Posts from Monday May 24 2010

Magnetar set to launch new fund

Magnetar Capital, the $7bn US hedge fund manager is poised to launch a new “event-driven” fund, the FT reported, citing people with knowledge of the situation. Magnetar founder Alec Litowitz — who left as head of risk arbitrage at Citadel Investment Group in 2005 to establish the firm –  will manage the fund.

Temasek names new president

Singaporean state investment company Temasek said Monday it had appointed Hsieh Fu Hua, former CEO of the Singaporean stock exchange, as its president and executive director. The WSJ reported that Hsieh would lead a search for a successor to current chief executive Ho Ching. Hsieh will assume his new duties on Aug 1, Temasek said in a statement.

Rio chief hits at Australian ‘risk’

Tom Albanese, Rio Tinto’s chief executive, intensified the mining industry’s campaign to kill off Canberra’s proposed 40% tax on resource company profits when he described Australia as his “number one” sovereign risk globally, the FT reported. Albanese said all Rio’s projects in Australia were being reviewed based on a worst-case scenario related to the so-called resources super-profits tax..

ECB steps up bond purchases

The European Central Bank stepped up its efforts to shore up eurozone debt markets, buying another €10bn of government bonds in the last week. Bankers expect the programme will have to be further increased amid continued market fragility, the FT said. The purchases — which were announced Monday and have had a limited effect — bring the ECB’s bond-buying to about €26.5bn

Bets against pound reach record

Speculators raised their bets against sterling to record levels after the recent UK general election, as worries escalated over the government’s finances, the FT said. Positioning data from the CME, often used as a proxy for hedge fund activity, showed that speculators had extended their bets against sterling from 72,188 contracts to 76,745 contracts, equivalent to $6.9bn, in the week ending May 18.PO

Ambani shares rise on ‘peace deal’

The peace deal announced by India’s warring brothers, Mukesh and Anil Ambani, sent their companies’ stock prices soaring on Monday. The end of their five-year feud will free up the siblings to pursue plans for big projects in oil and gas, telecoms, power generation and retail in India and overseas, according to the FT.

IBM in $1.4bn move for software unit

IBM on Monday mounted its biggest acquisition since 2007 as it reversed course and moved back into business-to-business software six years after quitting the market, the FT said. Big Blue agreed to pay $1.4bn in cash to buy Sterling Commerce from AT&T, the US telecommunications company that has owned it for the past decade. Sterling claims to handle more than 1bn transactions a year on behalf of 1,800 customers round the world.

Indian PM seeks to match China growth

Manmohan Singh, India’s prime minister, on Monday clearly set out striking peace with arch-rival Pakistan and getting on terms with China’s economic growth as top priorities for his second term in office, the FT reported. Mr Singh said investment and savings rates in India’s economy made economic growth of 10 per cent a year “an achievable target” in the medium term.

BP offers $500m for damage study

BP on Monday sought to deflect criticism over its handling of the Deepwater Horizon oil spill in the Gulf of Mexico by offering up to $500m for research into the disaster’s environmental effects, the FT said. BP said the research grant, to be disbursed over 10 years, would try to assess the impact of the escaping oil on marine life and the long-term effects of the chemical dispersants used in the clean-up. It said its clean-up costs to date were $760m.

Yahoo and Nokia in mobile web deal

Yahoo and Nokia, two companies under pressure from increasingly forceful competitors Google and Apple, have struck a broad alliance to strengthen their mobile internet offerings, particularly in emerging markets, the FT said. Yahoo will provide its e-mail and instant messaging services on all Nokia handsets, while the Finnish group will supply its mapping services to help Yahoo fight against Google’s similar applications.

US and China seek to strike conciliatory note

The US and China tip-toed around each other at a summit in Beijing on Monday, going out of their way to avoid open disagreements on North Korea, exchange rates and other thorny issues that divide them. Both governments were at pains to strike a conciliatory note in their public comments even though there were few signs of progress on any of the major subjects, the FT said.

Thai exports drive strong growth

Thailand on Monday announced better-than-expected growth for the first quarter of the year as the country benefited from a global recovery in exports, although the effects of recent anti-government protests remained to be seen, the FT said. GDP expanded by 12 per cent year-on-year and 3.8 per cent vs the previous quarter in the first three months of 2010, according to data which predated the most disruptive episodes of the Bangkok protests.

Seoul to halve trade with N Korea

Seoul said it would cut just under half its trade with Pyongyang and close its waters to North Korean vessels in retaliation for the sinking of a South Korean warship that killed 46 ­sailors, the FT said. But an industrial enclave at Kaesong, where South Koreans run factories in the North, would not immediately come under this trade ban, although it represents the majority of cross-border commerce. Out of the $1.7bn in annual inter-Korean trade, $940m comes from Kaesong, the FT reported.

