Posts from Monday Apr 11 2011

Further further reading

For the commute home, where low volumes signal a run to the beer market,

– Does slow stock trading signal a bear market? Read more

Inflation concerns lift gold to fresh peaks

The global growth trade remains the favoured strategy, initially pushing many commodity prices and core bond yields higher, but leaving stocks struggling for gains as higher input costs raise concerns over corporate margins, reports the FT’s global market overview. Those inflation concerns were most clearly expressed in the precious metals sphere, where silver struck another 31-year high of $41.93 an ounce and gold touched a record $1,476 an ounce early in the session before some profit taking kicked in. Wall Street is firmer, with the S&P 500 up 0.3 per cent, helped by Level 3’s well-received $3bn bid for Global Crossing. London’s FTSE 100 is up 0.1 per cent as miners ride the commodity rally and banks show relief following the publication of the Vickers report on the UK banking system. Brent oil, which has been more closely correlated to Mideast supply concerns of late, is down 0.6 per cent to $125.86 a barrel, while US-based West Texas Intermediate is off 0.6 per cent to $112.15. The dollar index sits just above 15-month lows.

Renault’s Pélata to quit in spy scandal

Patrick Pélata will step down as Renault’s chief operating officer – the most senior official at the French carmaker to lose his job after the company released findings from audit reports of its botched internal probe into alleged spying in its electric vehicles programme, reports the FT. Pélata offered his resignation after an extraordinary meeting of Renault’s board, and it was accepted, a company source told the FT on Monday.

Japan marks one month since quake

A powerful aftershock sparked further anxiety in disaster-hit northeastern Japan one month after the huge earthquake and tsunami that devastated coastal communities and sparked the world’s worst nuclear crisis in 25 years, reviews the FT. Amid growing concerns about the long-term health risks posed by radiation-leaks from the Fukushima Daiichi atomic power station, the government announced plans to widen evacuation zones around the crippled plant to beyond the previous 30km limit.

Gbagbo seized by Ivory Coast opposition

Laurent Gbagbo, Ivory Coast’s recalcitrant former president, has been seized by opposition forces after an all-out assault on his residence with help from French armoured vehicles, helicopters and troops, reports the FT. The UN mission in the Ivory Coast confirmed that Mr Gbagbo, who was declared the loser in November’s second-round run-off election but had refused to leave power, had “surrendered” to the forces of Alassane Ouattara, the president-elect.

UK moves bank rules closer to US

Global banking regulation took a step towards convergence on Monday as a UK commission proposed measures that will bring the country’s financial rules closer to the US, reducing fears that British lenders will flee London for New York, reports the FT. The Independent Banking Commission, led by Sir John Vickers, stopped short of forcing banks to split their securities businesses from their retail and commercial lending operations – a radical plan that had been bitterly opposed by the industry.

Intel unveils first chip for tablets

Intel is launching its first chip designed for tablet computers in an attempt to wrest control of the fast-growing market from UK-based Arm, whose chip architecture is now behind the majority of smartphones and tablets, reports the FT. The world’s biggest chipmaker will on Tuesday announce the availability of “Oak Trail”, the first product released by its newly-formed “netbooks and tablets” group, at a conference in Beijing. Intel expects more than 35 devices to be using Oak Trail starting from May, including ones from Fujitsu and Lenovo.

Tata chief warns of India unrest

The $39bn telecoms corruption scandal in India is threatening to trigger popular discontent among the country’s 1.2bn people like no other scandal in the country’s post-independence history, the Tata Group, India’s largest company, is warning. In an interview with the Financial Times, Kishor Chaukar, executive director of Tata Sons, the holding group of the Tata Group, said civil society’s growing frustration with widespread corruption threatened to lead to nationwide protests inspired by the recent popular uprisings in Tunisia, Egypt and Libya.

Pimco’s Gross bets against US debt

Bill Gross, manager of the world’s largest bond fund, is now actively betting against the value of debt issued by the US government, reports the FT. Pimco’s $236bn Total Return Fund held minus 3% of its assets in government related securities at the end of March, down from zero the month before, according to a report issued by the company on Monday.

The qualifier in Yellen’s speech

Most of Janet Yellen’s speech today about commodity prices and the economic outlook was about what you would expect, and we covered many of the same issues in our long discussion last week about inflation expectations.

To summarise, Yellen made the following points: Read more

“Gainful Employment” survives shutdown negotiations

And we’re not just talking about national zookeepers.

