Posts from Thursday Jul 1 2010

Japanese manufacturers turn optimistic

Large Japanese manufacturers are optimistic about business conditions for the first time in two years, according to the Bank of Japan’s much-watched Tankan survey.  The survey, which has a response rate of more than 98 per cent from more than 10,000 companies is one of the most closely watched indicators by Japan’s policymakers, suggested that businesses were becoming increasingly confident, the FT said. FT Alphaville also commented on the ‘TanKANnery‘.

US data suggests slowdown

Fears that the US recovery is losing momentum were reinforced on Thursday by disappointing data on the labour market and the manufacturing and housing sectors, the FT reported.  Jobless claims rose unexpectedly, while growth in the US manufacturing sector, which has been one of the bright spots of the US recovery, appears to be slowing. In housing, pending home sales tumbled by 30% in May, much worse than the expected 12.5% drop.

China joins global media with network launch

China unveiled its most ambitious effort for greater international influence on Thursday with the launch of a global 24-hour English-language TV news network run by Xinhua. The state news agency said CNC World could be received in Asia over satellite this week and available around the world from next month. In early October, the company aims to have deals to get CNC World on cable channels in Western countries, the FT said.

Greenback suffers as buyers back yen

The yen surged to its highest level against the dollar so far this year as worries about the health of the global economy boosted haven demand for the Japanese currency, the FT reported. Weaker-than-expected Chinese activity data on Thursday combined with continued weakness in global equities to heighten risk aversion and support the yen.The yen rose to a high of Y86.97 against the dollar, its strongest level since December.

Chalco drops Australia bauxite plan

Chalco, the second-largest aluminium producer, has pulled out of a A$3bn deal to develop a bauxite refinery in Australia, blaming a drop in aluminium prices and difficult global conditions, the FT reported. This would have been the first Australian investment for the Hong Kong-listed subsidiary of Chinese state-owned Aluminium Corporation of China and comes after its parent’s offer to inject $19.5bn into Rio Tinto last year was turned down.

Toyota plans Lexus recall

Toyota on Thursday said it would recall 270,000 Lexus luxury cars after it discovered that a key component in their engines was susceptible to cracking and could cause the vehicles to stall, the FT reported. Thursday’s revelation of the defect in some of the Japanese company’s most expensive models was a further blow to its already battered reputation for quality.

AIG, Goldman trade blame

Goldman Sachs executives on Wednesday rejected allegations that the bank was overly aggressive in seeking collateral from AIG as it hurtled toward its $180bn government bail-out, noting the troubled  insurer had refused to share valuations of the debt securities at the heart of the companies’ dispute, the FT reported. In testimony before the Financial Crisis Inquiry Commission, Goldman and AIG executives blamed each other for exacerbating AIG’s woes.

Asia output fuels China fears

Nervous investors in China had fresh cause to worry on Thursday as a slew of reports on manufacturing suggested that the pace of growth in factory activity was slowing across much of Asia and might even have turned negative in China, the FT said. Data showed China’s manufacturing output contracted slightly on one unofficial but closely watched measure while the country’s National Bureau of Statistics described the official numbers as grim.

GE chief accuses China of ‘hostility’

Jeffrey Immelt, GE’s chief executive, launched a rare broadside against the Chinese government, which he accused of being increasingly hostile to foreign multinationals, the FT reported. “I really worry about China,” Mr Immelt told an audience of top Italian executives in Rome, accusing the Chinese government of becoming increasingly protectionist. “I am not sure that in the end they want any of us to win, or any of us to be successful.” GE later moved to distance itself from his remarks.

Trends in FHA-insured loan performance still not encouraging

The FHA is a little bit sensitive about any suggestions it might not be A-OK, but the steady trickle of less-than-reassuring news about the federal mortgage insurer difficult to ignore.

Consider the following assertions from the Cleveland Fed, contained in a report on mortgage lending patternsRead more

FT Alphaville NY is hiring

APPLICATIONS MUST BE RECEIVED BY MONDAY 12th JULY

We are looking for natural writers, with an interest in and aptitude for all things financial – and, crucially, with the ability to be pleasant and have a sense of humour at unspeakably early hours of the morning. Read more

KNOC explores bid for Dana

KNOC, South Korea’s national oil company, is exploring a $1.5bn offer for the FTSE 250 oil explorer Dana Petroleum as part of a foreign acquisition spree planned over the next two years, FT Alphaville reported, citing people familiar with the situation. KNOC has made preliminary contact with Dana’s management about arranging an agreed deal. Korean-based sources said KNOC was willing to pay a “significant premium” for Dana shares Read more

Every little helps – revisited

There is nothing untoward with our accounting as Citigroup’s report acknowledges. We report in line with statutory guidelines and the accounts are externally audited. The issues discussed in the report have been gone over many times before and do not detract from our strong performance over the last year.

That was the Tesco PR’s departments rather wishy-washy response to Wednesday’s filleting of its accounts by Citigroup. Read more

M-m-m-meltdown

Gloom and doom on Thursday for stock markets after poor US jobs and PMI data:

 Read more

Will the EU limit hedge fund pay?

