Posts from Monday Mar 21 2011

Global stocks higher as Japan worries ease

Global stock benchmarks are sharply higher as signs of progress at the Fukushima nuclear plant in Japan counteract concerns over the west’s involvement in Libya and a subsequent jump in oil prices, reports the FT. The FTSE All-World equity index is up 1.6 per cent, and the S&P 500 on Wall Street is up 1.5 per cent, having over recent days retraced half of its losses since dropping from the February 18 cyclical peak. The Vix volatility index is down 15 per cent at 20.8 as traders’ anxiety eases. Growth-focused commodity currencies like the Aussie dollar are in demand as investors bet that the global economy’s fundamentals are strong. It is unclear, however, whether Brent crude’s move back above $116 a barrel before settling in late London trading at $114.91 a barrel is the result of hopes that damage to the world’s third-largest economy will not derail the global recovery, or fears that the coalition’s attack on the Libyan government’s military could lead to increased turmoil in the oil producing region.

Gold key to financing Gaddafi struggle

The international community has hit Muammer Gaddafi with a raft of sanctions and asset freezes aimed at cutting off his funding. But the embattled Libyan leader is sitting on a pot of gold, says the FT. The Libyan central bank – which is under Col Gaddafi’s control – holds 143.8 tonnes of gold, according to the latest data from the International Monetary Fund, although some suspect the true amount could be several tonnes higher. Those reserves, among the top 25 in the world, are worth more than $6.5bn at current prices, enough to pay a small army of mercenaries for months or even years.

Rift over command of Libya campaign

French attempts to sidestep Nato at the outset of military operations against Libya have divided the international coalition enforcing a no-fly zone over the country, western diplomats said. The French moves, which western diplomats said included launching the first attack on Libya without fully informing its allies, angered US and UK officials and are hampering efforts to transfer command of the operation to Nato, officials said, reports the FT.

Citigroup to boost shares with stock split

Citigroup has moved to build interest in its stock, which has languished below $5, revealing a reverse stock split and its first quarterly dividend in more than two years, reports the FT. At one cent per share, Citi’s second-quarter pay-out may offer stockholders more symbolic value than actual income. But for a bank that nearly collapsed during the financial crisis and until recently counted the US government as its largest shareholder, reinstating the dividend has been seen as an important milestone for Citi executives, its investors and regulators.

Apollo Global seeks to raise $480m in IPO

Apollo Global has kicked off its initial public offering of shares on the New York Stock Exchange, seeking to raise about $480m in what is expected to be the culmination of a five-year process towards public ownership for the private equity firm run by Leon Black, reports the FT. The move, which is expected to give the company a market capitalisation of about $7bn, follows a record start to the year for IPOs, with more than $26bn raised in January and February, according to Dealogic.

Google accuses China of disrupting Gmail

Google has accused the Chinese authorities of disrupting its e-mail service inside the country, adding a new twist to the stand-off over censorship that has bedeviled the US company’s attempts to push into the world’s most populous internet market, reports the FT. The claim by the internet giant on Monday followed weeks of sporadic problems encountered by internet users in mainland China as the government tightened its censorship measures in light of an anonymous online call for a “Jasmine Revolution” in China.

US Treasury eyes $20bn profit on crisis securities

The US Treasury will sell a $142bn portfolio of mortgage-backed securities acquired during the financial crisis, in the latest withdrawal from government market intervention, reports the FT. Officials said on Monday they expect to generate $15bn to $20bn in profit from the sale of the securities. The assets were acquired in 2008 and 2009 under authority granted by Congress to fight market turmoil. The sale, at a rate of up to $10bn a month, will help reduce the federal deficit, but officials stressed its timing was not related to an impending debt limit crunch.

Japan extends ban on contaminated food

Japan has widened a ban on shipments of spinach and milk from areas around the crippled Fukushima Daiichi nuclear power station, after levels of radiation found in samples exceeded legal limits, reports the FT. Other countries including China and South Korea have stepped up monitoring of food imported from Japan. Tokyo Electric Power will compensate local farmers, the FT adds.

Further further reading

For the commute home, unless your iPhone’s AT&T coverage remains terrible (which it does) and therefore you can’t read this yet,

– The Fed has five days to release details of emergency loans it made to banks in 2008. Read more

The yen and economic fundamentals

How do we know that foreign funds are being repatriated into Japan? Because the yen strengthened against the dollar after the earthquake and until the G7 intervened. Why did the yen strengthen? Because funds were being repatriated, or will be.

