Fears of a politicised crackdown on banks and financial markets brought on a crisis of confidence among investors on Thursday, sending share prices reeling and setting off a series of spasms in the currency markets. Disappointing US jobless data also revived fears that the economic recovery could prove short-lived, helping to push US Treasuries higher and German bond prices to a record as investors fled risky assets, the FT reports.
See the FT’s rolling global overview for a full report across assets classes and get a six point explanation of why markets at “gun shy” at FT Alphaville.
Dubai World has reached agreement in principle with its major creditors over the most controversial aspect of the government-owned company’s restructuring of $23.5bn in debts, the FT reports. Nakheel, Dubai World’s distressed property developer, is also near a separate agreement with its financial and trade creditors.
UBS will have to rebuild its highly-rated Asian capital markets franchise after Steven Barg, its team leader, resigned on Thursday – the third senior defection since March, the FT reports. Barg is joining Goldman Sachs.
RBS is examining a sale of the Priory Group, the celebrity rehab clinic, to private equity after shelving a £1bn IPO plan due to market turbulence, the FT reports.
A so-called cloture vote in the Senate carried financial reform significantly closer to reality in the US. Debate on the bill has been wrapped up, with a final vote on the legislation theoretically possible as soon as Thursday evening. After a 60-40 result, Democrats were seeking agreement from Republicans to allow votes on controversial amendments that would take Wall Street reform in a tougher direction, the FT reports.
Europe’s economic crisis is having a severe impact on Asian companies as the depreciation of the euro makes exports from Asia significantly more expensive in one of the region’s biggest overseas markets, an FT analysis says. Companies’ biggest fear, however, is that the turmoil in the eurozone will undermine Europe’s slow recovery from the global financial crisis, which would hit import demand.
Pakistan has blocked the Facebook and YouTube websites over material that it said was offensive to Muslims, the FT reports. The move against Facebook followed an outcry over a page set up by a Facebook user inviting people to draw caricatures of the Prophet Mohammed. YouTube was apparently blocked over links from Facebook to inflammatory videos on the video-sharing site.
Japan’s economy grew a relatively robust 1.2 per cent in the first quarter, but full recovery from the nation’s worst post-war slump remains highly reliant on demand from foreign export markets and a rebound in private consumption that may be faltering, the FT said. At an annualised rate of 4.9 per cent, GDP is running below some economists’ forecasts, although fears of “double dip” slowdown have receded.
The nearly 8,000 US banks and savings associations insured by the FDIC had a combined first-quarter profit of $18bn, more than three times the $5.6bn they earned a year ago, the FT reports. Nevertheless, as FT Alphaville notes, the FDIC’s quarterly banking profile for Q1 2010 is still grizzly reading. For example, there were 775 troubled banks at the end of the quarter, up from 702 at the end of Q4.
Quick Yahoo snaphot at the end of a bloody day on Wall St:
Arresting stuff from Alan Ruskin of RBS, who has just pinged out an “Alpha Alert”:
Pure panic. It is rare to see a day where the news flow fits so poorly with the decimation in the risk trade, from currencies to high yield to the once sweet and innocent money market. If this is a sovereign crisis (and this is surely still the core of the nervousness), the sovereign bond markets are doing very well thank you. All the major global fixed income markets are up, and even the epicenter of the crisis, Greece is hanging in, albeit no doubt with a little help from their new found Central Banker friends. The disjuncture between CDS (where the periphery CDS is up sharply) and bond spreads, show how European official intervention (in both markets) have reduced visibility, which no doubt is also part of the problem. Across an array of asset classes, I hear from traders a simple refrain – investors want to get close to base. That gold has gone down today is a telling comment on how much this has been a story of investors liquidating even winning trades. In the currency world, we have become used to thinking about yen carry trades blowing up, but this feels like the first clean blow-up of the EUR carry trade.
The FDIC released its quarterly banking profile for the first quarter of 2010 on Thursday, and we’ve read the report so you don’t necessarily have to*.
