Posts from Wednesday Feb 1 2012

Become Facebook’s friend

The strangest thing just appeared in our Facebook…

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Nomura posts gain

Nomura has reported a surprise 33 per cent gain in the fourth quarter compared to a year earlier, reports the WSJ. Part of the gain, however, was due to one-off events such as the sale of the company’s stake in Japanese restaurant chain Skylark Co. While Nomura’s fixed income and investment banking businesses reported increased reviews, the bank is still under review by Moody’s for a possible downgrade. Nomura cited cost-cutting measures amongst the reasons for its turn of fortune.

Facebook IPO filing awaited

IFR reports that Facebook is expected to file the preliminary prospectus for its long-anticipated IPO on Wednesday. It is expected that the offering will raise $5bn, though this could be increased to meet investor demand. Filing now should allow the company to complete the process by May. The coveted lead bookrunner role has gone to Morgan Stanley. Meanwhile the WSJ reports on a surge in the stock prices of social media companies in China where Facebook is blocked.

Hong Kong steps up file-sharing scrutiny

The Hong Kong government is stepping up its scrutiny of local internet businesses after US authorities led a high-profile crackdown on Megaupload, the file-sharing website accused of copyright theft, which was set up in the Chinese territory in 2005. Hong Kong Customs, which has been working with the Federal Bureau of Investigation on the Megaupload case for more than a year, said that it would set up an electronic crime investigation centre later this year, reports the FT. Media companies have called on the territory, which is also home to Filesonic – another “cyberlocker” site that allow users to upload their digital files to be saved in the internet cloud – to increase its focus on potential copyright infringers following the Megaupload case.

Ex-Credit Suisse traders plead guilty to mispricing

Two former Credit Suisse traders have have pleaded guilty to conspiring to overvalue mortgage-related securities at the height of the financial crisis. David Higgs and Salmaan Siddiqui admitted to criminal charges that were the first involving valuations of mortgage-backed securities during the crisis and come four years after the alleged mispricing, reports the FT. Criminal charges against a third banker are expected to be unsealed later on Wednesday, people familiar with the matter say.

Top manufacturing nations enjoying happier new year

The world’s leading manufacturing nations started the year with tentative steps towards recovery, according to a survey of purchasing managers in 30 countries. “Today’s data suggest that the global economy is faring much better than many had feared at the start of 2012,” said Chris Williamson, chief economist at Markit, which compiles the survey with JPMorgan. The survey index rose to 51.2 in January from 50.2 in December, with figures above 50 indicating expansion. The strong data cheered markets, as the FTSE All-World equity index rose by 1.4 per cent, the FT reports.

Production data boost stocks

Signs of a pick-up in global manufacturing activity boosted investor demand for growth assets, helping stocks on Wall Street snap a four-day decline, according the FT’s Global Markets Overview. The FTSE All-World equity index was up 1.4 per cent in afternoon trading hours in New York and the FTSE Eurofirst 300 was higher by almost 2 per cent. In the US, the S&P 500 index rose for the first time since last week, led by gains in industrial shares and financials, also supported by a report earlier in the session showing 170,000 US private sector jobs were added last month. Stronger appetite for growth-assets also helped boost trading in emerging markets, with two high profile corporate bond deals being priced on Wednesday: Mexico’s America Movil was about to become the first Latin American entity to issue Chinese yuan-denominated bonds, or dim-sum bonds. And Brazil’s largest company, Petrobras launched a whopping $7bn offer dollar-denominated debt in three tranches.

Europe thwarts DB-NYSE tie-up

The European Commission on Wednesday vetoed the proposed $9bn tie-up between Deutsche Börse and NYSE Euronext, scuppering an attempt by the German and US groups to create the world’s largest equity and derivatives exchange. Unveiling a verdict with far-reaching implications for a sector now littered with failed merger bids, Joaquín Almunia, European competition commissioner, said he blocked a “near monopoly” in European exchange-traded derivatives that would stifle competition, reports the FT. Mr Almunia’s decision overcame last-ditch resistance from a handful of fellow commissioners, underlining the clout and resolve of a competition watchdog that is overseeing antitrust investigations involving of Google, Gazprom and some of Europe’s biggest banks.

