This week on FT Alphaville,
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This CDS report was written by Markit’s Gavan Nolan
“Reaching the bottom of the slump is not when you start with exit strategies. We need to choose a point when we’ve already got some way out of the trough”. So said German Chancellor Angela Merkel today at the G8 summit in L’Aquila, Italy. The comments signal something of a volte face by Merkel, a leader in the “sound money” mould typical in Germany. Last month she was urging EU leaders to formulate “reliable and credible exit strategies” and she began this week’s summit in the same vein.
President Obama echoed Merkel’s new found sentiments. He said that the G8 leaders “agreed that full recovery is still ways off, that it would be premature to begin winding down our stimulus plans”. But only a few days prior he said that spending more borrowed money would be “potentially counterproductive”. Even the consensus that “the worst was now behind us” was broken by Russian President Dmitry Medvedev. “It’s not quite clear whether we’ve hit bottom and how long the crisis will last”, a view somewhat more pessimistic than his G8 counterparts. Read more
A major fire has been blazing along Dean Street, central London, for most of Friday afternoon, forcing evacuations and causing Oxford Street to be closed to traffic in both directions. Read more
There is a lot of talk about the end of the dollar as the world’s reserve currency, but most of it is hot air…for the time being anyway.
For all the tough talk, foreign central banks are not yet turning away from the dollar. To the contrary, during the first quarter of this year, foreign dollar claims increased two percentage points to almost two thirds of total allocated reserves, according to International Monetary Fund data.Furthermore, while currencies dance to many tunes, traders can play from certain song books for years. A while back so-called carry trades were the rage. Now it is all about risk. Read more
Charlie Bean, the Deputy Governor for Monetary Policy at the Bank of England, is undertaking a seven-day tour of Britain, starting on 13 July. The plan is to visit 14 towns and cities – explaining quantitative easing as he goes.
Here’s the pamphlet Mr Bean will be distributing across the land: Read more
An interesting report is out from Standard & Poor’s on Friday, entitled “The Devil is in the Details: Understanding the Variation in Corporate Default Rates and Rating Transitions.” Now doesn’t that sound exciting?
(Ahem) Read more
China’s heavy-handed tactics in arresting Stern Hu, Rio Tinto’s top iron ore executive in China, have done it no favours, but the effect on iron ore prices is still unclear.
The wider impact, meanwhile, is hard to quantify. Cash prices of iron ore shipped into China rose 5 per cent this week. That may reflect the miners’ determination to switch supplies to customers elsewhere, who have agreed contracts, as much as any local crackdown on traders.Perhaps a better indicator is the Aussie dollar — inextricably linked to China, Australia’s second-biggest trading partner — which fell 2 per cent this week, in trade-weighted terms. This may be a simple case of industrial espionage. But the cloak and dagger stuff helps no one Read more
Live markets commentary from FT.com
The Cold War in high-frequency trading seems to have escalated overnight.
July 9 (Bloomberg) — Citadel Investment Group LLC, the $12 billion hedge fund firm founded by Ken Griffin, sued three former executives and the firm they started, Teza Technologies LLC, over claims they violated non-competition agreements. Read more
Bored of banks? Had your fill of the miners? Got a pressing request for Small Cap Corner?
Here’s your chance. Read more
The Virgin Atlantic CEO writes:
Our industry has never seen anything like it. It’s been a year in which airline management teams have had to cope with major swings in oil prices and a swingeing cut in demand in recent months. While other sectors in the economy are now talking about green shoots it’s difficult to see many, if any, in aviation. Read more
And save the date – Nov 9, at Grosvenor House, Park Lane, London
Just four months to go till the 2009 Complinet Compliance Awards. Read more
Anglo American is on Friday set to name Sir John Parker as its new chairman aiming to reassure shareholders that the international mining group has a strong independent future after its emphatic rejection of a merger offer from rival Xstrata, the FT reported. Sir John, who has been chairman of National Grid since 2002, brings a wealth of experience of international business and is well-regarded in the City. He will replace Sir Mark Moody-Stuart, who will retire from the board after seven years at the helm.
