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Posts from Monday Jun 7 2010
The US Financial Crisis Inquiry Commission has launched a sharp attack on Goldman Sachs for its “abysmal” response to requests for information and issued a subpoena to compel it to provide documents and executives for interviews, the FT reports. Phil Angelides, chairman of the bipartisan commission, said Goldman had attempted to “stonewall” and “obfuscate” by failing to answer some questions but answering others by providing 5 terabytes of data, equivalent, he said, to 2.5bn pages of documents.
Australia’s Macquarie Group is in danger of losing dozens of senior bankers from its expanding North American and European operations after a second successive year of weak bonuses, the FT said. Analysts and people close to the bank said some top staff were assessing whether to jump ship after being told last month that their bonuses would be six-figure sums rather than the hoped-for seven figures.
Drastic public spending cuts totalling more than €80bn were unveiled by German chancellor Angela Merkel on Monday, the FT reports. The sweeping austerity package includes 15,000 job cuts in the public sector. New taxes will also be imposed on air travel and the nuclear power industry, and some form of financial transactions tax is planned, in addition to a banking levy already agreed by the German government.
Marsh & McLennan, the insurance broker and consultancy company, has sold Kroll, its corporate investigations division, for $1.13bn to Altegrity, a global security group based in the US, the FT reports. MMC bought Kroll from its founder Jules Kroll for $1.9bn in 2004. Altegrity is owned by Providence Equity Partners, a global private equity firm focused on media and information companies.
Nicolas Berggruen, the US-based investor, is close to taking over Germany’s insolvent Karstadt department store chain after a committee of the group’s creditors voted to favour his bid over those of two rivals, the FT reports. A formal contract to acquire Karstadt and the approval of a German court are set to follow this week, making Mr Berggruen’s group the owners of the chain of about 120 department stores with 25,000 employees.
Fresh selling hit stock markets around the world and commodity prices sagged, the FT reports. Market watchers blamed a broadening out of concerns about economic growth in the wake of disappointingly weak US job numbers on Friday. Conversely, gold had its best session for some time, rising almost $4 to $1,243 during New York trade.
Here’s an argument you rarely see ventured forth nowadays:
Synthetic CDOs were good for everybody… Read more
Here’s some bad (but not entirely surprising) news for investors in BP: its dividend might be about to go on a summer sabbatical.
Goldman Sachs thinks the payments, which account for around 12 per cent of the income generated by the FTST All share index, are about to be suspended for two quarters before being lowered to 10 cents a quarter. Read more
Bank of America Merrill Lynch has separated some facts from fiction in the case of the Spanish banking sector. Trouble is, as FT Alphaville notes, some of the “facts” are rather worrisome. Read more
Live markets commentary from FT.com
Britain’s Prime Minister David Cameron spoke out on the state of the UK economy on Monday morning, and he wasn’t pulling any punches.
The scale of deficit is worse than we thought… economic growth will not fix the problem… interest payments are soaring… and so on. Read more
Foxconn, the world’s largest electronics contract manufacturer and a key supplier to Apple, HP and Dell, is revamping the pay structure at its main production base in southern China in a move that could upend the cost structure of global electronics production, according to the FT. Following a 30 per cent wage increase from July 1, the group said workers who reached certain performance standards would now also get an additional 66 per cent pay rise from October 1.
Barcelona-based blood products maker Grifols has agreed to buy its Nasdaq-listed rival Talecris Biotherapeutics in a deal worth $4bn that will generate big profits for US private equity group Cerberus Capital Management, the FT reports. The deal, paid for with a mixture of cash and stock, values Talecris at more than the $3.1bn that Australian healthcare company CSL agreed to pay for it in 2008.
Investors used to guess when Federal Reserve chairman Ben Bernanke would finally raise rates and begin tightening the Fed’s extraordinary support to the US economy, the WSJ says – but now Europe is doing his job for him. Meager job growth and high costs for risky debt will probably add to worries over European sovereign debt in pushing the Fed to wait even longer.
