Your boss is quite a card player – how does he do it? He cheats..
Amidst the news of Chinese reflation and support to the property sector, Chinese markets having their best quarter since 2012, the Fed’s Stanley Fischer warning us to keep a close eye on employment rather than GDP data, and yet more noise around Greece pulling down the euro, did you spot Taiwan has decided to join China’s new Asian Infrastructure Investment Bank?
Clearstream reports that it is opening a new representative office in Zurich tomorrow (April 1) to better serve its growing customer base in the region. Marco Geisselhardt, head of relationship management, investment fund services at Clearstream, is named as its first manager.
What to talk about this morning… Month-end pressures? And what’s likely to be a very slow Holy Week as we move to the four-day Easter break? European markets on holiday on Friday when we get the next US non-farm payrolls number. It's moments like this that worry me.. it's quiet.. too quiet..
I’m sorry son, but we don’t stock party gimmicks in this shop.. try the house of fun.
What Happens When Oil Prices Rise? After yesterday’s note on the opportunities in alternative banking, it’s back to normal on the Morning Porridge as I attempt to enlighten, elucidate, educate, agitate and amuse on the current market drivers. This morning the story seems to be all about the US stock market hiccup/reversal. As regular readers will know, I know nothing about stocks, so I rely on my colleague Steve Previs to explain: “Well Bill, when there are more sellers than buyers… that’s what happens..”
Clarus Financial Technology, a provider of content, data and analytics for derivatives markets, is calling for greater debate around the format and extent of data made public on reporting under EMIR. In a response to ESMA's recent consultation paper on Article 9, Clarus highlighted the significant variation between the data available in the US and Europe, and the negative impact this is having on market participants.
Investment Banks and Liquidity – Creative Destruction in Europe?
I’m taking a slightly different approach in this morning’s Porridge. I want to think out loud about the future of banking, finance and liquidity. Recent headlines about banks pulling back from markets, sacking layers and layers of trading staff, and all the fevered headlines about crashing liquidity make it clear to me the era of universal and investment banking is drawing to an end. Maybe that’s a good thing.
Continuing its tradition of recording firsts in China, HSBC reports that it is the custodian bank and asset services provider for the first ever RQFII (Renminbi Qualified Foreign Institutional Investor) money market exchange-traded fund (ETF). The ETF will be domiciled and listed in the UK and settled via Euroclear Bank.
May contain nuts has become a metaphor for our times…
What’s not to like about the weekend we just had? Monday morning… And what feels like a sated market. After the frenetic pace of the first three months of 2015 – the Swiss currency cap ructions, global easing and the dollar’s remorseless rise, then the Fed setting a dollar line last week, and all the Greek noise, by the close last Friday it felt like market participants are waiting for the “next thing”.
Is it likely to change this week? I think.. perhaps.. Perhaps time for renewed conviction on bond markets.
Whether it’s proof Europe is working – we’ll get some sense of that from this week’s slew of critical data releases, how the Greece “thang” plays out, the Fed coming out with clear guidance, or whatever – I get the sense markets are taking stock; especially in terms of how tight credit spreads remain. Are some asset bubbles ripe for bursting or re-inflating?
In terms of what the ECB is thinking – who knows.. The potential axes of action are very limited. But, there is a very good thought-provoker from Wolfgang Munchau in the FT this morning: “The success of the Eurozone QE relies on a confidence trick”. It’s a story we’ve read many times before – the ECB relying on the Sturm und Drang effect of major policy announcements, hints, nods and winks, to manipulate and affect markets far more than what they actually do.
Munchau makes the obvious point the low interest rates effect of the QE was achieved well before the ECB bought a single bond. The only transmission mechanism thus far has been the weaker euro and a tiny improvement in bank lending. (Suggesting, heretically, the programme is far to small to have any real effects.) He then suggests the recent gains in apparent euro growth (that have triggered stock market records across Europe) may be entirely due to “lottery wins” from lower oil prices and are not sustainable! Oh my word – he should expect the Spanish Inquisition..
The Fed is in a much better place. Although my macro colleague Martin Malone describes the economic setting as “noisy”; due to oil, dollar, low wages and low inflation expectations, the Fed has plenty of time to access these factors and its decision to join the flock of dovish central banks last week. It acted to a) curb dollar strength and b) they have time to access the positive and negative benefits of these four critical issues.
That raises some interesting questions. There is massive positional divergence between potential policy action in Europe, the US, and Japan. Which is in the better place? I’ll go with the Japan stocks argument and the dollar for the meantime. I’m waiting to see some sustainable proofs from Europe. More to the point, Europe’s default mode is not to move quickly and will remain in “give it time to work”, especially if the real decision makers are utterly distracted by a nasty outbreak of Greece - again.
What does it all mean for bonds? In recent weeks we’ve seen the bond markets down from their highs – already leaving many long-only funds in pain and with limited manoeuvrability. But based on the ECB being unable to do anything – except keep buying, and the Fed doing nothing precipitate to US rates, maybe it’s time to be reviewing potential upside in the bond market? Spreads have widened – does that mean it’s time for another leg tighter? Perhaps…. Selectively.
I suppose I really ought to say something about Greece, but I’ve already read screeds and screeds of fevered “analysis” of the current face-off to bother contributing anything new. I guess the Greeks’ game plan is to keep pushing pushing and push some more. Like a toddler they know exactly what buttons to press. They are betting the utility they get from bawling their way to a new toy or a bottom slap is a bet worth taking..
HSBC says it has become the first custodian bank in China to service a Renminbi Qualified Foreign Institutional Investor (RQFII) based in Germany. HSBC is providing local custodian services to Deutsche Asset & Wealth Management Investment GmbH, which has secured regulatory approval to become the first German investor in China under the RQFII scheme, a programme designed to open up the nation’s onshore securities markets to overseas investors using renminbi (the news follows hard on the heels of the news of the granting of Deutsche Bank’s RQFII licence).
All that’s to come and everything under the sun is in tune
I’m not expecting a busy market this morning. The London markets will be scanning the cloud leaden skies for a hint of the Solar Eclipse. One of our office Shermans suggested: “you can’t have an eclipse without the sun..” Well, actually… you can. It’s up there.. it’s up there. I’m slightly miffed at the cloud cover. It’s not even our cloud; the current smog choking London is apparently French in origin. Typical.
BNY Mellon has named Arnon Goldstein as head of sales & relationship management, treasury services, for Asia Pacific, based in Singapore. He succeeds Frederick DiCocco, who has been appointed head of market management within BNY Mellon’s treasury services business. In this global role, DiCocco will have responsibility for the execution of the treasury services business strategy in each of its regional groups.
Progressive Capital Partners Ltd, a Swiss-based alternative investment management group, has appointed Societe Generale as clearing broker and certificate issuer to a range of funds managed by it. Societe Generale Securities Services has also been appointed as custodian to the funds.