The (early) Lunch Wrap | FT Alphaville

The (early) Lunch Wrap

Good morning, New York


Choose-your-own-Chinese data: The great thing about Chinese economic data is that you can read whatever you like into it, says Kate. She provides a nice list of the most recent contradictory signals coming from China accordingly.

On the mispricing of tail-events :
Izzy looks at the latest note from Christopher Cole at Artemis Captial Management, in which he argues that the single most undervalued asset class to hedge against hyperinflation is volatility itself. Tell that to the hyperinflationists loading up on commodities.

Star Trek met a Whale (Douglas Adams was delighted): Both Izzy and Lisa had another crack at Bruno “Voldemort” Iksil. Izzy pointed out that many people were still asking the wrong questions and they should be wondering about Volcker correlation loopholes and the role of the Chief Investment Office. While Lisa asked if it is valid to complain about cornering this market. The answer, we learned, is no, not really.

Deux Ex Macchiato came to AV: In the first post of his series , Deux Ex Macchiato writer David Murphy introduced us to credit valuation adjustments (CVA) by providing some historical perspective. His next post will cover the monolines, why they don’t generate much CVA any more and why they inspired a part of Basel III.

The Swiss floor has a permanent hole: But it might not matter all that much. Izzy took a look at why. Essentially it comes down to counterparties and how you just can’t cover them all (or even try to, apparently).


Major earthquake strikes Indonesia: US Gelogical Survey reports 8.7 magnitude earthquake off Indonesia coast; tsunami warnings have been issued across the region (BBC Breaking News).

Eurozone crisis reignites: Spanish ministers and European Union officials took turns on Tuesday to deny that the country needed an international bailout, in an effort to soothe the bond market. Investors have taken fright at the size of Spain’s budget deficit, the rise in its public debt and the weakness of domestic banks. The yield on Spanish 10-year sovereign bonds rose to 5.99 per cent on Tuesday afternoon, while Italian yields also advanced. Eurozone equities also suffered. (FT)

Santorum bows out: Rick Santorum has abruptly suspended his campaign for the US presidency, clearing the way for Mitt Romney to seal the Republican nomination and focus on his general election battle to unseat President Barack Obama. However, Santorum failed to endorse any other candidate (FT)

Sony warns of record loss: The scale of challenge of challenges facing Sony have underscored by a warning from the electronics and entertainment group that it expects to make a $6.4bn net loss for its just-ended financial year, its worst deficit ever. The loss comes after it was forced to give up billions of dollars of tax credits in the US that it had previously counted as earnings. (FT)

Best Buy chief walks: Best Buy’s chief executive has resigned suddenly after the company’s board launched an investigation into his “personal conduct”, ending a tenure in which investor confidence in the US electronics retailer’s ability to compete against online rivals plummeted. (FT) Best Buy shares sank to a three-and-a-half year low in response. (FT)

Unilever ends strikes: Unilever has struck a deal with two of the biggest unions representing its employes to cut pension benefits after a seven-month stand-off with workers that saw the Anglo-Dutch multinational suffer its first nationwide strikes. (FT)

Bo Xilai pushed out: China’s Communist party has formally dismissed Bo Xilai, one of its most powerful leaders, from his positions at the top of the ruling hierarchy and arrested his wife on suspicion of murdering British businessman Neil Heywood, who was found dead in a hotel room in Chongqing on November 15. (FT)

IMF set to recognise shrinking Chinese surplus: The IMF will “be significantly reducing” its medium-term outlook for China’s current account surplus, according to people familiar with the matter, a move which will give Beijing ammunition against critics who say that it keeps the renminbi artificially cheap to support its exporters. (FT)

Alcoa’s surprise profit: Alcoa, the world’s second-largest aluminium producer by market capitalisation, delivered good news with first-quarter results on Tuesday, reporting a $94m post-tax profit instead of the expected loss thanks to productivity gains and healthy demand in many markets. (FT)

Carlyle eyes $8bn valuation: Carlyle Group is eyeing a market valuation of $7.5bn to $8bn in an initial public offering, as the U.S. private equity firm prepares to kick off a marketing blitz to investors, perhaps as soon as next week, said a source with knowledge of the situation. Carlyle, which has $147bn in assets under management, plans to sell a 10 per cent stake to raise $750m to $800m in the IPO. (Reuters)

Bain looking to raise up to $8bn: Bain Capital is considering raising $6bn to $8bn for a new global buyout fund and offering investors up to three options on fees it charges to manage the money, according to two people with direct knowledge of the matter. (Reuters)

Obama returns to “Buffett rule”: Mr Obama is promoting the rule, which would set a minimum tax of 30 per cent on the income of millionaires, as he attempts to establish a stark contrast with Mitt Romney, his Republican challenger and a former private equity executive. (FT)

Barclays pay warning: Shareholder unease about the pay deals granted to bosses at Barclays intensified on Tuesday as a leading group of big UK institutional investors flagged its concerns about the bank’s pay policy ahead of its annual meeting in a fortnight. The Association of British Insurers warned its members in an “amber top” alert that there was a possible breach of best practice that investors needed to examine carefully. (FT)

Japan’s machinery orders push up: Japan’s core machinery orders rose a surprise 4.8 per cent in February from the previous month, the government said Wednesday, raising its assessment of the indicator for the first time since June last year in a positive signal for an economic recovery that has seen mixed signs recently. The gain was well ahead of expectations of a 0.5 per cent drop. (WSJ)

North Korea’s test fire: North Korea says it has started injecting fuel into a long-range rocket as its neighbours prepare for the imminent launch of the Eunha-3. North Korea says the rocket will carry a weather satellite into orbit, but the US and other countries believe the launch is a pretext to test an intercontinental ballistic missile. (FT)

Goldman’s Yoel Zaoui retires: Yoel Zaoui, one of Goldman Sachs’ most senior dealmakers, is leaving the US investment bank after a 24-year career advising on some of the biggest deals in global mergers and acquisitions. His departure is the third this year from the senior ranks of the M&A team. Gene Sykes, who co-heads the team based in New York, will assume sole responsibility for Goldman’s M&A group. (FT)

Travelzoo mulls sale: Travelzoo a publisher of travel newsletters and websites that has seen its shares plunge 75 per cent since July last year, is planning to sell itself, three people familiar with the matter said. The New York-based Internet company is in the process of hiring a financial adviser, the sources said. It has a market value of $336.1m. (Reuters)

Adelson wants Spanish Las Vegas: Billionaire Sheldon Adelson said on Wednesday he plans to spend $35bn on a mini-Las Vegas strip in Spain where he is courting the country’s two top urban areas, Barcelona and Madrid, with plans for a casino complex. (Reuters)

Czech rebellion snuffed: Czech Premier Petr Necas overcame a rebellion within his ruling coalition and unified the government behind a deficit-cutting agenda that has pushed bond yields to a record low. (Bloomberg)

Markets: European stock markets recovered some of their poise after the worst one-day drop in more than a month, as Spanish and Italian bond yields fell once more and restored some calm to financial markets. The FTSE Eurofirst 300 index gained 0.4 per cent in early trading, after shedding 2.5 per cent on Tuesday. It has now given up most of the first quarter’s rally. (FT’s Global Markets Overview)