Posts from Friday Jul 15 2011

The weekender

This week on FT Alphaville,

– We paid peanuts for ETFs and got… a lot of comments. Read more

Further further reading

For the commute home,

– Les Hinton, Dow Jones CEO, resigns. All Things Digital has posted his memo to WSJ staff and his letter to RupertRead more

No, no, no it ain’t CME babe

Here’s some genuinely sad news out of Chicago on Friday.

Courtesy of Reuters: Read more

Welcome to the Global Sovereign Crisis, says Deutsche

Deutsche Bank’s fixed income research team don’t see any need to beat around the bush.

We’re in the early stages of the Global Sovereign Crisis. End of. Read more

The New York Fed’s Maiden Lane pain

The New York Fed may be wishing it cashed in its Maiden Lane II chips back in March.

On Friday it released the first batch of quarterly data on counterparties to its partial sale of Mortgage-Backed Securities acquired as part of the AIG bailout. Read more

Stress, mitigated

So, eight banks officially failed Europe’s 2011 stress tests.

Exactly 20 banks would have dipped below the 5 per cent Core Tier 1 capital pass rate had it not been for capital raising undertaken between January and April of this year, according to Reuters. But look closer because “mitigation” actions by the banks actually extend beyond capital raisings already done. Read more

The evolution of systemic risk

Macro Risk Advisors, headed by Dean Curnutt, are specialists in derivatives strategy. One of their chief occupations is thus evaluating risk and volatility.

Given that, it’s probably fair to say they’re in a good position to comment on matters “systemic risk” related. Read more

Those European bank stress test results…

They’re here!

Eight banks failed — five Spanish, two Greek, one Austrian — by posting capital ratios below 5 per cent. But sixteen almost failed, posting ratios between 5-6 per cent. Read more

Startup stagnation… maybe

We finally got around to reading Kauffman’s new report aggregating various measures of job creation by startups, and which paints a depressing picture of entrepreneurship’s recent contribution to the US economy.

To begin with semantics, the report confirms our earlier skepticism about Kauffman’s own Index of Entrepreneurial Activity, which had reported “the highest level over the past decade and a half” for 2010. The problem was that the index included many people who had lost their jobs and were now categorised as self-employed, an approach that we thought limited the index’s usefulness. Read more

Imagining hypothetical split €-periphery exchange rates

HSBC’s macro currency strategy team has a vision.

A vision of how the euro might have performed had it been split into two currencies back in 2009. Read more

Eurozone CDO – it’s triple-A time

Readers may recall a likening of the eurozone to a giant collateralised debt obligation earlier this week.

Greece, Ireland and Portugal formed the equity slice, with Italy in the middling mezzanine, according to Will Porter at Credit Suisse. With the market suddenly panicking over all things Italiano, he said, it looked like debt worries were working their way up the eurozone CDO’s capital structure. Read more

US Markets Live transcript 15 Jul 2011

Live markets commentary from 

The price of distressed Treasuries

More and more folks are arguing (see Bob Janjuah, Caroline Baum, or Joe Weisenthal) that in the event of an imminent United States sovereign default, there’s only one thing to hold:

United States sovereign debt. Read more

Reminder: US ML begins at 10am New York time

That’s 3pm in London for the imperialists among you.

On the agenda will be US bank earnings, the debt ceiling debacle, Google, and this morning’s inflation numbers and other macro data. As usual, we’ll also invite one of our London colleagues to pop in for an update on the eurozone debt situation. Or something to do with a small British tabloid that’s been causing a few waves across the Atlantic as well. Read more

So how did the stress test go, Atebank?

And yes, it speaks volumes we asked the same question a year ago, and are expecting exactly the same answer. ‘Til next year then!

 Read more

More on fiscal union as the ultimate solution

On Friday, the theme of fiscal resolution to the European problem was gaining ground once again

Pimco’s Mohammed El Erian, writing in the FT, expressed the idea as one of only two possible paths for Europe at this stage. Read more

The AAA bubble

This, we think, could well be the most important chart in the world right now:

 Read more

Markets Live transcript 15 Jul 2011

Live markets commentary from 

The unstressed tests, and Italy bonds

We’re getting the results of the European bank stress tests later (at 1700 London time) and while we’ll discover who has failed, or nearly failed, the raw data on sovereign exposures, as Jonathan Weil notes, should prove far more useful in the coming days.

Although, FT Alphaville has already seen enough to indulge in a favoured game. That of pointing out just how quickly reality tends to outpace the “adverse” sovereign scenarios employed. Read more

Marius Kloppers finds something to buy

Here it is:

 Read more

Debt talks and bank stress tests loom

Trading is mixed and cautious, with investors unwilling to build bold bets ahead of European bank stress test results and a weekend that may bring further developments in US budget negotiations and Greek debt restructuring, the FT reports in its rolling global market overview. The FTSE All-World equity index is down 0.2 per cent, commodities are mildly softer, and currencies erring marginally towards “risk off” as the dollar index nudges up 0.1 per cent. S&P 500 futures suggest Wall Street will open higher by about 0.2 per cent and the FTSE Eurofirst 300 is down 0.4 per cent in early skirmishes.

