…to a fresh bear market. Major US indices after Friday’s rout:
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The rout in US equities continued apace going into the final 30 minutes of trade on Wall Street on Friday:
*Cue cheesy infomercial music and voice-over narration*
Have you been burnt by by Bernard Madoff? Suddenly can’t afford your valet? Has your kid’s college fund disappeared along with your Centurion card? Never fear, the hedge funds are here to help. Read more
Volatility remains high and the markets, which seemed to be fixated only on the European sovereign situation in the recent past, seem to have many more sources to find volatility. Early in the week, the markets shifted focus to the growing oil spill problem in the Gulf of Mexico. The “oil spill” names (BP PLC, Anadarko, Halliburton and Transocean) with the exception of Halliburton all saw record wides this week as scrutiny and public anger over the spill grew.
After six weeks, the spill is now the largest in US history. Fitch downgraded BP to AA from AA+ yesterday although CDS levels had already priced in the downgrade. On an implied ratings basis, BP is already trading at the equivalent of a single A credit. Fast forward to today, CDS spreads have come back tighter after the latest efforts to cap the well were successful. Estimates are that up to 90% of the oil flow can be diverted to tankers on the water’s surface; efforts are ongoing to increase efficiency to this level. Read more
Here’s something for the weekend — a nice overview of US debt, courtesy of BNP Paribas.
The idea is to look at all forms of American debt, private as well as government. Read more
What happens when government spokespeople start saying things like this:
June 4 (Bloomberg) — Hungary’s economy is in a “grave situation” because the previous government “manipulated” figures and “lied” about the state of the economy, said Peter Szijjarto, spokesman for Prime Minister Viktor Orban. The forint fell for a second day, dropping as much as 1.8 percent. Read more
Shares in Société Générale took a beating on Friday over rumours that derivatives positions in trouble:
Live markets commentary from FT.com
Early reticence is giving way to cautious optimism as investors bet that the crucial US jobs numbers for May, due later on Friday, will confirm the economic recovery remains on track, according to the FT’s global markets overview. The S&P 500 futures contract suggests a gain of 0.3 per cent for Wall Street, and the FTSE All-World index is up 0.2 per cent. However, private-sector jobs and unemployment data suggest that recovery will be slow, the WSJ says.
Large multinational banks will be made to set aside large capital buffers, in a fresh international agreement on capital and liquidity requirements — but at the cost of lengthening the implementation deadline for the latest Basel proposals, according to the WSJ. This process could now stretch well beyond 2012, after German, French and Japanese lobbying. A G20 government official confirmed the split over the new rules, Bloomberg reports.
Google will begin handing over to European regulators the rogue data it intercepted from private WiFi internet connections within the next two days, in an effort to defuse growing controversy over its latest privacy blunder, the FT reports. ‘We screwed up,’ Google CEO Eric Schmidt said, in a wider interview with the FT. Google also faces US privacy suits over the data blunder, the WSJ adds.
Got a spare 10 minutes? Some technical expertise? Experience in handling large volumes of data?
Then you might be able to get some use from the just-released UK Coins data. That’s the Combined On-line Information System, used by the Treasury to collect financial data from the public sector. Read more
AIG’s chief executive Robert Benmosche has asked the bailed-out insurer’s board for time to come up with options besides a public offering for spinning off its Asian unit, AIA, a source has told Reuters. A deal to sell AIA to the UK insurance giant Prudential collapsed on Wednesday, leaving AIG with its original plan of listing the unit on Asian exchanges.
Spot the odd sovereign out in these eurozone bond yield spread data on Friday.
Flashes (or should that be éclats?) via Reuters: Read more
Spanish banks rapidly seem to be becoming the ‘new Greece’, or rather, a key focus of eurozone concern, as their shares slide and credit default swaps (CDS) rise amid growing funding fears.
“Mr Asia” is en route to Yale, FT Alphaville says, as Morgan Stanley’s Asia chairman Stephen Roach steps down to take a teaching post. Which brings to mind Roach’s earlier academic contretemps over China with Nobel prize-winner Paul Krugman. Read more
JPMorgan has won an award for its innovative use of so-called rehypothecation, a way for hedge funds to extract greater value from their collateral by reposting it elsewhere, FT Alphaville notes. Ironic, then, that the bank has just been fined by the FSA for careless safekeeping of its clients’ money. Read more
Here’s an interesting coda, and/or reality check, to recent attempts at predicting the ultimate fate of the eurozone amid Europe’s sovereign debt crisis.
Germany really can’t leave the single currency even if it wanted to — and hasn’t been able to for a while, as its banks’ assets show fairly well. Read more
In a note published on Wednesday, analyst Olivia Frieser observed, in a comment on the findings of the June 2010 edition of the ECB’s Financial Stability Review, that Spanish banking sector assets total approximately €3,200bn. Read more
Comment, analysis and other offerings from Friday’s FT,
Analysis: European banks – leaning lenders
There are good reasons why the failure of CajaSur not only added another ruined temple to the age-old city’s Roman remains but also sent tremors round the world, the FT’s Sarah Gordon and Megan Murphy write. For a start, the takeover highlights how slowly Europe’s authorities have moved to clean up the banking sector. Across continental Europe, where banks at least initially appeared less exposed than others to the global financial crisis, many regulators shied away from the opportunity to force banks to build up their capital cushions or to tackle their debt loads. Read more
KKR and Affinity Equity Partners are seeking 1,500bn won ($1.25bn) to refinance loans used to buy South Korea-based Oriental Brewery, reports Bloomberg citing people familiar with the matter. The funds may borrow 1,400bn won in term loans and 100bn won in revolving loans from lenders led by Korea Development Bank. AB Inbev, the world’s largest brewer, said in July it had sold Oriental to KKR for $1.8bn. Affinity a Hong Kong-based buyout fund, paid KKR $400m for half the brewer’s equity, the FT reported then.
Seoul will use this weekend’s meeting of G20 finance ministers in the South Korean port city of Busan to enlist support for an international levy on bank transactions, the WSJ reported. The FT meanwhile said that the health of European banks appears set to dominate the meeting, in Busan with the UK and the US both calling on Wednesday for greater disclosure of their financial conditions.
The Irish government has been challenged by a judge to allow the state’s director of corporate enforcement full access to confidential documents in its investigation into the scandal-ridden Anglo Irish Bank, reports the FT. The state-owned property lender, nationalised in January 2009, was ordered by Justice Peter Kelly to reconsider its refusal to divulge key documents to the investigation. Anglo Irish has claimed privilege over documents relating to legal advice it received.