Posts from Monday Jul 19 2010

Important information about the 6am Cut

Some of you won’t like this. Charging is (partly) upon us.

From Tuesday (July 20) you will have to be a fully-fledged subscriber to in order to continue receiving the 6am Cut briefing service by email. That’s £3.79 a week for access to what we believe is the best business website aroundRead more

Indian takeover overhaul could drive up M&A costs

Buying controlling stakes in companies in India will become more expensive and tougher under radical changes regulators are proposing for the country’s merger and acquisition rules, the FT reports. India’s takeover panel on Monday said investors who wanted to buy more than 25 per cent of a company would have to make a mandatory bid for all remaining shares in the target.

IBM hits profit forecasts, but misses on revenue

IBM’s  quarterly revenue missed Wall Street’s expectations as a weaker euro hurt overseas sales, Reuters reports. However, firm growth in the company’s higher-margin services and software units bolstered profits.

BP talks with Apache reportedly prove problematic

BP’s talks to sell half its stake in Alaska’s Prudhoe Bay oil field to Apache hit trouble over the weekend, raising doubts about whether the deal will be completed, Bloomberg reports. BP and Apache resumed talks on Monday, the newswire added.

Fed eyes options for looser monetary policy

A slew of weak economic data means that when Federal Reserve chairman Ben Bernanke gives his semi-annual testimony to Congress on Wednesday his job will be to reassure, the FT reports. That reassurance might come in three forms: first, that the Fed thinks the economic recovery is still on track; second, that the central bank is ready to act if the economy does falter; and third, that the Fed is confident it has the tools to avert both inflation and deflation if it needs to.

Tomkins in talks over £2.9bn Canadian buy-out

Tomkins said talks about a possible sale of the UK engineering group to a consortium of Canadian buyers were at an advanced stage, the FT reports. The approach from Onex, Canada’s biggest publicly-traded private equity group, and the Canada Pension Plan Investment Board values Tomkins at 325p a share or £2.9bn, a 40 per cent premium to Friday’s closing price.

China’s partners set to reject trade plan

The US and China’s other big trading partners are expected to demand major improvements to Beijing’s latest proposal to join a global pact on government purchases because it does not go far enough in opening the $500bn Chinese procurement market to foreign businesses, the FT reports. The Chinese proposal to the World Trade Organisation Government Procurement Agreement (GPA) is seen as an attempt by Beijing to head off rising criticism from trade partners and foreign enterprises who say they are being shut out of large areas of China’s booming economy.

Emirates places $9bn order for 777s

Emirates, the Dubai-based airline, announced a $9bn order for 30 Boeing 777 passenger jets, making it the biggest deal so far at the UK’s Farnborough air show. The agreement follows an $11bn order for 32 Airbus A380 superjumbos by Emirates at the Berlin air show last month, the FT reports.

Temasek sells £700m in sterling bonds

Investors flocked to buy the first sterling bonds of Temasek, the Singapore sovereign wealth fund, on Monday in a powerful sign of the growing demand for emerging market assets among western investors, the FT reports. UK pension funds and life assurance companies queued up to buy the debt of the group, which is one of the world’s biggest sovereign wealth funds with a portfolio worth S$186bn ($135bn).

Forint drops sharply as IMF talks stall

The Hungarian forint dropped to a 15-month low against the euro after talks between Hungary and a group of international lenders over the country’s fiscal deficit broke down, the FT reports. Funding talks between Hungary and the International Monetary Fund were suspended without resolution at the weekend after the country’s government refused to consider further austerity measures and instead insisted on a new financial sector tax.

Deals raise hopes of rebound in global M&A

A flurry of international deal activity raised the prospect of a rebound in global mergers and acquisition activity, even though economic data increased fears about the pace of the global recovery, the FT reports. Some 25 potential and agreed deals worth nearly $8bn were announced on Monday in sectors ranging from UK engineering to Italian frozen food, according to data from Dealogic.

Hermès creates bespoke brand for China

Hermès is set to launch a new brand in China in September, in an attempt by the French company to win more customers in the world’s second-largest luxury goods market, the FT reports. Florian Craen, Hermès managing director in north Asia, said the Shang Xia brand – which means “up and down” in English – would remain “completely separate” from the main Hermès line to avoid customer confusion.

The three risks to global growth, from Barclays Wealth

Three regions, three problems.

According to strategists at Barclays Wealth on Monday, the global economy is facing three big risks in three big regions: Read more

Rating agencies to debt issuers: don’t cite us [UPDATED]

Consider this another step away from the rating agencies’ ability to claim “free speech”.

On Monday, in response to certain aspects of the D0dd-Frank Act, Fitch said it would not allow debt issuers to include its ratings in prospectuses or debt registration statements. Read more

Chart du jour, emerging Europe FX loans edition

BNP Paribas analysts Vivek Tawadey and Oleksiy Soroka on Monday commented on the standoff between Hungary and the IMF over the small matter of a controversial bank tax, among other things.

As they put it: Read more

Life on planet ZIRP

The consequences of near zero interest rate policies (ZIRP) are many and varied, as the UK’s retail investors found to their cost on Monday.

