Posts from Tuesday Jul 20 2010

Yahoo misses forecasts; Apple surges

Yahoo saw its stock slide by 4 per cent in late trading after the internet group reported net revenues of $1.13bn in the three months to end-June, compared with market expectations of $1.16bn. Yet net income during the second quarter hit $213m, against $141m recorded a year earlier, Reuters reports.

Apple, meanwhile, saw third quarter profits surge 78 per cent to $3.25bn, or $3.51 a share on the back of strong iPad and iPhone sales. Analysts, as surveyed by Bloomberg, were expecting just $3.11 per share on average.

Chaper 11 probe for WaMu

Washington Mutual has finally bowed to shareholder demands for a fresh investigation into its Chapter 11 plan in an attempt to settle litigation triggered by the 2008 seizure of its prize asset, Washington Mutual Bank, the WSJ reports. After weeks of fighting, WaMu’s former parent agreed to the appointment of an investigator but urged a speedy schedule for the investigation of the largest banking collapse in US history.

US housing starts slide 5% in June

Builders continued to suffer in June as the stalling US housing market reduced new residential construction to its slowest rate in eight months. US housing starts fell by 5 per cent to an adjusted annual rate of 549,000 last month, commerce department figures showed on Tuesday. That was a bigger fall than Wall Street analysts had projected, the FT said, and left starts down 5.8 per cent from the same month a year ago.

Bank of Canada raises interest rates

The Bank of Canada raised its trend-setting interest rate on Tuesday for the second time in less than two months despite growing uncertainty over the domestic and global economic outlook, the FT reports. Even as the bank lifted its overnight lending rate to 0.75 per cent from 0.5 per cent, it said that it expected the recovery in Canada to be more gradual than projected in the spring.

Ocado cuts price range for IPO

Internet grocer Ocado has been forced to cut the price of its London flotation less than 24 hours before it was due to list after failing to convince investors to buy in at a more punchy valuation of £1bn-plus, the FT reports. Founded by three Goldman Sachs bankers a decade ago, the business is likely to list at 180p a share after lowering the range to 180p-200p — down from 200p-275p a share.

Intel reaches antitrust accord with FTC

Intel, the US chipmaker, is close to settling a long-running antitrust suit with the US Federal Trade Commission, bringing to a close a legal battle that has dogged the world’s largest chipmaker for more than 10 years, the FT reports. The settlement will include concessions on its business practices, but will not include fines because the FTC does not have the authority to issue civil penalties.

Trump emerges from Chapter 11 for third time

Trump Entertainment Resorts is emerging from Chapter 11 bankruptcy protection for the third time. This time round, it is emerging with Avenue Capital, a distressed debt investment firm, holding the largest stake in the company, which controls three casino resorts in Atlantic City, New Jersey, the FT reports. The deal will enable Donald Trump and his family to retain up to 10 per cent of the company.

BP to sell Asian assets as Apache deal agreed

BP has said it will sell most of its assets in Vietnam and Pakistan as it accelerates divestments worth up to $20bn in it attempt to allay concerns over its financial health following the Gulf of Mexico oil spill, the FT reports.

Meanwhile, as Reuters reports, BP said on Tuesday that it had reached agreement to sell assets in Texas, Canada and Egypt to Apache Corp for $7bn.

Goldman Sachs profits plunge 83%

Goldman Sachs reported a steep drop in quarterly profits as the exceptional trading conditions that followed the 2008 financial crisis evaporated, exacting a toll on Wall Street’s most powerful profit engine, the FT reports. Goldman’s net income after payment of preferred shares plunged 83 per cent in the second quarter, to $453m, or 78 cents a share, missing analysts’ estimates. Revenue from its trading and principal investments – the heart of Goldman’s business – fell nearly 40 per cent. The bank also set aside more than $1bn for the UK bonus tax and penalties it agreed to pay last week to settle with the Securities and Exchange Commission.

