Markets Live: Monday, 11th July, 2016

Live markets commentary from 

Why the world needs investment, not money chasing old assets

The liquidity trap, when monetary policy becomes ineffective at very low or zero interest rates, may be old news but the global dimension of the problem is a new and worrying phenomenon — not least because it’s starting to undermine the usefulness of the global monetary reserve balance, which is mostly debt financed.

And here’s the rub: so engrained is the notion saving is always thrifty and good that it’s become extremely hard to articulate why this state of affairs is so disastrous for the global economy. Read more

FT Opening Quote: Looking to Europe

US and Asia markets rally; is Europe next? FT Opening Quote is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

Further reading

Elsewhere on Monday,

- JW Mason: I don’t see any method at all.

- ‘Hmmmm’ inducing but interesting: “All told, the Brexit story is mainly about values, not economic inequality.”

- Age is more than just a number.

- The strange story of a murdered banker in Puerto Rico.  Read more

FirstFT – China warns on UN ruling, a manifesto against ‘parenting’ and how to write the perfect resignation

Beijing says any ruling against it by The Hague will raise tension and undermine peace in the region Read more

Thought for the weekend

Wavelet transforms were invented for the purpose of analyzing time series data for which the mix of frequencies (power spectrum) may vary, and have come to be widely used in the fields of physics and engineering. One key application of wavelet analysis is identification of intra-cycle location, or distance to the next peak or trough. Applied to data for the USDJPY, this should provide us with some indication as to how long the yen might keep strengthening.

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Elizabeth Holmes: still absolutely, resolutely in denial…

First the quote from the Theramos founder herself….

We accept full responsibility for the issues at our laboratory in Newark, California, and have already worked to undertake comprehensive remedial actions. Those actions include shutting down and subsequently rebuilding the Newark lab from the ground up, rebuilding quality systems, adding highly experienced leadership, personnel and experts, and implementing enhanced quality and training procedures. Read more

Some pivotal questions about UK real estate

Osmaan Malik and Charles Boissier from the UBS equities team breakdown some of the key questions everyone is asking about UK real estate post the Brexit vote. Surprise point: REITs may be better positioned than most expect Read more

FT Festival of Finance: The podcast preview

Monsoon conditions, interference and sheer content volume means we’re having to dedicate a bit more editing time to the podcast version of the FT Festival of Finance (AKA Camp Alphaville 2016) than anticipated. But it’s all in the name of bringing you as smooth a listening experience as possible.

The fully finessed beach bundle will be with you next week. In the meantime, however, here’s a sneak preview of the unedited Brexit-themed content (you know, before it goes entirely stale). Read more

Barroso, now offering lessons from nobody

This crisis originated in North America. Many of our financial sector were contaminated by… how can I put it… unorthodox practice from some sectors of the financial market. But we are not putting the blame on our partners… Frankly, we are not coming here to receive lessons in terms of democracy… we are certainly not coming here to receive lessons from nobody.

– José Manuel Barroso, then President of the European Commission, speaking at the G20 summit in Los Cabos, Mexico in 2012, at the height of the eurozone debt crisis. Read more

“Previously nicknamed the ‘Uber’ or ‘Netflix’ of air travel…”

Before moving the relevant puff release to the bin, an open question: is there really a market in Europe where people will pay a set £2,500 monthly fee to fly as often as they want from Luton Airport to Cannes or Switzerland? The company concerned is Surf Air. Read more

Markets Live: Friday, 8th July, 2016

Live markets commentary from 

FT Opening Quote

A new CFO is announced for IG Group, with red faces at M&S amid plummeting UK consumer confidence. 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 Friday,

- Constâncio yesterday: “The present situation, after a new round of reduced stock prices following Brexit, deserves a deep reflection about the offsetting of some market failures with a small public support to markedly improve the stability of some banking sectors.”

- Das: Why traders have lost their touch.

- The market for citizenship.

- No-one really knows what open-ended funds will do.

- Peter Conti-Brown on the Fed. Read more

FirstFT – Snipers kill Dallas police, how low can the pound go and the North Korean tech scene

10 officers had been shot, of whom three had been killed, while three of the injured were in critical condition Read more

Are vehicle sales warning of a US slowdown?

