First Impressions

Connecting: HKEx’s Li Said It Will Help Connect To China’s Trillions

Hong Kong Exchanges and Clearing is all about connecting. HKEx’s CEO Charles Li says his exchange is the linchpin that connects mainland China’s markets with the rest of the world.

Li, who spoke with John Lothian News editor-in-chief Jim Kharouf at the FIA Boca conference, said his exchange is about strategic positioning with China and taking advantage of the explosive growth it sees, especially with the London Metal Exchange firmly integrated into its business.

“Our job is to find a way to make that connection,” Li said, of China, “the largest pool of capital that is yet to be globally deployed.”
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Quote of the Day

“The ECB can never be insolvent. The consolidated eurosystem, which legally doesn’t exist, could only go broke if either it had large numbers of foreign currency denominated or index linked liabilities which they don’t, or if they decide for some reason, should they make enormous losses, that they’re not going to issue enough base money to pay their bills because this would threaten inflation. So, only if they choose price stability over existence.”

Willem Buiter, Citi’s chief economist and former BoE MPC member in the story, “Buiter on why the ECB as a whole can’t go bust”.

Lead Stories

Tesla Stock Moves on April Fools’ Joke
MoneyBeat – WSJ
Tesla announced it is creating a rival to the Apple Watch, dubbed the Model W, in a tweet Wednesday. But… it was a joke. April Fools!

One Economist Just Delivered a Scathing Indictment of the New Greek Government
Holger Schmieding, chief economist at Berenberg, sure knows how to start a client note.
He is scathing on the damage he sees brought to the Greek economy by the election of the Syriza government.
He used this chart to illustrate his point: the collapse in Greek corporate confidence coincides with the election of the Syriza government.

Emerging markets: The great unravelling
Financial Times
Faced with recession, decade- high inflation, a fiscal crisis and water rationing, more than 1m Brazilians took to the streets last month to protest against corruption and mismanagement in their government. In China, growth is slowing as property prices fall, propelling more than 1,000 iron ore mines toward financial collapse. The patriotic citizens of Russia, meanwhile, are deserting their nation’s banks, switching savings into US dollars.

No Joke, U.S. Treasuries Tend to Rally in the Month of April
by Wes Goodman, Bloomberg
Treasuries tend to rally in the month of April.
U.S. government securities have advanced in the period every year from 2010 to 2014, according to data compiled by Bloomberg.

Comment: Mifid II needs to uphold spirit of reform
Michael Spencer, Xavier Rolet and Hans-Ole Jochumsen, FT
The clock is ticking on the implementation of Mifid II and reforms set to transform the European financial landscape.

U.S. Says HSBC Needs to Step Up on Compliance
Dealbook – NY Times
HSBC, the giant British bank that reached a multibillion-dollar settlement to resolve accusations of money laundering, still has a long way to go to root out the problems, federal prosecutors say.
The criticisms, gleaned from a 1,000-page report prepared by an independent monitor, were disclosed on Wednesday in a federal court filing.

Silicon Valley Bank Strengthens Its Roots
Dealbook – NY Times
While Wall Street banks scramble to stake claims in the booming technology industry, they are finding a smaller one already firmly entrenched.
Silicon Valley Bank has maintained a dominant position among start-ups and venture capitalists in one of the most promising and lucrative corners of the United States economy. By the bank’s count, it serves 65 percent of all existing start-ups and many of the most prominent venture capital firms.

Bank of America at center stage in U.S. top court bankruptcy case
As the U.S. Supreme Court on Wednesday considered the case of a Massachusetts homeowner battling his mortgage lender over a bankruptcy plan, several justices focused their attention on his unlikely ally: Bank of America Corp.
Bank of America, one of the largest U.S. banks, filed a friend-of-the-court brief in support of Louis Bullard, who owes community bank Blue Hills Bancorp Inc $387,000 for the mortgage on a property in the town of Randolph.

China Enters Stock Frenzy as Rookie Traders Open Record Accounts
by Ye Xie, Stephen E Stapczynski, Belinda Cao, Bloomberg
To get a sense of the frenzy in China’s world-beating equity market, consider this: In a two-week span last month, the rally lured 2.8 million rookie stock pickers, almost the equivalent of Chicago’s entire population.

Allston Said to Face CFTC Probe Into Alleged Manipulation
by Matthew Leising, Silla Brush, Bloomberg
High-frequency trading firm Allston Trading LLC is under investigation by the U.S. Commodity Futures Trading Commission for alleged market manipulation, according to a person familiar with the matter.