Shipping costs fall to 25-year low

A glut of ships has driven prices to ship dry commodities to their lowest level in 25 years, raising fears of fresh crisis for an industry vital to global trade, the FT reports. The key indicator of earnings for vessels carrying iron ore, coal and other bulk commodities – the Baltic Dry Index – fell on Wednesday to its lowest level since August 1986, extending a streak of consecutive daily falls from December 12 that seen the barometer fall 65 per cent. The index is widely followed outside the industry as a gauge of global trade. However, analysts said the latest slide in prices reflected mainly the impact of a surge in deliveries of ships ordered in the shipping boom before the 2008 financial crisis, which has outpaced still-growing demand to move goods.

Morgan Stanley’s most mysterious footnote — Part 2

In Part 1, we looked in and around Morgan Stanley’s mysterious little footnote about how the bank had reduced net exposure to Italy from $4.9bn to $1.5bn with a restructuring that settled in the early days of 2012.

As the bank doesn’t want to give any additional detail on what the restructuring, the below outlines some of the possibilities and the implications thereof. We emphasise that we don’t know which is the case and, again, we did ask Morgan Stanley for comment. Read more

Morgan Stanley’s most mysterious footnote — Part 1

(7) On December 22, 2011, the Company executed certain derivative restructuring amendments which settled on January 3, 2012. …

This mysterious little footnote announced to the world that in the fourth quarter, Morgan Stanley managed to arrange a deal that reduced the bank’s net exposure to Italy from $4.9bn to $1.5bn. Read more

Breaking up is hard to do — but here goes, anyway

From Jonathan Tepper, economist, chief editor of Variant Perception and co-author with John Mauldin of Endgame: The End of the Debt Supercyle…

A thirteen point guide to breaking up the euro. Read more

US unemployment “progress”

A chart via Nomura to keep in the back of your head as you eagerly anticipate this Friday’s BLS employment situation report in the US:

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Let there be credit claim collateral… just not everywhere

Turns out that not all the national central banks of the European System of Central Banks (ESCB) are so keen on widening collateral criteria, especially the idea of taking on more bank loans (tweaking the eligibility of credit claims) in exchange for central bank lending.

From Bloomberg on Wednesday (H/T Sean Corrigan): Read more

FT Alphaville asks the bloggers

We submitted three questions to the latest quarterly survey of economics bloggers by the Kauffman Foundation. Click to open the pdf and see how our comrades from around the interwebs responded (note: they really like NGDP targeting)…

We want negative Treasury yields

Interesting exchange in the latest minutes of the TBAC – Treasury Borrowing Advisory Committee, which brings together primary dealers and US Treasury officials… (Hat-tip Bondscoop)

The question was asked if it made sense for Treasury to permit bids and awards at negative interest rates in marketable Treasury bill auctions. DAS Rutherford [Matthew Rutherford, Deputy Assistant Secretary for Federal Finance] noted that there were operational issues associated with such a rule change, but that the hurdles were not insurmountable. It was the unanimous view of the committee that Treasury should modify auction regulations to permit negative rate bidding and awards in Treasury bill auctions as soon as feasible. Rutherford noted that any decision on this policy change would likely be made at the May refunding. Read more

Gangster economics

Struck by a recent report about how the Italian mafia was now Italy’s largest ‘bank’, Nicholas Colas, chief market strategist at ConvergEx Group, has decided to take a closer look at what one might call “off the grid” indicators for the US economy.

As Colas notes on Wednesday, some of these have been gaining traction: Read more

Blimey, Bill Gross has been on the Virginia Woolf…

Presented without comment:

​Where do we go when we die?
We go back to where we came from
And where was that?
I don’t know, I can’t remember
Virginia Woolf, “The Hours” Read more

Crunch de crédit continu (et collateral)

There’s a new ‘how is sovereign debt hurting you?’ question in the European Central Bank’s regular bank lending survey

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Sino-Forest’s diminishing returns

Here it is, and only a day past deadline: the Sino-Forest independent committee’s final report into the company’s assets and relationships between various poorly-understood entities.

