Forex volume slows, carry trades less profitable

The $4 trillion-a-day foreign-exchange market is losing confidence in central banks’ abilities to boost a struggling world economy.

Rather than sparking bets on growth, the JPMorgan Chase & Co. G7 Volatility Index, which more than doubled in 2007 to 2008 before policy makers employed extraordinary measures to address faltering global expansion, has dropped to a five-year low. While small foreign-exchange swings historically favor the strategy of borrowing in low-yielding currencies to buy those with higher returns, a UBS AG index that tracks profits from the so-called carry trade has fallen to the lowest level since 2011.


Average daily volume in foreign exchange fell 39 percent in September from a year earlier, according to data from ICAP Plc’s EBS trading platform. That’s also harming currency managers’efforts to boost returns.

http://www.bloomberg.com/news/2012-10-21/worst-carry-trades-show-central-banks-reaching-stimulus-limits.html 

Swiss Banks Shun Yanks

When Scott Schmith finally got his Swiss passport last month, it was time for him to take a drastic step: hand back his American one.

Among the reasons was a pending U.S. regulation aimed at tracking down tax cheats that is making life difficult for some Americans abroad. These expatriates say that foreign banks, which have expressed concern about compliance costs and potential penalties for failing to report on their American clients, are turning away their business.

http://online.wsj.com/article/SB10000872396390444592704578062570295543436.html?mod=WSJ_hp_LEFTWhatsNewsCollection

EU summit: France says bank deal helps eurozone fusion

The French president says a deal to start building a banking union on 1 January will enable the eurozone to speed up economic integration.

"Thanks to this we can advance more quickly and with more assurance," Francois Hollande said in Brussels.

He was speaking after EU leaders agreed to set up a single banking supervisor for the 17-nation eurozone - a key step towards a banking union.

But Mr Hollande also said EU states "need different speeds" of integration.

"We should have a council of the eurozone to meet on a regular basis... We need different speeds - that's agreed by everyone now, and there are even some moving backwards," he told a news conference.

Germany's Chancellor Angela Merkel insisted again that "quality takes precedence over speed" in setting up the banking union.

http://www.bbc.co.uk/news/world-europe-20005100?print=true

EES: Is Google Error a sign of things to come

A Google (GOOG) earnings report that was released early caused the stock to drop by 9% today, and shares were subsequently halted. As of 1:25 p.m. ET, Bloomberg reported that Google has blamed the early release on it's printer R.R. Donnelley (RRD), whose stock is also down on the news.

http://seekingalpha.com/article/933031-is-google-error-a-sign-of-things-to-come

Stocks Dip; Google Halted After 9% Drop

Stocks drifted lower again Thursday as techs dragged sharply following Google's surprise earnings announcement that disappointed investors.

Google shares were halted following a 9-percent plunge after the search-engine giant unexpectedly released its earnings report in midday trading. The company posted earnings of $9.03 a share on revenue of $11.33 billion, missing expectations for $10.65 a share on sales of $11.86 billion. The company was scheduled to post after the closing bell.

http://www.cnbc.com/id/49461731

More research:

http://www.zerohedge.com/news/2012-10-18/google-reports-early-huge-miss-sends-stock-plunging

http://www.zerohedge.com/news/2012-10-18/165-hedge-fund-suddenly-cried-out-terror-and-were-suddenly-silenced

U.S. Dollar Index Disguises Global Inflation Threat

When the U.S. Dollar Index peaked at 120.51 in January of 2002, few suspected that it was on the brink of a one-directional correction that would ultimately erase a third of its value. In fact, in just three short years, the dollar index shed, on average, a point a month before ultimately hitting a low of 80.77 in January of 2005. This sharp decline in the dollar index coincided with, and largely fueled, the first few years of the now decade-old bull market in gold.

http://www.marketoracle.co.uk/Article37053.html

EES: US Dollar Carry Trade Portfolio

This article will explain how to take advantage of the Fed's QE Infinity policy. It assumes that over the long run, the USD will decline most significantly against emerging market and high interest yield currencies. We will explore a few options how to execute this model U.S. Dollar carry trade portfolio.

Read More:  http://seekingalpha.com/article/924091-usd-carry-trade-portfolio

The Inflation Monster

Central banks are currently flooding cash-strapped industrialized nations with money. This may help governments reduce their debt load, but it also erodes the value of people's savings. A massive redistribution of wealth is threatening to take place in Germany and Europe -- from the bottom to the top.

Germany's central bank, the Bundesbank, has established a museum devoted to money next to its headquarters in Frankfurt. It includes displays of Brutus coins from the Roman era to commemorate the murder of Julius Caesar, as well as a 14th-century Chinese kuan banknote. There is one central message that the country's monetary watchdogs seek to convey with the exhibit: Only stable money is good money. And confidence is needed in order to create that good money.
The confidence of visitors, however, is seriously shaken in the museum shop, just before the exit, where, for €8.95 ($11.65) they can buy a quarter of a million euros, shredded into tiny pieces and sealed into plastic. It's meant as a gag gift, but the sight of this stack of colorful bits of currency could lead some to arrive at a simple and disturbing conclusion: A banknote is essentially nothing more than a piece of printed paper.
It has been years since Germans harbored the kind of substantial doubts about the value of their currency that they have today in the midst of the debt crisis. A poll conducted in September by Faktenkontor, a consulting company, and the market research firm Toluna, found that one in four Germans is already trying to protect his or her assets from the threat of inflation by investing in material assets, for example.

http://www.spiegel.de/international/europe/how-central-banks-are-threatening-the-savings-of-normal-germans-a-860021-druck.html 

Global financial risks have increased, says IMF

Risks to global financial stability have increased in the past six months despite efforts by policymakers to make the financial system safer, according to the International Monetary Fund.

