Posts from Thursday Jul 8 2010

Trichet dismisses fears over eurozone

The world should not write off the eurozone, the ECB president Jean-Claude Trichet said on Thursday, as a surge in German exports highlighted Europe’s economic resilience, the FT reports. Moving to shore up financial-market confidence in the 16-nation bloc, Trichet said that global gloom over its prospects was overdone. Economic data “are not confirming this pessimism”. A double dip into recession “is not at all what we are observing”, he added.

City figures plan new bank

A group of prominent City figures including Lord Levene, chairman of Lloyd’s of London, and corporate governance expert Sir David Walker plan to set up a new bank, the FT reports. The vehicle, as yet unnamed, is set to list as a shell company in coming weeks. It would then make a small acquisition of an existing operation with a banking licence, before tackling more ambitious dealmaking.

Rio Tinto confirms Mongolian mine interest

Rio Tinto has ended months of speculation by confirming plans to swap its shares in Ivanhoe Mines for a direct stake in Mongolia’s Oyu Tolgoi copper and gold project, which is 66 per cent owned by the Canadian miner, the FT reports. Rio owns an indirect interest in Oyu Tolgoi, one of the world’s largest undeveloped copper deposits, through its 29.6 per cent stake in Ivanhoe.

Loss for Paulson flagship fund

Leading hedge fund manager John Paulson has suffered a second consecutive month of steep losses for his flagship hedge funds, most of which are heavily geared towards a US economic recovery, the FT reports. Amid volatile stock markets, the $3bn Paulson & Co Recovery fund, which has large positions in US banks such as Citigroup, lost 12.39% in June, according to an investor in the fund.

Man funds see withdrawals

Volatile markets led institutional and private investors to withdraw almost $1bn from Man Group’s funds in the second quarter to June, the FT reports. But Peter Clarke, chief executive, pointed to the improved performance of the group’s flagship AHL fund, and to lower levels of redemptions by institutional investors, in the quarter. He also said that plans for the acquisition of rival GLG Partners were proceeding.

Swiss central bank faces €7.5bn loss

The Swiss National Bank may have suffered paper losses of up to SFr10bn (€7.5bn) from huge interventions in the currency markets to restrain the value of the franc. The central bank is expected by market observers to report a big loss when it publishes second-quarter accounts in mid-August, the FT reports.

IMF warns of contagion threat to US

The US economy has rebounded faster than expected but faces the threat of contagion from sovereign debt problems in Europe, the IMF has warned, the FT reports. In an advance summary of its annual health check of the US economy, the IMF said: “While still modest by historical standards, the recovery has proved stronger than we had earlier expected, owing much to the authorities’ strong and effective macroeconomic response.”

Temasek to focus on Asia

Temasek, the Singapore sovereign wealth fund, on Thursday said it would invest more in Asia after announcing a 42% increase in the value of its portfolio to a record S$186bn ($134bn) in the year to March, the FT reports. Simon Israel, Temasek’s executive director, said the fund was likely to stay overweight Asia for the “foreseeable future”, noting that nearly 80% of investment is now in Asia with just a fifth in the advanced industrial economies.

China in record JGB purchase

China bought a record amount of Japanese government bonds in May, in an apparent move to shift more of its massive foreign exchange reserves into Japanese debt, the FT reports. Chinese net purchases of JGBs soared to Y735.2bn ($8.3bn) in May, far outpacing the Y541bn in JGBs bought from January to April, according to official Japanese data.

GM to sell steering unit to Chinese group

General Motors is to sell its global steering business, formerly owned by supplier group Delphi, to Beijing-based Pacific Century Motors in one of the biggest sales of an auto-parts business to a Chinese company, the FT reports. In a statement late on Wednesday, GM said it would sell the business, known as Nexteer Automotive, to PCM, an entity formed by the Tempo Group and E-Town, an affiliate of Beijing’s municipal government. No financial details of the transaction were disclosed.

BoE and ECB hold rates

The Bank of England’s monetary policy committee on Thursday voted to hold interest rates at their current record low of 0.5% and, as widely expected, to hold off on any measures to expand demand through quantitative easing, the FT reports.  The ECB, meanwhile, held rates steady at 1% for the 14th consecutive month.

Reverse engineering Ocado’s valuation

Collins Stewart has put Ocado through Quest, its cashflow return on capital model. The results out underline the fact that there is no way the internet grocer is worth the indicative float price of 200-275p a share — unless, of course, it manages to grow sales 19 per cent a year for the next ten years and sustain returns almost twice those of Tesco!

Well it could happen. And England might win the next World Cup. Read more

It’s the BIS

Introducing Article 21 (a) – a Bank for International Settlements statute that might explain the recent controversy over gold trades by the central bankers’ central bank. FT Alphaville has the details. Read more

BP nearing the kill zone

BP’s credit defaults swaps narrowed sharply on Thursday hitting 380 basis points, versus 409 the day before, according to Markit.

Which, of course, could be down to the following news (via Reuters): Read more

To: michael.grade@ocado.com

Re: Flotation

Dear Michael, Read more

Now for the downside on AgBank’s IPO

It was only a few weeks ago that The Economist ran an article on Agricultural Bank of China headlined: “Listing or capsizing?”

