Posts from Tuesday May 25 2010

Beijing plans air cargo ‘champion’

The Chinese government plans to create a “national champion” in the aviation cargo sector, the FT said. But the entities involved have not yet reached a decision over how the consolidation should proceed or who would control the merged cargo operations of the big state companies.

Google irked by Aussie minister’s ‘creepy’ jibe

Google has hit back at an Australian politician who attacked the US technology group for being responsible for “probably the single biggest breach in the history of privacy”, the FT said. Stephen Conroy, Australia’s communications minister, described the behaviour of Eric Schmidt, chief executive, as “a bit creepy”.

Toshiba buys into uranium group

Toshiba is to invest $100m in one of the world’s largest producers of enriched uranium, as the top players in the nuclear industry race to secure their supply chain, the FT said. The Japanese group said it would take a stake in New York-listed USEC, which supplies more than half the US market with enriched uranium fuel.

Foxconn chief acts on suicides

Terry Gou, founder and chairman of Hon Hai, the Taiwanese parent company of Foxconn, rushed to Shenzhen on Tuesday in an attempt to deal with the crisis from a growing number of suicides among workers, the FT reported.

Pyongyang severs ties with Seoul

North Korea on Tuesday severed all ties with South Korea, hitting back at Seoul which has reduced cross-border trade to punish Pyongyang for sinking a warship in March. Pyongyang will expel South Korean workers from Kaesong, an industrial park where South Korean companies run factories, the FT said, citing North Korea’s official KCNA news agency.

Investors fear ‘hard landing’ for China economy

Only a few weeks ago, the main worry among Chinese policymakers was the risk the economy might overheat. Now the talk among investors has shifted to the possibility of a hard landing. The mood has changed because of a flurry of government policies introduced since mid-April to cool a red-hot property market and weed out speculative buyers, according to the FT.

Thaksin faces terror charges

A Thai court has issued an arrest warrant on terrorism charges for Thaksin Shinawatra, the former prime minister and de facto opposition leader. The warrant accuses Mr Thaksin of masterminding the anti-government demonstrations that paralysed central Bangkok and triggered street battles between protesters and troops that left 88 people dead and almost 1,200 wounded, the FT said.

China in African platinum deal

China is set to make its second largest investment in Africa outside the energy sector by ploughing $877m into South Africa’s platinum industry, the FT reported. It will be Beijing’s first direct investment in the continent’s platinum reserves, the majority of which are in South Africa. Jinchuan, a Chinese state-owned mining company, is to acquire a 51% in Wesizwe, a junior South African platinum developer, for $227m.

Crises trigger flight from risk

Share prices, commodities and the euro fell sharply as investors fled risky assets amid growing fears of a eurozone banking crisis and rising tension between North and South Korea. Stock markets took a pounding on Tuesday, leaving the FTSE Asia-Pacific index down 3.1% at a 10-month low. On Wall Street, the Dow slipped through 10,000 as the dollar and US Treasuries strengthened, the FT reported. See also the FT’s global rolling market overview.

US fears Chinese aggression in Pacific

The commander of US forces in the Pacific has warned that China’s military is asserting the country’s territorial claims in regional waters more aggressively. “There has been an assertiveness that has been growing over time, particularly in the South China Sea and in the East China Sea,” Admiral Robert Willard told the FT. He said China’s extensive claims to islands and waters in the region were “generating increasing concern broadly across the region and require address”.

BP chief takes on US critics

BP’s chairman on Tuesday faced down the company’s critics over its response to the Gulf of Mexico oil spill, insisting the group played a vital role in the US economy. As BP prepared its latest attempt to halt the flow, Carl-Henric Svanberg told the FT in his first newspaper interview since the April 20 explosion on the Deepwater Horizon rig that the UK energy company still had a future in the US.

‘It is forbidden to write or enter into currency derivatives…’

FT Alphaville’s resident germanophone Joseph Cotterill has tracked down the Finanzmärkte Diskussionspapier relating to Germany’s newest and most far-reaching draft law to ban all forms of naked short selling.

A key bit of which may be translated thus: Read more

RBS on central banks’ underwater EUR positions

RBS FX strategist Alan Ruskin on Tuesday issued an interesting piece of research/chart porn regarding ‘the extent to which existing central bank Euro reserve positions are already under water.’ The short answer to which is, quite a bit. FT Alphaville has the long answer. Read more

‘Berlin has decided to extend Leerverkaufsverbot’

Germany on Tuesday stepped up its campaign against short selling, and according to the Handelsblatt, is moving forward at speed (via Google Translate):

The federal government wants to ban naked short selling of shares, government bonds in the euro countries and insurance for risks of states in the euro area. Unlike previously planned, but these prohibitions are regulated in a “Law to strengthen the stability of financial markets” and no longer be part of the proposed Investor Protection Act. Read more

People Column peeked through the herbacious borders…

…at the opening of the Chelsea Flower Show on Monday night.

