Posts from Thursday Jun 10 2010

Seoul hints at rate rise

The Bank of Korea kept its low interest rates steady, as expected, but said it will pursue “price stability,” offering a new hint of unease about rising inflationary pressures that could prompt monetary tightening in the coming months, the WSJ said. The central bank flagged downside risks to South Korea’s export-oriented economy but also expressed optimism about the outlook, the newspaper reported.

SocGen trader slams Kerviel

Jérôme Kerviel was denounced by  a former trader colleague of on Thursday for taking “stratospheric” risks that had put their employer Société Générale in danger, the FT reported. The accusation came on the third day of Kerviel’s Paris trial and a day after Jean-Pierre Mustier, former head of SocGen’s investment bank, severely criticised Kerviel, blaming him for causing losses of €4.9bn.

Japan’s bonds given hard sell

A high-profile advertising campaign to persuade millions of small-time investors to buy Japan’s sovereign debt has gone for raw sex appeal: “Women have a thing for men who own JGBs!! . . . right!?” According to the finance ministry advert, women prefer men who invest in solid government debt because they are sensible investors, the FT reported. For a snapshot of the ads, see Brad deLong.

Japan government hit by expenses dispute

Payments for phone calls, tissue paper and tea have be­come targets of intense public scrutiny as Japan’s new government battles to refute allegations that three ministers claimed expenses they should not have done, the FT reported. The allegations, first reported in the Yomiuri newspaper this week, are the first big test for Naoto Kan since he became prime minister a week ago.

South Korea questions JPMorgan

Steve Lim, the veteran head of JPMorgan Chase’s South Korea operations has been questioned by local investigators probing insider trading allegations. He has not been charged or found guilty of wrongdoing, reports the FT. The move follows reports that South Korea’s markets regulator, the FSS,  was alerted to alleged unfair trading of shares in KCC, a local construction company.

Gold boosts Paulson

Gold-denominated investments in Paulson & Co, the $34bn hedge fund group run by John Paulson, have more than doubled underlying returns in the group’s funds for clients, the FT reported. More than a third of Paulson’s total assets under management, including all of Paulson’s personal investments, are denominated in gold share classes, said people familiar with the funds.

BP shares continue London slide after US attacks

Shares in BP lost further ground on Thursday on growing concern about the impact of the Gulf of Mexico oil spill on the company’s financial health. The potential cost of the crisis, and fresh fears over whether BP will pay its dividend, sent the shares tumbling 11 per cent at the open in London; they ended the day 6.7 per cent lower. But in the US, the company’s ADRs recovered from the 14-year lows they had hit during the previous session.

Reform of rating agencies poses dilemma

On both sides of the Atlantic, the debate about how to reform credit rating agencies has taken on renewed zeal and fervour, according to the FT’s Aline van Duyn. The biggest rating agencies have repeatedly said that they have learnt their lessons and have adapted many of their internal controls and procedures, but their assertions have not stopped efforts to regulate them more heavily from picking up steam.

China export surge stirs US anger

A surge in Chinese exports and rising anger in the US Congress will put renewed pressure on China to allow its currency to rise against the US dollar Data released in the US showed America’s trade deficit widening slightly in April, the FT said. That data gave more ammunition to China’s critics in the US Congress, who intend to proceed with legislation to restrict Chinese imports to correct the perceived misalignment of the country’s currency.

Goldman’s shares hit 52-week low

On a day when the S&P 500 index closed 3 per cent higher, Goldman Sachs’ shares touched a 52-week low of $131.30, a level not seen since May 14 2009. The former investment bank’s stocks have moved steadily lower since the SEC first used the ‘F-word’ in April. See FT Alphaville for more. Read more

SEC busts alleged $300m gilded Ponzi scheme

Fraudulent goldbugs?

The Securities and Exchange Commission today charged four Canadian men and two others living in Florida with perpetrating a $300 million international Ponzi scheme on investors in a purportedly successful gold mining operation. Read more

CDS report: Waiting for Trichet

A late sell-off in the US had the predictable dampening effect on European markets. The Markit iTraxx Europe opened 3.5bp wider at 140bp (+3.5) while the Markit iTraxx Crossover opened at 620bp, 6bp wider. But equally predictable was that the impact from the US would be short-lived and that another volatile session was in store. ECB president Trichet’s press conference was pencilled in as the main event today. The uncertainty around the ECB’s bond buying programme has contributed to the underperformance of financials and the turmoil in the broader market.

The markets were looking for details on the ECB’s interventions. In particular, some transparency on which countries’ bonds it has been buying would have been welcome, as would an explanation on why the purchased amounts have been irregular from week-to-week. Trichet refused to divulge these facts, though he did give a commitment to keep buying government bonds and extending access to unlimited three-month funds. The Markit iTraxx Senior Financials finished the day at 178bp, 13bp tighter, though in truth it was rallying from the open. Banks were among the strongest performing credits today, with Italian, French and Spanish banks recovering from their historically wide levels earlier this week. Read more

Short ARM tactics

Could a short sqeeze explain the 30 per cent spike in the share price of chip designer ARM Holdings on Thursday?

