George Osborne will have to frame his budget next week against the backdrop of significantly weaker economic forecasts, making the process of deficit reduction all the more difficult, the FT reports. The new and independent Office for Budget Responsibility on Monday cut the forecast for growth in 2011 and in subsequent years as it assessed the previous outlook for the economy as too rosy. Instead of predicting the economy would grow by 3.25 per cent in 2011 and by 3.5 per cent in the subsequent three years, the OBR cautions that growth is likely to be only 2.6 per cent next year and an average of 2.7 per cent into the medium term. Read more
Investor fears over Spain’s financial health have resurfaced amid warnings of funding problems for the country’s companies and banks. Government bonds sold off sharply on Monday as the Spanish Treasury secretary and a top banker admitted companies were having difficulties raising funds, the FT reports. Francisco González, chairman of BBVA, Spain’s second-biggest lender, said that international capital markets were “closed” to the majority of Spanish companies and financial firms. Read more
China is eyeing investments valued at several billion euros in Greek shipping, logistics and airport projects to be discussed in the second visit to Athens in four weeks by a senior Beijing official, the FT reports. Yet, the news came as rating agency Moody’s downgraded Greek debt on Monday night by four notches to junk status. For details of Moody’s action against Athens, see FT Alphaville. Read more
BP’s shares slid a further 9 per cent on Monday as Democratic congressmen called on the multinational oil company immediately to inject $20bn into a ring-fenced fund to clean up the massive spill in the Gulf of Mexico. US President Barack Obama also added to the intensifying pressure on BP suggesting the environmental disaster would have a profound impact on American thinking, the FT reports. Read more
Insurers Resolution and Axa hope to agree the £2.8bn sale of a chunk of the French group’s UK life assurance business by mid-next week, the FT reports. The two companies on Monday confirmed talks and gave details on the price and financial structure of the proposed sale, although they said there was no certainty of a final agreement. Lex says the deal seems to offer “jam tomorrow for Resolution’s investors, but today for Axa’s”. Read more
The top executive of HSBC in North America is leaving the bank just after its US business returned to profitability following a money-losing foray into consumer finance. Brendan McDonagh, 51, has been credited with managing HSBC’s US consumer business – and its vast exposure to sub-prime loans – through a financial crisis that had overwhelmed rivals on both sides of the Atlantic, the FT reports. Read more
Thailand’s government is considering buying control of Thaicom, a local satellite operator, from Singapore’s Temasek as part of a plan to prevent the opposition party from using the company’s satellites for anti-government broadcasts, the FT reports. “We are interested for security reasons: the satellites should really belong to the Thai people,” Sirichok Sopha, secretary to Prime Minister Abhisit Vejjajiva, said. Read more
India’s headline inflation has hit double digits, raising the possibility that the Reserve Bank of India will raise rates before a scheduled monetary policy review meeting next month. Revised figures released yesterday showed that the wholesale price index had risen 11 per cent in March year-on-year, overturning earlier relief that the economy had restrained inflation in single digits, the FT reports. In May the WPI rose 10.2 per cent, double what the government considers its “comfort level”. Read more
Agricultural Bank of China has secured some international cornerstone investors to take up to 40% of the Hong Kong portion of its initial public offering amid concern over weak investor interest in the mega-listing, the FT reports. The sovereign wealth funds of Kuwait, Qatar and Singapore have all signed up to take a portion of the shares on sale in Hong Kong before ABC begins marketing them to institutional investors. Read more
Moody’s downgraded Greece’s sovereign credit rating four notches on Monday, to Ba1 from A3, outlook stable.
The rating action effectively leaves Greek government debt with junk status. Read more
The great and the good of the European hedge fund industry are arriving by plane, helicopter, superyacht and… bus (me) to Monaco today in preparation for the opening of the 2010 GAIM conference tomorrow – the hedge fund industry’s biggest annual bash.
Big-ticket names including Leda Braga – the Brazilian superquant behind Bluecrest’s BlueTrend fund – the Man Group’s Peter Clarke and IKOS’ Elena Ambrosiadou (yacht apparently in tow offshore – how many >250ft sailing yachts can their be?) are coming to ritzy Monte Carlo to speak on the future of the industry – and hopefully raise a little bit of money for their funds in doing so. Read more
With BP’s share price taking another beating on Monday – it finished 9.3 per cent lower in London – JPMorgan has been drawing clients’ attention to cross current circularity – a situation whereby equity and credit markets look at each other for pricing information, apparently
Now, this is important, the bank says, because there is a risk a lower BP share price triggers a higher CDS spread and vice-versa as each security re-prices off the other, potentially creating a self feeding vortex of fear. Read more
…Well, we’re about to find out.
