Alcoa, the US aluminum producer, kicked off the US earnings season and promptly beat analysts’ projections as higher metal prices boosted sales, Bloomberg reports. Earnings from continuing operations were 13 cents a share, compared with expectations of 11 cents. Net income was $136m against a net loss of $454 million a year earlier, while sales rose 22 per cent to $5.19bn.
Tensions are rising between Rio Tinto and Canada’s Ivanhoe Mines over rights to a world-class copper deposit in Mongolia as the multinational mining group releases hundreds of millions of dollars to develop the mine over which it has limited control. Ivanhoe, a Vancouver-based mining company that owns Mongolia’s Oyu Tolgoi project, on Monday vowed it would defend a scheme which it believes protects shareholders against unfair takeovers, but Rio believes is a violation of its rights. The FT said Rio believes the agreement limits its long-term options, as it discusses methods of developing the project including bringing in Chinalco, the Chinese state-owned mining company that is Rio’s largest shareholder.
US financial reform finally appears to have enough votes to be passed by the Senate after Scott Brown, the Massachussetts Republican, said on Monday he had decided to back the sweeping legislation, the FT reports. The Obama administration and senior Democrats in Congress need 60 votes to be sure of passing the bill in a much-delayed vote that is expected to take place this week.
PetroChina, China’s largest listed oil and gas producer, says it would “welcome” closer co-operation with BP as the embattled UK group struggles to cover liabilities arising from the Gulf of Mexico oil spill disaster, the FT reports. Chinese energy companies have spent billions of dollars on overseas acquisitions this year, with headline deals including CNOOC’s $3bn investment in Bridas and Sinopec’s $4.65bn investment for a stake in a Canadian oil sands project.
Asia-based hedge fund managers are able to generate higher returns than those outside the region running similar strategies, according to research by GFIA, a Singapore-based consultancy. The FT reports that GFIA believes that one effect of the local outperformance will be to increase the dominance of the “Hong Kong/Singapore nexus” as the centre of the Asian hedge fund industry at the expense of London and New York.
China bought several hundred million euros worth of Spanish bonds last week as Asian investors returned to the eurozone peripheral market after a two-month hiatus, the FT reports. China’s State Administration of Foreign Exchange, which manages the country’s massive reserves, was allocated up to €400m of Spanish 10-year bonds in a debt deal last Tuesday.
Chinese property prices fell in June for the first time in nearly 18 months, a sign that the government’s campaign to reduce real estate speculation and cool the economy is beginning to bite, the FT reports. The average price of houses in 70 main cities in June fell by 0.1 per cent from May, the sort of moderate cooling in the property market policymakers are hoping to engineer.
Playboy could get caught up in a bidding war, after the company that controls rival Penthouse signalled it was preparing to trump an attempt by Hugh Hefner to take the adult entertainment company he founded private. Marc Bell, chief executive of FriendFinder Networks, which owns of Penthouse, told the FT on Monday an offer was imminent. “We are working on it as we speak,” he said. Mr Bell’s comments came after Mr Hefner submitted a bid to take Playboy private in a deal that would value it at $185m after earlier efforts to sell the company failed.
Also see the Gapperblog on the same subject.
Aon, the US insurance broker, on Monday said it would acquire Hewitt Associates, bolstering its human resources consulting arm in a cash and stock deal worth $4.9bn, excluding debt, the FT reports. Aon makes most of its revenues in insurance brokerage and combining its HR consulting business with Hewitt’s will create the world’s largest HR services provider with $4.3bn in revenues, overtaking Mercer.
As American equity markets awaited the onset of the earnings season (Alcoa kicks off, after the bell on Monday), consider this factoid from Matthew Rothman, Barcap’s top quant research man in New York:
Recommending stocks in the current environment may well be a fool’s errand…stock selection has rarely ever been more difficult than it has over the past 2 months. Stock return dispersion is a historically low levels with macro economic factors being chiefly responsible for the direction of stocks.
Here’s a bold call from UBS — sterling to end the year at $1.35.
Now, cable is currently trading just over $1.50 and last touched $1.35 in August 1985. Read more
No let up in the austerity please, Mr Osborne. That’s pretty much the message from S&P, which reaffirmed the UK’s AAA rating on Monday but maintained its negative outlook.
For the record, a negative (or a positive) outlook from the rating agency indicates a one-in-three chance of a rating change over a period of six months to year. Read more
We theorised on the possibility of some investors playing the contango trade in gold — perhaps from the moment they realised that financing costs would become low enough to make the trade profitable.
