Posts from Monday May 16 2011

Dollar slide fails to help Wall Street rally

Bears had the upper hand for much of the global session as concerns about sovereign debt and lingering wariness over global growth prospects discouraged buyers of racier assets, reports the FT’s global markets overview. The FTSE All-World equity index was down 0.5 per cent, primarily because of a weak showing out of Asia, and commodities prices were mixed, but US Treasury yields were inching higher as the country’s debt limit nears. Wall Street’s S&P 500 was down 0.5 per cent, not helped by a weaker than expected reading from May’s New York Fed Empire State manufacturing index or a below-consensus homebuilder sentiment reading. Yet the buck’s slide – it was down 0.4 per cent on a trade-weighted basis to 75.44 – briefly saw stocks rising to gains on the day, but they have since slid back into negative territory.

Battle lines drawn over fresh TMX bidder

Battle lines are being drawn in Canada between supporters and opponents of a C$3.6bn ($3.7bn) bid by nine domestic banks and pension funds for TMX Group, operator of the Toronto and Montreal stock exchanges, says the FT. The bid consortium, Maple Group Acquisition, announced on Sunday that it would offer cash and shares valued at C$48 per TMX share, about 20 per cent above the value of an all-share deal between TMX and the London Stock Exchange agreed in February. Reuters reports that if the TMX-London Stock Exchange deal falls through, the LSE could be vulnerable to a bid.

Deadline expires for BP-Rosneft deal

Talks to salvage BP’s proposed $16bn share swap with Rosneft, the Russian state oil champion, appeared close to collapse after a midnight deadline UK time to complete the deal expired, writes the FT. Rosneft was not willing to extend the deadline further, a person close to the company said, after talks failed earlier in the day over a deal to buy out BP’s partners in TNK-BP, its existing Russian joint venture. A sticking point was Rosneft’s refusal to allow four Russian oligarchs, operating as Alfa-Access-Renova (AAR), to join the deal, says the Telegraph.

Japanese groups suffer $25bn earthquake hit

The March 11 earthquake and tsunami caused Y2,000bn ($25bn) in damage to plant and equipment at Japanese companies and left many too uncertain of their business prospects to issue forecasts for the current fiscal year, according to recent earnings reports, says the FT. The disaster wrecked factories and infrastructure along the country’s north-eastern coast, creating shortages of industrial components that disrupted production of cars and electronics far beyond the stricken region.

DuPont secures $6.4bn Danisco deal

Du Pont, the US-based chemicals giant, has succeeded in its $6.4bn bid to acquire Danisco, having secured 92.2 per cent of the Danish food ingredients company’s shares, reports the FT. “We are delighted that the tender has been successful and we can move on to the process of integrating Danisco into DuPont,” said DuPont chairman and chief executive Ellen Kullman.

Goldman reshuffles investment bank chiefs

Goldman Sachs has shuffled the senior ranks of its investment banking arm as it seeks to repair client relationships that frayed during the bank’s public battles with regulators and politicians in the wake of the financial crisis, writes the FT. Goldman has appointed Richard Gnodde, a London banker who also spent eight years in Asia, as co-head of the investment banking division while picking a pair of veteran dealmakers to manage its merger advisory business.

Nasdaq and ICE withdraw bid for NYSE

Nasdaq OMX and the IntercontinentalExchange have abandoned their $11.3bn break-up bid for NYSE Euronext after a US competition regulator threatened to sue the companies to block the potential deal, reports the FT. The Department of Justice said that combining the NYSE’s stock market operations with Nasdaq’s would have “substantially eliminated competition” in listings, trade reporting and other areas. The failed deal is likely to leave Nasdaq and Ice on the prowl for new prey, argues Reuters.

Strauss-Kahn denied bail by NY court

Dominique Strauss-Kahn, the head of the International Monetary Fund, was denied bail on Monday after being formally charged in New York court over an alleged sexual assault on a maid at a hotel in the city, reports the FT. Prosecutors stressed that the — at least until Saturday’s events — presumed candidate for the French presidency was a flight risk, according to the New York Times. Battle has commenced over who will succeed him, adds the pink paper.

Further further reading

For the commute home,

– The upward slope of real house pricesRead more

Nasdaq gets flacktastic over dodgy company’s bell-ringing

The Financial Investigator reached a Nasdaq spokesman, Robert Madden, on his cell phone for comment. After learning who was asking the questions and their nature, Madden suddenly developed an inability to hear the conversation and hung up, promising to call back. He never did.