Details of a compromise on the most controversial bit of US financial reform still outstanding — derivatives trading — emerged on Monday, as legislators tried to merge the House and Senate bills. Read more
Just when you thought it was safe to go back into the Aegean…
The Greek sovereign is already covered by its bailout and has made a (fairly good) start on fiscal austerity (so far) — but the story has just begun for Greek banks. Read more
(Click to enlarge). Read more
As far as the post-crisis cottage industry in ‘the future of banking’ reports goes, here’s one that looks like it’s going places — in the UK, at least.
As the FT reports on Monday: Read more
Live markets commentary from FT.com
Does this sound familiar?
UK insurance company announces plan for transformational acquisition, funding by a large rights issue, deal maths only stack up if ambitious cost and revenue synergies are achieved. Read more
South Korea on Monday deployed what it could call its ‘magic won-booster’, following its weekend announcement of measures to curb forward currency trading and control currency volatility.
The steps, widely trailed in recent weeks, came after the South Korean won tumbled almost 10 per cent against the dollar this quarter, the sharpest drop of any Asian currency, amid concerns about the impact of eurozone turmoil and rising tensions with North Korea. Read more
A more adventurous mood gripped investors on Monday as worries about the impact of the eurozone sovereign debt crisis appeared to fade, the Financial Times reports. The FTSE All-World equity index was up 0.9 per cent, while commodities and the euro were also higher, with the dollar and core government bonds lower. S&P 500 futures were trading 0.8 per cent above their previous close. Traders were adding to bolder positions seemingly on hopes that the recent sell-off in riskier assets – which had seen global stocks shed 16 per cent between April 15 and last Monday – had been overdone. Read more
Herman Van Rompuy, president of the European Union, has blamed the strength of the euro in recent years for blinding the eurozone to its underlying fiscal problems. In an interview with the Financial Times, Mr Van Rompuy added that the 16-nation bloc had been on the edge of a breakdown last month that could have caused a world crisis. But European leaders now understood that the way forward was to implement politically unpopular but necessary economic reforms, such as opening up labour markets and raising the retirement age, he said. Read more
The first growth and public finance forecasts from Britain’s new Office for Budget Responsibility are out and — as expected — they’re lower than the last predictions, made in March, reports FT Alphaville. Britain’s economy is forecast to grow 2.6 per cent in 2011, compared to the previous estimate of 3.25 per cent. Read more
The United States has discovered nearly $1,ooobn in untapped mineral deposits in Afghanistan, according to the New York Times. The figure is far beyond any previously known reserves in the area and enough to completely turnaround the Afghan economy and perhaps the Afghan war itself, according to senior American government officials cited by the NYT. However, experts believe it will take decades for Afghanistan to exploit its mineral wealth fully. Read more
International commodity explorers – send for your tin hats and Kevlar vests.
The New York Times reported on Sunday that the US has discovered nearly $1,000bn in untapped mineral deposits in Afghanistan. Read more
Presenting a new condition for financial markets — Ackermann whiplash.
To wit, Friday’s market-boosting Ackermann commentary: Read more
It’s looking like a fun week ahead for the Great British Krona, as we head further into austerity mode for the UK’s economy.
Kicking off the action on Monday are the first economic growth forecasts from the UK’s brand spanking new Office for Budget Responsibility. These will probably cut prospects down from the previous government’s estimates, the FT reports. Read more
He’s set his sights on BofAML and the rating agencies. And now they’re set on you!
Felix Salmon points out there’s a lot of going on in this ad from Andrew Cuomo. Read more
In its latest Quarterly Bulletin, the Bank of England outlines in excruciating detail its risk management procedure for all the collateral it accepts as part of its liquidity operations, including those phantom synthetic securities, reports FT Alphaville. These are securities created by the banks specifically for use at the BoE. Read more
Lehman-Greece parallels we are familiar with.
But in the latest edition of the BIS Quarterly Review, the Bank for International Settlements argues that the current eurozone debt crisis has more in common with the slow-burn start of subprime than a sudden Lehman-esque collapse. Read more