AT&T and the Indian wireless carrier Reliance have begun early and informal talks over the US telecoms giant’s possible move to take a minority stake, people familiar with the matter have told the WSJ. The sources said that no deal is close, but added that the companies have been in touch over recent weeks. Reliance has been courting foreign suitors on the back of an expected mobile telecoms revolution in India.
Asian and European markets opened sharply lower on Monday in response to fears that the economic recovery is running out of steam, Reuters reports. Sudden panics over Hungary’s debt and US jobs on Friday underscore the precarious nature of growth. Risk asset investors think they have lost their comforter. And they don’t like it. Not one bit, according to the FT’s global markets overview, which reported that US equity futures indicate Wall Street will lose 0.4 per cent at the open.
It was a generally bad start to Monday for eurozone government debt, FT Alphaville says, as CDS pain went on, while yield spreads with German debt continued to widen for Italian, Spanish and French bonds. French debt is particularly one to watch, Deutsche Bank says, given knock-on effects on the health of corporate debt. Read more
BP saw the first significant progress in its seven-week attempt to capture oil pouring from its leaking well in the Gulf of Mexico on Sunday, but was still catching only about half of the estimated flow, the FT reports. On Saturday, a cap lowered over the well last week collected about 10,500 barrels of oil. The estimated flow from the well has been put at 12,000-19,000 barrels per day.
Probably not surprising in light of Friday’s market turmoil and bank rumours, but still interesting, FT Alphaville says; overnight deposits at the European Central Bank hit a new record of €350bn on Friday — a reminder of a bad week ahead for Europe. Read more
When Hungarian officials embarked on what Lex terms their “bone-headed exercise in expectations management” on Friday, it sent the forint tumbling and credit default swaps on the country’s debt surging by more than 100 basis points to 425. As the old cliche goes, trillions were wiped off global asset values. “Oops”, notes Lex.
Already jittery investors then drove the euro down against key currencies by more than 3 per cent in less than 48 hours, bringing it by the weekend to its lowest levels against the dollar since early 2006 and against the yen since late 2001. Read more
Comment, analysis and other offerings from Monday’s FT,
Mort Zuckerman: America’s jobless picture is alarmingly bleak
We are drifting, writes Zuckerman, editor in chief of the US & World News Report. We take comfort in bits of good news, but we are in dangerous waters; the Great Recession is being starkly revealed as a global crisis with the US, the traditional engine of recovery, sputtering on every cylinder. The personal income of Americans is still declining; the residential market remains stagnant at best; consumer growth is nominal. Read more
The UK government aims to kickstart a round of crucial asset sales with the auction of the Channel Tunnel rail link, used by Eurostar for its London-Paris route, for an estimated £2bn, reports Reuters, citing the Independent on Sunday. The Department for Transport and rail link owner LCR plan to provide potential bidders a sales document ahead of the UK’s emergency budget on June 22, the newspaper said.
Asian markets (Mon)
Nikkei 225 down 396.95 (-4.01 %) at 9,504.24
Topix down 31.24 (-3.51 %) at 858.92
Hang Seng down -493.47 (-2.49%) at 19,286.60
US markets (Fri)
S&P 500 down -37.95 (-4.344%) at 1,064.88
DJIA down -323.31 (-3.15%) at 9,932
Nasdaq down -83.86 (-3.64%) at 2,219 Read more
UK insurer Prudential is not considering a renewed attempt to buy AIG’s Asian life unit, the company said on Sunday, denying a media report that a fresh bid was in the works, reports Reuters. The Sunday Times reported that the Pru was considering resurrecting its bid and that CEO Tidjane Thiam believed he could table another offer before year-end. The Pru last week scrapped its plan to buy AIA, AIG’s Asian life unit, for $35.5bn after shareholder objections.
G20 finance ministers on Sunday agreed to drop proposals for a global levy on banks, bowing to opposition led by Canada after marathon negotiations at their weekend meeting in Busan, South Korea. A G20 communiqué said banks should make contributions only in countries where taxpayers had bailed out highly indebted banking systems. Pimco chief Mohamed El-Erian writes on FT Alphaville that the G20 result leaves the door open to “even wider country differentiation”.