Posts from Friday Jul 31 2009

The Weekender

On FT Alphaville this week,

Financial pundit scrap. Read more

Lex: Anglo American

Anglo’s CEO talked about many issue during the results presentation, but was deafeningly silent on the one most people wanted to hear about: Xstrata

“I’ve got nothing to say,” was, in effect, the sum of Cynthia Carroll’s defence when Anglo American’s chief executive was quizzed about Xstrata’s nil-premium merger proposal. Instead, she offered an almost Panglossian view of the South African miner’s longer term prospects. Little new, in fact, was revealed at the first half results on Friday.

 Read more

Legacy loan lift-off

The FDIC started its Legacy Loans Program this Friday, launching its first test deal in its effort to help banks shed their toxic assets.

Here are some details, from the FDIC’s press releaseRead more

Battle of the financial pundits

We at FT Alphaville are not getting involved in this one, though we think our readers might want to wade in.

The very vocal Janet Tavakoli, of Tavakoli Structured Finance, has been in an ongoing spat with Black Swan man Nassim Nicholas Taleb. Read more

Living in a commodities oxymoron

It appears it’s not just oil that’s defying supply and demand fundamentals, with prices rising in the face of growing inventories.

As Reuters reports on Friday copper and aluminium prices are doing much the same thing (our emphasis): Read more

US economy shrinks 1% in Q2

Government data released on Friday showed the US economy shrank 1 per cent in the second quarter, which was less than expected by analysts.

Here’s the Reuters release (our emphasis): Read more

Lunch Wrap

On FT Alphaville Friday morning,

China, some extreme views. Read more

China’s land boom, a datapoint

This is Guangqu Road in Beijing.

Guangqu Road from Beijingology Read more

Markets live transcript 31 Jul 2009

Live markets commentary from 

FHLBs, you shan’t go to the securitisation ball

That’s the Federal Home Loan Banks, the 12 regional US government-sponsored enterprises charged with providing loans to some 8,000 member banks.

The FHLBs have gained some prominence in the recent financial crisis, despite their own funding issues, as the two biggest GSEs, Fannie Mae and Freddie Mac, went into conservatorship last year. Indeed the FHLB system actually increased their lending in the crisis, helping their members finance their mortgage holdings at a time when ‘normal’ banks were reticent to to do the same. Read more

Buy suncream futures

11536.jpgOr, better still, make it a pairs trade and sell Britain’s Met Office as well.

The actionable event is clear for all to see:  having forecast a “barbecue summer” in the UK, the resultant wash-out has drawn an up-dated forecast from the national weather service, warning of a wetter than average August… Read more

Refining, the weakest link in the recovery

Stephen Schork of the Schork Report sets out the case very succinctly on Friday:

Thus, while we were led to believe that demand for oil was rising in the second quarter, hence the justification for that 40 percent surge on the NYMEX, we now have the balance sheets from Exxon, Shell et al. that prove it was a lie. Read more

S&P’s covered bond flip-flop?

What’s this?

Another flip-flop — albeit a more protracted one than that on CMBS — on the horizon from ratings agency Standard & Poor’s? Read more

China: A tale of extreme views

China – more specifically its short and mid-term future – has been the theme of the week, with much hype and speculation about coming meltdowns or rampant inflation. The truth, as the true experts conclude, is probably somewhere in between.

The week began with a report in the FT about how Chinese regulators had ordered banks to ensure unprecedented volumes of new loans are channelled into the real economy and not diverted into equity or real estate markets where, they warned, fresh asset bubbles are forming. Read more

Further reading

Elsewhere on Friday,

– Is the bond market bonanza just a blip?  Read more

Pink picks

Comment, analysis and other offerings from Friday’s FT,

Get ready for lower Chinese growth
Michael Pettis, senior associate at the Carnegie Endowment, writes:
Everything has changed. Whether America likes it or not, US debt levels will decline over the next several years. As a result American consumption will grow substantially slower than the US economy, and so the trade deficit will decline. Read more

Snap news

Breaking pre-market news on Friday,

– Luminar announces share issue to raise £37.5m, capital reorganisation — statementRead more

Earnings fuel surge of optimism

Equity markets around the world powered to fresh 2009 highs on Thursday as a global wave of forecast-beating corporate earnings helped allay concerns about potential asset bubbles in China. In New York, the S&P 500 closed up 1.2% at an eight-month high and within striking distance of the 1,000 level, up 45% from its low in March. But the Vix index of equity volatility was only a little lower at 25.32. The gains came amid positive earnings reports and upbeat outlooks from the likes of Honda Motor, AstraZeneca and Motorola, raising hopes of a broad-based economic recovery.

Tarp banks award billions in bonuses

Citigroup and Merrill Lynch, which lost $55bn in 2008, between them paid 1,400 employees bonuses of $1m or more each, according to a New York state report. The study, compiled by Andrew Cuomo, New York attorney-general, showed that JPMorgan Chase and Goldman Sachs, which both reported profits last year, paid the most million-dollar bonuses – 1,626 and 953, respectively. But Citi, which suffered a $27.7bn loss, paid million-dollar bonuses to 738 employees, while Merrill, which lost $27.6bn, paid 696 bonuses of $1m or more.