And while we stress this is just a theory – here are some interesting charts from Bloomberg showing a big contraction in the spread between the first month contracts and the second month contracts, as well as the second and the third from Lehman onwards — presumably as the arbitrage is eroded. Read more
Okay, okay, maybe that header’s a bit harsh. But we have to ask what the point is of Working Paper No 393, The financial market impact of quantitative easing, from the Bank of England’s Michael Joyce, Ana Lasaosa, Ibrahim Stevens and Matthew Tong?
Joyce et al could have saved some pixels, and simply said: “Dunno.” Read more
You could argue there’s a link between the trouble institutions are in and their propensity to use Powerpoint. See under: the U.S. Army and Afghanistan.
Now try the European Central Bank and the euro crisis. Read more
Shares in BP traded over 400p for the first time in around a month on Monday – June 9 to be precise – as bid rumours swirled:
We’ve noted a large fluctuation in last Friday‘s programme trading numbers out of the NYSE.
Consequently we’ve decided to chart the year’s overall trend. And doing so confirms a clear and prominent spike in programme trading on the NYSE at the end of June, and a smaller one at the end of March: Read more
According to the FT’s hedge fund correspondent, Sam Jones, the hugely successful Paulson & Co (he of subprime bet fame) currently denominates a third of its $33bn of assets under management in a share class bolstered by huge positions in the gold market.
In fact, the FT reports: Read more
Compared to those high-flying days of yesteryear, über-deal maker Chris Flowers has been rather quiet – and we’d venture, not overly successful – as of late.
Among the more notable in a series of rather underwhelming deals have been his huge investment, and equally huge paper loss, in Japan’s seemingly chronically-troubled Shinsei Bank, and an inexplicably large investment in 2008 in the then-troubled (and scandal-wracked) commodities broker MF Global. Read more
Live markets commentary from FT.com
Andrés Iniesta took his opportunity in the World Cup final, but will Spain take advantage of the chance offered by stress tests to restore market confidence in its financial system and economy?
It’s a question that Jacques Cailloux, chief European economist at RBS, has been debating with his colleagues, and his conclusion is that Spain will fluff the chance to restore international investors’ confidence in the medium term solvency of its banking sector (emphasis ours throughout): Read more
China defied widespread fears about a new slowdown in the global economy to record another surge in exports last month compared to the same period last year, although the figures will also draw attention again to whether the Chinese currency remains undervalued, the FT reports. A 44 per cent increase in exports last month year-on-year led China to rack up another large monthly trade surplus in June, the $20bn (€15.8bn, £13.3bn) result adding to the surplus of $19.5bn in May.
Stocks in the S&P 500 are correlating at rates not seen since October 1987, the WSJ reports — frustrating pickers of individual stocks as an indexing market takes over. Many money managers have left equities as a class altogether in favour of defensive positions in bonds or cash, while exchange-traded funds have also helped to fuel the correlation effect by allowing investors to rely less on traditional safe-haven firms.
There is a cautious tone to markets as traders absorb the sharp risk asset rally of recent days and contemplate the prospects for the US second-quarter earnings season, the FT’s global markets overview says. Treasury yields are lower and Wall Street equity futures are down 0.6 per cent, after stock markets posted their best gains in a year last week. Alcoa will report earnings after Monday’s close, while Google, Intel and JP Morgan are among firms disclosing this week.
Blackstone Group will take over management of Bank of America’s Asian real estate fund, the FT reports, giving the private equity group a platform for conducting more deals into the region. The deal, disclosed in a letter Blackstone sent its investors on Friday, is another sign of the retreat of both banks and former investment banks from the business of running real estate and corporate private equity funds.
BP continued work on a new capping system for the Gulf oil spill early on Monday, FT Alphaville reports, sparking a 5.5 per cent rally in BP shares in London trading. The cap could still take several days to install, the FT says. Fixing the spill goes on even as the energy giant talks to Apache on a deal to sell stakes in its Alaska operations, people familiar with the matter have told the WSJ. BP is meanwhile preparing a strategy for defending against a hostile takeover, on speculation that ExxonMobil is preparing a bid, the Daily Telegraph reports.
Google’s use of its search engine to support its expansion into new internet services gives it an unfair advantage and puts it on a collision course with antitrust regulators, according to Barry Diller, head of online travel company Expedia and InterActiveCorp, the FT reports. Google unsettled Diller’s industry two weeks ago with its $700m deal to acquire ITA Software, which makes search technology for airline flight and ticket prices. Diller described the agreement as a ‘frontal assault on a core area of internet life’.
Groan. After all those “Kan-do” headlines and puns that accompanied the meteoric rise of Japan’s latest prime minister last month, come the inevitable “Kan can’t” jokes… So we thought we might as well join in, FT Alphaville says. Read more
The price action in Falkland Oil & Gas on Monday morning, following news that it had found no hydrocarbons at its Toroa exploration well south of the Islas Malvinas: