Those engaged in ‘‘rumourtrage’’ or the spreading of rumours to affect share prices could be in for greater penalties if the Australian government heeds a market reform recommendation that would give the country’s regulator additional powers, The Age reports.
Canberra and Beijing signed 10 commercial deals worth more than A$10bn on Monday as the two nations strengthened trade links during a state visit to Australia by Xi Jinping, the Chinese vice-president, who is expected to become the country’s next president, the FT said. China is Australia’s biggest trading partner, and the economic relationship continues to strengthen in spite of a string of diplomatic difficulties.
Middle Eastern sovereign wealth funds have emerged as the most prominent international backers of Agricultural Bank of China’s planned $23bn-plus initial public offering, the FT reported. Qatar and Kuwait’s SWFs have agreed to invest $2.8bn and $800m, respectively, as cornerstone investors in what is expected to be the world’s biggest IPO. Other investors in the Hong Kong portion of the offering include Temasek, which plans to invest $200m, and Li Ka-shing, Hong Kong’s richest man.
China’s decision to end its peg to the US dollar triggered an immediate surge in Asian and other emerging market currencies in a sign of increasing confidence in a sustained economic recovery, reports the FT. Economists said the jump also reflected a belief that Beijing’s action would make central banks in other emerging markets less likely to intervene to hold down their currencies against the dollar to avoid a loss of competitiveness with China.
The Hong Kong-based liquidators of Lehman Brothers’ Asian operations have sold $620m of the failed investment bank’s portfolio of loans, bonds and equity positions in the region. The transactions, which achieved an average recovery rate of 100 per cent, represent the first major disposals from the $2.6bn “principal investments and loans” portfolio built up by Lehman, the FT says.
The SEC on Monday broadened its crackdown on alleged abuses in the market for complex debt products, accusing a boutique investment bank of defrauding investors in CDOs. In a civil suit, the SEC alleged that ICP Asset Management reaped tens of millions of dollars through a series of improper trades and triggered losses at CDOs it managed, the FT reports. The firm said it intended to “vigorously defend the allegations”.
No doubt about the winner on the London stock market from China’s decision to let the renminbi to appreciate ever so modestly – miners, miners, miners and for good measure miners.
At pixel time the FTSE 100 leaderboard was dominated by resources stocks: Read more
So China moves to flexibility in the renminbi, presenting a token diplomatic gesture before G20 talks, but ultimately not changing very much economically. Right? Well, sort of. The situation is more complex than that, and FT Alphaville has the breakdown. Read more
Moody’s Capital Markets Research group, a separate unit from the more well-known ratings division, published a note on Friday about the skepticism of credit market investors’ toward Spain’s savings banks.
According to analyst Lisa Hintz, while this skepticism is nothing new — as expressed by a sharp widening in CDS on the cajas — there appears to have been a shift in focus from concerns about real estate problems to the stresses of the sovereign: Read more
Many analysts view the Baltic Dry Index, a measure of shipping costs for dry commodities, as a forward macro-economic indicator. So should we be worried by the fact that the index last week experienced its biggest weekly decline since 2008? Analysts say yes. Read more
How’s this for a neat conclusion to the European Central Bank’s recent run of buying bonds from the eurozone’s troubled sovereigns?
Sell ’em on to other governments via the eurozone SPV. Read more
Live markets commentary from FT.com
Execution Noble has updated its original stress test scenario note for Spain’s Santander and BBVA banks, this time assuming a 10 per cent haircut scenario on Spanish sovereign bonds.
While their initial “adverse scenario” assessment in March, concluded that both banks would need to raise €8bn to meet potential funding shortfalls, their latest findings now hike that figure to €11bn. Read more
Caterpillar Inc., Cargill Inc., and Sacramento, Calif. are emerging as unlikely, but crucial players in the closing stages of financial reform, the WSJ reports. All use derivatives — which now face being pushed onto standardised clearing houses or exchanges, affecting any company which uses them to hedge risk. House and Senate politicians aim to finish negotiations on a final bill by Thursday, Reuters reports, but debates over consumer financial protection are also likely to weigh in this week.
Saudi Arabia, the world’s fourth-largest holder of foreign exchange reserves, is sitting on more than twice as much gold as previously thought, according to new estimates that point to the revival of bullion as part of emerging economies’ official reserves, the FT reports. The changes in Riyadh’s reserves were revealed by the World Gold Council, the industry-backed body which regularly tracks official bullion holdings.
