Posts from Wednesday Sep 8 2010

Obama pushes new stimulus proposals

President Barack Obama on Wednesday took Republicans to task over their economic “values” as he promoted an $180bn package of proposals to stimulate the US economy in the first week of campaigning for the November mid-term Congressional elections, the FT reports. In a speech in Cleveland, Ohio, Obama made a strong case for permanently extending Bush-era tax cuts for the middle class. But he stressed his opposition to the Republican plan to extend tax cuts for the richest 2% of Americans, which the White House says would add $700bn to the deficit over the next decade.

Sinochem in push to foil BHP’s Potash plan

Sinochem, the Chinese state-owned chemicals group, is trying to recruit at least one sovereign wealth fund and a Canadian pension fund for a consortium to block BHP Billiton’s $39bn hostile takeover of PotashCorp of Canada, reports the FT. People familiar with the discussions said Temasek, the Singapore state investment agency, had been approached to join the consortium, along with several Canadian pension funds, including Alberta Investment Management, a pension fund with $66bn under management.

Japan finance minister fails to curb yen

The Japanese yen hit another 15-year high on Wednesday despite fresh comments from the Japanese finance minister about the possibility of currency intervention, reports the FT. Yoshihiko Noda told lawmakers on Wednesday that Japan was ready to take “bold measures when necessary” which “naturally…includes intervention.” However, his comments did little to appease the risk aversion that is driving investors to snap up Japan’s currency, fuelled by concerns about the US economy, data showing Japan’s current account surplus had widened in July, a factor that helps the yen’s status as a safe haven, and evidence that Chinese buying of Japanese bills was ongoing.

Regional scramble for coal reaches Indonesia

The battle for resources between India and China has arrived in Indonesia, where Asia’s emerging giants are scrambling to secure the vast supplies of thermal coal needed to fire their electricity plants and power economic expansion, reports the FT. But a shortage of attractive, large-scale producers for sale and restrictive business conditions are driving fierce competition for assets in the world’s leading exporter of the commodity.

Paulson & Co funds hit by US economy fears

Paulson & Co, the world’s third-largest hedge fund manager, has seen another painful month thanks to growing fears over the health of the US economy, the FT reports. The firm’s $9bn Advantage Plus fund, which aims to profit from trading corporate events, lost 4.26 per cent in August, according to an investor, wiping out gains made in July. The fund, Paulson & Co’s largest, is down 11 per cent so far this year. Last month proved worse for the $3bn Paulson & Co Recovery fund, however, which was launched in 2008 to profit from a rebound in the US housing market and economy. The Recovery fund lost 9.13 per cent in August, erasing a 6.5 per cent gain in July and compounding a 12.6 per cent second-quarter loss. Its performance has been flat to date this year.

China bank regulator warns on risk

China’s main bank regulator has warned that serious risks are building up in the financial sector and specifically linked improving financial risk management to the “important task” of maintaining social stability in the country, reports the FT. The comments from Liu Mingkang, chairman of the China Banking Regulatory Commission, contrasted with the bullish outlook presented by most state-controlled banks in their interim reports in recent weeks. The banks mostly dismissed concerns about risks building up on their balance sheets following an unprecedented credit boom over the last two years. Mr Liu said financial institutions needed to improve the design, implementation and application of “stress tests” conducted recently to assess how vulnerable they are to a downturn in the economy or a crash in the property market.

Goldman eyes ‘prop desk’ shake-up

Goldman Sachs is preparing to shut down the unit that trades with the bank’s funds and move its traders to either an independent hedge fund or its asset management arm to comply with new US law and prevent an exodus of star employees, the report said, the FT reports. People close to the situation said no final decision on the fate of Goldman’s proprietary trading group had been made but bank executives wanted to move quickly to steal a march on rivals and reassure the unit’s staff. The move, expected after last month’s passage of US financial reform legislation, underlines Goldman’s need to refocus its strategy away from investments with its own funds as the post-crisis regulatory regime emerges.

