Posts from Thursday Mar 31 2011

CEO of Taiwan’s Acer resigns

Gianfranco Lanci, Acer’s chief executive and global president, has resigned from the Taiwanese computer maker, the latest top executive to fall because of a failure to react quickly enough to the rapid changes sweeping through the consumer electronics industry, reports the FT. Lanci’s resignation on Thursday came after the Asia’s biggest PC group by sales said last week that first-quarter results would be worse than expected, the second straight quarter that it would miss guidance.

Stocks struggle to end strong but volatile quarter on a high

Traders are trying to finish a volatile quarter on an upbeat note as a powerful undercurrent of bullishness based on hopes for global growth continues to battle with nervousness over Japan’s nuclear problems, Middle East unrest and eurozone fiscal woes. The S&P 500 on Wall Street is down 0.2 per cent at 1,325, as investors weighed another sub-400,000 number for weekly jobless claims against softer-than-expected March factory orders. The FTSE All-World equity index is up 0.1 per cent to 226.3, taking the benchmark’s gains since the start of the year to 4 per cent and leaving it less than 1 per cent below February’s cyclical peak. The Reuters-Jefferies CRB Commodities index is up 5.7 per cent for the quarter, a move that speaks to the optimism over resource demand that travels hand-in-hand with a positive prognosis for the global economy. Such a trundle higher in riskier assets has confounded the bears because it has come during a quarter in which markets have had to cope with a batch of worries, potentially all the more destabilising for their diversity.

Irish banks need €24bn after stress tests

Ireland’s stricken banking sector will require €24bn in additional capital, pushing the total cost of the government’s rescue to about €70bn (£62bn), reports the FT. As the results of stress tests on the country’s banks were revealed, the government announced a radical shake-up of the industry aimed at restoring investor confidence in Ireland’s banking sector, which remains dependent on the European Central Bank. Allied Irish Banks, which had previously been told to raise an additional €5.3bn, must now raise €13.3bn. Bank of Ireland must raise €5.2bn, Irish Life & Permanent €4bn and Educational Building Society €1.5bn.

Grain price surges as inventories fall further

Prices of farm commodities soared after the US government revealed that inventories of corn and soyabeans were lower than had been believed, adding to inflationary pressures around the world, the FT reports. The surge in grain prices has become a headache for policymakers, particularly in developing countries, forcing central bankers to tighten monetary policy. The US Department of Agriculture said on Thursday that the highest prices in two-and-a-half years were prompting farmers in the US, the world’s largest exporter of agricultural commodities, to plan big increases in plantings. However, the extra acreage is unlikely to be enough to rebuild stocks to comfortable levels.

Quake disaster hits Japan manufacturing

Japanese manufacturing activity sank to a two-year low in March, underlining the impact of the earthquake and tsunami on economic activity in the country, reports the FT. The damage caused by the March 11 disaster, which has claimed the lives of more than 11,000 people, severely disrupted the production of car parts, electronics and other products, forcing global companies such as Toyota to halt manufacturing.

Stabilising nuclear plant to take years

Japan’s quake-crippled atomic power station will take years to fully stabilise but officials hope to prevent any further deterioration of the plant and stem the leakage of radioactive material into surrounding areas within a matter of weeks, the FT reports. Workers are battling to contain radiation from the power station amid signs it may be continuously leaking into the sea. The huge earthquake and tsunami that ravaged Japan’s north-eastern coast on March 11 knocked out the plant’s cooling systems.

ECB waives Irish sovereign ratings threshold

A pre-emptive strike late on Thursday night against ratings agencies downgrading Ireland below the minimum needed for institutions pledging Irish paper as collateral, on account of the fresh bank capitalisation costs:

The Governing Council of the European Central Bank (ECB) has decided to suspend the application of the minimum credit rating threshold in the collateral eligibility requirements for the purposes of the Eurosystem’s credit operations in the case of marketable debt instruments issued or guaranteed by the Irish government. The suspension applies to all outstanding and new marketable debt instruments. It will be maintained until further notice. Read more

Shutdown averted, again, perhaps, or maybe not

Shutdown fears seemed to have shutdown on Wednesday evening when lawmakers allegedly found the contours of a deal to fund the government through the end of FY 2011.

