Posts from Wednesday Apr 6 2011

Further further reading, CPI jokes edition

For the commute home, where core inflation remains tightly restrained by your belt buckle,

– From Heidi Moore’s new blog at Marketplace — Bailouts: the investment banker employment act of 2008. Read more

Deflated inflation expectations

Given the attention that inflation expectations received in Tuesday’s release of the latest FOMC minutes, we’re not the least bit surprised that it’s been the topic du jour among analysts (along with other distractions).

We’ll get to them in a moment, but first, here is the key paragraph from the minutes: Read more

Gold’s message dismissed by equity bulls

Pretty much every major risk asset class was going up as traders seemed to be having a final splurge before the age of ultra-loose monetary policy comes to an end, reports the FT’s global market overview. The FTSE All-World equity index was up 0.4 per cent to a fresh cyclical high after Asian exchanges aside from Japan shrugged off China’s out-of-hours monetary tightening. The S&P 500 on Wall Street was up 0.2 per cent, while the Russell 2000 index of US small companies hit an intraday peak. In Europe, the FTSE Eurofirst 300 was higher by 0.3 per cent, helped by stronger-than-expected German factory orders in February. London’s FTSE 100 was up 0.6 per cent, boosted by miners as industrial commodities jump. Gold was up 0.2 per cent to $1,450 an ounce having hit a record of $1,462, while silver touched a fresh 31-year high of $39.75, having gone parabolic with its near-120 per cent rise in the past nine months. Brent crude breached $123 a barrel for the first time since August 2008 as the conflict in Libya combined with worries about production out of Nigeria and Gabon to increase concerns about supply disruptions at a time of increasing demand. A report that US crude inventories dropped the most in five years has not given much boost to West Texas Intermediate, which is up only 0.2 per cent at $108.62. The yen was down 1 per cent to an 11-month low against the euro of Y122.07. The dollar was broadly weaker, dipping 0.5 per cent on a trade-weighted basis.

Yageo valued at $1.6bn in KKR buy-out offer

Kohlberg Kravis Roberts and the chairman of Taiwan’s Yageo Corporation have launched a bid to take the electronic components manufacturer private, reports the FT. The deal, which values Yageo at $1.6bn, comes at a time when technology groups are re-examining supply chains and seeking alternative suppliers after the Japan earthquake.

Farmers look to earn their corn with new storage bins

Soaring corn prices have sparked a rush by US farmers to build storage bins across the Midwest, with many hoping to profit from an expected shortage by hanging on to grain supplies, reports the FT. The rapid pace at which bins are being erected has made the glint of galvanised steel a more common sight in rural parts of the US, their growing presence a sign that farmers expect to fetch higher prices for their corn as the country’s stocks fall to critically low levels.

Parties fail to break US budget deadlock

The US began preparations to stand down nearly 1m workers and suspend services ranging from processing tax returns to national parks as a government shutdown loomed over stalled budget talks, reports the FT. Republicans and Democrats in Congress remained deadlocked over a budget agreement for the final six months of the current fiscal year, ahead of a deadline on Friday when funding for the government runs out.

European banks in further capital calls

Two European banks announced plans to raise a combined €13.25bn ($19bn) of fresh equity on Wednesday, taking to nearly €25bn the total capital raisings unveiled since the start of the year by institutions across the continent, reports the FT. Commerzbank, Germany’s second-largest bank by assets, plans to raise €8.25bn from investors through a placement of securities followed by a rights issue.

US lawyer in $32m insider scheme

A mergers and acquisitions attorney and a stock trader were accused by federal prosecutors of masterminding a 17-year insider trading scheme that reaped $32m in illegal profits by stealing deal information from three of the world’s most prominent corporate law firms, reports the FT. Prosecutors filed charges in a New Jersey federal court against Matthew Kluger, a former senior associate at Wilson Sonsini Goodrich & Rosati, and Garrett Bauer, a trader who worked at several proprietary trading firms, over the alleged scheme.

Sócrates calls for Portuguese bail-out

Portugal is to follow Greece and Ireland in seeking financial aid from the European Union, reports the FT. Prime minister José Sócrates said in a televised address to the nation on Wednesday night that his debt-stressed country will ask for an international bail-out. FT Alphaville notes that it wasn’t immediately clear what was being requested or who would be doing the negotiating.

