Posts from April 2011

EU probing CDS market for collusion — full statement [updated]

Friday’s stunning announcement from the EU Commission below:

The European Commission has opened two antitrust investigations concerning the Credit Default Swaps market. CDS are financial instruments meant to protect investors in the event a company or State they have invested in default on their payments. They are also used as speculative tools. In the first case, the Commission will examine whether 16 investment banks and Markit, the leading provider of financial information in the CDS market, have colluded and/or may hold and abuse a dominant position in order to control the financial information on CDS. If proven such behaviour would be a violation of EU antitrust rules. In the second case, the Commission opened proceedings against 9 of the banks and ICE Clear Europe, the leading clearing house for CDS. Here, the Commission will investigate in particular whether the preferential tariffs granted by ICE to the 9 banks have the effect of locking them in the ICE system to the detriment of competitors. Read more

We have to mention the royal wedding

The wedding on Friday of Prince William, second in line to the British throne, and Kate Middleton is set to hog the global media spotlight as thousands of journalists, broadcasters and support staff converge on London for an event expected to be watched by some 2bn people, reports the FT. International news organisations have sent scores of workers to cover the event, with CNN alone deploying 50 journalists. The Foreign Press Association estimated that as many as 3,000 journalists would cover the wedding for non-UK media outlets. Christopher Wyld, FPA director described the event as a “combination of the best reality television, the best soap opera and there is real history on top of that.” More than 100 foreign photographers have applied for accreditation outside Westminster Abbey, where the marriage will take place, and along the route between the abbey and Buckingham Palace. TV and radio broadcasters have built 48 studios for the event. But, says the FT in a separate report, the largest audience will be online. See also the FT’s Philip Stephens on ‘confessions of a lapsed republican”.

Deutsche Bank beats expectations

Deutsche Bank said it expects to gain more this year than anticipated from buying Deutsche Postbank last year, suggesting it will achieve profit targets after beating analysts’ expectations with first-quarter earnings, reports the FT. Germany’s largest bank by assets outperformed many peers in its core investment banking businesses while reaping the benefits of domestic expansion into retail banking and wealth management. Deutsche earned net income of €2.1bn ($3.1bn) in the first quarter. Pre-tax profits from operating businesses were €3.5bn, with a record quarterly contribution from retail banking and asset management. The bank has a target of €10bn of annual pre-tax profits this year from operating businesses. Lex however warns that until CEO Josef Ackermann “delivers capital certainy, Deutsche’s shareprice looks set to hug 0.8 times book value”.

Overnight markets: Down

Asian stocks and crude oil fell for the first time in three days on Friday, while the won weakened after US economic growth and South Korea’s industrial production missed economists’ forecasts, reports Bloomberg. Many markets were closed for the Easter holidays and a public holiday in Japan. China’s renminbi strengthened, breaking through 6.5 per dollar for the first time since 1993.

The MSCI Asia Pacific excluding Japan Index sank 0.7% as of noon in Singapore. S&P500 Index futures were little changed. Oil declined 0.3 %, gold retreated from a record high and silver slipped, paring its biggest monthly jump since 1987. Read more

Russia’s Yandex files for IPO

Yandex, Russia’s number-one search engine, has announced it will list shares on Nasdaq in New York, reviving plans of a long-anticipated initial public offering, reports the FT’s BeyondBrics. The flotation follows the $1bn-plus listing in London late last year of internet giant, and will test investor interest in Russian internet companies, one of the world’s fastest growing internet markets. Yandex has not revealed how much it is planning to raise or what size valuation it is targeting, although a person with knowledge of the offering said it was estimated at $1bn in order to determine the registration fee. DealBook cites analysts saying Yandex is likely to see “high demand”.