Here are some stats that stood out in the report and the accompanying press release (headers and any emphasis FT Alphavillle’s): Read more
Here’s the May edition of the GMI global macro investor newsletter. It’s full of scary charts and words like “Elliott Wave” – a mention of which would usually be followed here by a trip to the desktop recycle bin.
Except that the author is one Raoul Pal, who previously co-managed GLG’s London-based Global Macro Fund and before that worked at Goldman Sachs… Read more
EDHEC-Risk, a unit of the France-based business school, on Thursday released a withering criticism of Germany’s unilateral ban on naked short selling of eurozone debt.
We quote: Read more
European credit markets were in full retreat this afternoon, disappointing those who thought that the solid opening this morning would presage a day of low volatility. Unlike yesterday, there was no obvious trigger that caused the sell-off. The negative sentiment from Germany‘s unilateral action on naked sovereign CDS lingered, and the euro resumed its sell-off after recovering yesterday. The doubts over the stability of the euro clearly have not been quashed by the EUR750 billion bailout. Read more
The UK’s FTSE 100 barely avoided falling below 5,000 during a sudden plunge on Thursday afternoon, one hour before closing down 1.65 per cent at 5073.13:
Well, here’s a contrarian long-term perspective on Thursday, notwithstanding the collapse on European bourses, and the NYSE’s invocation of Rule 48 amid the signs of contagion.
Volatility in European equities has indeed just passed a historic marker, as Philip Isherwood of Evolution Securities explains: Read more
Some of the IB research now being published is really bearish. Some is really, really bearish. Try this piece from the European Rates Strategy team at RBS, available at FT Alphaville Read more
Late-afternoon chaos for bourses across Europe on Thursday. See charts:
That’s the Dow. Will it hold above 10k?
We won’t continue wasting too many red pixels here. You should have the picture by now. Losses on the S&P 500 actually stretched to 3.3% mid-morning in New York.
That’s the Nasdaq on Thursday, responding to the eurozone implosion. Plus chart:
The NYSE has invoked Rule 48 – for the first time since the €750bn eurozone bail out was announced on May 10.
Curious. Another sudden hammering for the euro on Thursday, as the chart shows:
The list of dead and dying deals and loudly protesting companies in Australia’s resources sector is beginning to look very long, as FT Alphaville noted last week.
The companies, both foreign and domestic, which claim that Canberra’s plans for a 40 per cent tax on “super profits” of resources companies could kill their investment interest span a fair few sectors. Read more
Amid fresh bouts of currency volatility and speculation about Swiss intervention in the euro on Thursday, the “safe haven” aura seems to be shifting back towards the yen.
The euro slid against the dollar and yen on Thursday morning in Europe, to about $1.23 and Y112 respectively, reports Bloomberg. That followed its rebound on Wednesday, one day after the euro reached its lowest level in nearly four years on news of Germany’s ban on naked short selling. Read more
Britain’s fresh new ruling coalition published its full list of policies on Thursday. Only we still can’t quite tell what it’s actually going to do on reforming the City, or reducing the country’s fiscal headache.
Here’s what the Programme for Government had to say on fixing UK banks: Read more
The UK’s ruling Lib-Con party published its final coalition agreement on Thursday morning, and a couple of things stand out.
Perhaps the most important concerns the Consumer Price Index, which is, of course, used to set the government’s inflation target. As the agreement states: Read more
Live markets commentary from FT.com
So reckons CNBC’s Jim Cramer who attempted to calm the frayed nerves of investors in Wednesday’s edition of Mad Money.
Put simply, if we don’t a total capitulation in Europe over the next two days (and the German chancellor gets her parliament to approve €123bn in emergency loan guarantees for the eurozone) then everyone will have to admit the continent is merely suffering a downturn and get on with their lives. Read more
The Wall Street Journal reports that companies like Shell, Total and BP are continuing to do brisk business with Iran, but are preferring to keep a low profile while doing so. Their efforts to disguise operations include hiding ships’ movements, even though the deals are perfectly legal. Spokesmen for Shell, BP and Total declined to comment to the paper.