Posts from Thursday Jun 24 2010

China invests $1bn in Mozambique coal

China has deepened its interest in Mozambique’s natural resources, agreeing to invest $1bn in a coal project. Wuhan Iron and Steel, one of China’s biggest steel producers, will spend $200m on an 8 per cent share of Riversdale, a listed Australian company developing coalfields in Mozambique’s Tete province. Wuhan will commit an extra $800m to the Zambeze coal reserve, the FT reported.

DIC dismisses talk of assets fire sale

Dubai International Capital, a heavily-indebted investment arm of the emirate’s ruler, has dismissed speculation about a fire sale of assets by promising to keep its five majority-owned companies in Europe for at least two more years, the FT reports. “DIC is not currently planning the sale of any of its majority-owned European assets,” it said. “We do expect exits in the 2012-15 time frame once we have optimised value consistent with the management business plans.”

Australia’s new PM calls truce with miners

Julia Gillard, Australia’s newly crowned prime minister, has declared a truce with the country’s powerful mining industry over a controversial new resources tax, saying she would “throw the doors open” to the sector to discuss the levy, the FT says. Ms Gillard made no promises about changes to the tax but her promise to open negotiations prompted positive statements from the two giants of the industry in Australia, BHP Billiton andRio Tinto.

Abu Dhabi buys €1.8bn stake in UniCredit

Aabar Investments, one of Abu Dhabi newest and most active state-linked investment vehicles, has become the largest voting shareholder in UniCredit after buying a 4.99 per cent stake worth €1.8bn in Europe’s third-largest bank by market value, the FT says. Aabar, which has had a relationship with UniCredit since investing €49m in the bank’s hybrid equity-linked securities in March 2009, would normally require permission from the Bank of Italy to increase its stake beyond 5 per cent.

Toyota promotes foreign managers

Toyota acted on Thursday on a promise to shift more responsibility to its non-Japanese managers, promoting a group of North Americans and Europeans to run factories outside Japan, the FT said. The changes were part of the carmaker’s response to its recent quality problems, which have damaged its reputation and forced it to recall more than 8.5m vehicles worldwide.

Freight costs tumble to near nine-month low

The cost of shipping dry bulk commodities such as iron ore, coal and grains on Thursday extended its losses to a near nine-month low as the freight market felt the effects of lower buying by Chinese steelmakers, the FT said. The Baltic Dry index of freight costs dropped to 2,502 points on Thursday, its lowest since early October. The index has now fallen 40 per cent since its peak a month ago.

China currency dispute has not gone away

When it comes to the vexed question of China’s currency, everything has changed and nothing has changed, according to the FT‘s Beijing bureau chief. The weekend announcement that China was ending its two-year peg to the dollar was in large part designed to take the renminbi off the table at the G20 and focus attention on what the country sees as the principal problem in the global economy – mismanagement in the US. Nor has the new policy completely ruled out the prospects of a political showdown.

Oil majors rethink partnerships with BP

The world’s biggest oil companies are reviewing their current partnerships with BP and rethinking their willingness to agree new projects in which BP designs the oil well and runs the operations, the FT reports. ExxonMobil, Chevron, Total  and Royal Dutch Shell have all willingly partnered BP over the years but have sought to distance themselves following revelations about BP’s well design and operational decisions at the Macondo well.

Sovereign debt fears hit confidence

A tepid outlook for the global economy and a renewed focus on European sovereign debt provided little momentum for risk-takers as investors marked time ahead of the G20 meeting in Toronto this weekend, the FT says. With financial reform entering furious last-minute negotiations, plus a growing sense that a double-dip recession is a stronger possibility – Goldman Sachs analysts said the US Federal Reserve might not raise rates until 2012 – bulls are on the defensive.

Banks win battle to done down Basel III

Plans by global regulators to compel banks to set aside billions of dollars in extra capital to cope with future crises are to be pared back after intense lobbying by the industry, the FT says. After wrangling over the details of global proposals for regulatory overhaul published six months ago, a consensus on the Basel committee is suggesting that its blueprint be thinned down. Banks say the modified framework would prevent an excessive rise in funding costs and in borrowing charges for customers.

Hugh Hendry: Soros has embraced socialism

Hugh Hendry thinks George Soros is a swell guy. The kind of guy hedge fund managers want to be. But Hendry also thinks Soros has embraced socialism, and that it’s time for the Eclectica fund manager to take his place. Oh, and London’s taxes are too high. See FT Alphaville for the video.  Read more

US CRE prices rise, but fundamentals weak

US commercial real estate prices increased 1.7 per cent in April, according to Moody’s’ proprietary benchmark. That represented the first monthly increase since January — good news, right?

Not quite. As analysts at BNP Paribas noted on Thursday, on a longer-term basis the numbers were less positive: down 16.4 per cent versus April 2009, and 41 per cent below the peak in October 2007. Read more

Party like it’s 1999 (updated)

Here they are: the details of what will probably be the most hyped and overvalued IPO since the mad days of dot.comedy bubble.

Presenting Ocado, an online shop that delivers Waitrose groceries from a state-of-the-art warehouse in Hertfordshire. Read more

Notes from the deflationary quicksand

Deflationary quicksand… We will all end up Japanese… Collapsing houses of cards… Yep, it’s another missive from SocGen’s perma-bear Albert Edwards, who on Thursday developed some recent riffs on deflation a tad further. But as FT Alphaville notes, Evo Securities’ Ian Harwood, using the same data, comes to a very different conclusion.  Read more

Canadian ABCP saga lives on

Here’s something you don’t see every day; a possible ratings upgrade for Asset-Backed Commercial Paper (ABCP), the short-term borrowings upon which SIVs, conduits and the like, once thrived.