Circular logic if ever there was any. In truth, the above is a simplistic representation of arguments that the repatriation of funds is putting upward pressure on the JPY, so admittedly we’ve just knocked down something of a strawman. Read more

US deleveraging isn’t just about defaults and charge-offs

So the New York Fed is now blogging, and its first post happens to be about one of our favourite topics, consumer deleveraging.

More specifically, the authors scrutinise the Consumer Credit Panel report in an effort to discern how much of the deleveraging since the crisis is the result of households actually paying down debt rather than defaulting on various types of loans. More than we thought, to be honest. Read more

Why no Canadian, Australian housing busts?

Here’s a chart to ponder from the peer review of residential mortgage practices, just published by the internationally-coordinated Financial Stability Board:

 Read more

Oil and the cash battle in Libya

Coalition forces over Libya are not trying to kill Gaddafi, or to co-ordinate air strikes with the rebels, the Pentagon said on Sunday.

Assuming that’s true… Read more

The incredible increasing EFSF

Remember the incredible shrinking EFSF?

Europe’s bailout fund had a nasty but predictable habit of decreasing every time another troubled eurozone peripheral hit it up for cash. But forget it — for now. Read more

Watching Japan’s return from Oz

The repatriation effect on the yen is being closely watched by analysts all over the world following the Tohoku temblor and subsequent Bank of Japan intervention.

As most have commented this is on account of the patterns that followed on from Japan’s Kobe earthquake in 1995, which also saw the yen rise relative to the dollar. Read more

Irish mortgages everywhere – but not a one to collateralise with?

So. This is an interesting chart:

 Read more

Markets Live transcript 21 Mar 2011

Live markets commentary from 

Japan, to buy or not to buy?

It’s still early days yet on the “what next” question about Japan, but as we noted on Monday, there are some intriguingly counter-intuitive lines emerging on the question of whether to ‘buy’ (or ‘sell’) Japan in the wake of the devastating March 11 earthquake and tsunami and ensuing crisis at the Fukushima nuclear power plant.

Most of them make sense. Most correctly point out that the nuclear plant crisis must be fully resolved before an investor piles into the Nikkei in earnest. But up to now, most have been missing one huge factor, the escalating scare over radioactive contamination to food and water. But we’ll return to that further down. Read more

China’s missing M2

Have you seen China’s missing M2 monetary measure? Read more

Deutsche Telekom’s win/win deal


The price action in Deutsche Telekom on Monday morning: Read more

The Bank of Japan’s big chance

Just when I thought I was out, they pulled me back in.

Into a global liquidity push, that is. Even as other central banks are very slowly heading for the exits (again?), the Bank of Japan last week unleashed some ¥28,000bn of liquidity as it sought to avert an earthquake-sparked credit crunchRead more

Nasdaq OMX’s NYSE bid to face antitrust hurdles

Nasdaq OMX’s potential hostile bid for NYSE Euronext could face substantial antitrust questions in the US, according to the Wall Street Journal. The deal, which merges two direct competitors, is set to create a monopoly in the market for corporate listings, although much depends on how a bid would be structured, antitrust experts say. Many though see few palatable options for Nasdaq to allay concerns that the deal will harm competition, says the paper. “I think it would likely get a serious look from Justice Department and ultimately could raise sufficient concerns to cause them to block it,” Jonathan Grossman, an antitrust lawyer at Cozen O’Connor in Washington, told the WSJ. The antitrust snags could also help NYSE resist a bid by Nasdaq, which is considering a bid to break up NYSE’s existing deal to be acquired by Germany’s Deutsche Börse.

Google accuses China of disrupting Gmail

Google has accused the Chinese authorities of disrupting its e-mail service inside the country, adding a new twist to the stand-off over censorship that has bedeviled the US company’s attempts to push into the world’s most populous internet market, the FT reports. The claim by the internet giant on Monday followed weeks of sporadic problems encountered by internet users in mainland China as the government tightened its censorship measures in light of an anonymous online call for a “Jasmine Revolution” in China. “This is a government blockage carefully designed to look like the problem is with Gmail,” a Google spokesperson said. The problems that have been reported to take different forms, making it difficult to trace a pattern in the precise nature of the faults, the types of Gmail user affected, or the length of the time the issues have been experienced. Some users, for instance, have said they periodically fail to send, search or load e-mail, even though they can access their accounts, which gives the impression that the fault lies with Google. “There is no technical issue on our side,” the company spokesperson said. “We have checked extensively.” In other instances, users in China have been unable to log into Gmail or even access the Gmail site.