Goldman fined, again

Our FT colleagues reported the news on Wednesday:

Goldman Sachs is facing a fine thought to be near £20m from the UK’s financial regulator following a five-month investigation into the investment bank’s international business initiated in the wake of fraud charges against the company in the US. Read more

Stocks rebound after eurozone fears rise

Stocks rebounded following a burst of fear for Europe’s banking sector and sovereign debt difficulties, but gains have been limited as the Federal Reserve continues to see weakening throughout the US economy, reports the FT. Central banks were widely said to be reacting such concerns. The European Central Bank was reported to be increasing its purchase debts of “peripheral” European countries. Meanwhile, the Bank of Japan was widely said to be signalling an impending intervention to stem the yen’s rise, which has hurt shares of Japanese. Neither rumour was confirmed, however. That turned round a fall in risky assets on Tuesday, which extended into the Asian session. Later, demand for Portugal’s €1.04bn bond auction was better than expected, and perceived currency havens, such as the Japanese yen and Swiss franc lost gains. The FTSE All-World index was up 0.3 per cent.

Goldman now faces large fine in UK

Goldman Sachs is facing a fine thought to be near £20m from the UK’s financial regulator following a five-month investigation into the investment bank’s international business initiated in the wake of fraud charges against the company in the US, the FT reports. The fine, which could be announced by the Financial Services Authority as early as Thursday morning, will deal a blow to Goldman’s efforts to put the high-profile case behind it following the bank’s settlement with the US Securities and Exchange Commission probe in July for $550m.

Highlights (and lowlights) from the Beige Book

Just as the US was turning its weary eyes to Barack Obama’s speech on the economy on Wednesday, the Federal Reserve Board released the sixth Beige Book report of the year. This most recent edition covers activity in the last half of July and all of August.

The unsurprising top line: Read more

Watch President Obama’s speech on the economy

Starting at 2:10pm, EDT.

 Read more

CEBS says the stress tests were JUST FINE

We weren’t that taken aback by the WSJ’s recent, ah, exposé revealing that Europe’s recent stress tests were – shock! – perhaps less than helpful on the actual exposure of banks to risky sovereign debt.

But at least someone has taken it rather personally. Read more

Adventures in FX intervention

Now, even by Japanese central banking standards, this… is weird.

Via Citigroup’s FX wire on Wednesday: Read more

Hi Ho Silver Lining

Noel Gallager, Sid Waddell, Anna Wintour, hemlines, and cartels — just some of the subjects covered in the latest Thunder Road report from market analyst Paul Mylchreest.

But what has caught the attention of traders are Mylchreest’s thoughts on silver. He reckons big money is about to move into the metal and the price could be headed for $50-$100 an ounce. Read more

El-Erian: Judging Obama, Geithner and Goolsbee

Mohamed El-Erian, chief executive and co-chief investment officer at PIMCO, looks ahead to today’s American policy announcements

The US Administration will seek today to regain the economic policy initiative. Think of it as an overdue attempt by officials to be seen to be more engaged, and to influence a narrative that has slipped away at a time of unacceptably high unemployment, muted growth, and deficit concerns. Read more

Anglo Irish candour, at last? (updated)

Score one for the Irish bond (and CDS) vigilantes? Ireland’s government announced that severely troubled bank Anglo Irish would be split up on Wednesday — statement via the Irish finance ministry:

The Government decided that Anglo Irish Bank will be split into a Funding Bank and an Asset Recovery Bank. Anglo Irish Bank has not expanded its loan book since it was nationalised in early 2009 and this will remain the case. It is intended that in due course the Recovery Bank will be sold in whole or in part or that its assets will be run off over a period of time. Read more

The return of the WTI super contango

The WTI super contango is back — which means time to prepare for price distortions, offshore tanker storage buildup and the general return of evil hoarding oil spivs.