Unsurprisingly, John Boehner on Thursday says no deal is imminent. The proposed details are still worth glancing at, however, as the rough size of any final package now seems a bit clearer. Read more

Ireland: does the fire sale start here?

You’ve already had the stress test results (more on those in a moment), here’s the Irish finance minister’s statement regarding what survives of Ireland’s banking system.

In short: a rump Bank of Ireland, a mashed-together Allied Irish and EBS, and a cleaved Irish Life & Permanent. With the fate of Anglo Irish and Irish Nationwide still unclear. Read more

Who won the energy speech?

It would be easy to brush off President Obama’s “Blueprint for a Secure Energy Future” initiative and associated speech yesterday as the obligatory promise to lower dependence on oil in response to the latest surge in gasoline prices.

That’s the start of a brief note from BarCap. And yes, the speech was easy to brush off, sounding to our cynical ears like the kind of speech presidents have been giving since well before this correspondent entered the world. Read more

Crisis market metrics

Or, how well did the market do in judging banks’ health during the financial crisis? How accurate was the market stigma surrounding banks that might be tapping the Federal Reserve for help?

And so on. Read more

Ireland’s stress test results [updated]

Here’s the full report, click image to open:

The bank recapitalisation grand total: €24bn Read more

A first look through the Fed’s discount window

You’ve had the Primary Credit Dealer Facility data — ready yourself for the discount window stuff.

On Thursday the Federal Reserve released some 25,000 documents laying out just who tapped the Fed’s famous overnight facility between August 2007 and March 2010. Now the Fed’s previous $3,300bn data dump, in December, had lots of juicy detail on things like the PDCF and the TAF but it did not include discount window data, supposedly because of the stigma attached to using the thing. Read more

Viva, O’Vegas

As we wait for Ireland’s latest bank stress test results (due within half an hour at pixel time), a tidbit on methodology from the Irish Times:

BlackRock, the consultants hired by the Central Bank to verify the tests, have used mortgage losses in the US state of Nevada, one of the worst-hit in the subprime crisis, to assess Irish losses.

 Read more

Why is the Vix so low?

This is the Vix — globally respected barometer of market fear:

 Read more

Crop shops

A chart from Citi showing how this morning’s crop report fared against expectations:

 Read more

Sokol speaks…

… and when he looks back at Thursday’s interview with CNBC it might be with some regret.

When you are in a hole, stop digging etc… Read more

Lessons from the People’s Repository of China

Countries of the world take note!

When faced with falling demand for one of your nation’s top domestically produced crops (versus growing commodity import bills) follow the example of China. Stockpile! Read more

What lurks in Anglo Irish

What with being dead and all, Anglo Irish will probably not have a starring role in Ireland’s fifth attempt at recapitalising banks, due at 4.30pm (Dublin time) this Thursday.

That would be a shame. Read more

Why the Chinese copper financing scheme is a big deal

FT Alphaville has recently focused on the rise in commodity-backed financing schemes in China as a response to the People’s Bank of China’s tightening measures, which shut credit off to many small- and medium-sized companies in the country, as well as real-estate developers.

But, we would say, this is only one side of the story. Read more

Trade the weather, not consensus?

Just an idea, of course.

But it comes via JPMorgan’s Seamus Mac Gorain, and it’s part of a 12-page study covering more than a decade of intraday trading data around big economic releases. Read more

Markets Live transcript 31 Mar 2011

Live markets commentary from 

Microsoft files EU antitrust suit against Google

Microsoft has filed a formal complaint with European antitrust regulators about Google’s online search dominance in the region, according to the FT. While Microsoft and partner Yahoo have about a quarter of the US search market and Google the rest, Google has almost 95 per cent of the market in Europe, according to Microsoft’s general counsel Brad Smith, who cited data from regulators. Smith said in a Microsoft blog post that Google had obstructed Window Phones’ access to some of its sites and prevented advertisers from access to their own data. Google has consistently denied dominating the online search market and has contested individual allegations made against it.

