First Impressions
The Out of Options Motorcycle Club to Ride to Miami to Options Industry Conference
John Lothian News (JLN) by John Lothian
The Out of Options Motorcycle Club comes together to raise money by doing a charity motorcycle ride to the options conference. The group is riding for this year is the Babies Heart Fund, which supports the pediatric cardiology division at Columbia where ISE’s Molly McGregor’s son is a patient. She credits them with saving Nathan’s life and says the research they are doing now is simply amazing. The group is also riding for cancer research at St. Jude’s, an equally important cause and an amazing institution.
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***** I gave to both Babies Heart Fund and Futures for Kids yesterday. What can you do?
Quote of the Day
“The capital account convertibility China is seeking to achieve is not based on the traditional concept of being fully or freely convertible. Instead, drawing lessons from the global financial crisis, China will adopt a concept of managed convertibility.”
Zhou Xiaochuan, governor of the People’s Bank of China in the story, ” How the Yuan Could Win Reserve Currency Status Even if the U.S. Objects”.
Lead Stories
There Was Another Huge Move in German Bunds Today
Bloomberg
How big was today’s move in German bunds?
Really, really, really big.
Here’s the jump in yield on the 10-year on an intraday basis—it’s the biggest rise in about two years:
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CME’s Duffy Sounds Off on Gov’t Handling of ‘Flash Crash’ Arrest
By Julia Limitone
CME CEO Terry Duffy is poking holes in the government’s case against trader Navinder Singh Sarao’s arrest in London last week for his alleged role in the ‘Flash Crash’ of May 6, 2010.
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***** Where do you shoot fish? In a barrel of course. The fish that are unaccounted for you can’t see or shoot. The consolidated audit trail for equities is a pipe dream, a very expensive pipe dream. Until equities can show up with real data, futures will continue to be the whipping boy because it is the fish in the barrel with a ready audit trail. What futures orders or trades was it that caused Accenture to trade to one penny? Let’s not turn a blind eye to the catastrophe that was equity trading on the day of the Flash Crash. I am not seeking to deflect attention away from the futures story involving Mr. Sarao, but would like to remind us that there is a much bigger story to what happened that day.
S.E.C. Proposes Rules on Executive Pay and Performance
Dealbook – NY Times
Shareholders in American corporations may soon have an easier way to determine whether a top executive deserved a big bonus.
The Securities and Exchange Commission is proposing rules that would require companies to disclose more details about their top executives’ compensation and the companies’ financial performance.
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Pimco Hires Ben Bernanke as a Senior Adviser
Dealbook – NY Times
Pimco, the global bond giant, said on Wednesday that Ben S. Bernanke, the former Federal Reserve chairman, would become a senior adviser to the firm.
Mr. Bernanke was hired in a similar capacity by the hedge fund Citadel, reflecting what was most likely an intense bidding war for Mr. Bernanke’s services by financial services firms.
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We Thought Our Pay Would Be Higher, Wall Streeters Say in Poll
Bloomberg Business
Ask Main Street about Wall Street and you probably won’t hear this: Banker pay is surprisingly low. But that’s what financial professionals say. Asked whether they earn more or less than they expected when they decided to pursue a finance career, 48 percent of respondents in the Bloomberg Markets Global Poll say compensation is less or much less than they had hoped for.
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This Forecasting Model Just About Nailed the Weak U.S. GDP Number
Bloomberg
If you were surprised by the no-show performance posted by the U.S. economy in the first quarter, you aren’t alone. Economists surveyed by Bloomberg saw gross domestic product expanding at a 1 percent pace in the first three months of the year, much more optimistic than the 0.2 percent rate published by the Commerce Department on Wednesday.
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Assessing the impact of post-financial crisis regulation
Cyrus Amir-Mokri, Skadden Arps Slate Meagher & Flom LLP via Lexology
The financial crisis of 2008 demonstrated that the then-existing financial regulatory system was in need of substantial repair. By any measure, the financial regulatory reform that has followed has been extensive. In areas such as capital and liquidity, derivatives, resolution planning and consumer protection, the change has been sweeping. In the United States, the Dodd-Frank Act itself mandated the regulatory agencies to write almost 400 rules. That number does not include the rules based on international agreements such as the Basel accords on capital and liquidity.
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It’s Always a ‘Great Quarter, Guys!’ If You’re an Equity Analyst
Bloomberg
Almost every quarter is a great quarter, guys.
The earnings conference call is a routine of corporate America. Companies post financial results, and financial analysts dial in to the conference call.
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Shinzo Abe of Japan Avoids Specifics in Speech on Trade Accord
NY Times
Shinzo Abe, in the first address by a Japanese prime minister to a joint meeting of Congress, praised his nation’s “quantum leap” in economic reforms on Wednesday but offered no specific concessions as he appealed to skeptical American lawmakers to back a far-reaching Pacific trade accord.
