First Impressions

Exchange CEO Series – Expanding Metal: LME’s Garry Jones tells a Hong Kong growth story

Garry Jones is no stranger to exchange competition. Now the CEO of the London Metal Exchange, which was acquired by the Hong Kong Exchanges & Clearing (HKEx) last year, Jones been in the exchange, trading platform and derivatives dealer space for decades.

The LME deal represents a new set of opportunities, he said.

“Hong Kong’s acquisition of the LME was interesting, because for them it was the first real push into a new asset class,” Jones told Jim Kharouf, John Lothian News’ editor-in-chief at the FIA Boca Conference last month. “They bought the LME because of the strong franchise in metals but also as a bridgehead into Asia as well.”

He said that kind of M&A is moving exchanges out of their core areas and into new areas. “I think most exchanges realize that in order to grow at a particular rate, you have to do it not just organically, but by acquisition.”

Watch the video »

Quote of the Day

I believe that having a real interest rate at zero when the funds rate is at 2% and when inflation is at target and unemployment is close to 5% is a dangerous place for monetary policy to be.

Philadelphia Fed President Charles Plosser, in the MNI article “Fed’s Plosser: Zero Rate Dangerous if Unemp Dwn,Infl on Target “

Lead Stories

Will the Fed rock the boat again?
Whether they reveal anything new or just nuance, the minutes from the Fed’s last meeting will be a major highlight of the trading week when they are released Wednesday afternoon. Traders are watching to see if the minutes take on a more hawkish tone, particularly after Fed Chair Janet Yellen said during her March 19 press briefing that the Fed could start raising short-term interest rates about six months after ending its bond-buying program, expected in the fall.

***DA: I think the market has priced in what was said in March.

Fed’s Plosser: Zero Rate Dangerous if Unemp Dwn,Infl on Target
Philadelphia Federal Reserve Bank President Charles Plosser said Tuesday it would be “dangerous” to leave interest rates unchanged at a historically low level if the jobless rate falls near 5% and the inflation rate is near the Fed’s target of 2%.

***DA: I would say the ZIRP is dangerous either way.

ECB ready to act if needed, but new measures bring risks: Weidmann
The European Central Bank stands ready to act if needed to stop euro zone inflation getting stuck at low levels, though any new measures would bring risks that must be carefully assessed, Bundesbank chief Jens Weidmann said.

***DA: The verbal attack on deflation is intensifying.

Draghi Hunts for QE Assets in ‘Dead’ Market
Mario Draghi’s asset-purchase plan to ward off deflation may be lacking one key element: enough assets to buy.

***DA: If one is indifferent to price, it’s amazing how many assets come available. The question will be, as it is in the U.S., is whether pushing down long rates will help spur commercial activity.

DealBook: Banks Ordered to Add Capital to Limit Risks
by By PETER EAVIS, New York Times
The requirement could force the eight biggest banks in the United States to find as much as an additional $68 billion to put their operations on firmer financial footing, according to regulators’ estimates.

Taking the red pill, Greece edition
FT Alphaville
Here’s where another EUR 2bn or so of freshly-issued Greek bonds would go. Click for chart via Citi). And that’s after the largest sovereign debt restructuring in history. Bracing isn’t it?

Ukrainian Crisis Is Threatening Russian Economy, Says Fitch
Wall Street Journal
The Ukrainian crisis is denting Russia’s chances of a long-term economic recovery, having already spurred capital flight from the country, Fitch Ratings said Wednesday.

Shorting rates for fun and profit
FT Alphaville
So, dear sceptic, you think that interest rates will go higher. Prices for debt will fall, meaning a wonderful opportunity to bet on what must occur. Easy. Except it turns out that trading a bear market in bonds is hard.

Central Banks

Spotlight on economy: A chance to read the Fed tea leaves on Wednesday
MarketWatch Sometimes you have to look in the rearview mirror to figure out where to steer the car next. That’s what investors will do Wednesday when the Federal Reserve releases a summary of what its top officials discussed at their last big meeting in March. The Fed voted to scale back its bond-buying stimulus program, known as quantitative easing, for the third straight time to $55 billion a month.

***DA: When making trading decisions, I try to avoid tea leaves. Lunar cycles are another story.

Why do Pianalto’s economic views as a centrist matter to the Fed?
Market Realist
The speech by the Cleveland Fed President Sandra Pianalto at the University of Dayton’s RISE forum in Ohio on March 26 highlighted her views on the evolution of the monetary policy since the beginning of 1930—the time Federal Reserve began conducting the “monetary policy.” The monetary policy is framed to control the supply of money and short-term interest rates to influence economic growth and inflation.

ECB dismisses latest bank appeal over health-check deadlines
The European Central Bank has dismissed the latest appeal by the region’s biggest lenders for concessions, including easier deadlines, to make rigorous health checks of their industry less logistically onerous, sources told Reuters.

France Should Not Hold the ECB, EU Hostage: Schulz [VIDEO]
Christian Henning Schulz, Senior Economist at Berenberg, discusses the increasingly divergent views of the Fed and the ECB, and the impact of France and Italy on Europe overall. He speaks on Bloomberg Television’s “On The Move.”

No sign of deflation: ECB member
Business Spectator
There is currently no sign of deflation in the eurozone, European Central Bank Governing Council member Josef Bonnici said Tuesday. Recent negative readings of inflation have mainly been limited to a handful of stressed countries, the central banker said in opening remarks to the Central Bank of Malta’s annual report. Mr Bonnici is also governor of the central bank for the island nation.

