Posts from Tuesday May 18 2010

Pfizer confirms 6,000 job cuts

Pfizer, the world’s largest pharmaceuticals group, on Tuesday confirmed it would cut 6,000 jobs, or 18% of its production staff, as part of a global restructuring triggered by last year’s takeover of Wyeth, the FT reported. The cuts come as large drugs companies move to slash costs amid growing price pressures, aggressive competition by manufacturers of generics and a dearth of new drugs to replace those with expiring patents.

Top IPOs shine amid slump

European and Asian markets have seen more IPOs pulled so far this year than in any comparable period since records began in 1995, the FT reported, citing data provider Dealogic. Yet bankers hope the success of the few that did test market appetite will encourage other IPOs, and all eyes will be on Agricultural Bank of China, which plans to raise up to $30bn in Hong Kong and Shanghai this summer in what would be the world’s largest listing.

Iran faces fresh economic sanctions

The US turned the tables on Iran on Tuesday, introducing a new package of sanctions at the United Nations Security Council a day after Tehran celebrated a deal that had offered to delay tougher measures against its nuclear programme, the FT said. The US-drafted resolution had the support of China, Russia, France and the UK, US officials said, meaning that no veto-wielding member of the 15-strong council would block the package. The sanctions came on the same day China welcomed the nuclear fuel swap deal announced by Iran on Monday.

As Mrs Watanabe ages, Japan turns to Mrs Wang and her credit card

Japan is getting older. The older it gets, the more it relies on demand from emerging market consumers. That’s why Japan has decided to make a shopping holiday a little bit easier, according to the FT’s beyondbrics blog. The Japanese foreign ministry on Tuesday announced it will in July ease its requirements for tourist visas for individual Chinese, a step that national broadcaster NHK reckons could help raise the number of visitors from Asia’s fastest rising economic power roughly sixfold to 6m by 2016, beyondbrics reported.

Vodafone forced to write down Indian business

Vodafone was forced to write down the value of its Indian business by more than 25 per cent, just three years after securing control of the country’s second-largest mobile operator, the FT said. The writedown on its flagship emerging market business overshadowed the UK group’s results, where, for the first time, it set a three-year dividend growth target. The FT’s beyondbrics blog called Vodafone’s struggling Indian operations ‘a tarnished jewel‘.

Sina’s profit doubles

Sina Corp, owner of China’s larget internet portal, said Q1 net profit more than doubled to $24.4m as online-advertising revenue rose and expenses fell, the WSJ reported. The company said it expects its advertising business to maintain growth this quarter amid the continued recovery of the Chinese economy.

SEC to pilot ‘circuit breakers’

Plans to introduce “circuit breakers” on individual stocks to prevent a repeat of this month’s so-called “flash crash” are being worked on by the SEC and big US equity exchanges, the FT said, citing people close to the situation. The curbs will run across NYSE Euronext, Nasdaq, Bats Trading and Direct Edge, the four main public exchanges for US share trading. The SEC said in a statement it would seek comment on the proposed rules.

China set to be Qatar’s top gas buyer

Germany bans naked short-selling, euro slips

Germany on Tuesday temporarily banned short selling of debt issued by eurozone countries, according to a statement by the country’s financial services regulator. BaFin cited “extraordinary volatility in debt securities issued by eurozone countries” in its rationale for the move. The ban also extends to so-called ‘naked CDS’ on eurozone debt, and to naked short sales of the shares in ten financial institutions, including Deutsche Bank, Allianz and Commerzbank. The announcement saw the euro slip 1.6 per cent to a fresh 4-year low of  $1.2162.

Gome founder jailed

Huang Guangyu, once China’s richest man, was sentenced to 14 years in jail on Tuesday and given a record fine of Rmb600m ($88m) for insider trading, bribery and illegal dealing, the FT said. The Chinese subsidiary of Hong Kong-listed Gome Electrical Appliances Holding, which said the ruling “eliminated most of the uncertainties” surrounding it, was fined Rmb5m. It was unclear, however, what role Huang, still the company’s largest shareholder, would play in Gome’s future, the FT added.

BaFin statement on Germany’s naked short selling ban

Here’s the FT Alphaville translation of the statement by the German financial regulator on its move to temporarily ban certain naked shorts:

The Federal Financial Supervisory Authority has on Tuesday temporarily banned naked short sales of debt securities issued by eurozone countries for trading on domestic stock exchanges in the regulated market. It has also temporarily banned so-called credit default swaps (CDS) where the reference bond and liability are from a eurozone country, and which does not serve to hedge against default risk (naked CDS). Read more

Who exactly are authorised participants, anyway?

Paul Justice, an ETF strategist with Morningstar, pondered the causes of the May 6 ‘flash crash’ in a recent article for the investment research firm. According to Justice’s analysis, as reported by FT Alphaville, the reason why ETFs were disproportionately affected had more to do with the market makers and authorised participants charged with providing liquidity to the funds — as part of the ETF tracking mechanism — than the funds themselves. Read more

CDS report: No news = good news?

European credit markets continued to take their cue from equities, the rally that started yesterday extending into today. A lack of negative headlines around sovereigns helped support spreads, as did a recovery in the euro. However, the embattled currency lost ground later in the afternoon, and spreads consequently gave back some of their gains.

