For the commute home,
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Bloomberg reports on staling housing markets in Asia that have been hit by government efforts to prevent the real estate bubbles that Western economies have seen burst over the last few years. Property prices in Hong Kong have decreased by 6 per cent since June and Barclays analysts estimate a drop of 25 per cent could be seen by 2013. Would be Hong Kong homebuyers have to find large deposits, as well as stumping up extra transaction taxes and facing rising interest rates. The WSJ reports that banks in Hong Kong have also been seeing a decline in yuan deposits as increasing amounts of the currency is used to pay mainland suppliers. The outflow of deposits, as well as tighter lending conditions in China have motivated banks in Hong Kong to raise additional yuan funds in order to move further into the market. Flight to the to US dollar has also led to decreases in deposits.
US stocks defied European trends for a second day running, falling sharply on poor US economic data, after global indices had rallied on enthusiasm for a eurozone fiscal discipline pact brokered by Germany, reports the FT. Shares had opened higher on the eurozone deal, climbing as much as 0.6 per cent to 1,320.55, putting the index back into bull market territory. Technicians enthused about a so-called “golden cross”, as the S&P 500’s 50-day moving average broke above its 200-day moving average. The Global Markets Report notes weaker than expected numbers delivered by the Case-Shiller house price report, the Institute of Supply Management’s survey of Midwest business activity and a poll of consumer confidence during January. Together, they have pushed the S&P 500 down 0.2 per cent, hit the euro and allowed “core” bonds to recoup early losses. US 10-year notes are yielding 1.82 per cent, down 3 basis points. “The sudden appearance of weakening data on the economic scene is unwelcome and speaks to the fears laid bare by the Federal Reserve last week. The crumb of comfort is that if the economy is indeed softening it is doing so from higher ground,” said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co.
Unemployment figures have highlighted the widening gap between Germany and many fellow eurozone members, a day after Angela Merkel secured a new treaty enshrining Berlin’s vision for tough fiscal discipline, the FT reports. Unemployment in the 17 euro countries climbed to 10.4 per cent in December, with the November rate revised upwards to the same rate, setting a fresh record since the introduction of the single currency in 1999. So-called “peripheral” members such as Spain and Greece recorded the highest rates, of 22.9 per cent and 19.2 per cent. On the other side of the Atlantic, worries over the job market and higher petrol prices dragged US consumer confidence lower this month, while house prices across the country fell as foreclosures continued to forestall a recovery in residential property, reports the FT. Confidence unexpectedly declined in January to 61.1 from 64.8 in December, the Conference Board said on Tuesday, missing economists’ expectations of a rise to 68. The index is measured on a scale of 100 pegged to the level of confidence in 1985.
Russia’s economy grew by 4.3 per cent last year, benefiting from a surge in agricultural output and robust consumer spending, as well as record-low inflation. Yet the country is seeing signs of a slowdown in manufacturing, suggesting that it may experience a significantly tougher 2012, according to the FT. The jump in gross domestic product surprised economists who had predicted an increase of 4 per cent, Reuters said on Tuesday, and came after a particularly strong second half. Full-year GDP growth would likely have been a full percentage point lower if Russia had not seen such a dramatic turnround in the agricultural sector, which suffered on the back of a devastating drought and forest fires a year earlier, according to Vladimir Tikhonov, chief economist at Otkritie Capital.
Honda warned on Tuesday that its profits would fall by 60 per cent this year as a result of a soaring yen and floods in Thailand that knocked out a big assembly plant, reports the FT. The Japanese carmaker’s unexpectedly pessimistic forecast for the financial year ending in March predicted a net profit of Y215bn ($2.8bn). That would be down from Y534bn last year and Y15bn below what it had projected until October, when it suspended its guidance on account of the Thai disaster. Industry analysts tracked by Bloomberg had been expecting a milder decline to Y250bn.
In a further twist in the global legal battle waged by technology giants around the use of patents, Samsung Electronics is to be investigated by the European Union to assess whether it breached antitrust rules by refusing to provide rivals access to its technology at reasonable prices. Brussels will be looking into whether the South Korean technology giant, the world’s biggest smartphone manufacturer but also a key supplier to rivals such as Apple, had distorted the market by withholding “standard essential patent rights”, reports the FT. The European Commission, acting as the EU’s antitrust enforcer, said its investigation stems from Samsung’s lawsuits against competing groups, notably Apple, launched in several EU member states in 2011.
