Posts from Friday Mar 25 2011

The history of US finance in one very, very long chart

PowerPoint smackdown.

We popped this in further further reading but it’s cool and weekend-friendly enough to warrant a short Friday post. (You may have seen this before but we hadn’t, so please indulge this geekery.) Read more

Further further reading

For the commute home, or before your memorial Liz Taylor movie marathon this weekend,

- How the Chinese, Indians, Russian, Egyptian, Brazilian, and Americans spend their money. Read more

Florence and the derivatives machine [updated]

The sad, bonkers story of the derivatives battle between investment banks and Italian municipalities received another footnote on Friday:

Milan, March 25, 2011 — Moody’s Investors Service has today downgraded the City of Florence’s debt rating by one-notch to Aa3 from Aa2. The rating outlook is negative. Read more

Tamoil light

From Reuters on Friday:

RTRS – BP SAYS HALTS BUSINESS WITH LIBYAN-CONTROLLED TAMOIL Read more

Libor highballs?

There are two ways to manipulate Libor, the interbank lending rate that acts as a reference point for about $350,000bn worth of financial products.

Both could have their advantages. Banks that are net borrowers benefit from a lower rate as it reduces their interest payouts. And net lender bank would benefit from a higher rate because it would receive more interest on Libor-linked products. Read more

Death by expenses – the ACA Euro 2007-1 CLO

Did any one read the fine print in this CLO bond prospectus?

Because ACA Europe 2007-1, a €400m collateralised loan obligation issued by a UK unit of ACA Capital Holdings is in a spot of trouble. Read more

US Markets Live transcript 25 Mar 2011

Live markets commentary from FT.com 

Reminder: US Markets Live begins in 30 minutes

We’re kicking off promptly at 10am EST, 2pm GMT — and by “promptly” we mean three minutes late.

Topics du jour will be the latest on Japan, Eurozone/Portugal, MENA, plus the fourth quarter US GDP revision and UMich consumer sentiment. And whatever happens to break in real-time, of course. Read more

Get yer collateralised Portuguese bonds here

Portugal comes off the market, EFSF comes on the market.

Nomura’s European rates team was thinking ahead on Friday (click charts to enlarge): Read more

John Kemp dismantles the commodities vs global demand chart

On Thursday we wrote about the San Fran Fed’s commodities vs global demand chart. Just so you don’t have to go back, here it is again:

 Read more

Dear RepoClear Member, Re: Portugal [updated]

We were worrying recently that LCH.Clearnet would hike margin requirements for trading Portuguese bonds (hence, a sell-off).

Something else has come up: Read more

Markets Live transcript 25 Mar 2011

Live markets commentary from FT.com 

Portugal’s negative cash flow

Ahead of Friday’s meeting between Portugal’s political parties and President Aníbal Cavaco Silva and after S&P’s two notch downgrade, we thought this chart (from RBS) was worth an airing.

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To value a caja, correctly

Recapitalise, write down, rebuild.

Oops. Hang on. Not sure about thisRead more

Tepco reactor core may be breached, says nuclear agency

Japan’s nuclear regulator said one reactor core at the quake-damaged Fukushima Daiichi power plant may be cracked and leaking radiation, reports Bloomberg. “It’s very possible that there has been some kind of leak at the No. 3 reactor,” Hidehiko Nishiyama, a spokesman at the Japan Nuclear and Industrial Safety Agency said in Tokyo on Friday. While radioactive water at the unit most likely escaped from the reactor core, it also could have originated from spent fuel pools stored atop the reactor, he said. Reuters, meanwhile, reports that three more Japanese firms have diverted liquefied natural gas to Tokyo Electric, the operator of the plant, as it becomes increasingly reliant on thermal output to meet the region’s growing electric power needs.

