Posts from Monday Jan 17 2011

Investors hit at Apple’s secrecy on Jobs

Steve Jobs, Apple’s chief executive, will take indefinite leave because of undisclosed health problems, ceding day-to-day control to his chief operating officer while remaining involved in big decisions, the FT reports. Apple’s founder broke the news to staff in an e-mail early on a US public holiday, limiting immediate stock market reaction. In Germany, Apple shares fell as much as 8 per cent. In the e-mail, Mr Jobs said he hoped to be back “as soon as I can”. Mr Jobs had a liver transplant in 2009 during a or six-month medical leave and his latest departure has raised concerns that his pancreatic cancer has returned. Mr Jobs, 55, asked for privacy, and the company would not say whether cancer or another factor was involved. As in the past, investors complained that Apple was being overly secretive.

Santander chief Sáenz faces ban from banking

Alfredo Sáenz, chief executive of Santander and number two to executive chairman Emilio Botín, might be obliged to step down as a result of an imminent court ruling in a 14-year-old legal case against him, the FT reports. El Mundo, the Spanish newspaper, on Monday reported that the Supreme Court had decided in a majority vote to reject an appeal against Mr Sáenz’s conviction in December 2009 for making false accusations when he headed Banesto bank – although the court itself has yet to make public its judgment.

HK tests renminbi liberalisation

With the mainland currency not fully convertible, Beijing is using Hong Kong as a laboratory where international companies can hold and trade renminbi-denominated products, writes the FT. In a mirror image of the way that Deng Xiaoping, the late Chinese leader, designated Shenzhen, the Chinese city bordering Hong Kong, as a “special economic zone” for overseas manufacturing investment 30 years ago, Hong Kong is being used as a testing ground for further liberalisation of the renminbi.

Indonesian leader orders corruption probes

President Susilo Bambang Yudhoyono sought to bolster his anti-corruption credentials by ordering Indonesia authorities to look into dozens of companies allegedly linked to a tax official who amassed millions of dollars in bribes, the FT reports. The dealings of Gayus Tambunan, infamously photographed at a tennis tournament on the resort island of Bali after bribing his way out of a Jakarta jail, have enraged Indonesians and sent Mr Yudhoyono’s support plummeting.

Plan for extra Afghan troops sparks concern

A US-backed plan to hire 73,000 new Afghan soldiers and police officers has raised concern among diplomats in Kabul over the quality of recruits and the sustainability of an increasingly costly security apparatus financed almost entirely by international donors, the FT reports. The plan represents a 24 per cent increase over an initial American goal. It would cost the US an additional $6bn next year, roughly twice as much as previously planned, and could saddle Washington and other donors with heftier Afghan security costs for years, if not decades to come.

‘Bric’ creator adds newcomers to list

Jim O’Neill, who coined the term “Bric”, is about to redefine further emerging markets and will explain the new approach to clients this month, the FT reports. The chairman of Goldman Sachs Asset Management plans to add Mexico, South Korea, Turkey and Indonesia into a new grouping with the Brics – Brazil, Russia, India and China – that he dubs “growth markets”. “It’s just pathetic to call these four emerging markets,” he told the Financial Times. The new approach will involve looking at fresh ways to measure exposure to equity markets beyond market capitalisation – for example, looking at gross domestic product, corporate revenue growth and the volatility of asset returns.

Tirade against M Stanley goes viral in China

A prominent Chinese client’s tirade against Morgan Stanley on the country’s largest microblogging service has gone viral, the first time a global bank has become entangled in the country’s raucous internet culture, the FT reports. In a rhymed rap-style post laced with bad language, Li Guoqing, chief executive of Chinese book retailer Dangdang, on Saturday accused the underwriters of the group’s New York initial public offering of undervaluing the company. By Monday, the lyrics had been re-posted more than 6,000 times and attracted more than 2,700 comments. The incident highlights the public relations risks for multinationals posed by the Chinese internet, with its more than 440m users.