France’s Dassault has been awarded frontrunner status in the hotly contested $20bn race to supply 126 fighter jets to India, providing a much-needed boost for French economic and industrial prestige, the FT reports. The Indian government said the French Rafale fighter jet had beaten the four-nation Eurofighter Typhoon to become preferred bidder to equip India with the multi-role fighter jets in one of the world’s largest military contracts. Dassault now enters exclusive talks with the Indian government. The contract, estimated to be worth $15bn-$20bn, will help shape India’s air power for the next three decades and serve as the bedrock of a strategic partnership.
Angela Merkel, the German chancellor, flies to China on Wednesday to explain Europe’s crisis management in the eurozone, and woo Beijing and Chinese financial institutions to invest in Germany and the wider common currency area, the FT reports. “The chancellor will be seeking to gain the confidence of financial investors,” a senior German official said on the eve of her departure for an official visit to Beijing and Guangzhou. “China also has an interest in seeing confidence growing in the European economy.” At talks with both Hu Jintao, the Chinese president and Communist party leader, and Wen Jiabao, the prime minister, Ms Merkel will seek Beijing’s support for boosting the resources of the International Monetary Fund to cope with the global financial crisis and invest in eurozone government bonds and bloc rescue funds, Berlin officials said.
We bring this up because there is apparently somewhat of an après-Chinese New Year effect when it comes to the Baltic Dry Index. And since the Chinese New Year fell early this year, the BDI’s usual post New Year pick-me-up should be just around the corner. Read more
If there was a sense that boardroom tensions at Kazakh miner ENRC were easing, that sense appears to be mis-guided.
Are VIX ETNs and Vix-related funds influencing the Vix futures curve?
Has the popularity of Vix trading come to impact wider volatility surfaces, if not the S&P 500 options used to construct the Vix index themselves? Read more
Some will see this as further evidence that the Daily Mail runs the country….
The Forfeiture Committee has reached a decision. Read more
We’re sticklers for this stuff — but it’s an important point by Societe Generale’s analysts on Tuesday: (click charts to enlarge)
There’s no shortage of concerns about the impact that new regulations will have. Basel 2.5 hitting the bond market, the prohibition of ratings under Dodd-Frank hurting the beleaguered mortgage market, and the restrictions on prop trading by the Volcker Rule — which may lead to a giant sucking sound where the liquidity of several markets used to be.
We’ve already brought you one collateral crunchy statistic from the Bank of England’s latest monetary and finanical statistics. But here’s another interesting trend from the Bank’s gilt repo and stock lending numbers.
We should note that we have no idea how meaningful this is, but the trend is interesting nonetheless. Read more
Here’s one of those company statements that demands an instant translation. Guess it’s just ironic that it happens to concern the best-known PR man in Britain….
Chime announces that its chairman has asked the board if he can pursue the possibility of he, Piers Pottinger, and certain other members of the senior management team acquiring some of the businesses within the Public Relations division. The board has agreed that he can pursue that possibility. Read more
Live markets commentary from FT.com
The Federal Trade Commission has intensified its crackdown on the booming debt-collection industry, announcing a $2.5m settlement with a company for allegedly coercing borrowers into paying debts they no longer legally owed, the Wall Street Journal reports. According to the paper the settlement with Asset Acceptance Capital Corp, one of the largest buyers of soured US consumer debts, is the second-biggest penalty ever issued by the FTC to a debt collector. Investigations into other companies for similar violations, meanwhile, are still ongoing. “More cases are on the way,” said Tony West, an assistant attorney general in the Justice Department’s civil division, told the WSJ. Asset Acceptance said it didn’t admit to any of the allegations. The settlement must still be approved by the judge overseeing the civil case. At the heart of the US government initiative is the increasingly common practice of pursuing debts that have expired under statutes of limitation, the Wall Street Journal says.
