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Shares Rise On Renewed Optimism

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http://news.bbc.co.uk/1/hi/business/8258407.stm

European and Asian shares have risen strongly, buoyed by US stocks closing at their highest level so far in 2009 overnight on Wall Street.

Lifted by the latest signs of economic recovery in the US, the UK's FTSE 100 index was up 0.8% in early trading, while Japan's Nikkei ended up 0.5%.

The rises came after America's Dow Jones index closed Tuesday up 0.6%, to its highest level since October 2008.

Investor sentiment was boosted by a big rise in US retail sales in August.

Confidence was further increased by comments from Federal Reserve chairman Ben Bernanke, who said the US economy was now "very likely over".

The FTSE's rise was mirrored across Europe, where Germany's Dax had added 0.7% and France's Cac was up 1%.

The main Australian share index had earlier closed up 2.2%, while Hong Kong's Hang Seng added 1.8% and India's Sensex had advanced 1.1% in afternoon exchanges.

Cautious note

Official data showing that US retail sales rose 2.7% in August was warmly welcomed by the markets, because consumer spending is central to the US economy, accounting for more than two-thirds of US economic activity.

While the big rise was helped by the US "cash for clunkers" car scrappage scheme, which has now ended, retail sales excluding cars also increased by 1.1%, beating market expectations of a 0.4% gain.

However, despite the share rises, Mr Benanke warned that the US economy still faced some hurdles before it could exit recession.

"It's still going to feel like a very weak economy for some time," he said.

So maybe we could see the FTSE at around 5400 by the end of Sept?

Clearly not 6000 as I queried here, which was more down to me making up where we had started in the beginning of Aug for some unknown reason and amazingly no drugs where involved.

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I'm sure there will be plenty of tops called between now and then

I hope you paid heed to some of them.

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Noel,you're the person to ask about credit markets.Since you gave me the heads up on the free offering from markit,I've been following it.

http://www.markit.com/cds/cds-page.html

Can I ask to what extent do CDS affect the underlying cost of money for said company or nation state,ie if they widen,does it draw bond yields higher automatically?Or do CDS spreads widen if bond yields move hgiher?

Also,is there a normal level of CDS exposure to say market cap/liabilities eg Barclays has $4.2 billion net notional,yet HSBC only have $2 billion.You would have assumed HSBC would have the larger.

also,I know this is going to sound really dumb,but the net notional,does that pertain to the value of the contracts or the size of the potential payout in the event of a credit event?

is there a good site for learning more about the credit markets in semi laymans terms?

"Noel,you're the person to ask about credit markets."

I'm now in structured credit, so may be slightly rusty in single name CDS space - I'm sure there are others on here that are working in flow

"Can I ask to what extent do CDS affect the underlying cost of money for said company or nation state,ie if they widen,does it draw bond yields higher automatically?Or do CDS spreads widen if bond yields move hgiher?"

Some think yes

http://www.noelwatson.com/blog/PermaLink,g...ee8b737444.aspx

http://www.ft.com/cms/s/0/937f2be0-e031-11...?nclick_check=1

whereas there was a company that issued bonds last year (can't recall the name) that got them away far below what the CDS market was pricing. One thing I would say is that the credit markets tend to indicate where there may be a problem (see Icelandic banks),

Noel,you're the person to ask about credit markets.

which may make people sit up and take notice - leading to snowball effect

"Also,is there a normal level of CDS exposure to say market cap/liabilities eg Barclays has $4.2 billion net notional,yet HSBC only have $2 billion.You would have assumed HSBC would have the larger."

I wouldn't say there is a normal, and it depends on how each bank does its reporting (they may have hedged using monolines for example - but can this be counted as "proper" hedging.

"also,I know this is going to sound really dumb,but the net notional,does that pertain to the value of the contracts or the size of the potential payout in the event of a credit event?"

The latter, but don't forget to take into account recovery rate

"is there a good site for learning more about the credit markets in semi laymans terms?"

Wikipedia is very good

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"Noel,you're the person to ask about credit markets."

I'm now in structured credit, so may be slightly rusty in single name CDS space - I'm sure there are others on here that are working in flow

"Can I ask to what extent do CDS affect the underlying cost of money for said company or nation state,ie if they widen,does it draw bond yields higher automatically?Or do CDS spreads widen if bond yields move hgiher?"

Some think yes

http://www.noelwatson.com/blog/PermaLink,g...ee8b737444.aspx

http://www.ft.com/cms/s/0/937f2be0-e031-11...?nclick_check=1

whereas there was a company that issued bonds last year (can't recall the name) that got them away far below what the CDS market was pricing. One thing I would say is that the credit markets tend to indicate where there may be a problem (see Icelandic banks),

Noel,you're the person to ask about credit markets.

which may make people sit up and take notice - leading to snowball effect

"Also,is there a normal level of CDS exposure to say market cap/liabilities eg Barclays has $4.2 billion net notional,yet HSBC only have $2 billion.You would have assumed HSBC would have the larger."

I wouldn't say there is a normal, and it depends on how each bank does its reporting (they may have hedged using monolines for example - but can this be counted as "proper" hedging.

"also,I know this is going to sound really dumb,but the net notional,does that pertain to the value of the contracts or the size of the potential payout in the event of a credit event?"

The latter, but don't forget to take into account recovery rate

"is there a good site for learning more about the credit markets in semi laymans terms?"

Wikipedia is very good

And this chap is good

http://derivativedribble.wordpress.com/

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Only 400 points away from 2006 levels and 900 points away from 2007 levels.

Back in 2006 and 2007 we where growing and we were in a property and credit bubble.

Today we are in a recession with lots of money lost and yet the stock market is only 15-20% down on 2007 levels!!

If you strip out the banks which dragged down the FTSE lots then we are basically at 2007 levels. It is getting crazy.

I cant see it going up more than 10% from here.

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In 3, 6, 9 months time (who knows!) we're due a serious retrenchment of the stock markets. imo masses of QE money has found its way into stock. What exactly is underpinning the recent bull run? Consumer spending is likely to be as weak next yr as it's been this yr, unemployment is rising and continues to rise. The only reason many companies have reported better than expected results is because of slash n burn cost cutting, not growth.

With each passing day I get more and more nervous that financial armorgeddon pt II is looming large and those at the helm seem powerless to avert it.

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The people on here that claim to time the market appear to have a negative bias.

That just might be because it's been rising.

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Confidence was further increased by comments from Federal Reserve chairman Ben Bernanke, who said the US economy was now "very likely over".

Did it really say this? The BBC page now says

Confidence was further increased by comments from Federal Reserve chairman Ben Bernanke, who said the US recession was now "very likely over".

I liked the first one better.

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What optimism is this ?

Has someone at the BoE said the'd give them even more printed money ?

Someone will eventually go to work and say..."Did anyone actually read the new lately, we're f**ked, sell....."

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