Mwa ha ha. Read more

A Portuguese canary

A quick reminder of a wise old quote on writing plays:

If in the first act you have hung a pistol on the wall, then in the following one it should be fired. Otherwise don’t put it there. Read more

It was the cement’s fault

BP has published its internal investigation report into the Deepwater Horizon rig disaster in the Gulf of Mexico on 20 April 2010.

The conclusion? Read more

FX intervention day?

Moves on different sides of the globe suggest something could be afoot in currency markets.

The yen resumed its climb, advancing on Wednesday to a fresh 15-year high against the dollar of Y83.32. Meanwhile, the Swiss franc hit a record of 1.2795 against the euro – and approaching parity with the dollar for the first time in nine months – amid fresh concerns about the health of European banks. Read more

The audacity of hope

The power of a newswire.

The stupidity of a market. Read more

Fitch catches the BP knife

Fitch had a present for BP ahead of the oil giant’s publication of its internal inquiry into the Macondo explosion – raising its rating back to A from BBB, having downgraded at the height of the oil spill crisis.

From the ratings agency’s statement (emphasis ours): Read more

Markets Live transcript 8 Sep 2010

Live markets commentary from FT.com 

Connaught and super-absorbent moppets

This is a packet of super-absorbent Spontex thick moppets, which retail at around £1.80.

And this is a snapshot of the Connaught share register at the start of the month: Read more

Ousted AIG chief lands role at Willis Group

Martin Sullivan, who was ousted as AIG chief executive just three months before the world’s largest insurer was rescued by the US government, has returned to the industry with a leading executive role at Willis Group, the FT reports. Mr Sullivan is joining Willis, one of the world’s three biggest brokers, to lead a new unit designed both to win more large and complex multinational clients for the insurance broker and to sell more services to those it already has. AIG has meanwhile dropped plans to tempt strategic investors into its initial public offering of AIA in Hong Kong, as it rushes to complete its sell-off, the FT adds.

Obama pushes business tax breaks

President Barack Obama will step up his campaign to regain the political initiative on the economy, preparing to announce on Wednesday a plan allowing companies to write off all capital investments until the end of next year, the FT reports. Businesses have reacted coolly to the proposal, with many seeing little impact in the long term, the WSJ reports – which may be just as well, as there’s little sign Congress will vote on this or any other policy announced by the President this week, with mid-term electioneering taking the limelight. American businesses have a bigger problem, the Journal adds: some can access fast-growing foreign markets — while others can’t, creating a two-tiered economy.

More Greek haircut jitters

It’s not just the Greek banks that have been spooked by National Bank of Greece’s cash call and attendant fears of government debt restructuring.

French banks Société Générale and Credit Agricole, which have large holdings of Greek government debt and/or Greek banking businesses, are under pressure on Wednesday morning. Read more

Sinochem seeks Temasek for Potash bid

PotashCorp’s chief executive insists that BHP Billiton will not remain the sole bidder for his firm with its $39bn offer, Bloomberg reports. He might just get his wish. Sinochem, the Chinese state-owned chemicals group, has asked Temasek, the Singapore state investment agency, to join a consortium that would bid for all or part of the company, a person familiar with the talks told the FT. Temasek’s involvement might help Sinochem overcome potential political opposition in Canada to a Chinese-led bid for PotashCorp — and help its relative inexperience in making large deals overseas.

Whitney predicts 80,000 job cuts

Independent banking analyst Meredith Whitney believes banks will cut up to 80,000 jobs in the next year and a half, reports Bloomberg. Bank payouts will also collapse as Wall Street banks continue a structural decline begun three years ago, Whitney warned in a report. Maybe — but Barclays’ new chief executive Bob Diamond is planning rapid growth for his bank at least, reports the NYT. Not without political resistance to investment banking at Barclays’ home base in the UK, however, FT Alphaville observes — which may presage moving its headquarters to Wall Street sooner rather than later.