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Banks bond trading up in 2016 for first time since 2012 after Brexit, Tru...

´╗┐LONDON Bond trading revenue at the world's top banks rose last year for the first time since 2012, thanks to increased activity after Britons' voted to leave the European Union and Donald Trump won the U.S. presidential election, a survey showed on Thursday. The 9 percent rise in fixed income, currencies and commodities (FICC) trading last year failed to avert an overall 3 percent fall in revenue, however, due to a slump in equity and investment banking division (IBD) revenue, said industry analytics firm Coalition, based on its analysis of their public disclosures and independent research. The 13 percent fall in equity trading revenue was the biggest since 2008, when the global credit crunch crashed world markets and plunged the global economy into recession. FICC revenue was boosted by a 39 percent surge in the second half of the year, led by "robust growth" in G10 rates trading. The FICC rebound follows years of post-crisis decline, as banks have had to adjust to reforms compelling them to hold more capital and liquidity and reduce the amount of bonds they can hold on their books. This has resulted in a continuous reduction of staff, and the exit from some business lines altogether. Overall FICC trading revenue at 12 of the world's biggest banks rose to $75.9 billion from $69.9 billion in 2015, Coalition said. The $37.7 billion accrued in the second half of the year was the best July-December period since 2012. Coalition tracks Bank of America Merrill Lynch, Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, Societe Generale and UBS.

Within FICC, G10 rates trading revenue jumped 26 percent to $25.9 billion, and credit trading rose 20 percent to $14.8 billion. That offset declines in G10 FX, securitization, emerging markets and commodities. A "significant" decline in hedge fund activity, after many suffered a bruising 2015, was to blame for the fall in foreign exchange trading revenues, Coalition said. HEADCOUNT DOWN AGAIN

Equity trading revenue, including cash equities, equity derivatives, prime services (serving hedge funds) and futures and options, slumped 13 percent to $43.4 billion from $49.8 billion the year before. The weakness was driven by poor performances in cash and derivatives. Cash equity revenue fell 17 percent to $9.5 billion and derivatives revenue fell 21 percent to $12.8 billion. Investment banking division (IBD) revenue, comprising equity and debt capital market activity, and mergers and acquisitions, fell 9 percent to $36.8 billion. Within IBD, equity capital market operations were particularly weak, with revenue falling 35 percent to $6.3 billion.

Adding it all together, the world's biggest banks raked in $156.1 billion in revenue last year across FICC, equities and IBD, down 3 percent from $160.2 billion the year before, Coalition said. Despite the rebound in bond trading, however, the longer term attrition in headcount showed no sign of slowing. The aggregated number of FICC front office staff - covering sales, trading, and research - at the top 12 global banks fell 7 percent to around 17,500 in 2016, down from 18,800 the year before. That's 30 percent lower than in 2011. Aggregate equity headcount fell 4 percent to 18,200 and IBD staffing fell 1 percent to 17,500. Overall headcount fell 4 percent to 53,200, marking a fall since 2011 of more than 20 percent, according to Coalition data.

Fed and ECB go their separate ways

´╗┐Two of the world's biggest central banks are likely to find themselves with a bigger policy gap by the end of the coming fortnightThe European Central Bank on Thursday will resist calls to start tightening policy against surging inflation but robust U.S. jobs data on Friday could seal the case for another Federal Reserve hike the week after. So, let's say minus 0.4 percent rates in Europe and more than 0.75 percent in Washington. With just weeks to go before contentious French and Dutch elections, the ECB will be keen not to rock the boat, so it is likely to give just a token nod to robust growth figures, steering clear of any policy hint that may give emerging populist movements ammunition. A Reuters poll showed unanimity for no change. [ECB/INT] But the balancing act may be more difficult than it looks. With growth on its best run since before the financial crisis and inflation peeking just above the ECB's target, calls are mounting, particularly in Germany, for the bank to scale back its 2.3 trillion euro ($2.42 trillion) bond buying scheme and raise its negative interest rates. Doves hold a comfortable majority among the policymakers, however, so any shift will come at the margins. In practice that could mean increased inflation forecasts, letting an ultra-cheap lending scheme to banks expire as scheduled, and dropping a reference to the risk that growth may disappoint. Still, ECB President Mario Draghi will probably avoid any discussion about winding down asset buys, even pushing back on calls by some rate setters to tweak the ECB's guidance, giving up its reference to further rate cuts, a possibility markets have already priced out.

"If the French presidential election also passes without turbulence, and growth and inflation data remain solid, the ECB might turn more hawkish in its meeting on June 8," Reinhard Cluse, economist at investment bank UBS, said. "This would then leave the meeting on July 20 for preparing the markets for the tapering (off asset-buying) on September 7."For now though, Draghi will stick to his line that the inflation surge is temporary, growth is fragile and political risks clouds the outlook, requiring stimulus, a Reuters poll of analysts showed. Having tightened policy in 2011 just months before the euro zone debt crisis started spiraling out of control, the ECB will be desperate not to move too early, even if it risks being called out by some for moving too late.

U.S. JOBS The Fed, meanwhile, must deal with what Draghi dubbed a high-class problem: solid growth, full employment and returning inflation. Non-farm payrolls, due on Friday, are expected to show an increase of 186,000 jobs, probably enough to push the Fed to move. Unemployment benefits already fell to near a 44-year low late last month, indicating further tightening of the labor market. Indeed, markets FEDWATCH have now almost fully priced in a hike in March, the third since rates bottomed out at the height of the crisis, and two more increases could still come before the end of the year. Robust jobs growth threatens to overheat the labor market, just as inflation is heading higher, with the Fed's preferred measure now in the upper end of the range central bank officials in December estimated would be reached this year.

Manufacturing growth is also firming, offsetting relatively weak consumer demand, good enough for even the most dovish Fed officials to argue for a hike sooner rather than later. Soothing global growth fears, meanwhile, China is expected to report another set of strong figures for both exports and imports, indicating that even if overall growth is slowing and debt is rising fast, the slowdown remains under control, mitigating the risk for emerging market economies. Indeed, China's factory activity expanded faster than expected in February, firming arguments for the central bank to raise short-term interest rates by a another 10 basis points as soon as March. Data due on Wednesday are expected to show Chinese exports up by 10 percent in February while imports could have risen by 20 percent, a boon for countries like Australia, which supply China with raw materials. Indeed, the Reserve Bank of Australia may signal on Tuesday that policy easing is done, given the economy's convincing rebound last quarter, rising commodity exports and a robust increase in household debt levels.