The 6am Cut

London 6am Cut Posted 2013-06-21 05:34:33 by Joseph Cotterill Chinese interbank rates eased after reports of central bank support. The one-day repo rate receded 3.84 percentage points to 7.9 per cent, its biggest drop since 2007, while the seven-day rate fell 3.51 percentages points from the record high it set on Thursday (Bloomberg). Fed casualties watch: Pimco's Total Return Fund is now down 2.2 per cent for the year, the worst performing of large US total return funds (Bloomberg); Having fallen below $1,300, gold's 23 per cent slump this year is on course to be its worst since 1981 (Bloomberg); Thursday's bond sell-off saw ETFs' discounts to underlying asset values widen sharply, with cash redemptions halted for some (Financial Times). The ESM has been authorised to 'directly recapitalise' eurozone banks but only if governments make their own investments in stricken lenders first, and with retroactive application of the new powers to be decided on a 'case by case' basis. Eurozone financial ministers also confirmed the size of the direct recap funds to be €60bn, unless later expanded by the ESM board. The ESM expects the tool to become operational in the second half of 2014 (Financial Times). Oracle's revenue growth stagnated for another quarter. Revenues from new software licenses and cloud offerings increased by only 1 per cent in the second quarter. Oracle shares fell 8 per cent after the close, despite a doubling of its dividend and authorisation for a $12bn stock buyback (Wall Street Journal). The IMF has warned eurozone creditors of gaps in financing Greece's bailout, placing its distribution of aid in July in doubt. National eurozone central banks' refusal to roll over their maturing holdings of Greek bonds has compounded the €3bn-€4bn shortfall (Financial Times). Softbank's chief executive revealed the ambition behind its $21.6bn bid for Sprint Nextel. "We want to be the world's No.1 company in various terms including profit, cashflow and market value," Masayoshi Son told shareholders on Friday (Bloomberg). UK prosecutors alleged that former Libor trader Tom Hayes conspired with employees at eight banks and interdealer brokers. The companies named at a court appearance by Hayes, who has been charged with eight counts of "conspiring to defraud", included Tullett Prebon. The broker said on Thursday that it has been asked to provide information to investigators, but that it has not been told that it or its employees are being investigated (Wall Street Journal). COMMENT AND CURIOS - Did Bernanke just let down an asset bubble?, asks John Authers. (Financial Times) - Investors won't get fooled again by Russian growth, Sergei Guriev says. (Financial Times) - The real central bank exit to worry about might be the ECB's... (Financial Times) - Why triathlon-going 'middle aged men in Lycra' should take it easy. (Bloomberg) - Brazil's protests are pretty unlike elsewhere. (Reuters) OVERNIGHT MARKETS: DOWN Asian markets Nikkei 225 down -63.97 (-0.49%) at 12,950 Topix down -13.30 (-1.22%) at 1,078 Hang Seng down -305.59 (-1.50%) at 20,077 US markets S&P 500 down -40.74 (-2.50%) at 1,588 DJIA down -353.87 (-2.34%) at 14,758 Nasdaq down -78.56 (-2.28%) at 3,364 European markets Eurofirst 300 down -36.22 (-3.07%) at 1,143 FTSE100 down -189.31 (-2.98%) at 6,159 CAC 40 down -140.41 (-3.66%) at 3,694 Dax down -268.60 (-3.28%) at 7,928 Currencies €/$ 1.323 (1.325) $/¥ 97.29 (96.92) £/$ 1.55 (1.555) Commodities ($) Brent Crude (ICE) up +0.42 at 102.57 Light Crude (Nymex) up +0.17 at 95.31 100 Oz Gold (Comex) up +1.2 at 1,287 Copper (Comex) up 0.01 at 3.07 10-year government bond yields (%) US 2.42 UK 2.29 Germany 1.66 CDS (closing levels) Markit iTraxx Europe +12.3bps at 119bp Markit iTraxx Xover +45bps at 484.7bp Markit CDX IG +5.3bps at 92.6bp Sources: FT, Bloomberg, Markit
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US Markit Manufacturing PMI

Location: United States

Date: 20/06/2013

Time: 13:58 - 14:58

Strength: 2/3

Previous: 52.3 / Consensus: 52.8

Notes: The Manufacturing Purchasing Managers Index (PMI) released by the Markit Economics captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the manufacturing PMI is an important indicator of business conditions and the overall economic condition in the United States. Readings above 50 imply the economy is expanding, making investors understood it as a bullish for the USD, whereas a result below 50 points for an economic contraction, and weighs negatively on the currency.

