Posts from Tuesday Jun 29 2010

Tesla shares in strong demand after IPO

Shares in Tesla Motors, which produces a $109,000 electric-powered sports car, rose on Tuesday after strong demand helped it to raise more in an initial public offering than it had expected, the FT reports. Trading in Tesla’s shares on New York’s Nasdaq opened at $19 before noon on Tuesday before trading slightly lower at $18 a share.

US lawmakers to drop $19bn bank fee

US congressional negotiators are ready to drop a $19bn bank fee in order to vote through the landmark Wall Street reform bill, the FT reports. Instead, uncommitted funds from the $700bn troubled asset relief programme will be used to pay the cost of the legislation, “ending Tarp early”, according to officials. The legislation had been threatened after Scott Brown, the new Republican senator from Massachussetts, said he could not vote in favour of a bill that included the tax.  With the death this week of Robert Byrd, the Democratic senator from West Virginia, the Democrats need Mr Brown’s support to get the legislation through Congress in a final vote expected as soon as Thursday.

Google faces loss of China licence

Google said it had started a final attempt to rescue its presence in China after the Chinese government threatened to close its Chinese website down at the end of this month, the FT reports. In a blog post published late Tuesday, David Drummond, the company’s chief legal officer, said the Chinese government had rejected Google’s practice of automatically redirecting users in mainland China to its Hong Kong site.

Qatar in talks over Greek bank stake

The Qatar Investment Authority is in talks about taking a strategic stake in National Bank of Greece, the eurozone country’s biggest lender, the FT reports. The Gulf state’s sovereign wealth fund may purchase a stake of about 5-7 per cent of NBG, worth about €250m, in line with an investment policy of buying stakes below 10 per cent in financial institutions.

Well-oiled trader triggered big crude price rise

A former oil broker was fined and banned from the industry for five years after the UK regulator said he made unauthorised trades from home and triggered a spike in oil prices after a weekend of heavy drinking, the FT reports. The Financial Services Authority fined Steven Perkins, a former oil futures broker at the London-based PVM brokerage, £72,000 for “market abuse” after he took a “very significant” bet of more than $500m in Brent crude oil.

Japanese groups seek local leaders abroad

A number of Japanese manufacturers are planning to promote more foreign executives to top positions at their overseas operations, opening the way for potentially significant cultural changes as the focus of their businesses shifts abroad, the FT reports. Moves to localise management by companies as diverse as Toyota, construction-equipment maker Komatsu and Itochu, the trading house, follow a series of problems at some Japanese companies’ foreign operations that some have blamed on a shortage of managers with deep local ties

China and Taiwan sign landmark deal

China and Taiwan on Tuesday signed a landmark trade deal that marks the most dramatic improvement in cross-Strait relations in more than half a century, the FT reports. The Economic Co-operation Framework Agreement is the centrepiece of Taiwanese president Ma Ying-jeou’s effort to mend relations with China, which suffered under eight years of Chen Shui-bian, the former pro-independence Taiwanese president.

Chinese buyer to battle Starbucks

Competition for China’s cappuccino drinkers is to intensify after China Resources Enterprise, a Hong Kong conglomerate controlled by Beijing, pledged to overtake Starbucks and turn a local chain in to the country’s biggest coffee house, the FT reports. CRE, China’s biggest supermarket chain operator, said on Tuesday it would buy 80 per cent of Hong Kong-based Pacific Coffee for HK$326.6m ($42m) and expand on the mainland as it seeks to tap in to China’s growing coffee-drinking culture.

Stocks sink amid rush to safe havens

Fresh worries about the heath of the eurozone financial system compounded with concerns over the prospects for global growth, hitting equity markets across the world and sending investors into perceived safe havens, such as US treasuries. See the FT’s rolling global overview here, which notes the the yield on the 2-year US Treasury note reached a record low on Tuesday. FT Alphaville has some (more) random reasons to be bearish.

Sell!

A poor day for US financial markets, all round:

 Read more

SEC goes after social media-savvy penny stock touts

Is this the first time the SEC has cracked down on Twitter? (Coming soon: fines for RegFD violations…)

The regulator’s Miami office, working in tandem with Quebec’s Autorité des marchés financiers, has “obtained an emergency asset freeze against a Canadian couple who fraudulently touted penny stocks through their website, Facebook and Twitter”. Read more

Stressful European bank spoilers

Not more European bank stress-test leaks. Although at least this particular indiscretion, centred on German banks, hints at how the actual tests will be received.

As Bloomberg reported on Tuesday: Read more

Random Reasons to be Bearish

Take your pick in explaining the generalised bloodbath across major equity markets on Tuesday:

Then consider this: Read more

Depressant or stimulant?

The inflation/deflation debate has recently morphed into a new form: The austerity/stimulus deadlock.

Some (Paul Krugman, ahem) believe rushing into austerity measures at this point could be a dangerous move. In fact, Krugman, for one, believes austerity measures risk sparking the very depression last year’s stimulus response tried hard to avoid. Read more

Quis custodiet ipsos custodes? Or, the FSA on auditors

Here’s a discussion paper to strike fear into the hearts of prompt debate among audit firms — another analysis of their failings in the banking crisis, carried out by the UK’s financial regulator, the FSA.