Click to enlarge: Read more

The equity underwriting fat cats

So which banks have the most to lose from the UK Office of Fair Trading market study into equity underwriting fees and associated services?

Over the past ten and a half years the biggest fee earners have been JP Morgan (including Cazenove), RBS (including Hoare Govett) and UBS. Goldman Sachs was the top book runner. Read more

Send for the rally monkey

The reason (ahem) is Chinese export data, which was leaked on Wednesday and confirmed on Thursday. Apparently this is reassuring because its shows China has not been affected by the sovereign debt crisis in the eurozone. Read more

Japan’s no-playboy bonds

Presented without comment, from RBS on Thursday:

…our colleague Bill O’Donnell reports that a new Japanese Ministry of Finance advert says that Japanese women prefer men who invest in government bonds, as ‘Playboys are no good’. This tells you all you need to know about why you should buy bonds. Even when someone is trying to be bullish govvies – as the government is, good for them – they are still seen as a dull last resort anti-playboy investment. We suggest you will see far greater (positive) returns in 30-yr govts in 2010 than you will see (negative) return in equities. And are JGBs boring? You decide. 10-yr JGB total return YTD: +2.1%, NIKKEI total return YTD: -9.9%. Seems to me that if you want to finance that playboy lifestyle you would do far worse than buying some bonds!

 Read more

Beyond patriotism

Britain’s Prime Minister David Cameron tried to draw the sting from recent US attacks on BP on Thursday — a sign that the company’s tanking stock is being watched with concern in Whitehall.

Or in this case, Kabul. Flashes, via Reuters: Read more

Of Taunus and Tier 1

Here is a lovely picture of the Taunus mountain range, near Frankfurt:

 Read more

Extend and pretend in US housing is reeeaaally extended

What’s this? A sudden wave of US housing optimism?

From HousingWireRead more

Markets Live transcript 10 Jun 2010

Live markets commentary from 

‘Severe’ AIG losses ahead, panel warns

The Congressional Oversight Panel has said that US taxpayers face ‘severe losses’ from the government’s 2008 bailout of AIG, the WSJ reports. The panel’s report warned that the US will maintain its stake in the insurer through 2012, adding that there was a failure to ‘exhaust all options’ as AIG verged on collapse at the height of the financial crisis. The Federal Reserve said that it disagreed with the view that better alternatives were available at the time.

Equity underwriting fees and the OFT

It’s not a full blown investigation (yet) but…

The Office of Fair Trading has confirmed on Thursday morning that it plans to undertake a “market study” into equity underwriting and associated services. Read more

Antitrust probe looms for Apple on mobile ads

US antitrust regulators plan to investigate whether Apple is unfairly restricting rivals such as Google and Microsoft in the market for advertisements carried on the iPhone, iPad and iPod, people familiar with the move have told the FT. Apple has sold $60m in advertising to run on its iPhone from July. Google has complained that its own mobile advert network has unfairly been frozen out of Apple’s plans, the WSJ reports.

Investment banks face UK underwriting probe

Morgan Stanley and JP Morgan will join banks under scrutiny in an investigation by Britain’s antitrust agency into equity underwriting practices, Bloomberg reports. The probe, which will begin later this year, was sparked by companies’ complaints that the size of charges has spiralled, the FT adds.

It’s happening: mining super-tax super-contagion

Miners of the world take note: it’s happening – mining super-tax contagion.Amid the hoo-hah and howls of outrage Down Under about Canberra’s plans to slap a 40 per cent “super-profits” tax on mining companies, reports on Thursday suggest China is now considering imposing a super-profits tax on resources companies. See FT Alphaville for details. Read more

Shares in BP slide after New York sell-off

Shares in BP continued to slide in London trading on Thursday on growing concern about the impact of the Gulf of Mexico oil spill on the company’s financial health, the FT reports. The potential cost of the crisis, and fresh fears over whether BP will pay its dividend, sent the shares tumbling 11 per cent at the open, although they later recovered some of those losses to stand 5.9 per cent lower. The company’s ADRs fell almost 16 per cent in New York overnight.

BP short interest, other facts and stuff (updated)

Readers have been asking for short interest data on BP and here, via Data Explorers, it is:

As you can see from the graph, stripping out the spike related to the last (?) dividend payment, the underlying level of stock outstanding on loan (SOOL) has barely budged since the spill Read more

The ‘Sinofication of BP’: Thinking the unthinkable

The ignominy continues to pile up for BP, as its share price plunges and credit default protection on it blows out. That’s made a few ‘unthinkable’ scenarios rather less so, FT Alphaville writes, including one analyst’s speculation of a Chinese takeover bid. Read more

ECB debt certificates live on in analysts’ minds

On Wednesday, the European Central Bank had a technical hiccup.

It accidentally published a “test message” outlining details of the planned sale of €10bn worth of three-month debt certificates to help mop up some eurozone liquidity. The sale was quickly squashed by ECB spokespeople, but the idea is continuing to appear in market commentary on Thursday. Read more

China’s locals on a locally-generated China crisis

The China analysts over at Standard Chartered have been on a field trip — and they’ve heard some strong pessimism on the financial health of the country’s local banks, especially their ties to local government, FT Alphaville notes. One to watch. Read more