And not just any ABCP either, but the Canadian ABCP which reached prominence in 2008 via the so-called Montreal Accord — said to be the biggest structured credit restructuring (ahem) in history. Read more

Fun with Greece CDS ahead of index reshuffles

Greek five-year CDS were trading at 972 basis points on Thursday. That’s a new record high according to CMA Datavision.

Here’s the accompanying chart: Read more

Markets Live transcript 24 Jun 2010

Live markets commentary from FT.com 

A €2,000bn EuroTARP needed

Time to wrap a cold towel round the head.

Willem Buiter has been looking at the €860bn war chest the EU and the IMF have amassed to tackle the sovereign debt crisis in the eurozone and the unresolved question of what the cash might actually be used for. Read more

Lots of cash, little deals for private equity

Private equity funds are sitting on a $500bn pile of cash, but are faced with too few deals worth splashing out on, the NYT says. Although buyout firms have ever more backing from public pension funds and endowments, they are asking clients for more time to find the best deals. Money invested in funds in 2006 and 2007 is now coming towards a deadline for investing in companies. Private equity firms are at least looking at small US banks for opportunities, Reuters reports – starting small can help build up a strong track record for later.

GM close to launching IPO

General Motors could launch plans for an initial public offering as soon as next week, a person familiar with the preparations has told Reuters. The IPO could raise $20bn, which would make it one of the largest-ever offerings in the United States. GM is also in negotiations with JP Morgan and Wells Fargo to create deals for more accessible auto loans for consumers, two sources added.

Apple files fresh patent suits as iPad excels

Apple has filed court documents complaining that the Taiwanese smartphone company HTC has violated four patents relating to phone software, the WSJ reports. Apple sued HTC, which makes phones that use Google’s Android operating system, in March over ten patents, followed by a May counter-suit by HTC over five patents. Apple meanwhile faces industry accusations that it has locked other companies’ technology out of its iPad and iPhone products, especially now that it has become the most valuable company in its sector, according to the NYT. Apple has sold 3 million iPads in three months on the eve of the release of the iPhone 4, Reuters reports.

Google wins YouTube copyright ruling

A New York federal judge has ruled that Youtube did not infringe Viacom’s copyrights when content from its television channels was posted on to the site, Bloomberg reports. Judge Louis Stanton said that YouTube, owned by Google, was protected by a safe-harbour provision in the Digital Millennium Copyright Act. Viacom, which has sought over $1bn in damages said that it will appeal the ruling. The decision is a setback in the bigger struggle media companies face in how content is distributed without compensation on the Internet, the WSJ says.

BP reinstalls spill cap as legal risks rise

BP has restarted collecting oil from the Gulf spill, turning around a temporary setback in the operation when a cap placed on the well was damaged, Reuters reports. However, the legal and regulatory hurdles facing the energy giant are becoming more permanent, with New York State’s pension fund the latest to launch a shareholder action against BP, alleging the company misled over its ability to deal with oil leaks, according to the FT. BP had joined other oil companies in using faulty US government projections on potential Gulf spills to prepare for their response, the WSJ reports.

G’day, Gillard — not

Australia’s proposed mining super-tax — unlike the prime minister who launched it — appears to be sticking round. Kevin Rudd’s successor Julia Gillard, is cut from the same Australian Labor Party cloth, which doesn’t bode well for BHP Billiton, Xstrata and Rio Tinto, who all have heavy (and heavily taxable) Australian mining exposure, FT Alphaville says. Read more

Join the euro? The Danes say nej tak…

A datapoint on the perception of the eurozone — courtesy of Danish bank, Danske:

Statistics Denmark regularly surveys the attitude of the Danes to the euro on behalf of Danske Bank. The June poll shows that the No side has caught up with – and overtaken – the Yes camp, so that it now has a comfortable lead of 11.3pps. This is the largest No lead since we launched our EMU poll in 1999. Looking solely at those who are certain how they would vote, the No side has in fact an even more solid lead. Only 32.1% of Danes polled expect to vote Yes, while 47.8% would be certain No voters – a difference of 15.7 percentage points. Read more

BIStoric

The Bank for International Settlements — the central banks’ bank — has done something great, FT Alphaville says; its put annual reports going back to 1931 (until 1996) online. For one thing, it’s an intriguing glimpse into central bankers’ reactions to the Great Depression of the 1930s — and the difficulties of recovery. Read more

Further reading

Elsewhere on Thursday,

- Sticking it to the strategic defaulters.
 Read more

Pink picks

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

Wolfgang Schäuble: Maligned Germany is right to cut spending
To the question of what caused the recent turmoil in the eurozone, there is one simple answer: excessive budget deficits in many European countries, writes the German finance minister. It comes therefore as a surprise, to me at least, that one of the most passionately debated economic issues of the day should be whether Germany is acting prematurely in reining in its deficit and thereby choking the rebound at home and in our neighbours’ markets. My response is an emphatic no. Read more

Snap news

Breaking pre-market news on Thursday,

- Resolution agrees to buy Axa’s UK life business for up to £2.25bn; to launch £2bn rights issue – statementRead more

Overnight markets: Mixed bag

Asian markets
Nikkei 225 up +16.67 (+0.17%) at 9,940
Topix up +1.05 (+0.12%) at 881.89
Hang Seng down -17.96 (-0.09%) at 20,839

US markets
S&P 500 down -3.27 (-0.30%) at 1,092
DJIA up +4.92 (+0.05%) at 10,298
Nasdaq down -7.57 (-0.33%) at 2,254 Read more