Posts from Tuesday Apr 26 2011

Further further reading

For the commute home, where there is often such a thing as too much information, like the government warning on your favourite bottle of scotch,

– US IPO filings reach 2007 levels. Read more

Australia seeks workers to meet boom

Australia is facing a critical shortage of workers as record numbers of large natural gas and mining projects are built to service the energy and steelmaking needs of China, Japan and South Korea, its top three export markets, the FT writes. Deloitte Access Economics, an advisory group, estimates the value of Australian investment projects either under way or in planning has reached A$777bn ($832bn). “What is driving this is the sheer amount of profit that mining companies can earn with commodity prices being so high,” said David Rumbens, a director at DAE. “It makes new investment projects irresistible.” “A decade ago, mining investment in Australia was barely half the level of manufacturing investment. Now it is more than five times the level of manufacturing investment,” he said.

Government panel calls for Grameen overhaul

A Bangladeshi government panel has accused Grameen Bank, the globally renowned microlender founded by Nobel laureate Muhammad Yunus, of poor governance and circumventing the law, calling for the institution’s restructuring and more vigilant ­regulation, reports the FT. Mr Yunus, 70, lost a court battle earlier this month to keep his job as managing director of the bank, after Bangladesh’s central bank ordered his removal for exceeding the retirement age. Mr Yunus has defied the order and continued to work in his position at Grameen headquarters while awaiting final court confirmation of his removal.

France backs Draghi for ECB presidency

Mario Draghi, governor of the Bank of Italy, has taken a big step towards succeeding Jean-Claude Trichet as head of the European Central Bank after being strongly endorsed by France’s Nicolas Sarkozy, acting with Germany’s tacit blessing, the FT reports. “France will be very happy to support an Italian for the presidency of the ECB,” the French president said in Rome on Tuesday at a press conference with Silvio Berlusconi, Italy’s centre-right prime minister. “I know Draghi well. We support him not because he is an Italian but because he is a man of quality.”

S&P surges after strong US results

A batch of strong results from leading US companies including Ford Motor, UPS and 3M helped push the S&P 500 index to its highest level since June 2008 in a sign of rising market confidence in spite of concerns about the world economy, the FT reports. Ford, the second-largest US car company by revenues, reported its highest quarterly profit for the period in 13 years, in the latest sign of the revival in US manufacturing. UPS, the logistics company, and 3M, the diversified manufacturer, raised their guidance for full-year earnings after first-quarter profits beat analysts’ expectations. Lockheed Martin, the defence contractor, also raised its full-year projection. The news follows excellent results from industrial companies such as United Technologies, Eaton and Honeywell. Of the 154 constituents of the S&P 500 that have reported earnings for the first quarter, 122 have delivered earnings ahead of average expectations, according to Bloomberg data. The S&P 500 index was 0.9 per cent up at 1347 by midday in New York and up 7.1 per cent this year. The rally this year has been led by the energy sector, which has risen 16 per cent, followed by the industrial sector and healthcare, which are both up 10 per cent. The benchmark has nearly doubled from its low of 676 set in March 2009, during the financial crisis, but is still 14 per cent below its all-time high of 1,565.15 reached in October 2007. Ford’s first-quarter earnings were $2.55bn, up 22 per cent on a year earlier and far ahead of analysts’ estimates. The company ascribed the rise to higher volumes and selling prices, as well as lower interest payments. Operating profits in Europe almost trebled, helped by new models.

The United States of pension shortfalls

A year of local governments living dangerously

It’s not just the US sovereign that’s recently taken a credit beating.

A Moody’s report on US public finance rating revisions out Tuesday shows how the fiscal ripple effect continues to deteriorate credit conditions in US municipalities. This may not be big news to muni watchers, but there have been other reports out recently that are worth tying together. Read more

Allied Irish and a collapsing capital hierarchy

And the Allied Irish credit event query is — gone!

 Read more

If algos can mis-value a book by $23.7m…

… how might they be mis-valuing equities?

So asks Themis Trading on Tuesday after discovering this curio of a story from CNN about algo-bots gone wild on Amazon. Read more

The market for Sovys [updated]

Oops. Acronym alert. Sovys = Sovereign Yield Spread Futures, interest-rate products unveiled by CME Group last Thursday.

It’s a fascinating little challenge to all sorts of sovereign trading traditions, including bonds and CDS. Read more

Markets Live – Fed press conference special, featuring Gavyn Davies

Not since Arthur Dent quizzed Deep Thought has a Q&A session been so eagerly anticipated.

On Wednesday (27 April) at 2:15pm New York time / 7:15pm London time Federal Reserve Chairman Ben Bernanke will conduct the first post-FOMC press conference in the central bank’s history. Read more

Don’t mess with Eurostat

Presenting the new, improved, contingent liabilities-laden Eurostat data release.

