US stocks saw their sharpest correction in months following a surge in oil prices amid turmoil in the Middle East and disconcerting economic news at home, reports the FT’s global market overview. Turmoil in the Middle East and north Africa remained the main focus of traders as worries about supplies kept oil near two-and-a-half-year highs, raising concerns about inflationary pressures and encouraged flight from riskier assets. The FTSE All-World index was down 1.7 per cent, partly on the back of a miserable showing in Asia as the region reacted to a spike in energy costs – US crude oil rose nearly 9 per cent on Tuesday, following a similar rise for Brent crude on Monday – and fears grew that instability could harm global growth prospects. Wall Street’s S&P 500 fell 2.1 per cent, pulling back from the 32-month high hit on Friday ahead of the Presidents’ Day holiday Monday. The Vix volatility index spiked nearly 30 per cent, to just below 22, its highest level since December 1. Benchmark US yields were at a three-week low as investors seek out “safety”. The 10-year yield was down 13 basis points to 3.45 per cent. The Swiss franc was up 0.8 per cent versus the dollar and euro and higher by 0.6 per cent against the yen.
New Zealand rescue workers continued frantic searches on Wednesday for people trapped under debris in the aftermath of the earthquake in Christchurch that has so far claimed the lives of at least 65 people, reports the FT. The 6.3 magnitude quake struck at lunchtime on Tuesday – a busy period for the nation’s second-largest city. An estimated 120 people had been pulled from the rubble by early Wednesday morning, local media said. Bob Parker, the mayor of Christchurch, said his best estimate was that more than 100 remained trapped.
JPMorgan and Fidelity are among the overseas banks and asset managers preparing to apply for trust company licences in China as the sector attracts a new wave of foreign investor interest, reports the FT, citing people close to the plans. Regulators in Beijing, concerned by inflationary pressures, are leaning on the country’s more heavily regulated commercial banks to curtail credit growth. However, trust companies, which do not take deposits, are more lightly regulated.
India’s parliamentary deadlock was broken on Tuesday when Manmohan Singh, prime minister, gave way to opposition demands for a parliamentary investigation into a high profile telecoms corruption scandal, reports the FT. The climbdown rescued India’s legislative agenda from months of bitter obstruction by the Hindu nationalist Bharatiya Janata party. The world’s largest democracy has been paralysed by a furore triggered by an official audit that claimed as much as $39bn had been lost from the national exchequer.
Best Buy, the world’s largest electronics retailer by sales, is closing all of its branded stores in China, highlighting the resistance of Chinese shoppers to some western-style store experiences. The retailer, which will continue to run 170 stores in China under the Five Star brand acquired five years ago, is also giving up an attempt to enter Turkey, with the closure of two trial-run stores opened in the past two years. The company said in a statement that it would close all nine China stores that carry the Best Buy brand, one of the best known US retail marques, but one that has failed to catch on in China, reports the FT.
Walmart, the world’s largest retailer by sales, said on Tuesday that comparable sales at its US stores fell for the seventh consecutive quarter, despite predicting a turnround in sales declines at its largest and most profitable business, reports the FT. The retailer said comparable sales – at stores open at least a year – fell by 1.8 per cent against the same period last year. Net sales in the US also fell by 0.5 per cent in the three months to the end of January, to $71.1bn.
Chinese authorities have launched a far-reaching crackdown on lawyers and activists following an online call for a “Jasmine revolution” in the country, in an indication of their concern that the democracy movements sweeping the Middle East could prompt a response in China. The FT reports that China Human Rights Defenders, a rights group, said more than 100 people had had their freedoms restricted since last Friday’s online appeal.
Two Iranian navy ships entered the eastern Mediterranean after passing through the Suez Canal on Tuesday, the first such voyage since 1979 and one that has raised sharp concerns in Israel, reports the FT. Egyptian officials told Reuters news agency that the two vessels – one frigate and one supply ship – had entered the Suez Canal at 5.45am. They entered the Mediterranean Sea in the late afternoon, according to several reports citing Egyptian authorities.
Muammer Gaddafi, the Libyan leader, vowed to fight until the last drop of his blood had been spilt rather than step down, describing anti-regime protesters as “rats” and “mercenaries” working to foreign agendas, the FT reports. In a threatening 75-minute TV address on Tuesday, delivered from the ruins of a former Gaddafi family home bombed by US military aircraft in 1986, he called on supporters to “cleanse Libya house by house” unless the protesters surrendered. Meanwhile, calls grow for investigations into the vast business interests of the ruling clan, the FT also reports.
For the commute home or while relaxing about your kid’s future,
– Monitor the latest in Libya. Read more
Spotted: Vix, the ‘fear gauge’, up nearly 28 per cent on Tuesday.
In a whopping report out Monday, Citi’s Willem Buiter and Ebrahim Rahbari call time on ‘Emerging Markets’ and ‘BRIC’ labels.
And not a moment too soon, we reckon. Read more
Ouch, nearly everywhere.