National Savings & Investments, the UK government’s savings arm, pulled a number of deposit accounts and cut rates on some others as it moved to stem the flow of money into its products. Read more

Frozen in the Greek repo markets

The European Repo Council put out an interesting paper earlier this month on developments in the repurchase and securities lending markets, post the Lehman and European sovereign crises. It’s available here.

Within it: views on the impact of short-selling bans, the problem of settlement failures as well the need for market infrastructure reform. Read more

Basel as MMORPG

David at Deus Ex Macchiato has had a pretty capital idea for testing out bank regulation — and a pretty timely one, with Basel reforms in play.

In short, turn it into a gameRead more

International Power and the change of control premium

Talks between International Power and GDF Suez are back on but what shape might a deal take? We know it will be structured as a reverse takeover with GDF transferring some of its non-European assets into the UK company, but what will be the equity spilt, and will shareholders in International Power get a cash sweetener?

Somewhat fortuitously Merrill Lynch, which restarted coverage of IPR on Monday morning with a “buy” rating and a target of 380p, has been re-examining the merits of a deal with the French, plus what the merged company might look like. Read more

Canvassing QE’s contribution

The Bank of England’s £200bn QEasing programme may have ended earlier this year, but one key question remains; how successful was it? And, perhaps more importantly, did investors value it?

This little survey — from Credit Suisse — can help with the latter query: Read more

Markets Live transcript 19 Jul 2010

Live markets commentary from 

Anyone for bonos?

Ever wondered exactly who’s been holding Spanish government debt recently, who’s been cutting down — and who might change their mind in the coming months?

Wonder no further. Read more

Seeping oil detected at BP well

US government officials have asked to see BP’s plans for reopening the sealed Macondo well after tests found a suspected leak seeping from the seabed, reports Bloomberg. In a letter addressed to Bob Dudley, BP managing director, National Incident Commander Thad Allen said tests had detected a “seep a distance from the well and undetermined anomalies at the well head.” BP had said last week that its newly fitted containment cap was holding back all oil flow from the stricken well. The FT, meanwhile, reports that UK prime minister David Cameron will fly to Washington on Monday on a two-day visit in which he will be seen defending BP’s current and previous actions.

Hotel(ling) Chocolat

Hotelling’s theory dictates that eventually in commodities, the curve should flatten and the hoarded sums be liquidated, bringing prices back into kilter, reports FT Alphaville. But, it also says that will happen only if interest rates become high enough to incentivise producers to store their ‘wealth’ in cash rather than commodities. The fact this has not happened (yet), is therefore more demonstrative of the level of wealth preservation hysteria on the long-side, than any real commodity shortage. It may also be indicating there’s something really wrong with keeping rates as low as they are. Read more

Forint falls after IMF suspends Hungary talks

Hungarian assets came under heavy selling pressure on Monday after the International Monetary Fund and European Union postponed the conclusion of a budgetary review in Budapest, reports the FT. The international organisations  have insisted that the government rethink its proposals, which are hoping to secure greater budgetary leeway in 2011. Although Hungary is not in urgent need of IMF financing, the failure of the negotiations was a blow to investors who remain uneasy about the country’s debt levels and reliance on external financing.

Cash for chocolate

Oompa, Loompa, doom-pa-dee-da
If you’re not greedy, you will go far
You will live in happiness too
Like the Oompa Loompa doom-pa-dee-do

That, by the way, is FT Alphaville’s ode to Anthony Ward (dubbed “Choc Finger” by tabloid press), manager of the Armajaro hedge fund flagship fund. That’s the fund which last week stashed 240,100 tonnes of cocoa beans, via the Liffe exchange’s biggest physical delivery since 1996 — equal to some 7 per cent of annual global production, according to the FT. Read more

Traders rein in risk as European fiscal fears return

Traders shrank their risk profiles on Monday as the revival of European fiscal fears joined worries about the health of the US economy, the FT reports. The FTSE All-World equity index was down 0.4 per cent, the oil price was lower and core bond yields remained depressed. Activity in the Asian session had been curtailed by Tokyo’s closure for a public holiday but the main drivers of short-term market sentiment were clear: the tremors from Wall Street’s 3 per cent tumble on Friday.

Moody’s downgrades Ireland rating

Moody’s, the ratings agency, on Monday downgraded Ireland’s government bond ratings because of the country’s deteriorating public finances, the FT reports. The downgrade of one notch to Aa2 puts Moody’s rating on the same level as Standard & Poor’s, which rates Irish debt at AA, and one notch higher than Fitch, which gives the country’s bonds an AA minus rating. Irish 10-year bond yields, which have an inverse relationship with prices, rose 8 basis points to 5.51 per cent, the highest level since the end of June.

Tomkins in talks over £2.5bn Canadian buy-out

Tomkins on Monday said talks about a possible sale of the UK engineering group to a consortium of Canadian buyers were at an advanced stage, reports the FT. The approach from Onex, Canada’s biggest publicly traded private equity group, and the Canada Pension Plan Investment Board values Tomkins at 325p a share or £2.9bn ($4.45bn), a 40 per cent premium to Friday’s closing price. Tomkins shares opened 31 per cent higher on Monday at 312p.

A bid and a double-dip warning from Tomkins

Shares in engineering conglomerate Tomkins are moon-bound on Monday morning:

 Read more