Posts from Tuesday Jun 22 2010

Google and Twitter v the investment banks

How do Wall Street’s lawyers and lobbyists find the time?

Somehow, while fending off the complaints of munis burnt by derivatives, contending with proposals to overhaul the US financial system and worrying about the SEC poking around, they’ve managed to wage war on theflyonthewall.comRead more

Asian millionaires overtake Europeans

The net wealth of Asian millionaires has eclipsed that of rich Europeans for the first time, largely because of the relative health of stock markets in Hong Kong, India and China last year, the FT said, citing the annual Merrill Lynch Wealth Management /Capgemini  poll. As of late last year, there were 3m millionaires in both the Asia-Pacific and Europe. The survey quantified the wealth held in Asia at $9,700bn, compared with $9,500bn in Europe.

UAE banks and non-performing loans

“Evrgreening” is thriving in the UAE’s banking sector, the FT’s beyondbrics blog reported, citing a Fitch report published on Tuesday. UAE banks are hiding the true extent of their dud loans by restructuring and rescheduling debts to avoid writedowns – known as “evergreening”. The practice may reduce pressures on profits and capital, but will tie up money in dud loans when banks are needed to resume lending and offer at least some support for the wilting property market, beyondbrics said.

UAE fails to emerge from the frontier

Hopes that the UAE and Qatari stock markets would be upgraded to emerging market status by MSCI Inc suffered a blow on Tuesday after the index provider said it was to continue classifying them as frontier markets, the FT’s beyondbrics blog reported. MSCI said in a statement that both the UAE and Qatar needed to move away from the frequent use of dual account structures, such as separate custody and trading accounts.

US judge reverses drilling moratorium

A federal judge in Louisiana on Wednesday blocked the Obama administration’s six-month moratorium on deepwater oil drilling, imposed following the Gulf of Mexico spill, the FT reported. The White House immediately said the administration would appeal. Yahoo! News, citing financial disclosure reports from 2008,  said the judge “appears to own stock in numerous companies involved in the offshore oil industry”.

Beijing allows renminbi to fall in value

China let the renminbi drop slightly in value against the dollar on Tuesday in a move that analysts said was designed to deter speculators benefiting from a stronger Chinese currency. Traders said state-owned banks had been in the market buying dollars, which they saw as a sign that the authorities were trying to control tightly the value of the renminbi and limit expectations of future gains, the FT reported.

China scraps commodity export tax rebates

China said on Tuesday that it was removing export tax rebates for key commodities, including some steel exports. The news was likely to soothe trading partners such as the US and the EU who have both attacked China’s steel export subsidies, the FT said. Export rebates will be scrapped for some steel products, including hot rolled coil, as well as other products such as corn starch, fertilisers, glass goods, rubber goods and medicine.

New strike reported at Toyota’s China parts supplier

A strike has halted production at a Chinese factory owned by Japan’s Denso Corp, a car parts maker affiliated with Toyota. The stoppage has halted supply of the factory’s fuel injection equipment and other products to Toyota, Honda Motor and other carmaker clients since Monday, Denso spokeswoman Yoko Suga told Reuters.

Japan sets targets to rein in debt

Japan on Tuesday moved to shore up confidence in its state finances by issuing a “fiscal management strategy” that aims to cap government bond issuance at current levels, curb future spending growth and target primary budget balance by 2020, the FT reported. The government aims to ensure that debt issuance next fiscal year does not exceed the roughly Y44,000bn expected this year, and that it “steadily decreases” thereafter.

Central banks see growing reserve asset role for gold

Nearly a quarter of central banks believe gold will become the most important reserve asset in the next 25 years, the FT reported, citing an annual poll by UBS. The result highlights the sea-change in attitudes in the official sector towards the yellow metal.

Destabilisation fears back to haunt China

Fears that speculative inflows of “hot money” could destabilise the Chinese economy have long preoccupied policymakers in Beijing. Now that the renminbi has been cut loose from its peg to the US dollar, these worries are back with a vengeance, the FT reported. Speculating on a revaluation is widely seen as a one-way bet, which raises the prospect that speculative capital will flood into China, fuelling asset bubbles and inflation.

JPMorgan reshuffles senior management

Jamie Dimon on Tuesday re­shuffled JPM’s top management, the FT reports. Doug Braunstein, head of investment banking for the Americas, will become CFO, replacing Michael Cavanagh, who will lead the treasury and securities services business. Heidi Miller, the veteran executive who runs that unit, will take over the new role of president of the international business, charged with challenging overseas rivals in both cash management and wholesale banking.