It said little progress had been made in making the system more transparent and less complex, and that confidence in it had become "very fragile".

http://www.bbc.co.uk/news/business-19888996?print=true

Mysterious Algorithm Was 4% of Trading Activity Last Week

A single mysterious computer program that placed orders — and then subsequently canceled them — made up 4 percent of all quote traffic in the U.S. stock market last week, according to the top tracker of high-frequency trading activity. The motive of the algorithm is still unclear.

The program placed orders in 25-millisecond bursts involving about 500 stocks, according to Nanex, a market data firm. The algorithm never executed a single trade, and it abruptly ended at about 10:30 a.m. Friday.

http://www.cnbc.com/id/49333454

BUSTED: Mario Draghi And ECB VP Caught On Microphone Joking About Whether Their Words Will Move Markets

At the conclusion of the Q&A following last week's ECB press conference, ECB president Mario Draghi and vice president Vítor Constâncio forgot to mute their mics before sharing the following exchange:

• Draghi: "Well, I don't think, there shouldn't be any market reaction."
• Constancio: "No, no."
• Draghi: "I guess, no? If there is, I don't know what to say."
• Constancio: "No, no."
• Draghi: "It's more boring..."
• Constancio: "No, markets were not expecting much…"
• Draghi: "Ok."

Trust them – they know what they're doing.

Read more: http://www.businessinsider.com/mario-draghi-ecb-live-microphone-2012-10#ixzz28jty9qsQ

Spending Cuts No Longer Yield Earnings Growth for U.S. Companies

Profit gains earned through job cuts and factory closings in the absence of a global economic recovery are starting to reach their limit.

Third-quarter profits and sales for the Standard & Poor’s 500 Index (SPX) probably fell in unison for the first time in three years, according to analysts’ estimates compiled by Bloomberg. Per-share earnings may have dropped 1.7 percent on average after they were little changed in the second quarter. Sales may have slipped 0.6 percent, the data show.

While most companies plan to keep a lid on spending, lower expenses aren’t leading to the same kinds of increases they reported earlier this year. Hewlett-Packard (HPQ) Co., the world’s largest personal-computer maker, already forecast full-year profit that trailed analysts’ estimates, FedEx Corp. (FDX) cut its annual earnings forecast and Intel Corp. (INTC) projected lower third- quarter sales, with all three citing softening demand.

“A lot of the earnings growth that we’ve seen has been related to cost reductions,” said Peter Jankovskis, co-chief investment officer for Oakbrook Investments in Lisle, Illinois, which manages more than $3 billion. “Now many of those cost reduction efforts have run their course. Without revenue growth, there is no room for profit to expand further.”

Alcoa Inc. (AA), the largest U.S. aluminum maker, kicks off the third-quarter earnings season tomorrow and is projected by analysts to report a 13 percent drop in sales, the biggest drop in three years, on plunging prices for the commodity. That may wipe out per-share earnings, according to estimates.

http://www.bloomberg.com/news/print/2012-10-08/spending-cuts-no-longer-yield-earnings-growth-for-u-s-companies.html

Jack Welch says White House manipulates data, Krueger admits

Former General Electric Co. (GE) Chief Executive Officer Jack Welch, writing on his Twitter account, accused the Obama administration of manipulating U.S. employment data for political advantage.

http://www.bloomberg.com/news/2012-10-05/former-ge-ceo-jack-welch-says-white-house-manipulates-jobs-data.html

“No serious person would question the integrity of the Bureau of Labor Statistics,” Krueger said in the Bloomberg Television interview. “These numbers are put together by career employees. They use the same process every month. So I think comments like that are irresponsible.”

Forex volume slows first time in 6 years

Growth is slowing down for the first time in six years, according to a report prepared by analyst Sreekrishna Sankar.

Despite a widespread shift to electronic trading in the past decade and the emergence of technical platforms that cater to institutions, near-zero interest rates and fears of recession in many parts of world are causing banks and asset managers to pull back from foreign exchange trading. 

The result: Volume is at $4.3 trillion a day this year, down from peak of $4.7 trillion in October, Celent says.

This remains above 2010 levels. But the only country where volumes are up is the United States, which is showing what Celent calls a “minimal increase.” All other parts of the world are showing a drop in volume from 2011.

Economic crises in Eurpe and elsewhere are slowing FX growth. The biggest drop is in spot markets, Celex said. That is where investors had begun to treat foreign currencies as a new asset class, representative of the strength of different economies.

http://www.tradersmagazine.com/news/institutions-pull-back-from-fx-trading-110369-1.html

Black market currency traders fight riot police in Tehran as rial drops by 40 percent

TEHRAN — Clashes and at least one spontaneous protest erupted in Tehran on Wednesday over the plunging value of Iran’s currency, as black-market money-changers fought with riot police who were dispatched to shut them down, and hundreds of angry citizens demonstrated near the capital’s sprawling merchant bazaar, where many shops had closed for the day. The official media reported an unspecified number of arrests including two Europeans.

http://www.reuters.com/article/2012/09/28/us-cftc-positionlimits-idUSBRE88R1C120120928