Posts from Wednesday Jan 6 2010

CDS report: Remember Iceland?

Gavan Nolan of Markit wrote this CDS report

Credit indices outperformed stocks for the second-day running and fulfilled their promise of breaking through key resistance barriers. The Markit iTraxx Europe index closed at 68bp, over 2bp tighter than yesterday and the first time it has closed below 70bp since May 2008. The Markit iTraxx Crossover surged through 400bp and, at 393bp, is at its tightest level in two years. North America was not to be outdone and the Markit CDX IG index is trading at 78.25bp, the first time it has traded below 80bp since year-end 2007. Read more

Moral hazard for the massess

What’s good for bankers should be good for everyone, right?

That’s certainly the view of the National Assembly of Kuwait, which on Wednesday voted through a bill demanding that the government buy up all consumer debt, write-off the interest and reschedule the principal. Read more

Stimulus strains in Latam…

What’s going on in Argentina?

On Wednesday, Reuters was citing a local Buenos Aires TV station called C5N as saying that President Cristina Fernandez has called for the resignation of central bank president Martin Redrado. Read more

UK debt is still wanted?

Pimco may be cutting its holdings of UK debt and be fretting about the 80 per cent chance of a ratings downgrade, but there are plenty of other investors keen to get their hands on government paper – if Wednesday’s auction of £4bn of 2015 gilts is anything to go by.

The issue was covered 2.68 times – more than the equivalent auction in December – and the highest yield paid was 3.082 per cent, according to a release from the Debt Management Office. Read more

Lunch Wrap

On FT Alphaville on Wednesday morning,

FSA goes after former iSoft directors. Read more

Markets Live transcript 6 Jan 2010

Live markets commentary from 

Better late than never

It is has only taken three and half years, but the FSA has finally started (criminal) proceedings against former directors of  iSoft, the healthcare software company that was one of the key players in the government’s bungled £12.4bn upgrade of NHS computer systems.

From the FSA on Wednesday morning: Read more

As good as it gets for the retailers

The Christmas reporting season for the retail sector is just getting into full swing, but already some trends are emerging.

Both Next Marks and Spencer have  reported sales figures which impressed (in fact, M&S has reported the first quarterly underlying sales growth in the UK for the first time in more than two years) but both have seen their shares prices retreat. Read more

Buffett/Kraft conspiracy theories

7.5p, or 1 per cent.

That’s the gap between the Cadbury share price and the value of Kraft’s £10.4bn bid on Wednesday morning. Read more

TrimTabs on that ‘US government-rigged stock market’

FT Alphaville loves a good conspiracy theory, so here’s one to kick off Wednesday morning.

It’s the TrimTabs report referenced in this morning’s 6am Cut, questioning whether the US government is secretly propping up stock markets. Read more

Further reading

Elsewhere on Wednesday,

– Is the Huffington bank boycott a good idea? Read more

Pink picks

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

pink picksMartin Wolf: The eurozone’s next decade will be tough
What would have happened during the financial crisis if the euro had not existed? The short answer, writes Wolf, is that there would have been currency crises among its members. The currencies of Greece, Ireland, Italy, Portugal and Spain would surely have fallen sharply against the old D-Mark. That is the outcome the creators of the eurozone wished to avoid. They have been successful. But, if the exchange rate cannot adjust, something else must instead. That “something else” is the economies of peripheral eurozone member countries. They are locked into competitive disinflation against Germany, the world’s foremost exporter of very high-quality manufactures. I wish them luck. Read more

Snap news

Breaking pre-market news on Wednesday,

– Marks & Spencer UK like-for-like sales rise 0.8% over 13 weeks to December 26 – statementRead more

Kraft’s Cadbury deal runs up against Buffett

Warren Buffett on Tuesday unexpectedly intervened in the takeover battle for UK confectioner Cadbury, telling Kraft it should not use too much of its stock to finance the £10.4bn hostile deal. The intervention by the billionaire investor, who is Kraft’s largest shareholder, came as the US group said it would increase the proportion of cash in its existing offer for Cadbury from the proceeds of a $3.7bn sale of its North American pizza business to Nestlé.

See Lex on the matter and also Lombard. Bloomberg, meanwhile, notes an historical parallel: Buffett helped scupper Coca-Cola’s bid for Quaker Oats a decade ago.

