Posts from Monday Jun 28 2010

BREAKING: Russian-Irish spy ring eyed ‘global gold market’ in…Jersey?

The stuff of cheap thrillers, this one:

That’s from this complaint – part of a fast-developing spy story, allegedly involving various Russians, some of whom are said to have been operating under Irish names. Read more

Boeing shares fall 44% before trades cancelled

Shares in aircraft maker and Dow constituent Boeing fell 44 per cent on Monday before NYSE Euronext and Nasdaq OMX Group cancelled trades, Bloomberg reported. Apparently errant orders sent the quote to a low of $38.77 during early trade – compared with a quote of 68.77 on Friday.

UK regulator sees second chief quit

Britain’s Financial Services Authority has lost the second of its two managing directors as it prepares to split itself in two to comply with the new government’s plan to shake up financial regulation. The FT reports that Jon Pain, head of supervision, plans to announce on Tuesday that he will leave early next year when the FSA divides up his division into two teams, one focusing on prudential regulation and the other concentrating on supervising the way banks and brokers treat customers and conduct business.

Siemens plans to set up bank

Siemens plans to set up its own bank in a move that underscores how large industrial groups are seeking to reduce their reliance on bank financing after the credit crisis, the FT reports. The German engineering group said that it would use a banking licence primarily to expand its sales finance business but also to be able to deposit some of its current €9bn ($11bn) cash pile at the Bundesbank and to broaden its sources of financing.

Hit to Agricultural Bank IPO

Agricultural Bank of China, which hopes to raise as much as $23bn in the world’s biggest initial public offering, has been forced by the weak mainland stock market to offer its shares at a lower price range in Shanghai than in Hong Kong. Agricultural Bank stood to raise as much as $13bn in Hong Kong and another $10bn in Shanghai, if the shares sold at the top of the price range and underwriters on the deal triggered options to increase the offering’s size by 15 per cent. But analysts doubt there is demand to support a top-of-the-range valuation, the FT reports.

Japan’s first iron ore swap agreed

The Japanese steel industry, the world’s largest after China, has started to lock in iron ore prices through the use of derivatives in the clearest sign of the development of a financial market around the commodity used in steelmaking, the FT reports. Mitsui, the Tokyo-based trading house or sogo shosha, said it had signed the country’s first ore swap with Credit Suisse.

DP World shelves London listing plans

DP World, the world’s fourth-largest container terminal operator, has postponed plans for a dual listing in London until 2011, blaming technical problems arising from the merger of the Dubai and Nasdaq stock exchanges, the FT reports.

Bankers pore over Wall St reform details

Some of the largest commodity traders on Wall Street could face changes under the Dodd-Frank US financial reform bill advanced by lawmakers last week, with some banks being forced to spin off the units that handle assets such as oil, gas, coal and industrial metals, the FT reports. The bill would also require the Commodity Futures Trading Commission to limit the size of traders’ positions in commodity derivatives, potentially blocking large investors from using basic materials as an inflation hedge or a bet on global growth.

See FT Alphaville for some snap commentary and a look at how the legislation might affect hedge funds.

Renaissance Capital to open HK office

Renaissance Capital, the Moscow-based investment bank, is opening an office in Hong Kong in expectation that a wave of Russian companies will choose to sell shares in the city. The move comes five months after Rusal, the aluminium group controlled by Oleg Deripaska, became the first Russian company to list on the Hong Kong stock exchange, the FT reports.

Lazard banker trio to win Le Monde bid

A trio of businessmen have won the race to take over Le Monde, France’s most prestigious daily newspaper, after a rival consortium including France Telecom and Prisa of Spain said on Monday it would withdraw its offer, the FT reports. The winning trio of Matthieu Pigasse, a Lazard banker, Pierre Bergé, the former business partner of Yves Saint Laurent, and Xavier Niel, the telecoms billionaire have agreed to invest around €100m in return for control of the cash-strapped daily.

Banks in Spain hit by end of ECB offer

Spanish banks have been lobbying the ECB to act to ease the systemic fallout from the expiry of a €442bn funding programme this week, accusing the central bank of “absurd” behaviour in not renewing the scheme, the FT reports. On Thursday, the clock runs out on the ECB financing programme – the largest amount ever lent in a single liquidity operation by the central bank – under the terms of the one-year special liquidity facility launched last summer. Banks across the eurozone, but in Spain in particular, have found it hard in recent weeks to secure liquid funding in the commercial markets, with inter-bank funding virtually non-existent.

What’s with the T-bills, Greece?

Greece may be a month into its bailout — but its government revealed on Monday that it will still go to the market to honour some obligations. As Reuters reports:

“Greece will go to the markets mid-July, issuing T-bills of three, six and twelve months,” Deputy Finance Minister Philippos Sachinidis told Reuters. Greek officials have previously said the country may go ahead with a T-bill auction in July but Sachinidis’ comments confirmed those plans.

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Quick comment on the Volcker rule, banks and private equity

The final language of the long-awaited Dodd-Frank financial reform bill runs to a couple thousand pages, and we have short attention spans here on FT Alphaville. In other words, we’re grateful to those providing quick-fire summaries of relevant regulation.

Step forward, Dan Primack of the excellent peHUB and peHUB Wire, on the implications of the final Volcker rule language for banks and private equity. As Primack wrote in Monday’s issue of the WireRead more

Dollar signs and European bank stress

Whatever happened to the dollar funding crisis?

If you’ll remember — central banks restarted dollar swap lines in May, after fears of banks’ exposure to bad sovereign debt dried up liquidity in the market. There wasn’t exactly a stampede to use the facilities when they opened, though. Read more

Borrowing BP

Here’s an interesting fact from Data Explorers, the securities lending data company, regarding short interest in BP-issued securities.

