Posts from Tuesday May 11 2010

The devalued euro, in real terms

Chart du jour, courtesy of Clusterstock, showing the rising price of gold, in falling euros:


Related links:
Gold hits all-time high as investors seek haven
– FT
Risky assets fail to extend relief rally
– FT

FDIC considers living wills, safe harbours

Two important developments in FDIC world on Tuesday.

First, the failed-bank overlord  formally proposed a new rule that would require the largest US banks to prepare ‘how-to’ guides for regulators who might need to dismantle them further down the line. Read more

BoNY Mellon unit charged over Madoff

The New York attorney-general has charged Ivy Asset Management, a Bank of New York Mellon subsidiary, with fraud, the FT reports. The firm is alleged to have deliberately misled clients about investments tied to Bernard Madoff so as to protect its fee income.

European debt crisis ‘may hit US growth’

Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, warned that the European debt crisis posed the biggest threat to the US economy, even as he offered a relatively upbeat assessment of the recovery, the FT reports. “Potential scenarios in Europe could affect US growth … That is probably the most likely downside risk,” he said, adding: “It’s not clear it is going to have any effect at all so far but it has the potential to.”

Brown bows out, Cameron seeks to form next UK government

David Cameron was finally handed the keys to Number 10 on Tuesday night after Gordon Brown bowed to the inevitable and resigned as British prime minister, the FT reports. The Tory leader, having finalised a coalition agreement with Britain’s Lib Dems, accepted the Queen’s invitation to form the country’s next government.

To review Brown’s last moments in office – and Cameron’s first — review the Westminster blog’s live updates with the FT’s Kiran Stacey.

Toyota back in despite recalls

Toyota on Tuesday revealed that it managed to make a profit in its fourth-quarter in spite of the safety crisis over its vehicles, the FT reports. The world’s biggest carmaker reported a Y112bn ($1.2bn) net profit for the three months to March compared with a loss of Y765bn in the same period last year.

Gold hits all-time high

Gold prices hit an all-time high amid volatile financial markets in Europe, the FT reports. Spot gold in London surged to above $1,230 a troy ounce, surpassing the previous record set in December last year. Gold prices in euro terms also hit a fresh all-time high of €969 an ounce in late trading in London on Tuesday, up almost 26 per cent since the beginning of the year.

Chinese price rises accelerate

Chinese inflation and housing prices continued to accelerate last month, highlighting the difficulties Chinese officials face as they try to engineer a modest cooling in economic activity, the FT reports. Consumer price inflation increased to 2.8 per cent in April from 2.4 per cent the month before, its highest level in 18 months although still below the government’s target of 3 per cent.

Meanwhile, Jamil Anderlini discusses a 12.9 per cent jump in property prices in this FT video.

Temasek and Hopu in US natural gas buy

Two of Asia’s most active investment funds, Temasek of Singapore and Beijing-based Hopu Investment Management, have agreed to pump more than $1bn into Chesapeake Energy, a leading US producer of natural gas from shale rock, the FT reports.

SEC cracks down on ‘illicit’ short selling

This is a first:

The Securities and Exchange Commission today charged two Boca Raton, Fla., residents for engaging in illegal short selling of securities in advance of participating in numerous secondary offerings to make illicit profits. Read more

Schapiro on the flash crash: no evidence of a fat finger

The Great Flash Crash mystery endures. According to SEC chair Mary Schapiro it probably wasn’t a ‘fat finger’ and its certainly wasn’t a terrorist. FT Alphaville has her Senate subcommittee testimony from Tuesday. Read more

Gordon Brown resigns. No, really.

The crackshot live-bloggers over at the FT’s Westminster blog are on the case (warning: for UK politics wonks only):

5.36pm: Jim wants to contradict my contradiction of his post (see 5.24pm), making the point: Read more

The incredible quantum credit rating

Well, here’s an intriguingly self-reflexive comment from Moody’s.

No, it’s not a comment on its tanking share price or that Wells noticeRead more

Nasdaq, NYSE testimony on the flash crash

The House Financial Committee on Financial Services, via the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises (whew) will host an inquiry into “the stock market plunge: what happened and what is next?”.

Among those scheduled to testify on Tuesday afternoon from 3pm New York time are SEC chair Mary Schapiro, CFTC chair Gary Gensler and senior executives from NYSE Euronext, Nasdaq and the CME Group. Read more

Oh, those evil, speculative… European officials

The chairman of France’s financial regulator, L’Autorité des marchés financiers, seems to be wishing speculative attacks on those European states who declined to support the eurozone bailout at the weekend – most notably Britain. FT Alphaville has the details.
 Read more

Welcome to the OECD debt trap

George Magnus’ most recent report on the upcoming global structural crisis to come is so good, we thought it was worth highlighting some additional extracts.

