Posts from March 2010

Obama permits Atlantic oil exploration

Barack Obama on Wednesday made his boldest bid so far to win Republican support for a watered down bill to tackle climate change when he said he was lifting some restrictions on US domestic offshore drilling for oil. The move, which, for the first time in more than 20 years, will open up potential sites off the coastlines of Virginia and Florida, was broadly welcomed by the energy sector but criticised by environmental groups.

Berlin and Paris eye bail-out levy

Germany and France on Wednesday called for an international bank levy as Wolfgang Schäuble, German finance minister, outlined plans to force his country’s banks to pay €1.2bn into an insurance fund to cover future bail-outs, the FT reports. But the countries differed on the details: Berlin wants a bespoke fund without contributions from insurers, while France could include insurers, even hedge funds, and will treat the levy as a tax flowing into government coffers.

Gartmore exec slams compliance rules

Roger Guy, the co-head of Gartmore’s flagship hedge fund, has hit out at the company’s “excessive” internal compliance rules which he blames for the suspension of his partner Guillaume Rambourg earlier this week. Mr Rambourg’s suspension, disclosed on Tuesday, sent shockwaves through the financial community in London and caused Gartmore’s share price to plummet more than 30 per cent in late trading.

EMI hit by collapsed rights deal talks

EMI has just a few weeks to produce a new plan for its private equity owner to present to investors after the collapse of talks about a £200m distribution deal left the company almost certain not to meet a key bank test of its financial health. An eleventh-hour attempt to sell distribution rights in the Americas to Vivendi’s Universal Music or Sony Music fell apart over concerns about price, timing and whether the sale could be blocked by Citigroup, which lent £3.2bn for Terra Firma’s £4.2bn buy-out of EMI in 2007.

US firms cut 23,000 jobs in March

US companies continued to cut jobs in March, dashing hopes that private sector employers would begin hiring for the first time in two years. Private businesses cut 23,000 workers this month versus expectations of gains of 40,000, according to a survey from ADP employer services.The ADP report comes ahead of Friday’s closely watched government non-farm payrolls figures.

CS bosses to share SFr3bn bonuses

The top 400 executives of Credit Suisse will share a jackpot of more than SFr3bn when a special bonus scheme that reached maturity on Wednesday pays out next month. The end of the bank’s five-year performance incentive plan means Brady Dougan, chief executive and the biggest beneficiary, will receive 1.3m shares. Based on Wednesday’s closing share price of SFr54.35, he stands to make SFr70m (€49m) – on top of the SFr19.3m compensation he received for 2009.

Google’s business in China starts to unravel

Google’s business in China showed signs of unravelling on Wednesday as search problems shook the confidence of advertisers and users, the FT said. Google accused China on Tuesday of blocking searches on its Hong Kong website, and searches out of China continued to be plagued by problems on Wednesday. Advertisers said they had witnessed a slowdown in traffic and would react by switching to other search engines. Beijing has declined to comment on the confusion.

Sony and Toshiba sell factories to Taiwanese

Sony and Toshiba sold factories to Taiwan rivals on Wednesday in a shift by Japanese groups away from electronics manufacturing.The sale of Sony’s Nitra television plant in Slovakia to Hon Hai marks the end of an era as Sony steps back from the activity that made it famous, the FT said. Toshiba said it was selling a plant in Singapore that made small LCDs to AU Optronics of Taiwan, while Sony will sell a similar factory to Kyocera, its Japanese rival.

Iron ore price deal sparks steel fury

European steel and auto industries on Wednesday accused mining companies of unfair pricing practices following the introduction of a new system for valuing iron ore that will see the cost of the resource nearly double. The complaints followed warnings steel prices would have to rise by up to a third after miners and steelmakers in Japan and China agreed to a change in pricing iron ore.

Is the private label securitization market about to make a comeback?

We’ll have to see this to believe it, but the Wall Street Journal reported on Wednesday that Redwood Trust is hoping to launch a $200m RMBS deal.

Redwood, in its own words, is “a financial institution focused on investing in, financing, and managing non-agency residential and commercial real estate loans and securities.” Read more

Banking bubble (charts)

Citi’s European banks research team has come up with a fresh take on earnings and valuation bubbles across major markets. Analysts led by Ronit Ghose compared the market value of banks to the size of the economies in which they are based – a measure dubbed ”penetration” – and made copious use of bubble charts. FT Alphaville has more. Read more

There’s too much liquidity in the eurozone (for now)

One view regarding the unexpectedly poor showing at Wednesday’s last ever six-month Long-term refinancing operation (LTRO) by the ECB is that there’s too much liquidity in the eurozone.

Barclays Capital’s Laurent Fransolet emphasizes the point in his take on the financing operation. As he stated on the day (our emphasis): Read more

CDS report: All on Good Friday

European credit markets were devoid of momentum today as the upcoming Easter holiday and the impending US jobs report on Friday led to inertia. Investors received an inkling of what to expect from the NFP on Friday, and it wasn’t positive. The ADP survey showed the private sector cutting 23,000 jobs in March, the lowest monthly loss since February 2008. But the figures disappointed the street, which had been expecting a gain of 40,000. The ADP is far from a perfect indicator for the NFP, though it has proved reliable in recent months. The consensus for the NFP is a gain of about 190,000 jobs. A figure well below this could ferment talk of a jobless recovery and raise questions about the strength of the US consumer. On the other hand, it will cement expectations of rock-bottom rates for the foreseeable future.