Extraordinary, this — so we’ll just slam up the details from the FSA:
The Financial Services Authority (FSA) has today fined Ravi Shankar Sinha £2.867 million for fraudulently obtaining £1.367 million for himself from a company owned by a private equity fund advised by JC Flowers by means of a fictitious invoicing scheme. The financial penalty consists of £1.367 million disgorgement and a punitive element of £1.5 million. Sinha is also prohibited from performing any function in relation to any regulated activity in the financial services industry. Read more
Apple has finally named a successor to Ron Johnson as head of its retail store operation, choosing John Browett, chief executive of the British electronics retailer Dixons, the FT reports. Mr Browett will join in April as senior vice-president of retail, reporting to Tim Cook, Apple’s chief executive. Mr Johnson was named last June as the new chief executive of JC Penney, the US department store chain. His successor has been chief executive of Dixons since December 2007 and will take responsibility for Apple’s retail strategy and the expansion of its retail stores worldwide. “Our retail stores are all about customer service, and John shares that commitment like no one else we’ve met,” Mr Cook said in a statement. According to the Wall Street Journal, the company considered a range of executives from the US and Europe, including Steve Cano, an Apple retail executive who was one of Mr. Johnson’s lieutenants.
US companies with the lowest credit ratings could struggle to refinance about $80bn of debt maturing in the coming years as sovereign debt problems potentially threaten their access to the capital markets and banks in both Europe and the US look at retreating from speculative lending, Moody’s Investors Service has warned in a new report, says the FT. The largest debt issuers in this category are some of the big buy-outs struck at the height of the credit boom, including Clear Channel Communications, with more than $16bn of debt due through 2016, Texas Competitive Electric Holdings, formerly TXU, with almost $11bn and Caesars Entertainment, formerly Harrah’s, with close to $8bn. Debt maturities for companies with ratings below investment grade, or junk, are generally manageable, however, the rating agency said. Thanks to robust financial markets in the first part of 2011, these companies have extended the bulk of upcoming maturities on their debt, known in market parlance as the “maturity wall,” to 2016 from 2014, giving some breathing room for the eurozone problems to play out.
Net profit at Spain’s Santander, the eurozone’s biggest bank by market capitalisation, fell 35 per cent last year to €5.35bn from €8.18bn in 2010 as the Spanish property market collapse and the eurozone debt crisis continued to erode earnings, the FT reports. Santander released results on Tuesday showing it barely made a profit in the final quarter of last year – net profit was €47m compared to €2.10bn a year earlier – after it set aside a €1.81bn fourth-quarter gross charge to clean up bad property loans in Spain. Over the year as a whole, the bank made total net extraordinary provisions of €3.18bn, largely because it is anticipating new provisioning rules likely to be announced on Friday by the centre-right government that took power in Spain in December. Bloomberg reports that the bank previously said it had about €1.5bn in gains from sales of insurance and auto loans unit stakes in the Americas to bolster its balance sheet. Santander has used those funds to partly offset the one-time provisions.
European banks are preparing to tap the European Central Bank’s emergency funding scheme for up to twice as much as the ECB supplied in its debut €489bn auction last month, providing further evidence of the sector’s liquidity squeeze, the FT reports. Several of the eurozone’s biggest banks have told the Financial Times that they could well double or triple their request for funds in the ECB’s three-year money auction on February 29. “Banks are not going to be as shy second time round,” said the head of one eurozone bank at last week’s World Economic Forum in Davos. “We should have done more first time.” Three bank chief executives, all of whom asked to remain anonymous, said they were planning to increase their participation twofold or threefold. Three bank chief executives, all of whom asked to remain anonymous, said they were planning to increase their participation twofold or threefold.
Sentiment regarding prospects for the eurozone debt crisis was enjoying one of its more optimistic phases, helping many “risk” assets end a strong month in good form, the FT reports. The FTSE Eurofirst 300 was higher by 0.6 per cent and S&P futures suggested Wall Street would gain 0.4 per cent later in the day. The FTSE All-World equity index was up 0.6 per cent, taking its gains in January to more than 6 per cent. The benchmark rallied nearly 20 per cent from its October intraday low on the back of, arguably, three main supportive factors. They were: hopes the eurozone crisis was easing, as liquidity efforts by the European Central Bank were seen helping selected “peripheral” sovereign yields fall; generally better economic data from the US and reduced fears of a Chinese hard landing; and most recently, an inference the Federal Reserve stands ready to support assets further if required.