Shocks & Stares » downgrade http://blogs.hillandknowlton.com/shocksandstares H&K\'s Financial & Professional Services Team Blog Tue, 19 Mar 2013 08:00:56 +0000 http://wordpress.org/?v=2.9.2 en hourly 1 Euro 2012: Fifa vs. Moody’s http://blogs.hillandknowlton.com/shocksandstares/2012/02/euro-2012-fifa-vs-moodys/ http://blogs.hillandknowlton.com/shocksandstares/2012/02/euro-2012-fifa-vs-moodys/#comments Thu, 16 Feb 2012 17:10:12 +0000 nwoods http://blogs.hillandknowlton.com/shocksandstares/?p=541 It’s 2012, another year in which I can gorge upon a feast of world class sport. The Olympics, the Paralympics, the European Championships and god forbid another failed attempt by Andy Murray to win Wimbledon. The UK may be nearing a ratings agency downgrade but it’s not all bad and a glorious summer awaits.

I wonder what it’s like working in the City when a major sporting event is on. With targets to hit, demanding clients, every pound and every move under scrutiny, I bet they never get chance to scream “REF!!!!” across the trading floor.

Euro 2012 kicks off in 2012 but with ECB research showing inattentive trading during national football matches what impact for the Eurozone? (Image:Euro2012media.com)

Interesting then, that according to the latest bit of research from the European Central Bank, that’s exactly what happens. Its White Paper “The pitch rather than the pit – Investor inattention during FIFA world cup matches” looks at trading data during 2010 World Cup matches and draws some interesting conclusions. My favourite excerpts from the three key findings include:

First, we find strong evidence of decreased activity in stock markets during soccer matches at the 2010 World Cup. Trading activity dropped markedly, especially if the national team was one of the competitors. Compared to normal market circumstances, the median number of trades dropped by 45% if the national team was playing, while the volume dropped by around 55%.”

“Second, we show how goals scored by either team led to an even stronger decline in the number of trades and offered quotes. Also, we find that market activity was already significantly below the benchmark right before the match started, and continued to be lower during the 45 minutes after the match had ended”

 “Third, we show that also price formation was affected during the soccer matches, as the evolution of returns on national markets decoupled from those on global markets.”

Worrying stuff indeed! We all know that lots of research points to the financial benefits of hosting a major sporting event such as the Olympics or World Cup but does this latest study suggest a potential economic threat caused by investor inattention? With the European Championships scheduled for this summer could we finally see sport play a major role in shaping the Eurozone’s economic future?

Whats even more interesting is if you take the official FIFA rankings of those countries qualified (hence their likelihood of progressing further in the competition) and compare this with their respective credit rating:

Country  FIFA Ranking Moodys Credit Rating
Spain 1st A3
Germany 2nd Aaa
Netherlands 3rd Aaa
England 5th Aaa
Portugal 6th Ba3
Italy 8th A3
Croatia 9th Baa3
Denmark 10th Aaa
Russia 13th Baa1
Greece 14th Ca
France 17th Aaa
Sweden 18th Aaa
Republic of Ireland 20th Ba1
Czech Republic 29th A1
Ukraine 59th B2
Poland 70th A2

 

The above analysis not only raises conspiracy theories around the UK Government’s involvement in the appointment of Fabio Capello and hence its relatively robust economic rating but it also points to  potential problem for the PIGS, who’s traders according to form are likely to be inattentive for longer. With this in mind should any of the PIGS nations live up to their footballing prowess we could see the Eurozone put under even greater pressure.

Either way, I’m sure that having undoubtedly read the ECB’s latest research in great detail, both Merkel and Sarkozy will be praying that we don’t get a re-run of 2004. A Greece vs. Portugal final could be catastrophic!

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Friday Fiver http://blogs.hillandknowlton.com/shocksandstares/2011/12/friday-fiver-3/ http://blogs.hillandknowlton.com/shocksandstares/2011/12/friday-fiver-3/#comments Fri, 02 Dec 2011 16:43:35 +0000 Edward Jones http://blogs.hillandknowlton.com/shocksandstares/?p=453 It’s been a big ol’ week in the land of FPS, what with the Autumn Statement, Public Sector strikes, another round of downgrades for Europe’s banks and the beginning of Yuletide. Here’s our take on the week that was.

