The Lunch Wrap | FT Alphaville

The Lunch Wrap

Good morning, New York


Chinese gambling: So, the Economist predicted that Chinese GDP would surpass US GDP at market exchange rates in 2018. Not likely, said Michael Pettis. He also offered a bet on it involving a very cool underground Chinese band and some Peking University freshmen. The details are in here.

Lessons from Japan: We took a look at Japan’s Great Depression – particularly the lessons of Japan’s balance sheet recession and the similarities with US households’ deleveraging journey. Izzy’s argument and Richard Koo’s charts are all in here.

Spain’s on the rack: Spain’s honeymoon ended a few weeks ago (when it said it would breach its budget target) and now credit default swap markets are viewing Spain as a greater risk than Italy. Lisa argues it is increasingly likely Spain will be pushed into a bailout in 2012 – potentially by the ECB in return for a continued willingness to fund the Spanish banks.

Portugal PSI: With the trend towards ever greater subordination of private bondholders by the official sector, it may be better to restructure now, lest an ever greater haircut be required. But will Portugal need to restructure its debt at all? Joseph looks into how the bailed out sovereign has been doing and who it’s creditors are (hint: they are close to home).


Crude interventions: Confirmation by France that it was in talks with the US, UK and Japan to release billions of barrels of oil on to the market combined with an FT op-ed by Saudi minister of petroleum, Ali Naimi (in which he said: “The bottom line is that Saudi Arabia would like to see a lower price”) sent crude prices tumbling on Wednesday. (FT)

BoA pay explosion: The pay of Bank of America’s chief executive, Brian Moynihan,  shot up more than 300 per cent last year even as the shares fell below $5. His overall package of $8.1m, up from $1.9m in 2010, was boosted by $6.1m in performance-related stock. (FT)

MF Global: Three MF Global executives frustrated and stymied lawmakers in both parties (WSJ) in a US congressional inquiry into the MF Global failure.  While MF Global assistant treasurer Edith O’Brien pleaded the fifth amendment. (FT) During the three-hour hearing, lawmakers lambasted the witnesses for their broad denials and claims of ignorance about how more than $1bn in customer money had disappeared from the firm. (Dealbook)

Chinese financial liberalisation: China approved a broad package of financial reforms in Wenzhou, a city known for entrepreneurship and underground lending, in what may be a prelude to a national effort to liberalize China’s creaking financial system. The State Council said it would allow private lenders in Wenzhou, whose legal status has been in limbo, to operate as investment companies and was studying allowing Wenzhou residents to invest directly overseas, giving them a way to earn better returns than in Chinese banks. (WSJ)

Facebook IPO: Facebook will permanently halt trades of its stock on private secondary markets at the end of this week. The move is to allow the social network to finalise its shareholder list and tighten information pathways leading up to its initial public offering, expected in May. The length of the stop on trading is unusual and may prevent any leak of sensitive information from a private transaction, thereby avoiding legal risks. (FT)

German unemployment falls to record low: German unemployment dropped for a fifth consecutive month in March with the jobless rate sliding to 6.7 per cent, marking a new record low since figures for unified Germany were first published. (Reuters)

BoE’s Fisher wants more collateral: Banks should continue to build up the amount of collateral they have pre-approved for use in the Bank of England’s emergency liquidity scheme, the Bank’s executive director for markets Paul Fisher said on Thursday. Fisher also sits on the Bank’s Monetary Policy Committee. (Reuters)

Balfour Beatty job cuts: Balfour Beatty, the UK’s biggest construction company, has warned 12,000 staff in the UK they could lose their jobs as a result of the downturn in the building industry. Initial estimates suggest 4,000 jobs could be lost as Olympics related projects come to a close. (FT)

Japan Airlines IPO: Japan Airlines is planning to tap Australia’s Qantas Airways, British Airways’ owner IAG and other members of the Oneworld alliance as investors in an initial public offering expected to be worth at least $6bn. (Reuters)

Spanish strike: Spanish unions said a high turnout for a general strike to protest government budget cuts and reforms on Thursday had almost brought heavy industry to a halt while the government said the day was proceeding normally. (Reuters)

Fitch blocked: An Indian high court order has blocked Fitch Ratings from issuing a credit rating for one of the country’s biggest non-bank lenders in an unusual move that highlights the controversy generated by rating agencies. (FT)

Myanmar floats currency: Myanmar said it would float its currency to make the resource-rich Southeast Asian country more inviting to foreign investors following decades of pariah-nation status. (WSJ) However, Myanmar faces a tougher road as its lacks financial infrastructure and is less developed and not as connected to the global marketplace as other Asian countries were when they moved away from fixed exchange rates. (WSJ)

Mobile roaming cap: The EU agreed the charge for using data services such as email and web browsing will be capped at 70 cents a megabyte,  a fraction of the €2-€5 charged by most operators across the EU. The cap will fall to just 20 cents by 2014, all but eliminating a lucrative sideline for telecoms operators. Many of their share prices dropped after the agreement. (FT)

Britain shortlists for rail franchise bidders: Stagecoach, FirstGroup, Go-Ahead and National Express are among 13 firms vying to be the next operators of the Great Western, Thameslink and Essex Thameside rail franchises, Britain’s Department of Transport said. (Reuters)

Macau casinos: Sheldon Adelson is adding a fourth casino in Macau, the world’s largest gambling hub, drawing almost six times the revenue of the Las Vegas Strip. (Bloomberg)

Markets: After stampeding for much of the year, the bulls are rather limping into the end of the first quarter as doubts about the strength of the global economy turn the herd more timid. Europe’s FTSE Eurofirst 300 has opened with a loss of 0.1 per cent. (FT’s Global Markets Overview)