US financial regulation
Sometimes the simplest explanation is the only one needed, and in economics it doesn’t get much simpler than supply and demand. Competing reasons have been offered for the sustained, vigorous decline in 10-year and long-dated US Treasury yields despite the acceleration in the economic recovery since last spring. Most recently the sharp drop in yields has coincided with the stunning fall in oil and long-term inflation expectations, which boost real yields and thus make Treasuries more appealing.
Whilst everyone was focused on the ECB on Thursday… … the Fed pulled this little snippet out of its bag: As part of the continuing program of operational testing of its policy tools, the Federal Reserve plans to conduct a series of eight consecutive seven-day term deposit operations through its Term Deposit Facility (TDF) beginning in October. Okay, the Fed has tested term deposits before, so it’s not that mind blowing an announcement in and of itself. The significance, if any, is that it’s subtle confirmation that both reverse repos and TDs will be used in the Fed’s unwind process. The maximum award has also been increased to $20bn.
Markets: A solid rebound in US markets failed to provide Asian bourses with any momentum. Equities across Asia-Pacific were weaker, with losses amplified by data suggesting China’s services sector stagnated for the first time in nine years last month. HSBC’s purchasing managers’ index for China’s services sector, fell to a reading of 50 for July, the lowest in records dating back to November 2005. Market sentiment had been better in earlier trading following a rebound on Wall Street. The S&P 500 rose 0.7 per cent, helped by some encouraging earnings reports, after losing 2.7 per cent last week. (FT’s Global Markets Overview)
Markets: Asian markets were broadly positive on hopes of a robust US second quarter gross domestic product report due out later today. Tokyo markets were subdued after data released on Wednesday showed a 3.3 per cent decline in Japanese industrial production from May to June. (FT’s Global Markets Overview)
Markets: Asia-Pacific equities climbed to fresh six-year highs as investors continued to place geopolitical concerns on the back burner. The upward moves followed an overnight session that saw global equities rally, in part because sales of previously owned homes in the US rose to their highest since October. The S&P 500 touched a record intraday high but then pared gains, ending up 0.5 per cent at 1,983.5. Volatility, as measured by the CBOE Vix index, fell 6.8 per cent. Even Russia’s Micex snapped a six-day run of losses, gaining 1.6 per cent. (FT’s Global Markets Overview)
Markets: The influential head of the US House Financial Services Committee has called on US Treasury secretary Jack Lew to investigate whether sweeping financial reform has impaired the $10tn market for US corporate debt and risks amplifying an interest rate shock for large companies.In a letter sent this week to Mr Lew, Congressman Jeb Hensarling argued that it was the responsibility of regulators to ensure that the Volcker rule, a core element of the Dodd-Frank financial reforms that bans banks from proprietary trading, does not harm US capital markets. (Financial Times) UK ministers, led by business secretary Vince Cable, have ordered a review into the sell-off of state assets, just days before MPs publish a report that is expected to criticise last year’s privatisation of Royal Mail. Lord Myners, former City minister, will lead a panel of experts to examine alternatives to initial public offerings for privatising state assets, as well as whether the process of gauging what investors are willing to pay for shares can be improved. (Financial Times)
Ukraine, Georgia and Moldova agree closer ties with EU || Italy leads calls to slow sanctions against Russia || Merkel to limit Juncker fallout || Berlin drops Verizon over US spying fears || Banks start to drain Barclays dark pool || NYSE has won the coveted listing of Alibaba || The World Bank has issued its first ever catastrophe bond || Wall Street banks create corporate bond trading platform || GoPro Shares Jump 31% in Debut || American Apparel faces loan repayment || Markets
Camp Alphaville reminder: Eight days to go (Details here) Markets: Japanese stocks dropped following indications the Bank of Japan sees no urgent need to ramp up already aggressive monetary stimulus, while most other major Asian bourses ticked up. The yen nudged higher against the US dollar, rising 0.08 per cent as traders exited bets on further currency-weakening stimulus. Shares in Japanese exporters reacted negatively, as a higher domestic currency erodes the value of their local currency earnings. (FT’s Global Markets Overview)
