Posts from Wednesday Apr 20 2011

Apple does not crumble; smashes street expectations

Apple Inc reported above expectations earnings after the bell on Wednesday, with demand driven by healthy iPhone and iPad numbers, reports the Reuters news wire. Second quarter revenue was $24.67bn (expected: $23.38bn) and earnings per share a whopping $6.40 (expected: $5.37). Apple’s CFO added that the firm had “sold every iPad2 we could make”. Shares were up three per cent in extended trading at pixel time.

Further further reading

For the commute home, where per-capita beer consumption is about to explode,

– “We’re still in the early days of this trend, whereby countries slowly converge in terms of per-capita beer consumption.” Read more

Stocks rally on upbeat US earnings

That’s more like it, exclaim the bulls. A batch of strong US earnings reports has revived investors’ hopes that the global economic climate remains conducive to improving corporate performance, sharply boosting risk appetite after the brief wobble delivered by S&P’s warning on US debt, reports the FT’s global market overview. The FTSE All-World equity index is up 2.1 per cent, commodities and “growth” currencies are rallying with some vigour, while perceived havens such as the yen and core bonds are under pressure. The S&P 500 on Wall Street is up 1.4 per cent – results from United Technologies are adding buoyancy – while the FTSE Eurofirst 300 is higher by 1.8 per cent. But amidst the risk-ballistic mood, gold has breached $1,500 an ounce for the first time and silver has touched a 31-year high of $45 an ounce.

Coffee breaches historic $3 level

Coffee prices have broken through the psychologically important $3 a pound level for the first time in more than 34 years as roasters scramble to secure scarce supplies of Arabica beans and investors continue to pour money into the niche commodities market, says the FT.

Nissan set for manufacturers’ first return to Japan bonds

Nissan Motor is likely to become the first Japanese manufacturer to issue corporate bonds domestically since the March 11 earthquake and tsunami amid strong investor demand for private sector debt, writes the FT. Yields rose sharply higher after the disaster, exacerbated by the ongoing crisis at Tokyo Electric Power’s nuclear plant in Fukushima, which prompted rating agencies to cut Tepco’s long-term debt rating several times.

  Read more

Profits rise 48% at Wells Fargo

Wells Fargo reported a 48 per cent increase in first-quarter profit, but the stock sank in morning trading on concerns about revenue and loan growth, highlighting the fragility of the economic recovery, the FT reports. The fourth-largest US bank by assets on Wednesday reported net income of $3.8bn, or 67 cents a share, compared with $2.5bn, or 45 cents, in the same quarter last year.

  Read more

Vodafone to eye Indian listing if it wins $2.6bn tax battle

Vittorio Colao, chief executive of Vodafone, said the UK-based mobile phone operator would consider listing its Indian business if it won a long-running legal battle with Indian authorities over a $2.6bn tax bill, reports the FT. Tax authorities in the country have ordered Vodafone to pay $2.5bn in back taxes for its $11bn acquisition of Hutchison Whampoa’s 67 per cent stake in a domestic mobile operator that it completed three years ago.

China to alter taxes in bid to cut wealth gap

China is to lift the exemption threshold for personal income tax payments in an effort to redistribute the spoils of rapid growth and reduce a widening wealth gap, reports the FT. The level at which Chinese citizens must pay income tax will be raised from Rmb2,000 ($305) a month to Rmb3,000, the finance ministry said on Wednesday. Raising the threshold to this level will cut the number of taxpayers by about 50m to 350m and reduce government tax revenue by about Rmb99bn.

Gold pierces $1,500 to set fresh high

The price of gold leapt to a record above $1,500 a troy ounce and silver soared past $45 as the huge debt burden of western countries burnished the appeal of the precious metals, the FT reports. Investors are focusing on fears of the debasement of paper currencies amid rising inflation from China to Europe and a warning by Standard & Poor’s that the US could lose its triple A credit rating

The sanctions dodging Tunisia-Libya oil swap

Reuters’ Jessica Donati and Emma Farge on Wednesday spot some odd goings-on in the Tunisian port of La Skhira:

Oil trading and shipping sources said at least 120,000 tones of gasoline had arrived so far this month at La Skhira for ship-to-ship transfers, a figure that amounts to nearly half of Tunisia’s annual imports.