The deleveraging pain in Spain

Here’s a problem for Spain (and to a lesser extent, the US and UK) charted:

 Read more

Gates calls for Syrian forces to move aside

Syria should follow Egypt’s lead and the Syrian army should “empower a revolution”, Robert Gates, US secretary of defence, argued as thousands marched in a southern city, the FT reports. Mr Gates made his comments – some of the toughest remarks to date by a US official about the rule of Bashar al-Assad, Syria’s president – on a day of further upheaval in the Middle East and beyond. The White House signalled it was preparing for a change in power in Yemen, where it has been allied with the government of Ali Abdullah Saleh, president. Nato allies reached a deal in which the alliance will take over command of the Libyan no-fly zone, although responsibility for strikes on forces loyal to Col Muammer Gaddafi will not immediately come under the Nato umbrella.

Goldman slides to 10th place in US M&A ranks

Goldman Sachs dealmakers have slid to their worst position in more than two decades in Thomson Reuters’ US deal advisory rankings, reports the news agency. The bank, previously a top dealmaking institution, come in at 10th place for the first quarter of the year. While deal rankings can move around dramatically each quarter, Reuters says it is embarrassing for Wall Street’s premier bank to have fallen in the pecking order. League tables are closely followed by bankers who compete hard for lucrative assignments advising companies on mergers and acquisitions. According to the Thomson Reuters stats, Goldman advised on $71bn worth of US deals in the first quarter, far less than JP Morgan’s chart-topping $170bn, and even lower than much smaller banks such as Rothschild, Evercore Partners and Lazard. It is Goldman’s lowest quarterly ranking since Thomson Reuters began tracking US M&A deals in 1990.

364 days later – HMV edition

A year is an awfully long time for a business in structural decline.

Ask Simon Fox, the boss of HMV. Read more

RIM shares tumble on PlayBook costs

Research in Motion cautioned that its performance in the current quarter would be affected by costs associated with the launch of its PlayBook tablet device next month, disappointing investors who sold-down the stock in after-market trading, the FT reports. Shares in the Canadian company tumbled as much as 12 per cent in after-hours trading on Nasdaq before settling 10 per cent lower at $57.50. RIM also confirmed that its soon-to-be released PlayBook will be able to run software applications developed for other devices, including Android-based smartphones – a move that could enable it to compete more effectively with Apple’s iPad. Continued strong sales of its BlackBerry family of smartphones, particularly in markets outside North America, helped RIM report a 36 per cent increase in fiscal fourth-quarter revenues and a 32 per cent increase in net profits for the quarter ending February 28.

Stocks rally for seventh session

Hopes that the global economic recovery is sufficiently robust to see off a combination of Japan’s travails, Mideast unrest and eurozone fiscal woes was delivering another positive day for many riskier assets, the FT’s global market overview reports. The FTSE All-World equity index was up 0.1 per cent, the seventh day in a row that the global benchmark has recorded gains, leaving it 5 per cent above last week’s post-Japan earthquake low and just 2 per cent below February’s cyclical high. Sentiment was being bolstered by signs of continuing improvement in the US labour markets and as corporate earnings underpin valuations. Oracle was the latest technology group to deliver solid profits and an upbeat outlook, illustrating its confidence by sharply increasing its dividend. Meanwhile, gauges that signal optimism over the global economy were stuck on green. The Aussie dollar, a so-called commodity currency, was once again flirting with 29 year highs versus its US namesake, on Friday up 0.3 per cent to $1.0241.

Oracle earnings beat expectations

Oracle, the US software maker, claimed market share gains from rival SAP on Thursday as it reported quarterly earnings that showed a further rebound from the economic downturn, the FT reports. A better than expected 29 per cent rise in revenue from new software licences pushed the company’s earnings well above its own and Wall Street forecasts. Oracle issued a forecast for its current quarter ahead of most estimates and raised its dividend by 20 per cent. The company’s shares climbed 3 per cent in after-market trading, having already risen more than 2 per cent earlier in the day. Safra Catz, one of two Oracle presidents, would not attribute the group’s success to a broader recovery in IT spending, claiming it reflected the success of a wave of Oracle software products and the successful integration of Sun Microsystems, which it acquired early last year.