Trafalgar to liquidate Catalyst fund

Trafalgar Asset Management – the prominent UK hedge fund run by outspoken investor Lee Robinson – is liquidating its flagship fund, reports the FT. The $450m Trafalgar Catalyst Fund is being wound down as a result of “material” investor redemption requests,. An investor in the fund expressed concern about the apparent intention of Robinson – who personally manages the fund and co-manages the firm alongside partner Theo Phanos – to establish a new venture separate from Trafalgar.  Trafalgar is among a handful of London hedge funds in which Goldman Sachs owns a significant stake through its Petershill vehicle – managed by Jonathan Sorrell, son of the WPP chief executive, Sir Martin Sorrell. The liquidation of Catalyst is likely to affect the value of Goldman’s stake.

Jimmy Choo eyes $1bn HK float

Jimmy Choo and its private equity owner TowerBrook Capital are considering a £650m ($1.07bn) initial public offering of the luxury shoe group, in a move that could intensify competition in the auction for the company, reports the FT. Three bidders are vying for control of Jimmy Choo – private equity group TPG Capital; Jones, the US retailer, and a consortium of Investcorp and Labelux, the private luxury goods group that owns Bally. Second-round bids are due in mid-May. It is understood that bids on the table are above £500m. But Jimmy Choo and TowerBrook are now considering an IPO after a proposal by HSBC. It is likely any listing would take place in Hong Kong, fast emerging as the public market of choice for luxury labels.

BGC Partners buys Newmark

BGC Partners, the US brokerage, announced on Thursday the purchase for an undisclosed price of Newmark, the real estate advisory firm that operates as Newmark Knight Frank in the US, reports DealBook. BGC’s chief executive and chairman, Howard Lutnick said the deal marked the start of BGC’s push into commercial real estate. Lutnick is also chief executive of the brokerage firm Cantor Fitzgerald, BGC Partners’ controlling shareholder. Newmark has a close partnership with London-based Knight Frank, although the firms are independent of each other. Shares of BGC rose about 2% in afternoon trading on Thursday.

Nasdaq/ICE may go hostile for NYSE

Nasdaq OMX and IntercontinentalExchange are set to go hostile in their bid for NYSE Euronext after shareholders raised pressure on the NYSE parent for a better deal, reports Reuters. Nasdaq and ICE are expected to soon take their $11.1bn bid directly to NYSE’s shareholders through a tender offer. The move is seen as the next logical step for Nasdaq and ICE after being rebuffed twice by NYSE, which favours its existing $10.1bn deal with Germany’s Deutsche Boerse. A direct appeal to shareholders through a tender offer would intensify pressure on NYSE. Earlier, the FT reported that Deutsche Börse executives for the first time publicly backed statements by Duncan Niederauer, NYSE chief executive, that at least €100m of extra synergies can be extracted from their planned merger. That will quiet speculation the two sides had not previously agreed on what cuts to make. Meanwhile, says DealJournal, Niederauer “has some serious sweet-talking to do”.

Panasonic to slash jobs

Panasonic Corp, Japan’s biggest home appliance maker and the world’s largest maker of plasma televisions, plans to cut nearly 5% of its full-time workforce over the next two years as it steps up efforts to restructure its businesses, reports the FT. The company, which reported its first profit in three years on Thursday, said it planned to cut its regular workforce to 350,000 by March 2013 from 366,937. The statement followed a report in Japan’s Nikkei newspaper that Panasonic was set to cut more than 12% of its workforce, or 40,000 jobs. Analysts said the figure incuded the elimination of part-time jobs that were not counted as regular ones. The move follows the company’s Y664.8bn purchase in 2010 of remaining stakes in Sanyo Electric and Panasonic Electric Works, in which it owned 50% and 51% respectively.

Total agrees $1.4bn stake in SunPower

Total, the French oil and gas group, has agreed to take a majority stake in SunPower, the California solar power company, for about $1.4bn, in one of the largest-ever single investments by an oil company in renewable energy, reports the FT. Total plans to buy up to 60% of SunPower’s A and B shares at a price of $23.25, a 46% premium to the A shares’ closing price on Wednesday. SunPower is the second-largest US solar panel supplier. By taking a majority stake but maintaining SunPower’s independence, Total hopes to use its financial strength and global reach while preserving SunPower’s culture and entrepreneurial tradition.