Camp Alphaville reminder: Tickets to nerdstock available here. Markets: Asia-Pacific equities fell back from Tuesday’s six-month highs as investors adopted a cautious stance ahead of a key meeting by Europe’s central bank on Thursday and influential jobs data from the US. Wall Street’s session overnight added to the subdued tone. The S&P 500 was flat, after striking new record highs in each of the three prior sessions, as signs of rally fatigue emerged. The CBOE Vix volatility index – Wall Street’s “fear gauge” – was up 2.4 per cent in late trade, but still at a historically low level. (FT’s Global Markets Overview)
Hey, how would you like to invest in US credit card debt, via the UK’s tax free regime of individual saving’s accounts? You can’t yet, but the hedge fund Marshall Wace and broker Liberum are aiming to raise £197m for a investment trust listed in London to do just that. For possible catches, you might turn to the 96 page prospectus that dwells on the risks at hand. But the chief pause for thought might be that this will be an expensive way to lend money to consumers and small businesses, offset by the use of some leverage to juice the returns back up. First though, a little background on those involved may help to understand how it works.
Markets: Asian markets were under pressure in the face of fresh tension in Ukraine and after the S&P 500 dropped to a two-month low on Friday. However, action was muted as investors waited for key Asian data later in the week, including China GDP figures on Wednesday. The US earnings season also ramps up, with about 10 per cent of S&P 500 companies set to report this week. (FT’s Global Markets Overview)
Markets: Japanese stocks were on pace for their worst week of declines since 2011, leading a broader Asia-Pacific sell-off. A 6 per cent drop in US biotech shares spooked markets, sending the S&P 500 down by 2.1 per cent in its worst session since early February. The tech-heavy Nasdaq Composite tumbled 3.1 per cent for its worst day since November 2011. The negative tone spread across Asia, with Japanese stocks under added pressure following the release of minutes from the Bank of Japan’s March 10-11 meeting, which depicted a central bank that sees little reason to unleash further stimulus. (FT’s Global Markets Overview)
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)
Markets: Asian equity markets pulled back in response to more signals that the US economy slowed down last month. US equities were held back from reclaiming record highs after a survey of US homebuilder confidence saw its biggest monthly drop on record, blamed on snowstorms that hit the eastern seaboard. A reading of New York state manufacturing conditions also disappointed. (FT’s Global Markets Overview)
Markets: Caution continued to reign across Asian equity markets after US stocks fell for a third straight session and as investors looked ahead to key events later in the week. In Japan, the Nikkei 225 average was 0.5 per cent lower following a 2.4 per cent fall in its first trading day of the year on Monday. In China, the Shanghai Composite was down 0.4 per cent, a fourth straight decline that placed the index at a six-month low. (Financial Times Global Markets Overview)
Markets: Asian equities and currencies were mostly on hold as markets looked to Friday’s looming release of US jobs data. Economists expect the US unemployment rate to have fallen from 7.3 per cent in October to 7.2 per cent for November. Non-farm payrolls data are forecast to show the world’s biggest economy added 185,000 jobs in November. (Financial Times)
Markets: Equity markets are weaker across the Asia-Pacific region. Investors are cautious ahead of interest rate decisions in the eurozone and the UK on Thursday plus a highly-anticipated monthly US jobs report on Friday. The broad losses follow a 0.1 per cent pullback in the S&P 500, after a strong private payrolls survey increased speculation that the Federal Reserve could soon trim back, or “taper”, its stimulus measures known as quantitative easing. (Financial Times)
Markets: Asian markets were mixed, with Japanese stocks dropping from a six-year high, while China stocks outperformed. Overall, most bourses weakened as investors stayed on the sidelines ahead of important data due out later this week, including Friday’s US jobs report from November. (Financial Times)