Shocks & Stares » Trading 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!

]]>
http://blogs.hillandknowlton.com/shocksandstares/2012/02/euro-2012-fifa-vs-moodys/feed/ 0
FPS’ Friday Fiver http://blogs.hillandknowlton.com/shocksandstares/2011/10/fps-friday-fiver-23/ http://blogs.hillandknowlton.com/shocksandstares/2011/10/fps-friday-fiver-23/#comments Fri, 21 Oct 2011 13:22:39 +0000 David Chambers http://blogs.hillandknowlton.com/shocksandstares/?p=370 Hello All! We seem to say this every week, but yet again it’s been a very busy and news heavy 7 days in the world of professional and financial services. This week’s Friday Fiver has a distinct air of gloom about it I’m afraid, though we do find room for a spot or two of humour as always. Thanks as ever to Ed, and Jonathan for their contributions.

CHART OF THE WEEK – GREECE: IN A NUTSHELL…..Stephen Hawking’s follow-up to his immensely successful 1988 book on the cosmos was labelled ‘The Universe in a Nutshell‘. As anyone with a passing interest in physics knows, it would take a forest of nutshells to even begin explaining the wonders of our universe. At times, the complex, ever-changing state of the Greek and wider eurozone crisis can feel pretty similar.

Help is at hand though, thanks to a handy chart unveiled by The Spectator this week. Sadly, upon reviewing it, only the most optimistic person would conclude that the eurozone is heading for anything other than very troubled waters.

The options (or not) for Greece (Chart: The Spectator)

THE DEVIL OF THE DETAIL – BANKING RESULTS…..Hot on the heels of Goldman Sach’s results this week came Morgan Stanley’s trading update. Unlike their rivals, MS were able to report a large profit for the quarter of $2.2bn.

Or were they? As some media outlets quickly noted, the majority of MS’ profits for the quarter were a result of the company reducing the value of the debt it holds. Once the benefits of this accounting manoeuvre were removed, the results looked far less impressive - Iain Dey at the Sunday Times provided one of the best summaries of the ‘revised’ picture.

He wasn’t the only journalist somewhat peeved at the sleight of hand either:

BEHIND CLOSED DOORS…..A “dark pool” may sound like a feature of an exotic health spa and for all we know, it could well be. The increasing importance of dark pools in financial markets however was apparent this week.

In simple terms these are markets behind closed doors that allow institutional investors to trade with one another outside public exchanges like the London Stock Exchange. This week we heard that investors are increasingly using dark pools to access and trade privately owned stock in companies like Facebook before they float.

The emergence of dark pools was one consequence of the European Commission’s MiFID regulation which was in part designed to break up the monopoly of public exchanges. Now however the Commission is looking to take back control of its creation amid concerns about their lack of transparency. Complicated stuff, but as always, the FT [article here] explains developments in simple terms and their graphic below illustrates the overarching trend.

PROOF THAT PLAN A COULD BE OK?…..In amongst the growing concern about the eurozone, and increasing focus on the OccupyLondon movement, the ONS announced on Friday that public borrowing for September was below expectations. In addition, borrowing in August was actually lower than first thought.

Does this mean that the Chancellor’s refusal to adopt anything less his Plan A might be starting to bear fruit? Quite possibly, though as the BBC’s Hugh Pym pointed out, much depends on UK growth in the next few months. The Chancellor hasn’t been proved right yet by any means, but at least he now has a proof point to attack his critics with.

GOOD WEEK/BAD WEEK…..Leaving aside the obvious winners and losers over the last 7 days, it was a good week for the economist and Sunday Times columnist, Irwin Stelzer, who picked up the ‘economics commentator of the year’ award at the media industry’s Editorial Intelligence awards on Thursday.

Or at least he would have picked it up if not for a small error by the normally unflappable Robert Peston who is this week’s ‘bad week’ winner. Regrettably for the BBC’s Business Editor, he fluffed his lines on stage by announcing the wrong winner. And thus, the FT’s Martin Wolf walked on stage to collect the prize, only to have it quietly taken away from him 10 minutes later. If you want to read more on this little tale, Roy Greenslade provides a full commentary here. Mr Peston’s stablemate, Rory Cellan-Jones also clearly enjoyed the incident, as well as his colleague’s fashion sense.


