Good morning New York,
FT ALPHAVILLE
The QE repo distortion is uncharted territory for funding markets: Scott Skyrm noted on his blog earlier this week that it took only six months of Fed QE purchases to move GC rates from an average of 0.24 per cent in December 2012 to an average of 0.05 per cent this month. There is says Izzy, consequently, a growing distortion in the short-term funding markets, which is clearly one of the first unintended consequences of the QE programmes to surface.
NEWS
Bo Xilai was charged today with several counts of corruption and abuse of office: The former high-flying Chinese politician's dramatic purge last year sparked the most serious political upheaval in the country in decades. The trial, which is virtually certain to have a pre-ordained outcome, is expected to start within weeks and will be closed to the public and media, according to people familiar with the matter. An internal party document indicated Bo would be tried on charges of taking Rmb20m ($3.2m) in bribes via his wife, embezzling Rmb5m, and abusing power, an official said. (Financial Times)(Wall Street Journal)
"RBS is weighing an idea to dispense with its freestanding investment banking operation and to integrate it with the group's corporate banking unit, according to two people familiar with the idea. If enacted, it could prompt the departure of current co-heads of the so-called markets business, Peter Nielsen and Suneel Kamlani, the people said." (Financial Times)
The UK economy grew by 0.6 per cent in the three months to June, in line with analysts' expectations. (Financial Times)
South Korea's economy grew at the fastest rate in more than two years, as consumer spending rebounded and the new government boosted state expenditure. GDP rose 1.1% in sequential seasonally-adjusted terms, or 2.3% year-on-year. (Financial Times)
Barclays close to securing 2014 capital deadline: The bank is close to a deal with regulators to meet a 3% leverage ratio requirement by December next year, in a snub to former BoE governor Lord King, who had argued for an end-2013 deadline. A 2014 deadline would force it to accelerate its original plan to meet the 3 per cent ratio by 2015, though bankers said it would be feasible without radical changes of strategy. (Financial Times)
"The eurozone has delayed its decision on whether to approve its next aid payment for Greece until Friday after Athens failed to fulfill all the conditions it had set out earlier this month." Jeroen Dijsselbloem said Greece needed to adopt promised measures regarding teachers by Thursday for the €4bn payment to be released. Greek officials said a vote on the matter would pass easily. (Wall Street Journal)
US regulators' muni case setback by UBS sentencing: Three of the bank's former muni bond desk employees received much lighter prison terms than the US government sought from a federal judge on Wednesday, a setback in prosecutors' long investigation into rigging of the market. (Wall Street Journal)
'Fabulous Fab' takes to witness stand: "Fabrice Tourre, the former Goldman Sachs banker accused of defrauding investors in a complex mortgage bond known as Abacus, on Wednesday took to the witness stand to defend himself for the first time in court. He pushed back against arguments from the US Securities and Exchange Commission's lawyers that he helped Paulson & Co build a synthetic collateralised mortgage obligation that was designed to fail, and also hid from the deal's investors that the hedge fund was betting against the bond." (Financial Times)
Google announced a $35 streaming TV device. The open protocol device would work with any tablet, smartphone or other device, in a challenge to Apple TV. (Financial Times)
Failed ETF trades surge: "Falling equity markets have resulted in the highest level of failed trades in the $2tn exchange-traded fund (ETF) market for nearly two years " (Financial Times)
China announced a 'mini-stimulus' which, though limited in size, could herald more policy moves to prop up growth. Measures including creating more financing channels to speed up railway construction and tax breaks for small companies and exporters. The target for fixed asset investment in railways has been raised from 650bn to 690bn. (Bloomberg)(Financial Times)
Yuan forwards weaken as Central Bank lowers reference rate: Twelve-month non-deliverable forwards dropped 0.14 percent to 6.2815 as of 4:57 p.m. in Hong Kong, trading at a 2.3 percent discount to the onshore spot rate, which rose 0.02 percent to 6.1347, China Foreign Exchange Trade System prices showed. (Bloomberg)
Facebook beats: Shares leapt as much as 20% in after-hours trade as it reported ad sales rose. (Financial Times)
Markets: The global equity rally is struggling for momentum as lingering concerns about the pace of China's economic growth, alongside a fresh spike in bond yields and mixed corporate earnings, encourages the paring of "riskier" bets. The dollar index is easing 0.1 per cent as the euro adds 13 pips to $1.3214. Gold is barely changed at $1,321 an ounce. The FTSE All-World index is down 0.3 per cent as the FTSE Eurofirst 300 slips 0.2 per cent and after the Asia-Pacific region fell 0.7 per cent. The latter inherited a soft lead from Wall Street on Wednesday, and index futures suggest the S&P 500 will ease another 1 point to 1,685 when trading begins later in the day. The US benchmark index is having difficulty breaching the 1,700 level for the first time, and this reticence seems to be impacting global sentiment writes the FT's Global Markets codebreaker Jamie Chisholm.