Rajaratnam faces a fresh raft of insider charges

US prosecutors said on Tuesday they planned a huge expansion in insider trading charges against Raj Rajaratnam, and accuse the billionaire founder of the Galleon hedge fund group of making at least $36m in illicit profits – more than twice the amount originally alleged. The new claims were made in court documents filed by prosecutors in opposition to Mr Rajaratnam’s second request to reduce his $100m bail bond. Indicted last month in one of the biggest insider trading cases in history, he has denied any wrongdoing. Prosecutors now allege that between March and July 2006, Mr Rajaratnam obtained non-public information about AMD’s acquisition of ATI Technologies “from an inside source to whom Rajaratnam had begun making large payments in exchange for insider information in or about 2004”.

HM Treasury to benefit as bonus tax fails to stem payments

Alistair Darling’s attempt to stop banks making lavish bonus payments through the one-off 50 per cent “supertax” has failed, government officials admit, as many institutions plan to absorb the charge rather than reduce pay-outs. The chancellor’s allies admit the tax has not changed the behaviour of big financial institutions, but take comfort in the fact that the Treasury is set for a windfall of hundreds of millions of pounds just months before the election as a result.

Prince Alwaleed shores up Kingdom

Prince Alwaleed bin Talal al-Saud, the Saudi investor, revealed on Tuesday that he plans to shore up the balance sheet of his investment vehicle by “donating” SR2.24bn (€416m) of shares in Citigroup into it. Prince Alwaleed said the initiative would help lead Kingdom Holding, which floated 5 per cent of its shares on the Saudi stock exchange in 2007, to profitability and enable it to distribute dividends to shareholders.  Also see FT Alphaville on the matter.

Democrat’s Dodd set to retire

From the Washington Post: Senator Chris Dodd, who chairs the Senate Banking Committee, is expected to announce that he has decided against running for re-election this November. His retirement would be the second such announcement by a Senate Democrat in 24 hours; North Dakota’s Byron Dorgan said Tuesday that he would not run this fall.

Russia taps international bond markets

Russia is launching an investment banking beauty parade to help the country launch its first international bond in nearly a decade. Russia’s VTB Capital is expected to be one of the lead managers, alongside three or four western institutions. Barclays Capital, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs – which arranged the country’s last eurobond issue, in 1998 – JPMorgan and UBS are all said to be in the running.

Iceland faces financial isolation as president blocks repayment deal

Iceland’s  president blocked a deal to repay Britain and the Netherlands almost €4bn ($5.7bn, £3.6bn) lost in the Icesave division of failed Icelandic bank Landsbanki. The British and Dutch governments condemned the decision by Ólafur Ragnar Grímsson and hinted at repercussions. Fitch, the credit rating agency, warned of “a renewed wave of domestic political, economic and financial uncertainty” for Iceland and downgraded the country’s main sovereign rating to junk status.

Aviva in US bolt-on

Insurance group Aviva, is to buy the US asset management group River Road for an undisclosed sum. Aviva Investors, the group’s asset management arm with $364bn under management, will buy the Louisville, Kentucky-based company, which manages $3.6bn in US equities in what it said was an important move strategically.

Clampdown on second homes, Chinese edition

China’s housing ministry will curb credit for some home purchases to reduce speculation and rein in surging prices, Bloomberg reports. The nation will “further restrict credit for the purchase of second homes and curb speculative housing investments,” Minister Jiang Weixin said in a statement on the ministry’s Web site today after an annual work meeting. The news agency says he didn’t elaborate.

Conspiracy corner: TrimTabs boss ponders secret market support

According to the WSJ’s Market Watch: the unusual circumstances that led the equity market rally in 2009 might be explained by secret government moves to buy stocks, according to Charles Biderman, the founder and chief executive of TrimTabs, a research firm that tracks liquidity flows in the market. “We cannot identify the source of the new money that pushed stock prices up so far so fast,” Biderman said in a statement Tuesday.

Overnight markets

Asian markets
Nikkei 225 up +73.04 (+0.68%) at 10,755
Topix unchanged 0.00 (0.00%) at 655.00
Hang Seng up +186.17 (+0.84%) at 22,466

US markets
S&P 500 up +3.53 (+0.31%) at 1,137
DJIA down -11.94 (-0.11%) at 10,572
Nasdaq up +0.29 (+0.01%) at 2,309 Read more