Posts from Friday May 6 2011

The return of … The Weekender

We’re going back — waaayyy back, into FT Alphaville history to resurrect “The Weekender” — a round-up of the week’s most entertaining, most enlightening, or simply most relevant, blog posts.

You know, something to read on those quiet Saturdays and Sundays. Read more

Further further reading

For the commute home, have a great weekend,

- “Breaking stride to pick up a penny, if it takes more than 6.15 seconds, pays less than the federal minimum wage.” Read more

The (possible) future of US manufacturing

Even as it was becoming clear that first-quarter growth had decelerated, there were plenty of signs that the manufacturing sector remained an exception.

Factory production in the first three months of the year grew by 9.1 per cent (annualised), freight and rail volumes grew, jobs growth in the sector has been steady, the monthly ISM surveys have been positive, and earnings by companies like Caterpillar and the Detroit carmakers have beaten consensus handily. Read more

Greek-out culminates in talk of eurozone exit [updated]

All those Greek-out! leaks — recent reports suggesting the Hellenic Republic was gearing up towards a debt restructuring — seem to have reached a final, dizzying (and totally unconfirmed) pinnacle.

But first, courtesy of RBS’s chief European economist Jacques Cailloux, reminder of what’s already happened in recent Greek debt/eurozone crisis news: Read more

Some more standard deviations in commodities

Sean Corrigan at Diapason Commodities sends us this chart on Friday:

 Read more

More on the April employment report

Our takeaway from the April employment report is that its two surveys — of households and of establishments — finally converged a bit, as was probably inevitable.

For many months now, the household survey had been painting a much better jobs picture than the establishment survey, with total employment (measured in the household survey) well outpacing payrolls growth (from the establishments). Read more

Deutsche chimes in on the commodities rout – it’s the QEnding

Still pondering possible reasons behind the recent commodities rout?

Deutsche Bank says it’s all because of the coming QEnding, or the end of the Federal Reserve’s second bout of quantitative easing, scheduled to take place in June. And it makes some sense. Read more

Covering RBS funding, quietly

In an otherwise static RBS funding base for the first three months of the year…

… There was really only one type of security taking up a bigger share of financing the world’s biggest balance sheet than at the beginning of 2011 — covered bonds: Read more

Payrolls crush consensus, grow 244,000 in April

Consensus had been for around 185,000, and there was a big upward revision for the February number, from 194,000 to 235,000. The unemployment rate ticked up to nine per cent.

We’ll be back with analysis in a bit, but for now here’s the release from the BLS: Read more

Honey, I broke the repo market

If you’re a money market fund manager, you’ll already be aware (plus possibly extremely concerned about) that general collateral rates are approaching zero. If you’re not, then read on.

As a reminder, the introduction of a new fee on banks in April by the US Federal Deposit Insurance Corporation sparked a slump in the government repo market, knocking that general collateral rate. Read more

There’s still room for more oil slides, Goldman says

Just what everyone has been waiting for!

The latest thoughts from Goldman Sachs’ energy gurus on the most recent commodity mega-slide. Read more

Commodities VaRy extreme right now

Hark — the standard deviation devils sing (again).

As Reuters columnist John Kemp pointed out yesterday, recent swings in the commodities complex have produced some impressive probabilities figures. The kind you can wheel out in dinner party conversation. For instance, front-month Brent crude futures sank almost $12 per barrel (or over 9 per cent) on Thursday, leading the market down from over $120 at the start of the day to under $110. Read more

Markets Live transcript 6 May 2011

Live markets commentary from FT.com 

What drove the commodities rout?

The quick answer is… nobody knows.

Although JBC Energy has come up with a helpful summary of points that they feel could be behind the Thursday rout. Read more

Helphire heads for intensive care

And today’s UK small cap disaster is…

 Read more

Fall-out from the imploding commodities complex

It was inevitable that Thursday’s commodites rout would claim some victims … just as Friday’s further slide in commodities prices will inevitably cause more casualties.