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QEnding: rates and fates

A lot of people have been hard at work lately disputing the Pimco-nian idea that the end of QE2 will lead to an inevitable climb in yields.

Bloomberg, in a story about the continued demand for off-the-run Treasuries, quotes a number of analysts saying they’re just not worried about it, as investors will fill the breach. Paul Krugman makes the pro-stocks, anti-flows case, and our pal Joe Weisenthal at Business Insider has diligently been spotting other examples and reminding us that the end of the first easing round was followed by lower rates, not higher. Read more

Tightening: not when, but how fast

In a previous post we looked at how the futures markets were pricing in the eventual beginning of Fed tightening.

Yeah, we know — it’s way too premature to be discussing this. Read more

Are you an insider trader?

That’s a question Reuters’ Matthew Goldstein asks in a special report published Wednesday on how the FBI’s Behavioral Analysis Unit (BAU) is helping the SEC investigate white collar crime.

From the report: Read more

The rambling chairman

It is a sadly rare opportunity to find financial statements that really tell shareholders what management is thinking.

Thus without too much further comment… (H/T Bryce Elder) Read more

Uranium markets, the post-Japan view

Given the scale of the original reaction to troubles at Japan’s Fukushima-Daiichi nuclear plant, it’s interesting to see the degree to which uranium ore prices have stabilized since March. Especially since the crisis itself is doing anything but.

Indeed, via RBC Capital markets on Wednesday: Read more

Between Greek default and dodgy Russians

Cyprus. An endlessly fascinating case study in the contagion risk from Greece defaulting.

And now with an offshore tax twist. Read more

A whisper of restructuring

A vague and no doubt silly rumour on Wednesday that Greece will default this weekend. (Would they really? It’s funny timing). Anyway, no surprises who has taken damage:

Some smart – but conflicted – routers

A block trade, born in a US-based pension fund, is traveling the electronic execution highway.

The trade — let’s call him Benny — is sent to the fund’s broker for execution. That broker, now sitting in his office in New York, has a number of options when it comes to Benny. He can send Benny to an exchange like the NYSE or attempt the trade over-the-counter. Or he can send it to another division of the brokers’ own firm, to be filled using the company’s own inventory. He can internalise little Benny. Read more

The coming QEnding

Or, supply dynamics in quantitative easing. Required reading for a quiet Wednesday, really.

Remember how QE works. The Federal Reserve buys US Treasuries from investors in the hopes of pushing them into things like corporate credit, but at the same time the central bank’s purchases decrease UST supply. They squeeze investors from ‘safe’ US Treasuries into riskier assets. Read more

Markets Live transcript 20 Apr 2011

Live markets commentary from 

What is the fair value of a Vix future?

What is the fair value of a Vix future? In truth, it’s actually pretty hard to say.

This is a point FT Alphaville has raised before of course — whilst pondering some other volatility-related issues, like the current elephant in the room that is Vix-related ETNs (arguably tramping about on the supply and demand balance of the Vix curve), and the question of why spot volatility remains so stubbornly low while longer-dated volatility and variance pound higher. Read more

A longer-term muni issuance drought

City and state government plans to cut borrowing indicate that the current dearth in issuance of municipal debt has turned into a long-term trend, the WSJ reports. Muni issuance fell to $47bn in the first quarter from $107bn a year ago. Municipalities have undergone an attitude change in reliance on long-term borrowing, with California halving its issuance plans to little more than half last year’s $10bn. The median municipal debt deal in 2011’s first quarter has also fallen to a decade low of $5m, with much greater selection over which projects go to markets for financing.

