Posts from Wednesday Jan 12 2011

Further further reading

For the commute home,

– An excellent sortable chart of dividend stocksRead more

Here comes the promised CMBS issuance

Looks like the expected 2011 rise in CMBS issuance remains on schedule, according to the WSJ on Wednesday:

In the next two months alone, an array of firms—some of which are packaging their first loans since 2007—are expecting at least $5 billion in new issues. Those include a Morgan Stanley/Bank of America group, a team led by Deutsche Bank and UBS, J.P. Morgan, and a group that includes Wells Fargo and Royal Bank of Scotland, according to people familiar with the deals.

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Risk assets rally after Portuguese bond auction

A successful sale of Portuguese bonds has unleashed a wave of buying, as oil and share prices continue their rise to fresh two-year highs, reports the FT’s global market overview. The FTSE All-World equity index is up 1.5 per cent – a fresh 27-month high – commodities are firmer and the dollar is weaker as residual optimism regarding global growth prospects continues to see racier assets trundle higher. The S&P 500, up 0.8 per cent, is at its best level since September 2008, with the ongoing $600bn of Federal Reserve quantitative easing and the sharp rise in oil prices providing further support, especially to energy shares. US 10-year yields, the global benchmark, are up 1 basis points to 3.35 per cent, falling 7 basis points from their peak after an auction of $21bn of 10-year notes saw demand push the yield at sale lower than expected. The FTSE Asia Pacific index is up 0.9 per cent, supported by a 1.5 per cent rise in Hong Kong as HSBC led banks higher, while energy producers got a boost from higher crude oil prices. Shanghai added 0.6 per cent as surging coal prices helped miners. Japan’s Nikkei 225 was flat , though an overnight slip for the yen lent support to some exporters.

List of US concerns with China grows

China needs to reduce unfair subsidies and stop the theft of intellectual property as well as letting its currency appreciate, Tim Geithner, US Treasury secretary, said on Wednesday. In a speech ahead of next week’s visit to Washington by Hu Jintao, Chinese president, Mr Geithner widened the range of US concerns with Beijing’s economic policy well beyond the currency that has been a focus of Capitol Hill’s anger, and said the economic future of the US was in its own hands, reports the FT. China needed to promote fair competition with the US and other trade partners by reducing implicit subsidies from low-cost finance, land and energy, and clamp down harder on the theft of intellectual property from foreign companies.

Portugal banks draw on ECB funds

Portuguese banks have increased their reliance on the European Central Bank for funding, a sign of possible strain in the country’s financial sector, reports the FT. Portugal’s central bank released figures showing financing of the commercial banks by the ECB rose to €40.9bn in December, the first monthly increase since August, up from €37.9bn in November. The reliance of many banks based in the peripheral countries on the ECB for funding has prompted some investors to warn that they have become overly dependent on central bank loans as they continue to find difficulty in tapping the private markets.

World moves closer to food price shock

The world has moved a step closer to a food price shock after the US government surprised traders by cutting stock forecasts for key crops, sending corn and soyabean prices to their highest level in 30 months, reports the FT. The price jump comes after the UN’s Food and Agriculture Organisation warned last week that the world could see repetition of the 2008 food crisis if prices rose further. The trend is becoming a major concern in developing countries. While officials are drawing comfort from stable rice prices, key for feeding Asia, they warn that a sustained period of high prices, especially in grains such as wheat, would hit poorer countries. Food price hikes have already led to riots in Algeria, Mozambique and Arab states. Delhi onion sellers have gone on strike, too, reports the FT.

Production data spark India growth fears

Pranab Mukherjee, India’s finance minister, warned that the slowdown in industrial output growth coupled with rising inflation would damage the country’s overall economic growth. Production by manufacturing, mining and power industries grew 2.7 per cent – a 20-month low and less than expected – in November from a year earlier, the Indian government said on Wednesday. The figure is a fraction of the 11.3 per cent rise seen in October, reports the FT. The data will add to the pressure on the Reserve Bank of India not to raise interest rates at its meeting on January 25. It had been expected to increase lending rates to combat spiralling inflation.

Thailand raises rates

The Bank of Thailand on Wednesday raised interest rates for the fourth time in seven months, lifting the benchmark rate by 25bp to 2.25% as central banks across Asia are moving to rein in rising prices, reports the FT. Despite Thailand’s early move to start raising rates – its central bank has now raised rates at four of its last five meetings, from June – inflation has been slowly creeping up. China, India, South Korea, and Australia all raised rates in the second half of 2010 in efforts to curb inflation. Figures issued last week indicated that core inflation in Thailand hit 1.4% in December, significantly higher than expected although well within the bank’s target zone at 0.5% to 3%. Headline inflation was unchanged at 3%.

Spying is a ‘reality’ in China, says EADS chief

Industrial espionage is a “reality” in China, says a leading French industrialist. Louis Gallois, head of EADS, Europe’s aerospace and defence group, made the comments as Renault prepared to reveal specific allegations in the spy case that has led to the suspension of three executives at the French carmaker, reports the FT. Answering questions at a new year’s address, Mr Gallois said Airbus, the EADS aircraft subsidiary, had exercised “prudence” when carrying out test flights in China. The FT also reports that EADS is working on a “number” of acquisition targets and hopes to start buying later this year.

Vietnamese leaders deliver mixed messages

Vietnam’s ruling Communist party opened a secretive, eight-day national congress in Hanoi on Wednesday, reports the FT, with leaders once more giving out mixed messages about the government’s willingness to restructure the fast growing yet unstable economy. In his opening address, Nong Duc Manh, the outgoing party chief, said the country must overcome serious challenges – including an under-developed education system, weak infrastructure, corruption and wasteful spending by state-owned companies – if the economy is to continue thriving. Addressing nearly 1,400 delegates, he said the party had learnt that it must “seriously prioritise the quality and the effectiveness of growth and sustainable development”.