Emerging-markets funds managed by Goldman Sachs Group Inc. and Franklin Resources Inc. were among the U.S.-registered mutual funds affected the most in this week’s commodities selloff. The $831 million Goldman Sachs BRIC Fund and the $825 million Templeton BRIC Fund, which focus on Brazil, China, India and Russia, both fell 5.7 percent in the week ended yesterday. Read more

Markets stabilise ahead of US data

Markets have stabilised following Thursday’s commodity rout as traders prepare to tackle the crucial US jobs numbers later in the session, the FT reports in its rolling global markets overview. The FTSE All-World index is down 0.2 per cent, mainly reflecting a 1.5 per cent fall for Japan’s Nikkei 225 index. Tokyo is playing catch-up after a three-day break, during which time global equity benchmarks have slid from cyclical peaks on worries over slowing economic growth. US stock futures are pointing to a 0.4 per cent gain at the open, indicating that investors are not prepared to give up on the bull run quite yet. The FTSE Eurofirst 300 is up 0.1 per cent.

Bin Laden raid reveals rail terror plot

Osama bin Laden was plotting an attack on the US rail system, a plot uncovered by the raid that killed the al-Qaeda leader in his hideout in Pakistan, US officials say. On Thursday night, the Department of Homeland Security said it had issued a message to authorities throughout the US about a potential al-Qaeda scheme against the rail sector, the FT reports. A US official confirmed that the plot, which involved derailing a train on a bridge, was detailed in handwritten notes from February 2010 discovered among bin Laden’s effects in Abbottabad, Pakistan. The Wall Street Journal adds that al-Qaeda and other terror groups have long aspired to blow up commuter trains and subways in the U.S.

Compare and contrast, RBS and Lloyds

Where Lloyds goes, RBS follows.

Not in terms of a socking great provision for PPI mis-selling (RBS says it can’t estimate the cost, but reckons it could be significant) but those increased Irish impairment chargesRead more

Probe eyes trades by SAC Capital

Prosecutors are examining trades made in an account overseen by hedge-fund titan Steven Cohen that were suggested by two of his former fund managers who have pleaded guilty to insider trading, the Wall Street Journal reports. The development surfaced in court filings submitted in connection with a sweeping insider-trading investigation, which focuses on ways traders can receive nonpublic information from experts connected to industries or firms. At issue is trading in a $3bn stock portfolio personally overseen by Cohen at SAC Capital Advisors and referred to by the government in the filings as the “Cohen Account.” There have been no accusations of wrongdoing against either Mr. Cohen or SAC.

China pays ’close attention’ to debt debate

China, the biggest foreign holder of Treasury notes, is closely watching the debate over raising the US debt ceiling and wants the Obama administration to do more to curb the deficit, Bloomberg reports, citing comments by vice finance minister Zhu Guangyao. His comments came days before about 30 top Chinese officials travel to Washington for an annual meeting on economic and military cooperation. Treasury Secretary Timothy F. Geithner will meet his counterpart vice premier Wang Qishan for two days of talks beginning May 9 and press the US case for allowing China’s currency to appreciate further.

Goldman chief to face questions on his future

When Lloyd Blankfein faces Goldman Sachs shareholders at the annual meeting on Friday morning, he will almost certainly be hit by a barrage of familiar questions on the bank’s actions during the crisis, its pay practices and its run-ins with regulators, the FT notes. One of these likely inquiries looms larger now: will this be his last appearance as Goldman’s chairman and chief executive? The Guardian reports that Goldman Sachs is bracing itself for what may be the most contentious annual meeting in the embattled investment bank’s 142-year history. On Friday shareholders are planning to call on Goldman’s executives to justify the combined $69.6m  payday its top five executives received in 2010 and to answer questions about allegations that the bank misled clients and lied to Congress, the newspaper says.

Here we go again

Related link:
Commodity sell-off 2011: is this it? – FT Alphaville

M&As to fuel high-yield bond and loans sales

An uptick in mergers and acquisition activity is set to boost issuance in the US leveraged finance market as investors in Europe strike a note of caution on market dynamics there, according to the FT. Leveraged loan and junk bond issuance has been strong in the US this year, driven by companies’ efforts to refinance debt borrowed during the credit boom of the past decade. Bankers and market experts, however, are now pointing to a growing pipeline of deals related to M&A. The need for new money for loans and bonds to finance M&A deals, rather than refinance existing debt, could help to ease what has been a cash glut in both markets this year and reduce the instance of controversial financing structures, which have returned in the rally.

