Tomorrow is going to a difficult day for the witnesses called before the Senate Permanent Subcommittee on Investigations.
We haven’t made our way through all 300 pages+ of the report, but we’ve searched around and come across some excerpt-worthy items. And we’ll have plenty more coverage tomorrow, when we host a special edition of US Markets Live starting at 9:25am EST. Read more
Close but no cigar for the S&P 500. The index remains three points below its all-time closing high of 1565, having gained 0.5 per cent on Thursday amid another round of improved jobless claims data, and energy stocks rallying on natural gas prices (Wall Street Journal).
Average weekly new jobless claims have now fallen to their lowest level in to five years (Financial Times, Reuters). Read more
Remember the Bank of England audits? Launched in May last year. Covered banking rescues, the really super top-secret hush-hush banking rescues, and fan-charting.
The bank’s official response to them is out. Read more
William Porter at Credit Suisse has been mulling the market’s muted reaction to the Italian elections. Increased stress is no longer finding its way into widening spreads, thanks to the Draghi “put”.
This credit strategist is concerned. A dampened signaling mechanism increases the risk of something going badly wrong — a market crash, even. Read more
He struggled as a young bureaucrat on a climb with officials and journalists up a 1,500-meter (4,900-foot) mountain in Nagano Prefecture, to the west of Tokyo, according to Utsumi, now president of Japan Credit Rating Agency Ltd. Kuroda “got exhausted and said he’d never do it again,” he said. “He’s not the sporty type.”
Metaphors aside we can ignore that but the rest of Bloomberg’s profile of the man set to take over at the Bank of Japan is worth a read. After all Kuroda has to convince the Japanese that Abenomics is for real now that much of the easy lifting has already been done. Read more
Live markets commentary from FT.com
Adding to the list after doctors who smoke, psychologists with serious family problems, and engineers who can’t figure out how to work the lights: an organisation that handles insolvencies in the UK that wouldn’t be able to stay afloat were it not for £89m of “rescue cash” between 2008 and 2012.
Go on, have a giggle before we get to the serious part… Read more
Meanwhile at Harvard Business School || An argument about excess reserves || Xi Jinping, China’s new president || Also, there’s a new pope || Tim Cook has to testify in ebook case || Blackberry gets order for 1m Z10s || Obama has words for China on cyber espionage || CFTC probes gold pricing || JPM-MF Global accord approved Read more
From Google Reader* on Thursday,
- Mathbabe goes finance myth-busting.
- Cyprus and the politics of contagion fear.
Asian stocks mixed || Qatar in talks on £10bn UK infrastructure || CFTC investigating gold pricing || New UK regulator warns on bonus cap costs || Xi Jinping becomes China’s president || Diet lower house approves BoJ nominees || Australian job numbers beat expectations Read more
Longest winning streak for the Dow in 16 years. The index edged up just 5 points to close at 14455.28 — registering nine c0nsecutive days of gains for the first time since November 1996. The S&P 500 closed at 1,554.52, within a whisker of its all-time high of 1,565.15 (Reuters).
The new Pope is Argentine, a former Archbishop of Buenos Aires. Jorge Mario Bergoglio will assume the papal name of Francis I, having won on the fifth ballot. As cardinal, he balanced modernising and conservative sides of the Argentine church. Pope Francis is the first Jesuit ever to achieve the papacy, and the first non-European for 1,272 years (Financial Times, Wall Street Journal). Read more
From a note Wednesday morning by ConvergEx (emphasis ours): Read more
Alan Blinder closes his op-ed in today’s Wall Street Journal:
Is there a way out? Here’s one thing that could help. As I have argued for some time, the Fed should reduce the interest rate it pays on the roughly $1.7 trillion of banks’ excess reserves. If it did so, banks would keep less cash on deposit at the Fed. The liberated funds would probably flow mainly into the money markets, but some would probably find their way into increased lending—which would give the economy a little boost. Read more
Compare (Bloomberg News, 2011):
EU Writedown Plan Puts Banks’ Long-Term Debt in Firing Line Read more
Statistical modelling. It goes everywhere.
The Monkey Cage points us to this 2004 paper on strategic voting in papal elections (there was still no sign of white smoke at pixel time on Wednesday): Read more
This guest post is submitted by Donald Luskin, chief investment officer of Trend Macrolytics. A hat tip to Lorcan Roche Kelly, chief Europe strategist of Trend Macrolytics and longtime friend of FT Alphaville, for the suggestion.
