BC Partners is in talks to buy back some debt in Foxtons in an extraordinary reversal after the private equity firm lost control of the UK real estate agency last year, the FT reports. BC is in talks with BofA-Merrill Lynch to acquire some of the debt that the bank holds in Foxtons after a debt for equity restructuring in 2009, said people familar with the matter. One person added Mizuho was also in talks to sell some of its debt interest in Foxtons to BC.
FedEx, the US package shipping company, warned of slowing economic growth ahead as it announced a consolidation of its struggling freight business and cut 1,700 jobs, reports the FT. FedEx said first-quarter profits more than doubled over the past year, but the gloomy outlook sent its shares down nearly 4 per cent to $82.81 in late trade on Thursday. FedEx, the second-biggest package shipping company in the world by revenues, is regarded as a bellwether for the US and global economy because of the broad range of goods it transports across the world. The company said it would merge FedEx Freight and FedEx National LTL at the beginning of next year. The company would shutter 100 facilities and cut 1,700 jobs in a move that will initially cost FedEx up to $200m in severance and lease termination fees.
The European Union will waive tariffs on a series of Pakistani exports as part of a plan agreed by member states to aid the country’s recovery from devastating floods, the FT reports. The agreement was reached at a summit of European leaders in Brussels after weeks of tense negotiations that balanced the EU’s ambition to exercise a more influential and coherent foreign policy against the national interests of its 27 member states. David Cameron, the UK prime minister, and Lady Ashton, EU foreign policy chief, emerged as champions of the Pakistani cause amid reservations from France, Italy, Portugal and Poland that any concessions would come at the expense of their domestic textile industries.
Italy has dropped its resistance to an EU trade agreement with South Korea, putting the deal on track to come into force next year, the FT reports. Italy’s assent came after fellow member states agreed to postpone the agreement’s provisional starting date until next July – a roughly six-month delay. The compromise was brokered with the help of Lady Ashton, the EU’s foreign policy chief. The EU has touted the agreement as a model for bilateral trade agreements it is pursuing elsewhere in Asia and Latin America. The accord will wipe out €1.6bn ($2bn) in annual duties on EU exports.
India has delivered its fifth interest rate rise of the year, signalling that the accommodative monetary policy adopted during the global financial crisis has come to an end as it bids to contain fast-rising consumer prices, reports the FT. India has emerged this year as the most aggressive tightener of monetary policy among major economies as it wrestles with the highest inflation of any Group of 20 nation. The Reserve Bank of India said on Thursday that it was moving closer to a neutral monetary policy by raising its repo rate – at which the central bank lends to commercial banks – by 25 basis points to 6 per cent. It increased the reverse repo rate 50 bps to 5 per cent.
Naoto Kan, Japan’s prime minister, warned that his government was ready to take further “resolute action” in currency markets, despite complaints from US and European politicians about Tokyo’s dramatic unilateral yen-selling intervention, reports the FT. Speaking to the Japan Chamber of Commerce and Industry on Thursday, Mr Kan said the strong yen and weak stock market had “added to uncertainty” about the Japanese economy, which is still struggling to shake off the effects of its sharpest postwar recession. “We will absolutely not permit precipitous moves in the yen,” Mr Kan said. Tokyo on Wednesday intervened in currency markets for the first time in more than six years, sending the yen nearly Y3 lower against the dollar to just Y85.52 in a matter of hours. By Thursday morning in Tokyo, the US currency was trading at about Y85.35. Japan’s decision to intervene after the yen hit a series of 15-year highs has been praised by leading exporters, as well as by the Keidanren, Japan’s most influential business lobby.
China has sent a delegation of officials and companies on a buying trip to the US, reviving its practice of cheque-book diplomacy just as political pressure mounts in the US over Beijing’s currency policy, the FT reports. Led by the commerce vice-minister, a group of 50 executives and officials arrived in the US on Wednesday to begin placing high-profile orders for US-made goods on the same day that a congressional hearing began to investigate the alleged undervaluation of the Chinese renminbi. Tim Geithner, the US Treasury secretary, told the committee in written testimony that China’s efforts to strengthen its currency since abandoning a dollar peg in June had been “too slow and … too limited”. The Obama administration opened two new cases against China at the World Trade Organisation on Wednesday.
