Financial job losses
Janet Yellen to see Jackson Hole return to wonky roots || StanChart’s NY anti-money laundering settlement draws UAE ire || Activist Edward Bramson steps up pressure to join Electra board || Co-op Bank slashes first-half losses || Markets
“Money,” we were once told, “is whatever you can use to pay your debts.” That definition is both precise and slippery, since much of what can be used as “money” during good times is prone to losing its money-ness precisely when the need to repay debt is greatest. Think of someone in the days before deposit insurance trying to pull cash from a failed bank to cover expenses after losing a job — or, for a more recent example, a hedge fund attempting to cover redemptions from panicked investors only to find that the prime broker responsible for holding its cash had blown up and the collateral it had provided was worthless. The only kinds of money that reliably hold their value are the ones explicitly backed by a strong government*. Unfortunately, there isn’t nearly enough available to satiate the total demand for cash. Financial firms fill the gap by creating products that often offer many of the conveniences of money but that lack government guarantees, thereby rendering them inherently unstable and prone to crises. These products are “mostly money” in the way that Westley was only “mostly dead.” They were also the topic of the “Workshop on the Risks of Wholesale Funding,” which we attended last week at the Federal Reserve Bank of New York.
Banco Espirito Santo has recently, and spectacularly, shown how many sins of the past lie beneath Portuguese corporate life. Also recently, readers of the Independent (and Matt Levine) would have come across what must be one of the most pointlessly complicated derivatives transactions ever — and also involving a Portuguese company.
Markets || Argentina defaults as last-minute talks fail || Sierra Leone declares Ebola virus public health emergency || SFO pays £1.5m to Robert Tchenguiz || Lloyds takes fresh £600m PPI hit || House price growth slows in July || Former Banco Espírito Santo board face legal action after losses || Balfour Beatty ends merger talks with Carillion:
RBS shares jump on better-than-expected trading update || BSkyB to pay up to £7.4bn to acquire European sister companies || Pearson sticks to profit targets || Lloyds to pay up to £300m Libor fines || Air Algerie airliner wreckage found in Mali || Heathrow records growth and looks for more via a third runway || Goldman bankers to Babble on their own chatroom || Amazon dives after losses blow out || Markets
Markets: Asian equity markets were in day two of a rebound as investors took an optimistic view that problems in Portugal’s banking sector won’t cause anything like the contagion seen in 2011. Mainland China markets pared losses after central bank data showed that all sorts of money was being thrown around to prop up growth. The M2 measure of money supply rose at an annual pace of 14.7 per cent – its quickest since August – versus forecasts at just 13.6 per cent. (FT’s Global Markets Overview)
Camp Alphaville reminder: You turn your back for five minutes and there’s a mystery anthropologist added to the lineup. (Details here) Markets: Asia-Pacific bourses were on the ascent after a dovish outlook from the Federal Reserve propelled the S&P 500 to a fresh record high, jumping 0.8 per cent to 1,956.98. The CBOE Vix volatility index fell 12 per cent, closing at its lowest level since February 2007. Perceptions that the Fed will hold interest rates low helped drive investors into Treasuries, sending the yield on the 10-year note down 6 basis points to 2.59 per cent. (FT’s Global Markets Overview) A paragraph so good it goes straight to the top:
Camp Alphaville reminder courtesy of Paul Murphy: “Think of a festival, but for finance rather than music. Oh, and without the drugs.” (Details here) Markets: Asia-Pacific equities were treading water head of a keenly anticipated European Central Bank policy meeting. Focus was also shifting to Friday’s May US jobs report. after private payrolls processor ADP reported that 179,000 jobs were created in the US last month, fewer than expected and down from a revised 215,000 increase in April. (FT’s Global Markets Overview)
Markets: Australian equities lost momentum after the government revealed its 2014 budget — various welfare benefits would be cut, 16,500 public jobs would be axed, and a 2 per cent levy would be temporarily imposed on incomes above A$180,000 — while Asia-Pacific bourses elsewhere sought direction as traders waited for corporate earnings. The subdued tone in Asia followed a US session in which the S&P 500 hit 1,900 for the first time ever, but then pared back to close flat at 1,897. Tech stocks resumed their slide, with the Nasdaq losing 0.3 per cent. India’s stock markets keep moving upwards, anticipating a Modi victory. The nifty has climbed nearly 7 per cent in the past week. (FT’s Global Markets Overview)
Institutional Investor’s Alpha published its rich list for 2013 this week which, as Matt Levine has described with flair and some made-up maths, is only tangentially related to how well the hedge fund managers in question performed last year: If you start with a ton of money, and/or your hedge fund has really good returns, you will make a lot of money. Notions of fair compensation for your labor, or appropriate pay for performance, just don’t enter into it. Money begets money, lots of money begets lots of money, and skill in the begetting is a nice bonus. That post is also his contribution to the burgeoning mountain of Piketty-related comment, and without tossing another pebble onto the pile, it is worth digging a little more into the reasons for those vast fortunes to exist, and why that matters.
