The European Central Bank entered uncharted territory on Monday by buying eurozone government bonds as part of a massive financial support scheme that cheered markets and eased pressure on the area’s most indebted countries, the FT reported. The Greek bond market saw its largest one-day gain since Greece entered the eurozone in 2001. Tensions eased in money markets and the euro rose at one point by more than 2 per cent against the US dollar.
Sony on Monday said it returned to an operating profit last year as it reported stronger-than-expected results following the launch of a sweeping restructuring programme by Sir Howard Stringer, chairman and chief executive, the FT reported. The consumer electronics company made an operating profit of Y213bn in the year to March, before restructuring costs and losses at Sony Ericsson, compared with the Y140bn it forecast in February and a Y127bn loss last year.
Goldman Sachs’ trading operations made money every single business day in the first quarter, a feat that was a first for the bank, but could fuel criticism of its business model and market behaviour, the FT said. Goldman’s trading desk recorded a profit of at least $25m on all of the first quarter’s 63 working days, making more than $100m a day on 35 occasions. But as FT Alphaville pointed out, the bank is also facing serious legal risks.
China returned to a modest trade surplus of $1.7bn last month after recording a surprise deficit of $7.2bn in March. The 87% reduction in the surplus compared with last year could ease some international pressure on Beijing to appreciate its currency, noted the FT.
Taobao, China’s leading retail e-commerce company, on Monday unveiled an alliance with Yahoo Japan Shopping, as the Alibaba unit moves to internationalise its business, the FT said. Yahoo Japan Shopping will offer 50m Chinese product listings introduced by Taobao to Japanese consumers from June 1, while TaoJapan will carry 8m Japanese listings for Chinese consumers. The move highlights how Asian internet companies are increasingly seeking cross-border tie-ups in the region as they look for growth overseas.
BP has spent $350m so far on trying to contain its oil spill in the Gulf of Mexico, the company said on Monday morning, raising the prospect that the cost of the clean-up alone could reach $1bn. The company is preparing a new bid to stem the flow of oil with a “junk shot”: a risky procedure that involves filling the well with debris, followed by heavy fluids, followed by cement to seal it closed, the FT reported.
Gordon Brown agreed on Monday evening to step down as Labour leader as the Liberal Democrats opened formal talks with the party about forming a coalition government, the FT reported. The shock development came on an extraordinary day of political wrangling, as Lib Dem MPs offered a lukewarm response to their leader’s initial plans for a power-sharing deal with David Cameron’s Conservatives.
China’s budding investment banks have zoomed to the top of Asia’s all-important league tables, and they’ve even begun to win business outside the mainland, according to the WSJ’s Deal Journal blog. The test now, the blog said, will be whether they can build on recent success, or whether they follow the same path as Japan’s banks – which have gained prominence but are still struggling to expand outside their home turf.
Regulators, politicians, media types, investors and exchanges are still trying to figure out just what happened to cause that sharp, sudden and scary plunge on Wall Street last Thursday. Now analysts at Barclays Capital have weighed in, arguing that a ‘perfect storm’ of events precipitated the plunge. FT Alphaville has more. Read more
The story of the day again is volatility in the sovereigns. The weekend announcement that the International Monetary Fund had approved is portion of the Greece aid package ($38 billion) brought a strong rally to the markets out of the open. The loan is reportedly the largest financial commitment the IMF has ever made to one country. G20 ministers also met this weekend. Officials from the G20 in an apparent move to calm the markets offered the strongest language to date this weekend affirming commitments to Greece, and implicitly the eurozone. The impact of all of this was broadly felt and stimulated a rally across major equity indices and most corporates. Of course, the most noticeable impact was in the sovereign markets. Read more
Commodities guru John Kemp at Reuters has again been focusing on full stocks at Cushing Oklahoma and the continuing widening contango, in his latest market commentary.
A bit of background: Cushing is the main physical delivery point in the US for Nymex WTI crude. The inability of traders to deliver easily into the hub has the effect of depressing the time-spread between the front-month and second-month, as traders look to close out positions which would otherwise force them to take delivery without the means to store oil. Read more
Spare a thought for Jean-Claude Trichet, president of the European Central Bank.