Shanghai slide leaves investors wary

The new trading week has got off to a cautious start as a surge of fresh concern regarding the impact of China’s monetary policy pushes against the long-established bullish undertow, the FT reports. News of a medical leave of absence for Apple’s Steve Jobs and relatively hawkish comments from a Federal Reserve regional president have pushed US S&P 500 futures down 0.3 per cent in electronic trading, adding to the downbeat mood. Wall Street is closed on Monday for the Martin Luther King holiday.  The FTSE All-World equity index is down 0.2 per cent, industrial metals are mostly softer and the dollar is stronger as risk trades are reassessed following the recent strength, which last week led to the S&P 500 in New York hitting a 27-month high and the CRB commodities benchmark touching its best levels since October 2008. Hopes for an improving US economy, a strong US fourth-quarter earnings season, and the calming of eurozone fears following some generally successful “peripheral” debt auctions last week had helped the mood of late. In addition, the market continued to gain succour from the understanding that the US Federal Reserve is deploying its $600bn quantitative easing programme. But Asian markets on Monday had their first chance to respond to Friday’s late news that the People’s Bank of China had raised banks’ reserve requirement ratio by 0.5 percentage points. The reaction has not been good, with Shanghai stumbling 3 per cent – a dive that is damping sentiment in Europe.

Eurogroup – Live

It’s the event of the week — the European finance ministers’ meeting in Brussels.

 Read more

Further further reading

For the commute home or your day off,

– An expert take on a US sovereign default.
 Read more

Brics, MIKTs and O’Neill’s ‘lucrative lexicon’

We knew that Jim O’Neill couldn’t stay out of the limelight for long after moving out of centre-court as chief economist of Goldman Sachs late last year.

Now, in the loftier position of chairman of Goldman Sachs Asset Management, the man who still dines out on coining the term “Bric” says he is about to “redefine” emerging markets once again. Read more

China. Rock. Inflation. Hard place.

Michael Pettis has a blunt way of describing the China predicament, after Friday saw the People’s Bank raise required reserve ratios for the seventh time over the past year, in an effort to rein in inflation and curb lending by the country’s banks.

In a sentence, it’s “damned if you do and damned if you don’t.” The issue, says the Shenyin Wanguo Securities analyst and all ’round China expert, is that high or just persistent inflation creates “an almost unsolvable problem for the PBoC. Read more

‘A conscientious job’ in Chinese markets

1. Create a favorable public opinion climate for the two holidays [including Spring Festival] and “two meetings” (NPC and CPPCC). Do a conscientious job of channeling [public opinion] on such hot topics as income distribution, the stock market and property market, employment and social security, education and public health and sanitation, and safe manufacturing, explaining the issues and dissolving tensions.

 Read more

More Spanish banking negativity

RBS is recommending a cautious stance on Spanish banks on Monday.

It’s nothing to do with provisioning for legacy assets or impairments, however. Read more

Fix the EFSF – lose the triple-A?

Here’s an elegant, if controversial, solution to the limits of the EFSF.

The European Financial Stability Facility (EFSF), as we’ve written at length, largely resembles a giant CDO. It’s overcollateralised by 20 per cent to achieve a triple-A rating, which means the funds it’s actually able to lend out are much reduced. Indeed the €440bn headline figure disguises actual possible lending of just €250bnRead more

What fresh basis the ECB hath wrought – yet again

Did ya know?

The European Central Bank — via its Securities Markets Programme — now owns almost 20 per cent of the outstanding government bonds of Greece, Ireland and Portugal. Read more

Bigger is not necessarily better in private equity

Size really does matter — but not how you think it might, according to one view of the private equity world.

As FTfm reports on Monday, new research from the Edhec-Risk Institute, an arm of France’s Edhec Business School, found that the world’s largest private equity groups have been delivering the worst returns for investors across the industry, according to an analysis of 7,500 investments over the past 40 years. Read more

Markets Live transcript 17 Jan 2011

Live markets commentary from 

Rзflзctions on BP’s Russian dзal

It’s not just US Congressmen who are concerned about BP’s Global and Arctic Strategic Alliance with Rosneft.

BP’s partner in Russia is also worried. Read more

VimpelCom seals revised Wind deal

VimpelCom ‘s supervisory board has given final approval to a revised bid for Egyptian tycoon Naguib Sawiris’ telecoms assets in spite of continued opposition from key shareholder Telenor, Reuters reports. According to its statement, six directors – three nominated by Russia’s Altimo and three independents – voted in favour of the transaction. The three Telenor-nominated directors voted against. The revised $6.5bn deal, which is set to be completed in the first half of the year, will create one of the world’s biggest mobile telephone providers, with 173m subscribers spread across emerging markets, according to the Wall Street Journal. Under the new terms, VimpelCom  is to pay Mr. Sawiris’ Wind Telecom, formerly known as Weather Investments, $1.50bn in cash, $300m less than the initially proposed deal.

