Posts from Monday Feb 7 2011

Mubarak regime tries to ease discontent

Egypt unveiled a 15 per cent pay rise for government workers on Monday, in a sign of the struggle President Hosni Mubarak’s regime faces as it tries to soothe popular discontent while restoring confidence in the economy, reports the FT. The Muslim Brotherhood on Monday said it was reconsidering its participation in talks with Omar Suleiman, Egypt’s vice-president, as the banned opposition group and others complained that the beleaguered regime was showing no intention to reform.

Hopes continue to brighten for economy

Investors continued to bet on a US economy that is picking up steam, bidding up US stocks and selling US Treasury bonds, reports the FT’s global market overview. Global stocks were generally higher following the drop in the US unemployment rate to 9 per cent in January reported on Friday. The FTSE All-World equity index rose 0.6 per cent, to a fresh cyclical peak. The S&P 500 in New York was up 0.8 per cent at 1,320, its best level since June 2008. The resource-heavy FTSE 100 in London rose 0.9 per cent and the broad FTSE Eurofirst 300 was also up 0.9 per cent. Tresaury yields also hit their highest since April, pushed along after Richard Fisher, head of the Dallas branch of the Federal Reserve, said he “would formally dissent as a voter” if the Fed were to propose further easing. he dollar is firmer as a tug of war plays out between those still trading the buck’s inverse risk-on relationship and those noting the greenback’s improving yield attraction. The dollar index was up 0.2 per cent at 78.20 and the euro was down 0.1 per cent to $1.3571, having given up an initial advance following the German industrial data. Copper saw a new record high, then tumbled back to Friday’s close in late London trading. The London-traded contract was flat at $10,050 a tonne, having earlier hit a record of $10,160 as traders reckon supply will be outstripped by improved demand as the global economy recovers.

Fresh clashes on Thai-Cambodia border

At least five people have been killed and thousands displaced in four days of fighting between Cambodian and Thai troops along a disputed stretch of border, reports the FT. The Cambodian authorities said that the 11th-century Preah Vihear temple, which lies at the heart of the border dispute, had been damaged when the two sides traded artillery, rocket and small arms fire.

Japanese companies struggle to do overseas deals

The mantra on the lips of many Japanese chief executives these days is “overseas expansion”. With a shrinking domestic market due to a rapidly deteriorating demographic profile, they are keen to find new opportunities abroad, reports the FT. Noriyuki Inoue, chief executive of Daikin, voiced the increasingly common view last month when he told reporters that the air conditioner manufacturer wanted to make foreign “tie-ups, joint ventures and acquisitions an everyday practice”.

Japanese shipyards demand action on cheap won

Two Japanese shipbuilders have called for urgent government action to tackle what they say is the unfair advantage enjoyed by South Korean rivals from an artificially cheap currency. In an interview with the Financial Times, Shinjiro Mishima, president of Universal Shipbuilding, one of Japan’s biggest shipbuilders, said the Japanese government should counter the “extremely determined” efforts by Seoul to control the level of the won.  “[The government] should of course act . . . we want intervention,” said Mr Mishima.

Indonesian growth hits six-year high

Indonesia’s economy grew at its fastest pace in six years in the fourth quarter of 2010, beating economists’ forecasts and heightening concerns about overheating, reports the FT. The economy expanded 6.9 per cent in the three months ending in December compared to a year earlier, mirroring a spurt across much of Asia in the last quarter of 2010, with many countries defying expectations of a slowdown caused by stuttering western demand and tighter monetary policy.

AOL to buy Huffington Post for $315m

AOL, the US internet company, is making a big bet on the viability of free online content by agreeing to buy the Huffington Post, the left-leaning web operation started by Arianna Huffington, for $315m, reports the FT. The deal, which was announced late on Sunday night, is the latest and most significant step AOL has taken to becoming a serious player in advertising-supported internet content.

US seeks pact with Brazil over renminbi

The US is attempting to enlist Brazil in a united front against China’s allegedly undervalued currency, as Latin America’s largest economy struggles with a flood of cheap Chinese goods and a surging Brazilian real, reports the FT. Tim Geithner, US Treasury secretary, visited São Paulo and Brasília on Monday to lay the groundwork for the move ahead of a meeting of the Group of 20 nations this month and a planned visit by Barack Obama, US president, to Brazil, which is expected in March. “Brazil is seeing a surge in capital inflows,” Mr Geithner said in prepared remarks for a speech at a São Paulo business school. “These flows have been magnified by the policies of other emerging economies that are trying to sustain undervalued currencies with tightly controlled exchange rate regimes.”

The Puerto Rico pensions debacle

And you thought that Illinois pensions were enough to keep the SEC busy.

From Bloomberg on FridayRead more

Further further reading

For the commute home, and while you’re waiting for AOL to become cool again,

- Can we trust TIPS to reliably predict future inflation? Read more

Harbinger exits Inmarsat

Proving once again that lock-up arrangements with big investment banks aren’t worth the paper they’re written on, news reaches the FT Alphaville desk that Philip Falcone’s Harbinger Capital Partners is placing its remaining 14 per cent stake in Inmarsat.