Markets: Appetite for stocks has returned to Asia-Pacific following a more encouraging development in Ukraine, and after the US central bank chief pledged to continue supporting markets with easy money policies. Markets were rallying after Putin indicated that he was ready to discuss a way out of the Ukraine crisis. He called on pro-Moscow groups in eastern Ukraine to postpone a referendum on independence that was planned for Sunday. (FT’s Global Markets Overview)
Markets: “Asian stocks swung between gains and losses as investors weighed corporate earnings before the Federal Reserve decides on U.S. monetary policy. The Bank of Japan refrained from expanding stimulus.” (Bloomberg)
Holcim and Lafarge outline cement merger deal || BlackRock positions potential successors to Fink || Dropbox and Square raise new credit facilities || Nigeria almost doubles GDP in recalculation || Former adviser attacks European Commission over austerity || Markets
Markets: Asian markets were in a near-frozen state ahead of the US jobs report due to be released later on Friday, which influences the Federal Reserve’s thinking on monetary policy. A retreat from risk was apparent among some Asia tech stocks, however, which followed their US counterparts lower. Wall Street paused for breath after two successive record closing highs for the S&P 500. (FT’s Global Markets Overview)
Optimism over the US economy, the prospect of further easing by the European Central Bank and waning market tensions regarding the Crimea crisis are helping push European stocks to two-week highs following a sturdy Asian session. The positive mood sees most industrial commodities gain ground and reduced demand for supposed havens such as Treasuries. Gold, which dropped to a one-month low on Tuesday, is up $3 to $1,313 an ounce even as the dollar index rises 0.1 per cent to 80.04. The FTSE Eurofirst 300 is up 0.6 per cent after its Asia-Pacific peer rallied 1 per cent and as US index futures show the S&P 500 adding 4 points to 1,870. That would leave the New York benchmark just 8 points below its record high.
Inflation falls to lowest level in four years || EasyJet shares climb as mild weather helps cut airline’s losses || Bord Gáis Funds cut Russian holdings after sanctions || Energy sold to Centrica-led consortium for €1.1bn || Royal Mail union warns of industrial action after 1,300 job cuts || Co-op Bank review finds yet more skeletons || The US is losing its edge as an employment powerhouse || Walt Disney Co to buy Maker Studios || Markets
Markets: Disappointing economic data from Japan and a further decline in China’s currency had Asian equities falling out of favour on Friday. The renminbi, which is tightly guided by the Chinese central bank, has fallen as much as 0.83 per cent against the US dollar. This is the currency’s ninth day of declines. (FT’s Global Markets Overview and FastFT)
Markets: Asian equities were under pressure as investors grappled with uncertainty about Chinese policymakers’ intentions regarding the country’s currency, and following a subdued session on Wall Street. (FT’s Global Markets Overview)
From the introduction to a new IIF paper: The already acute financial pressures appear to have intensified further in recent weeks, with bank deposits falling sharply, the government out of funding and foreign exchange reserves likely to have tanked to as low as $12 billion by late February. The political change in Kiev has increased odds that Ukraine would receive the urgent financial assistance needed soon enough to avert default. With the Russian bailout likely to be put on hold, this assistance should amount to at least $20 billion this year alone. However, this would require the prompt formation of a new government able to undertake the reforms needed to alleviate the acute macroeconomic imbalances and put the economy on sound footing.