It’s always fun when a flack reaches deep into his bag of tricks, and this is a reliable favourite. Or perhaps Madden has been taking pointers from Chris “Oooh, terribly bad line, terribly sorry” HuhneRead more

No bail for IMF bailout lord

Dominique Strauss-Kahn was remanded in custody on Monday by a New York court. From the FT:

The head of the International Monatery Fund was appearing in a Manhattan court on Monday to face a complaint over an alleged sexual assault on a maid at a hotel in the city. Read more

I think, therefore I am nothing

Perhaps some Deutsche Bank analysts have been into the absinthe.

From a DB research note out Monday: Read more

Hello to bondholders, Dubai to banks

Or, what happens when an autocratic put and bad debts collide?

In which FT Alphaville wonders if one of 2011’s greatest stunts in defying credit gravity (charts via Exotix)… Read more

Machine-readable sovereign downgrades are here

Here’s how those macro-obsessed markets are helping to reshape market technology:

New York, NY – May 16, 2011 – Selerity, a provider of real-time event data solutions for the financial services industry announced today an agreement with Standard & Poor’s (S&P) to deliver low-latency credit rating announcements in a machine-readable format. Clients using the Selerity Platform will now have access to breaking credit-related announcements from S&P, including ratings on public companies, along with developed and emerging sovereign nations globally.

 Read more

How the Basel III sausage gets made

Otto von Bismarck may have been talking laws when he made his first sausage analogy, but it’s well-suited to the creation of Basel III banking rules. Just think of all the toing and frowing over things like upcoming Liquidity Coverage Ratios (LCRs) and Net Stable Funding Ratios (NSFRs).

It shouldn’t surprise readers that these various acronyms are subject to push and pull. Read more

It wasn’t the ‘froth’ that caused the commodities rout

Contrary to popular belief, analysis of the latest CFTC position data is beginning to show that it wasn’t so much the ‘froth‘ in the market that was responsible for this month’s run-up and subsequent commodity price collapse, but the professional fund community.

John Kemp at Reuters has pored over the latest data set and concluded, amongst other things that: Read more

Teva moves in on Japan’s nascent generics boom

The one certainty about a country with a rapidly greying population is that its demand for drugs — more and cheaper ones — will almost certainly grow.

Amid the latest acquisition frenzy taking hold in the world of big pharma, Japan has captured a substantial amount of attention — not least the final stages of talks for one of the biggest pharma deals in recent history: Takeda Pharmaceuticals’ $14bn bid for Swiss drugmaker Nycomed. Read more

Markets Live transcript 16 May 2011

Live markets commentary from 

Battle lines drawn over fresh TMX bidder

Battle lines are being drawn in Canada between supporters and opponents of a C$3.6bn ($3.7bn) bid by nine domestic banks and pension funds for TMX Group, operator of the Toronto and Montreal stock exchanges, the FT reports. The bid consortium, Maple Group Acquisition, announced on Sunday that it would offer cash and shares valued at C$48 per TMX share, about 20 per cent above the value of an all-share deal between TMX and the London Stock Exchange agreed in February. Reaction to the Maple bid has been divided. Supporters see it as a vehicle for the creation of a Canadian “national champion” and an affirmation of the strength and stability of Canada’s financial system. Critics contend that a takeover of TMX will severely restrict competition in securities trading and exacerbate conflicts of interest.

Glencore narrows IPO price range

Glencore, the Swiss-based commodities trading giant, has revised the price range for its planned $11bn initial public offering to 520-550 pence per share, from an earlier guidance of 480-580 pence each, reports Reuters on Monday, citing a source with direct knowledge of the matter. Glencore is set to close the IPO books on Tuesday, one day ahead of schedule, with final pricing due on May 19. According to Bloomberg, orders will close at 4 p.m. London time tomorrow, except for investors meeting management after this date. Glencore has said it expects admission and unconditional trade to begin on May 24. The IPO includes an overallotment option, known as the greenshoe, of 10 percent of the offer, allowing Glencore to raise as much as $11 billion.

US Treasury urges debt ceiling action

Debt worries keep bears in the box seat

Bears had the upper hand as concerns about sovereign debt discourage buyers of racier assets, the FT’s global market overview reports. The FTSE All-World equity index was down 0.5 per cent, commodities prices were mostly falling, while US Treasury yields were inching lower in traditional response to heightened risk aversion. S&P 500 futures were pointing to a 0.2 per cent fall when Wall Street opens. The previous week ended with worries about the eurozone fiscal crisis and a possible Greek debt restructuring harming the euro and forcing the dollar higher. This, in turn, triggered the usual “risk off” response by traders apparently still wedded to the buck as a negatively correlated gauge for broader sentiment. Similar dynamics were weighing on markets on Monday, but with the added spice of scandal. Allegations of sexual assault against Dominique Strauss-Kahn, managing director of the International Monetary Fund, have allowed pessimists to suggest this could hobble a Greek request for further aid from the EU-IMF – potentially making a debt default by Athens more likely.

