Posts from Wednesday May 25 2011

Shell chief Voser in Russian talks

Peter Voser, chief executive of Royal Dutch Shell, has held talks with Igor Sechin, Russia’s powerful energy tsar, about possible co-operation in exploration of the Arctic and the Black Sea as the country seeks alternatives to the failed strategic tie-up between Rosneft and BP, the FT reports. Coming just days after Rosneft’s proposed $16bn share swap with the UK oil group expired last week, the meeting between Mr Voser and Mr Sechin earlier this week in Moscow will heighten speculation that the Russian state oil champion is preparing to replace BP with another partner.

Sony battles further hacker attacks

Sony’s battle with computer hackers is spreading from its US-based PlayStation Network to business units globally, as the Japanese group acknowledged three new attacks on Wednesday, writes the FT. Sony customers in Canada, Thailand and Indonesia had their personal information targeted in the latest incidents the company said. It added that it did not know whether the attacks were connected to the theft last month of information belonging to 100m users of the PlayStation online game network and other internet-based services. The company said it had taken down a website run by Sony Ericsson Mobile Communications in Canada, through which intruders had obtained names and e-mail addresses of about 2,000 customers. A Sony web site in Thailand was meanwhile used in a “phishing” attack, in which cyber criminals attempt to lure people into entering sensitive information such as credit card numbers into fake or hijacked sites. Sony said it had received no reports of information being stolen, and that it had taken down the site.

Eurozone worries keep bulls in check

Wall Street’s refusal to buckle when faced with the risk-averse session presented by Asian and European peers has provided stability to many market sectors, the FT reports. But despite strength in selected risk assets, there remains a tangible sense of wariness regarding the eurozone sovereign debt crisis. An early strong bounce in the dollar forced a retreat for some commodities and suggests that anxiety about decelerating economic activity in the US and China may also be keeping a lid on any exuberance. A sharp pullback in US durable goods orders for April has only heightened those concerns. However, the buck’s strength has faded somewhat and this has allowed certain assets to gain. WTI crude is up 1.6 per cent to $101.16 a barrel, although copper is sharply outperforming with a 2.2 per cent gain to $4.10 a pound as a buy recommendation by Goldman Sachs continues to reverberate. The FTSE All-World equity index is up 0.2 per cent, having at one point shed 0.5 per cent to hit a two-month low, when it was 6 per cent off the cyclical high touched at the start of May. Core bonds have been in and out of positive territory, tracking the vacillating broad shifts in risk appetite. The yield on US 10-year paper is up 1 basis point at 3.12 per cent, still flirting with six-month lows. A Treasury auction $35bn of five-year notes saw the strongest demand, as measured by the bid-to-cover ratio, since 1994. The yields at auction were the lowest since November, at 1.81 per cent. Wall Street’s S&P 500 opened with a loss, but is up 0.3 per cent, led by firmness in tech stocks. The FTSE Eurofirst 300 is up 0.7 per cent, helped by “bargain hunting” in banks, while Asia fell 0.6 per cent.

Hit-and-run sparks Mongolian protest against China

Thousands of ethnic Mongolians have protested this week outside government offices in the northern Chinese province of Inner Mongolia, in a rare show of defiance in the normally peaceful region, writes the FT. About 2,000 Mongolian students in the remote city of Xilinhot joined the peaceful protest on Wednesday, according to a US-based human rights group, photographs and accounts posted on the internet. The protest was sparked by allegations that a Chinese truck driver intentionally ran over a Mongolian herder on May 10, killing him.

Sharif calls for Chinese help in building dams

Pakistan’s main opposition leader and former prime minister has appealed for Chinese expertise to build hydroelectric dams to help his country in urgently overcoming crippling power ­shortages. In an interview with the Financial Times, Nawaz Sharif said Islamabad should call on Beijing to use its infrastructure capabilities to supply hydropower to Pakistan. “Energy is the number one priority. We have to reform the existing system. We should invite the Chinese to build dams [for hydroelectricity],” he said. “There is no time to waste. Our [parliamentary] elections are two years away. Why can’t the government do this [with China] today?”

China to buy Europe bail-out bond

Asian investors including the Chinese government are expected to represent a “strong proportion” of the buyers of Portuguese bail-out bonds when the eurozone’s €440bn rescue fund begins auctioning them next month, according to senior fund officials, the FT reports. Klaus Regling, chief executive of the European Financial Stability Facility, told reporters on Wednesday that Beijing was “clearly interested” in the Portuguese auctions and that he expected China to participate. He argued the intense interest from Asia and other international investors showed renewed confidence in the future of the euro as a currency. But Mr Regling acknowledged that the primary motivation of Asian investors was to find new, safe investments into which to put their growing cash piles, rather than any endorsement of how Europe has handled the debt crisis in some eurozone countries.