BP’s Dudley under fire as Rosneft deal gets blocked

BP’s plans for a historic $16bn share swap and Arctic alliance with Russia’s state-oil champion Rosneft are in the balance after an arbitration tribunal extended an injunction on the deal, reports the FT. The ruling is a setback for the UK oil group and Bob Dudley, its new chief executive, who had argued that the alliance, unveiled in January, was an important growth opportunity for the company as it tries to recover from the Gulf of Mexico disaster last year. Reuters adds that Dudley is under fire due to the role of the British oil company’s partners in joint venture TNK-BP in blocking the deal. ”Given his (Dudley’s) past relationship in Russia, how difficult it has been, he should have been a bit more appreciative of how tricky it can be operating in Russia,” Arbuthnot Securities analyst Dougie Youngson told Reuters.  Dudley was in charge of TNK-BP before being forced to leave Russia in 2008 due to what he said was a campaign of harassment by the joint venture’s co-owners.

Merkel agrees eurozone fund restructure

Angela Merkel, the German chancellor, convinced her European counterparts to restructure a new €500bn eurozone bail-out fund so that members will not have to pay cash into the system so quickly, the FT reports. The new fund, which goes into place in 2013, will require €80bn in paid-in cash as well as €620bn in guarantees and callable capital so that it can use its full €500bn to rescue debt-ridden countries that suffer a Greece-like implosion. Originally, eurozone finance ministers had agreed to put €40bn immediately into the fund upon its creation in 2013, with the rest being paid in over three years. But Ms Merkel’s coalition partners, the Free Democrats, resisted paying in so much so quickly, and the German chancellor was able to spread the payments to €16bn per year over five years. Portuguese bond yields though did not respond positively to the news, and the 10-year Portuguese bond yield has since struck through the 8 per cent level.

China customs detain Glencore trader over fuel imports

Chinese customs officials have detained a Beijing-based Glencore trader as part of an investigation into fuel imports and potential tax evasion, Reuters reports. Sources with direct knowledge of the situation told the news agency that Li Buhua, a Chinese national, had also been released last week on bail. Glencore, was not immediately available for comment. The Swiss commodity trading giant,valued earlier this year at about $60bn, is in the process of preparing for what could be a record London initial public offering. Reuters says Chinese customs have since late last year been investigating imports of “power kerosene”, a fuel of a quality between diesel and kerosene but which can easily be turned into diesel. It is not, however, subject to the same taxes that apply to diesel or kerosene. According to the FT, Glencore is hoping to sell a stake of about 20 per cent and worth about $10bn-$12bn, in London and Hong Kong as early as May.

Bargain basement

For sale, offers over £400,000:

 Read more

Tokyo: who’s in the money?

Interesting times in the Japanese stock market – not to mention the shell-shocked country as a whole – as the key Nikkei and Topix gauges ended the holiday-shortened week up a respectable 3.3 per cent and 3.6 per cent respectively.

The newfound interest in Japanese stocks could well recede on Friday’s news of fresh problems at the stricken Fukushima nuclear power plant, as authorities admitted the No. 3 reactor could be cracked and leaking radiation. Read more

Further reading

Elsewhere on Friday,

- “Of course the game is rigged.” Read more

Pink picks

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

Gillian Tett: Vix volumes rise could drive investor trends
Does the existence of another hedging tool smooth adjustments or can a “fear” gauge create more fear?, asks the FT’s Gillian Tett. My own instinct is that creating the Vix has been beneficial – on balance, more transparency is good. But as global instability rises, and financial flows and electronic communications speed up, these questions about “reflexivity” are becoming more important. Better keep watching the Vix – not just for its level but volumes too. Read more

Snap news

Breaking pre-market news on Friday,

- Standard & Poor’s cuts Portugal by two notches to BBB; warns of further downgrade — reportRead more