Here’s a Steve Eisman-friendly tidbit from the government shutdown negotiations, courtesy of the Higher Ed Watch blog on Saturday: Read more

The market for sovereign default recoveries

Markets in everything, as Marginal Revolution might put it.

We’ll start with a problem that might not be hugely on the market’s mind right now, but is getting ever closer: Read more

When life gives you lemons trade agriculture commodities

By Theo Casey, a columnist at Futures & Options World, blogging on the back of FOW’s European Equity Options conference in Amsterdam.

The 2008/09 global interest rate dunk hit structured products hard. Read more

A large dislocation in the repo markets

We all remember the Fed’s sort-of promise to abide by self-imposed System Open Market Account (SOMA) restrictions — supposedly, so as not to completely corner the US Treasury market.

Well, according to Bank of America Merrill Lynch’s Shyam S. Rajan, those restrictions could be up for review quicker than you can say “the Fed owns more Treasuries than China“. Read more

Pinewood, Peel and Michael Grade

This is Michael Grade

FT Alphaville readers probably know him best as the chairman of Webvan 2.0 Ocado but he’s also chairman of Pinewood Shepperton, the film studio owner that revealed a takeover approach on Friday. Read more

A little less Brent…

Ever wondered how much Brent there actually is in a barrel of Brent oil?

Answer: Not very much, and increasingly less. Read more

Grossly unimpressed: Pimco shorts US government debt

Pimco is not amused with the political impasse in Washington.

From Reuters on Monday morning: Read more

Delta one: the special ops of equity trading

FT Alphaville moderated a panel on “The rise and rise of Delta One” at the FOW European equity options conference in Amsterdam on Friday.

There was an excellent range of speakers representing a good slice of the Delta one industry in Europe, from market-makers to providers, to derivatives strategists. Read more

ICB miscellany

A couple of interesting datapoints from John Vickers & Co’s interim report on the UK banking industry:

First up, the value of implicit government support for Too Big too Fail Banks (emphasis throughout ours): Read more

What Japan’s post-quake data say so far

Facts and figures on the Japanese economy have dribbled out since the March 11 disasters. The latest data release, on Monday morning, dealt with February figures and showed that Japanese core machinery orders fell a larger-than-expected 2.3 per cent in February from January.

As it was all about industrial activity before the March 11 earthquake and tsunami, and came after January’s 4.2 per cent monthly surge, the release didn’t hold that much interest for those gauging the economic impact of the disasters. Read more

Markets Live transcript 11 Apr 2011

Live markets commentary from 

Quake watch: More rock’n’roll in Japan

Another day another quake… At least, it felt a bit like that when, exactly one month after the March 11 quake and tsunami devastated northeastern Japan, a magnitude 7.1 earthquake hit the northeast yet again and rocked Tokyo at 5.25pm on Monday.

Monday’s earthquake struck along the ravaged northeast coast, but much closer than the March 11 one to the coast of Fukushima and Ibaraki prefectures — the former, about 240km northeast of Tokyo, the site of the crippled Daiichi nuclear power plant, where an estimated 300 workers are trying to stem radiation leaks and bring the plant under control. Read more

HBOS remembered

We said earlier on Monday that only one bank came off badly in the interim report from the Independent Commission on Banking.

We were wrong. Read more

JP Morgan accused of putting clients needs second

New documents unsealed late last month as part of a lawsuit by bank clients against JP Morgan show the US investment bank may have broken its fiduciary duty by ignoring red flags about a troubled investment vehicle called Sigma, the New York Times reports. The paper states that despite top executives receiving warnings about Sigma as early as the summer of 2007, the bank chose not to move $500m in client assets it had put into the vehicle two months earlier. Instead, while clients lost nearly all their money, JP Morgan collected some $1.9bn from Sigma’s demise, according to the suit. The paper says that as Sigma’s troubles worsened, JP Morgan lent the vehicle billions of dollars and received valuable assets in the form of a security deposit. “After Sigma came undone in September 2008, many of those assets ultimately became JPMorgan’s and eventually appreciated in value, giving the bank a large profit”, according to the suit. The bank says Chinese walls prevented different units of the company dealing with Sigma from sharing such information.

China reveals surge in exports

China on Sunday announced an unexpected surge in March exports, signalling strong global demand despite the Japanese earthquake and high global oil prices, the FT reports. On a quarterly basis, China recorded its first trade deficit since 2004 in the first quarter, the General Administration of Customs said. The first quarter trade deficit of $1.02bn reflected domestic economic strength and rising commodity prices, analysts said. But Zheng Yuesheng, statistics chief with the customs administration, told state television that the first-quarter deficit was likely to be only “temporary”. And a late surge in exports – which rose 35.8 per cent year on year in March – boosted the trade balance narrowly into positive territory for March, with a $140m surplus.

