Posts from Monday Apr 4 2011

Further further reading

For the commute home, where your discount windows have always been transparent and available with easy credit,

– Appetite grows for asset-backed securities. Exotic ones, no less. Awesome. Read more

Stocks invigorated by M&A and US jobs report

Global stocks are challenging cyclical highs as the warm glow from Friday’s strong US jobs data challenge the chill from Middle East turmoil, Japan’s earthquake travails and eurozone fiscal woes, reports the FT’s global market overview. The FTSE All-World equity index was up 0.3 per cent at 228.5, just shy of February’s post-credit crunch closing high of 228.9. US equities struggled for direction, with the S&P 500 adding less than 0.1 per cent to 1,333.25 by mid-session on Wall Street. The Dow Jones Industrial Average rose 0.2 per cent to 12,395.26, while the Nasdaq Composite put on 0.1 per cent to 2,791.12. The Australian dollar rose to a high of $1.0416 against the US dollar, its highest since it was allowed to float freely in 1982, and hit an 11-month peak of Y87.67 against the yen. The dollar also hit a five-month low of $1.4268 against the euro and pulled back from Friday’s six-month peak of Y84.72 against the yen to stand down 0.2 per cent at Y83.90 by midday in New York. Oil prices rose above $120 a barrel for the first time since mid-2008 on Monday as supply disruption in Gabon, compounded continuing losses from Libya.

Vodafone agrees €8bn SFR sale

Vodafone shares rose on Monday morning after the UK mobile phone group agreed to sell a 44 per cent of SFR, France’s second-largest mobile phone company, for €7.95bn (£7.02bn) to Vivendi, reports the FT. Jean Bernard Lévy, Vivendi’s chief executive, said the increase in profits that would result from the deal, subject to completion, would allow the group to raise the dividend for shareholders of Europe’s largest publicly listed media company and already owner of 56 per cent of SFR.

Philippines steps up anti-corruption drive

The Philippine government will sharply step up convictions of tax evaders, corrupt officials and other criminals in order to bolster the country’s finances and restore public faith in often corrupt institutions, the president has said, reports the FT. In an interview in Manila’s Malacañang palace, Benigno Aquino III said that on his instruction, the internal revenue and customs bureaux were filing a case a week to send a message that “we are going after tax evaders”.

Google bids $900m for Nortel patents

Google has sought to bolster its weak position in the smartphone industry’s patent wars, bidding $900m for a stack of patents put up for sale by Nortel, the bankrupt Canadian communications equipment maker, reports the FT. The bid, announced on Monday, comes as the search company, along with handset makers and others that use its Android mobile operating system, find themselves beset by lawsuits over the software.

Ivory Coast in chaos

West African officials were reconsidering military intervention in Ivory Coast and the UN threatened air strikes as rival presidential claimants on Monday rallied their armies for a battle at the heart of the country’s main city, Abidjan, reports the FT. Hundreds of thousands of refugees poured into fragile neighbouring states and more than 1m people have fled Abidjan as a four-month post-election power struggle has degenerated into civil war.

Ex-BP chief in talks to set up fund

Tony Hayward, the former chief executive of BP, is in the early stages of setting up an investment fund focused on the energy sector, in a move that would mark his return to the UK corporate scene after leaving the oil group after last year’s Gulf of Mexico accident, reports the FT. The talks remain at an early stage and an investment fund is only one of a number of options Mr Hayward is considering, people close to him stressed on Monday. He has also been in talks to become the senior independent director of Glencore, the commodities trader, when it lists.

Tepco to dump radioactive water into sea

Japanese nuclear technicians plan to release 10,000 tonnes of moderately radioactive water into the sea from Fukushima Daiichi nuclear station to create room to store more highly contaminated water building up under the crippled plant, reports the FT. A manager at Tokyo Electric Power (Tepco), the station’s operator, broke into tears while announcing the emergency measure on Monday, and apologised for the “additional hardship” being placed on communities near the plant, 240km north of Tokyo.

Li Ka-shing lines up first offshore renminbi IPO

Cheung Kong Holdings, the conglomerate controlled by Li Ka-shing, plans to raise Rmb10bn-Rmb12bn ($1.5bn-$1.8bn) this month by spinning off its flagship Chinese property asset in Hong Kong’s first renminbi-denominated stock offering, reports the FT. The company plans to float a 40 per cent stake in Hui Xian Reit, a real estate investment trust backed entirely by the Oriental Plaza, a vast commercial building close to Tiananmen Square in the heart of Beijing.