US derivatives plans spark doubt on CDS

A US legislative plan to regulate the near-$600,000bn market in OTC derivatives suggests that lawmakers debate the idea of banning so-called “naked credit default swaps”, which allow investors to speculate on the creditworthiness of companies. The proposal by key congressional committees would push most derivatives on to an exchange or clearing house but leaves open the issue of whether to outlaw CDSs, in which the buyer does not own the underlying asset.

Lenders win control of Delphi

A US bankruptcy court has given the go-ahead for a group of lenders to take control of Delphi, the US car-parts maker, setting the stage for Delphi to emerge from bankruptcy protection by the end of September, four years after seeking court protection from its creditors. The lenders, mostly hedge funds led by Elliott Associates, won an auction this week by outbidding buyout group Platinum Equity, which agreed a deal for Delphi last month before the court intervened, charging a secretive ‘sweetheart’ deal.

Sumitomo Trust to acquire Citi unit

Citigroup said on Thursday it would raise Y112.4bn ($1.2bn) by selling its Japanese fund management arm, part of an effort to repair its balance sheet after its rescue by the US government. Citi agreed to sell Nikko Asset Management to Sumitomo Trust & Banking, Japan’s fifth-biggest bank. The sale is Citi’s second significant divestment in Japan this year, after agreeing in April to sell Nikko Cordial, its local securities broker.

Microsoft and Yahoo on defensive

Microsoft and Yahoo were forced to mount a renewed defence of their search alliance on Thursday as investors continued to punish Yahoo’s price over the deal. Yahoo’s shares slid further on Thursday, extending their loss to 15% since the deal was announced on Wednesday; Microsoft has edged up 2% in the same period. Investors have expressed concern about the financial and strategic implications of the deal and the lack of any up-front payment from Microsoft to secure the alliance.

Ireland reassures on bad bank ‘fire sales’

Ireland’s bad bank that plans to buy up billions of euros of impaired commercial property loans from Irish lenders will not engage in “fire sales” of the property holdings it will control in Britain, Ireland’s finance minister said on Thursday. Discussing draft legislation to legally establish the National Asset Management Agency, set up on an interim basis in April, Brian Lenihan detailed sweeping powers to buy up to €90bn of property loans, including an estimated €25bn that Irish banks have lent on commercial property projects in south-east England.

FirstRand in tie-up with Chinese bank

South Africa’s biggest financial services group on Thursday announced a “strategic co-operation” agreement with China Construction Bank, China”s second-largest bank, a move that underlines the growing interest of South Africa’s corporate sector in Asia and Chinese interest in African construction projects. FirstRand, which last month announced a new business focus on Asian markets, says the agreement will allow it to compete more effectively for business in Africa.

Agencies berated as Reed taps investors

Big UK institutions turned their guns on credit-rating agencies on Thursday as Reed Elsevier, the Anglo-Dutch publisher, became the latest company to tap its shareholders for capital, reports The Times. Highlighting a new mood of defiance, key City shareholders expressed resentment at their treatment in company fundraisings. Reed raised £824m by placing a tenth of its shares in both London and Amsterdam, and said it had done so to protect its BBB+ credit rating. Reed shares closed 12% lower as the group reported a 52% yoy drop in first-half pre-tax profits to £188m.

Mizuho in fourth straight quarterly loss

Mizuho Financial Group, Japan’s third-biggest bank by market value, booked its fourth-straight quarterly loss on higher bad loan charges, reports Bloomberg.  The Y4.5bn loss ($47m) in the three months ended June 30 compares with a Y133bn profit a year earlier, and a loss in the preceding quarter. Bad loan and credit charges were Y76bn in the first quarter from Y4.7bn yen a year earlier as corporate bankruptcies continued to rise in Japan.

Shell and Exxon Q2 profits tumble

Profits at two of the world’s biggest oil companies, ExxonMobil and Royal Dutch Shell, have plummeted amid tumbling international oil prices and weaker demand for energy. Exxon, the largest US oil group, and Shell, the biggest in Europe, on Thursday unveiled post-tax Q2 profits that were roughly a third of those a year ago. Exxon saw a 66% yoy drop in Q2 net income – the steepest fall in more than a decade – to $3.95bn, while Shell suffered a 70% decline to $3.24bn.

NYSE Euronext reports loss

NYSE Euronext, operator of the New York Stock Exchange, on Thursday reported a Q2 net loss of $182m, compared with a profit of $195m a year ago, after absorbing a one-time charge, mostly made up of a $355m payment to LCH.Clearnet for breaking a contract as the US group moved to set up its own UK-based clearer. The payment is tax-deductable, which will reduce it to $250m, but it still exceeds the $200m that NYSE Euronext this month agreed to pay for 20% of Qatar’s Doha Securities Market.

Overnight markets: Up

Asian stocks climbed on Friday, sending the MSCI Asia Pacific Index to a fifth monthly gain, as better-than- expected earnings and a commodities rally lifted confidence about a global economic recovery. Futures on the S&P500 Index were little changed on Thursday after the gauge gained 1.2% on Thursday to the highest level in almost nine months.

Asian markets (Fri)
04:10 BST
Nikkei up 139.69 (1.37%) at 10,304.90
Topix up 10.26  (1.10%) at 947.20
Hang Seng up 345.30 (1.71%) at 20,579.38 Read more