Telling the Story
John Lothian – John Lothian News
We need you to tell a story and help us fill up our MarketsWiki Education World of Opportunity events in Chicago and New York.
We love to tell stories. People in this industry are always telling stories about the markets. We replay the day’s trading with our fellow traders or friends. We tell strangers about the amazing things that happen in the markets. Everyone talks about some market event or action – even cab drivers sometimes, according to industry lore.
Those events, that market action and happenings, and the stories, have attracted thousands of young people into our markets over the years. Based on the stories, and the swirl and whirl of the kaleidoscope of the trading floor, there was never a shortage of fresh new talent attracted to our industry.
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Quote of the Day
“I think that the best way to think about this is, a pause button has been pressed on the project of full European integration. I don’t anticipate that there’s going to be major cataclysmic changes as a result of this.”
President Obama in the story, “Obama says time to chill, hit the pause button over Brexit hysteria”
Economic implications of Brexit
Ben Bernanke – Brookings Institution
After several days of market upset, a few reflections on last week’s momentous vote in Great Britain. Even more obvious now than before the vote is that the biggest losers, economically speaking, will be the British themselves. The vote ushers in what will be several years of tremendous uncertainty—about the rules that will govern the U.K.’s trade with its continental neighbors, about the fates of foreign workers in Britain and British workers abroad, and about the country’s political direction, including perhaps where its borders will ultimately lie. Such fundamental uncertainty will depress business formation, capital investment, and hiring; indeed, it had begun to do so even before the vote.
Europe’s illusory ‘single capital market’
Nikkei Asian Review
Businesses across sectors and regions are growing wary of the possible wrenches Brexit could throw at them. Financial markets, especially in Europe, could suffer a particularly severe blow. On Saturday, the day after a majority of Britons voted to leave the European Union, Jonathan Hill announced he would resign as a commissioner on the European Commission, the EU’s executive body. Commission President Jean-Claude Juncker regretted the Briton’s departure, calling Hill a “true European.” Hill had been in charge of driving the Capital Market Union, meant to compete with the U.S.’s capital market. Without Hill’s leadership, the goal of integrating Europe’s capital markets will be significantly hampered.
Brexit adds to existing troubles faced by banks
As voters went to the polls on Thursday, stock market investor Chris Dyer held precisely zero UK bank stocks. With hindsight, it was an enviable decision. As stock markets have tumbled in the aftermath of the decision to leave the EU, crashing bank stocks have created some of the largest reverberations. The value of Barclays and Royal Bank of Scotland have dropped more than 30 per cent since the vote. Fears were not limited to the UK; the main European banks index lost 23 per cent by the end of Monday, after trading at its lowest level since the eurozone crisis.
Moody’s cuts outlook on UK banking system, 12 banks after Brexit
Moody’s Investors Service cut its outlook on the UK banking system to ‘negative’ from ‘stable’ on Tuesday, citing the referendum vote in favor of the UK leaving the European Union.
Economic Fears Rising, Britain Hopes to Stay in E.U. Market
Four days after a decisive vote to leave the European Union, Britain was consumed on Monday with questions of when and how the country’s departure from the bloc would happen — and increasingly, of whether it would happen at all. The immediate outcome of Thursday’s referendum was not the promised clarity but an epic political muddle and a policy vacuum that invited more confusion and turmoil throughout the day in Britain, on the Continent and in the financial markets.
Accounting Choices Blur Profit Picture
U.S. companies that rely solely on standard accounting to report their financial results are in the minority, and their numbers are shrinking fast. Just 29 companies in the S&P 500 index—or 5.7% of the total—closed their books for 2015 exclusively using U.S. Generally Accepted Accounting Principles, or GAAP. That’s a sharp decline from 25% in 2006, according to research firm Audit Analytics. The purists are dwindling as companies struggle to increase their earnings in the wake of the 2008 financial crisis, analysts and accountants say, and regulators are taking notice.
How Britain Could Exit ‘Brexit’
In the days since Britons voted to leave the European Union, the so-called “Brexit” referendum has created such severe turmoil that public attention is increasingly focused on an extreme option: Can they get out of it?
Soros Wagered Deutsche Bank Would Drop in Brexit Turmoil
Soros Fund Management took a short position in Deutsche Bank AG of about 7 million shares as turmoil from the U.K.’s decision to leave the European Union sent bank stocks lower.
Brexit: Deflationary Now, Inflationary Later
Central banks’ efforts to revive economic growth and inflation suffered another blow with Britain’s vote to leave the European Union. The vote has unleashed anxiety and uncertainty that will dampen investment, hiring, wages and prices.
Is ‘Brexit’ Europe’s Lehman Brothers Moment?
Is this another Lehman Brothers moment? That question has been sometimes whispered, and sometimes shouted, in the aftermath of Britain’s vote to leave the European Union. It has been a turbulent few days on global financial markets, but is this, like the Lehman Brothers bankruptcy announced on Sept. 14, 2008, the trigger of much bigger financial calamities to come? The short answer is “no.” The long answer is “no, but.”
