Posts from Friday Jun 18 2010

May’s market mayhem in FX settlements

June’s ECB Monthly Bulletin, released on Thursday, is turning out to be a treasure trove of enlightenment when it comes to what transpired inside the financial system in May.

We’ve already noted the critical dysfunctions the Bank observed in the money markets — which it said were comparable to the stresses experienced over the course of the Lehman collapse. Read more

Sovereigns not included? More on Europe’s stress tests

Slowly, we’re finding out a bit more about the methodology behind the stress tests that are due to be published for the top 25 EU banks, plus Spain’s banking system.

Morgan Stanley’s Huw van Steenis and team, for example, have sought guidance on one one key questionRead more

Some consequences of May’s money-market mayhem

On Thursday, the Italian Treasury made a relatively interesting, if low-profile, announcement.

From now on, it said, it would begin issuing a new type of floating rate bond called a CCTs-eu. This was to replace conventional CCTs (Certificati di Credito del Tesoro) which were until now linked to the weighted average rate for six-month Italian BOT bonds. Read more

The mirror crack’d

One of the more interesting things to watch at the GAIM hedge fund conference in Monaco this year – more for light, than heat, truth be told – was Mike Novogratz, one of the founders of the giant Fortress Group, and Hugh Hendry, the voluble manager behind the definitely smaller but in some ways no less influential Eclectica Asset Management, slugging it out.

The GAIM organisers’ own blog post more or less neatly summed up the contest: Read more

The World Cup effect

Standard Chartered says markets have drifted higher over the last fortnight because of the World Cup effect, reports FT Alphaville. Which suggests Europe should perhaps forget the European Financial Stability Fund, and focus on organising the European Football Soccer Federation, to hold a tournament forthwith. Read more

Europe’s north-south divide could last years

Citigroup’s equity strategy team has offered a little insight into the recent thoughts of Willem Buiter, the bank’s chief economist, in their latest note.

As can be expected from Buiter, it’s not cheery stuff when it comes to the matter of the European peripheral countries — but mainly for Spain and Greece. Read more

Must Europe’s stress tests fail in order to succeed?

Alastair Gray of UBS has a pretty harsh response to the impending publication of stress tests on twenty-five EU banks.

He wants to see some failure in the mix: Read more

Markets Live transcript 18 Jun 2010

Live markets commentary from 

The VAT, the RPI, and the index-linked gilt

The ConDem government’s emergency UK budget will be unveiled next Tuesday.

There seems to be a growing consensus among analysts that we are in for an increase in Value-Added Tax (VAT). A jump in the tax from its current 17.5 per cent to 20 per cent would raise around £12bn, or 0.9 per cent of UK GDP, if it’s implemented from January 2011 (JPMorgan estimates). Read more

Medvedev says cannot rule out euro collapse

Russian President Dmitry Medvedev has told the Wall Street Journal he has doubts about the future of Europe’s common currency. According to the paper, when asked whether Europe’s debt turmoil could threaten the euro, he answered, “I don’t exaggerate the threat, but it can’t be underestimated.”He has also warned that the Gulf of Mexico oil spill stands to threaten the survival of BP, a key operator and investor in Russia.

Citigroup seeking to raise $3bn for funds

Undeterred by the potential passing of the Volcker rule, Citigroup is said to be looking to raise more than $3bn for its private-equity and hedge funds, Bloomberg reported on Friday. The fund raisings come as US lawmakers consider banning banks from owning and investing in so-called alternative funds. Sources told Bloomberg that Citi Capital Advisors, which oversees about $14bn, may seek $1.5bn for private equity this year and $750m for hedge funds. An additional $1bn is said to be targeted next year for hedge funds.

US states query Google’s Street View data

Google is likely to face a co-ordinated inquiry from multiple US states into its collection of data from unsecured wireless networks, adding to a litany of probes that include actions by authorities in Germany, New Zealand as well as a pan-European group of privacy officials. The FT reports that the attorneys-general of the states of Connecticut, Illinois and Massachusetts have all sent letters to Google demanding more information about how the data were assembled from 2007 until this year and what has been done with them.

Verizon hints at dividend pay-out to Vodafone

Verizon Communications has raised the possibility that Verizon Wireless, the leading US mobile phone operator, could start paying a dividend to Vodafone in 2012, reports the FT. Analysts said it was the first time that Verizon Communications, the US telecoms group with a controlling stake in Verizon Wireless, had spelt out a potential date for the restoration of dividend payments.

Japan outlines plans to merge exchanges

The Japanese government has unveiled a proposal to merge the country’s major exchanges by 2013 in a bid to make the bourses more competitive regionally and attract more funds, the FT reports. The idea is contained in the government’s new growth strategy, approved by the cabinet on Friday, that the ruling Democratic party hopes will rescue Japan from chronic deflation and double the country’s long-term real growth rate to 2 per cent by 2020.