An abiding narrative explaining the melt-up in US equities — despite a sluggish economy and slow earnings growth — is that quantitative easing by the Fed amounts to printing money, which finds its way into stocks. Read more
Quite a few analyses of the sequestration cuts have noted that they do little to address the sources of longer-term budget deficits, which are mainly the result of expected health care costs.
Matt Slaugher of Tuck Business School and Matthew Rees of Geonomica argue something similar but take a slightly different approach, emphasising which generations the cuts are punishing most: Read more
Live markets commentary from FT.com
From Irish airline Ryanair, a few weeks back…
In response to media reports today 23 Jan, Ryanair’s Stephen McNamara said:
“Don’t believe all of what you read in the press. Michael O’Leary confirmed in Rome yesterday (22 Jan) that there is no aircraft order imminent and none that is expected until perhaps the end of calendar 2013 or early 2014, at the earliest.”
From the newswire on Wednesday… Read more
Well, some of them at least. One of the big determinants of whether ‘Abenomics’ manages to pull Japan from its deflationary spiral is through wage growth. Inflation can’t really kick off or arguably even begin without rising wages. One can argue about how important wage growth is, or where it fits in causality-wise — and we’ll come to that later. But it is — or will be — an important signal as to whether this three-pronged approach of the new-ish Japanese government is working.
And actually, it might be catching on. Read more
The future of financial benchmarks || Transition at the BoJ || Spectre of stagflation in the UK || 787 Dreamliner could return within weeks || Turkey emerges as economic victor from Iraq War || IBM uses big data on brain injuries || Republican budget proposal || Silicon Valley hits India over trade || China’s steel output rises || Bailout talks in Cyprus || Market Update Read more
Barclays views it as imperative that the market has access to Benchmarks that are well constructed, transparent and that inspire the confidence of other market participants and regulators…
You can say that again.
Some (more) Libor reading landed this week — the responses from banks, and other cogs and gears of the market, to a recent report by Iosco about reforming financial benchmarks. Everyone from Thomson Reuters to the European Central Bank, Blackrock to Calpers, has weighed in here. Read more
Asian shares struggled for traction as some investors locked in profits from the markets’ recent rally. The yen strengthened 0.2% and the Nikkei fell 0.5% after a small rise earlier in the day. Australia’s S&P/ASX 200 index slipped 0.2% due to weakness in financial shares, while South Korea’s Kospi Composite index added 0.1%. The Hang Seng index was down 0.4% and the Shanghai Composite index fell off 0.1%. (Financial Times)
UK stagflation spectre looms: “Inflation expectations, as measured by the difference between nominal and inflation-linked bond yields, ticked up to near 3.3 per cent on Tuesday, levels not seen since September 2008.” Separately, the National Institute of Economic and Social Research said the economy continued to flatline in the first two months of 2013. (Financial Times) Read more
Excitement about an imminently more pro-active BoJ might take a bit of a tumble on this news out of Tokyo late yesterday.
From the Japan Times:
The Democratic Party of Japan said Tuesday it will support Asian Development Bank President Haruhiko Kuroda as the next Bank of Japan governor but will oppose Gakushuin University professor Kikuo Iwata’s nomination as one of the two BOJ deputy governors because of his extreme stance on monetary policy.
ROUND-UP
FT markets round-up:“Stocks are struggling for traction as the bull run that has taken many equity barometers to multiyear or, in some cases, record highs endures one of its periodic pauses. The FTSE All-World index is down 0.2 per cent, retreating from its latest four-year peak as the FTSE Eurofirst 300 gained 0.1 per cent and after the Asia-Pacific region shed 0.3 per cent. Wall Street’s S&P 500 is slipping 4 points from its best close in five years of 1,556, while the Dow Jones Industrial Average is trading near its previous record close of 14,447.” (Financial Times) Read more
Last week continued a healthy discussion of the national income share that goes to capital versus labour. Or in layman’s terms, companies versus workers.
An earlier version of the discussion focused on whether technology or monopolistic behavior or some other non-cyclical reason was to blame. But the more recent iteration has been more about whether the trend has been exacerbated in the current recession-and-recovery period, contrasting the robustness of the corporate recovery against the sluggishness of jobs and income growth. Read more
ROBOTS! AUTOMATONS! CYBORGS! ARTIFICIAL INTELLIGENCE! ARGHH!!!
Last weekend I attended Robots on Tour, a robotics, humanoids and cyborg exhibition put together by the Zurich-based Artificial Intelligence Laboratory at the University of Zurich. Read more
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