Draghi Shuns Brexit Debate in Call for Global Policy Alignment
Mario Draghi took an unusual tack among the world’s major policy makers — giving a speech that had no explicit reference to the U.K.’s decision to quit the European Union. While investors are keen to hear what the European Central Bank president is doing to contain the fallout from Brexit, he decided to use his opening address at the ECB Forum in Sintra, Portugal, to call for global policy alignment. Acknowledging that ultra-loose monetary policies have “inevitably” created potentially destabilizing spillover effects, he said there is a “common responsibility” to address the world’s economic weaknesses.
Central Bankers Face Conflicting Pressures From Brexit Vote
European Central Bank President Mario Draghi urged central banks to better coordinate policies to confront the problem of ultralow inflation in an era of slow global growth, underscoring the conundrum he and his associates face in the wake of Britain’s vote to leave the European Union. The guardians of the global monetary system face conflicting pressures as they seek to support their economies amid new turbulence. They also run the risk that their efforts will work at odds with each other and destabilize the financial system.
Market sees 2 rounds of BOJ easing within a year
Nikkei Asian Review
In the wake of the British vote to exit the European Union, financial markets expect the Bank of Japan to expand its monetary easing program twice within the next 12 months to cope with the potential fallout. The outlook is supported by overnight index swaps, which exchange unsecured overnight call rates for fixed interest rates for certain periods. OIS rates are considered a leading indicator of the BOJ’s monetary policy.
Federal Open Market Committee announces its tentative meeting schedule for 2017–June 28, 2016
The Federal Open Market Committee on Tuesday announced its tentative meeting schedule for 2017:
Congressional watchdog expands probe of lax Wall Street oversight
A U.S. congressional watchdog said on Tuesday it has formally added three agencies to its investigation into whether government regulators are too soft on the banks they are meant to police.
Bank Stress Tests May Also Test Stockholders
Bank stress exams may test investor patience. On Wednesday, the Federal Reserve is scheduled to report how 33 financial institutions fared in a simulated bad economic downturn. Countercyclical factors included this year could mean that even those banks that ace the tests will have to hang on to additional profit rather than return more money to shareholders.
Shanghai orders banks to strengthen checks on overseas direct investment to help stem illegal capital outflows
South China Morning Post
The foreign exchange authority in Shanghai has asked banks to strengthen due diligence checks of overseas direct investment by companies to stem illegal capital outflows, three banking sources said.
U.S. Questions Whether Futures Markets Can Police Themselves
A top executive at 3Red Trading LLC reassured his co-founder about the future of the firm, even as federal regulators and two exchanges were investigating them for alleged market manipulation. “Just finished up with the head honchos,” Edwin Johnson wrote about a meeting with Intercontinental Exchange Inc. executives. “We will do a very basic phone interview next week. Then it will all go away,” he texted his partner in the spring of 2013. “I was given their word last night.” Likewise, he texted, top brass at CME Group Inc. “are 100 percent behind us.”
Brexit Threatens to Knock Pound Off Reserve Currency Throne
Britain’s vote to leave the European Union knocked sterling to decade-lows and could now erase a distinction that’s centuries’ old: its status as a reserve currency. In the two days after last Thursday’s Brexit vote, the pound fell 11.2% against the dollar, its steepest two-day decline in nearly 50 years. On Tuesday, the pound edged higher again, but investors see the currency continuing the decline amid political and economic uncertainty in the U.K.
China’s Li seeks to dissuade yuan bears
Nikkei Asian Review
Britain’s vote to leave the European Union is already having an impact on international financial markets, adding to the uncertainty facing an underperforming global economy, Chinese Premier Li Keqiang told a summer session of the World Economic Forum here Monday. The yuan fell to a five-and-a-half-year low against the dollar in the wake of last Thursday’s U.K. referendum. Speaking to assembled business and finance leaders, Li argued that a long-term decline in the Chinese currency would have no basis in economic reality.
Japan’s top government spokesman: Extremely nervous moves seen in FX market
Japan’s chief cabinet secretary, Yoshihide Suga, said on Tuesday the government would continue to carefully watch currency markets, where “extremely nervous moves” are seen.
Japan should not give up right to intervene if yen rises sharply
Japan should not give up the right to intervene in currency markets if the yen sharply rises as it will threaten the nation’s economy, a key economic adviser to Prime Minister Shinzo Abe said on Tuesday, after Britain’s vote to exit the European Union caused market turmoil.
FX volumes on EBS platform topped $200 billion on Brexit Friday
Currency trading platform EBS saw daily volumes at least double to top $200 billion on Friday in the frenzied market reaction to Britain’s shock decision to leave the European Union, a source close to the company told Reuters on Tuesday.
Why Does a Weak Pound Matter to the World?
Imagine you’re living in London and you want to buy an apartment in New York. You find the right home, agree upon a price, and draw up the documents. And then all of a sudden before the deal is finalized, the value of the British pound drops sharply against the U.S. dollar. Each pound is now worth fewer dollars. For you, who holds your money in sterling and needs to exchange it for the American currency to make your purchase, the cost of your new home just got way more expensive. You became poorer.