EU presidency wants to ditch ban on proprietary trading at banks
European Union plans to ban banks taking market bets with their own money should be scrapped to avoid crimping the flow of funds needed for economic recovery, an EU document showed on Tuesday.

Another Politician Wants to Ban Insider Trading
By Matt Levine, Bloomberg
Why is insider trading illegal? I think there are two main theories:
It is unfair: You shouldn’t trade if you have information that everybody else doesn’t have.
It is theft of information: Companies own their inside information, and you shouldn’t take their information and use it for your own profit.The first theory is far more popular but obviously wrong. Honestly you should only trade if you have information that everybody else doesn’t have. The (social) point of trading is to get information incorporated into market prices. If you have no information to incorporate into the price, you’re not doing anyone any favors by trading. Least of all yourself: If you only have the same information as everyone else, how are you going to make any money? Just index.

UBS Shareholders to Vote for First Time on Executive and Board Pay
Dealbook – NY Times
UBS said on Wednesday that its shareholders would, for the first time, vote on the compensation of its directors and its top executives at its annual meeting in May.
The Swiss bank has previously held advisory votes by shareholders on its prior fiscal year’s compensation report at its annual meetings, but this year will be the first time that shareholders will be asked to directly approve pay for executives.

Pay pops for CME’s CEO and chairman
By LYNNE MAREK, Crain’s Chicago Business
The top two executives at CME Group, which operates the biggest futures exchange in the world, got 25 percent-plus raises last year as the company’s trading volumes and stock price climbed.

Morgan Stanley’s James Gorman Gets 25% Raise
Dealbook – NY Times
Morgan Stanley’s chief executive, James Gorman, received a 25 percent raise for 2014, bringing his total compensation to $22.5 million.
The bank said in a regulatory filing on Wednesday that Mr. Gorman’s pay package was justified by his success in reducing the bank’s reliance on risky trading activities and cutting costs across the company.

Citadel Securities Hires Senior Swaps Executive in Europe
Citadel Securities, the market-making arm of Chicago hedge fund giant Citadel LLC, said it hired a senior swaps executive in Europe, as it looks to build its presence in off-exchange traded markets.
A Citadel spokesman said Simon Holmes joined Wednesday from ICAP PLC, where he was chief operating officer of the brokerage firm’s electronic interest-rate swaps trading platform in the U.S., called i-Swap.

Central Banks

Goldman economist says Fed hike likely late 2015 or early 2016
Goldman Sachs (GS.N) Economist Jan Hatzius said on Wednesday he believed the Federal Reserve will likely raise interest rates late this year or early next year, given the amount of slack still present in the labor market.

Buiter on why the ECB as a whole can’t go bust
Financial Times
Citi’s chief economist and former BoE MPC member Willem Buiter is worried that the ECB’s new profit-and-loss sharing stance on National Central Bank asset exposures risks transforming the 19 NCBs of the eurosystem into a glorified currency board.

Fed’s Lockhart sticks with June to September liftoff, despite growth downgrade
Atlanta Federal Reserve bank president Dennis Lockhart said on Wednesday that the United States remains on track for a likely interest rate hike in the June to September period, with a weak first quarter likely to give way to stronger growth.
“The weakness of the first quarter got my attention. I still believe the factors are transitory,” Lockhart told reporters at a monetary policy conference here. “We will see a pick-up.”

Congress wants more answers on possible Fed leaks
U.S. lawmakers want additional answers from the Federal Reserve about published reports on the details of market-sensitive policy deliberations in 2012.
Some members of Congress have indicated in recent days they are unsatisfied with a March 23 Fed memo summarizing its internal probe of the matter, which found no major breaches of communication.

Central Banking Refuted In One Blog- Thanks Ben!
Seeking Alpha
Blogger Ben’s work is already done. In his very first substantive post as a civilian he gave away all the secrets of the monetary temple. The Bernank actually refuted the case for modern central banking in one blog.
In fact, he did it in one paragraph.

European Central Bank Lifts Ceiling on Greek Emergency Loans
The European Central Bank on Wednesday increased the amount of money Greek banks can borrow under an emergency lending program, extending a lifeline for the country’s banks as its government continues tense negotiations with its creditors over its bailout program.

