Tag Archives: Saudi Arabia

And It Wasn’t Even Against the Law

Someone made a helluva lot of money this week. But most silver speculators, however, received a rather disturbing phone call from their brokers, that in turn reinforced the sell-off in silver, forcing the devils gold to take the biggest drop in more than 30 years. This is the kind of volatility that makes money – big money.

At this stage no one can be sure what is causing the sell-off, though there seems to be consensus that commodities as an asset class had got ahead of itself.

Gavan Nolan


Investors shifted quickly focus this week amid a sharp, and not quite explainable,  sell-off in commodities. Silver, in particular, made a spectacular decline. The price of the second most precious metal dropped by more than 25% during the week – the biggest correction for more than 30 years.

But a correction had to come at some point. The silver price has nearly doubled since the beginning of the year.

A series of margins calls by exchanges have no doubt contributed to the precipitous decline, credit analyst Gavan Nolan at Markit points out in his weekly summary.

But silver is not the only commodity to suffer falls.

Oil, which has also risen sharply over the last year, has been in free fall since Tuesday. Industrial metals such as copper, as well as soft commodities like corn and cotton, also saw large declines.

Were there fundamental reasons for the correction? Economic data, on the whole, has been disappointing this week. Leading indicators for the service sector, particularly the Markit PMIs and the ISM survey, suggested that the recovery in losing momentum in the US and in the UK, Gavan Nolan writes.

Disappointing factory orders from Germany, the driving force of the European economy, added to the unease.

And then there is the US labour market. The swift recovery in job creation that many had hoped for has failed to materialise, with a weak ADP private sector survey and another downbeat initial jobless claims figure depressing sentiment ahead of the non-farm payrolls report friday, Nolan adds.
Whether the economic data alone rationalizes such a major sell-off is open to question, according to Markit Financial Information.

The realisation that interest rates are being hiked across the developing world could have spooked investors. Monetary policy shifts in the developed world will also have an impact on risk appetite. The current round of quantitative easing in the US is expected to end in June (though the Fed balance sheet will stay roughly constant). Many suspect that the liquidity provided by central banks has driven up the price of risky assets. A normalisation of policy could bring an end to the bull-run in commodities. At this stage no one can be sure what is causing the sell-off, though there seems to be consensus that commodities as an asset class had got ahead of itself, Nolan writes.

The reaction in the credit markets to the commodity volatility, however, was relatively sanguine.

Equity indices took a tumble through the week but the main credit indices were fairly resilient.

The Markit iTraxx Europe index was only about 0.25bp wider than last Thursday’s close (post NFP bounce), while the eurostoxx and FTSE 100 were still well down over the week.

Sovereigns helped credit outperform on Wednesday after the EU/IMF bailout of Portugal was announced.

However, these gains were quickly given back during the latter part of the week; talk of Greece restructuring its debt is still hanging in the air, Nolan concludes.

2 Comments

Filed under Uncategorized

Markit Statement on European Commission CDS Inquiry

Never have so few words been written in such a long time…. Well, I’m not 100% sure about that, but the financial information provider Markit certainly took some time to up with the following 106-word-comment on today’s top story; the alleged exclusive information deal with the world’s largest banks.

“Markit does not believe it has engaged in any inappropriate conduct and looks forward to demonstrating that to the Commission.”

Michael Gormley


I guess it’s about eight hours since I asked Markit for a comment on EU’s CDS-investigation. That equals about 0,22 word per minute, or 13,25 word per hour. 

Anyway, Markit have carefully chosen the following 106 words:


“Markit is aware of the European Commission’s statement that it will open investigations relating to the Credit Default Swaps information and clearing markets.

Markit has no exclusive arrangements with any data provider and makes its data and related products widely available to global market participants.

Markit has created new and innovative products and services in a competitive marketplace since its inception, bringing greater transparency and information to the CDS market.

Markit is unaware of any collusion by other market participants as described by the Commission.

Markit does not believe it has engaged in any inappropriate conduct and looks forward to demonstrating that to the Commission.”

Michael Gormley
Director

Link

Related by the Econotwist’s:

1 Comment

Filed under International Econnomic Politics, Laws and Regulations, Technology

Hyperventilating, Or Just Taking a Breather?

After yesterday’s panic – mostly due to the negative S&P action on US  debt – the markets returned to something resembling “normality,” Tuesday. But the fear is still out there. And one can not say for sure if the market participants are just taking a breather or if they’re hyperventilating.

“The talk of a Greek restructuring hasn’t gone away; indeed there were further reports of a German government official saying that a haircut was inevitable.”

Gavan Nolan


It was quite a busy day in credit markets Tuesday, as the US earnings season was billed as the main event. A strong performance from two prominent names helped spreads rally in the afternoon. But there’s still a ticking bomb beneath the surface.

Greece’s fiscal fate, the other driver behind recent volatility, was also bubbling under the surface.

“But investors appeared to take a breather today in what was probably another session affected by the upcoming Easter holiday,” credit analyst Gavan Nolan at Markit writes in his daily comment.

Well, there’s also the possibility that the market participants are hyperventilating as another anxiety attack is building up inside.

.

Roasting A Pig?

“It sound contradictory to say that it’s a disappointment if Goldman Sachs’ earnings don’t beat expectations but that’s how the market treats the company’s results,” Nolan points out.

Now, that is interesting; why?

The bank that sees itself as some kinda God, but are seen by others at the manifestation of the devil,  performed about what could be expected in the first quarter of 2011.

Goldman’s profits, however, came in well ahead of the  consensus estimates.

The bank’s earnings per share was $1.56, significantly down on last year, but still almost double analyst estimates.

“It’s all-important FICC division’s revenues jumped 164% from a disappointing fourth-quarter, defying forecasts of a difficult start to the year,” Gavan Nolan highlights.

Goldman’s spreads have underperformed its larger banking rivals over the last six months, with many predicting that its reliance on trading revenues would suffer disproportionately.

“That didn’t happen, but it will interesting to see on Thursday how Morgan Stanley fared,” Nolan notes.

Johnson & Johnson, one of the few AAA-rated corporates left in the credit universe, also surprised on the upside.

The company’s sales rose 3.5%, beating expectations, and it raised its full-year earnings guidance.

“A rebound in housing starts and permits completed the positive picture from the US,” the Markit analyst writes.

The Slaughter House

The widening in European sovereigns was curtailed Tuesday, with profit taking probably making some contributions.

“The talk of a Greek restructuring hasn’t gone away; indeed there were further reports of a German government official saying that a haircut was inevitable,” Gavan Nolan writes as a final remark.

Peripheral banks rallied in tandem with the sovereigns.

  • Markit iTraxx Europe S15 100.75bp (-1.5), Markit iTraxx Crossover S15 373.75bp (-9.5)
  • Markit iTraxx SovX Western Europe S5 187bp (-2)
  • Markit iTraxx Senior Financials S15 133.5bp (-6), Markit iTraxx Subordinated Financials S15 235bp (-10)
  • Sovereigns – Greece 1240bp (+4), Spain 241bp (-12), Portugal 608bp (-12), Italy 151bp (-8), Ireland 600bp (0)
  • Japan 86bp (+1)

1 Comment

Filed under International Econnomic Politics, National Economic Politics