Posts from Monday Mar 28 2011

Further further reading

For the commute home, where your productivity gains are measured in trash bags taken out and dishes washed,

– A preview of the upcoming film Too Big To Fail, starring Paul Giamatti as Ben Bernanke and James Woods as Dick Fuld. Read more

Stocks down for first time in eight sessions

A seven-session rally in global share prices despite lingering concerns about the Middle East and Japan has come to an end, as US Federal Reserve officials seemed to view this period of global optimism as a good time to begin discussing an end to easing, reports the FT’s global market overview. Though European bourses were sporting minor gains and the S&P 500 on Wall Street was up 0.2 per cent following well-received US personal income and consumption data, the FTSE All-World equity index was down 0.1 per cent, following a weak Asian session. The Fed’s improving outlook was reflected in a modest rise in the front-end of the US rate curve, with 2-year Treasury notes up 3 basis points to 0.7645 per cent. US 10-year Treasury yields were up just 1 basis point to 3.44 per cent. Brent crude was weak following gains for Libya’s rebels and Qatar’s agreement to accept oil under their control had reduced supply fears. The May contract was down 0.3 per cent at $115.30 a barrel.

Chinese to drive energy M&A

China’s oil and gas companies are set to continue their global mergers and acquisitions drive this year after the country’s top three groups reported strong profits for 2010 and outlined future acquisition plans, reports the FT. PetroChina and Sinopec plan to spend a combined $36bn on exploration and production investments this year. Cnooc, which spent $9.9bn last year on oil and gas investments, said that its expenditure would “continue to rise”.

Ebay to purchase GSI for $2.4bn

Ebay has made a bid to revive sales growth and diversify its business with the agreed acquisition of GSI Commerce, an interactive marketing company, for about $2.4bn, including debt, reports the FT. Ebay will pay $29.25 a share, a premium of 51 per cent over GSI’s closing share price last week, for the Pennsylvania company, which handles the e-commerce activities for large brands and retailers, including the National Football League, Toys R Us and Ralph Lauren.

Japan hurts computer-driven hedge funds

Several of the world’s biggest computer-driven hedge funds have been hit hard by volatile Asian markets after the Japanese earthquake and tsunami, reports the FT. Graham Capital in Connecticut saw its $4bn flagship fund lose around $300m, down just under 8 per cent, over the first two weeks of the month. The firm’s other funds also suffered steep losses of around 5 per cent each, according to an investor.

Lenovo joins tablet war with LePad

When Lenovo, the world’s fourth-largest PC vendor, launched its tablet computer on Monday night, the world was not invited, reports the FT. The company treated Chinese media to a lavish party in Shanghai, and the LePad – a device with a 10.1-inch screen powered by a Qualcomm Snapdragon processor – went on sale in China only. And yet, some industry experts see the Chinese company, under Yang Yuanqing, chief executive, as the most likely future rival for Apple in the global tablet market.

Radioactive flood in Japan reactor tunnels

Dangerously radioactive water has leaked from Japan’s crippled Fukushima Daiichi nuclear power station, in the latest breakdown of containment systems at the plant battered by an earthquake and tsunami, reports the FT. Tokyo Electric Power, the plant’s operator, said on Monday that a network of underground maintenance tunnels connected to the four most damaged reactors had been flooded close to overflowing with the highly contaminated water.

Vietnamese traders beat bullion export ban

Vietnamese gold traders have sent billions of dollars worth of high-grade gold jewellery to be smelted in Switzerland over the past two years to circumvent government restrictions on bullion exports, reports the FT. Before 2008, Vietnam exported minimal amounts of gold ornaments to Switzerland, which dominates the global gold smelting industry, turning items from rings to candlesticks into international standard bullion.

Qatar boost for Libyan rebel council

Qatar has become the first Arab country to recognise Libya’s rebel national council as the representative of the North African nation, easing the way for the opposition to profit from oil sales on global markets, reports the FT. Over the past two days, rebels have seized control of the bulk of Libya’s oil industry – including the country’s largest oilfields in the so-called Sirte basin and the main terminals – as they have pushed back Muammer Gaddafi’s forces with the assistance of Nato air strikes.