The Markit iTraxx Europe index was trading around 110bp, about 4bp tighter than yesterday’s close but wider than the 106bp levels reached in the morning. The Markit iTraxx Crossover was just 2bp tighter at 528bp after being as tight as 515bp this morning.  Sovereigns put in a solid performance, the Markit iTraxx SovX Western Europe index 7.5bp tighter at 122.5bp. Read more

Die Leerverkäufer sind kaputt (updated)

As of midnight on Tuesday, the German breed of short-seller (Leerverkäufer)  is set to become a rare species, according to Dow Jones:

Germany will ban so-called naked short-selling from midnight, a lawmaker with the ruling Christian Democratic Union told Dow Jones Newswires Tuesday. Read more

Biggest stocks to get circuit-breakers, Reuters says

The first tangible exchange response to the Flash Crash may be imminent, Reuters reported on Tuesday, citing ‘sources’ on plans to set up circuit-breakers to prevent sudden slides in key stocks.

Flashes (excuse the pun) via Reuters: Read more

The world according to Fitch

Fun with Fitch on Tuesday, as the rating agency published its first Credit Outlook for the world economy overall — effectively a handy digest of its ‘ratings universe’.

Sovereign debt looms large, as could be expected. Read more

Any decision to invest in Prudential or the Rights Issue Shares…

…should be based on consideration of the prospectus as a whole by the investor.

They’re joking, right? Read more

An intermediation problem, not a liquidity problem

Talk about demand for the proverbial liquidity mop.

As FT Alphaville noted earlier, the ECB set out to sterilise up to €16.5bn of its bond purchases via the auction of one-week fixed-term deposits on Tuesday. Read more

China’s commodities/property price nexus

FT Alphaville on Tuesday highlighted a bleak view of China’s property prices/commodities nexus from Stephen Wyatt, commodities commentator for the Australian Financial Review. Wyatt argued that if Chinese policy makers “over-tighten” amid their efforts to cool the property sector, resulting in significant contraction in the Chinese construction sector, commodity markets could be “crushed” by the dual forces of a debt-burdened Europe and a fragmenting China. Read more

A Greek refinancing interlude

Lest we forget, considering all the trouble it caused: Greece will use the first bit of its bailout, received on Tuesday, to pay back its €8.5bn bond maturing on 19 May.

As Reuters reports, the May maturity was a most ill-starred bond: Read more

Is it really a commodity crash?

Barron’s on Tuesday called it “the crash you didn’t hear”. They were referring to the sell-off in the Thomson Reuters/Jefferies CRB index, which dropped 2 per cent and hit a seven-month low on Monday, after falling some 10 per cent in the past month.As Barron’s notes, the so-called crash has affected commodities from copper to crude oil to corn, and prices have been tumbling for the better part of a month. They link the fall primarily to the resurgence of the dollar.
But, they add, the sell-off could now be accelerating. For more, see FT Alphaville. Read more

The slow death of Hamp, the summer of delinquencies

The misfortunes of the US Treasury’s Hamp programme continue to make headlines.

On Monday, the department released its latest data for the Home Affordable Modification Plan. The April report showed that about 123,000 trial Hamp mortgage modifications were cancelled last month, and some 37,000 new trials were started, amongst other thingsRead more

Greece gets the cash

Markets Live transcript 18 May 2010

Live markets commentary from 

Senators act to restrict foreign bailouts

The US senate on Monday approved a measure that could make it harder to deploy US funds in rescuing foreign governments, the Wall Street Journal reports. The move, according to the paper, signals Congress’s growing unease with the sort of aid recently handed out to Greece. The measure was adopted by a 94-0 vote as part of an amendment to the financial regulatory overhaul bill the Senate is considering. It would require the Obama administration to certify that any future loans made by the International Monetary Fund would be fully repaid.

BP raises estimate of oil captured in Gulf spill

BP has doubled its estimate of the amount of oil it’s able to collect from the Gulf of Mexico leak off the coast of Louisiana to about 2,000 barrels a day, Bloomberg reports on Tuesday. According to regulatory filing, about two-fifths of the escaping oil is now being captured. That compares to 1,000 barrels of oil a day BP said it was managing to capture on Monday. Separately, the WSJ reports the Obama administration now plans to name a special commission to investigate the Gulf of Mexico oil spill.

Dear George, about that inflation…

April inflation data for the UK is in, and it’s a bit of a bump on the head for the Bank of England: a 3.7 per cent rise in CPI year on year, reports FT Alphaville. Cue a letter from the Bank of England’s governor Mervyn King to Britain’s shiny new Chancellor George Osborne, then. Read more

Union to challenge ruling on BA strike

Unite, the union representing British Airways cabin crew, said it would go to court on Tuesday to seek to overturn a judge’s last-minute ruling that blocked a series of planned walkouts, the FT reported. Tony Woodley, joint leader of the Unite union, questioned whether workers still had the right to strike after Mr Justice McCombe on Tuesday granted an order against the union, giving a reprieve for passengers who had faced weeks of travel chaos.

Buffett reduces Kraft stake in first quarter

Berkshire Hathaway sold off 31.5m shares of Kraft in the first quarter, while the global food company was completing its acquisition of Cadbury, a deal that Warren Buffett had publicly criticised. According to the FT quarterly disclosures show Mr Buffett’s Berkshire reduced its Kraft holdings by 23 per cent in the first three months of 2010. Kraft’s acquisition of Cadbury was approved by shareholders of both companies in February.

Blackstone-led consortium drops bid for FNIS

Private equity firms Blackstone, TPG and THL have abandoned their planned $15bn bid for Fidelity National Information Services after the board of the payments processor sought a higher price, people familiar with the matter said late on Monday. The deal, though never announced, would have been by far the biggest leveraged buyout since the financial crisis began, the FT reports. “The board thought they could push them, but the premium was already huge,” said one person familiar with the situation.