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US Initial Jobless Claims

Location: United States

Date: 20/06/2013

Time: 13:30 - 14:30

Strength: 2/3

Previous: 334K / Consensus: 340K

Notes: The Initial Jobless Claims released by the US Department of Labor is a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labor market. A larger than expected number indicates weakness in this market which influences the strength and direction of the US economy. Generally speaking, a decreasing number should be taken as positive or bullish for the USD.

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UK Retail Sales (YoY)

Location: United Kingdom

Date: 20/06/2013

Time: 9:30 - 10:30

Strength: 2/3

Previous: 0.5% / Consensus: 0.2%

Notes: The retail Sales released by the National Statistics measures the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. Generally speaking, a high reading is seen as positive, or bullish for the GBP, while a low reading is seen as negative or bearish.

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UK Retail Sales ex-Fuel (YoY)

Location: United Kingdom

Date: 20/06/2013

Time: 9:30 - 10:30

Strength: 2/3

Previous: 0.2% / Consensus: 0.5%

Notes: The Retail Sales ex-fuel released by the National Statistics is a measure of changes in sales of the British retail sector excluding fuel. It shows the performance of the retail sector in the short term. Percent changes reflect the rate of changes of such sales. The changes are widely followed as an indicator of consumer spending. A high reading is seen as positive (or bullish) for the Pound, while a low reading is seen as negative (or bearish).

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DE Markit Services PMI

Location: Germany

Date: 20/06/2013

Time: 8:28 - 9:28

Strength: 2/3

Previous: 49.7 / Consensus: 50.0

Notes: The Services PMI released by Markit Economics interviews German executives on the status of sales, employment, and their outlook. Because the performance of the German service sector is extremely consistent over time, services does not impact final GDP figures as much as the more volatile figure on the manufacturing sector. Any reading above 50 signals expansion, while a reading under 50 shows contraction.

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DE Markit Manufacturing PMI

Location: Germany

Date: 20/06/2013

Time: 8:28 - 9:28

Strength: 2/3

Previous: 49.4 / Consensus: 49.8

Notes: The Manufacturing Purchasing Managers Index (PMI) released by Markit Economics captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the Manufacturing PMI is an important indicator of business conditions and the overall economic condition in Germany. Normally, a result above 50 signals is bullish for the EUR, whereas a result below 50 is seen as bearish.

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The 6am Cut

London 6am Cut Posted 2013-06-20 05:33:22 by Joseph Cotterill Ben Bernanke said that QE could end completely by mid-2014, and that it would be "appropriate to moderate the monthly pace of purchases later this year" on current economic trends. Ten-year Treasury yields hit their highest level since March 2012 after the Fed chairman's press conference on Wednesday, rising to 2.36 per cent (Wall Street Journal, Reuters). Bernanke: "when asset purchases ultimately come to an end, the unemployment rate would likely be in the vicinity of 7 per cent, with solid economic growth supporting further job gains" (Financial Times). Chinese manufacturing activity slumped further in June. The HSBC-Markit flash PMI came in at 48.3, lower than forecasts of 49.1, and May's reading of 49.1 (Bloomberg). The Australian dollar fell to its lowest level against the US dollar since September 2010, below $0.93, following the PMI release (Wall Street Journal). UK bank capital hole: RBS is £10bn-£12bn short, Lloyds £8bn-£9bn, and Barclays £3bn-£5bn according to Prudential Regulation Authority findings out early on Thursday (Financial Times). The UK government will launch an "urgent investigation" into creating a bad bank from RBS's toxic assets, Chancellor George Osborne said in his annual Mansion House speech. "We will see whether it's right for Britain to, in effect, see RBS broken up," the Chancellor said, indicating that the bank's Irish and UK commercial estate exposures, or £65bn-£130bn of its balance sheet, could be bad-banked (Financial Times). The bad-bank proposal has gathered momentum after a Treasury rethink of its effects on RBS's capital, but one key drawback is the time a split would take (Financial Times). The Treasury is also "actively considering options" for how to begin selling its Lloyds shares, the Chancellor said, but warned no fixed timescale was in place (Wall Street Journal). Chinese interbank rates spiked again, to their highest level since 2006. The seven-day repurchase rate rose 1.24 percentage points on Thursday, to hit 12 per cent. The central bank again declined to conduct liquidity operations (Bloomberg). Sony will study Third Point's proposal for the company to spin off its entertainment arm, its chief executive told shareholders. But Kazuo Hirai reiterated that the business was not for sale (Reuters, Dealbook). Microsoft recently came close to buying Nokia's handset business. The 'advanced' talks ran aground over price, which was not disclosed (Wall Street Journal). The UK's Financial Conduct Authority has begun to vet senior appointments to hedge funds, including US funds with operations in London. Several candidates for positions have been informally vetoed after interviews with the regulator. "The FCA is looking more closely at US hedge funds than the SEC is," according to one lawyer (Financial Times). COMMENT AND CURIOS - President Obama kept calling George Osborne "Jeffrey" at the G8. (Financial Times) - Big Steel has become too big too fail in China, says John Gapper. (Financial Times) Meanwhile, the Verrazano-Narrows bridge in New York is being repaired with... Chinese steel. (Wall Street Journal) - Are UK banks in recovery mode? Chris Giles: "The simple answer is No." (Financial Times) - "Count seven covers the grave offence of the defendant paying himself as much money as he legally could..." Fred Goodwin on 'trial'. (Financial Times) - Where next for Japan's big, $2,400bn pile of corporate cash? (Bloomberg) OVERNIGHT MARKETS: DOWN Asian markets Nikkei 225 down -129.67 (-0.98%) at 13,115 Topix down -11.51 (-1.04%) at 1,095 Hang Seng down -528.72 (-2.52%) at 20,458 US markets S&P 500 down -22.88 (-1.39%) at 1,628 DJIA down -206.04 (-1.35%) at 15,112 Nasdaq down -38.98 (-1.12%) at 3,482 European markets Eurofirst 300 down -3.23 (-0.27%) at 1,180 FTSE100 down -25.39 (-0.40%) at 6,348 CAC 40 down -21.21 (-0.55%) at 3,839 Dax down -32.43 (-0.39%) at 8,197 Currencies €/$ 1.325 (1.339) $/¥ 96.92 (95.21) £/$ 1.544 (1.56) Commodities ($) Brent Crude (ICE) down -1.33 at 104.79 Light Crude (Nymex) down -1.31 at 96.93 100 Oz Gold (Comex) down -29.50 at 1,344 Copper (Comex) down 0.03 at 3.12 10-year government bond yields (%) US 2.36 UK 2.13 Germany 1.56 CDS (closing levels) Markit iTraxx Europe -0.8bps at 107.3bp Markit iTraxx Xover +0.1bps at 442.5bp Markit CDX IG +5.7bps at 87.3bp Sources: FT, Bloomberg, Markit
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UK BoE's Governor King Speech