The Bank of England sowed confusion in the gilts markets on Thursday, announcing it would suspend its £125bn asset purchase programme, at least for now, but offering no clue to its future thinking. UK government bonds sold off sharply after the Bank disappointed investors by failing to increase its quantitative easing programme, the FT said. Lex believes the Bank may only be pausing for breath, while FT Alphaville noted the gilt purchase programme accounted for almost 10 per cent of UK GDP.
Lloyd’s of London has begun the biggest strategic review it has undertaken this decade in an attempt to ensure the more than 320-year-old insurance market does not fail in exploiting the gaps in the market thrown up by the financial crisis, the FT said. The London-based institution, which deals in large and complex insurance risks from all over the world, has brought in consultants from Deloitte to assist in the review, which Lloyd’s hopes will lead to a new strategic plan to be published in January.
China has launched its highest-profile criticism of the dominant role of the US dollar as a global reserve currency at a meeting of the world’s biggest economies, the FT said. Dai Bingguo, Chinese state councillor, was unequivocal in calling for the world to diversify the reserve currency system and aim at relatively stable exchange rates among leading currencies. Analysts said Mr Dai’s comments – which follow earlier statements by the People’s Bank of China in March – appeared mostly political in nature.
Drax, the energy group, is making the contenders for its latest corporate broking mandate fight it out in an Apprentice-style challenge. UBS this week secured the mandate to be Drax’s co-corporate broker, alongside Deutsche Bank, pipping Citigroup and Credit Suisse, after a mammoth five-month process in which a longlist of nearly a dozen brokers was cut to the three-strong shortlist. For the final task, UBS, Citi and Credit Suisse were each told to organise an event – for UBS, an investor dinner in London; for Citi, a two-day roadshow in New York and Boston; and for Credit Suisse, a European roadshow in Amsterdam, Geneva and Zurich, the FT said.
Four of the biggest names in the UK digital media scene are teaming up to launch an investment fund for internet start-ups, the FT reported. Michael Birch, co-founder of Bebo, the social network acquired by AOL last year for $850m, is the cornerstone investor. The fund, PROfounders Capital, has already raised about $30m and is not planning to take institutional money. PROfounders will invest in “digital disruptive” businesses, such as digital health and education, where Europe is yet to create world-leading companies.
Sprint Nextel, the struggling US mobile network operator, is to outsource the management and day-to-day running of its two nationwide networks to Sweden’s Ericsson in a seven-year deal worth between $4.5bn and $5bn, the FT said. The deal, believed to be the largest network management deal to date, represents a coup for Ericsson and the latest in a series of moves by Sprint to streamline its operations, stem customer defections and return to financial health.
Beijing on Thursday detained an executive of a large Chinese steel mill in a widening probe that has already led to espionage allegations against four employees of Rio Tinto, the Anglo-Australian miner.The government also defended its decision to detain the four Rio employees, one of whom is an Australian national, the FT said.
Citigroup replaced Ned Kelly, its finance chief, on Thursday after less than four months in the job. The surprise move follows regulatory pressure to overhaul top management, and could weaken the position of Vikram Pandit, chief executive, the FT said. John Gerspach, a Citi veteran, will replace Mr Kelly, and become the bank’s fifth finance chief in five years.
A poor performance by Japanese shipping companies amid fears that a global recession just might curb international trade weighed pushed the Topix index to an eighth day of declines, while the Nikkei Average was little changed. A report in the Nikkei newspaper that container rates between Asia and North America were being cut and the steady decline in the Baltic Dry index hit investor sentiment and sent shipping stocks tumbling. Elsewhere in Asia, the tone was similarly weak, putting the MSCI Asia Pacific Index on course for its second week of declines, Bloomberg said
Asian markets (Thurs)
Nikkei down 3.6 (-0.04%) at 9,287.46
Topix 1.8 (-0.2%) at 872.11
Hang Seng down 26.49 (-0.15%) at 17,764.10 Read more