Posts from Monday Jan 24 2011

The second coming of Spanish bank recapitalisation

In case you missed this on Monday afternoon — here’s the FT’s report on Spain’s bank recapitalisation:

Elena Salgado, finance minister, said the additional capital needed by the Spanish banking system would not exceed €20bn ($27bn) – at the lower end of estimates made by analysts and economists – and would ideally come from the private sector rather than the state. Read more

Further further reading

For the commute home, or while you’re recalculating,

– “Spain’s savings banks… have seven months to raise capital through private investors or the state will partially take them over.” Read more

India proposes environmental incentives

Jairam Ramesh, India’s feisty environment minister, has proposed that New Delhi give fiscal incentives, such as tax breaks, to companies for complying with environmental laws, reports the FT. His idea came in response to complaints from companies that there was little reason to invest in clean technology, as India’s overstretched local pollution-control authorities do little to penalise companies for poor environmental performance.

Wall Street reignites bullish mood

Wall Street continued to chug forward, dragging other markets with it, in spite of signs of a weakening risk rally evident in last week’s wobbly trading, reports the FT’s global market overview. The FTSE All-World index was up 0.6 per cent, and many commodities were again in demand, with tin hitting a record, as the dollar weakened. Oil and gold also continued their recent correction phase, both dropping further from their recent highs in this session. The S&P 500 in New York was up 0.6 per cent. In Europe, many bourses struggled for much of the session, but turned things round as Wall Street showed it would not be cowed. The FTSE Eurofirst 300 was up 0.3 per cent, though disappointing results from Philips weighed. The euro was initially retreating on profit-taking after strong gains last week. It turned things round, however, and was up 0.2 per cent versus the dollar at $1.3645. The dollar index had given up early gains and was down 0.3 per cent to 78.00.

Cocoa jumps as Ivory Coast bans exports

Cocoa prices jumped as much as 7 per cent on Monday after the internationally recognised president-elect of Ivory Coast imposed a one-month export ban in an attempt to oust Laurent Gbagbo, who the international community said lost elections though he remains president, reports the FT. Ivory Coast is the world’s largest producer of cocoa, accounting for about 40 per cent of the global supply. The commodity is the main source of income for the government of Ivory Coast and any stoppage in exports would cut the funding Mr Gbagbo relies on to pay loyal civil servants and the military.

StanChart buys Singapore’s GE Money

Standard Chartered is to buy the Singapore automotive financing arm of General Electric, the US conglomerate, for nearly S$1bn (£488m), the FT reports. The business, which is part of GE Capital, has assets of S$2.35bn. Standard Chartered makes about 90% of its revenues in Asia. It said that the acquisition was an opportunity to add scale to its consumer lending businesses in Singapore, which last year recorded economic growth of nearly 15%.

Ho keeps Macao casinos stake in the family

Stanley Ho, the billionaire chairman of Macao’s biggest casino operator SJM, has handed over his shareholding to family members in order to ensure a smooth transition of control of his gaming empire, reports the FT. Mr Ho’s 31.65 per cent stake in STDM, the controlling shareholder of SJM, will be roughly split between Chan un-Chan, Mr Ho’s third wife, and his second wife’s five children – Pansy Ho, Daisy Ho, Maisy Ho, Josie Ho and Lawrence Ho. A company statement said 89-year-old Mr Ho no longer had an “attributable interest in shares of the company”.

Indonesia to sign $15bn deals with India

Indonesia will sign 17 deals worth more than $15bn this week during a visit to India by Susilo Bambang Yudhoyono, Indonesia’s president, along with a dozen of his key ministers. The deals will be a significant boost to ties between Asia’s two largest democracies. The agreements, to be formalised on Tuesday, are part of an ambitious push by Indonesia, a member of the group of 20 and south-east Asia’s largest economy, to attract $150bn in infrastructure investment. Among the projects to be implemented over the next three years are multibillion-dollar investments by Indian energy companies Reliance Group, Archean, Adani and Tata, according to a list given to the Financial Times by the Indonesian Investment Co-ordinating Board.