Then, on Wednesday, came the hype and gush about how the bank – the last (and weakest) of China’s five large state banks to list -  had lined up its record-busting $22.1bn IPO for a dual Hong Kong/Shanghai listing – even as global markets slid and dozens of IPOs were pulled. Read more

Markets Live transcript 8 Jul 2010

Live markets commentary from FT.com 

EU rules PT’s ‘golden shares’ unlawful

The “golden shares” held by the Portuguese government in Portugal Telecom were ruled unlawful by Europe’s top court on Thursday, reports the FT. The decision comes just days after Lisbon used its special veto rights to override other shareholders and block Telefónica’s €7.15bn offer to buy PT out of Vivo, its Brazilian mobile phone joint venture. Judges at the European Court of Justice said that the 500 so-called golden shares, which allow Portugal to prevent other investors from obtaining more than 10 per cent of the telecom group’s equity, were a restriction on the free movement of capital.

Brussels to look closely at Google probe

The prospect of Google facing a European inquiry into alleged anti-competitive behaviour appeared to increase on Wednesday, reports the FT, with Brussels’ leading competition official breaking his silence to suggest how seriously he took the issue. Warning about the risks of online market dominance, Joaquin Almunia said he would look closely at complaints from three companies, including Microsoft, that the search company had unfairly demoted rivals in its rankings.

Bulls on the charge as risk assets return to favour

From the narrow streets of Pamplona to the deep canyons of Lower Manhattan, the bulls have torn through the timid, reports the FT. Stocks soared 3 per cent in the US and commodities rallied, while the dollar and Treasuries fell as the brave ran with risk. And today the cattle are still in command. The FTSE All-World equity index was up 0.7 per cent, Tokyo rallied 2.8 per cent, while the euro hit a two-month high against the buck as haven currencies retreated.

IMF warns on global recovery

The International Monetary Fund has warned that the risk of a slowdown in the global economic recovery has risen sharply, but that governments should continue planning to tighten fiscal policy, the FT reports. Updates to the IMF’s regular world economic outlook and assessment of global financial conditions, released on Thursday, said jitters in financial markets in May and June threatened confidence and growth worldwide.

When is a stress test not a stress test?

When is a ‘stress test’ not a ‘stress test’? One analyst raised the point in responding to the unveiling on Wednesday evening by the Committee of European Banking Supervisors of its stress tests of 91 European banks (more detail in our earlier post).

“This isn’t a stress test,” Jaap Meier, analyst at Evolution Securities, told Bloomberg. It’s “merely the current valuation of government bonds.” Read more

Gardner gets to grips with Connaught

If there’s such a thing as the British business establishment then Sir Roy Gardner, chairman of Compass and former boss of Centrica, is a member.

So, there was understandable surprise in May when Sir Roy took  on the chairmanship of Connaught, a support services and social housing specialist that had grown quickly through acquisitions and had been dogged by concerns about its accounting policies. Read more

Commercial bank ‘gold swap’ intrigue continues

The footnote in the Bank of International Settlement’s latest annual report, which revealed the bank was sitting on 342 tonnes worth of gold (about $14bn) as part of a ‘gold swap’ deal with a (or some) mysterious counterparties has on Thursday been further clarified, reports FT Alphaville. The Wall Street Journal’s version of the story, which described the counterparties involved as central bank institutions, has been retracted in favour of the Financial Times’ original – which said the counterparties were European commercial banks. Read more

Buiter: Markets are very noisy small children

Some FT readers undoubtedly remember – and miss – Willem Buiter’s inimitable turn of phrase since he left his Maverecon blog on FT.com for the undoubtedly more lucrative role of Citigroup’s chief economist, among other things.

Buiter reminded us earlier this year of his flair for quirky metaphors, remarking on how reduced financial and economic growth figures merely suggest a wider problem, “just like finding a mouse in your soup”. Read more

Further reading

Elsewhere on Thursday,

- The $2.6m steak lunch with Warren Buffett. Read more

Pink picks

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

John Gapper: The mobile winner will not take all
The mobile revolution has broken out and there are casualties, writes the FT columnist. Mobile technology is on the rise as hardware and software companies face a new competitive landscape. The smartphone, along with the tablet computer, is coming of age, pulling the attention of software developers and consumers away from desktop computers and laptops. Read more

Snap news

Breaking pre-market news on Thursday,

- Connaught says CEO and FD to leave company; starts review of accounting policies  — statementRead more

Overnight markets: Up

Asian markets
Nikkei 225 up +247.56 (+2.67%) at 9,527
Topix up +19.44 (+2.31%) at 860.95
Hang Seng up +302.71 (+1.52%) at 20,160

US markets
S&P 500 up +32.21 (+3.13%) at 1,060
DJIA up +274.66 (+2.82%) at 10,018
Nasdaq up +65.59 (+3.13%) at 2,159 Read more

EU lawmakers pass bonus curbs

EU lawmakers on Wednesday approved tough new curbs on bankers’ bonuses which could take effect in much of the EU by this winter’s pay season, the FT reports. Banks will be forced to defer 40-60% of bonuses for three to five years, and pay half of any immediate bonuses in shares or other securities linked to a bank’s performance. The Telegraph meanwhile reports that the UK’s FSA watchdog is considering claiming exemption from the EU bonus curbs.