Good morning, New York
Broken transmission mechanisms; FT Alphaville highlights ECB board member’s Benoît Coeré’s presentation about how the central bank lost control over the interest rate channel in 2011 meaning it had no choice but to turn to liquidity measures to revive the transmission mechanism and to regain its influence on interest rates. Of particular concern, he notes, was the ECB’s diminishing influence on the secured collateral financing market, a factor which justified intervention in government bonds.
The Vix feedback loop’s distortion of underlying options markets is becoming accepted theory in the marketplace. Izzy discusses what role the distortions may have played in the recent suspension and reopening of the TVIX ETN, and to what degree shorting the Vix has now become the most crowded trade of the year.
US corporate cash is still piling up, notes FT Alphaville’s Cardiff Garcia. He cites an RBC Capital note which says that from a flows perspective, capital expenditures are being surpassed by internally generated cash flows at a quarterly annulaized rat of around $200bn.
The Bundesbank on women; Lisa Pollack asks if having come out and said that a “higher proportion of female executives lead to a more risky conduct of business”, the Bundesbank will target puppies and ice-cream next?
News corp in fresh storm: Rupert Murdoch’s News Corp is facing a fresh barrage of allegations over its business practices after an Australian newspaper released 14,000 emails concerning one of the group’s security subsidiaries (FT) . The Australian Financial Review has said the company sabotaged its competitors by promoting high-tech piracy that damaged Austar and Optus at a time when News Corp was moving to take control of the Australian pay-TV industry (AFP).
Abu Dhabi eyes RBS injection: Abu Dhabi has discussed a £10bn investment into Royal Bank of Scotland, as part of a complex transaction that would help pave the way for the government’s eventual exit . The investment has been debated in the course of long-running talks between UK government officials and potential investors in both RBS and Lloyds, Britain’s two big part-nationalised banks. The discussions have taken place at regular intervals over the past three years, according to people close to the discussions (FT).
Oil futures point to price fall: Oil contracts for delivery in three to five years’ time are trading at their biggest ever discount to spot prices, prompting a debate about whether the era of triple-digit oil prices will be a short-term phenomenon (FT)
Chinese art buyers renege: A Chinese Imperial jade seal and album of calligraphy are being re-offered for sale this week after the original Asian bidders failed to pay. In a sign that auction houses clamping down on slow payments and nonpayments, sellers are now demanding deposits by bidders on top lots and, in some cases, suing the non-payers (Bloomberg).
UK economy shrinks: Britain’s economy shrank by more than expected in the last three months of 2011 than previously thought, driven down by a weaker services sector, official data shows (Reuters).
Magic wins LA Dogders for $2bn: The drawn-out race for control of the Los Angeles Dodgers has reached its end. A consortium led by Earvin “Magic” Johnson, the basketball legend who is one of the city’s favourite sons, triumphed with a $2bn bid – a record price for a sports team (FT). The sales figure shatters the previous record sales price for a US sports franchise, Steve Ross’s purchase of the Miami Dolphins for $1.1 billion three years ago (WSJ).
Goldman changes board structure: Goldman Sachs has agreed to change its board structure in order to persuade a union pension fund to drop a shareholder proposal that could have cost Chief Executive Lloyd C. Blankfein his job as chairman. The deal will see Goldman appoint a “lead” director, but shareholders won’t get a chance to vote at the firm’s annual meeting in May on the proposal to replace Mr. Blankfein with an independent chairman (WSJ).
Lloyd’s of London posts first annual loss in six years: The operator of the 324-year-old insurance market posted the loss after a succession of natural catastrophes pushed it £516m into the red in 2011. The insurance market also announced on Wednesday that it had given top executives salary increases of up to 20 per cent in 2012 as part of a pay overhaul that also cut their maximum potential bonuses (FT).
BATS Chairman to give up post: BATS Global Markets directors have voted to remove Joe Ratterman as chairman while expressing unanimous support for him to stay on as the company’s chief executive. The vote came after last week’s collapse of the exchange operator’s initial public offering, which raised questions about BATS’s technology and put Mr. Ratterman on the defensive (WSJ).
France discusses strategic oil reserves: France is in contact with Britain and the United States on a possible release of strategic oil stocks “in a matter of weeks” to push fuel prices down, Le Monde daily said on Wednesday, citing presidential sources. France would join a UK-U.S. cooperation on a release of strategic oil stocks that is expected within months, two British sources said earlier this month, in a bid to prevent fuel prices choking economic growth in a U.S. election year (Reuters).
Markets: European bourses were on the back foot as the “Bernanke bounce” began to fade and investors scratched around for fresh catalysts to propel risk assets to new highs. The FTSE Eurofirst 300 was down 0.3 per cent following a 0.4 per cent slide for its Asia-Pacific peer, and after Wall Street closed at its session lows overnight on some uninspiring housing and consumer confidence readings. S&P 500 futures suggested New York would be flat when the bell rang later in the day (FT Global Markets Review).
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