Meanwhile, in the Chinese property market…

Tip of the hat to the FT’s Tim Harford for this — an old-school academic’s take on life inside China’s uh, keen real estate sector. Mysterious goings on inside the country’s state-owned enterprises included.

‘Evaluating Conditions in Major Chinese Housing Markets,’ an NBER paper by Jing Wu, Joseph Gyourko and Yongheng Deng, is old-school by the way because it’s focused on land supply. From the abstract (emphasis ours): Read more

Hurry, Webvan 2.0 special offer (updated)

A victory of sorts for common sense over investment bank hype.

Just out on RNSRead more

Funny money profit warning

The emergency budget, the World Cup, the weather (rain, sun, wind and snow), global warming, and even Glastonbury have all been blamed by UK companies for profit warnings. But no one has ever blamed dodgy paper for an earnings miss — until now.

Shares in De La Rue fell sharply on Tuesday after the world’s largest banknote printer warned of a bit hit to sales because of quality and production irregularities. Read more

Goldman’s EBITDAF

That’s earnings before interest, taxes, depreciation, amortisation and fines…

 Read more

What’s up with Spanish mortgage lending?

The non-performing pain in Spain is back in the limelight.

The total stock of non-performing loans sloshing around the Spanish banking system hit €100bn in May, according to data from the Bank of Spain released on Monday. Read more

Goldman reports $0.78 earnings per share in Q2

Goldman Sachs’ announced earnings per share of $0.78 in its second quarter results on Tuesday — $2.75 proforma, excluding the impact of the UK bonus tax and settlement with the SEC. The results compared with a consensus of $2.36 proforma.

Full second quarter revenue, meanwhile, came in at $8.84bn with earnings in its key fixed income, currency and commodities division accounting for about half the figure at €4.40bn. Read more

QE II, or ‘standing up to free markets’

The debate over a second round of US quantitative easing is heating up.

And with it, a rather uncomfortable situation for the Federal Reserve. Read more

Markets Live transcript 20 Jul 2010

Live markets commentary from FT.com 

It’s all Greek (banks) to the ECB

Here’s an intriguing tidbit from the Bank of Greece’s monthly financial statement for June, released on Tuesday:

 Read more

Toyota receives US grand jury subpoena

Toyota has received a fresh federal grand jury subpoena in New York to submit documents related to problems with steering relay rods, reports the AFP wire - a move which puts further pressure on the company’s vehicle safety record. The company, however, did not specify the models or the production years involved in the subpoenas. According to the wire, under the US legal system, grand juries review evidence to determine whether there is probable cause for an indictment leading to a trial. Toyota has so far had to pull some 10m vehicles from market since late last year, largely due to sudden acceleration problems.

Stocks rise amid conflicting signals

The optimists in the market just had the upper hand on Tuesday, as conflicting signals battled to control market sentiment, reports the FT. The FTSE All-World equity index was higher by 0.2 per cent, while commodities were gaining ground and the dollar was flirting with its lowest level in 10 weeks. US stock futures, meanwhile, were down 0.4 per cent. Demand for risk assets, though, was fairly timid as traders processed recent catalysts, including the fact that the US second-quarter earnings season in recent days has not been providing the expected pep forecast. Better is expected today from sector benchmarks Goldman Sachs (before the opening bell) and Apple (after the close).

Nokia launches search for new CEO

Nokia shares traded as much as 5 per cent higher on Tuesday, after the Wall Street Journal reported the mobile-phone maker was launching a search for a new chief executive. The move follows current chief executive Olli-Pekka Kallasvuo’s struggle to compete in the market for high-end smartphones, says the Journal. According to people familiar with the matter, Nokia has approached the heads of several US technology companies for the post and may make a decision by the end of the month.

