Posts from Friday Feb 11 2011

An exchange for the bigger, not the better

Reuters is reporting that the board of NYSE Euronext will hold a meeting on Sunday to discuss the potential merger with Deutsche Börse AG.

Details of what the NYSE Euronext board might discuss or what it might vote on were unclear. The two companies declined to comment.

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SEC charges IndyMac execs with securities fraud

Is Chuck Schumer a happy man tonight?

The SEC on Friday charged three former IndyMac executives with securities fraud. The regulator accuses former CEO Michael Perry and former CFOs Scott Keys and Blair Abernathy with deliberately misleading investors about the mortgage lender’s worsening capital and liquidity conditions in the run-up to its collapse in July 2008. Read more

Further further reading

For the commute home or while watching Al Jazeera

First CDS traded and cleared under Dodd-Frank rules Read more

The end of the home ownership “dream”

Government reports don’t normally make for interesting eulogies, but this one is an exception.

The Treasury-HUD report to Congress on the future of the US housing market is out and generating qualified praise (though little surprise). Read more

Philly Fed forecaster survey catches up to reality

Yes, we know, we know — forecasts are nonsense. It’s practically our motto around here.

But we post the Philly Fed’s quarterly survey of professional forecasters to keep track of shifts in sentiment among private-sector economists, if only to see how slow they are to change their minds. Read more

Dear Level Global investor…

‘While others zigged, we zagged’. The Feds — steamrollered.

Click for the full letter from Level Global to its investors, notifying them that it will be winding down due to ‘the ongoing Government investigation’: Read more

Goodbye for good, Mr Mubarak

In the name of God the merciful, the compassionate, citizens, during these very difficult circumstances Egypt is going through, President Hosni Mubarak has decided to step down from the office of president of the republic and has charged the high council of the armed forces to administer the affairs of the country. May God help everybody.


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Running for covereds

A chart to end a week full of talk of haircuts for senior bank bondholders. The below is from Citi’s Hans Lorenzen — showing senior unsecured financial issuance suffering:

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World’s best bank (2006 vintage)

It has long been known that consulting firm Oliver Wyman crowned Anglo Irish the world’s best bank in 2006 — just when Anglo was actually… well, you know the story.

Sadly, the report that bestowed this fateful distinction has (quite unaccountably!) vanished from the Oliver Wyman corporate site. Read more

FCIC audio and a forgetful Fuld

The Federal Crisis Inquiry Commission has released the audio interviews to go along with its 662-page potboiler. We’re talking hours and hours of stuff to listen to here.

And there are some big names — Goldman’s Lloyd Blankfein, Deutsche Bank’s Greg Lippmann and Eugene Xu, Warren Buffett, JPMorgan’s Jamie Dimon, the Fed’s Donald Kohn, Merrill’s John Thain — and many, many more. Read more

Has the Fed’s exit strategy been Basel-ed?

A piece of the Fed’s exit strategy in tatters because of Basel III? Perish the thought.

Yet RBC Capital Market’s Mike Cloherty certainly seems to think so in a short note published late on Thursday. And it’s worth remembering that the Fed’s variegated arsenal of exit mechanisms has been cited as one of the reasons (the Fed keeps saying) we shouldn’t worry about the US central bank’s ability to deal with inflation. Read more

Markets Live transcript 11 Feb 2011

Live markets commentary from 

US default risk is 0.05 per cent, Moody’s says

Once upon a time, credit default swaps on US sovereign debt hovered around 2 basis points. They’ve since gone up to a record 100bps and are now at about 40bps:

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Man strolls back into burning platform

Actually — less ‘man jumps off burning platform‘, more two elephants romping on an ominously squelching water bed.

Or as Nokia put it on Friday: Read more

ECB resumes peripheral bond-buying

FT Alphaville reports that the European Central Bank has intervened in eurozone bond markets for the first time in two weeks, buying Portuguese debt amid fears that the country could yet seek an international rescue. The FT says that the ECB returned to the market on Thursday as Portugal’s cost of borrowing on 10-year debt jumped to a euro-era high of 7.63 per cent, traders said. The ECB temporarily suspended its bond-buying programme in mid-January. FT Alphaville also notes that the surge in Portugese bond yields came just a day after a syndicated debt offering that was meant to have widened the country’s investor base and locked-in borrowing costs.

Turmoil in Egypt keeps traders wary

Global markets are shaping up for a difficult day as investors become increasingly worried that the political turmoil in Egypt could intensify after president Hosni Mubarak refused to step down, the FT reports in its rolling global markets overview. US stock futures are near session lows and the dollar is seeing haven flows, with traders fearing instability could spread across the Middle East should the situation in Cairo deteriorate further. Brent crude prices are once again moving higher, reversing a dip on Thursday that had been sparked by hopes Mr Mubarak was about to relinquish power.

Pepsi faces steep input price inflation

PepsiCo faces the highest levels of input price inflation in many years, underlining the broad pressures confronting global food companies amid steep rises in the price of oil and agricultural commodities, the FT reports. The snacks and soft drinks company, whose food business includes Frito-Lay and Quaker, expected an additional $1.4bn to $1.6bn in extra input costs in its 2011 financial year, equivalent to cost inflation of 8 to 9.5 per cent. But WSJ Heard on the Street thinks Pepsi has an edge on input-cost inflation, having hedged some commodities at high prices in 2008.