And here is what they saw. Read more

Libor life-savers?

Is that an ECB rate cut on the horizon? Markets rallied somewhat on Tuesday, on talk of an intervention to the tune of a 50bps slice off the main refi rate. An ECB spokesman declined to comment on the speculation.

Markets were jumpy: Libor is on the rise, and scares over Spanish banks have refocused fears over Europe’s sovereign debt crisis. And in the midst of the jitters and rumour, Marc Chandler at Brown Brothers Harriman, weighed in on the state of inter-bank funding. Read more

Would you like some wine with that chocolate bond?

Here on FT Alphaville, we’re no stranger to the world of arty private equity funds and wine investments, and Bowie bonds are old hat. But chocolate bonds – well, that’s a new one.

On Tuesday, GorkanaPR reported that Hertfordshire-based upmarket chocolate manufacturer Hotel Chocolat is planning a tasty fundraising: Read more

ING’s pictorial guide to the market

Rule 48 rides again

The NYSE again invoked Rule 48 on Tuesday, having last brought it out on May 20:

 Read more

If first you don’t succeed…

…try, try again.

Breaking on Bloomberg Tuesday lunchtime, another German attack on the wolfpack: Read more

Beware the ides of money funds, Libor

Libor laments notwithstanding, this was a big jump on Tuesday:


CDS report: Geopolitical risk to the fore

After a tepid start to the week yesterday, the credit markets today showed the volatility we have become accustomed to. Long-standing concerns over eurozone sovereigns and their fragile banking systems combined with fresh geopolitical turmoil to push spreads wider. “Fresh” might be overstating the case; tension between North and South Korea is nothing new. But the rhetoric has gone up several notches after the North was accused of sinking a South Korean warship. Pyongyang has responded by ordering its military to prepare for war, according to reports today. Experts in the region believe that war is highly unlikely. But the uncertainty created has worried the markets and pushed South Korea‘s sovereign CDS to 175bp, its widest level since July 2009. Japan, Korea’s neighbour, saw its spreads widen to 100bp, the first time it has reached this mark since March 2009.

The escalation in Korea unsettled European markets already suffering from nerves. The Markit iTraxx Europe index was 9.5bp wider at 130bp, while the Markit iTraxx Crossover was 44bp wider at 629bp. Both indices were significantly wider earlier in the session, with the Crossover hitting 650bp for the first time since July 2009. Risk appetite was waning rapidly and capital appeared to be flowing to the usual safe havens. The euro was down at 1.218 this morning before recovering to 1.222. Read more

China, A-shares and double-dip recessions

A big swing up – and back down – for Chinese stocks at the start of the week spoke more eloquently than any analyst could about the market’s extreme sensitivity to any hint of price-curbing measures in China’s overheating property market.

And it’s also shed some light on the role of the country’s restricted A-sharesRead more

Markets Live transcript 25 May 2010

Live markets commentary from 

Ironic fact du jour

William Hill is offering odds of 25-1 on a 0-2 North Korean victory in Tuesday’s World Cup warm up match.

Related links:
S Korea won hit by escalating tension – FT
North korea vs South Korea breakdance – YouTube

Those Libor laments in context

 Read more

Barney Frank to shepherd financial reform

US representative Barney Frank will lead the House-Senate conference to finalise financial reform, Reuters reports. Senators Chris Dodd and Blanche Lincoln join him on the Democratic side of the panel, while Republican senators Richard Shelby and Saxy Chambliss are also expected to be named. The conference looks likely to be dominated by veteran lawmakers whom Wall Street will find it difficult to sway, the WSJ adds.

Libor catches out European banks

Europe’s banks have borne the brunt of recent rises in interbank lending rates, according to the WSJ, with institutions on the continent reporting higher borrowing costs than their US counterparts. Three-month dollar Libor reached 0.5 per cent on Monday. FT Alphaville argues that European credit risk favours a long-term grind higher in Libor.

Flight to safety

Summers in ‘second stimulus’ call

The Obama administration made a strong plea to Congress on Monday to grit its teeth and pass a new set of spending measures – dubbed the “second stimulus” by some economists – in order to help dig the economy “out of a deep valley”, the FT reports. Barack Obama’s senior economic adviser Lawrence Summers said that a move to fiscal discipline would be premature at this point in the cycle.