Brexit vote, soft yuan may be spurring flight to bitcoin
Nikkei Asian Review
The British vote to exit the European Union seems to have benefited bitcoin amid a stampede out of the pound and the euro, though many see Chinese money accounting for much of the digital currency’s rise. Bitcoin surged Friday morning, Japan time, as the Brexit camp was winning in the referendum, data from the CoinDesk cryptocurrency news website shows.
Fidelity, JPMorgan Embrace Asia Bond E-Trading to Cut Costs
JPMorgan says 70% of bond trades electronic, from 20% in 2009
Potential for faster Asia growth due to low adoption: Tradeweb
Fidelity International and JPMorgan Chase & Co. are among bond investors warming to electronic trading systems in Asia.
Increasing regulatory pressures and bank balance sheet constraints have led to an evolution in the fixed income market over recent years. With MiFID II poised to hit the European market in 2018, market participants had plenty to discuss at the Fixed Income Leaders Summit in Boston this year. The day before the conference officially started, a ‘platform evaluation day’ was held for buy-siders with the aim of providing clarity on the multitude of fixed income initiative offerings. Incredibly, there are now more than 100 platforms available. This number is increasing.
Japan Yields All Drop Below 0.1% First Time in Global Bond Surge
Bond yields in Australia, U.K., Korea drop to all-time lows
Treasuries slip after yields approached record low last week
Japan’s benchmark bonds are now all yielding less than 0.1 percent for the first time, leading a global surge in sovereign debt, as the U.K.’s decision to leave the European Union threatened to slow growth and keep the Federal Reserve from raising interest rates.
Indexes & Index Products
Fidelity Just Made Buying an Index Fund Vanguard Cheap
Money manager Fidelity Investments plans to slash prices on more than two dozen funds, a concession to an industry movement toward cheap products that track the market. The changes will lower Fidelity’s fees below or on par with those at low-cost pioneer Vanguard Group and Charles Schwab, another firm with ultralow customer expenses. Fidelity oversees retirements for millions of Americans.
How Much Longer Will S&P 500 Profit Contract?
Second-half recoveries since the financial crisis are like Bigfoot — much talked about but rarely seen. This year is liable to bring more of the same — with Brexit only adding to potential pressures.
Loading Up On Cash And Gold Is The Only Way Out Of This
John Mauldin – Forbes
Looking at the global economy today, you can’t help but notice several worrying developments. On the one hand, we have currency devaluations and negative interest rate policies: on the other, slow-to-no economic growth in both developed and developing economies. Even experienced investors don’t know what to make of today’s financial markets.
Gold registers first loss in 3 sessions as post-Brexit volatility eases
Gold futures ended lower after two consecutive days of gains as haven investments lost some traction following a tentative return of risk appetite, three days after the U.K. voted to exit the European Union.
Gold is sending a dark sign that ‘almost everything has changed’ in the market
Gold and the US dollar are no longer behaving normally and it’s crucial that investors pay attention to this move, Raoul Pal and Grant Williams said during a discussion about the Brexit on Real Vision Television—a subscription financial news service they cofounded. Gold is widely considered a hedge against the US dollar. When the dollar falls in value, gold prices often rise. However, this relationship has been breaking down. Pal, a former macro fund manager and author of the research letter “The Global Macro Investor,” recently said that a dollar rally along with a gold rally is “a sure sign that almost everything has changed.”
Unsold Lots, Empty Seats as Brexit Hits London Art Auctions
A week of London contemporary art auctions got off to a rocky start at Phillips on Monday as collectors tried to make sense of Britain’s vote to exit the European Union and its fallout.
The best-paid bank CEO in America may not be who you think
The list of top-paid executives in the U.S. banking industry offers few surprises, with one notable exception. The king of the compensation mountain doesn’t work for the most famous nor the biggest bank, but for an institution that’s little known on the national stage. Kevin Cummings, chief executive of Investors Bancorp Inc. ISBC, +1.12% beat bigwigs at more dominant players in the industry to be the top-earning bank CEO in 2015, according to an analysis by S&P Global Market Intelligence.
Obama says time to chill, hit the pause button over Brexit hysteria
AP via South China Morning Post
US President Barack Obama cautioned against “hysteria” over the United Kingdom’s vote to leave the European Union last week, saying all of Europe needs to take a breath and reassess how to preserve national identity while taking advantage of political and economic integration.
The Anger Wave That May Just Wipe Out Laissez-Faire Economics
Donald J. Trump and Boris Johnson: Is this how the era ushered in by Ronald Reagan and Margaret Thatcher finally ends? It once looked as though the financial crisis of 2008 might even bring about the end of laissez-faire economics. “The idea of an all-powerful market which is always right is finished,” declared Nicolas Sarkozy, then the president of France. And Peer Steinbrück, Germany’s finance minister at the time, predicted that “the U.S. will lose its status as the superpower of the world financial system.”