Intel boosts dividend and stock buy-backs

Intel has boosted its dividend payments by the largest amount in five years and added $10bn to its stock buy-back plans, joining a growing list of maturing technology companies that have upped their cash distribution plans to try to revive flagging share prices. The return to big stock buy-backs by such companies marks a return to confidence following the financial crisis and recession, reports the FT. Most cut back sharply on repurchases in 2009 to conserve funds, only to see cash reserves build up quickly as the crisis proved short-lived. The Intel move lifted shares in the world’s largest chipmaker by nearly 2 per cent in early Monday trading in the US to $21.14, though they missed out on the broader Nasdaq rally of the past six months.

Moscow braces for fresh terror campaign

Moscow is bracing itself for a renewed terror campaign by Islamist militants after an explosion ripped through the international arrivals hall of the city’s Domodedovo airport, killing 35 people and injuring up to 170, reports the FT. Police put the city’s transport hubs on high alert after the second major terrorist attack to strike the capital in a year. There were no immediate claims of responsibility on Monday. But prosecutors said they were investigating a terrorist attack “most likely” carried out by a suicide bomber, while analysts said the attack bore the hallmarks of a campaign by militants battling to create an Islamist state in the Russia’s volatile North Caucasus.

SWFs, plotted

Courtesy of the Sovereign Wealth Fund Institue:

 Read more

Space, time and public pension black holes

Mad, bad, and dangerous to know — the response from states to the idea of Congress pre-emptively legislating for their bankruptcy.

In Monday’s Wall Street Journal, EJ McMahon of the Manhattan Institute adds to the criticism, arguing that it could distract states from the essential task of pension reform. Read more

Beware the (Chinese) retail flows

In Shanghai, it seems, the dumb money is very dumb indeed — and there’s a lot of it.

This first bit comes via our Tilted colleague (and the original AV’er) Paul Murphy. In December the CSRC, China’s financial markets regulator, and the OECD released a joint paper on the legal infrastructure of the country’s public markets. Read more

Quote du jour, carbon market farce edition

Continuing the theme of farcical carbon markets:

Friday saw market uncertainty following the EU’s mistaken release of a press release suggesting that member states had voted in favour of a ban from the 1 st of January despite the vote not having taken place.

Lloyds gets the red pen treatment

First the good news. House broker UBS remains extremely on bullish Lloyds Banking Group.

We remain convinced that the group can, by 2013, deliver a mid- to high-teens RoE on a capital base and net asset value considerably higher than the current level. Our 12-month price target is 100p.

 Read more

The FX market is now through the looking glass

It seems ingrained in the FX market that rate rises are currency positive, but this has not always been the case. In an environment where inflation is problematic the market asks the question – is the central bank ahead or behind the curve?

Those are the opening thoughts of HSBC’s in-house FX guru David Bloom and team on Monday. Read more

Inflated expectations and spare capacity concerns

As Nicolas Sarkozy has noticed, worries about global inflation have picked up in the first weeks of 2011.

And according to two notes out on Monday this is not just down to rising commodity prices; there is also a lack of spare capacity that is being reflected in rising core inflation and increased expectations. Read more

Have the media made the Greek crisis worse? Puh-lease.

Or, how FT Alphaville spent the fall and winter of 2009/2010.

We bring it up because some sociologist-boffin has penned a paper suggesting the media made the Greek crisis worse with their relentless coverage and “sarcastic” headlines (no name check for FT Alphaville though, disappointingly). Read more

Chinese plate-spinning

And last week’s cash crunch in Chinese interbank markets…

 Read more

CMBScurviness by originator

Iffy commercial loans pre-financial crisis? Blame the conduits.