Zapatero warns on regional spending

José Luis Rodríguez Zapatero, Spanish prime minister, has issued a hardline warning to the country’s autonomous regions that they must curb public spending and debt creation so that Spain can recover from its sovereign debt crisis, the FT reports. After decades of government concessions to regional demands, Mr Zapatero said in a Financial Times interview that the central government would strictly enforce deficit limits and act against any region that stepped out of line. “At the end of the day, who is accountable, who is responsible?” he asked. “It’s the central government, isn’t it? And we have to spearhead, lead the way forward with the control of public spending for the autonomous regions. And they have to deliver. They have to fulfil those obligations, because if they don’t, the government will act.”

Hu questions future role of US dollar

China’s president Hu Jintao has raised questions on the role of the US dollar in the global monetary system on the eve of a state visit to Washington, saying “the current international currency system is the product of the past”, reports the FT. Mr Hu, who arrives in Washington on Tuesday, also delivered a thinly veiled critique of US monetary policy, underlining China’s concern about the impact on its own economy of recent stimulus measures taken by the US Federal Reserve. “The monetary policy of the United States has a major impact on global liquidity and capital flows and therefore, the liquidity of the US dollar should be kept at a reasonable and stable level,” said Mr Hu.

On EFSF government bond purchases [updated]

The future’s already here — it’s just not evenly distributed.

You could say the same thing about fiscal transfer between core and periphery in the financial markets of the eurozone, we guess. Read more

Shanghai slide leaves investors wary

The new trading week got off to a cautious start as a surge of fresh concern regarding the impact of China’s monetary policy pushed against the long-established bullish undertow, reports the FT’s global market overview. The FTSE All-World equity index was down 0.3 per cent, industrial metals were softer and the dollar was stronger as risk trades were reassessed following the recent strength, which last week saw the S&P 500 in New York hit a 27-month year high and the CRB commodities benchmark touch its best levels since October 2008. Asian markets, meanwhile, had their first chance to respond to Friday’s late news that the People’s Bank of China had raised banks’ reserve requirement ratio by 0.5 percentage points. The reaction has not been good, with Shanghai stumbling 3 per cent –- a dive that was damping sentiment in Europe.

Skype chief in call to arms

Skype plans to lift its headcount by nearly 50 per cent this year, reports the FT, as it looks to reinvigorate its lacklustre product development processes and capitalise on its viral consumer growth. The hiring spree marks an attempt by Tony Bates, Skype’s new chief executive, to inject urgency into a company synonymous with online voice and video calling. While its brand recognition and reach put it among the top handful of consumer internet companies, Skype has been slow to come up with a broad “premium tier” of services for which it can charge users – something Mr Bates aims to put right in a hurry.

A guide to eurozone bond auction styles

Given the number of diverse conventions in eurozone debt issuance, FT Alphaville wonders to what degree processes will have to be consolidated before any such thing as a eurozone bond can be considered. Marc Ostwald of Monument Securities, meanwhile, performs the invaluable service of explaining at length that you can’t really look at a set of auctions across the eurozone and conclude everything is improving (nor equally, that everything is going to pot). For now, you still have to look for national context. Read more

Breaking up Smiths Group

BP’s share swap and Arctic exploration deal with Russia’s state oil company Rosneft might have stolen all the headlines but it is Smiths Group which is the stand-out feature in the FTSE 100 on Monday morning.

Shares in the engineering conglomerate moved sharply higher following news — released after the UK stock market closed on Friday — that it had rejected a £2.45bn offer for its medical business from private equity group ApaxRead more

Further reading

Elsewhere on Monday,

– Can Europe be savedRead more

Pink picks

Comment, analysis and other offerings from Monday’s FT,

Clive Crook: A daft way to tackle America’s debt
All too memorably, the Republican party now taking over in Congress promised to cut $100bn from spending in the current fiscal year, says the FT columnist. The idea is to bring outlays back to 2008 levels, in effect cancelling out the Obama administration. Nice line, except that you cannot also cancel out the recession, which has unavoidably increased demands on the budget. Somehow, budget compromises will have to be struck. But room to manoeuvre is exactly what the Republicans’ bragging and posturing and exaggerated certainties up to this point rule out. Read more

Snap news

Breaking pre-market news on Monday,

– Nord Gold announces intention to list on London Stock Exchange — statement and statementRead more