[We looked at the independent committee a while back.] Read more

Markets Live transcript 1 Feb 2012

Live markets commentary from FT.com 

The ‘quiet’ CFO behind Facebook’s IPO filing

Facebook’s filing on Wednesday is set to price its initial public offering at some $5bn, but could be increased in response to investor demand, IFR reports. Guiding the IPO will be David Ebersman, Facebook’s quiet but no-nonsense chief financial officer, says AllThingsD. “Facebook is not taking chances with this IPO and wants to make it a blue-chip event,” one source told AllThingsD. Ebersman has pushed to keep banks’ fees in the offering low.

Gingrich not going away

Mitt Romney has stormed to a 46 per cent share of the vote in the GOP Florida primary, although Newt Gingrich shows no signs of dropping out of the race, says Politico. But Romney’s superior funding and campaign organisation could pummel Gingrich’s chances before long, the FT reports. But although Florida is a key swing state, the fact that only five per cent of GOP nomination delegates have been chosen leaves Gingrich with the hope of sweeping Southern state primaries on March 6 — Super Tuesday, the NYT adds.

China’s not so amazing PMIs

China’s official PMIs went to 50.5 for January, but European markets were not that impressed.

The HSBC/Markit Economics PMIs, meanwhile, were an uninspiring 48.8, compared to 48.7 in December. Read more

White House set to unveil mass refi plan

President Barack Obama will announce details of his plan to allow millions of home owners to refinance into lower-cost loans later on Wednesday, the WSJ says. The proposal appeared in President Obama’s State of the Union address, but remains controversial in Congress for its up to $10bn costs. Republicans have said they will oppose taxing banks to pay for the measure. The White House is nevertheless also likely to pursue policies that avoid Congressional approval, such as a plan to auction foreclosed homes en masse to investors seeking to develop them as rental property.

DB/NYSE officially dead

The European Commission has finally scuppered NYSE Euronext’s merger with Deutsche Boerse, according to the FT. European Union decisions to prohibit mergers, as the Commission has done with this deal, are relatively rare. Joaquin Almunia, EU competition commissioner, had argued that the proposed tie-up would risk creating a monopoly in the market for exchange-traded derivatives. However, Wednesday’s decision came after an unusually fierce debate among the college of commissioners, where a minority challenged the verdict because it hindered the emergence of “European champions” in a global market.

‘Nearly all’ missing MF Global money found

Investigators have tracked down almost all of MF Global’s missing client funds, but haven’t disclosed their progress publicly because it may complicate retrieval of the money, NYT Dealbook reports. The root of the problem lies in a conflict between one team of lawyers pressing to recover cash for clients, and another seeking recovery for creditors. Some funds from MF Global’s futures client accounts were paid out to securities customers leaving the broker, Dealbook adds. Meanwhile, MF Global’s former chief risk officer is expected to reveal his warnings about the broker’s sovereign debt trades in Congressional testimony on Thursday, the FT says.

First criminal case in crisis CDOs

Federal prosecutors are to file criminal charges against former Credit Suisse traders alleging they purposefully mis-priced CDOs, which triggered a $2.8bn write-down at the bank, the FT reports. It is the first criminal case to emerge from the wreckage of valuing structured products in the crisis, though the SEC is also likely to press civil charges. Two traders are expected to plead guilty. Prosecutors will argue that the traders inflated CDO prices to protect their bonuses despite knowing that the value of the securities had dropped, the WSJ adds. Credit Suisse in 2008 explained its write-down as the result of “mismarkings” in CDO prices, Bloomberg says.

The NBBO flutter

Oh the weird and wonderful charts of Nanex.

Here’s the latest one from the market data analytics firm (click to enlarge): Read more

The Iron Lady

Meet Gina Rinehart.

She’s the richest person in Australia, and if the iron ore price holds, the daughter of Australian mining pioneer, Lang Hancock, could soon be the world’s richest woman — a position currently occupied by the Wal-Mart widow Christy WaltonRead more