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from Unstructured Finance:
Wall Street goes to war with hackers in Quantum Dawn 2 simulation
Wall Street will have a simulated cyber war called Quantum Dawn 2 this month.
Quantum Dawn 2 is coming to Wall Street.
No, it’s not a video game or a bad zombie movie; it’s a simulated cyber attack to prepare banks, brokerages and exchanges for what has become an ever-bigger risk to their earnings and operations.
Organized by the trade group SIFMA, Quantum Dawn 2 will take place on June 28 – a summer Friday that, with any luck, will be a relatively quiet day in the real markets.The drill involves not just big Wall Street firms like Citigroup and Bank of America, but the Department of Homeland Security, the Treasury Department, the Federal Reserve, the Securities and Exchange Commission, according to SIFMA officials.
“We go through a pretty rigorous scenario where we look at multiple threats being thrown out at the U.S. equity markets,” said Karl Schimmeck, vice president of financial services operations at SIFMA.
During the exercise, which runs from 9 a.m. to 2:30 p.m. in New York, participants will receive blasts of vague and confusing information about what appears to be a hacker attack on fake trading and information platforms that are not plugged into actual markets. The participants may see “latency,” or unusual slowness, in trading, or viruses trying to invade the systems. They will also have to call one another to figure out what’s going on.
from Breakingviews:
Bond jitters shouldn’t delay Japan pension reform
By Andy Mukherjee
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
By reforming Japan’s public pension system, Prime Minister Shinzo Abe is taking a calculated risk. Asking state funds to buy fewer government bonds may look like an own goal at a time when the central bank is struggling to control yields. But the payoff to both the government and Japan’s fast-ageing society could be worth it.
from Global Investing:
Cheer up Morocco, frontier markets are hot
Morocco fears its stock market is on the verge of being re-classified as a frontier market when index provider MSCI announces its annual rejig of equity indices this month.
Maybe it should pray for relegation instead. A report at the end of last week by Citi notes the boom in frontier market equities -- they have risen 15 percent since the start of this year, a stark contrast to their better known, more liquid emerging market cousins which have fallen around 5 percent so far this year. In fact the performance of the frontiers -- comprising less liquid, smaller markets from Kenya to Kazakhstan -- has been more akin to the U.S. or Japanese equity markets which have earned investors double-digit returns this year.
from Global Investing:
South Africa’s perfect storm
Of all the emerging currency and bond markets that are feeling the heat from the dollar's rise, none is suffering more than South Africa. A series of horrific economic data prints at home, the prospect of more labour unrest and the slump in metals prices are making this a perfect storm for the country's financial markets.
Some worrying data from the Johannesburg Stock Exchange this morning shows that foreigners sold almost 5 billion rand (more than $500 million) worth of bonds during yesterday's session alone. Over the past 10 days, non-resident selling amounted to 10.7 billion rand. They have also yanked out 1.2 billion rand from South African equities in this time. And at the root of this exodus lies the rand, which has fallen almost 15 percent against the dollar this year. Now apparently headed for the 10-per-dollar mark, the rand's weakness has eaten into investors' total return, tipping it into negative return for the year.
from Global Investing:
Weekly Radar: Central banks try to regain some control
Central banks may be regaining some two-way control over global markets that had started to behave like a one-way bet. After flagging some unease earlier this month that frothy markets were assuming endless QE, the Fed and others look to be responding with at least some frank reality checks even if little new in the substance of their message. In truth, there may be no real change in the likely timing of QE's end, or even the beginning of its end, but the size of the stock and bond market pullbacks on Wednesday and Thursday shows how sensitive they now are to the ebb and flow of central bank guidance on that score. Although the 7% drop in Japan's stock market looks alarming - Fed chief Bernanke actually played it fairly straight, signalling no imminent change and putting any possible wind down over the "next few meetings" still heavily conditional on a much lower jobless rate and higher inflation rate. The control he gains from here is an ability to nuance that message either way if either the data disappoints or markets get out of hand.