A bit of optimism to end the US session helped global stocks pare losses and Treasury yields rise, but poor news in other regions saw oil tumble and gold reach a new all-time high, the FT The FTSE All-World index was down 0.3 per cent, alongside oil, which fell more than 2 per cent by the end of the day. Gold hit a new nominal high of $1,278 an ounce. On Wall Street, the S&P 500 was little changed after spending much of the session down, held back by a poorly received first-quarter earnings report from FedEx – the logistics group considered a useful gauge of broad commercial activity – and a second consecutive negative reading of the Philly Fed manufacturing survey. But the Philly Fed index did not get worse, and there was a slightly better than forecast survey of US weekly initial jobless claims, which saw last week’s dip in new claims persist. Copper, a bellwhether metal, rose through earlier declines. The bond market has also reacted as if it were positive economic news, with 10-year yields climbing once again.
Tim Geithner, US Treasury secretary, encouraged the US Congress to pile pressure on China to force it to allow its currency to rise and said the administration was examining a range of tools to urge Beijing to act, the FT reports. But during his appearance in front of the Senate banking committee on Thursday, Mr Geithner stopped short of promising to impose any of the aggressive legal or administrative measures demanded by American lawmakers. His comments came in response to renewed anger in Congress about the effects on the US economy of China’s intervention to hold down the renminbi. Ahead of the hearing, Beijing hit back at criticism of its currency policy, saying that the US’s problems were not of China’s making. Jiang Yu, spokeswoman at the Chinese foreign ministry, told reporters: “I would point out that appreciation of the renminbi will not solve the US deficit and unemployment problems.”
We’ve been keeping a watchful eye on this year’s junk debt bubble rally, if only because its implications could stretch well into the future.
It remains unclear whether investors have made a wise decision by going further out on the yield curve and snapping up speculative-grade bonds in near-record amounts. (An updated estimate from Reuters (HT Lex) in early September puts global high yield debt issuance at $177bn this year.) Read more
Have we been missing the Irish forest for the (ahem) Anglo Irish trees?
Uncertainty over how much the Irish government will have to fund Anglo Irish’s liabilities before it’s wound down has stalked the market recently. Read more
As pointed out to us by some friendly sources — there’s been some interesting moves in the USD/RUB crossrate on Thursday:
Attention George Papaconstantinou — the more you insist upon something, the no likelier it is actually to be true. Although your credibility will collapse even further when the opposite happens.
As the Greek finance minister said on Wednesday, via the FT: Read more
Readers might remember a WSJ story earlier this year which highlighted intriguing end-of-quarter peculiarities in New York Fed data on primary dealers in repo markets.
The WSJ’s point was that the irregularities could have been the result of banks trying to mask their risk levels in the past five quarters by temporarily lowering their debt, just before reporting it to the public. Read more
In the tsunami of commentary triggered by Tokyo’s move on Wednesday to intervene in currency markets to curb the yen’s rise, some views of its implications strike us as more cogent than others.
For example, Nomura’s Tokyo-based team led by currency strategist Yunosuke Ikeda (who, we might add, was proven correct on recent predictions of intervention moves) writes on Thursday (our emphasis): Read more
Live markets commentary from FT.com
… but were afraid to ask.
Unicredit have just published useful report for anyone heading for Munich this weekend for Oktoberfest 2010. Read more
The Obama administration appeared poised to appoint Elizabeth Warren, a Harvard law professor, to set up its Consumer Financial Protection Bureau in a move that will delight the Democratic base and cause ructions in the Senate, reports the FT. Liberal Democrats have been urging the president to name Ms Warren to head the bureau, a move that would require her to be confirmed by the Senate, where she would face stiff Republican opposition. Officials said on Wednesday that they expected Ms Warren to be appointed to a role helping establish the bureau, which has broad powers to crack down on “abusive” selling of credit cards and mortgages.