Citi Indonesia arm hit by theft allegation

Citigroup has been barred from selling wealth management services to new clients in Indonesia after allegations that a long-time employee stole millions of dollars from customers of its premium retail bank, reports the FT. The ban was revealed on Wednesday by Darmin Nasution, Indonesia’s central bank governor, who told legislators Citi had been instructed to “temporarily suspend” recruitment of new clients to Citigold, the US bank’s flagship service for wealthy customers.

Can dogs really smell cell phones?

Apparently so.

We ask as this was mentioned by Matthew Kluger, the M&A lawyer charged on Wednesday with earning $32m through insider trading. Garrett Bauer, a trader, was also charged with using MNPI — material non-public information, in case you don’t speak the lingo — provided by Kluger to trade in advance of big deals stretching back to 1994. Read more

Portugal to seek EU aid

Unleash the rescue dogs.

In a live TV address on Wednesday Portugal’s interim PM José Sócrates announced it was was requesting EU assistance: Read more

Buffett’s “insider” trading policies and procedures

Courtesy of the WSJ; quote marks Warren’s own:

 Read more

Carry trade = quantitative easing

Can prolonged periods of negative real interest rates ever be good for economies in a globalised world?

Anders Aslund, senior fellow of the Peterson Institute for International Economics, argues noRead more

Some thoughts on unpaid internships and finance

FT Alphaville occasionally volunteers at a non-profit which, amongst other things, helps first-generation college students from migrant families apply for internships and jobs. They, like their peers, often want to intern at banks. Some of the best moments for staff are when students get an internship on Wall St.

These positions are often well paid and involve a multi-stage interview process. That’s where the non-profit comes in: offering CV and cover letter advice, mock interviews, and mentoring. Getting one of these gigs is a tough yet largely meritocratic process. Read more

Reassurance on Irish bank data quality

FT Alphaville wishes to make a correction — on an Irish bank’s behalf. Via the Central Bank of Ireland:

The Central Bank has today updated the table on senior and subordinated debt published on 2 March 2011. Due to an error in the figures submitted by EBS to the Central Bank the table has been amended to include a corrected figure for EBS unguaranteed secured senior bonds. Read more

About that Home Retail bid rumour

There was much excitement around rumoured takeover target Home Retail Group on Tuesday morning.

Its shares shot up 10 per cent as the City woke up to the fact that Madison Dearborn Partners, the US buyout specialist, has amassed a 4 per cent stake in the parent company of Argos and Homebase. Read more

The curious case of the JJB cash call [updated and explained]

If Wednesday’s cash call from Commerzbank is mind-numbingly complex, then the latest fund raise from JJB Sports, the struggling sports retailer, is downright odd.

First, let’s consider the fees. Read more

Irish GNP warrants, FTW

It’s not every day that one sees the Irish central bank governor effectively proposing Ireland restructure its debt, but that’s the comment pages of the FT for you.

From the pen of Patrick Honohan on Wednesday, a piece which worries about getting investors to return to Ireland’s very weak growth prospects, cuts, deleveraging, etc… Read more

ECB fears at extreme, in Schatz options

Stefano Di Domizio at Lombard Street Research notes on Wednesday that the put/call ratio on the German Schatz (the two-year bond) has suddenly and seriously discorrelated from the put/call ratio on the Bobl (the five-year bond).

Here’s the chart: Read more

QEased commodities, chart du jour

The QEased commodity debate is on fire.

And to keep it sizzling on Wednesday, we throw this chart of the Continuous Commodity Futures Price Index from Sean Corrigan at Diapason Commodities into the mix: Read more

Portugal meets its debt ceiling…

…debt ceiling punches back.

Results of Portugal’s latest debt auction are out — short-term 6- and 12-month securities, with yields of… Read more

Markets Live transcript 6 Apr 2011

Live markets commentary from 

FT Alphaville/FOW take on optionality in Amsterdam

FT Alphaville has joined forces with Futures and Options World to bring you the latest news and skew from the European Equity Options Trading Conference taking place this Thursday and Friday in Amsterdam.