Brisbane shuts down as river breaks its banks

Brisbane’s riverfront business district was eerily quiet on Wednesday, hours before the capital of Australia’s resource-rich Queensland state faced the full force of a crippling, 100-year flood, reports the FT. Businesses were shut, workers sent home, public transport halted and the electricity grid switched off as the Brisbane river broke its banks and washed into city centre streets. The river was due to peak at 5.2 metres early Thursday local time, with more than 50 suburbs in the city of 2m threatened by flooding. Three-quarters of the state of Queensland have been declared a natural disaster zone. “We are now in the grip of a very serious natural disaster,” Anna Bligh, the state’s premier, said, adding that up to 30,000 Brisbane residents were likely to be affected.

AIG seals deal to offload Taiwan unit

AIG has agreed to sell its Taiwan life unit to a consortium led by local industrial groups Ruentex and Pou Chen for $2.16bn, reports the FT. It is the US insurer’s second attempt to divest Nan Shan as part of its efforts to repay US government bail-out funds received during the financial crisis. The announcement follows more than a year of uncertainty about the fate of Nan Shan, Taiwan’s third-largest life assurer and biggest remaining foreign-owned life assurer. Lex argues that the sale represents a desperate move to conclude a three-year farce.

Lighter shades of beige

The Fed’s latest batch of crowd-sourced qualified optimism was released on Wednesday.

The December beige book maintained the cautious volte-face amongst contacts Federal Reserve districts from September’s description of “widespread signs of deceleration”. Read more

The latest ‘New Normal’ backlash(es)

The New New Normal apparently means to bash the old New Normal.

They say that three makes a trend in journalism. Never mind that we don’t know who “they” are, or that it’s quite a silly notion. We’ve got four examples of something interesting, and we plan to share them now regardless of whether they’re indicative of anything bigger. Read more

Chancing on the (debt) ceiling

When it comes to the debt ceiling, perhaps we should adopt that wise and time-honored maxim: don’t hate the player, hate the game.

With a hat tip to Self-Evident, David Greenlaw & Ted Wieseman from Morgan Stanley on Tuesday released a handy timeline detailing what to expect during the coming showdown. Read more

EFSF 2.0

From Wednesday’s FT:

In parallel, we must ensure that the financial support mechanisms put in place last May are fit for purpose. The effective lending capacity of the current European financial stability facility should be reinforced and the scope of its activity widened. Here we need to review all options for the size and scope of our financial backstops – not only for the current ones, but also for the permanent European stability mechanism too.

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A Fed on hold

Back in November, we previewed the new voting membership of the FOMC and speculated on its possible consequences for monetary policy in 2011:

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David Rosenberg’s cartoon-ish 2011

David Rosenberg’s gone all cartoony.

The Gluskin Sheff analyst seems to have given up on on words and is instead using charts — and Loony Tunes — to illustrate his (very salient) points. Read more

A gasoline snow print

Everyone loves a snow day.

And recent snowfalls across North America, it seems, have provided many with an excuse to take one. (That is, to stay at home for the day rather than to go to work or school.) Read more

Shaking up the UK banking sector

A couple of months from now the Independent Committee on Banking will reveal the range of options it is considering to promote “financial stability and competition” in the UK banking sector.

But will the ICB opt for a break-up or a shake-up? That’s the question Rohith Chandra-Rajan, banks analyst at BarCap, has been debating. And his answer? Shake-up. Read more

On the implications of a widening WTI-Brent spread

The spread between the two main global oil benchmarks, West Texas Intermediate and Brent, is blowing out (again). And it’s been doing so for most of the month.

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NYSE invokes Rule 48 for Wednesday’s open

Fresh from the New York Stock Exchange on a snowy Wednesday morning:

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Bye, bye AAA-rated banks at S&P…

It’s weird that last week’s 73-page monster report from Standard & Poor’s, on possible changes to the way it rates the world’s banks, didn’t get more attention.

It’s an interesting attempt by S&P to make up for rating agency shortcomings (to put it mildly, ahem) during the financial crisis — and it might also mean the end of triple A-rated banks, too. At least at S&P, and in terms of their stand-alone ratings. Read more

Let there be light … pools

You’ve heard of dark pools, right?

Well meet their opposite. On Tuesday, Credit Suisse announced it was launching a ‘light pool’ aimed at institutional investors wary of the shadowy, murky dark. Read more

Save Europe, tax the banks?

Or, let them send bailout funds.

Instead of the thorough banking sector rescue which some commenters have been advocating — it looks like the European Commission could be considering the exact opposite. Read more

Happy Portugal – market takes down €1.25bn of debt

The much-anticipated results of Portugal’s Wednesday bond auction are in.

Via Reuters: Read more

Markets Live transcript 12 Jan 2011

Live markets commentary from 

When PBoC officials disagree

We’re used to seeing both dovish and hawkish displays at any one time from monetary policy committee members in the west.

But it’s always been much rarer to see conflicting views from high-ranking members of the People’s Bank of China. Read more

US to match Chinese terms for train order

The US is going to match Chinese terms with cut-price export financing for the first time to help General Electric win an order for 150 diesel-electric locomotives from Pakistan, the FT says. With Hu Jintao, China’s president, due in Washington next week, the move suggests Barack Obama, US president, will continue to push China to follow global standards on trade. Dow Jones reports that China’s ambassador to the US said s higher yuan can’t fully resolve the US trade deficit, but that Chinese and US businesses have the potential to cooperate on some high-speed rail projects within the States.

Oil gusher!

Brent has surged to a 27-month high:

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