Minmetals in $6.5bn bid for Equinox

Minmetals Resources has launched a C$6.3bn (US$6.5bn) bid for Equinox Minerals, the Australian-Canadian copper miner , in the largest unsolicited takeover attempt by a Chinese mining company, reports the FT. The Minmetals bid is conditional on Equinox dropping its own offer for Vancouver-based Lundin Mining. The state-owned Chinese miner said its all-cash offer of C$7 per share – a 23 per cent premium to Friday’s closing price – was a superior alternative for Equinox shareholders to a Lundin acquisition, offering “certainty of value and timing in realising their investments”.

Libyan rebels set for first oil exports

Libyan rebels are set for their first oil export as soon as Tuesday as they seek funding to sustain their uprising against Muammer Gaddafi’s rule, reports the FT. The Liberia-flagged Equator tanker was off Port Said, Egypt, early on Monday and is expected to dock at the Marsa el-Hariga crude oil export terminal near Tubruq, in east Libya, on Tuesday morning, according to Lloyd’s Intelligence, the shipping industry data provider. Meanwhile, oil prices rose above $120 a barrel for the first time since mid-2008 on Monday as supply disruption in Gabon, a small African producing nation, compounded continuing losses from Libya, adds the FT.

Earnings vs event-driven stock correlations

During last summer’s US economic slump, the CBOE S&P 500 implied correlation index hit a couple of intraday record highs before starting a consistent (if jumpy) downward trend through the end of the year, as equity markets recovered and the tin hats came off.

Since then the index been somewhat erratic, which is unsurprising given the big event-driven moves we’ve seen this year: Read more

Settling in (or not) for a long-term Libyan oil swap

Monday — a dramatic day in the story of Libyan rebels’ bid to get their country’s crude to the outside world.

It is getting out one end, at least. The Equator, a Liberian-flagged tanker, is in Egyptian waters heading for Tubruq, the rebels’ oil port, for loading early on Tuesday, the FT reportsRead more

DeKalb County, Georgia on municipal minds

On Friday S&P stressed its March 29 five-notch downgrade of the GO and appropriation-backed debts of DeKalb County, Georgia was “not the canary in the coal mine, but more the anomaly”.

But in a municipal market report also out on Friday, Citi is more sceptical about the nature of the proverbial bird and what it means for other US local governments and the credit outlook for some munis. Read more

Stress tests, not seniority, as the ESM’s big flaw

S&P recently cut Portugal’s rating. It notably blamed the risk of Portugal taking ESM loans senior to its bonds (inter alia), which markets have been flagging for a while.

When also cutting Portugal last week — Fitch notably didn’tRead more

Dead cats bounce west

A chart to ruffle some sovereign CDS feathers, via Markit:

 Read more

Some circumstantial copper evidence

Sean Corrigan, chief investment strategist at Diapason Commodities, was the first to detect a correlation between China’s loose monetary policies and copper prices. His basic finding; the greater the amount of loans extended in China, the more copper imports into China.

Although that was in January 2010. Read more

Premium capture is the new 436(g), Citi says

The repeal of Rule 436(g) sent the securitisation industry into a tizzy in the summer of 2010.

Now a component of last week’s proposed risk retention rules for Mortgage-Backed Securities (MBS) is sparking comparisons from some analysts, in relation to the commercial MBS market. The troublesome bit is called “premium capture” — and it’s pretty much the only thing that came as a surprise to the securitisaton industry in the 233-page proposal published by US regulators last week. Read more

Markets Live transcript 4 Apr 2011

Live markets commentary from 

The volatility is out there

FT Alphaville has pondered over why the Vix is currently so low.

We’ve also wondered if QE may be inadvertently triggering a gigantic ‘Bernanke put’ in the equity market, pushing volatility elsewhere — specifically into the FX market. Read more

Interpublic discloses stake in Facebook

Interpublic, the US advertising group, has emerged as an unlikely beneficiary of the surging value of Facebook, reports the FT. The company owns a stake in the social network now valued at $200m to $300m, depending on Facebook’s valuation and the actual size of the stake. Interpublic owns slightly less than 0.5 per cent of Facebook, paying less than $5m for it in 2006, say people close to the company. Interpublic, which owns McCann Erickson and other agencies, secured shares in what was then an emerging site. While it was rare for advertising groups to invest in social networks, Interpublic made an early commitment to spend $10m for its clients on Facebook. Paidcontent says news of the stake emerges as many marketers are still looking for the best ways to approach the social network.

Republicans eye healthcare to slice deficit

Republicans in the House of Representatives vowed to present a long-term budget proposal that would cut more than $4,000bn from US deficits over the next decade, exceeding the target set by a bipartisan fiscal commission appointed by Barack Obama, the FT says. With details expected to be released on Tuesday, Paul Ryan, chairman of the House budget committee, said his party’s plan would put the brakes on the growth of Medicare and Medicaid, the two largest government healthcare programmes, while proposing deep cuts and caps to spending. The WSJ says the plan would essentially end Medicare.