RIM plunges on profit warning

Shares in Research in Motion, the Canadian manufacturer of the BlackBerry, plunged as much as 11% in after-hours trading after the company issued a surprise profit warning due to growing competition from Apple and Google as well as delays in the launch of an updated generation of smartphones, reports the FT. RIM said on Thursday it had cut sales and profit forecasts for the current quarter due to slowing demand for its ageing smartphones, which are losing ground to the iPhone and other touchscreen- based handsets. RIM said it expected profits this quarter of $1.30-$1.37 a share, down sharply from last month’s forecast of $1.47-$1.55. The NYT says that RIM’s previously robust financial performance is ‘not looking so solid.

Further further reading

A friendly reminder that FT Alphaville is off on Friday to celebrate an odd ritual whose meaning escapes its American correspondent. (We kid, people, relax.)

Monday, of course, is a bank holiday. We’ll be on alert in case something huge breaks, but in all likelihood we’ll see you on Tuesday. Read more

More on Q1 GDP

Our thoughts are below, but for reference you can click to enlarge these two charts. The first, via RQD Economics, shows the change in each of the categories that contribute to the GDP number:

 Read more

Reflections on Bernanke

The following was written by Gavyn Davies and is also posted at his blog. We’d like to again thank Gavyn for having joined FT Alphaville yesterday for our special edition of Markets Live.

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Copper, the re-export factor

We’ve already referred to the latest Reuters Metals Insider report on Thursday, but somehow we feel that the following is worth a special mention of its own.

That is, what happens when the government attempts to rein in innovative Chinese financing schemes like those using copper as collateral? Read more

A little Protium light

For no reason other than to have it out in the open somewhere -presenting the financial filings of C12 Capital Management LLP:

It’s controlled by C12 Capital Management Holding Ltd – as in the guardians of Protium, the infamous Barclays toxic asset portfolio which is now being wound up – and it’s a nice breadcrumb on the trail leading to Michael Keeley, the former BarCap executive who managed Protium assets. Read more

A Greek buyback boondoggle

Not quite a Greek restructuring or re-profiling, but a big warning sign that we’re now very close.

First a little background… Read more

Chinese bonded warehouses’ copper inventories still rising

Having flagged the problem in the first place, it was natural for Standard Chartered to follow up on the state of China’s bonded warehouse copper inventories this month.

And what they found — surprise, surprise — was that stocks in April were still on the rise: Read more

US real GDP was 1.8% in Q1

Maybe you’ve been watching with increasing anxiety as the Q1 forecasts kept dropping.

Well, the revised estimates turned out to be mostly right. (Yes, we know, economists also think much of the deceleration is likely due to temporary factors: bad weather in January, higher oil prices, Japan, etc). Read more

“Mostly meaningless blurbs”

Oh deary me.

Someone at a major European investment bank (known for its foreign exchange services) is possibly a touch red-faced right about now. Read more

Dead economist throwdown, yo

Something to hold you over while you eagerly await those US GDP numbers:

Part 1 is here.

Markets Live transcript 28 Apr 2011

Live markets commentary from 

Japan’s ‘stunning’ stats: Yosano’s new nightmare

As variously predicted, the “3/11 effect” on Japan’s economy is starting to kick in. And true to warnings that the impact could be far worse than feared, the latest batch of data is reasonably horrible.

Only a day after S&P signalled fresh concerns about Japan’s economy, official data on Thursday showed a far sharper plunge in March industrial production than the consensus 10.6 per cent – a whopping 15.3 per cent fall from February – while March household spending slid an annual 8.5 per cent. Read more

Nomura quarterly profits drop 35%

Nomura reported a 35 per cent drop in quarterly net profits as its global market operations were hit by volatility resulting from the European sovereign credit crisis, the FT reports. Japan’s leading investment bank posted net profits of Y11.9bn ($146m) in the January to March quarter, a decline of 11 per cent compared with the third quarter of its fiscal year. Nomura said its quarterly revenue performance was the best since September 2009. The bank’s performance in global markets was “unfortunately, a bit disappointing”, said Shigeru Oshita, chief fund manager of Japanese equities at Chuo Mitsui Asset Trust and Banking. While western investment banks’ profits from global markets rose substantially in the past quarter, “Nomura’s global markets business has not grown much at all compared with the third quarter”, he said.

