Markets: “Japanese stocks jumped and the yen skidded to six-year lows against the dollar on Friday after the Bank of Japan surprised markets with fresh easing steps – a move aimed at stoking inflation and recharging a fragile economic recovery. The Nikkei stock average rallied [4.5 per cent at pixel with the yen threatening 110 against the dollar] after Japan’s central bank said it would purchase more shares of exchange-traded funds and real estate investment trusts, and extend the duration of its portfolio of Japanese government bonds, to “pre-empt manifestation” of risks.” (Reuters) Read more
With the end of QE, just a quick chart to reiterate that central bank bond buying doesn’t work the way one might expect.
Far from reducing bond yields, when the Federal Reserve buys bonds, it tends to make yields go up. Equally, when it stops – or says it will stop, or tapers – the yield goes down. Read more
The Fed’s balance sheet is no longer in expansion mode, which means it’s time for post-mortems of the most recent asset purchase programme. (Our colleague John Authers has a very good round-up of what did and didn’t happen since QE3 began.)
We want to focus on the fact that the most recent round of bond-buying seemed to have no inflationary impact. If anything, an observer of the data who had no preconceptions about monetary policy operations would conclude that QE3 was disinflationary. Alphaville writers have been exploring this possibility for years (though without firm conclusions).
Let’s start by looking at the changes in actual inflation since the start of 2010. Read more
С начала года ЦБ для поддержания курса рубля потратил $68 млрд. Полторы Олимпиады улетело в пустоту.
— Alexey Navalny (@navalny) October 30, 2014 Read more
Live markets commentary from FT.com
When city-dwellers moan about their high cost of living, they often elicit the unsympathetic retort that they should shut up and praise the ghost of Jane Jacobs for the cultural vibrancy of their neighborhoods, the lucrative jobs, and the artisanal pizza.
Living in a great city is a consumption good, you whinging ninnies — you SHOULD have to pay for it! Why do you think you’re entitled to live wherever you want?
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The Bank of Japan has bought bonds, bills, stocks and property since embarking on its radical monetary easing programme last April.
Now it’s buying time. Read more
Elsewhere on Thursday,
- There will never be a time when you – the retail investor – are the first to read, understand and react to a news story. Redux.
- AND high-speed traders avoid low-speed website.
- Remembering the suits vs geeks divide.
- “Three recent breakthroughs have unleashed the long-awaited arrival of artificial intelligence…” Read more
Markets: Asian equities were mixed after the Federal Reserve confirmed it would end the asset purchases that have supported economies across the region for half a decade. The moves came ahead of gross domestic product data due out later on Thursday that are expected to show the US economy grew 3 per cent in the July-September period from the second quarter, according to a Bloomberg survey. But concerns about capital outflows from emerging economies now that the Fed has stopped pumping liquidity into the global financial system weighed on some Asian markets. The US dollar staged its third day of gains against the yen, rising as much as 0.3 per cent to Y109.1. (FT’s Global Markets Overview) Read more
We had a chat with the FT’s US markets editor Mike MacKenzie about Wednesday’s FOMC statement. There were masks:
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FURTHER FURTHER READING Read more
Full text here. The highlights:
– Large scale asset purchases have ended, as expected (though remember that the Fed is still reinvesting the principal on MBS and rolling over maturing treasuries). Read more
The European Central Bank’s latest quarterly bank lending survey shows that lending standards are getting looser and that demand for credit is rising. Lorcan Roche Kelly of Agenda Research summarised the main findings with this handy chart:
Negative numbers for the orange-ish lines mean that lending standards have loosened (slightly), meaning credit is easier to get. Positive numbers for the green and blue lines mean that demand for loans is increasing. Overall the supply of loans is still shrinking, but not as fast as it was in recent years and loan growth could even return by the end of 2015 if current trends hold up. That said, we can’t help but note the large difference visible in the chart between loans to households (orange and beige) and loans to businesses (red). Read more
We guess this is the regulatory version of those occasions where a self-regarding company chairman or chief executive announces their retirement, only to watch the company’s share price rise in relief.
From Tesco on Wednesday afternoon, following a report on Kleinmanwire: Read more
Along with the Facebook results on Monday, there was another SEC filing.
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Live markets commentary from FT.com
Fed’s grand experiment draws to a close || Sanofi board ousts chief executive Chris Viehbacher || Legal costs drag Deutsche Bank to third-quarter loss || Norway’s oil fund hit by European stocks || Mortgage data show UK housing market cooling || Inflated exports cast doubt on Chinese trade outlook || Wall Street is sceptical of Facebook’s plans to pour money into products || Markets Read more
Some semiotics. This is what Americans call a cast iron skillet.
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First on Alibaba, the FT reports that the Cayman registered derivative contract vaguely related to ecommerce in China — and which floated on Sept 19 the same day the S&P 500 peaked — has almost broken into the list of the world’s 10 most valuable companies:
Shares of Jack Ma’s Hangzhou-based group climbed as much as 2.8 per cent to touch a new record high of $100.50, lifting its market capitalisation above $247bn. Read more
Elsewhere on Wednesday,
- Facts and myths about bank leverage ratios.
- But really, are we sure the world’s greatest counterfeiter would have been caught?
- In which Matt Levine and the Streetwise Prof hug and blush a little.
- Rational regret is a real issue. Read more
Markets: Asian bourses were generally higher ahead of the expected conclusion of the Federal Reserve’s asset purchase programme, with shares in Japan fuelled by better than anticipated industrial output data. The S&P 500 climbed 1.2 per cent to 1,985 in the New York trading session, with news that US consumer confidence had hit its highest level in seven years adding to the positive mood. According to S&P Capital IQ, aggregate expected third-quarter S&P 500 earnings now stand at $29.26, representing 6.3 per cent quarterly earnings growth. The latest gain for the S&P 500 took it back above its 50-day moving average for the first time in nearly a month. (FT’s Global Markets Overview) Read more
FURTHER FURTHER READING
- Bridging the divide between finance and technology. Read more
Mario Draghi probably wasn’t expecting that his July 2012 comment that “the ECB is ready to do whatever it takes to preserve the euro” would coincide with the start of a relentless drop in bank lending to nonfinancial businesses far worse than what occurred during the first wave of the recession:
At least some of this decline can be explained by the lack of demand for credit in an environment of stagnant growth and relatively high real interest rates. But the robust growth of the euro-denominated corporate bond market — up by more than half since the start of 2009 — suggests that problems within the banks are also to blame. Read more
The Twitter paradox in chart form:
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Live markets commentary from FT.com
UBC takes $2bn charge || Profits down at Standard Chartered || BP hit by oil price || Swedish rates go to zero || Lloyds cuts jobs, branches || Profits drop at BG || Sanofi profits up as CEO fights for job || Stocks steady ahead of Fed Read more
Tbh, we thought this one would just go away.
But no, on November 30 there’s to be a vote in Switzerland which, if won, would shackle the Swiss National Bank by forcing it, amongst other things, to hold at least 20 per cent of its assets in gold; to repatriate any gold stored abroad; and to refrain from selling any gold in future.
From SocGen’s Sebastian Galy:
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A sad demise or just an over-hyped concept from its Wikileaks conception? Either way, the below is sensible stuff from Gavekal’s Chen Long and Andrew Batson on analysts’ favourite growth proxy for waning Chinese growth. Read more
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