US auto market struggles over Japan quake impact

The Wall Street Journal reports that two months after the March 11 earthquake rocked Japan, the ripple effects are starting to hit US car dealers like AutoNation. Dealers had begun the year expecting a surge in auto sales. But due to the quake’s effect on Japanese auto makers, many dealers are now in bind: They’re running short of Japanese-brand cars as demand is rising. “We are in a completely different environment than at the beginning of the year, and we have to pivot on a dime,” AutoNation Chief Executive Michael J. Jackson said at a meeting last week according to the Journal. Other auto dealers are  also coming to grips with the same reality. Houston-based Group 1 Automotive Inc. is getting less than half the Toyota and Honda vehicles it wanted for May, Chief Executive Earl Hesterberg said in an interview. Models from Toyota, Honda and Nissan Motor Co. make up about 60 per cent of Group 1’s new-vehicle sales.

How do you say bail-in in Swedish?

Those who don’t keep up with Danish legal proceedings might have missed this development.

Last week, the country’s lawmakers sat down to debate a tweak to the country’s Bankpakke III bailout (or should that be bail-in?) bill. The change would promote private buy-outs of troubled banks, with the help of funds from Denmark’s deposit guarantee, thereby sidestepping some of that bail-in requirement. Read more

BP tries to save its Russian Arctic deal

BP was on Sunday night locked in last-ditch talks to keep its Arctic ambitions alive before a proposed $16bn (£9.9bn) share swap with Rosneft, the Russian state oil champion, lapses at midnight on Monday, the FT reports. The UK oil group held talks with Rosneft, as well as its Russian billionaire partners in TNK-BP, its existing joint venture in the country, on Sunday to work out a compromise suitable to all three parties. A potential buy-out of Alfa-Access-Renova (AAR), the vehicle through which BP’s partners in TNK-BP hold their share, was one of the solutions under discussion, according to people familiar with the negotiations. According to the WSJ, the deal could be worth $30bn or more, giving Rosneft the 50 per cent stake in TNK-BP now owned by the billionaire partners.  In turn, those partners would get cash and substantial stakes in both BP and Rosneft, according to these people.

Strauss-Kahn agrees to test in sex case

Dominique Strauss-Kahn’s expected court appearance on charges of sexual assault was delayed on Sunday night as one of his lawyer’s said he had agreed to undergo a forensic examination at the request of prosecutors, the FT reports. Mr Strauss-Kahn, managing director of the International Monetary Fund, was due to be arraigned at the New York Criminal Court following an alleged Saturday attack on a 32-year-old maid at a luxury hotel in Manhattan. Police said on Sunday night that the maid had picked Mr Strauss-Kahn out of a line-up. According to the Associated Press, the maid told authorities that when she entered his $3,000-a-night suite early Saturday afternoon, she thought it was unoccupied but Strauss-Kahn emerged from the bathroom naked, chased her down a hallway and pulled her into a bedroom, where he sexually assaulted her. The former French finance minister was – until news of the charges emerged – a favourite for the opposition Socialist party’s presidential nomination ahead of 2012 elections in which the unpopular incumbent, Nicolas Sarkozy, faces re-election, says the FT. For more see FT Alphaville.

China’s copper collateral – and covert credit

Whatever happened to China’s amazing copper collateral shenanigans?

Goldman Sachs said last month that China’s central bank may have cracked-down on the scheme, which saw Chinese corporates use copper as collateral for new loans. Meanwhile, attention turned to other commodities that could potentially be used by China’s companies in a similar way. Read more

Après Strauss-Kahn [Updated]…

No, you could not make it up, as FT Alphaville previously noted.

News of the weekend arrest of IMF managing director Dominique Strauss-Kahn gave blogs and news media organisations an eventful Sunday night as more information emerged about the circumstances allegedly leading to Strauss-Kahn’s arrest. Read more

Further reading

Elsewhere on Monday,

– No he Kahn’tRead more

Pink picks

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

Wolfgang Münchau: Dogmatists raise the costs of eurozone crisis
It is getting harder, politically. Finland and Germany have approved the bail-out of Portugal. But it is not clear whether both will vote in favour of the second Greek loan package, due this autumn, says the FT’s Wolfgang Münchau. I still think they might, but it is not hard to imagine some political accident, in Berlin, in Athens, in Helsinki, in all three or somewhere else. Pressure for a Greek default inside the eurozone is growing in Germany. Most policymakers and economists agree that Greek debt is not sustainable. Some commentators in British and US newspapers have even been advocating a Greek exit from the eurozone. The European Central Bank rejects both these suggestions. Read more