Greek exit would leave eurozone central banks with a large hole to fill
A GREEK departure from the euro could expose the European Central Bank (ECB) to losses on tens of billions of credit, a hole Germany and other euro members may have to fill.
As political wrangling with Athens freezes access to loans from eurozone states, Greece has been drawing heavily on the ECB, running up an ever larger tab. The Greek government insists it will remain a eurozone member but the uncertainty has prompted the ECB to examine the effect of a possible “Grexit”, people familiar with the matter say, uncovering a big potential bill for the ECB and the states that underpin it.


Forex reserves in emerging markets begin to shrink
James Kynge and Jonathan Wheatley, FT
Foreign currency reserves in emerging markets fell last year for the first time in two decades, as developing economies found themselves beset by waning competitiveness, capital outflows and concerns over US monetary policy.

Jack Lew: China’s currency is not ready for prime time
U.S. Treasury Secretary Jack Lew said Tuesday that China’s yuan is not yet ready to join an elite grouping of currencies used by the International Monetary Fund.

Rousseff Rules Out Currency Intervention After Real’s Tumble
Brazil will let the real fluctuate freely and doesn’t intend to intervene in the market to defend the currency, President Dilma Rousseff said.
“What we are doing is a policy of floating currency, and we’ll continue to do that,” she said in an interview at the presidential palace in Brasilia on Tuesday.

The Hottest Currency On The Internet (That You Probably Aren’t Investing In)
With the simplicity of PayPal transaction buttons and simple-scripts installs to set up an entire eCommerce platform on your site, making money online is certainly one of the top entrepreneurial trends of the new century.
You don’t even have to be Mark Zuckerberg to make it happen.
As with any trend, however, eventually saturation points are met, and it seems everywhere you go online, there’s a button asking to you to buy something.

Indexes & Index Products

Investors Across the Globe Join the Party
Stocks in the U.S. and big global markets ended March on a down note, but investors had plenty to celebrate during a quarter marked by records broken around the world.
At least 17 stock indexes set fresh highs as easy-money policies from major central banks and signs of stability in some troubled economies helped lift prices to new highs, including in the U.S., the U.K, Germany and India. Some 29 more hit their highest levels going back a year or more. These winners included markets in Japan, France and Spain.

Nasdaq Quarterly Streak Sets Record Even as High Proves Elusive
While the Nasdaq Composite Index has hit a wall trying to reach its all-time high from 15 years ago, it just ran off a streak of success it never managed even during the Internet bubble.
Even with Tuesday’s 0.9 percent drop, the 44-year-old equity gauge ended the January-to-March period with a 3.5 percent gain — extending the number of quarterly advances to nine. Increases of 13 percent or more in Apple Inc. and Biogen Idec Inc. helped lift the Nasdaq within 1 percent of its record three times in the quarter.

NYSE Arca exchange glitch hampers trading in popular ETFs
Intercontinental Exchange Inc’s NYSE Arca had a technical glitch on Tuesday that resulted in some of the most popular exchange-traded funds being temporarily unavailable for trading and some investors paying more for stocks than they otherwise may have.

Smart Beta Safe? Regulators Set Sights on New Indices
Chief Investment Officer
The popularity of “alternative beta” strategies has begun to attract the attention of financial watchdogs on both sides of the Atlantic.
US and European regulators are beginning to scrutinize smart beta products, as the sector continues to gain popularity.

HKEx Prepares Its First Mainland Chinese Equity-Index Futures
by Eduard Gismatullin, Bloomberg
Hong Kong Exchanges & Clearing Ltd. plans to offer its first mainland Chinese equity-index futures later this year as the bourse expands its derivatives business.


India hikes import tariff on gold, silver
DNA India
The increase in tariff value on imported gold has been notified by the Central Board of Excise and Customs, according to an official statement. The government today raised import tariff value on gold to USD 385 per 10 grams and silver to USD 543 per kg, taking cues from firm global price trends.

Gold seizure at int’l airport sees 173pc jump last fiscal
Anjali Lukose, Indian Express, Mumbai
The Chhatrapati Shivaji International Airport (CSIA) has seen a 173 per cent jump in gold seizures by Customs officials in financial year 2014-15 from fiscal 2013-14, with 943 kgs of gold having been seized. This figure is the highest among airports in the country. Seizures of gold at the airport in 2013-14 was 346 kg, while it stood at 64 kg in 2012-13.

Gold & Copper Traders Looking At Diverging Central Bank Action » Fx Empire Network
FX Empire
Gold traded April on a down note as geopolitical stress and central bank action kept precious metal traders on the edge throughout March. Gold is trading on the first day of the month at 1187.60 while silver ended at 16.682. Gold closed the month well above its monthly trading range while silver remains near the bottom of its range.

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