Consider, for instance, the charts below. According to the UBS senior economic adviser, these reflect the makings of a potential debt-trap in not one, but numerous over extended OECD governments the world over: Read more

Dead Brown bounce

The UK won’t be getting a left-wing grand coalition after all, after five days of party negotiations in the wake of inconclusive elections and a mounting fiscal challenge.

UK gilts and sterling promptly rallied on Tuesday. Read more

Resistance is futile

Curiously Borg-like language from EU internal markets commissioner Michel Barnier on Tuesday, as things went all regulator post that-rescue package.

Flashes, via Reuters, emphasis FT Alphaville’s: Read more

Magnus: ‘An existential crisis for the euro-system’

UBS senior economic adviser George Magnus has laid his cards on the sovereign crisis table.

He, for one, does not think the European Union’s weekend rescue will be enough to resolve the situation or stop it from spiralling into a structural crisis for all large debtor nations in the industrialised world. Read more

Forget ‘bonus rage’, go to (a British) court

While US investment bankers face congressional grillings and “bonus rage”, Britain – somewhat ironically – is looming as a shining centre of bonus redemption for litigious bankers.

Even as the UK attempts to halt a bonus culture that politicians blame for helping to create the credit crisis, imposing a 50 per cent “super tax” on bank bonuses over £25,000, bankers have been on a winning streak in the courts. Read more

Eurozone banks sip at ECB’s dollar swap facility

Rumours of an interbank funding squeeze swirled through the market last week.

Barclays Capital analysts for example noted that demand for USD funding in Europe had spiked in recent days: Read more

Markets Live transcript 11 May 2010

Live markets commentary from FT.com 

UK gilt auction – ‘pass’

The Debt Management Office has just released the results of the first post election gilt auction.

And… Read more

Oil executives burned by scrutiny

Top officials from BP, Transocean and Halliburton are set to point the finger at each other in the first of a series of congressional hearings on Tuesday, as legislators look for answers following last month’s Gulf of Mexico oil spill, the FT reports.

Rig operators Transocean and Halliburton blame a faulty cement ‘plug’ for the explosion, the WSJ notes, while the well’s owner BP has pointed to failure in a set of valves on the seabed.

Portugal Telecom rejects Telefónica Brazil bid

Portugal Telecom has rejected a €5.7bn offer by Telefónica to buy it out of Vivo, their Brazilian mobile phone joint venture, the FT reports.

Portugal Telecom’s board on Monday “unanimously” rejected an unsolicited cash offer from Telefónica to buy the Portuguese company’s 50 per cent stake in Brasilcel, which has a controlling stake in Vivo. Telefónica owns the remainder of Brasilcel.

Europe-inspired risk rally fades

Monday’s dramatic “risk on” rally petered out on Tuesday morning as Asian and European markets fell following Monday’s surge in European markets, according to the FT’s rolling global market overview.

The euro also faltered in signs that the immediate euphoria from Monday’s surprise €750bn EU and IMF loans package was beginning to wear off. Copper and U.S. index futures also fell after China’s inflation rate hit an 18-month high, Bloomberg reports.

US nudged Europe into rescue

President Obama told European leaders late on Sunday night that an overwhelming financial rescue of the eurozone must be made, the NYT reports. Markets in Asia and Europe continued to digest the weekend’s $955bn bailout plan on Tuesday.

American officials had expressed fears over Europe’s response to its debt crisis since February, the Times adds. The WSJ notes that the IMF’s role in the rescue package leaves it an ‘essential institution’ in the eurozone, having once been a pariah.

Dude, where’s my web of debt?

Ah, the power of infographics. You might have seen this nifty little NYT diagram of the links between Europe’s, err, porcinely acronymous debt-laden sovereigns:

Aaah! Big! Debt! Terror! Except the picture may not be so informative as it is striking, in fact. Read more

Somewhere, over the rainbow… a UK downgrade

Britain’s Liberal Democrats are now negotiating with the incumbent Labour party, after the UK election failed to produce a government amid fiscal challenges. Analysts quickly raised the chances of a sovereign downgrade on news of the deal, FT Alphaville notes. Read more

Won’t somebody please think of the weddings?

The cake has been bought.

The dress has been fitted.
 Read more