Markets: Solid gains on Wall Street improved global sentiment and helped push Asian equities up to their best level in a month. Stocks in Greater China were mixed, a day after taking a big tumble on concerns that the mainland’s real estate boom could stall. But the bigger story in China was its currency. The onshore renminbi staged its biggest one-day drop in more than two years. (FT’s Global Markets Overview)
Arrest warrant issued for toppled Yanukovich || HSBC misses cost efficiency and return on equity targets || Carphone Warehouse and Dixons discussing merger || Deutsche Bank to cut US unit’s assets by quarter to meet Fed rules || China property prices continue to rise || G20 aims to add $2tn to global economy || Netflix to pay Comcast for better speeds || Moody upgrades Spain’s debt rating || The future of BP’s flagship Rumaila oilfield in southern Iraq is in jeopardy || Markets
Alert, alert! Matt Taibbi of Vampire Squid fame has discovered contango in a five-page mega opus for Rolling Stone magazine, in which he blames all the usual names for crimes against markets, people and everything good in the world. It’s also a running continuation of his “everything is rigged” theme. But it’s a terribly nauseating read for anyone following the story since 2008. First off, Taibbi turns out to be a dependable repackager of other people’s stories. Facts and ideas unearthed by others are borrowed and twisted until they fit his own version of reality (often without citation or attribution). Case in point, the “vampire squid” description is surprisingly similar to popular writer ‘Coin’ Harvey’s 1894 description of the Rothschild bank as a black octopus stretching its tentacles around the world. True, Taibbi never claimed to have come up with the term himself and perhaps it is just a coincidence, but one can’t deny he’s benefited immensely from borrowing it and applying it to Goldman Sachs.
Markets: Asian equities continued to edge higher with support from Wall Street, in spite of less than encouraging data from Japan, where machine tool orders declined 15.7 per cent in December, about four times worse than estimates. (FT’s Global Markets Overview)
Japanese wages fall for 19th month || London Underground workers begin 48-hour strike || The US budget deficit will fall to 3 per cent of economic output this year || Microsoft banks on the cloud under Nadella || Muddy Waters rode shorting wave on Blinkx || Morgan Stanley restates Q4 earnings || JPM resolves civil mortgage claim by paying $614m || Small, and oft weak, banks face TARP hit || Russian oligarchs take battle to NY court || Deutsche Bank fires currency traders || Sony in talks to sell Vaio
Markets: Asian markets’ half-hearted efforts at a relief rally soon fizzled out as investors remain cautious and fleeting early gains failed to bring indices anywhere close to the levels seen before the emerging market turmoil began. Signs of stability are plentiful, however. Three of the hardest hit currencies in recent weeks – the Turkish lira, the South African rand and the Hungarian forint – led a rebound overnight, strengthening 1.9 per cent, 1.7 per cent and 1.6 per cent respectively against the dollar. (FT’s Global Markets Overview)
Glimmers of hope in Spain, which has adjusted its economy (cut labour costs) and is peering around the corner of recovery. Credit Suisse has sufficient confidence to upgrade its views on some of the banks. They would now buy Caixabank and Popular, while Sabadell gets a reprieve from the sell list. We see Spanish banks approaching a ‘turnaround’ in the earnings cycle after material progress in terms of funding, capital and Non Performing Asset recognition, and with superior operating leverage adding appeal to the story…