Posts from Friday May 28 2010

Finra probing subprime RMBS offerings

Finra, a regulator with an impressive track record of investigatory failures, is looking into the accuracy of disclosures linked to subprime RMBS offerings, according to a Reuters report on Thursday.

According to the Reuters report, Finra’s enforcement director James Shorris said: Read more

Bonfire of the sovereign ratings: Fitch strips Spain of its triple-A

US stocks moved sharply lower and the euro slid against the dollar after Fitch downgraded the Kingdom of Spain to AA+ from AAA on Friday.

Here’s the statement, emphasis FT Alphaville’s: Read more

Calming down on bank credit risk

Three-month dollar Libor fell just a bit on Friday, breaking with its unsettling rise over recent days, a trend which may have been related to fears over US financial reform and European sovereign exposure.

Time then for some reflection. Read more

CDS report: Looking to fundamentals

Markit chart of iTraxx Europe and SovX WE

The week ended with a whimper rather than the bang we have become accustomed to. Indeed, the last few days have been untypical of what has been one of the most turbulent months in recent memory. The impending long weekend in the UK and UK is no doubt contributing to the tepid denouement. But events earlier in the week suggested that we were set for yet more volatility. Read more

Why is the ECB shooting the Greek debt messengers?

European Central Bank board member Lorenzo Bini Smaghi dislikes the analyst ‘herd leaders‘ who have doubted recent ECB policy on Europe’s sovereign debt crisis.

And when it comes to the prospect of a Greek sovereign default, his dislike of banking-types becomes really evident, as made clear in a speech on FridayRead more

Market upheaval should not be the new black, SEC says

Volatility might be the new black, but regulators are none too impressed with market upheaval of the May 6 flash crash persuasion.

In a speech on May 24, SEC commissioner Luis Aguilar deplored “the perils of fragmented regulation” and “the dangers of weak oversight of our tightly interconnected financial markets”. Read more

Euro tea-leaves

It’s been a relatively dull week for the Drachmark. EUR/USD shifted a bit from 1.25 at the start, to 1.24 at pixel time — with few of the vertiginous falls that had attended the worst of Europe’s sovereign debt crisis.

But where next for euro assets? And what’s really been driving the decline? Read more

FASB’s mark-to-mayhem

Tremble US financial institutions, for FASB is about to fair value your assets, FT Alphaville writes. Barclays Capital has a handy summary of the planned accounting changes, which banks say will increase volatility. Well, really? Read more

Decline and fall (of ratings lift)

Barbarians at the gate? Nearly.

Standard & Poors on Thursday placed the City of Rome’s A+ credit rating on outlook negative, as it assessed the impact of fresh Italian austerity measures. Read more

Ageas goes where China fears to tread

Chinese officials were busy on Thursday wheeling out a raft of semi-positive, if not lukewarm remarks about their confidence in eurozone investments, after denying an FT report that they were reviewing their holdings of eurozone debt.

Well — concerns clearly exist, as the FT’s Gillian Tett says in her Friday columnRead more

Markets Live transcript 28 May 2010

Live markets commentary from FT.com 

RBS bears brunt of Libor rise

The Royal Bank of Scotland has seen its dollar borrowing costs rise 25 per cent amid interbank lending fears on Europe’s crisis, Bloomberg reports. The UK state-owned bank quoted rates above dollar Libor yesterday, according to BBA data. Barclays also quoted higher rates, as Libor edges upward on concerns over exposure to eurozone sovereign debt. FT Alphaville has more on the Libor risks facing UK banks.

Shell makes strategic bid on shale gas

Shell has acquired the US natural gas explorer East Resources Inc. in a bold move for influence in North American shale, the WSJ reports. Private-equity firm KKR will win big from the deal thanks to its large stake in East Resources, which is currently engaged in exploring the Marcellus Shale stretching from West Virginia to New York. Reuters adds that the deal came hours after the US government cast doubt on Shell’s offshore oil interests in Alaska.

Markets recover from month of drama

And, relax!, the FT’s rolling global markets overview says. A less febrile mood than of late is enveloping markets, as major financial centres prepare to put a painful and frenetic May behind them. The FTSE All-World equity index is up 0.7 per cent and European bourses held on to gains on Friday. But yields on highly-rated government bonds are a touch lower, suggesting investors’ confidence remains fragile. US equity futures were under par on Friday, with the S&P 500 looking to open 0.2 per cent down.

Morgan Stanley turns bullish on UK equities

As the London market looks to record its third consecutive session of gains, Morgan Stanley has made a very bold call on Friday morning: the broker has increased its year-end target for the FTSE 100 to 5,800 from 5,000.