But first — an atrocious set of numbers on 2010’s EU government deficits and debt, with one name sticking out above all… Read more

An Allied Irish credit event query [updated]

Fresh on the Isda website, and spotted by a reader:

 Read more

What to expect from Chairman Bernanke

No doubt about the big financial event of the week — it’s Ben Bernanke’s first post-FOMC meeting press conference.

And like the other big event of the week — the Royal Wedding in London, England — courtiers are doing some careful stage planning to make sure everything goes smoothly. Read more

Markets Live transcript 26 Apr 2011

Live markets commentary from 

Lactalis launches full takeover bid for Parmalat

Groupe Lactalis, the privately held French dairy company announced on Tuesday that it had launched a €3.4bn ($4.9bn) bid for the rest of Parmalat, Italy’s biggest dairy company and one of the country’s best-known consumer brands, the FT reports. Lactalis, which already owns 29 per cent of Parmalat, will offer €2.60 per share, a 12.5 per cent premium to the closing price on April 21. “We have an ambitious growth plan for Parmalat, making it the Italian company of reference in the dairy market,” Emmanuel Besnier, Lactalis chairman, said in a statement to the stock exchange on Tuesday. Lactalis became the largest shareholder in Parmalat last month after it struck a deal to buy out a trio of foreign activist funds who had been agitating for change at the group. At the time, Lactalis said it had paid €2.80 per share for a 15.3 per cent stake, building on a 11.4 per cent holding it had already acquired.

US policy shift builds pressure on Syria

The US announcement on Monday that it was pursuing “targeted sanctions” against Syria heralds a likely shift by western governments towards increasing pressure on Damascus, the FT reports. Although imposing sanctions on leading Syrian officials might have limited practical effect, it marks a big change in the US stance towards Bashar al-Assad, Syria’s president, and is the latest shift in tortured relations with Damascus. The Bush administration classified Syria as an associate member of the “axis of evil” and withdrew its ambassador after the 2005 assassination of Rafiq Hariri, the former prime minister of Lebanon who had crossed swords with Mr Assad. Ties were further tested in 2007 after Israel bombed a hidden Syrian nuclear reactor that western intelligence agencies said was intended as part of a weapons programme.

Barrick makes $7.6bn offer for Equinox

Barrick Gold, the world’s biggest gold producer, has made an agreed C$7.3bn ($7.6bn) offer for Equinox Minerals, the Australian-Canadian copper miner that has been the target of a hostile offer from China’s Minmetals Resources, the FT reports. The bid is another sign of the scramble for raw materials and signals an expansion of Barrick’s ambitions in the global mining industry. The Toronto-based Barrick has offered C$8.15 a share for Equinox, compared with Minmetals’ C$7 per share offer. Craig Williams, Equinox’s chief executive, said Barrick’s offer “is superior to the public proposal made by Minmetals in terms of certainty and value”. Minmetals on Tuesday announced that it had withdrawn its offer. Shares in the company, which ranks among China’s largest metals traders and has so far been one of the bolder Chinese miners in terms of overseas deals, fell 13 per cent on Tuesday on news of the deal’s collapse. For more see FT Alphaville.

Bad juju in Irish bank buildings

We’re unsure if this is exorcism, omen, or what.

According to the Irish TimesRead more

Risk appetite wanes ahead of key data

Whether bloated by Easter eggs or wary of the probable end of QE2 and further Chinese tightening, risk assets were taking a breather on Tuesday, reports the FT’s global market overview. European stock markets opened modestly down while commodities were softer and “haven” currencies such as the yen and Swiss franc were firmer. Silver slumped by almost 10 per cent from its highs of Monday and was now at $45.88. The FTSE All-World Index was down 0.12 per cent as traders in Europe returned after the long Easter weekend to largely sit on the sidelines ahead of an important Federal Open Market Committee meeting on Wednesday. Ben Bernanke, the Fed’s chairman, will have plenty to discuss at his inaugural press conference following the meeting, including the likely stopping of that source of liquidity for risk assets – QE2 – in June.