DBRS, or the rating agency you’ve never heard of

The Wall Street Journal on Monday ran an important and timely story on the continued practice of ‘ratings shopping’, in which an issuer approaches multiple agencies in an effort to get the highest possible rating:

Real-estate investment firm Redwood Trust Inc. approached two credit-rating firms early this year to rate a new mortgage-bond offering. It was an important deal, the first of its kind in two years. Read more

CDS report: More pain in Spain

It was a quiet start to the week with much of Europe closed for the Whitsun public holiday. The major credit indices were tighter and outperformed lacklustre equity markets. Some of the gains were lost in the afternoon amid low volumes. The Markit iTraxx Europe was 1.5bp tighter at 120bp, while the Markit iTraxx Crossover finished at 585bp, 8bp tighter than Friday’s close.

Perhaps the main talking point of the day was the Bank of Spain seizing control of CajaSur over the weekend. The central bank was forced to intervene after CajaSur’s merger with larger savings bank UniCaja failed to go through. CajaSur’s “viability problems” meant that it had little chance of surviving as a stand-alone entity without assistance. It is a small institution – only 0.6% of Spanish banking assets – and its problems have been known for some time, so its seizure had little impact on the credit markets. But it served as a reminder than the effects of Spain’s bubble economy bursting have still to be played out, and other savings banks are expected to run into difficulties. Spain’s mainstream banks widened today, underperforming their European peers. The Markit iTraxx Senior Financials was 2bp tighter at 164bp. Read more

Austerity all’Italiana

It’s funny what a whiff of bond market grapeshot can do: more and more European governments seem to be getting religion on fiscal austerity by the day.

A recent convert — Italy, as Reuters reportedRead more

How sovereign bonds should be rated

What happens when you attempt to derive the value of sovereign bonds as indicated by their credit default swap levels? Analysts at Standard Chartered have tried to find out, and FT Alphaville has their results. Teaser: ‘Asian sovereigns generally appear to be rated below where they ‘deserve’ to be, given where the market currently quotes their respective CDS.’ Read more

Libor’s slow grind higher

Libor is back.

The FT reported on Monday that we are due a sharp rise in dollar interbank offered rates, on account of renewed credit risk fears around European banks. Read more

A Japanese casa for Spain

ING’s Simon Goodfellow looks at the Spanish issue this week.

His main question — “What would happen to the banking system in Spain if the Spanish housing crisis turned Japanese?” Read more

And the award for most impressive sovereign funding goes to…

EuroWeek just bestowed its 2010 award for most impressive sovereign funding official to this man:

 Read more

Whither corporate bond issuance?

“Forget the shorts”, as FT Alphaville noted on Friday. Company and financial bond issuance has virtually collapsed in Europe in recent weeks amid fears over the eurozone’s public debt problems and US financial reforms.

As the FT reported on Monday, the market for new issues effectively shut down after Germany spooked investors with its decision to slap a ban on naked short selling. New issues from companies and banks fell to $1.1bn last week, the lowest of the year, according to Dealogic. Read more

Osborne cuts it

Finally, the first indications of the tone of cuts to come in Britain.

While the new UK chancellor will be presenting his freshly put-together budget on Tuesday, on Monday, George Osborne, outlined the cuts that wouldn’t need parliamentary approval: Read more

AN ÜBER BEAR EARLY WARNING ALERT

The use of “Caps Lock” can only mean one thing — Bob ‘the bear’ Janjuah is back.

And his latest missive — the first since the euro meltdown — does not dissapoint. Read more

Markets Live transcript 24 May 2010

Live markets commentary from FT.com 

‘Time to stand up and be counted’

Ian Harwood, strategist at Evolution Securities, is in bullish mood on Monday and he is not the only one…

(Emphasis ours): Read more

Prepare for 10 years of FX ‘super-volatility,’ says UBS

Were you battered by currency volatility last week? You’d better get used to it. UBS currency analyst Mansoor Mohi-uddin is predicting a decade of ‘super volatility’ amongst global currencies, in the Swiss bank’s new FX mega-trends 2010-2020 note. FT Alphaville has the details.  Read more

Stocks rise as sense of calm prevails

A calmer mood is prevailing across markets, though investors remain wary following recent turmoil, according to the FT’s rolling global market overview. The FTSE All-World equity index is up 0.3 per cent and demand for industrial commodities has risen. Chinese stocks were sharply up and European bourses opened higher, but US stock futures are off a fraction following Wall Street’s late 1.5 per cent bounce on Friday.

Strippers out in front as inflation wanes

Treasury zero-coupon bonds are on the rebound and Strips securities are the stars of the US government debt market as inflation reaches a 40-year low, Bloomberg reports. Strips have outperformed S&P 500, the CRB Index and TIPS in recent weeks, after data showed that inflation is on the back-burner.

Austerity and the eurozone economy

For all the talk of deflation and double dip recession, how much damage will fiscal austerity inflict on the European economy?, FT Alphaville asks. Surprisingly not much, according to one analyst. Read more

China won’t commit to US on renminbi

China kept the door to exchange rate reform open on Monday without committing to actual appreciation of its currency, during economic talks with United States officials, Reuters reports. President Hu Jintao also offered concessions on increasing Chinese domestic demand.