Credit Suisse and UBS are trying to find buyers for 64m shares on Monday evening. There are no details yet on pricing but shares in the satellite communications group closed at 688p. Read more

M&A, high yield update

Courtesy of Thomson Reuters:

The value of worldwide mergers and acquisitions totals $309.6 billion through year-to-date 2011, a 69% increase over last year at this time and the strongest start for M&A since 2000, when the opening weeks of the year saw $554.2 billion in deal activity. Financials, materials and energy & power M&A account for 60% of this year’s total, compared to 2000 when media, telecommunications and healthcare M&A drove 70% of announced activity. Read more

Economic forecasting delusions, cont’d

Regular readers of FT Alphaville know our fascination with — and deep skepticism of — macroeconomic forecasting.

To keep the meme going, we pass along three recent entries on the topic from around the econoblogosphere. Read more

Hands back once again

None other than Guy Fawked himself.

Breaking on Sky NewsRead more

Merrill’s scrubbed Ireland note

It was here. But Merrill wanted it taken down. Bye By, Philip Ingram’s research.

From the FT mailbag

A particularly amusing rant from respected chartist Brian Marber:

Dear Sir Read more

Nokia’s night of the long knives

Build, catalyze and/or join a competitive ecosystem.

Those are the choices facing Nokia’s new chief executive Stephen Elop, as he prepares for Friday’s make-or-break strategy day.  Read more

An accounting boost for CoCos

How regulators can build a market for reasonably-cheap-to-issue Contingent Convertible capital, by Barclays: Step 1) Eliminate mark-to-market accounting to ensure that asset price swings never result in a CoCo trigger being reached…

… Oh, wait… Read more

A senior haircut precedent in … Denmark

Something is interesting in the state of Denmark.

Over the weekend, Amagerbanken, a smallish Danish bank filed for bankruptcy. Its assets now have to be transferred to Denmark’s bad bank curating-company Finansiel Stabilitet (FS), which has already taken over the assets of a number of failed financial institutions. The Amagerbanken case is special however. Read more

Gold is good to go at JPMorgan repos

JPMorgan, one of two tri-party clearing banks in the US, will now accept your bullion.

From a February press releaseRead more

King Mervyn

Via the New York Times, which is apparently trying to explain Bank of England governor Mervyn King to an audience of Martians:

To Mr. King’s defenders, however, those who raise such fears do not know the heavy burden of running the Bank of England from its palace-like base on Threadneedle Street at the heart of the City, as London’s financial district is known. Indeed, Mr. King has plenty of fans who praise him for the power of his convictions — unpopular as they may be… Read more

EFSF mission creep, a collateral story

Is it just us, or what?

Increasingly, Europe’s bailout fund is starting to work like a great general-purpose bucket of high-quality collateral for the eurozone. Read more

Merrill’s missing Ireland note

One of the most damning bits of Michael Lewis’ “When Irish eyes are crying” article concerns a zoology student, ‘business relationships’ and a missing Merrill Lynch note.

Here’s the extract via Barry Ritholtz over at Big Picture: Read more

Markets Live transcript 7 Feb 2011

Live markets commentary from FT.com 

Egypt seeks record $2.6bn bond sale

Egypt will try to raise as much as E£15bn ($2.6bn) in a record sale of Treasury bills with bankers predicting yields will rise as foreign investors avoid the auction, reports Bloomberg, citing an interview with Hisham Ramez, deputy governor of the country’s central bank. Local banks have enough funds to buy all the debt, he said. A lack of international investor participation may mean higher bond yields and could further weaken the pound, which fell yesterday to the lowest level since January 2005.

The pre-emptive UK rate hike

Citigroup’s Michael Saunders and Ann O’Kelly, on this week’s Bank of England rate decision:

We expect that the MPC will leave rates on hold at the upcoming [February 10] meeting. However, we believe it may well be a much closer call than many expect, and there is a decent chance that the MPC will tighten policy. If it does decide to tighten, a 25bp hike is the most likely option, with little chance of either a 50bp hike or an early reversal of QE… Read more

UK rate rise jitters

What’s this? Some pre-MPC nerves in the government bond market:

RTRS-UK 10-YEAR GILT YIELD RISES TO 9-MONTH HIGH AT 3.865 PCT

Bond market flashes inflation warning

The US bond market has begun sending a message that inflation risks are rising and the Federal Reserve may be too slow to act, potentially marking a significant turning point in the economic recovery, the Wall Street Journal reports. In the past week, Treasury-bond yields have jumped to their highest levels since last spring. Yields on 10-year Treasuries surpassed 3.5 per cent and 30-year yields broke through 4.7 per cent, which makes some worry could mean rates will march even higher.

New record for copper signals growth hopes

Investors are adding to strategies that bet on economic growth, with sentiment supported by an apparent easing of tensions in Egypt, the FT reports in its rolling global markets overview. The FTSE All-World equity index is up 0.2 per cent, just shy of last week’s intraday cyclical peak. Commodities are firmer, the dollar softer and Treasury yields higher. The performance of copper summarises the mood. The red metal, which is considered a bellwether of economic activity because of its industrial and construction use, has hit a record above $10,100 a tonne in London.

US recovery gets push in right direction

Demand for capital equipment in the US is starting to pick up strongly, manufacturers say, boosting confidence in the health of the economic recovery and raising hopes of a revival in American industry, the FT reports. Comments in recent days from many of the leading manufacturers of capital goods – including factory equipment, earthmovers and truck components – have suggested that while the fastest growth is still likely to be in emerging economies, they also expect significant growth in US sales.