Ireland breached EU rules on IBRC liquidation – ECB
The Independent
IRELAND breached EU rules by failing to consult the European Central Bank (ECB) in advance about the law to liquidate IBRC and replace its debts to the Central Bank. The deal, which allowed for the tearing up of the so-called Anglo Irish Bank promissory notes, also raised concerns at the ECB about ‘monetary financing’, the ECB said.

Bank of Japan holds off additional monetary easing
Daily Times
The Bank of Japan on Tuesday painted an upbeat picture of the world’s number three economy and stood pat on its monetary easing programme as it assesses the impact of a controversial sales tax rise.

IMF cuts Japan growth forecast, warns over ‘Abenomics’
Global Post
The International Monetary Fund on Tuesday cut its 2014 growth forecast for Japan and warned that Prime Minister Shinzo Abe must follow through on promised reforms to cement a turnaround in the world’s number-three economy.


FX industry to conduct workshop on options clearing
by Joel Clark, Euromoney
Senior represenatives from banks, clearing houses and CLS will meet in London on April 24 as pressure grows to find a workable mechanism for central clearing of forex options.
Industry efforts to begin central clearing of over-the-counter (OTC) foreign-exchange options in line with new regulation are finally gathering pace after several false starts, with a workshop due to take place later this month at which key stakeholders will attempt to jointly determine a way forward.

Is it time to go long all currencies?
IG Group
The S&P and the Dow also broke its four-day downtrend, which will see support for the broader market, particularly the information technology space. What was interesting overnight was the USD weakness. The dollar index lost 0.6% but it was the movements against the EUR, JPY, GBP, AUD, BRL and CAD that are really interesting. Why this is interesting is that going long in each of these cases including the USD is compelling.

ECB’s Bonnici Says Bank Will Take Rising Euro Into Account
Wall Street Journal
The European Central Bank could be forced to act should the euro strengthen further, and could use a variety of instruments to do so, including an asset-purchase program known as quantitative easing, a member of its governing council signaled.

Why you should care about Bitcoin: digital currency is here to stay
The Guardian
Like a still obscure version of online dollars, bitcoins – or something like them – are here to stay and redefining money.

The Coming Currency Clash in Asia
Before the global financial crisis, the strange phenomenon of “uphill” capital flows—money moving out of middle-income economies and into richer ones—garnered considerable attention. While private capital was flowing in the opposite direction, net flows were driven by emerging markets’ accumulation of foreign exchange reserves, mostly stashed in the government bonds of advanced economies.

India’s Foreign Exchange Reserve Cushion Grows
Wall Street Journal
India’s foreign exchange reserves have jumped up in recent months to end last fiscal year at one of their highest levels ever, giving the country a substantial cushion to protect it from the end of the United States’ easy money policy and other shocks.

Indexes & Index Products

Nasdaq OMX partners with Chaikin Analytics to launch enhanced alpha indices
Simon Smith – ETF Strategy
Nasdaq OMX, a leading exchange group and index issuer, has teamed up with Chaikin Analytics, a provider of equity analytics, to launch the Nasdaq Chaikin Power Indexes, a range of rules-based, quantitatively-enabled US equity strategy indices.

VXST Options to Launch April 10 – By Matt Moran
Matt Moran,
April 8, 2014 – CBOE plans to launch options on the CBOE Short-Term Volatility Index (VXST) on Thursday, April 10. Below are points that can help in your analysis.

4 charts to make you smarter about ‘smart beta’ ETFs
Victor Reklaitis – MarketWatch
Smart beta ETFs. Alternatively-weighted ETFs. Indexing 2.0. Whatever you want to call this trend in exchange-traded funds, it’s attracting more investor dollars.
These ETFs offer a twist on index-based investing, a decades-old approach that’s epitomized by well-established products like the SPDR S&P 500 ETF.


Russia’s Polyus Gold to consider London delisting – report
Russia’s biggest gold miner Polyus Gold is considering delisting from London, Kommersant newspaper said on Wednesday, which would make it the first Russian company to heed a call by officials to bring assets home to survive Western sanctions.

***DA: Sanctions against Russia are proving to be vastly different than, say, Cuba or Iran.

5 Reason Gold Volatility Has Dramatically Declined
Tommy Humphreys –
Volatility in the Gold market, both realized and implied, has dramatically declined during the past year as evidenced by the following two charts:
Why the sudden reduced volatility in gold? And what clues does this offer us about what might be next for gold?

Gold and the Ideal Buy Point
Justin Smyth – GoldSeek
Next month marks the 3-year anniversary of the bear market in silver that started in May 2011. Later this summer we will hit the 3-year anniversaries of the bear markets in gold and gold stocks. We are now psychologically conditioned for pain and punishment in the gold markets and to beware of the next downward plunge.

***DA: To a gold bug, the ideal time to buy is always the same: RIGHT NOW!

Daily Nugget: Gold Experts Are Bearish
Despite a sharp jump in equities and low demand in China, the gold price jumped up by 1% this morning thanks to technical buying post rising above $1,300. Safe haven demand, due to events in the Ukraine, continues to support the price after rallies following NFP data fizzled out. Silver and the PGMs also climbed by about 1%.

World’s largest single crystal of gold identified
The world’s largest single crystal of gold, weighing 217.78-grammes, has been verified by US experts. The crystal is worth an estimated USD 1.5 million, and was found in Venezuela.
Researchers at Los Alamos National Laboratory used a neutron scanner to effectively look inside the 217.78 gramme piece of gold, roughly the size of a golf ball.

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