Pimco engineers ‘Black swan’ protection product

Wall Street’s hottest new product might soon be fear itself, reports Bloomberg. According to the wire, Bill Gross’ Pimco is planning a fund that will make investors; money in the event of market declines of more than 15 per cent. Insurance against low probability events of this type, dubbed ‘Black Swans’ by author and investor Nassim Nicholas Taleb, has been in high demand since the events of 2008, says Bloomberg. The wire cites Morgan Stanley research as noting a fivefold increase in the trading of credit derivatives that speculate on market volatility in that time.  Amongst the latest to launch is Barclays’ inverse S&P 500 VIX Short-Term Futures ETN, which listed as recently as Monday.

UK Plc feels the pain of Osborne’s axe (updated)

George Osborne’s austerity measures are beginning to bite; and UK Plc is feeling the pain.

On Tuesday morning shares in the confusingly named Cable & Wireless Worldwide fell 12p, or 14 per cent, to 71.5p after the telecoms company warned profits would be at the low end of City forecasts because of a sharp slowdown in UK public sector spending brought on by the newly-elected chancellor’s emergency budget. Read more

Halliburton hit by oil crackdown

Halliburton, the US oil services company, said on Monday that the suspension on new deepwater drilling following BP’s well explosion will hit its earnings by as much as $72.42m per quarter for the remainder of 2010, reports the FT. The disclosure comes as oil groups are seeking to assess the impact on their bottom lines of the government-imposed six-month moratorium set on May 6. On Monday, the Houston and Dubai-based company, reported blockbuster second-quarter results of $489m — an 83 per cent jump on the year before — thanks largely to strength in the firm’s US drilling activities. Shares ended the day 6 per cent higher, according to Reuters.

Emirates places $9bn order for 777s

Emirates, the Dubai-based airline, on Monday announced a $9bn order for 30 Boeing 777 passenger jets, making it the biggest deal so far at the UK’s Farnborough air show, reports the FT. The agreement follows an $11bn order for 32 Airbus A380 superjumbos by Emirates at the Berlin air show last month. According to the Telegraph, that brings Boeing’s tally for the airshow to 70 orders so far, still far behind Airbus’s 122 orders, which is already close to the airline’s 130 target for the week. In leasings, Bloomberg reports General Electric’s GECAS has ordered 40 Boeing 737-800s and 60 Airbus A320s, in deals collectively valued at $8bn.

Cameron to face BP Libya questions

President Barack Obama will raise the issue of BP’s alleged role in lobbying for the release of Libyan terrorist Abdel Basset al-Megrahi when he meets UK prime minister David Cameron on Tuesday, reports the FT. The White House said on Monday both leaders would “likely touch on” the Libyan issue in their first official meeting since election. The visit comes just a day after US government officials decided leaks around BP’s capped Macondo were ‘inconsequential’ and posed no threat to the company’s pressure tests. A seep detected three kilometers away, meanwhile, has been classified as unrelated, according to Bloomberg.

Intel reaches antitrust accord with FTC

Intel, the US chipmaker, has reached a preliminary settlement with the Federal Trade Commission that will include concessions on its business practices, reports the FT, citing a person familiar with the deal. The agreement, which is expected to be finalised by next week, will not include fines because the FTC does not have the authority to issue civil penalties. But it will force Intel to make changes to its marketing. The FTC had accused Intel, which accounts for more than 80 percent of global computer processor sales according to Bloomberg, of stifling competition in the market for up to a decade.

The BoE’s phantasmic new web idea

The long-awaited outcome of the Bank of England’s consultation into the type of bank collateral it allows banks to use at its discount window facility (DWF) is out, reports FT Alphaville. And as noted before, the BoE has been keen to expand its accepted collateral in an effort to cut down on so-called ‘phantom securities,’ or originator-made securitisations created specifically for central bank use. Read more

Shorting (and scheduling) the stress tests

Ahead of the European stress test results, Dataexplorers — the short data specialist — is providing a daily update on short interest in European banks. The first report was published on Monday — and it answers a few important questions, says FT Alphaville. That includes which names are being targeted by short sellers. Read more

Further reading

Elsewhere on Tuesday,

- The Greek debt song.

 Read more