The man has had a rough couple of days. Just last Thursday, he was being roundly abused for declining to even consider the prospect of intervention in the secondary market for government bonds, quite a tough line to take. Read more
Fresh off Freddie Mac asking the US Treasury for $10.6bn to offset losses on bad loans, Fannie Mae entered its own plea for a $8.4bn helping of financial aid. Moreover, the home-loan company — which on Monday reported a net loss of $13.1bn for the first quarter of 2010 — warned in its 10-Q filing with the SEC that there is “significant uncertainty as to our long-term financial sustainability”, FT Alphaville reported. Read more
Monday’s sovereign CDS action, in a Markit chart…
Nasdaq has published the list of trades it cancelled as a result of Thursday’s epic market ‘flash-crash’ — and as it transpires, a significant number of those affected were ETFs or ETNs. While we at FT Alphaville can’t definitively explain the reason for the large number of affected ETFs and ETNs, we can point to a few market-structure factors that could offer some clues. Read more
Morgan Stanley strategist Teun Draaisma has thrown in the towel and closed his bearish underweight position on European equities. Draaisma has been bearish since late January, when he downgraded in the expectation of a 10-15 per cent fall in stock prices. He thinks we have now had the correction – the MSCI Europe index was down 13 per cent last Friday from its mid-April peak – and on a 12-month view its time to turn bullish. FT Alphaville has more. Read more
The numbers are in: Goldman Sachs made money every single day in the quarter ended March 2010, and at least $100m on 35 of those days, according to the former investment bank’s latest filing with the SEC.
Here’s the relevant chart from their 10-Q: Read more
Here’s an interesting tidbit, or two, or three (or four) from the ‘Legal Proceedings’ part of Goldman Sachs’ filing to the Securities and Exchange Commission, published on Monday:
We are involved in a number of judicial, regulatory and arbitration proceedings (including those described below) concerning matters arising in connection with the conduct of our businesses…
A picture, even one of Bank of England website press releases, tells you everything:
Eurozone financial CDS has well and truly tightened from last week’s blow-outs:
While Europe’s markets threw themselves into a dead wolf bounce on news of the EU’s bailout on Monday, traders around Asia were contemplating the day’s gains in regional markets.
In a wave of what some fear could be misplaced optimism following overnight news of Europe’s massive rescue plan, Australia was one of the region’s biggest gainers, rising nearly 2.7 per cent after suffering a 6.8 per cent plunge last week on fears of European contagion, and also on concerns about the impact of the government’s proposed 40 per cent “super tax” on resources companies. Read more
Live markets commentary from FT.com
RTRS-GERMANY’S BUNDESBANK SAYS EURO ZONE CENTRAL BANKS HAVE STARTED BUYING GOVERNMENT BONDS.
And by the looks of thing, the process may have kicked off in Greece: Read more
Further reaction to the European “shock and awe” stabilisation package this time from Marc Ostwald of Monument Securities who says there are lots of unresolved issues.
Perhaps the most important, he says, is encapsulated in a 1950s German saying: “Wer soll das bezahlen?”, which in English roughly translates to “Who is going to pay for this”? Read more
Sen. Carl Levin has told the WSJ that he is drafting legislation to ‘prohibit companies from taking the opposite side of the deal for their own account’, as part of a move to stop Wall Street investment banks from betting against their customers. The amendment may be proposed as soon as Monday for inclusion in the Senate finance reform bill.
China’s trade balance nudged back into surplus in April after recording a deficit in March, the FT reports. The relatively modest $1.7bn surplus will ease some of the pressure on Beijing to appreciate its currency. Down 87 per cent from the same month last year, the surplus follows an unexpected deficit in March.
Global financial authorities launched an audacious package of measures in the early hours of Monday morning – including $955bn of government-backed loan guarantees and a commitment to buy European sovereign bonds – to combat rising financial market tensions triggered by worldwide fears over public finances, according to the FT.
The world is racing to avert a crisis in Europe, the WSJ adds. President Barack Obama called for ‘resolute action’ in phone calls to French President Nicolas Sarkozy and the German Chancellor Angel Merkel on Sunday. Read more
Courtesy of the fixed income team at Deutsche Bank and drawn up before overnight events.
It’s a handy table of Lehman-Greece parallels, or, financial system stress measures now versus the fourth-quarter of 2008 — after Lehman Brothers collapsed. Here it is: Read more