Big Oil break-ups

First Marathon Oil, then ConocoPhillips, next BP?

The Lex column doesn’t think further Big Oil break-ups are likely: Read more

Rebekah Brooks quits, Murdoch stays defiant

Rebekah Brooks, chief executive of News International, has resigned, Sky News reports. Seperately, Rupert Murdoch told the WSJ, which he owns, that News Corp has made only “minor mistakes” and handled “extremely well” the crisis that has forced the closure of the News of the World and scuppered its BSkyB bid. The FT reports News Corp chairman and chief executive’s first extended comments on the tabloid scandal came as the FBI opened a probe into a claim that the News of the World may have sought access to messages on phones belonging to victims of the terrorist attacks of September 11 2001.

Ten banks may fail Europe’s stress tests

The publication of European banks’ stress test results on Friday could lead to a wave of distressed debt deals, according to investment bankers and restructuring experts, the FT says. The results of the stress tests – due at 5pm London time – are expected to see about 10 of the 91 banks tested fall short of having the required 5 per cent core tier one capital, including a clutch of four smaller Spanish savings banks and as many as three Greek banks. The Guardian adds that analysts expect between five and 15 European banks to fail stress tests as Italy prepares to vote on austerity budget.

ConocoPhillips unveils break-up plan

ConocoPhillips, America’s third largest integrated oil company, will hive off its refining assets to focus exclusively on exploration and production, the FT reports. ConocoPhillips announced on Thursday that it will divide into two publicly traded entities by the first half of next year. The Wall Street Journal says the decision to split a company with 29,600 employees and $160 billion of assets deals a blow to the legacy of CEO Jim Mulva, who said he will retire once the separation is complete. The Edmonton Journal says ConocoPhillips shares rose as much as 7.5 per cent on the news.

JPMorgan second-quarter profit jumps 13%

JPMorgan Chase reported a 13 per cent jump in quarterly profits on fewer loan defaults and surprisingly resilient trading revenue, defying expectations that a litany of economic, legal and regulatory challenges would weigh heavily on US banks’ results, according to the FT. Revenue rose, net income exceeded Wall Street estimates, and JPMorgan’s chief executive downplayed two of investors’ biggest concerns: the bank’s potential losses in Greece and other troubled European economies, and the effects of sweeping financial regulatory reform on banks’ profits. Reuters notes that Citigroup, which reports on Friday, now has an uphill climb to match JPM’s strong results.

Merkel warned on Greek bail-out standoff

Pressure mounted on Angela Merkel, the German chancellor, to make a quick decision on how to get private bondholders to pay part of a new €115bn Greek bail-out, with senior Italian officials and the IMF warning that continued uncertainty risked undermining the eurozone, the FT says. The calls came as fears that a stalemate could last through the summer forced Rome to pay some of its highest rates on record in order to borrow €3bn ($4.3bn) from the bond market. Reuters notes that Thursday’s auction of Italian debt was well-covered but that the country had to pay the highest interest rates in three years. FT Alphaville talks of an epic eurozone week, as seen through bank and sovereign CDS spreads.

BHP Billiton in $12bn US shale gas deal

BHP Billiton has made another big bet on energy in the US, announcing an agreement to buy Petrohawk, an independent oil and gas company, for $12.1bn in cash, the FT reports. In its biggest acquisition to date, the Anglo-Australian mining group said on Thursday it had agreed to pay $38.75 a share for Petrohawk, which operates in three leading areas of shale gas and oil production in the US. The deal values Petrohawk at $15.1bn including net debt. NYT DealBook says should the tender offer succeed, it may also help BHP move past its spotty history of deal-making. Last year, the Canadian government effectively blocked the company’s $38.6bn bid for the Potash Corporation. BHP has also failed to both buy its main rival, Rio Tinto, and form a joint venture with that mining company.

S&P warns on US rating, US thinks options

The White House suggested it was beginning to look for novel ways to protect the US from a default on its debt in the event that a deal could not be reached with congressional Republicans to shrink US deficits, the FT says. The Wall Street Journal adds that a backup plan to cut the federal deficit and keep the US government from default gained momentum Thursday. FT Alphaville reports that Standard & Poor’s said late on Thursday it was putting the US on credit watch negative, noting “there is at least a one-in-two likelihood” that it could lower the long-term rating on the US within the next 90 days. Bloomberg says US Treasuries and the dollar fell after the S&P statement.

Credit Suisse drawn into US tax probe

The outlook for Credit Suisse darkened on Friday after the Swiss bank revealed it had been formally placed under investigation by the US authorities over allegations it helped rich American people evade tax, the FT reports. The move marked a significant escalation in a near four-year battle between the US and Switzerland over the alleged role of some Swiss private banks in helping US clients with undeclared offshore accounts to avoid taxation. The WSJ says the move also shows officials are using information culled from the thousands of Americans who came clean on their hidden foreign accounts by submitting so-called voluntary disclosures. According to Swissinfo, Credit Suisse also added that the “US authorities are conducting a broader industry inquiry.”