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E.C.B. Says Loans to Private Sector Rose in March for First Time in 3 Years
NY Times
Bank loans to the private sector rose for the first time in three years, according to data published on Wednesday by the European Central Bank, a signal that stimulus measures might be easing the credit crisis that has been stifling eurozone growth.
Loans to the private sector excluding banks rose 0.1 percent in March compared with a year earlier, the central bank said. It was the first annual increase since March 2012.
The data come amid other signs that the eurozone banking system is finally recovering from a crisis that began in 2008.
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CME loses bid to dismiss members’ case
By LYNNE MAREK, Crain’s Chicago Business
In a court battle instigated by some of its long-time futures exchange members, CME Group lost an early round today when a judge refused to dismiss the case.
Cook County Circuit Court Judge Mary Mikva ruled against the futures exchange operator by rejecting its motion to compel arbitration. Allowing arbitration would have sidelined the case.
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Goldman Sachs’ reported spending on EU lobbying rises 14-fold
Duncan Robinson in Brussels and Tom Braithwaite in New York, FT
Goldman Sachs has revealed a 14-fold increase in the amount it says it spends on lobbying in Brussels after the EU strengthened its disclosure rules.
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Citigroup challenged over ‘opaque’ lobbying at fiery meeting
Ben McLannahan in New York, FT
A ‘Citi’ sign is displayed near Citibank headquarters in Manhattan on December 5, 2012 in New York City. Citigroup Inc. today announced it was laying off 11,000 workers, about 4 percent of its workforce, in a move to slash costs. (Photo by Mario Tama/Getty Images)©Getty
Investors challenged Citigroup executives at the bank’s annual shareholder meeting on Tuesday, expressing concerns over “opaque” lobbying efforts, which contributed last year to a watering down of post-crisis regulatory reforms.
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Majority of banks are investing in new payments technology
ACI-Ovum research
The overwhelming majority of banks, retailers and billing organisations worldwide are currently investing or planning to invest within the next two years into new payment technologies and infrastructure, a global survey by payments provider ACI and Ovum has revealed.
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Hedge Fund Cello Capital Adds Team From Weinstein’s Saba Capital
Bloomberg
Hedge fund Cello Capital Management hired a team of commercial mortgage bond traders from Boaz Weinstein’s Saba Capital Management.
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Central Banks
U.S. Stocks Trim Losses After Thin Fed Statement
MoneyBeat – WSJ
The Federal Reserve did not raise interest rates on Wednesday, and didn’t give any solid indications of when it might increase rates, although it reaffirmed its optimism about the economy and its desire to raise rates. The market took modest solace from it.
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Fed’s downgrade of economic outlook signals later rates lift-off
Reuters
The Federal Reserve downgraded its view of the U.S. labor market and economy on Wednesday in a policy statement that suggested the central bank may have to wait until at least the third quarter to begin raising interest rates.
The Fed’s statement put in place a meeting-by-meeting approach on the timing of its first rate hike since June 2006, making such a decision solely dependent on incoming economic data.
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Yellen May Get No Second Chance at Getting It Right on Fed Rate Hike
Bloomberg
The best-case scenario for the U.S. Federal Reserve’s first interest-rate increase since 2006 is that the economy and markets don’t skip a beat.
It’s the worst-case scenario that troubles Fed Chair Janet Yellen, according to Bank of America Corp. economist Michelle Meyer. In that outcome, central bankers increase rates from near zero only to realize that the world’s biggest economy is too fragile to handle even a small tightening of credit.
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Bankers Shouldn’t Run Central Banks
Bloomberg
The Japanese government did something weird last week, but weird in a good way that other governments should follow. It nominated (drumroll) a new member of its central bank (fanfare) who has actually (fireworks) worked in industry (huge applause, fade to sunset) — namely Yukitoshi Funo, 68, who used to run Toyota Motor’s North American business. Equally surprisingly, the guy he’ll replace later this year is Yoshihisa Morimoto, himself a former executive of Tokyo Electric Power Co.
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Currencies
U.S. senator bent on keeping currency rules out of fast track
Reuters
The chairman of the U.S. Senate committee responsible for trade said on Wednesday he will fight to keep lawmakers from adding tough rules against currency manipulation to legislation meant to ease passage of a Pacific trade pact.
Orrin Hatch, the Utah Republican who heads the Senate Finance Committee, said he wanted the “fast-track” trade legislation to pass the full Senate in its original form. Some lawmakers want to add currency rules and another change that backers of the trade deal have dubbed a “poison pill”.
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U.S. Yields Are Rising and the Dollar Falling. What Gives?
Bloomberg
Global investors’ penchant to take on risk is on the rise, that’s the key to the weakening U.S. dollar, according to Steven Englander, global head of Group of 10 currency strategy at Citigroup Inc.