ICBC plays down credit boom risk

China’s largest bank lent Rmb640bn ($98bn) to local governments in the post-crisis credit boom, but insists these loans do not pose a danger to the country’s banking system, reports the FT. In an interview with the Financial Times, Jiang Jianqing, chairman of Industrial and Commercial Bank of China, the world’s biggest bank by market capitalisation, acknowledged that unbridled lending to development companies controlled by local governments did carry some risk for the economy. The development companies now account for 10 per cent of ICBC’s loan book. In the aftermath of the 2008 global financial crisis, Chinese banks roughly doubled their lending activity.

US families and attitudes toward financial risk

What impact did the crisis have on the attitudes of American families toward financial risk?

A paper published last week by the Federal Reserve, and cited in a speech by Elizabeth Duke on Thuesday, begins to answer this question by looking at how US households’ wealth, savings and expectations changed between 2007 and 2009. The researchers conducted a follow-up survey in 2009 of families analysed as part of the Survey of Consumer Finances (SCF) in 2007. Nearly 89 per cent of 2007 participants were re-interviewed. Read more

Price-level targeting: no chance

Former CEA chair Cristina Romer talks to Ezra Klein:

Ezra Klein: You’ve also criticized the Federal Reserve for not doing more. What would you like to see them doing?

 Read more

More on uncertainty and capital controls

In a previous post about the efficacy of capital controls, we interpreted a passage from Reinhart & Rogoff’s epic This Time is Different by saying “there remains an awful lot we simply don’t know about the consequences of capital flows, capital controls, or, more generally, about the appropriate pace and nature of financial liberalisation in developing economies.”

Well, the crisis-expert duo is back, joined by Nicolas Magud of the IMF, with a new paper summarised at VoxEU that explains why such a prominent economic topic brings so much confusion — though their conclusions include more questions than answers about the ability of capital controls to successfully manage flows. Read more

FSA vs CPPGroup

Profit warning du soir:

CPPGroup Plc (“CPP” or “the Group”) announces that it is in discussions with the FSA in relation to certain issues surrounding the sale of the Group’s Card Protection and Identity Protection products.  The FSA’s investigation only relates to such of the Group’s products as are sold into the UK, and specifically to alleged failings in sales calls with customers.  The Group may need to conduct a review in order to identify whether any deficiency has caused customer detriment requiring redress.

 Read more

Standard Bank says Chinese copper market cause for concern

We’re calling it the “The Great Chinese Commodity-as-Collateral Financing” fiddle.

That is, the purchase of commodities like copper on deferred payment terms for the sole purpose of raising cheap financing for reinvestment in higher yielding assets. Read more

Libyan crude, liberated?

On Monday, Qatar gave diplomatic recognition to Libya’s rebels.

On Saturday — Qatar Petroleum had agreed to market Libyan oil controlled by the rebels to international buyers. Read more

The ‘Banks Under Restructuring’ programme

BURP, for short.

Oops. Excuse us. Manners. Read more

Some curious silver forward patterns

Another day, another reoccurring pattern in London silver forward fixings.

For example, spot the negative oddity here: Read more

CDS options market multiplies alongside questions

What’s over-the-counter, a derivative, and expands despite financial crises?

The CDS index options market. Read more

Japanese utilities have a ‘Tepco moment’

A new phase in Tepco’s “BP moment”: just like the whirlpool created by the massive tsunami after the March 11 earthquake, Japan’s biggest electricity provider and operator of the crippled Fukushima nuclear power plant is dragging peers into its own troubled vortex.