It comes at a particularly bad time for auditors. Read more

That ‘Monster QE, markets-on-a-cliff-edge,’ RBS note

What more can we say about RBS’s ‘Monster QE’ note that hasn’t already been said by Ambrose Evans-Pritchard, of the Telegraph? Well, for a (facetious) start we can note some media-bank symbiosis:

* Monster QME coming. With fiscal policy off the agenda, we have always expected more QME (quantitative monetary easing). And this time will be different. We have always argued that buying of bonds is less efficient than guaranteeing yield levels, and that yields are the key, not raising money supply, given demand for credit is dead (so all QME did was raise bank reserves and show money velocity collapse). There has been a subtle shift from central banks toward our view, most evident from the UK MPC, whose £200bn programme started by focusing almost purely on underlying M4, but ended differently with MPC speeches about how successful it was in keeping Gilt yields low. Read more

ECB fixed-term deposit FAIL

Oof.

The European Central Bank’s latest attempt to sterilise its government bond purchases has landed with a resounding thud. Results from the ECB’s Tuesday one-week fixed-term deposit (FTD) auction, in which it planned to drain the €55bn of extra liquidity created by its €55bn of bond-buying, are in. Read more

Agua caliente at the ECB

A certain FT story has caused a bit of a stir in European markets on Tuesday.

It regards the fact that Spanish banks are lobbying the European Central Bank “to act to ease the systemic fallout from the expiry of a €442bn ($542bn) funding programme this week” and the fact they have accused the central bank of “absurd” behaviour in not renewing the scheme. Because apparently having banks rely solely on ECB liquidity isn’t absurd in its own right. Read more

Markets Live transcript 29 Jun 2010

Live markets commentary from FT.com 

Traders bet on bidding war for Chloride

US engineer Emerson has increased its offer for Chloride, the UK power supply specialist, to 375p per share in cash, trumping an agreed, 325p per share bid from ABB, the Swiss-Swedish electrical engineering group, reports the FT. Emerson originally offered 275p per share for Chloride in late April, prompting ABB’s counterbid in early June. ABB said it had noted Emerson’s announcement, and would consider its options before issuing a reply.

NY Fed says banks’ BP exposure is not a threat

After poring over documents and asking banks about their exposure to BP over the past two weeks, the Federal Reserve Bank of New York has decided there is no need to ask firms to alter their credit relationships with the oil major, Reuters reports. The NY Fed also concluded further troubles at the company, including a potential bankruptcy, would not pose a systemic risk to the US financial system. The Fed examination underscores market uncertainty about how the spill’s staggering clean-up bill might affect Wall Street.

Bout of nerves sparks rush to havens

Investors flooded into perceived havens as worries about the eurozone’s financial system and global growth prospects continued to nag, the FT reports. The yield on the US 10-year Treasury dropped below 3 per cent, while the yield on the 2-year note breached 0.6 per cent, a record low. The yen was in demand, commodities and the euro were stumbling and the FTSE All-World equity index was off 0.9 per cent. Corporate credit spreads were wider, signalling heightened concern.

Google faces losing its China licence

Google on Tuesday said that it was making a final attempt to retain a presence in mainland China after the Beijing government threatened to close its Chinese operation, the FT reports. The US internet giant said that the Chinese government wanted to put a stop to its practice of automatically redirecting users in mainland China to its Hong Kong site – an arrangement which has allowed Google to avoid self-censoring its search engine in order to meet Beijing’s strict internet regulations.

Fantasy oil major M&A

As fantasy corporate finance goes, an Exxon bid for BP is not as far fetched as it sounds, reports FT Alphaville — and certainly more realistic than an approach from either PetroChina (political barriers) or Gazprom (political barriers, high debts, low stock market rating). The anti-trust issues would not be insurmountable. Any Exxon offer could separate BP’s downstream operations (refineries, pipelines, terminals and retail sites) and they could be left in the hands of BP shareholders. Read more

Numbers for LTRO-watchers

Just two days to go until the July 1 expiry of the European Central Bank’s one-year LTRO.

The Long-Term Refinancing Operation added €442bn in liquidity back in June 2009. And now — much to some banks’ chagrin — it’s due to come to an end with no matching-maturity replacement. Instead, the ECB is offering unlimited three-month LTROs to coincide with the end of the 12-month one. Read more

Stampeding to the lifeboats

Early morning chaos on European bourses on Tuesday:

 Read more

LTROops

The amount of money rolled from the European Central Bank’s 12-month Long-Term Refinancing Operation (LTRO) into its three-month one — an indication of banks’ demand for ECB liquidity — might not be too high, reports. And that’s because . . .the original tender was bid partly by stronger banks for carry trades and in part from weaker banks for funding needs. And this time round, demand for carry trade is much less likely. Read more

Those low interest rate U-Zirpers at the BIS

In the battle between Austerians and Stimulants, the Bank for International Settlements (BIS) knows where it stands. In its latest annual report the central banks’ bank takes aim at everything from delayed fiscal adjustments to the extended period of low interest rates in places like the UK and US.

The whole thing reads like a confirmation of every risk you might have suspected, to date, could accompany extended loose and unconventional monetary policy. It’s BIS’s job to identify risks, of course, but seldom are they so . . . forthright, or wide-ranging. Rage against the Zirp, dear BIS. Read more

Further reading

Elsewhere on Tuesday,

- The millionaire not next door. Read more

Pink picks

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

Nouriel Roubini: Greece’s best option is an orderly default
It is time to recognise that Greece is not just suffering from a liquidity crisis; it is facing an insolvency crisis too, writes the economist. The €110bn bail-out agreed by the European Union and the International Monetary Fund in May only delays the inevitable default and risks making it disorderly when it comes. Instead, an orderly restructuring of Greece’s public debt is needed now. Read more