Volatility, options, futures, ETFs, Delta One, high frequency trading … you name it. We’ll be covering it. Read more

Key investors lap up Glencore flotation

Demand from key institutional investors for shares in Glencore on its flotation has been well above the group’s expectations, particularly in Asia and the Middle East, according to bankers involved in the initial public offering, the FT reports. The Swiss-based company plans to allocate between 20 and 30 per cent of its IPO to so-called cornerstone and anchor investors, which commit themselves to buy ahead of the launch of the flotation and usually are locked in for a certain period. The appetite for the company has been boosted by a recent surge in the value of Glencore’s holdings in listed companies, including a 34 per cent stake in London-listed miner Xstrata. According to Bloomberg data, Glencore’s stakes were worth $32.3bn on Wednesday. In addition to those assets, Glencore controls unlisted assets, such as mines and farming activities, and its trading business.

P&G sells Pringles for $1.5bn

Procter & Gamble has ended a long quest to sell its Pringles potato crisp business by spinning it off to Diamond Foods in a $1.5bn stock deal, marking an exit from the food sector for the world’s biggest consumer goods company, reports the FT. Pringles had been the odd one out among P&G’s stable of personal care and household brands, which include Head & Shoulders shampoo and Ariel laundry detergent. In addition to paying $1.5bn in stock to P&G shareholders, Diamond will take on $850m of Pringles’ debt in the transaction. It is expected to be completed by the end of 2011, but is subject to approval by antitrust regulators in five countries. P&G is giving up the only partly tapped potential of Pringles in emerging markets in order to sharpen its focus on more profitable core brands, while Diamond said Pringles would enable it to broaden its

Cisco chief signals company rejig

John Chambers, chief executive of Cisco Systems, made a rare admission of management failures at the heart of the internet equipment company as it signalled a shake-up to refocus Cisco on its most important markets, reports the FT. The comments, in a bluntly worded e-mail on Tuesday to Cisco’s employees, follow a fall in confidence on Wall Street in the company in recent months. Investors have become concerned about perceived overexpansion into new and low-margin businesses such as consumer products, and fears have spread that China’s Huawei is starting to eat into Cisco’s core switch and router markets. Cisco’s stock has fallen 35 per cent over the past 12 months at a time when the Nasdaq Composite has risen by 15 per cent.

IMF gives ground on capital controls

The International Monetary Fund has proposed its first ever guidelines for using controls on flows of speculative capital, legitimising a controversial tool that it once campaigned against, the FT reports. The guidelines – which are not yet official Fund policy – say that countries can control capital inflows when their currency is not undervalued, when they already have enough foreign exchange reserves, and when they are unable to use monetary or fiscal policy instead. The IMF said that around one-quarter to one-third of a group of countries that it studied are “currently likely” to meet its criteria for the use of controls. The framework is the IMF’s attempt to recognise the short-term use of capital controls to manage inflows of “hot money” but distinguish them from long-term barriers against foreign capital.

  Read more

No breakthrough in US budget talks

A high-stakes White House summit failed to produce a US budget agreement but congressional leaders reported progress later in the day as they sought to avert the first government shutdown since the mid-1990s, the FT reports. A spokesman for John Boehner, Republican speaker of the House of Representatives, and Harry Reid, Senate majority leader, said on Tuesday that the two men met after the White House meeting and had “a productive discussion”. “They agreed to continue working on a budget solution,” the spokesman said. Earlier, President Barack Obama said Americans expected their politicians to act “like grown-ups”, making some concessions in which everybody “gives a little bit” and not “quibbling around the edges”. The remarks came in a rare appearance in the White House press room that highlighted the tension in the talks. For more on the shutdown, see FT Alphaville.

Stocks struggle as inflation worries colour trading

Inflation and the possible subsequent policy responses remained at the forefront of investors’ thinking, putting a brake on stocks as they neared post-recession peaks, the FT’s global market overview reports. The FTSE All-World equity index was up fractionally at 228.4, less than 1 point below February’s high after Asian exchanges – Japan aside – shrugged off China’s out-of-hours monetary tightening. US stock futures were up 0.1 per cent and the FTSE Eurofirst 300 opened higher by 0.2 per cent as miners saw buyers. Beijing’s fourth interest rate rise in five months highlights the growing concerns about gathering price pressures and the destabilising impact they may have on the global economy – though strength in industrial metals suggests many investors are not curbing their enthusiasm for the recovery narrative.