Arcadia denies oil manipulation

Oil trading house Arcadia Petroleum has robustly denied charges made by US regulators that it manipulated the US oil market three years ago, the FT reports. The move opens the door for a court case fighting the Commodity Futures Trading Commission over the regulation of the murky physical oil market. The CFTC on Tuesday charged the London-based Arcadia, two affiliates in the US and Switzerland and two traders with manipulating oil prices in 2008 by amassing dominant positions in the physical market. The CFTC charge is only the second oil manipulation case it has filed since launching a “nationwide crude oil investigation” three years ago as the cost of US oil prices surged towards a record high of $147 a barrel.

OECD urges Fed and BoE to raise rates

The Federal Reserve and the Bank of England should follow the European Central Bank and implement “early” rises in interest rates, the Organisation for Economic Co-operation and Development said on Wednesday, as it urged central banks to respond to evidence of self-sustaining growth, reports the FT. Celebrating its 50th birthday, the Paris-based international organisation had an upbeat message on the global economy, which allowed fiscal and monetary policies to move towards more normal settings. “We are in a phase of strongish recovery with some good signs that [the recovery] is becoming less policy driven and more self-sustained,” Pier Carlo Padoan, the OECD’s chief economist, told the Financial Times. The economic forecasts of the OECD are little changed and show steady but unspectacular growth across the OECD’s advanced member economies in the years ahead.

Lagarde launches IMF candidacy

Christine Lagarde, the French finance minister, has launched her bid to become the next managing director of the International Monetary Fund, writes the FT. Ms Lagarde, who has widespread support in Europe amid praise for her handling of the eurozone crisis, said she considered her nationality neither “a handicap, nor an advantage” for the top job in global finance. The former US-based corporate lawyer, 55, is the frontrunner to succeed Dominique Strauss-Kahn, who resigned last week after being charged with sexual assault. But the growing consensus in the industrialised world over Ms Lagarde’s nomination has sparked disagreement with emerging market countries, which argue that the leadership of the fund should no longer be reserved for a European. Her main rival is Agustín Carstens, governor of the Mexican central bank, who told the Financial Times that he intended to carry “the flag of emerging markets”.

Further further reading

For the commute home,

– Infographic: what the largest social media companies are worth, plus some ideas for Twitter 2.0Read more

German exposure to Greece, a bad bank tale [updated]

Alternative title: Moralrisikodämmerung.*

From a Fitch report just out on Wednesday — a twist on the big contagion story of German banking exposure to a Greek default: Read more

Insider trading in the House…

… of Representatives, that is:

A previous study suggests that U.S. Senators trade common stock with a substantial informational advantage compared to ordinary investors and even corporate insiders. We apply precisely the same methods to test for abnormal returns from the common stock investments of Members of the U.S. House of Representatives. We measure abnormal returns for more than 16,000 common stock transactions made by approximately 300 House delegates from 1985 to 2001. Consistent with the study of Senatorial trading activity, we find stocks purchased by Representatives also earn significant positive abnormal returns (albeit considerably smaller returns). A portfolio that mimics the purchases of House Members beats the market by 55 basis points per month (approximately 6% annually).

 Read more

CNBC’s Mark Haines dies at 65

Veteran CNBC anchor Mark Haines, host of the network’s Squawk on the Street programme, has died suddenly at the age of 65:

 Read more

The Chinese reverse merger scandal comes to the UK

So, the UK stock market has a play on the Chinese reverse merger scandal after all.

Or it did have. Read more

Albert Edwards and an afternoon tea-party with the Vestal Virgins

Breaking news.

Albert Edwards is bullish. Read more

Complete idiots

From a great IFR piece on bank exposure to Greece:

Perhaps remarkably, some banks even saw the drop in prices as a chance to increase their exposure to Greek bonds, so as to repo the instruments at full face value at the European Central Bank’s open market operations. “One chief financial officer told me I was a complete idiot not to be buying bonds and that was only back in April,” said one adviser, who asked not to be identified.

 Read more

Markets Live transcript 25 May 2011

Live markets commentary from 

On the brink of a British double-dip

Dramatic, we know. But the ONS has confirmed the economy grew only 0.5 per cent in 2011’s first quarter after its 0.5 per cent fall in 2010’s last three months, and technically…

 Read more

Frontline warns of rough times ahead

The operator of the world’s largest crude oil tanker fleet has signalled it is preparing to batten down the hatches for a prolonged rough ride as ship deliveries continue to outpace demand, driving earnings down, the FT reports. Frontline gave its assessment of market conditions after publishing first-quarter results showing net income down 81 per cent to $15.5m on the same period last year, on revenue down 29 per cent to $235m. Of the net profits, $13.2m came from asset sales. The company, listed on the Oslo and New York Stock Exchanges, is closely watched because its chief executive and largest shareholder is John Fredriksen, the Norwegian-born shipowner widely regarded as his generation’s finest player of shipping markets. Earnings for most crude oil tanker sizes have been at unprofitable levels for much of the year so far, as the rapid pace of ship deliveries has outpaced growth in demand to transport oil.