Banks hit by £2bn yearly levy in UK

Banks in the UK will be forced to pay more than £2bn in a new annual levy announced on Tuesday, in what was expected to be the first of a series of taxes on large financial institutions in several developed economies, the FT says. The tax, to be paid from January, will be imposed on UK banks and building societies as well as the UK operations of foreign banks.

Ratings agencies react

The rating agencies are beginning to respond to Tuesday’s ‘unavoidable Budget’ in Britain.

Via Reuters: Read more

The bank-friendly chancellor (updated)

So how much will the bank Budget levy cost UK-listed banks?

Here are some rough calculations from a sector analyst. Read more

Analysts react on debt and inflation

It was billed as the austerity budget. But Marc Ostwald of Monument Securities says Chancellor George Osborne’s fiscal outlook for the UK has been revealed to be rather rosy in one respect:

…the fundamental problematic remains that the GDP forecasts look to be too optimistic by roughly 0.3% to 0.5% per annum, i.e. for this year we would expect GDP to be around 1.0%; while for 2011-2015, GDP seems more likely to be in the 2.0-2.5% range rather than the 2.5%-3.0% range that this Budget assumes.

 Read more

Osborne’s retailer therapy

Chancellor George Osborne introduced a VAT hike to 20 per cent from 17.5 per cent on Tuesday, effective from January 4 2011.

And yet… UK retailers rallied on the news: Read more

More UK tax bombshells — and gilt cuts

More tax increases from Britain’s Chancellor George Osborne, including on the thorny issue of capital gains tax.

Flashes, via Reuters: Read more

The Chancellor’s VAT bombshell

This one got some parliamentary boos as Chancellor George Osborne presented his austerity Budget: a rise in the UK’s value-added tax rate.

Via Reuters: Read more

Osborne’s £2bn bank tax (updated)

Not much joy for Britain’s bankers in one measure from the UK’s austerity budget.

Although it is not as bad as it could have been – the bank levy will raise just £2bn a year, not upwards of £3bn as had been rumoured in some publications. And the planned cuts to corporation tax will also help Read more

George goes green

Continuing FT Alphaville’s traditional coverage of Budget Day neckwear:

What does the colour of Chancellor George Osborne’s tie mean? Read more

Osborne wields the axe, gilts react

Britain’s Chancellor George Osborne set out his government’s tough austerity budget on Tuesday — including measures to strip back the UK’s fiscal deficit.

Initial flashes, via Reuters: Read more

US Housing Bubble v2.0, charted

It’s no secret that the US government is trying to prop up house prices.

Its various programmes, Hamp, MHA, tax incentives, etc., have been explicitly linked to higher house prices before — most notably in Sigtarp’s first-quarter report to Congress. Raising house prices can be politically popular, and helps out the banks — at least in the short-termRead more

Credit Agricole names its Greek pain

Shares in Credit Agricole were down 4.84 per cent in Paris at pixel time:

 Read more

Anatomy of an emergency unwind

The case of Socgen’s rogue trader Jerome Kerviel heads into its tenth day, with ever more insightful snippets of information being unveiled regarding the bank’s trading practices.

On Tuesday, for example, it was the turn of Maxine Kahn, a trader in Société Générale’s European options division to take the stand. Read more

Markets Live transcript 22 Jun 2010

Live markets commentary from 

News Corp’s long wait

Chase Carey, News Corporation’s chief operating officer, reckons regulators could clear a bid for satellite broadcaster BSkyB in six months.

Nobody else does. Read more

The summer doldrums

The World Cup, Wimbledon and the emergency budget. Market professionals have plenty of excuses to sit on the sidelines at the moment — and they are taking it.

On Tuesday morning, the most actively traded stock on the London market was Stanelco, a sub-penny share bioplastics group that recently had to go cap in hand to its shareholders for a cash injection. Read more

Orszag steps down from budget post

Peter Orszag will step down from as White House budget director in July, two officials in the Obama administration have told the WSJ. Mr Orszag’s departure removes one of the most important members of President Obama’s economic team. Gene Sperling and Laura D’Andrea Tyson, both former chief economic advisers to President Clinton, are in the running to replace him, Politico reports.

Britain awaits tough budget

The UK will set out a five-year plan on Tuesday to fill the hole in its public finances, unveiling an austerity budget that will define the course of the country and the fate of its coalition government, the FT reports. The Chancellor George Osborne will map out tax rises and spending cuts worth a potential $126bn, as the country’s leaders believe they must act to prevent the UK becoming a target of the sovereign debt crisis.