The central banks are clearly treading a fine line between getting traction in the real economy and not blowing new financial bubbles. The decider may be inflation and on that score central banks have a lot of leeway right now – global inflation is still evaporating and, as measured by JPM, fell in April to just 2.0% - its lowest in 3-1/2 years. That said, CPI was also very well behaved in the run-up to 2007 credit crisis - it was asset prices and not consumer inflation that caused the problem. So - expect to hear plenty more cat-and-mouse on this from the central banks over the coming weeks/months.
from Breakingviews:
FirstGroup cash call shows deleveraging imperative
By Dominic Elliott
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
It’s shaping up to be the year of the rights issue in Europe. FirstGroup’s 615 million pound ($1 billion) cash call suggests companies are biting the bullet and exploiting the rise in equity markets to repair their balance sheets. The jumbo issue from the UK rail and bus operator comes after similar fundraisings from the likes of Commerzbank, Dutch cable company KPN and travel operator Thomas Cook. Other distressed companies should look to delever while they can.
from Global Investing:
Emerging European bonds: The music plays on
There seems to be no end to the rip-roaring bond rally across emerging Europe. Yields on Turkish lira bonds fell to fresh record lows today after an interest rate cut and stand now more than a whole percentage point below where they started the year.
True, bonds from all classes of emerging market have benefited from the flood of money flowing from central banks in the United States, Europe and Japan, with over$20 billion flowing into EM debt funds since the start of 2013, according to EPFR Global. Flows for the first three months of 2013 equated to 12 percent of the funds' assets under management.
from Breakingviews:
Shell must hope Voser successor mimics his ways
By Kevin Allison
The author is a Reuters Breakingviews columnist. The opinions expressed are his own
When a chief executive unexpectedly leaves to spend more time with his family, it's usually a cue to start a post-mortem into a failed tenure. Shell looks like an exception. Actually, it is shame Peter Voser is leaving. The Anglo-Dutch oil major could do worse than hope his successor mimics his ways.
from Global Investing:
Weekly Radar: May days or Pay days?
So, it's May and time for the annual if temporary equity market selloff, right? Well, maybe - but only maybe. A fresh weakening of the global economic pulse would certainly suggest so, but central banks have shown again they are not going to throw in the towel in the battle to reflate. The ECB's interest rate cut today and last night's insistence from the Fed that it's as likely to step up money printing this year as wind it down are two cases in point. And we're still awaiting the private investment flows from Japan following the BOJ's latest aggressive easing there.
So where does that all leave us? A third of the way through 2013 and it’s been a good year so far for nearly all bulls – both western equity bulls and increasingly bond bulls too! Not only have developed world equities clocked up some 13 percent year-to-date (the S&P500 set yet another record high this week while Europe's bluechips recorded a staggering 12th consecutive monthly gain in April) , but virtually all bond markets from junk bonds to Treasuries, euro peripherals to emerging markets are now back in the black for the year as a whole. For the most eyebrow-raising evidence, look no further than last week’s debut sovereign bond from Rwanda at less than 7 percent for 10 years or even newly-junked Slovenia’s ability this week to plough ahead with a syndicated bond sale reported to already be in the region of four times oversubscribed. For many people, that parallel rise in equity and bonds smells of a bubble somewhere. But before you cry “QEEEEE!” , take a look at commodities -- the bulls there have been taken a bath all year as data on final global demand hits yet another ‘soft patch’ over the past couple of months.
from Global Investing:
Deutsche’s emerging markets bear sticking to his guns
Emerging markets bear John-Paul Smith first made his call to underweight emerging equities at the end of 2010. In a note released late on Monday he points out that such a position would have paid off handsomely -- since end-2010 emerging equities have underperformed MSCI's World index by 27.5 percent and U.S. MSCI by 37.6 percent.
Smith, who is head of emerging equity strategy at Deutsche Bank, sees no reason to change his call. Reckoning that the cyclical heyday of emerging markets is past, he is advising clients to hold on to developed and U.S. equities at the expense of emerging markets. The reason? China, pivotal for the rest of the EM world for commodities, trade.