Wachovia targeted over CDO sale

The SEC is preparing to bring civil charges against Wachovia, the once-troubled bank now owned by Wells Fargo, for allegedly overpricing mortgage-bond deals, the Wall Street Journal reports, citing people familiar with the matter. The agency has focused on the amounts Wachovia charged investors for CDOs, and SEC officials believe the Charlotte-based bank applied excessive markups that didn’t reflect the diminishing value of the underlying loans, the people said. The Wachovia inquiry is part of a broader probe by the SEC into Wall Street’s sales of about $1,000bn worth of CDOs.

Mystery surrounds SouthWest jet rupture

Government and industry safety officials haven’t yet pinpointed the cause of a five-foot gash that opened in the fuselage of a midair Southwest Airlines jet, and the carrier said Sunday it expects many of its oldest Boeing 737 models to stay grounded for inspections for at least two more days, the Wall Street Journal says. Southwest voluntarily stopped flying 79 of its oldest 737 models, which account for nearly 15 per cent of its fleet, in the wake of the incident. The Seattle Times adds that cracks have been found in at least two other Southwest Boeing 737-300s. Boeing is developing a “service bulletin” strongly suggesting immediate checks on all similar models with comparable flight time and age.

Head in the clouds at Autonomy

Autonomy’s idiosyncratic approach to investors relations continues.

The FTSE 100 software company has chosen to respond to a recent scathing note from JPMorgan analyst Daud Khan not with a quiet phone call, but via the Q&A section of its corporate websiteRead more

The hidden slide of Japanese business sentiment

The Bank of Japan’s quarterly Tankan business survey is seen as a vital guide to corporate Japan’s expectations and more importantly, a key indicator of spending and investment plans.

It is also, as MoneySupply once noted, “one of the best bits of economic data in the world: how many other business surveys cover 11,528 companies with a 98.7 per cent response rate?” Read more

Vodafone agrees €8bn SFR sale

Vivendi has struck a deal with Vodafone to pay €7.95bn (£7.02bn) for the 44 per cent of SFR, France’s second-largest mobile phone company, it does not already own, reports the FT. Jean Bernard Lévy, Vivendi’s chief executive, said the deal would allow Europe’s largest listed media company to raise its dividend for shareholders. Vivendi said the €7.75bn price reflected a valuation of 6.2 times SFR’s 2010 pretax earnings. In addition, Vivendi will pay Vodafone €200m to reflect SFR’s extra cash generation between January and July this year. Vodafone CEO Vittorio Colao has been reducing the company’s portfolio by selling minority stakes in Chinese and Japanese mobile operators. The SFR deal would be the biggest disposal to date. One analyst told Bloomberg that for Vodafone, the price is “much better than most people expected”. NYT DealBook notes Vivendi was advised by Rothschild and Vodafone by Lazard.

Asia stocks invigorated by US jobs report

Global stocks are challenging cyclical highs as Friday’s strong US jobs data provides a disinfectant to challenge the market germs of Middle East turmoil, Japan’s earthquake travails and eurozone fiscal woes, the FT reports in its rolling global market overview. The FTSE All-World equity index is up 0.3 per cent to 228.3, fractionally below February’s post-credit crunch closing high of 228.9, as markets continue to recover from the mid-March sell-off. But moves are fairly minimal, as illustrated by US stock futures, which are flat. Asia has led the gains as traders got their first chance to react to news that the jobs market in the US looks to be picking up steam, raising hopes that the global economy can pull through troubles.

ECB criticised over expected rate rise

The European Central Bank faces an international backlash this week, when, in spite of the eurozone debt crisis, it is expected to raise interest rates and to consider ways of weaning the weakest banks off its offers of unlimited liquidity, the FT says. Plans by the ECB to tighten monetary policy before the US Federal Reserve and Bank of England were criticised at the weekend as premature and potentially dangerous by economists. For instance, Bloomberg reports that Ernst & Young said a rate rise “could potentially endanger the fragile economic recovery in the eurozone.” Greece’s finance minister also voiced concern.

Minmetals in $6.5bn bid for Equinox

China’s Minmetals Resources has launched a C$6.3bn (US$6.5bn) unsolicited bid for Equinox Minerals, the Australian-Canadian copper miner which itself is in the throes of seeking to acquire Vancouver-based Lundin Mining, the FT reports. The bid is the largest-ever unsolicited takeover attempt by a Chinese mining company, at a time when China’s miners are increasingly seeking to go abroad. Beyond Brics says Minmetals is going long on copper, giving the entire copper sector a boost. Fox Business adds that the bid will be could prove an important test case for the approach of Australia’s foreign investment regulator.