Legal action looms as Icelanders vote No

Britain and the Netherlands have vowed to take Iceland to court over €4bn ($5.8bn) lost in the failed Icesave bank after a deal to repay the money was rejected for a second time by Icelandic voters in a referendum, the FT reports. The result represented an act of defiance by Iceland’s crisis-hit electorate, with nearly 60 per cent voting against the deal in spite of warnings that a No vote could disrupt the country’s economic recovery and scupper its bid to join the European Union. The British and Dutch governments made clear there was no room for further negotiation with Reykjavik, setting the stage for an international court to decide who is responsible for foreign deposits lost when Iceland’s banking sector collapsed in 2008. The dispute involves money deposited by British and Dutch customers in the Icesave unit of bankrupt Landsbanki. They were reimbursed by domestic deposit insurance schemes, leaving the UK and Dutch treasuries out of pocket.

Inflation concerns lift gold to fresh peaks

The global growth trade was in the driving seat, pushing commodity prices and core bond yields higher, but leaving stocks struggling for gains as higher input costs raise concerns over corporate margins, the FT’s global markets overview reports. Those inflation concerns were being most clearly expressed in the precious metals sphere, where silver struck another 31-year high of $41.93 an ounce and gold touched a record $1,476 an ounce. The grey and yellow metals are now up 1.7 per cent to $41.53 and up 0.1 per cent to $1,474, respectively. The FTSE All-World equity index is flat, while US stock futures point to a 0.2 per cent advance for Wall Street at the opening bell. In London, shares in Barclays and Royal Bank of Scotland topped the FTSE 100 as the interim report of the Independent Commission on Banking stopped short of recommending the break-up of high street banks. European bourses were mixed. The FTSE Eurofirst 300 was down 0.3 per cent as the heavyweight automaker and parts sector seemed to be suffering in sympathy with Japanese peers following a Citigroup downgrade.

Kroenke launches £731m Arsenal bid

Arsenal’s protracted ownership saga is set to come to a head after leading shareholder Stan Kroenke made an offer to take control of the English Premier League football club, valuing its equity at £731m, the FT reports. Mr Kroenke, the US billionaire sports franchise owner who became an Arsenal shareholder in 2007, has sat on a 29.9 per cent stake in the club since November 2009, just shy of the level that requires a formal takeover offer. Mr Kroenke has now agreed to buy the 16.11 per cent stake of board member Danny Fiszman, who is seriously ill. He has also received irrevocable acceptances from ex-board member Lady Nina Bracewell-Smith – who last April put her 15.9 per cent stake up for sale through Blackstone, the private equity group – and other directors of the club that hold shares, taking his stake to 62.89 per cent.

UK banking report heralds industry shake-up

Lloyds Banking Group could be forced to sell hundreds of extra branches under initial recommendations put forward by the UK’s Independent Commission on Banking as part of its efforts to make banks safer and inject more competition into the retail market, the FT reports. Specific measures to weaken the state-backed bank’s dominant 30 per cent share of the market for current accounts, by selling “assets and liabilities” over and above the 600 branches it is already divesting, were among far-reaching proposals in the commission’s long-awaited interim report. The recommendations published on Monday follow a four-month consultation between the commission, led by Sir John Vickers, and the industry on two key aspects: how to improve banks’ structure to ensure they can better withstand future crises, and how to increase competition in the highly concentrated retail banking market. For more see FT Alphaville.

US profits set to suffer as commodity prices bite

Analysts expect companies to report slower growth in profits for the first quarter as rising commodity prices dent profit margins and risk hitting consumer spending, the FT reports. Earnings per share for companies in the S&P 500 index grew 41 per cent in 2010 following a sharp slowdown in 2009, according to Thomson Reuters, but are forecast to grow just 13.6 per cent in the first quarter compared with the same period a year ago. However, many strategists believe that results may be better than anticipated. Forecasts have been raised for materials groups – such as Alcoa, which on Monday will become the first S&P company to report earnings for the quarter. Materials groups’ earnings per share are now expected to grow by 44 per cent versus the first quarter of last year, thanks to rising prices for metals, oil and grains. Energy groups’ earnings are expected to grow by 23 per cent. However, rising input prices could hurt other sectors.