Bloomberg throws weight behind NYSE merger

Michael Bloomberg, mayor of New York, has thrown his weight behind the proposed merger of Deutsche Börse and NYSE Euronext, calling the deal “very good for New York” — a good sign that the deal will not be resisted on Wall Street or in Washington, says the FT. Fears remain that the tie-up could fall foul of antitrust authorities in Europe, where the combination of the two groups would see their Eurex and NYSE Liffe derivatives businesses combined, creating a near-monopoly in interest rate futures contracts. As the WSJ notes, Deutsche Börse is the upstart in this deal – and even then, approaches to NYSE were driven by fear of even smaller platforms gaining an edge in alternative trading platforms.

Rise in rates is headwind for housing

US 30-year mortgage rates have jumped above 5 per cent for the first time since last spring, the Wall Street Journal reports, in a rapid rise that could present a challenge to the still-troubled housing market. The average rate on 30-year fixed-rate mortgages climbed to 5.05 per cent in the week ended Thursday, according to a widely watched survey by government-backed mortgage company Freddie Mac, up from 4.81 per cent a week ago. Reuters adds that the US Treasury completed a round of bond auctions this week, with Thursday’s sale of $16bn worth of 30-year bonds, which were sold at a high yield of 4.750 per cent, with 66.45 per cent of the bids awarded at the high.

Nokia, Microsoft join forces for smartphone

Nokia is to form a “broad strategic partnership” with Microsoft and make Windows its main smartphone operating system in a radical bid to fight back against Apple and Google products, the FT reports. In a statement announcing the alliance, Nokia said that Windows Phone 7 would become its ‘primary smartphone platform’ although its own Symbian operating system would continue to be sold. MeeGo, a new Nokia OS, would also be released later this year. Nevertheless, this is far from just a platform deal, with the intention to integrate considerable amounts of content, writes GigaOM. Investors are less than convinced: shares in Nokia tumbled 11 per cent on the news, Reuters says.

Regulators set to miss Dodd-Frank deadline

US regulators will miss a July deadline set by Dodd-Frank legislation for some of the rules on newly policed swaps markets, the head of the main derivatives regulator has said. Gary Gensler, chairman of the Commodity Futures Trading Commission, said the regulator was still working towards the deadline, the FT reports. Bloomberg adds that Gensler also told the House Agriculture Committee that the CFTC doesn’t have the budget to enforce new derivatives regulations required under the Dodd-Frank Act.

WTI-Brent spread hits new record

The price difference between the world’s top oil benchmarks has reached an intraday record of more than $16 a barrel, doubling in three weeks, as West Texas Intermediate oil disconnects from top global oil references Brent and Dubai, the FT reports. The spread fell back to just above $14. Wikileaks has also released a diplomatic cable detailing official Saudi fears that the WTI market had become ‘too much like gambling’. In the past, officials have blamed technical problems with WTI supply rather than ascribing the market’s difficulties to speculative price swings. ‘Cushing syndrome’, a glut of oil inventory at WTI’s main supply point in the US, currently accounts for WTI’s depressed state versus other benchmarks.

Mubarak clings on to power in Egypt

Egypt’s higher council of the armed forces was due to issue “an important statement in a short while”, the country’s state news agency reported on Friday, following the president’s refusal to resign, the FT says. Enraged by President Hosni Mubarak’s defiance, massive demonstrations are expected across Egyptian cities later, the FT reports. The meetings by the military high command appear to be pointing to a split between officers over Mr Mubarak’s fate, the NYT says. Crowds have begun massing outside the presidential palace and other locations, reports BBC News, which also has the full text of Mr Mubarak’s statement.

Warsh to depart Federal Reserve board

Kevin Warsh, the youngest-ever governor of the US Federal Reserve and one of chairman Ben Bernanke’s closest lieutenants, is to leave the Fed at the end of March, the FT reports. Warsh’s resignation will remove a hawkish voice from the rate-setting FOMC, although one who was always a loyal supporter of Mr Bernanke. Mr Warsh will not attend the next meeting of the FOMC on March 15. notes that Warsh had always been a “wishy-washy” proponent of quantitative easing. The Washington Post notes that Warsh’s departure also leaves the board of governors without any specialists in financial markets. The Fed announcement available here.

Central bankers, mad as hell…

What happened to the discreet, decorously shadowy world of the central banker?

The publicity and consternation generated by this week’s news of the exits of Axel Weber from the Bundesbank and the Federal Reserve’s Kevin Warsh are rare public indicators of internal dissent and cental banker-discontent. Read more

Project Merlin’s (unprofitable) magic wand

The UK coalition government waves its magic (Project Merlin) wand over the nations’ banks — and presto — less bonus-y, more responsible, £190bn-lendier banks.

It’s worth remembering, though, why banks have tended to veer away from lending to small- and medium-sized businesses in recent years. It’s not been very profitable. Read more

Webvan Celeste

Related link:
John Lewis pensions trust sells remaining stake – RNS

Further reading

Elsewhere on Friday,

– “Portugal appears to be on the chopping block and we all know it.” Read more

Pink picks

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

Philip Stephens: All aboard for a two-speed Europe
Europe is on the move, writes the FT columnist. After years rusting in the sidings, the Franco-German locomotive has chugged back into view. Angela Merkel is at the controls. Nicolas Sarkozy can be seen beside her in the cab. These two leaders will never be soulmates, but they seem to have agreed on a destination. It’s called European economic government. But there is a snag – there always is when it comes to the EU – and the eurozone crisis is far from over. Read more

Snap news

Breaking pre-market news on Friday,

– Nokia announces new leadership, new financial targets and new strategic partnership with Microsoft — statement and statementRead more