NY Fed’s Maiden Lane II auction rattles AIG

The New York Federal Reserve has dealt a blow to AIG ahead of a public offering in May by saying it would auction mortgage-backed securities held in the Maiden Lane II vehicle rather than allow the insurance group to buy them back, the FT says. The NY Fed said it would sell the securities ‘individually and in segments’ rather than as one block, in order to maximise proceeds for taxpayers and ensure institutions did not have concentrated exposure to the securities. Robert Benmosche, AIG’s chief executive, said the decision was ‘not good’. AIG has a large cash pile for buying distressed assets, but few holders have been willing to sell at current prices.

Rajaratnam’s boasts on Goldman tip

Prosecutors in Raj Rajaratnam’s insider trading trial have played a recorded phone call in which he is heard telling a colleague that he was told by a board member of Goldman Sachs that the bank would report a quarterly loss, the FT reports. The jury heard a recorded call where Mr Rajaratnam told a Galleon trader he received “a call at 3:58pm last night saying something good might happen to Goldman”. Prosecutors have shown that Rajat Gupta, then a Goldman director, called Mr Rajaratnam at that time, after a board meeting in which a $5bn investment by Warren Buffett was approved. Discussions of Goldman losses are also covered in detail in the calls, the WSJ reports.

Bank of Japan considering emergency loans

Japan’s central bank could offer temporary lending to banks in order to tide over companies left with cash-flow problems after the earthquake, people familiar with the matter told Bloomberg. Plunging sales and cuts to power supplies have left companies without cash on hand for paying salaries. Japanese manufacturing activity sank to a two-year low in March, underlining the impact of the earthquake and tsunami, the FT reports. The seasonally-adjusted Markit/JMMA Japan manufacturing purchasing managers’ index fell to 46.4 in March from 52.9 the previous month, the steepest decline since the data began in 2001.

US back on top in M&A and IPO stakes

US M&A activity has jumped 84 per cent to $267bn in the first three months of 2011, leading a 26 per cent rise in deal activity worldwide, reports the FT. The US now accounts for almost half of global activity, up from about a third last year. Deals involving companies from Brazil, Russia, India and China accounted for 12.6 per cent of global activity, their highest contribution since Mergermarket records began in 2001, although emerging markets M&A fell 14 per cent overall. The US also led global equity fundraising in 2011’s first quarter, accounting for 35 per cent of global equity issuance, Reuters reports. Goldman led the dealmaking tally, followed by Bank of America Merrill Lynch.

Former Goldman trader launching $1bn HK fund

Morgan Sze, the former head of Goldman Sachs’ Principal Strategies unit, has received commitments of more than $1bn from investors ahead of launching his hedge fund in Hong Kong on Friday, Reuters reports. Azentus Capital’s multi-strategy fund will be one of the biggest hedge fund launches since the financial crisis, and will immediately surge to the top of Asia hedge funds, a region where only eighteen funds top $1bn assets under management, but which contributes a fifth of the $1.9 trillion managed by hedge funds worldwide. New York has 128 funds managing more than $1bn. Azentus will launch the fund with a slew of former executives from Goldman’s Asian operations onboard.

Jamie Dimon attacks capital rules

JPMorgan Chase’s chief executive Jamie Dimon has warned that new capital rules could be “the nail in our coffin for big American banks”, reports the FT. If requirements were set too high, or allowed foreign banks to count capital differently, US banks would be disadvantaged, Dimon said in remarks to the US Chamber of Commerce. “If you think that’s helping growth, it’s not,” Dimon said, adding that a 7 per cent capital ratio would be adequate. Mr Dimon’s comments come as Wall Street executives and Republican members of Congress are starting to attack regulation as anger at the financial industry subsides.

Reverse convertibles come under SEC probe

The SEC is investigating whether Wall Street banks adequately told investors of the risks of reverse convertible notes, bonds linked to the performance of underlying equities, sources familiar with the matter have told the WSJ. Finra will also likely levy a large fine on a brokerage firm for mis-selling of reverse convertibles, later this summer, sources said. It remains unclear whether civil charges will be brought against the notes’ underwriters or sellers. ‘Pure poison’ or a ‘chainsaw’ are terms FT Alphaville has used to describe reverse cons before — the coupon-paying notes seem conservative, but can quickly haemorrhage money if the underlying stocks fall below a protection price over the life of the notes.