]]>
http://blogs.hillandknowlton.com/shocksandstares/2011/10/fps-friday-fiver-23/feed/ 0
FPS’ Friday Fiver http://blogs.hillandknowlton.com/shocksandstares/2011/03/fps-friday-fiver/ http://blogs.hillandknowlton.com/shocksandstares/2011/03/fps-friday-fiver/#comments Fri, 25 Mar 2011 14:50:26 +0000 David Chambers http://blogs.hillandknowlton.com/shocksandstares/?p=3 Hello All! And welcome to our brand new, dedicated Financial Services blog from our FPS team here at H&K. This blog will cover all things related to finance, money, the economy, politics, consumer trends and probably a bit of humour along the way. We hope you enjoy reading it and look forward to your comments.

In the meantime, here’s this week’s Friday Five with contributions from Ed, Ross and Marie.

George Osborne's Budget has generally been well received, but more pain lies ahead

Two days on from the Budget…There’s always a mad rush to get initial reaction out on Budget Day. Two days on though, where do we stand? Our initial reaction remains largely the same – George Osborne delivered a Budget for business and one designed for growth. The question though is at what cost.

The Institute for Fiscal Studies argued yesterday that due to inflation the pain on the public sector will be even greater than originally thought as we try to cut our public spending and drive growth. Moody’s then compunded this, putting a chill on the UK with a warning that slow growth and our high debt risk our precious AAA debt rating. It’s not any rosier in Parliament for the Coalition either. Ed Miliband is picking up some momentum, his key spinners have found a more coherent message, and local elections are on the horizon – never easy for an incumbent government, especially if the Lib Dems suffer again as they did in Barnsley last month.

Never thought you'd see these two in the same image? No, us neither. Until now

What Anne Hathaway and Warren Buffett have in common…We came across a fascinating column on the Huffington Post this week. It explored the lengths financial traders are going to in order to extract the best possible return by sourcing as much information as possible, no matter its source or content.  The post noted the curious way in which Warren Buffett’s investment company, Berkshire Hathaway, saw its shares rise on occasions when actress Anne Hathaway appeared in the news. The theory goes that this is a result of automated financial trading engines picking up the chatter on Anne and applying it to the stock market.

US site, The Atlantic, picked up the story and delved a bit deeper – it’s well worth a read, but is perhaps summed up by a quote from computer scientist John Bates, who simply explains companies are now trying to “correlate everything against everything”.

Change for Takeover specialists…In a move reminiscent of the curtain opening trick in the Wizard of Oz, the UK’s merger regulator, the Takeover Panel proposed changes to its rules that would seek, among other things, to make deal fees public to increase transparency. In particular, it proposes that the maximum and minimum fees, including incentives and success fees, paid to deal advisers by both bidders and targets should be revealed.

Cadbury Law - change for takeovers, but what about for takeover advisers?

What does this mean? Ultimately, that the value M&A ‘wizards’ who provide financing, corporate broking, legal, accountancy, consulting and PR services will be open to more public and in particular shareholder scrutiny. What impact this will have is unclear though. Everyone knows that bankers make considerable fees from M&A, just as everyone knows bankers make considerable salaries and bonuses as a result of these fees. No one seems to be able to do much about the latter and so it is unlikely that much will be done about the former.

Clearly, based on the strong reputation of many of the top investment banks, people are likely to still pay good money for that wizardry. What about the rest of us though? Aided by these new transparency measures and given that knowledge is power, will M&A advisory services become more of a buyers’ market? Certainly, it will become more value-focussed, but that is not necessarily a bad thing. Whether ‘public scrutinisers’ really understand what they are evaluating is another matter.

Still waiting for the Big Society?…David Cameron’s ‘Big Society’ has received mixed reviews, but a common response has been from those who claim to not understand what it is. MPs from all parties as well as the media have often muddled the concept, perhaps to undermine it before it has even got off the ground. Credit then to The Economist which this week has analysed exactly what BigSoc is and presented it clearly without trying to induce scepticism. The paper breaks the concept down into three strands: pluralism, localism and voluntarism.

The struggle to define BigSoc has clearly served to slow down people from embracing and committing to it – is this failure to agree the reason why businesses aren’t engaging with and supporting it with any gusto at present? It remains to be seen though whether debates like The Economist’s can actually serve to shape what the Big Society is. Nearly one year on from the General Election, many would argue we’re still waiting to answer even that basic question.

David Buik - "One of the last true city gents"

Farewell to a legend…Finally, a short note on the passing of an institution. BGC Partners’ David Buik has been an ever present on TV screens, in newspaper columns and on radio for many a year, but today retires. Described by some on Twitter today as one of the last ‘true gents’ in the City, he’ll be missed.

]]>
http://blogs.hillandknowlton.com/shocksandstares/2011/03/fps-friday-fiver/feed/ 0