According to the BBC, new EU rules to regulate bank bonuses – announced on Thursday - will hit Mayfair hard: the onerous restrictions on pay, says Robert Peston, the BBC’s business editor, will apply to hedge funds too:

I have learned that the bonuses paid to senior executives at hedge funds and fund managers are to be subject to strict conditions, under new EU-wide rules that have been agreed by EU members states and legislators. Read more

Shell’s Vulcan mind meld returns

The share price of Royal Dutch Shell’s suddenly saw a ghost on Thursday afternoon.

 Read more

Whisky Galore

Here’s an interesting way to make a good a pension fund deficit – fill it with 2.5 million barrels of maturing Scotch whisky.

This novel idea has been dreamt up by Diageo and forms a key part of a 10-year funding plan for the drinks group’s UK Pension Scheme (which at the time of the last the triennial actuarial had a deficit of £862 million). Read more

Spanish risk: let’s get regional, redux

An interesting coda to Moody’s warning of a possible downgrade of Spain’s sovereign debt on Wednesday.

On Thursday the rating agency went after Spain’s regions — five of them. Read more

From junk bonds to junk mortgage bonds

If investors really ♥ junk for most of this year, they really really might ♥ mortgages.

It’s a point you might not have realised just by looking at non-agency residential mortgage-backed securities (RMBS) and high-yield bond indices over the past 13 months or so. Non-agency mortgages are those that aren’t covered by the US GSEs, and so are without a government-backed guarantee. Read more

Maiden Lane’s $42m of junk

Bloomberg has some numbers to go along with FT Alphaville’s April analysis of the Federal Reserve’s Maiden Lane portfolio, the special-purpose vehicle it created to help JP Morgan’s takeover of troubled Bear Stearns in 2008.

As we pointed out, Fed chairman Ben Bernanke’s April 2 2008 statement that the assets taken from Bear Stearns to collateralise the Fed’s $29bn loan were “entirely investment grade” wasn’t strictly true. The Fed accepted at least 10 bonds that were rated sub-investment grade before that statement. Read more

That $19bn bank fee? Focus on what it paid for.

Republicans moaned unconvincingly for months that the financial reform bill perpetuates endless taxpayer bail-outs. It’s supposed to do the exact opposite, of course, giving regulators the power to step into a failing institution like AIG or Lehman, stabilise it to preserve value and prevent any system-wide shocks, then liquidate it, using the assets to pay all costs and to pay off creditors. If they need more cash they can use Treasury funds but must claw it back from the industry over time.

But perhaps the Republicans should have moaned more? Read more

TanKANnery

Some rare upbeat – if somewhat bemusing – news out of Japan on Thursday that should give the ever-hopeful new government of Naoto Kan a boost ahead of the country’s July 11 upper house election.

Amid continuing signs of economic torpor, the Bank of Japan’s latest quarterly Tankan survey of business sentiment far exceeded economists’ predictions, showing that the country’s top manufacturers are optimistic — seemingly undeterred by the strong yen and a recent string of fairly dismal figures including falling household spending, rising unemployment and declining industrial output and wagesRead more

Post-ECB stress test (dis)order

Europe’s banks have (sort of) cleared the hurdle over ECB liquidity. Now can they survive July’s scheduled stress tests?

Perhaps it depends on the R-wordRead more

Markets Live transcript 1 Jul 2010

Live markets commentary from FT.com 

Another rollover to worry about?

How worried should we be about the rollover in lead economic indicators?

As Lex noted earlier this week, Economic Cycle Research Institute has scolded pundits, such as SocGen’s Albert Edwards, for misinterpreting its widely followed indices. According to the ECRI all they indicate are a pronounced slowdown, typical after the initial recovery from a recession. Read more

Singing’ a liquid tune – banks tap €111.2bn from ECB six-day op

Results of the European Central Bank’s six-day fine-tuning operation are out.

And they are — €111.2bn allocated to 78 banks. Read more

Quarter to forget for US equities

Volatility reigned in 2010′s second quarter, the WSJ reports, with the Dow Jones Industrial Average posting its first quarterly drop since the first three months of 2009. The S&P 500′s performance was its worst since the final three months of 2008, sliding by 11.9 per cent — which was also the percentage rise in gold per troy ounce, to $1245, after investors flocked to safe havens. Bonds have meanwhile outperformed stocks by the widest margin since 2001, according to Bloomberg.

Asian manufacturing gloom resumes growth fears

Chinese factories slowed production in June for the first time in fifteen months, while manufacturers in other major Asian countries eased the pace of growth in output, according to new data released on Thursday, the FT reports. Both official and unofficial Chinese PMI showed a marked slowdown, the WSJ adds, indicating that Beijing’s policy of economic tightening is entering its stride. Markets reacted to the data with a heavy sell-off, according to the FT’s global market overview, with S&P 500 futures pointing to a 0.5 per cent loss.

The bonos are all right, for now

Spain headed to market on Thursday with an auction for five-year bonds. Given the pressure on the country’s public finances — including more credit downgrade fears — this one’s worth a look.

And the results were perhaps not too bad. Flashes, via Reuters: Read more

More please … the 12-month LTRO roll-over ain’t over yet

Relieved at the results of Wednesday’s three-month European Central Bank offer? Not so fast. FT Alphaville observes that Europe’s banks are tapping ECB liquidity less overall — but this may be obscuring discrepancies between banks, creating a two-tiered system: those that can survive higher interbank rates in the future, and those that still have to cling to the ECB’s petticoats. Read more