CARNEY SPEECH FORENSICS: Sterling & the FTSE being misled by deliberate rumour/directionalising? Or is there a leaker in the Bank of England?

carneyrates

STRONG RUMOURS & STOCKS/CURRENCY BOUNCE LEAVE SOME WONDERING WHAT’S GOING ON IN THE CITY TODAY

Just when you thought things couldn’t get any sillier, the FTSE has started today’s session with a bounceback “because” said several pundits, “some investors are gambling that Carney will signal a more bullish outlook for rates”.

Now, nobody is that stupid. Bank of England Governor Mark Carney has said openly to anyone who asked him in the first five weeks of 2016, that the UK economy is definitely too weak to handle a rate rise. This is in direct opposition to what David Cameron says at every PMQs – “we have a strong economy building up a head of steam” – but there’s nothing new there.

So why are investors doing this?

Last night, nobody expected anything but a nervous market today. But in the City itself, before trading opened this morning, one of those ‘this is inside track – be prepared for a surprise’ rumours did the rounds about the Governor’s speech. Such things are standard before a rates meeting. But this wave of gossip appears to have taken hold.

Investors began piling into the Quid at around 7.40 am:

£$4216Carney

One can’t be sure what exactly happened. My guess would be that in the light of an allegedly falling likelihood of Brexit (after yesterday’s Cameron attempt to make a sow’s ear look like a silk purse) person or persons unknown decided to bet on a bullish stock market start and/or rising Sterling before the FOMC decision….and then a fall after the Carney blah-blah-blurb. Then kicked off the rumour about, say, bullish BoE rate futures.

The rumour looks as if it’s now taken a firm hold:

FTSEcarney4216

The other (in my view far less likely) possibility is that Carney is going to sound optimistic, and there’s been a leak.

Events like this take place under the Bourse regulation radar every day all around the globe. The loser from this little bit of ‘directionalising’ is going to be sap money; but the ethics or legality of this aside, what good at all does this kind of trading do the real economy? And the answer is important: it’s a perversion of the original idea of bourses being a chance for the wider community to invest in socially functional growth. Because it cons investors into thinking a rumour is true.

Such things have wider ramifications. For example, since I began this post the ECB has cut its eurozone inflation target by half to 1%. That’s a very bad economic sign indeed over there in the rubble that is still our biggest trading partner. So far, the FTSE has ignored it, and maybe it will make Sterling stronger still in the very short term; but as an ecoomic indicator, it is still far more important than some Canuck banker dividing zeros.

It is no way to run a railroad. Or a pissup in a brewery. Or indeed, anything.

32 thoughts on “CARNEY SPEECH FORENSICS: Sterling & the FTSE being misled by deliberate rumour/directionalising? Or is there a leaker in the Bank of England?

  1. JW late in the day yesterday the dow began rocketing up on No basis whatsoever except it was in tandem with oil going up for likewise No reason whatsoever. So they have to keep it all going up no matter what is happening in reality. There have been no true fundamentals on the bourses for some time.. Bad news is good news used to work when things got so bad that everyone agreed there must be more QE coming etc. But that meme died when it was admitted that printing moar didn’t help. So now they must get it to go up and have no explanations. So there has to be bullsh*t rumours …. it really is nonsense…

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  2. “For example, since I began this post the ECB has cut its eurozone inflation target by half to 1%.”

    Congratulations on this astonishing scoop. So far nobody else seems to have got it.

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  3. The introduction of electronic trading in all Bourse has allowed individuals the opportunity to distort the market in any way they want. A single purchase of the right transaction “type” will alert all of the other automated systems who automatically follow and we have a market being manipulated. The skills is knowing what the right “type” of transaction will cause the desired effect, but believe me, they have all of the modelling tools needed to get the right transaction scenario. This really isn’t rocket science, just clever mathematics.

    There are no more free markets, the powers that be have that little earner completely ringed fenced off from small investors.

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  4. @KFC

    Go and look at the current state of the transportation industry in the states at the present. Demand for moving goods around the US has dropped off a virtual cliff.

    There is no consumer demand in the world’s largest economy.

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  5. Probably nothing more harmful than a few street shorts running for cover . market participants are more edgy than ever , in every market . No point in over-analysing relatively minor , albeit imcomprehensible movements . Check out Credit Default Swap spreads on corporate and financial bonds over past 5 days . Some sever selling going on . No fundamental reason for bank senior debt spreads to widen but the fear effect jas set in .. selling leads to more sellers . The market regulators for resons only known to them are destroying the ability of banks to make markets in bonds , which in turn decreases liquidity and increases volatility . And this is a given in every area : bonds , stocks , Forex .

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  6. Stevie,

    The skills is knowing what the right “type” of transaction will cause the desired effect, but believe me, they have all of the modelling tools needed to get the right transaction scenario.

    What you’re looking for is something called a ‘Fibonacci Retracement’; it’s not rocket science, as you rightly suggest. It does require a keen mathematical mind that can do more than just stuff numbers into the correct equations. In short, using it is something of an artform.

    http://www.investopedia.com/terms/f/fibonacciretracement.asp

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  7. Gemma, I am not looking for anything. I am talking about instigating MARKET change. For example, when the Market suddenly rises for no appreciable reason (see John’s comments above).

    You are talking about something completely different. Retracement is used to analyse trends when an asset price has changed and you want to guess when any peak or trough (in the price) is likely to occur.

    One precedes the other.

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  8. “Retracement is used to analyse trends when an asset price has changed and you want to guess when any peak or trough (in the price) is likely to occur” – put it the other way around and you have your preceding order.

    It’s why it’s an art, not a science ;-)

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  9. Gemma, what must happen before retracement can begin?

    The answer is simple, a change must have occurred.

    Therefore we cannot “put it the other way around”.

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  10. Stevie, when changes are happening all the time, it’s easy to find the right one…you’re trying to say that surfers can only surf if there’s a wave, which is true. Only waves come in all shapes and sizes, some better than others – and that is where the art comes in.

    As to Deutsche Bank, please remember that when it comes to derivatives, it is Deutsche’s wholly owned British subsidiary – which in effect is a British bank, operating under British laws.

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  11. errmm…finger wave…. no, it is 100% German Deutsche Bank derivatives originating in Frankfurt which means the German taxpayers are on the hook. The question is ..how many British banks will this cripple..??

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  12. Ermm I don’t know who Stevie is who posted at 5:08 but it wasn’t this one!

    @Stevie (5:08) you are quite correct? I would ask another question…. How much will the German taxpayer will be prepared to bail-in Deutsche Bank?

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  13. Stevie, are you being trolled? It’s not unheard of on this site…

    Once profitable swaps and assorted derivatives contracts sprung losses when new rules mandated that banks back those volatile contracts with heavy reserves. The tighter regulations forced Deutsche Bank to sell derivatives portfolios at heavy losses.

    Now one knows why Deutsche underperforms… after all, in London, the accounting rules are so slipshod, derivatives are still profitable because they’re not on the books at all! European banks are still measured against those banks who can still hide their derivative stocks behind a veil (that is to say, British and American ones).

    http://fortune.com/2015/06/10/deutsche-bank-troubles/ (June last year).

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  14. Stevie
    You ARE being impersonated by a troll who calls himself IvanTerrible. Sorry about that: until he commits a crime I can’t ace him out.

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  15. Isn’t it dishonest to even attempt to impersonate someone else?

    If he is called Ivan Terrible, he should post using his name, or his chosen moniker and not sully other people’s character. That is simple, bare-faced fraud. If that’s not a crime, I don’t know what is.

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