Grantham comes nose to nose with a paradigm shift

GMO’s Jeremy Grantham reckons we are witnessing the most important economic event since the Industrial Revolution, reports FT Alphaville. “From now on, price pressure and shortages of resources will be a permanent feature of our lives. This will increasingly slow down the growth rate of the developed and developing world and put a severe burden on poor countries.” Read more

Private clients regain confidence in UBS

UBS’s recovery from the credit crisis continued apace in the first quarter as investment banking reaped the benefits of its rebuilding and private banking clients regained confidence in the Swiss group’s prospects, the FT reports. Clients in the bank’s powerhouse private banking business deposited a net SFr11.1bn, marking a decisive return to positive inflows after huge withdrawals in the credit crunch and a limping revival in 2010. Meanwhile, investment banking bounced back, with sharply higher revenues in equities – a traditional UBS strength – and the previously beleaguered fixed income business. Net group profits after minorities reached SFr1.81bn ($2.02bn). Although down on the SFr2.2bn achieved the same time last year, the result beat the SFr1.7bn earned in the fourth quarter of 2010, prompting an uncharacteristically effusive judgment from Oswald Grübel, UBS chief executive.

Barrick outguns Minmetals for Equinox

First (and could it be final?) round in the world’s biggest gold takeover play goes to Barrick Gold. From the FT on Tuesday:

Minmetals Resources has withdrawn its $6.5bn offer for Equinox Minerals, a day after being trumped by Barrick Gold’s agreed C$7.3bn ($7.6bn) takeover bid for the copper miner. Read more

Further reading

Elsewhere on Tuesday,

– Wall Street’s dubious fiscal frenzyRead more

Pink picks

Comment, analysis and other offerings from Tuesday’s FT,

Gideon Rachman: Egypt’s liberals are losing the battle
All sorts of contending forces rub shoulders in Egypt these days, says the FT’s Rachman. Last week, I found myself in the lobby of a Cairo hotel, chatting to a square-bearded, pot-bellied, fundamentalist preacher who is eager to see all women in Egypt wear the niqab – the all-encompassing veil that leaves only a slit for the eyes. Just behind him, French tourists ambled around in bathing suits. Then the hotel crooner began belting out “My Way”. I suggested we move to a quieter spot and the preacher agreed, pointing out that, as a Salafi, he objected to all forms of music – and not just Frank Sinatra. Read more

Snap news

Breaking pre-market news on Tuesday,

– UBS sees inflows of $11.5bn to wealth management business in Q1 — statementRead more

Lloyds eyes Scottish Widows sale

Lloyds Banking Group is set to put its Scottish Widows insurance business up for sale as part of new chief executive Antonio Horta-Osorio’s review of the bank, reports Reuters, citing The Times of London. Horta-Osorio, who took the helm of the part-nationalised British lender in March, is set to unveil the result of a strategic review at the end of June and is expected to say he will focus the group on core banking services. Scottish Widows could come with a price tag of between £5bn-£7bn, the Times said. There has long been speculation that Lloyds may sell insurance assets as it seeks to bolster its balance sheet. The report added that Horta-Osorio is also considering putting the bank’s 60% stake in St James’s Place, the wealth manager acquired after it took over HBOS at the peak of the global banking crisis, for sale. The stake is worth about £1bn.

Vickers pressured on bank bonus rules

Key British MPs are urging Sir John Vickers to widen his proposals on bank reforms by defining new bonus transparency rules to provide an early warning of the build-up of risk, reports the FT. Members of the Commons treasury committee will next month urge Sir John to ensure his commission’s final report on Britain’s banking industry contains tougher scrutiny of the role of bonuses in creating systemic risk. Andrew Tyrie, Tory chairman of the committee, argues that the Independent Commission on Banking, led by Sir John, must address the issue of pay in its final report in September. Britain’s banks will argue that tougher transparency rules could hurt the UK’s competitiveness as a financial centre.

Overnight markets: Down

Asian stocks fell on Monday after profit forecasts from Nintendo to Nidec signalled slowing earnings growth and as commodities dropped, led by the biggest slump in copper in about seven weeks, while the yen and dollar rose, reports Bloomberg.

The MSCI Asia Pacific Index fell 0.5% to 137.85 as of 12:10pm in Tokyo. S&P500 Index futures were little changed. Copper plunged as much as 3.3% and zinc sank as much as 4.4% on the London Metal Exchange, which reopened after a two-day holiday. The yen added 0.5% to €118.77. The dollar gained for the first time in six days versus Europe’s currency. Read more

Lloyds  and Grainger in tie-up

Lloyds Banking Group is to create a mechanism to help restore the value of thousands of non-performing home loans with Grainger, the UK’s largest listed residential landlord, reports the FT. The deal, the first of its kind in the UK, will see Grainger manage a portfolio of homes on behalf of administrators for the housing groups that had been backed by Lloyds. Lloyds has more than £500m of commercially owned residential property in its business support unit, or “bad bank” – mostly old buy-to-let portfolios created by property entrepreneurs backed by HBOS in the boom years. Lloyds acquired HBOS at the height of the financial crisis. Many of the residential portfolios slumped in value in the crash, leaving the underlying assets worth less than the book value of the loans.