The Autumn Statement

After declaring the Pre-Budget Report dead, the Government this week delivered their Pre-Budget Report Autumn Statement. It was depressing news, but we all knew it was going to be and it looks set to continue for the foreseeable future. The headlines are lower growth, increased borrowing, a squeezed public sector and more measures to help small businesses, a 0.088% increase in the bank levy and a promise to further reduce corporation tax.

Picture: Reuters UK

What really caught our eye(s) however, were the measures to help mid-size businesses; a theme championed by John Cridland at the CBI, the forgotten army of mid-size businesses have suddenly been remembered. In an attempt to create the UK equivalent of Germany’s Mittelstand, tucked away on page 64 of the Autumn Statement are a host of measures to help mid-size firms achieve their potential and export more proactively. After all, where else is growth going to come from?  

Going down, down, down…..

There’s been so much grim news on the economic front this week that it’s a little hard to pick out the ‘highlights’. To recap quickly – China’s domestic consumption appears to be slowing, as does its manufacturing production; the UK is going to grow very little in 2011, and even less in 2012; Italy continues to have to pay a fortune to borrow money; business confidence that the eurozone will survive is ebbing away; and several stars of The Only Way is Essex are about to be booted off.

Amongst the carnage, two (possibly linked) events stood out. On Tuesday evening, the ratings agency Standard & Poor’s downgraded its investment rating on a string of high-profile banks including HSBC, Barclays and Goldman Sachs. The markets, predictably, took a grim view as the FTSE and other indices headed south yet again. It’s possible, though unproven, that regulators took a grim view as well. On Wednesday afternoon, as most of the UK’s economic journalists were huddling down for some post-Autumn statement analysis at the IFS, the Bank of England and several other central banks released a statement detailing co-ordinated action to lower the cost of borrowing in dollars for banks and other financial institutions. The markets, predictably, took a decidedly less grim view of this and promptly shot up north, yet again. Conclusions? That the global forces buffeting the global economy have become so strong that every announcement either way is now being leapt upon like a cure for cancer – stand by for next week…

Happiness is… a cigar called Hamlet

Who would believe it? Despite being in the depths of one of the worst economic cycles in recent history, the people of Britain consider themselves, for the most part, to be pretty damn happy! In a survey commissioned by David Cameron to gauge how happy the UK is, three quarters of us place ourselves at seven out of ten or higher on a scale of wellbeing.

With unemployment scaling 8% and inflation pushing 5%, you would be forgiven for thinking that the good people of Britain would be pretty miserable. But that good old stiff upper lip and Blitz spirit appears to be in abundance. People claim that their children’s well-being, personal relationships and mental well–being are the things they are most satisfied with. Which basically means that those things that money can’t buy, make us happy and we value them most.

Now isn’t that something to smile about?

Smile! Image Source Page: http://dzzle.com/videos/yogurt+advert

The ultimate compliment

This week we were reading about Warren Buffett’s latest investment, the acquisition of his local newspaper, the Omaha World-Herald Company.

Whilst reading the FT’s report on the subject, we were struck by a realisation of profound significance. Warren Buffett is the spitting image of Carl Fredricksen from Disney/Pixar’s 2009 film Up.

Carl has much in common [full plot here] with Buffett who is known for his kind nature and is a renowned philanthropist. Perhaps Disney/Pixar were paying him a compliment.

The Fiver team were dissapointed to subsequently find via Google that others have spotted the resemblance but we are still claiming this one for industry event small talk.

Carl Fredricksen from Pixar smash Up (Pic: Bloomberg News via The Telegraph)

Warren Buffett (Picture: Disney/Pixar)

Good Week/Bad Week…..

Leaping up the charts this week, it’s tall, thin and very clever economist, Robert Chote, head of the Office for Budget Responsibility. As we noted above, the OBR released decidedly grim numbers on the future of the UK economy on Tuesday, so you might not think Mr Chote would be a particularly happy bunny. He picks up our award however, because as one media commentator put it, Mr Chote is now effectively chief policy officer for the UK economy – based on his numbers, the Chancellor (and probably the Bank of England) have to react.

Hurtling down the charts sadly is former Italian footballer, Damiano Tommasi. The follically-blessed former Roma man came up with a novel solution to Italy’s debt problems this week when he called on his fellow footballers to use their sizeable wage packets to buy Italian bonds at a discounted rate – hence saving the government from having to agree to interest rates of over 7% every time they were looking to top-up the cash register. Sadly, the idea bombed, seemingly never to return.

So there you have it. Thanks to Clare Coffey, Jonathan Henderson and Dave Chambers for their contributions.

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