A new Federal Reserve discussion paper takes a look at 30,000 loans that were eventually turned into Commercial Mortgage-Backed Securities (CMBS) to figure out whether mortgages originated by certain types of lenders were more risky. Read more

Muni mayhem, charted

Recent action in the municipal bond market … from The Bond Buyer:

 Read more

Correlation trading and the WTI-Brent spread

Another day, and another widening in the WTI-Brent front-month future spread — this time to what looks to be approaching record wides.

The spread hit as much as -9.50 on Monday and according to Bloomberg data the record for the differential stands at -10.67, as struck on February 12, 2009: Read more

Markets Live transcript 24 Jan 2011

Live markets commentary from 

Great mysteries of our time… continued

That’s right, at pixel time shares in the loss-making UK internet grocer Ocado were changing hands for 242p, giving it a market value of a cool £1.2bn. Read more

Buiter on Europe’s secret liquidity operations

Willem Buiter wants you to familiarise yourself with the ELA.

That’s the Emergency Liquidity Assistance that the eurozone’s national central banks (NCBs) are able to provide their local banks under some legal fuzziness in the eurozone. The acronym has managed to grab a few headlines over in Ireland, but for the most part ELAs remains relatively unknown. Soo too, do the details of them. Read more

Fed optimism, debt fears clash this week

The Federal Reserve’s first policy statement of 2011 is likely to call on signs of muted but increasing recovery, the NYT reports. People familiar with the deliberations of the Federal Reserve Board said that the current focus on quantitative easing would be maintained, but that Fed economic projections would be revised. Looking towards the end, and unwinding, of QE purchases of Treasuries may well bleed into an emerging new debate: what to do about the national debt. President Barack Obama will call for deficits to be tackled ‘in a responsible way’ in Tuesday’s State of the Union address, the FT says, while former Deputy to the Secretary Roger Altman warns that the US risks an age of austerity in a FT op-ed.

Some UK M&A candour

As we have discovered in recent weeks there’s a greater chance of getting blood from a stone than a UK-listed company voluntarily confessing to M&A activity.

So it’s to Serco’s credit that it has has attempted to set the record straight following reports which claimed the outsourcing firm had made a $2bn offer for SRA International, a US security, defence and health services company. Read more

Irish crisis reminds on euro woes

Ireland’s main political parties will meet on Monday to work out how to speed up parliamentary approval of financial legislation which must be passed in order to release aid from the EU and IMF, the FT reports. The government’s collapse over the weekend has made the Irish government the first political casualty of Europe’s debt crisis. Although the bill will be passed — few parties want to debate its merits during the election — this latest bout of instability underlines the uncertainty still hanging over the resolution to the crisis, Bloomberg says. At the same time, shorts on the euro have come off at a record rate in the last week, the FT says.

Inflation and fundamentals vie across markets

Fundamentals are back, says the WSJ. Unfortunately, so is inflation, the Journal adds. Risk-on, risk-off correlations are giving away to long-term trading as stocks and commodities begin to follow their own dynamics, it notes. Macroeconomic pressures are still on the mind of central bankers, however, with ECB president Jean-Claude Trichet signalling that ‘second-round effects’ on consumers from commodity price rises must be fought, in an interview. The comments suggest that the ECB would be prepared to look through a temporary rise in inflation, which currently stands at 2.2 per cent in the eurozone, Bloomberg reports.

Steel rises, oil prevaricates on macro outlook

Steel prices are set to jump by up to 66 per cent this year, amounting to a burst of inflation on a scale that the industry has suffered just once in the past 70 years, the FT reports. If forecasts produced by executives and analysts turn out to be correct, the rise in steel prices during the year will be the second-biggest jump since modern records began in the 1940s. But rising global output faces a much less certain outlook from the price of oil, which is on the tip of $100 a barrel, the FT adds — sketching out three scenarios for oil and the recovery. Oil will either stabilise at $100; enter a supply shock that leads to $150 — or derail the recovery at $100 and promptly decline to $40 a barrel.