According to strategist Graham Secker the prognosis for stocks over the next year is good, especially because recent events in the eurozone have delayed the onset of monetary tightening in many regions around the world. (In other words the mess has been swept under the carpet for a bit longer and there’s still a chance to buy before it finally blows up). Read more

Troubled Apple supplier ups wages

Foxconn, the electronics contract manufacturer to such firms as Apple, Sony, and Dell, is planning to raise wages for its Chinese workers by about 20 per cent after a spate of suicides at its main plant in southern China put working conditions at its factories under international scrutiny, the FT reports. Apple had previously announced that it would investigate Foxconn’s response to the suicides.

Pru aims to slash $35bn AIA price tag

Prudential is trying to renegotiate the $35.5bn price tag on the Asian businesses of AIG, in a last-ditch attempt to win over some of its biggest investors and head off a “no” vote on its planned takeover of AIA, according to the FT. The UK life assurer has asked investors hostile to the deal whether a price cut would change their minds. Pru earlier halted its Hong Kong shares before announcing that it is in talks with AIG over price, with full details at FT Alphaville.

Geithner talks up stability deal

The US and Europe are in broad agreement on imposing more conservative rules on financial institutions, but such regulation should not be so drastic that it would “create headwinds to the economic recovery”, Treasury secretary Tim Geithner warned on his trip to Europe, the FT reports. Mr Geithner had been expected to be much harsher on Europe’s response to its sovereign debt crisis, but instead praised German ‘leadership’.

Obama halts Gulf deepwater drilling

President Barack Obama has ordered all 33 deepwater oil rigs in the Gulf of Mexico to halt drilling and extended a moratorium on new deepwater wells, while BP temporarily suspended its latest effort to contain the US’s biggest oil spill, the FT reports. Failures of command on the Deepwater Horizon after its explosion again highlight safety rules for offshore drilling are sufficient, the WSJ adds, in its continuing investigation.

Pru/AIA – It’s alive

Shares in Prudential were strangely becalmed in London, following Friday’s news of talks to renegotiate the $35.5bn price tag for the Asian business of AIG, FT Alphaville writes — the market seems unsure whether the deal will go ahead. Strange, because it appears Pru will get its prize. Read more

Friday’s ‘interessant’ eurozone bond trade

Waiting for that €9.5bn Friday Italian bond auction?

Here are some charts to mull over ahead of (another) litmus-test of demand for peripheral eurozone debt. Italy will be selling three- and 10-year BTPs plus seven-year CCTs. Read more

Two very different quant models say Brazil will win World Cup

Continuing our recent theme of financial analysts-turned-soccer-experts, we bring you a Friday edition of 2010 World Cup predictions, FT Alphaville writes. Brazil looks like a winner — thanks to some rather… odd quant criteria. Read more

Further reading

Elsewhere on Friday,

- ‘I would recommend you panic’. Read more

Pink picks

Comment, analysis and other offerings from Friday’s FT,

Martin Wolf: Spare Britain the policy hair-shirt
The UK should tighten fiscal and monetary policy now, in the depths of a slump. That, in essence, is what the OECD calls for in its latest Economic Outlook. But the FT’s Wolf wonders what John Maynard Keynes would have written in response, and imagines “it would have been savage”. Read more

Snap news

Breaking pre-market news on Friday,

- Prudential says discussions regarding current status of the AIA transaction are continuing; could lead to changed deal terms – statementRead more

Watch this space: Pru halts Friday HK trading (updated)

All eyes on Prudential and its planned $35.5bn takeover of AIA, the Asian business of US insurer AIG, on Friday.

Here’s the Pru’s Friday statement to the Hong Kong stock exchange: Read more

The pictorial, speculative, yen carry trade

Academics have been busy figuring out ways to plug the gaps in pre-crisis financial data, FT Alphaville says — and in doing so they’ve managed to quantify the notoriously opaque yen carry trade. It’s not pretty, but it’s a worthy attempt. Read more

Overnight markets: Up

Asian markets
Nikkei 225 up +124.39 (+1.29%) at 9,764
Topix up +9.22 (+1.06%) at 879.11
Hang Seng up +348.54 (+1.79%) at 19,780

US markets
S&P 500 up +35.11 (+3.29%) at 1,103
DJIA up +284.54 (+2.85%) at 10,259
Nasdaq up +81.80 (+3.73%) at 2,278 Read more

Ageas offloads eurozone bonds

Ageas, the Belgian insurance group formerly known as Fortis Holding, has offloaded €4.8bn of southern European government bonds in just 11 days in what the FT  describes as an “effort to reassure investors over the quality of its investment portfolio”. Ageas shares jumped 12% in afternoon trading on the news.

Sanofi, Nichi-iko in Japan venture

Japan’s Nichi-iko Pharmaceutical said on Friday it had agreed an alliance with French drug maker Sanofi-Aventis amid the expansion of Japan’s generic drug market, reports the WSJ. Under the deal, Nichi-iko will issue Y4.4bn ($48m) in shares to Sanofi through a third-party placement in June. Earlier the FT reported that Sanofi said it had received “significant interest” in its animal health assets, some of which it might sell to complete a planned merger of the business with Merck.