Stress test decision reassures investors

European bourses were higher on Friday, recording their eighth day in a row of gains, as investors calculated that the publication of eurozone bank “stress tests” would remove some of the anxiety regarding the bloc’s financial system. The FTSE All-World equity index was up 0.3 per cent, commodities were mixed and currencies quiet. European Union leaders’ promised to reveal details of the tests by the end of July and the relative success of recent eurozone bond auctions has helped push the embattled euro to a three-week high versus the US dollar.

What are BP dividend swaps telling us?

When BP finally resummes dividend payments after the 2010 moratorium how much can cash are shareholders expect to receive? The answer, via the dividend swaps market, is a lot less than the 56 cents (or 14 cents a quarter) BP has paid for the past couple of years, reports FT Alphaville. Read more

US Congress mauls Hayward

Irate members of Congress accused Tony Hayward of “stonewalling” on Thursday as BP’s embattled chief executive came under sustained attack during a prolonged hearing on Capitol Hill into the Gulf of Mexico oil well disaster, reports the FT. Mr Hayward, appearing before a congressional committee for the first time since the April 20 blow-out, tried to assuage public fury over the spill, saying he was “deeply sorry” for it and was “devastated” by the loss of 11 lives in the explosion.

Macondo, in historical Hollywood context

In case you were curious about how BP’s stricken Macondo well currently stacks up to other historical oil spills, here’s a useful graphic from Société Générale, putting it all in context:

 Read more

Japan’s shiny new ‘financial nation’

After moves to sex-up Japanese government bonds and make debt-reduction a priority of his economic agenda, Japan’s new prime minister Naoto Kan is clearly out to show he means business.

On Friday, his government unveiled a proposal to merge the country’s main stock exchanges by 2013, in a push to attract more funds to Japanese bourses and boost their regional competitiveness. Read more

O, debito moratoria at Italy’s banks

Italy has extended the moratorium on business debt it began in August 2009, reports FT Alphaville. The agreement, between the Italian Banking Association (ABI) and Confindustria (Association of Industrial Corporates) gives small and medium-sized businesses the ability to put off paying a loan’s principal for up to a year. Read more

Further reading

Elsewhere on Friday,

– For the 100th time, is Spain next – or not? Read more

Pink picks

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

 Read more

Snap news

Breaking pre-market news on Friday,

– Santander announces offer for 300 RBS branches — statementRead more

Japan’s inflation target dies a very early death

Japan’s been without inflation for oh, 10 years now. So why start?

The Democratic Party of Japan’s (DPJ) manifesto, released on Thursday, was full of pledges to reduce the state debt — but no mention on that rumoured western-style 2 per cent inflation target. A DPJ panel had advocated such a target, to boost the country out of its decade-long deflation. Read more

Japan’s Kan to tackle debt

Japan’s new government on Thursday made fiscal consolidation a centrepiece of its latest election manifesto, with Naoto Kan, prime minister, signalling a possible doubling of the 5% consumption tax, reports the FT. The moves underscored Kan’s move to make public debt reduction a top priority, a policy stance that is winning support for his DPJ administration from business groups ahead of next month’s Diet upper house election.

Overnight markets: Mixed

Asian markets
Nikkei 225 down -7.08 (-0.07%) at 9,992
Topix down -1.69 (-0.19%) at 885.79
Hang Seng up +122.88 (+0.61%) at 20,261

US markets
S&P 500 up +1.43 (+0.13%) at 1,116
DJIA up +24.71 (+0.24%) at 10,434
Nasdaq up +1.23 (+0.05%) at 2,307 Read more

Australian CEO quits over complaint

Mark McInnes on Friday quit as chief executive officer of Australian retailer David Jones, ending a seven-year tenure, after a complaint that he behaved in an “unbecoming” manner to a female staff member, reports Bloomberg. DJ shares fell as much as 4.7% in Sydney after Australia’s second-biggest department-store chain said McInnes would leave his role and the board immediately and that Paul Zahra, general manager, would assume the CEO’s role.

Congress attacks BP chief

Tony Hayward, BP’s embattled chief executive, faced furious questioning on Thursday as US lawmakers hit at the public face of the Gulf of Mexico oil spill for the first time since the April 20 disaster, reports the FT. Hayward told a House energy sub-committee he was “deeply sorry” for the catastrophe and vowed that the British company would meet all its obligations. But, as the FT noted in a separate analysis, his “short and largely content-free” responses may only have antagonised lawmakers.

US companies eye buy-backs

US companies are indicating a desire to buy back their own shares at the highest rate in months, as record levels of cash pile up on balance sheets, reports the FT. Companies announced 27 new buy-back programmes last week totalling $18.5bn. the most since February, according to data provider TrimTabs. Walmart alone announced a $15bn plan, which included $4.7bn from a previous buy-back.