GE to invest in buoyant gas market

General Electric is making “a big bet on gas” in an attempt to benefit from the increased use of the fuel for power generation, in part as a back-up to variable renewable energies such as wind and solar power, the FT reports. John Krenicki, the vice-chairman of GE in charge of its energy business, said the group was “looking at a 25-year, very bullish market” for gas, and making acquisitions and investing in new products to profit from it. The rise of gas for power generation is being driven by cheap supplies becoming available in the US, and perhaps eventually elsewhere, as well as by its lower carbon dioxide emissions when burnt than coal and its good fit with renewable energy. Mr Krenicki said: “We are betting on gas in a big way, investing ahead of the curve.

Japan slides to trade deficit as exports fall

Japan’s trade balance fell for the first time in three months in April as supply chain problems from the March earthquake and tsunami sharply curtailed exports. Japan swung into a trade deficit of Y463.7bn ($5.7bn) as exports fell 12.5 per cent from a year earlier, and imports rose 8.9 per cent on higher demand for fuel, the FT reports. The deficit was significantly smaller than the median estimate of 24 economists surveyed by Bloomberg, which was for a shortfall of Y704bn. Despite the lower figure than forecast, the deficit highlights the impact of the March earthquake and tsunami, which knocked out a wide range of production sites and affected some of Japan’s biggest exporters, including Toyota, Sony and Hitachi.

Eurozone worries keep risk assets under pressure

The respite on Tuesday from worries over eurozone sovereign debt and, to a lesser extent, signs of slowing global growth, proved all to fleeting for frazzled bulls, the FT’s global market overview reports. Traders were again wary of risk assets as a falling euro signalled that fears about the broader impact of any Greek debt restructuring would continue to weigh on sentiment. A retreat for some commodities and a bounce in the dollar suggested anxiety about decelerating economic activity in the US and China may also be contributing to the sour mood. WTI crude was down 0.9 per cent to $98.66 a barrel, though copper was bucking the trend with a 1 per cent gain to $4.05 a pound as a recommendation by Goldman Sachs to buy the metal continued to reverberate. The FTSE All-World equity index was down 0.3 per cent, having at one point shed 0.5 per cent to hit a two month low, at which time it was 6 per cent off the cyclical high touched at the start of May.

US Treasury sells $5.8bn stake in AIG

The US Treasury took the first step in its exit from American International Group, and made a small profit, by selling $5.8bn worth of the shares it inherited in bailing out the insurance group during the financial crisis, the FT reports. The shares were priced at $29, with the Treasury selling 200m shares. AIG itself sold 100m shares, raising $2.9bn for the group as it moves towards independence and attempts to rebuild its core businesses. The price of AIG shares has fallen sharply this year, but the Treasury was still able to generate a modest profit on its $47.5bn cash injection by selling just above its break-even point of $28.73 a share. That does not account for other elements of the $180bn bail-out.

CFTC charges traders over oil price

The US commodities regulator has charged a trading house and two individuals with manipulating oil prices in 2008 by amassing dominant positions in the physical market that created the impression of a shortage. The charge is only the second oil manipulation case the US Commodity Futures Trading Commission has filed since launching a “nationwide crude oil investigation” three years ago as the cost of West Texas Intermediate, the US benchmark, surged towards a record high of $147 a barrel. The regulator alleged that Parnon Energy, a US oil trader, together with its Swiss and UK affiliates Arcadia Energy (Suisse) and Arcadia Petroleum, made more than $50m from the scheme in January and March 2008. The strategy focused on exploiting the WTI delivery point in Cushing, Oklahoma. For more on the story see FT Alphaville.



This can’t end well. Nasdaq recently got the regulatory green light from the SEC to launch its new BX Venture MarketRead more

Et in Cushing ego

Wow. Turns out that in 2008 (into the mega rally time period) someone may have been “squeezing” oil after all.

As the FT reports: Read more

The horror… the horror…

We’re slightly late to this, but nevertheless, Monday’s statement by Christian Noyer, governor of the Bank of France and a member of the European Central Bank’s governing council, on the ‘horror’ of a Greek debt restructuring is well worth a read.

He sets out the ECB’s view of why a restructuring means default and what dire consequences would follow. Read more

Further reading

Elsewhere on Wednesday,

– Is it possible to have panic buying? Read more

Pink picks

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

Martin Wolf: Europe should not control the IMF
The king is dead; long live the queen, says the FT’s Martin Wolf. Dominique Strauss-Kahn, the French erstwhile managing director of the International Monetary Fund, had not even resigned before Europeans started to coalesce around Christine Lagarde, the French finance minister, as his successor. Gone are past promises of an open selection. The Europeans insist on the principle that what we have we hold. The ancien régime survives. Mme Lagarde is a perfectly respectable candidate. She is French, almost a requirement, it often seems, for the European head of an international institution. She is an extremely likeable and impressive person. But she is not a perfect candidate: her economics are limited. Read more

Snap news

Breaking pre-market news on Wednesday,

– Nationwide says underlying annual profits up 30 per cent, helped by lower bad debt charges — statementRead more