Investors’ attitudes to Japan’s other utilities have not been nearly as severe as the scare that has driven Tepco’s share price down 73 per cent since March 11, and further widened its CDS spreads on Monday by 143bps to 473bps (amid fears, as Markit’s Gavan Nolan remarked, that the company “is losing control of the situation”). But it’s still a very worrying sign for anybody involved in Japan’s nuclear power industry. Read more

Markets Live transcript 28 Mar 2011

Live markets commentary from 

The Chinese time deposit conundrum

This is interesting from BNP Paribas on Monday:

 Read more

Doubts rise over export-led recovery

Around half of America’s climb out of recession since 2009 has come from exports — but now the markets for those exports are becoming shaky, the WSJ reports. JPMorgan analysts lowered their US growth forecasts to 3.4 per cent from 4 per cent on Friday, following shocks to the Japanese economy and oil prices. Executives at companies such as Adobe have already noted a hit from Japan’s earthquake by lowering revenue forecasts for the latest quarter. Elsewhere in the supply chain, trade-focused companies are postponing orders. Overshadowing the most recent shocks is the recession’s huge impact on world trade. FT Alphaville notes a new Fed paper which estimates that global trade volumes fell by 19 per cent during the crisis.

Porsche selling $7bn shares to cut debt

Luxury car maker Porsche has unveiled a €5bn ($7bn) share sale to reduce its debt as part of a planned merger with Volkswagen that is already facing regulatory delays, Bloomberg reports. The company announced the new shares in the capital increase at a 32 per cent to Friday’s closing price in order to lure investors, the FT reports. Porsche has shareholder approval to sell many more shares at an even steeper discount if investors are not willing to buy at the current price. The issue will be watched closely in a market for listings that has been rocked by volatility arising from the Japan earthquake and war and revolution in the Middle East.

Being Ben Bernanke

April 27.

Mark the date in your diary. Read more

Youtube seeking Hollywood backing

Google is deepening its ties with Hollywood by enlisting top stars to supply original content for YouTube in a bid to boost profits and user engagement, the FT reports. The company is offering stars cash advances against future advertising revenues in return for lending their name to these channels and overseeing the content, according to people familiar with the plans. In meetings with the agencies which represent Hollywood’s biggest stars, Google has made no secret of its desire to add more professional, original content to YouTube. The aim is to generate better CPMs – the cost per thousand ad impressions – for the advertising on YouTube, said a person familiar with the situation.

Facebook aiming to hire Robert Gibbs

Facebook is seeking to hire Robert Gibbs, President Obama’s former press secretary, to manage its communications ahead of its planned initial public offering in 2012, NYT Dealbook reports. Sources added that the talks remained at an early stage and could fall through. The role’s compensation would likely involve cash and shares in Facebook. Gibbs had planned to launch the President’s 2012 re-election bid and has discussed the Facebook offer with Obama advisers, leading the company to ask him to expedite a decision on the role, says Reuters.

Radioactive water hobbles Fukushima repairs

Efforts to repair cooling systems at two of the Fukushima nuclear plant’s stricken reactors are being delayed by the need to drain radioactive water from the floors, the FT says. Tokyo Electric Power, the plant’s owner, said it did not know why the water had such high radiation levels. But a government official said that the levels likely came from fuel rods that had partially melted down and come into contact with water coolling the reactor, reports Bloomberg. Tepco announced on Monday that radioactive water had now been found outside reactor buildings as well, Reuters reported on Monday.

A very special collapse in world trade

How big the fall in world trade in 2008/2009?

THIS big: Read more

Rebels advance west in Libya

Rebels against Colonel Gaddafi claimed they had taken control of his home town on Monday, as part of a westward advance across Libya’s coast that has already captured several oil towns, Al Jazeera reports. Coalition air strikes had hit Sirte for the first time on Sunday night in addition to destroying Gaddafi loyalist ground forces that would have impeded the rebel advance, the FT says. The fall of Sirte cannot be so far confirmed, but would indicate that the rebels have now recaptured all the territory lost since the regime began a counter-offensive earlier this month. The rebels also say that Qatar has agreed to help them sell oil on international markets, Reuters reports.