This week on FT Alphaville,
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Our colleague Sam Jones is leaving us to take up the glamorous role of FT hedge fund correspondent.
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Live markets commentary from FT.com
Comment, analysis and other offerings from Friday’s FT,
Adam Posen and Nicolas Véron – European banking needs a state-led triage body
The Bank for International Settlements has just announced that national governments have done too little to clean up their banking problems, and it is right. The European Summit concluded that there can be no fiscal federalism to transfer funds between banking systems, were they to require recapitalisation. That is reality. It seems difficult to craft a policy responding to the first while abiding by the second. Yet, all recent systemic banking crises in developed countries (including the US savings and loans, Sweden and Japan in the 1990s) have only been solved when there was a government-led triage process, with state intervention to resolve the cases of insolvency. Read more
Stock markets on both sides of the Atlantic tumbled on Thursday as a bigger-than-expected fall in US jobs last month dashed hopes that the US was moving out of recession. The data showed that the number of people in employment fell 467,000 in June and the unemployment rate rose from 9.4% to 9.5%, its highest for 26 years. President Barack Obama called the jobs data “sobering”, but expressed confidence in a recovery soon. The figures sent shares in the US and Europe and commodity prices sharply lower.
US state regulators on Thursday closed six banks in Illinois and one in Texas, raising the number of US bank failures to 52 this year, reports the WSJ. The seizures were the most in a single day during the financial crisis. The Federal Deposit Insurance Corp estimated that the closures of First State Bank of Winchester, John Warner Bank, Rock River Bank, Elizabeth State Bank, First National Bank of Danville, Founders Bank and Millennium State Bank of Texas would cost it $314m.
A startling spike in oil prices on Tuesday to their highest this year was caused by a rogue broker who placed a massive bet in the Brent oil market, triggering almost $10m (€7m) of losses for his company. PVM Oil Associates, the world’s largest over-the-counter oil brokerage, said on Thursday it had been the “victim of unauthorised trading”. The privately owned company said that as a result of the unauthorised trades it had been forced to close substantial volumes of futures contracts at a loss.
Private equity that want to buy troubled banks would have to maintain significant capital levels and promise not to “flip’’ investments for at least three years, under proposals by US regulators. The proposed rules, which would require buyout firms to maintain a tier one capital ratio of at least 15% – three times the level typically required of other banks – for at least three years, were introduced on Thursday despite disagreements among regulators over how far the requirements should go.
Two of China’s biggest oil groups have approached Repsol YPF, the Spanish oil company, over possible asset purchases and joint ventures worth billions of dollars. Repsol is discussing a possible sale of its 75% stake in YPF, the Argentine company that accounts for two-thirds of the Spanish group’s oil production, to CNPC, parent of listed PetroChina, in a deal that could value YPF at $17bn.
Johnson & Johnson on Thursday said it will buy an 18.4% stake in Irish biotech company Elan, in a $1.5bn bid to crack the elusive but potentially lucrative market for Alzheimer’s disease treatments, reports the WSJ. The agreement gives J&J access to bapineuzumab, a closely watched experimental Alzheimer’s treatment.
The Chinese government has hired two foreign banks to restructure some of the country’s best railway assets with a view to listing the holding company in an initial public offering that could be worth as much as $5bn. Macquarie Securities and JPMorgan have been employed to arrange the restructuring with a view to a potential Shanghai and Hong Kong listing expected in the summer of 2010.
The International Petroleum Investment Company, which is wholly owned by the Abu Dhabi government, on Thursday said it had raised $5bn in syndicated loan facilities to help finance a recent multibillion dollar spending spree. The funds will help pay for its purchase of Canada’s Nova Chemicals, in a deal worth $2.26bn in February, and also for its acquisition of Santander’s 32.5% stake and Union Fenosa’s 5% holding in Cepsa for €3.3bn, which took IPIC’s total shareholding in the Spanish oil refiner to 47.1%.
Intermediate Capital Group, the mezzanine debt provider, is to raise £351m in a fully underwritten rights issue to boost its “firepower” for buying debt in private equity-owned companies at big discounts. Outlining ICG’s ambition to become the biggest independent fund manager of debt in buyout deals, ICG managing director Tom Attwood said there was an opportunity to make 25-30% returns buying leveraged loans at a discount.
The Children’s Investment Fund Management, the UK hedge fund manager run by Christopher Hohn, posted its fourth consecutive year of double-digit growth in 2007. Revenue rose more than 70% from £333m to £574m, according to the 2008 accounts filed this week. Performance at the underlying TCI funds in 2008, however, was down 43%, as a number of investments went awry.
US marshals on Thursday seized the luxury $7m New York City penthouse apartment of imprisoned fraudster Bernard Madoff and his wife, Ruth, reports Reuters. Mrs Madoff was present when agents took possession of the four-bedroom apartment on Manhattan’s East Side under court orders. Disgraced financier Bernard Madoff, 71, was sentenced on Monday to an effective life term for fraud amounting to as much as $65bn.
Germany could soon see its first trial related to the financial crisis, after prosecutors charged Stefan Ortseifen, the former chief executive of stricken lender IKB. Prosecutors in Düsseldorf said they had charged Ortseifen – who led the mid-sized corporate lender until its near-collapse in the summer of 2007 – with manipulating the share price and breach of trust.
John Peace, who has been appointed chairman at Standard Chartered, the emerging markets bank, is to receive £650,000 a year plus a further £500,000 in shares that will vest over the next three years. Peace, who became acting chairman after Lord Davies left in January to become UK trade minister, was confirmed in the role on Thursday. Sir Win Bischoff , 67, now tipped to become chairman of Lloyds Banking Group, was also a candidate but it is thought StanChart wanted a candidate who could serve two terms.
Asian stocks fell for a third day as figures showing worsening job markets in the US and Europe fanned doubts about global economic recovery. In New York, futures on the S&P500 lost 0.1% after the gauge slid 2.9 percent on news that the US lost 467,000 jobs in June, over 100,000 more than economists had forecast.
Asian markets (Fri)
Nikkei down 101.32 (-1.03%) at 9,774.83
Topix down 7.51 (-0.81%) at 916.51
Hang Seng down 1.70 (-0.01%) at 18,176.35 Read more