The renminbi rose to a 21-month high against the dollar on Monday, Reuters reports, as traders reacted to the People’s Bank of China’s weekend announcement that the currency’s peg to the dollar will effectively be dropped. The Bank’s decision to leave the exchange rate unchanged from Friday to Monday nevertheless took the market by surprise, the WSJ says. The renminbi’s new regime is certainly a deft political move by the Chinese authorities ahead of the latest G20 talks, the FT argues, but the economic implications of the shift remain up for debate. FT Alphaville rounds up reactions from media commentators and currency analysts.
BP managed to avoid further liabilities related to the Gulf spill even as it set up a $20bn compensation fund under White House pressure, officials familiar with the matter have informed the WSJ. The energy giant escaped costs for distress caused when President Obama imposed a six-month moratorium on deepwater drilling, as well as dodging the bill for restoring the Gulf beyond its pre-spill condition. An internal BP document estimating a worst-case scenario spill of 100,000 barrels per day has been released by Representative Ed Markey, Reuters adds.
There’s nothing like a credit downgrade to focus the mind, FT Alphaville observes. After Moody’s cut Anadarko’s rating to junk late on Friday, the US oil company (and 25 per cent non-operating investor in the Macondo well) has broken its silence on BP – with an attack that tries to pin all costs for the spill on the energy giant. BP issued a furious response on Monday. Oh dear. Read more
We’re on European bank stress test methodology watch.
And according to Nomura’s European bank team, the key question is how much time banks will be granted to deal with or absorb projected losses. In other words, whether they’ll be able to fund stress test-exposed losses using their projected future earnings. Or not. Read more
‘Authorities moved too quickly to solve the 2008 financial crisis.’ — Discuss, says FT Alphaville. That’s one idea contained in a new BIS working paper, which has compared today’s financial meltdown with the Nordic banking crises of the 1990s. Read more
Bank regulators may have moved to crack down on hybrid capital, but the banks themselves seem to have other ideas.
Witness HSBC’s $3.4bn sale of perpetual bonds last week. Read more
Elsewhere on Monday,
– ETFs gone wild.
Comment, analysis and other offerings from Monday’s FT,
Wolfgang Münchau: We need the figures on Europe’s toxic banks
Governments are still fighting the wrong crisis, writes the FT columnist. Global investors have recognised a fundamental truth, that this is not a sovereign debt crisis at heart, as Germany and the European Central Bank keep on telling us, but a banking crisis and a crisis of policy co-ordination failures. Uncertainty will persist, until we have a reliable estimate of the remaining toxic waste in bank balance sheets, and some resolution trajectory. Read more
Breaking pre-market news on Monday,
– BP says disagrees strongly with Anadarko allegations – statement. Read more
If most of the media agrees that China’s decision to enhance the yuan’s flexibility was a step in the right direction, many currency analysts are voicing some of their own reservations — not least in terms of the future of the PRC’s FX reserves, writes FT Alphaville. Read more
Some critics are doubtful about the significance of Beijing’s moves on the exchange rate of its currency — but the volumes devoted to China’s weekend statement on currency flexibility on Monday morning would suggest otherwise, FT Alphaville writes. Read more
Nikkei 225 up +177.18 (+1.77%) at 10,172
Topix up +15.03 (+1.70%) at 899.67
Hang Seng up +442.58 (+2.18%) at 20,729
S&P 500 up +1.47 (+0.13%) at 1,118
DJIA up +16.47 (+0.16%) at 10,451
Nasdaq up +2.64 (+0.11%) at 2,310 Read more
In case you missed these stories:
Calpers buys 12.7% stake in Gatwick
The California Public Employees Retirement System, the biggest US state pension fund, confirmed on Friday it was buying an equity stake in Gatwick airport. Read more
Calls for a shake-up of the Prudential’s board of directors could intensify this week as the life assurer meets some of its top shareholders in the wake of its failed bid for AIA, reports the FT. Fidelity International, the investment group, is to meet Harvey McGrath, the Pru chairman, on Monday ahead of a week of critical meetings between main board directors and shareholders. Investors have called for McGrath and Tidjane Thiam, the chief executive, to resign following the $35.5bn bid for AIA in Asia, which incurred costs of more than £400m.
Bain Capital has hired bankers to sell TeamSystem, the Italian business management software provider, for as much as €600m ($743m), reports the FT. UBS will run the auction. The US buy-out firm hopes to draw financial and trade bidders for TeamSystem, which it bought for €274m in 2004. One likely bidder is Sage, the UK-listed software group, which made an unsuccessful offer for TeamSystem when Bain bought it almost six years ago. Advent International, Apax Partners, CVC Capital Partners, Bridgepoint and Providence Equity are among buy-out groups also circling TeamSystem.