The Case-Shiller house price numbers are out for December — and as always, they show a three monthly average (in this case for October, November and December) with a two month lag. Read more
Breaking at pixel time — Reuters quoting an Italian government source that ‘informal’ Opec talks have begun on raising output if Libyan supply collapses (only for the Saudi oil minister to deny that Opec will consider extraordinary talks.)
Which is precisely what the supply has been doing (the country’s gas exports aren’t looking too hot either). Italy has every incentive to do something about it of course, given its ample Libyan exposure in both resources. Read more
How to separate the fortunes of a nation from those of its failed banks has become one of the biggest questions to come out of the recent financial crisis.
And no more so than in Ireland — which has seen its off- and on-balance sheet liabilities rise with almost every added layer of bank bailouts and financial guarantees. And nowhere might that exercise prove more difficult, either. Read more
Here’s something the US market may have missed on Monday.
It’s the battle of the housing data providers — with CoreLogic challenging the National Association of Realtors on their recent home sales figures. Read more
2011 has so far been kind for credit markets. Could that be about to change?
William Porter, head of European credit at Credit Suisse (and of ‘eurozone as a giant CDO‘ fame) muses on the subject in the bank’s latest European credit flash. Read more
Live markets commentary from FT.com
Here’s a big table for institutional investors to pore over on Tuesday:
Two Swiss bank fallers at Tuesday morning pixel time:
Oil production in Libya is set to drop dramatically as major international companies and sub-contractors evacuate their staff from the north African country, potentially sending oil prices much higher, the FT says. Crude oil prices shot up on Monday to a fresh 2½-year high above $105 a barrel as traders braced for the impact of political unrest in Libya. Brent rallied further in after-hours trading, up to $108.70 a barrel. The Wall Street Journal adds that sweet crude futures for delivery in March traded at $93.84 a barrel, early on Tuesday, the highest levels since October 2008.
Turmoil in the Middle East and north Africa remains the main focus of traders as worries about supplies push oil to two-and-a-half-year highs, raising concerns about inflationary pressures and encouraging flight from riskier assets, the FT reports in its rolling global markets overview. The FTSE All-World index is down 0.9 per cent on the back of a miserable showing in Asia as the region reacted to Monday’s spike in energy costs and fears grew that instability could harm global growth prospects. Meanwhile, the Milan Bourse has halted trading due to technical difficulties, Forexyard reports. Italian stocks took a beating on Monday based on their Libyan exposure.
The FDIC has sent letters to former executives of the failed Washington Mutual Bank warning of possible legal action, the Wall Street Journal reports, citing a person familiar with the situation. The FDIC has discussed damages of $1bn in relation to the potential Washington Mutual lawsuit and a decision against former execs of WaMu, the largest institution to be seized by regulators during the financial crisis, could be made within the next 30 days. It is unclear which former WaMu executives would be charged.
Republican leaders in the House of Representatives are in the early stages of crafting a new short-term bill to fund the US government, congressional aides said, in a sign that they are open to a compromise that would avoid a shutdown of the federal government, according to the FT. On Saturday the House passed an aggressive budget measure for the rest of the fiscal year that includes $61bn in spending cuts, which has been criticised by Democrats and the White House as too draconian. But only a few days later it has emerged that Republican party leaders are preparing a bill that would fund the government for a much shorter period, with fewer spending cuts.
Cash-strapped Illinois plans to sell $3.7bn of bonds this week to fund its annual pension bill in a test of broad-based demand for troubled US municipal debt, the FT says. Market participants said the bonds would draw interest in spite of Illinois’ financial problems because the state was likely to offer relatively high interest rates compared with other areas of the bond market, which have rallied significantly. The sale was postponed last week so the state could pay its annual pension contribution.
Bank of America has revised the results of its international credit card business for the last two years, adding a $20.3bn non-cash goodwill writedown in 2009 while reversing a $10.4bn charge made last year, the FT reports. The changes filed with regulators this month did not affect BofA’s consolidated results or balance sheet for either year, the bank said in a statement on Monday. BofA adjusted the financial reports for its FIA Card Services unit to reflect increased defaults and an almost two-year-old change in rules, Bloomberg adds.
The world’s biggest cotton traders and Texas farmers are clashing over supplies as the price of a bale reaches an all-time high, the FT says. Merchants buying cotton from the high plains encircling the Texas city of Lubbock have been accusing some growers of walking away from contracts signed when prices were less than half current levels. The dispute has prompted lawsuits, arbitration claims and the setting up of an anonymous phone line for informants. Commodity Online quotes the vice president-operations of the Lubbock-based, Plains Cotton Growers, Inc. as saying that even as cotton futures hits a record of over $2 a pound, high prices are not being realised by farmers.
Dynegy’s second effort to sell itself has collapsed, prompting the US power producer’s top management to announce their departure, the FT reports. Carl Icahn, the activist shareholder, said on Monday that he had not obtained sufficient votes in favour of his offer to buy the US power producer for $5.50 a share in cash. Dynegy shares have been trading higher than the offer price on expectations of an even sweeter deal. American Banking says Icahn’s offer, which was extended for a final time last week, required that at least 35 per cent of the shares outstanding would be tendered.