The Markit iTraxx Europe index widened nearly 1bp to 78.5bp, more or less where it finished last week. It was a similar story with the Markit iTraxx HiVol and Crossover indices, both slightly wider at 118bp and 426bp respectively. Sovereigns continued to underperform, with the Markit SovX Western Europe index 1.5bp wider at 83.5bp, 4.5bp wider than Friday’s close. Read more

Overheard in the Long Room

The members of FT Alphaville’s private forum, the Long Room, enjoy (and regularly engage in) spirited debate. Here’s a selection of what’s been said and posted just recently:

– Moorad Choudhry argues that it’s going to be a hard year for optimists. Read more

Moody’s downgrades five Greek banks

Moody’s on Wednesday downgraded the deposit and debt ratings of five Greek banks, citing “a weakening in the banks’ stand-alone financial strength and anticipated additional pressures stemming from the country’s challenging economic prospects in the foreseeable future.”

It’s worth remembering that the rating agency’s power over the Greek sovereign was lessened by the European Central Bank’s decision to keep the minimum credit threshold for eligible collateral at BBB- beyond the end of 2010. Still, the banking downgrades will do little to boost investor confidence. Read more

The Dodd bill has an is-ought problem

A what-ought problem? An is-ought problem.

Senator Chris Dodd’s gigantic financial reform bill is starting to attract a bit of nerd rage for giving regulators power to regulate — but not the requirement to use it. Read more

Is Henry Kissinger helping Rio Tinto in China?

Yes, you’ve read that right — Henry Kissinger. Rio Tinto has had rather a bad patch in Beijing, especially since four Rio executives were recently jailed for bribery, but it’s a surprise to see the controversial former US Secretary of State named in connection with company, FT Alphaville said. Read more

The pirate business model

If you’re interested in the economics of the Somali pirates (and who isn’t?), FT Alphaville reported on an account of their business model, which was tucked away in an annex to the UN’s latest report on Somalia. Including: “The refined business model guarantees every participant in the operation, if successful, a well-defined percentage or share of the ransom money.” Read more

What does weak demand for ECB funds mean?

The ECB’s last ever six-month long-term refinancing operations (LTRO) took place on Wednesday, fetching unexpectedly weak demand, according to the newswires.

As Bloomberg reported: Read more

Markets Live transcript 31 Mar 2010

Live markets commentary from 

The eurozone’s gone double-digit on unemployment

As Reuters reported on Wednesday:

The euro zone’s 10 percent jobless rate in February was the highest since August 1998 and in line with market expectations. A month earlier unemployment was at 9.9 percent. The figure pointed to only subdued recovery from the worst economic crisis in decades, with high unemployment curbing consumer spending that is key to reviving economic growth. Sluggish private demand also keeps the lid on price growth.

 Read more

Obama to announce offshore drilling areas

President Obama will announce on Wednesday his plan to open a vast stretch of the Atlantic coastline to offshore oil and gas drilling, the New York Times reports. The Times noted that much of the proposed area — extending from the north coast of Delaware to central Florida — would be opened to drilling for the first time. The FT’s Energy Source blog discusses the political implications of the move.

BSkyB ordered to sell sports to rivals

Ofcom ruled on Wednesday that British Sky Broadcasting must sell Premier League football and other premium programming to rivals, the FT reports.The satellite broadcaster has bitterly resisted Ofcom’s intervention in its business and is likely to seek to block implementation of Ofcom’s ruling while it prepares a full appeal. The broadcaster criticised the ruling as an “unprecedented and unwarranted intervention”.

Investors cautious as US labour data looms

A first quarter that started with a bang looked to be finishing with a whimper on Wednesday, the FT’s rolling global markets overview writes. Lingering sovereign debt fears and trepidation before a crucial US labour report encouraged traders to pare risky bets ahead of the Easter weekend. The FTSE All-World index, which had welcomed the first day of the new decade by jumping 1.7 per cent, again faltered in the face of 18-month highs, trading flat but off early lows. Greek debt was again under pressure, though the euro bounced on better economic data out of Germany.

China, Taiwan Yahoo users report hacking

Several scholars, rights activists and journalists working on China and Taiwan issues have reported that their Yahoo e-mail accounts have been hacked into, the FT reports, in the latest internet incident involving China since Google’s decision to stop censoring its Chinese site. According to a cybersecurity report issued by Symantec earlier this week, China has become the world’s largest source of targeted attacks – malicious mails sent in small numbers aimed at gaining access to sensitive data.

The morning after…

. . . After Ireland’s new bad bank rolled out swingeing haircuts on Tuesday for the troubled loans Allied Irish Bank and Bank of Ireland want to offload on to it, that is.

And after financial regulators added tough new capital requirements for both banks. Read more

The Sky has not fallen in

BSkyB must offer Sky Sports 1 and 2 to its rivals, the British regulator Ofcom has ruled — at a price Ofcom will determine. But, FT Alphaville writes, if you thought that was bad news, think again – shares in BSkyB are the biggest risers in the FTSE 100 at the moment. Read more

IMF squabbles, Polish edition

A curious — if bitter — row is developing in Poland over the country’s use of its $20.5bn IMF credit line, FT Alphaville writes. The finance ministry wants more of it, while the central bank most certainly doesn’t. Where next for Poland’s recovery?  Read more

Around the world in three Libor rates

We’re still very much in loose and liquid times, FT Alphaville writes, but they are evolving; discrepancies are appearing, if you look at three key Libor rates. And it’s very much down to the various monetary policy strategies being operated by central banks. Read more

Key man risk, defined

Ever wondered what it might look like?

Here’s the answer: Read more