The US government is requiring oil and gas companies in the Gulf of Mexico to promptly set permanent plugs in nearly 3,500 non-producing wells, reports the FT. Under the new rules announced on Wednesday, the companies also must dismantle about 650 oil and gas production platforms if they are no longer being used for exploration or production. Until now, these companies waited sometimes years after the infrastructure had been out of use to properly seal and dismantle their equipment. But the Interior Department is mandating that any well that has not been used during the past five years for exploration or production must be plugged and associated equipment must be decommissioned if no longer involved with exploration or production
Thursday morning and the biggest FTSE 100 faller is BT Group:
Tin prices rose to a two-year high, less than 10 per cent below the metal’s all-time high set in mid-2008, as production problems in Indonesia, the world’s top exporter, continued to tighten the market, the FT reports. The metal, used for soldering in the electronics industry, could hit a record high before the end of the year or early in 2011, analysts and traders said. If the forecast proves accurate, tin would become the first base metal to revisit the all-time highs set in mid-2008. Analysts are also betting that copper prices could set an all-time high in 2011, the FT said.
A flurry of differing catalysts, and a poor performance out of Asia, seems to have left European investors somewhat bewildered at the start of the session, leaving stocks becalmed near five-month highs, reports the FT’s global market overview. The FTSE Eurofirst 300 was down just 0.1 per cent and London’s FTSE 100 was off 0.3 per cent, with miners seeing selling. The FTSE All-World index was down 0.2 per cent, commodity prices were falling and core bond yields were dipping as traders slightly reduced their risk profiles. US equity futures were down 0.2 per cent. Negative force was being supplied by reports that China’s banks face increased capital requirements – raising fears that any resultant sharp contraction in lending could cause one of the main pistons in the engine of global growth to falter. Chinese stocks fell sharply in response.
You probably missed Monday’s big news in the world of milk – Tesco matching Asda’s promotion on white stuff, reducing the price of a four-pint plastic bottle from £1.53 to £1.25, says FT Alphaville. Now that’s a pity, because it was a real money-making opportunity.In what looks to be a direct response to Tesco’s move, Robert Wiseman has warned that profits will be hit by £7m this year and potentially £16m next. Read more
The world has become full of risk-averse investors, and stocks will suffer, says FT Alphaville. Wait — let’s edit that. The world has become full of yield preservers, and they will suffer stocks. Or — as is current fashion — stock dividends. However, there’s something of a temptation to equate dividends to buying stocks outright. But according to Lombard Odier, even though dividend yields are now reaching 10 year bond yield levels in the US, it’s a dangerous temptation. Read more
The narrative that emerged on Wednesday about the Bank of Japan’s intervention is that it was done for two reasons: devaluing the yen against the dollar to boost Japan’s export industries, and — because the bank wasn’t sterilising the yen sales — to give the economy an added inflationary bump.
As Reuters reports, the move has unsurprisingly upset US lawmakers hoping to pressure China into allowing its own currency to strengthen. Read more
Elsewhere on Thursday,
– ‘Hostility and marginalization’ at Goldman? Read more
Comment, analysis and other offerings from Thursday’s FT,
John Gapper: Paulson made the right sacrifice
The argument over the decision by Hank Paulson, along with Ben Bernanke of the Federal Reserve, to let Lehman fail continues and could go on indefinitely, writes the FT columnist. But the fact that Mr Paulson and Mr Bernanke singled out Lehman to try to hold the line on moral hazard, in which the world is now awash, was justified. Inconvenient as it is, Lehman was a necessary sacrifice in the search for a solution to the crisis. Read more
Breaking pre-market news on Thursday;
– John Lewis Partnership reports 15 per cebt rise in half year operating profits; Waitrose Deliver sales up 54 per cent – statement. Read more
US lawmakers on Wednesday threatened legislation against Chinese currency intervention as Washington filed two new trade cases against Beijing at the World Trade Organisation, the FT reports. The moves were aimed at what the US has called distortionary and illicit measures by Beijing to favour its own companies. A congressional hearing on Wednesday considered proposals to allow the US to treat Chinese currency undervaluation as an illegal export subsidy when imposing emergency tariffs. Bloomberg reports that US Treasury secretary Tim Geithner said the US is considering ways to urge China to let its currency appreciate more quickly.