Location: United Kingdom

Date: 19/06/2013

Time: 21:00 - 22:00

Strength: 2/3

Previous:

Notes: The BoE Chairman Mervyn King was born in 1948. He graduated from Kings College, Cambridge, and Harvard. He gives a press conference as to how the BoE observes the current UK economy and the value of GBP. His comments may determine a short-term positive or negative trend. If he shows a hawkish outlook, that is seen as positive (or bullish) for the GBP, while a dovish is seen as negative (or bearish).

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US Fed's Monetary Policy Statement and press conference

Location: United States

Date: 19/06/2013

Time: 19:30 - 20:30

Strength: 3/3

Previous:

Notes: Following the Fed's rate decision, Ben Bernanke gives a press conference regarding monetary policy. His comments may influence the volatility of USD and determine a short-term positive or negative trend. His hawkish view is considered as positive, or bullish for the USD, whereas his dovish view is considered as negative, or bearish.

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US FOMC Economic Projections

Location: United States

Date: 19/06/2013

Time: 19:00 - 20:00

Strength: 3/3

Previous:

Notes: This report, released by Federal Reserve, includes the FOMC's projection for inflation and economic growth over the next 2 years and, more importantly, a breakdown of individual FOMC member's interest rate forecasts.

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US Fed Interest Rate Decision

Location: United States

Date: 19/06/2013

Time: 19:00 - 20:00

Strength: 3/3

Previous: 0.25% / Consensus: 0.25%

Notes: The Board of Governors of the Federal Reserve announces an interest rate. This interest rate affects the whole range of interest rates set by commercial banks, building societies and other institutions for their own savers and borrowers. It also tends to affect the exchange rate. Generally speaking, if the Fed is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the USD.Review Alex Nekritin's Article -Suggested Strategies to trade the US dollar with this economic release.

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DE 10-y Bond Auction

Location: Germany

Date: 19/06/2013

Time: 10:30 - 11:30

Strength: 2/3

Previous: 1.41%

Notes: Displayed in the calendar is the average yield on the Federal Bonds auctioned by Deutsche Bundesbank. German Federal Bonds have maturities of above then ten years. The yield on the bonos represents the return an investor will receive by holding the bond until maturity. Investors monitor the yield volatility and compare the average rate at auction to the rate at previous auctions of the same security as an indicator of the government debt situation.

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UK Bank of England Minutes

Location: United Kingdom

Date: 19/06/2013

Time: 9:30 - 10:30

Strength: 3/3

Previous:

Notes: The minutes of the BoE MPC meetings are published two weeks after the interest rate decision. The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee. Generally speaking, if the BoE is hawkish about the inflationary outlook for the economy, then the markets see a higher possibility of a rate increase, and that is positive for the GBP.