While the amount of BP equity that’s out on loan has contracted to 1.6 per cent of the shares in issue from just below 2 per cent for the UK listing in mid June — having risen to that level from almost nothing — there has been a small surge in the borrowing of BP corporate bonds. Read more

Dodd-Frank Act Title XVI (f) (2): Hedge Fund Tax

Dear hedge fund manager,

Please rate, on a scale of  1-10, your company’s importance as a source of credit for low-income, minority, or underserved communities and the impact the failure of such company would have on the availability of credit in such communities;

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Guest post: El-Erian on a disappointing G20 compromise

Pimco’s chief executive Mohamed El-Erian considers whether the G20 Summit in Toronto created a constructive compromise on financial stability, or generated a losing plan to turn around a slowing global economy.

________ Read more

UK banks’ funding fun has just begun

Nomura’s analysts had some sort-of good news for UK banks on Monday:

UK banks are benefiting from a combination of declining impairments, rising margins and strengthened capital bases. The domestic banks are trading on valuations at or below book value. In the past, UK banking has proved a profitable industry and could be expected to be so again, as long as economic recovery continues, even if future returns are well below those achieved in the past cycle…

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Dances with defaults, adventures in news

Here’s a timely discussion paper from the Federal Reserve.

In it, the authors attempt to build a quantitative model to take into account sovereign default risk, economic fundamentals and — most interestingly — news on future fundamentals. Think of an EU minister saying Spain and Portugal face a loss of productivity, and the ensuing jump in Spanish and Portuguese bond yields. Clearly there’s a link, and now academics are trying to quantify it. Read more

Markets Live transcript 28 Jun 2010

Live markets commentary from 

BP’s trading division loses its lustre

The New York Times reports how the prospects for BP’s trading unit are looking uncertain following the Deepwater Horizon disaster, especially as the resources the division once took for granted become threatened. There are already signs, the NYT says, that trading partners are becoming wary of BP’s financial outlook with one market participant, Bank of America Merrill Lynch already halting long-term contracts with BP.  The paper says the secretive unit earns the company between $2bn and $3bn annually and has long inspired fear and envy among rival traders.

DP World shelves London listing plans

DP World, the world’s fourth-largest container terminal operator, has postponed plans for a dual listing in London until 2011, blaming technical problems arising from the merger of the Dubai and Nasdaq stock exchanges. “The board has decided to postpone the listing process until an acceptable system that supports the dual listing is available”, the group said in a statement. A spokeswoman said technical difficulties had arisen from a planned combined Nasdaq-Dubai stock exchange trading platform, which it said had been postponed three times.

StanChart given boost by consumer business

Improvements in economic conditions and asset quality during the first six months of 2010 have buoyed the consumer and wholesale banking businesses of Standard Chartered, the bank said on Monday. However, the group said that income from its own-account business had been slightly weaker in the period, reports the FT, with some clients growing nervous in late May over European debt worries. Shares in Standard Chartered fell 0.6 per cent or 10½p to 1732p

Guaranteed bonuses return to Wall Street

Leverage is back on Wall Street, according to Bloomberg, and this time it’s the bankers who have it. Figures from the New York State Department of Labor showed that 6,800 financial-industry positions were added from the end of February through May, the largest three-month increase since 2008.  And while most new hires aren’t receiving guarantees, Bloomberg reports banks including Nomura and UBS have offered top prospects one-year guarantees worth between $2m and $4 m, according to people briefed on the matter.

Bloggers can’t do economics. Discuss.

A new-ish letter (H/T Greg Mankiw) from a Fed economist opens with the below:

In this essay, I argue that neither non-economist bloggers, nor economists who portray economics —especially macroeconomic policy— as a simple enterprise with clear conclusions, are likely to contibute [sic] any insight to discussion of economics and, as a result, should be ignored by an open-minded lay public.

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Markets becalmed after G20 meeting

Like an England centre-half pairing, markets appeared unsure which direction to take on Monday, with investors relieved by a benign G20 meeting but still harbouring lingering concerns about the strength of the US and European economic recoveries. The FT reported European bourses were struggling to snap a four-day losing streak, while Asian stock markets and commodities started the week decidedly mixed. The FTSE All-World index was up 0.2 per cent and the currency complex was struggling to establish a trend. US equity futures pointed to a 0.3 per cent advance at the open.

Attention knife-catchers…

. . . because BP could try to protect shareholder value by de-merging its US operations.

That’s the view of Unicredit, which reckons a split is something that the board of BP has to consider, given that its business model (think deepwater exploration, the Gulf of Mexico, technical excellence) has been shredded by the Macondo oil spill: Read more

So tell us Mr Chinese official, do you have a debt problem?

China-watchers will be familiar with LGIVs (or, LGFVs) — they are the financial vehicles through which China’s local governments borrow from banks to fund their stimulus/infrastructure projects. And they’ve been a source of China concern for a while now, FT Alphaville reports — the worry being that Chinese banks will be left on the hook for these off-balance sheet vehicles if local governments can’t pay up. Read more

The pension fund that’s not invested in BP

UK pension funds can breathe a small sigh of relief on Monday. BP stock has recouped much of Friday’s loss, which saw it trading at 1996 levels on the day.

At pixel time, shares in the beleaguered oil giant were 4.32 per cent higher versus a relatively flat FTSE 100. Read more

Quantifying the ECB overdraft

Covered bonds and ABS not sold off into the wider market are probably being hoarded as possible collateral for central bank funding, FT Alphaville reports. As BarCap put it, the ABS and covered bonds could tell us the size of the ‘overdraft’ that banks are running at either the BoE or ECB. Although they could also just be telling us how much banks are putting aside as ‘just in case’ collateral. Either way though, it’s interesting. Read more