US traders use river transport to profit from oil glut

Barges laden with crude are set to make their way to the oil-rich Gulf of Mexico in the latest sign of how price anomalies have reconfigured energy markets. Petro Source Terminals, a storage tank operator, plans to start filling vessels with crude oil at the river port of Catoosa, Oklahoma, to sell to refiners in Louisiana, hundreds of miles downstream. The company is hiring barges because the price of West Texas Intermediate crude, the US oil benchmark, has been weighed down by record 40m-barrel stocks at its delivery point in Cushing, Oklahoma. On Wednesday, the price of Louisiana sweet crude was $127 per barrel, while Nymex June WTI futures were $111.90, having dropped 31 cents. Profit awaits traders who can sell WTI-linked oil in more expensive markets, but moving it out of landlocked Cushing is difficult. This week two companies, Enterprise Products Partners and Energy Transfer Partners, said they would build a pipeline to move 400,000 barrels per day from Cushing to Houston to provide an outlet for the “stranded” barrels. The project would not begin service until late 2012.

Higher margins and oil prices lift Shell

Royal Dutch Shell’s first-quarter underlying profit rose by almost a third, aided by improved refining margins and increased crude oil prices, the FT reports. The Anglo-Dutch energy group on Thursday said that first-quarter profit rose 41 per cent year-on-year to $6.9bn (£4.1bn) on a current cost of supplies basis, a closely watched post-tax measure that removes the effect of price changes on inventories. Underlying CCS profit – which further strips out one-off items, such as disposal gains and fair value accounting fluctuations – rose 30 per cent to $6.3bn, slightly ahead of the $6.2bn average forecast of analysts polled by Bloomberg. Oil and gas output in the first quarter was down 3 per cent year-on-year at 3.5m barrels of oil equivalent per day, having been squeezed by disposals. The first quarter dividend remained unchanged at $0.42 per share.

Apple pledges to curb collection of location data

Apple has blamed programming errors for its collection of data that tracked the rough location of iPhone users and pledged to cut down drastically on the practice, which has alarmed consumers and privacy advocates, the FT reports. After a week of increasing criticism and regulatory attention over the issue, the company said that it should not have been compiling the information on users who turned off location-based services. It said it should not have stored the records for a year. “The reason the iPhone stores so much data is a bug we uncovered and plan to fix shortly,” Apple said. “We don’t think the iPhone needs to store more than seven days of this data.” The furore echoes Google’s gaffe with its StreetView service, in which fleets of cars sent out to take pictures recorded personal data sent over WiFi networks. Google’s unauthorised data collection was uncovered by German regulators, prompting the company to drop the practice.

Protium’s acid reflux [updated]

Plenty of column inches on Thursday are devoted to the wind up of Protium, the Cayman Islands-based vehicle created by Barclays to warehouse a portfolio of highly toxic credit market assets.

According to the FT, analysts see the Protium — also a name for a medical treatment for gastric acid —  as another example of Barclays’ unnecessary complexity that has fuelled distrust among shareholders, holding back the bank’s share price and rating the stock at barely 80 per cent of the group’s asset value, a discount to many peers Read more

Spanish market weighs on Santander

Net profit at Spain’s Santander, the biggest bank in the eurozone by market capitalisation, fell to €2.11bn ($3.11bn) in the first quarter of this year, 4.8 per cent down on the same period of 2010 and slightly worse than expected by market analysts, the FT reports. Santander said on Thursday that its international diversification had kept profits high, although continued strong performance from Brazil and the rest of Latin America failed to compensate fully for the weakness of continental Europe, especially the Spanish domestic market. Banco Sabadell, a smaller listed Spanish bank, also announced on Wednesday that its net profit fell 22 per cent to €84.2m in the first quarter from €108.4m in the same period of 2010. Santander nevertheless said business, margins and profits were all showing signs of improvement since last year. In Spain, gross income was up 7 per cent to €1.56bn from a low point in the fourth quarter of 2010.