termination of activities) of a representational office of Inter RAO in the Republic of Cuba, and amendment of the Charter of Inter RAO related to the liquidation of a representational office.

3. Approval of the Insurance Program of Inter RAO for the year 2015.

4. Consideration of the report on the Company’s compliance with the legislation of the Russian Federation in the field of insider information and market manipulation for the 2nd quarter of 2014.

 Read more

Welcome to Russia’s Hunger Games

Given that modern-day warfare must at some point involve drones or autonomous vehicles, it makes sense that modern-day propaganda wars should involve Twitter and social media.

The battle for cyber hearts and minds in that regard is now getting really interesting.

One need only do a casual Twitter search for “пустые полки“, the Russian for empty shelves, to see what we mean.

The backstory here is that in retaliation for US and EU sanctions, Russia has decided to ban the importation of large categories of food products from each. Read more

The (early) Lunch Wrap

Russia sends own aid convoy to Ukraine || Sanctions have low impact on Russian oil || UK evolving into self-employment capital of western Europe || Serco pays price for outsourcing scandals as profits tumble || London house prices to slow to 3% next year, says Hamptons || UK retail sales weaken as supermarket price war hits food trade ||Markets Read more

The inside is getting out

Some board members are not the best judge of value when it comes to their own stock, but overall you might expect buying by insiders to be a good sign. That theory has prompted Citi to take a look at purchases by directors, as they try to work out whether stock markets are overvalued.

More on the details below but to cut to the conclusion, the data is inconclusive for the UK, while European boardrooms do not appear to be flush with confidence. Read more

Further reading

Elsewhere on Tuesday,

- How not to get hacked at Defcon.

- On macroeconomic forecasting.

- Kinder Morgan reverse-engineers itself $12bn.

- The story behind a famous footnoteRead more

The 6am London Cut

Markets: “Asian stocks rose, with the regional index heading for its biggest two-day jump since May, while the dollar climbed against the euro, Swiss franc and yen. The cost of insuring Asian debt declined with wheat.” (BloombergRead more

The Closer


- The FICC and the dead: banks and volatilityRead more

Demographics and US GDP growth

Credit Suisse’s global demographics research team came out with a new note on Friday featuring some enlightening charts about the US economy. It provides a handy way of evaluating the country’s lackluster performance since 2000, as well as a few longer-term trends.

As the CS team notes, GDP growth can be decomposed into three distinct forces: growth in the population of working-age people, growth in the number of hours worked by each working-aged person, and productivity growth. Read more

A little case of Russian crude stigma

Russia’s ESPO crude blend determines the key compensation rate for Russian oil production.

As analysts at JBC Energy note on Monday, however, the crude now trades at its weakest differential to Dubai crude — the benchmark it is most commonly compared to — since it became an established blend on the market in 2010.

Whilst the analysts are quick to point out that there are legitimate fundamental reasons for the weakness, it should not go unnoticed that some regular ESPO customers seem to be missing from the market. Read more