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The 6am Cut

London 6am Cut Posted 2013-06-19 05:28:11 by Joseph Cotterill Senior bankers should face a criminal offence of 'reckless misconduct' under a toughened sanctions regime for failures at UK banks, according to the Parliamentary Commission on Banking Standards. The Commission's long-awaited 571-page report also criticises UK governments for "clearly not acceptable" interference in the running of part-nationalised lenders (Financial Times). Full report HERE, summary HERE -- other key recommendations: Study a split of RBS. "The Commission recommends that the Government immediately commit to undertaking such detailed analysis on splitting RBS and putting its bad assets in a separate legal entity" Get rid of UK Financial Investments. "It may be possible to bolster UKFI's independence, but this would be extremely unlikely to end political interference in the State–owned banks" Decade-long pay deferrals. "...much more remuneration to be deferred and, in many cases, for much longer periods of up to 10 years" Commission quote: "One of the most dismal features of the banking industry to emerge from our evidence was the striking limitation on the sense of personal responsibility and accountability of the leaders within the industry for the widespread failings and abuses over which they presided..." Andrew Tyrie MP: "This is not a bank bashing report" / George Osborne: "warm response" / Ed Balls: "radical blueprint" / CBI: 'said that prescriptive measures to defer bonuses would not be right' (Financial Times) ______________________ In Asia, the Nikkei 225 increased up to 1.3 per cent on good data for Japanese exporters, although the Shanghai composite was in danger of closing at its lowest level since December following signs of interbank funding getting tighter (Bloomberg). Dish abandoned its current pursuit of Sprint Nextel. Dish said before a Tuesday deadline for a final offer that it would instead focus on its offer for Clearwire, though it added that it "continues to see strategic value" in a merger. Sprint shareholders will vote on a $21.6bn offer from Softbank on June 25 (Reuters, Wall Street Journal). Abenomics watch: The value of Japanese exports rose 10 per cent in May from a year earlier, their largest increase since 2010. Exports to China rose 8.3 per cent (Bloomberg). Shinzo Abe claimed G8 backing for his stimulus policies. "This is a policy to achieve domestic objectives and this is not targeted at the foreign exchange rate of Japan," the Japanese prime minister said following the G8 summit at Lough Erne. Other leaders had a "clear understanding" of the need for stimulus, Abe added (Financial Times). EADS's chief executive said "never say never" to another attempt at a BAE Systems tie-up. But Tom Enders played down the prospects of a rapid return to dealmaking after last year's planned deal between the two companies foundered on German government opposition (Financial Times). How to game Platts oil benchmarks? "Offer to sell a small amount at a loss to drive down published oil prices, then snap up shiploads at the lower price... Several... traders interviewed by The Wall Street Journal said they have engaged in similar transactions... Platts says it isn't aware of any instances in which its indexes were gamed in such a way." (Wall Street Journal) COMMENT AND CURIOS - Making 'reckless misconduct' in banking a crime is the right move, says Philip Augar. (Financial Times) - John Kay: don't blame the tax havens -- fix corporation tax in the G8 instead. (Financial Times) - Martin Wolf's take on the IMF's Greek mea culpa. (Financial Times) - Daniel Loeb, Abenomist. (Bloomberg) OVERNIGHT MARKETS: UP Asian markets Nikkei 225 up +140.75 (+1.08%) at 13,148 Topix up +14.61 (+1.34%) at 1,101 Hang Seng down -264.54 (-1.25%) at 20,961 US markets S&P 500 up +12.77 (+0.78%) at 1,651 DJIA up +138.38 (+0.91%) at 15,318 Nasdaq up +30.05 (+0.87%) at 3,482 European markets Eurofirst 300 down -0.92 (-0.08%) at 1,184 FTSE100 up +43.72 (+0.69%) at 6,374 CAC 40 up -3.11 (-0.08%) at 3,860 Dax up +13.78 (+0.17%) at 8,229 Currencies €/$ 1.339 (1.34) $/¥ 95.21 (94.88) £/$ 1.56 (1.57) Commodities ($) Brent Crude (ICE) down -0.03 at 105.99 Light Crude (Nymex) down -0.08 at 98.36 100 Oz Gold (Comex) down -2.00 at 1,364 Copper (Comex) up 0.01 at 3.16 10-year government bond yields (%) US 2.19 UK 2.14 Germany 1.57 CDS (closing levels) Markit iTraxx Europe +0.2bps at 108.1bp Markit iTraxx Xover +1.2bps at 442.4bp Markit CDX IG -0.1bps at 81.7bp Sources: FT, Bloomberg, Markit
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