Apple’s iPhone 5 ships in September

A new, faster, Apple iPhone will start shipping in September, three sources close to the company’s supply chain have told Reuters. The phone’s production will begin this summer, the sources said. Apple’s famously super-efficient supply chain and constant reiteration of the iPhone has turned the company’s orders for components into a ‘cash cow’ for low-margin suppliers in Taiwan and China, analysts added. However, Apple’s quarterly results later on Wednesday may reveal damage to its supply chain and margins from the earthquake in Japan, a region critical to the touchscreen technology used in iPhone and iPad designs, Reuters adds.

Facebook struggles to find lobbying voice

Facebook is fighting to make its presence felt in Washington ahead of growing political scrutiny of its stance on privacy and China, the WSJ reports. The social network company’s lobbying efforts have led to a new office being set up inside the Beltway. However, plans to hire the former White House press chief Robert Gibbs have fallen through and Facebook has said it is open to playing by China’s rules in expanding there, a stance on censorship that is likely to attract political heat. The company is now looking to hire lobbyists with deep congressional experience. Meanwhile, President Barack Obama heads to Facebook headquarters to sell tax hikes for billionaires on Wednesday, Reuters reports.

Antitrust probe of Nasdaq-ICE’s NYSE bid

Nasdaq OMX and ICE have made a bold move to push NYSE to reopen takeover talks, unveiling a commitment to pay a $350m reverse break-up fee and touting $3.8bn in committed financing, according to the FT. The antitrust review that the fee is meant to salve has nevertheless already begun. The Justice Department is querying market participants about the implications of a Nasdaq-NYSE tie-up, Bloomberg reports. Nasdaq’s chief executive said he had met with the Justice Department twice in the last week and would make a formal filing to regulators soon, the WSJ reports.

Royal Wedding markets, then and now

And so it begins. The first Royal Wedding investment-related PR research. Read more

Exxon says BP spill response lost time

ExxonMobil’s chief executive has claimed that BP lost time trying solutions that would never work during last year’s Gulf oil spill, the FT reports. Rex Tillerson said his engineers had known that BP’s attempt to build a containment dome would not work, adding that this initial failure allowed the problem to become much bigger. Mr Tillerson has previously criticised BP about its assessment that there are industry-wide lessons to be drawn from the Deepwater Horizon accident. However, his latest comments about the crisis response are the most specific so far.

BofA selling $5bn private equity arm

Bank of America Merrill Lynch is getting rid of its last big private equity fund with a plan to spin off BAML Capital Partners into an independent firm, Reuters reports. The new company will manage the unit’s $5bn assets until they are wound down. BAML Capital Partners was famed before the crisis for leading  some of the PE industry’s biggest buyouts, including the $31bn takeover of HCA in 2006, the FT says. Post-crisis, BofA has scrambled to comply with Volcker Rule restrictions on banks trading alongside clients in their fund management businesses.

Tech earnings provide cheer

Earnings reports from Intel and IBM have revealed an unexpected rebound in business spending, indicating optimism about economic recovery, the FT reports. Intel reported revenues of $12.8bn, up 25 per cent on a year ago, while IBM’s revenues were up 8 per cent to $24.6bn, its highest in a decade. Businesses have pumped up their spending on servers and data hardware necessary for cloud and mobile computing, the WSJ says. Even Intel’s personal computing revenues posted a strong performance, defying analyst forecasts of competition from tablet computers. The upbeat earnings sent Asia stocks and commodities higher on Wednesday, Reuters reports.

QEased credit – but maybe not for long

It’s money money everywhere and not that much to buy.

Citigroup credit strategist Matt King has a nice note out on Wednesday attempting to delve into the ‘cash on the sidelines‘ notion — or the idea that there’s a wall of money just waiting to be invested. (It’s true, of course. In the credit space, King points out that inflows to corporate credit have more than doubled since 2007, while net issuance has fallen. This means most new issues are oversubscribed and investors are left feeling they have to buy the market, regardless of whether they actually like it.) Read more