American interest rates imply the economic outlook has worsened considerably in the past eight months. Optimists think the markets are wrong, pointing to the continued improvement of the job market and the rebound in consumer price inflation. But other data corroborate the pessimism of the fixed-income markets.

Recall the world five months ago, when fears of a downturn were far more pronounced than today. Back then, plunging industrial commodity prices, yawning risk spreads, and sharp declines in stock prices led many to worry a downturn was imminent. When we looked at the data we were cautiously optimistic, noting previous recessions had been mostly attributable to sharp contractions in residential construction and spending on motor vehicles, which in turn were often associated with big changes in credit conditions: Read more

Transaction costs as the saviour of UK real-estate?

Six open-ended UK property funds (and counting) have suspended redemptions on the back of Brexit induced volatility leading some to worry the market’s on the verge of a sizeable correction in UK real-estate prices.

But this isn’t the crisis of 2007, says SG’s Jean-David Cirotteau.

As Cirotteau and team observe, during the subprime crisis, UK office prices dropped by 38 per cent from peak to trough from the end of 2007 to mid-2009, and within that context the London residential price correction was more limited, with the market falling by 17.7 per cent. Read more

Italian banks, this is euro area politics. We think you already know each other? [UPDATED]

Italian banks are a problem. Post-Brexit they’re a serious problem.

A full recap of said banking sector and its estimated €200bn of gross non-performing loans would, according to JPM, “require up to €40 billion (less than 2.5% of GDP)”.

Manageable, say JPM again, “given the current Italian fiscal position and sovereign cost of funding.”

Only problem is… Read more

Markets Live: Thursday, 7th July, 2016

Live markets commentary from 

Finger in air, GBP forecasting (second) edition

Welcome back to The Forex, where estimates are just that and things can get too mechanistic quickly (do read George Magnus for something more contextual than the below).

From Deutsche’s George Saravelos:

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Opening Quote: Rocky retail in the UK

UK retailers, with some exceptions, have had a rocky start to the day, but The City can take solace in musical metaphors for Brexit. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for a full newsletter here.  Read more

Further reading

Elsewhere on Thursday,

- Er… “If national security is under threat, China is likely to implement Tobin tax to take control of capital.”

- The good, the bad, and the ugly.

- Magnus: FTSE isn’t telling us anything about the post-Brexit world, but £ is.

- Position limits (and competition between jurisdictions more generally) as “one reason to believe that Britain’s exit will have some big upsides, not just for the UK but for Europe generally.”

- Just print money and give it everyone. Please. Read more

FirstFT – Fed eyes Brexit effect, the leader we now need and why bad ideas refuse to die

US policymakers keep a wary eye on labour market Read more

Video: What does Brexit mean for globalisation?

Another video we filmed at Camp Alphaville last week featuring Paul Donovan, Diane Coyle, Charles Kenny, and Tina Fordham:

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The Great British Krona and some perspective (it doesn’t help much though)

First, we gotta note that GBP hit a 31-year low against the dollar below $1.28 before coming back in a touch.

You can also look at the pound index here, but expect a similar lack of comfort.

But, to compound the ugliness and the real reason we’re here in this post, some longer term facts from Bank of New York Mellon’s Simon Derrick: Read more

Markets Live: Wednesday, 6th July, 2016

Live markets commentary from 

“Modified EBITDA” brought to you by Frank Quattrone

The weird thing with fairness opinions is that the target company and their bankers have the incentive to make the company’s previous pre-deal market value look as full and juicy as possible. This way, when the buyout comes along, that premium price offered looks foolish to pass up.

In November, we brought you the story of tech company Aruba Networks that was sold to H-P by star banker Frank Quattrone. His firm, Qatalyst Partners, was accused by aggrieved shareholders of using an excessive “dilution factor” in its DCF valuation to dial back the theoretical value of Aruba in order to make the H-P buyout price look more favourable. Read more

FT Opening Quote: Brexit nerves hit markets

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,

- Five bricks in the wall of worry.

- How Remain lost.

- Channeling Charles Kindleberger on Brexit.

- “The costs of inequality are not merely economic or social ones. They are also political: inequality leads to poorer political decision-making.” Read more

FirstFT – Pound plumbs new depths, how Europe should respond to Brexit and the prospect of a work-free world

Investors rush for the perceived havens of gold and government bonds Read more