Republicans split over Medicare plan

Republicans in the House of Representatives have splintered over plans to reform Medicare, the healthcare programme for the elderly, entering new budget talks in apparent disarray, the FT reports. A month ago, House Republicans proposed dramatic changes to Medicare as part of their 2012 budget, a politically risky blueprint designed to highlight the party’s determination to curb the mounting US debt load. But this week, just as the White House and lawmakers began fresh negotiations on a deal to raise the US debt limit – Republicans sent conflicting messages on whether they would continue to push for Medicare reform. The LA Times says Republicans are acknowledging that their plan to privatise Medicare isn’t moving forward any time soon as talks over how to shrink the federal deficit continue.

Commodities rout intensifies

Silver prices plunged for the fifth consecutive day on Friday as the grey precious metal suffered its biggest correction since the billionaire Hunt brothers cornered the market in 1980, the FT reports. The reversal of fortunes for silver – which until this week’s 25 per cent drop had been up 56 per cent since January – has led a wider sell-off in commodities markets, which were heading towards one of their worst one-day falls on record. Brent crude dropped as much as $12.17 to a low of $109.02 a barrel, the FT says. The drop was the largest in percentage terms since the financial crisis and the largest ever in absolute terms. FT Alphaville has a round-up of some extraordinary commodities sell-off numbers. Goldman’s Bric fund is among the most hurt in the “panic selling,” according to Bloomberg. The WSJ cites an analyst saying “hedge funds got scared and everyone’s running for the door”.

The Irish pain of RBS, charted

Ulster Bank Group accounts for 10% of the Group’s total gross customer loans or 9% of the Group’s Core gross customer loans. The impairment charge of £1,294 million for Q1 2011 was £135 million higher than the £1,159 million impairment charge for Q4 2010. This was driven by continued deterioration across most portfolios during the quarter…

From page 114 of the RBS IMS for the first quarter of 2011. Read more

Paulson credit strategy reaps gains

Credit strategies are leading the way for hedge fund managers as funds adjust to volatile trading conditions, the FT says. Credit is the best performer so far this year, without the benefit of leverage, among funds managed by John Paulson & Co. The group’s $9bn Credit Opportunities fund returned 1.4 per cent in April and is up 7.8 per cent for the year, according to investors. Paulson’s credit funds were up between 5.92 per cent and 6.34 per cent in the first quarter. The robust performance in credit comes as it emerged leading hedge fund managers were caught out by a pause in the swift rise in gold, volatile prices and a resilient stock market in the first quarter. The San Francisco Chronicle adds that Paulson’s biggest fund, Advantage Plus, is said to be down 1.7 percent in 2011 after gaining 0.1 percent last month.

Carlyle faces China investment questions

Carlyle, the US private equity group, is facing questions over its investments in two Chinese companies that have been accused of fraud and suspended from trading on stock exchanges in Hong Kong and New York, the FT reports. The scrutiny comes at an unwelcome time for Carlyle, as the manager of some $106bn in funds seeks to burnish its reputation ahead of a planned initial public offering. China Forestry, a Hong Kong-listed plantation operator in which Carlyle has an 11 per cent stake, and China Agritech, a Nasdaq-listed fertiliser maker in which Carlyle has a 22 per cent stake, have both had their shares suspended from trading in recent months. FT Alphaville had an earlier post on China’s vanishing forests.

AIG profit slumps on natural disasters

AIG’s first-quarter profit slumped 85 per cent as losses from natural disasters offset gains that the insurer booked on securities and other assets, the FT reports. The results underline AIG’s transformation in the wake of its near collapse and $180bn government rescue from a sprawling financial empire to a company focused on core insurance operations. An earthquake in New Zealand and floods in Australia added to pre-tax catastrophe losses, which totalled $1.7bn during the period. A year ago, they were $500m. AIG’s net income narrowed to $269m in the first quarter from $1.78bn a year earlier. The New York Times adds that AIG said its Chartis property and casualty business increased net written premiums nearly 20 percent in the quarter.