Stocks higher as Japan crisis eases

European bourses followed Asian peers higher as signs of progress at the Fukushima nuclear plant in Japan counteracted concerns over the west’s involvement in Libya and a subsequent jump in oil prices, reports the FT’s global markets overview. The FTSE Eurofirst 300 was up 1 per cent and London’s FTSE 100 was gaining 1.1 per cent, with banks and cyclicals making good headway. Germany’s Dax index was up 2 per cent after Deutsche Telekom soared 16 per cent at the open following its $39bn sale of T-Mobile USA to AT&T. A more optimistic mood in the markets was reducing the need for perceived havens such as Treasuries, where yields were sharply higher. The FTSE All-World equity index was up 0.3 per cent and US stock futures were higher by 1.1 per cent. A rally for many riskier assets suggested that investors were placing greater weight on an improving situation at Fukushima than the continued tensions in Libya and across the Middle East. Tokyo’s stock market was closed for a national holiday, but the yen was still trading and the Japanese authorities will be pleased to see that the currency has stabilised above the Y80 mark to the dollar following last week’s intervention by G7 central banks.

Psst, chancellor

Ahead of this week’s ‘pro-growth’ but pro-austerity UK budget, comes a no-growth finding from the Institute for Fiscal Studies. Not only did the UK experience the biggest three-year drop in real living standards since 1980-83 between 2008 and 2011, says the Institute, incomes in 2013-14 are likely to be below those in 2008 -09. That will be the biggest drop over a five-year period since the five years from 1972 to 1977. FT Alphaville wonders if it’s stagflation time in the UK? Read more

Further reading

Elsewhere on Monday,

Crude’s watchdog is ready to bark. Read more

Pink picks

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

Robert Skidelsky and Felix Martin: A way out of Britain’s growth dilemma
As he prepares for Wednesday’s Budget, the UK’s Chancellor George Osborne faces a dilemma, write Skidelsky and Martin, author of Keynes: The Return of the Master, and an economist at Thames River Capital LLP. On the one hand the recovery has stalled even before his cuts have started. On the other the simple solution of relaxing austerity plans to stave off a double-dip recession is financially and politically unrealistic. Fortunately, there is a way to square this circle – and it requires no U-turn at all. Read more

Snap news

Breaking pre-market news on Monday,

– Swiss Re estimates Japan claim costs at $1.2bn – statementRead more

Bradesco eyes Carrefour Brazil unit

Bradesco eyes stake in Carrefour’s Brazilian banking arm Bradesco, one of Brazil’s biggest banks, is planning to buy a stake in the local finance arm of French retailer Carrefour to take advantage of surging demand for consumer credit, reports the FT. Many Brazilian retailers have moved to allow consumers to pay for goods in instalments – a phenomenon that has helped propel the economy to the fifth-largest in the world and proved especially lucrative for local banks. Last year, Bradesco made about 10bn reais ($6bn) in net income.Itaú-Unibanco, Brazil’s largest non-government bank, is its main competitor, but Santander is also in the running, he said. French bank BNP Paribas has so far provided the financial services offered by Carrefour in Brazil but the retailer is looking for a new partner.

Canberra denies blocking exchange deal

The Australian government has been forced to shoot down reports it will reject the Singapore Stock Exchange’s near $8.4bn bid for its Australian counterpart, as politicians opposed to the deal stepped up efforts to block the deal, reports the FT. Wayne Swan, the Australian treasurer who will provide an initial ruling on the deal after taking advice from the country’s foreign investment regulator, on Monday insisted no decision had been made. The Singapore bourse’s agreed A$8.4bn ($8.37bn) cash-and-share offer for the Australian Securities Exchange announced last October would create Asia’s second-largest exchange by the number of listings, behind the Bombay Stock Exchange but ahead of exchanges in Tokyo and Hong Kong.