“Risk appetite is improving as Greek risk diminishes; inflation expectations bounce back; and the fear trade is being unwound,” Englander wrote in a note published Wednesday. “U.S. data and Fed expectations are not helping, but this would not explain why U.S. yields have been going up the last two days, while the U.S. dollar is going down. U.S. yields are being dragged up by global yields, just as they were dragged down.”
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Barclays sets aside further £800m to cover forex probes
Martin Arnold, Banking Editor, FT
A Barclays sign outside a Barclays Plc bank branch on May 8, 2014 in London, England. Barclays announced yesterday that they will cut 14,000 jobs this year across the investment part of their company as part of a new strategy. (Photo by Dan Kitwood/Getty Images)©Getty
Barclays has put aside a further £800m to cover the cost of investigations into manipulation of foreign exchange markets, offsetting a rebound in its investment bank and cutting its quarterly net profits by more than half.
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How the Yuan Could Win Reserve Currency Status Even if the U.S. Objects
WSJ
Will the U.S. back China’s latest bid to make the yuan a global currency? It may not really matter.
Washington’s veto-power at the International Monetary Fund may not apply when the executive board decides later this year whether to include the yuan in the elite basket of currencies that comprise the IMF’s emergency lending reserves.
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Bank of America to Pay $180 Million to Settle Private Forex Lawsuit
WSJ
Bank of America Corp. has agreed to pay $180 million to settle a lawsuit by private investors who accused the bank and others of manipulating foreign-exchange rates.
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Indexes & Index Products
Case-Shiller Home Price Index Climbs Modestly in February
WSJ
Home prices continued to rise modestly in February, according to a report released on Tuesday, a continued upward push in home values which underscores concerns that buyers’ incomes aren’t keeping pace.
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Two Index Fund Studies Remind Us of One Good Strategy
Forbes
Index fund investors let the facts speak for themselves. The long-term data comparing active funds to index funds shows actively managed mutual funds underperform in all asset classes and all investment styles. There is no ambiguity in the results, and there’s nothing new to report here. The data has been saying the same thing for decades.
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Apple sweetens S&P 500 buyback and dividend boom
FT.com
Apple is leading a surge in US companies returning cash to shareholders, with S&P 500 equity investors set to receive a record $1tn from buybacks and dividends this year
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Q1 Earnings Scorecard – S&P 500 vs. Russell 2000
Zacks.com
Apple may be able to achieve double-digit earnings and revenue growth. But the iPhone maker is effectively in a league of its own – The magnitude of Apple’s results has a bearing on the aggregate earnings picture, particularly for the Technology sector. But it’s earnings performance and outlook doesn’t tell us much about what to expect from other operators, even in the Technology sector.
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The Yield-Grab Faucet Remains Open, as Long as Rates Are Range Bound
S&P Dow Jones Indices Indexology Blog
Crude oil has been able to recover from its recent free fall and has stabilized at USD 57 over the week. The stability in oil, with the expectation of prices going higher, has investors changing their view from deflation to an increasing inflationary expectation. The performance of the S&P U.S. TIPS Index does not reflect the current inflation conversation.
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Christian Kronseder Joins STOXX Limited As COO
MondoVisione
STOXX Limited, a leading provider of innovative, tradable and global index concepts, today announced that Christian Kronseder will join the company as chief operating officer (COO), as of May 1st, 2015.
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Gold
Options trader bets millions on speedy gold spike
CNBC
The greenback’s retreat has sent money piling into gold. Now one trader is making a massive bet that bullion will rally more in the next couple of months.
Since testing 12-year highs back on March 13, the U.S. dollar index has fallen 3 percent. In that same time frame, gold has gained almost 5 percent. After disappointing gold bugs for much of the first quarter of 2015, the yellow metal is now 2 percent up for the year.
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Gold falls after Fed does not rule out 2015 rate rise
Reuters
Gold fell on Wednesday, extending the session’s losses after the U.S. Federal Reserve signaled it was taking a meeting-by-meeting approach on when to raise interest rates for the first time since 2006.
Following a two-day meeting, the Federal Reserve pointed to weakness in the U.S. labor market and economy, a sign it is struggling with plans to raise interest rates this year.
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Venezuela in gold swap with Citi
Financial Times
Venezuela has turned to Wall Street to help it secure US dollar funding through its large gold reserves as the country struggles with an economic crisis that has left it struggling to pay for essential items such as food, medicine and even toilet paper.
The country’s central bank has swapped part of its gold reserves for $1bn in cash through a complex agreement with Citi, according to people familiar with the transaction.
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READ MORE: JLN Financials: There Was Another Huge Move in German Bunds Today; CME’s Duffy Sounds Off on Gov’t Handling of ‘Flash Crash’ Arrest; S.E.C. Proposes Rules on Executive Pay and Performance.