Posts from Friday Feb 10 2012

Further further reading

For the commute home,

– Dude, where’s my national mortgage settlement document? (Via Ryan McCarthy.) Read more

Editorialising, SEC-style

Maybe we are making too much of this, but when the SEC is on its 30th or so figurative lynching related to the Galleon rat case, does it really need to juice up its press releases in the hope of a tabloid pickup?


The blogosphere

On Wednesday, FT Alphaville met Yves Smith, proprietor of the blog Naked Capitalism. Ms Smith is the author of the book ECONned: How unenlightened self interest undermined democracy and corrupted capitalism.

Nabbing the quietest table we could find at Candle 79, we asked her a few questions about Naked Capitalism, the blogosphere, bankers, and bonuses… as well as what she does for fun. Read more

US Markets Live transcript 10 Feb 2012

Live markets commentary from 

Reminder: US Markets Live at 10am New York, 3pm London

Greece, the foreclosure settlement, um, Greece… we really have no idea what we’re going to talk about this morning. Watch us wing it at the usual place, starting in a few minutes.

Those haircut-heavy credit claims [updated with more haircuts]

Updateapologies for a rather disorganised (and long) post… but we’ve finally gained information from all seven eurozone central banks who’ll accept additional credit claims under the ECB’s new rules…

Lend to an Italian small business for five years, take the loan to the Bank of Italy for ECB three-year funding… get this kind of haircut: Read more

Markets Live transcript 10 Feb 2012

Live markets commentary from 

Bill Gross, Treasuries king for much longer?

Pimco’s Total Return Fund, managed by Bill Gross, now holds Treasuries to the greatest extent since July 2010, departing from sharp cuts to its holdings in 2011, Bloomberg reports. Holdings of US government debt rose to 38 per cent last month from 30 per cent in December. The fund gained 2.13 per cent in January, beating almost all of its peers, according to Bloomberg data. Gross nevertheless faces rising doubts that the $250bn Total Return Fund has become too big to manage and too reliant on derivatives, says Reuters in a special report.

Warning sign over Chinese imports

China’s imports fell 15.3 per cent in January, indicating pressures on domestic demand beyond the normal Chinese New Year slowdown, the FT reports. The country’s exports also recorded their first year on year drop since late 2009, of 0.5 per cent. Year on year or even month on month data comparisons can be difficult, given the lunar cycle that determines the date of New Year — confusing analysts, Reuters says. But declines in the steel and export sectors appear to go beyond the New Year effect, in addition to lower iron ore imports and volatile spot demand for copper.

Venizelos, uncut

Having been Schäubled late on Thursday, here’s the actual statement issued early on Friday by Greek finance minister Evangelos Venizelos.  We’ve emphasised the rousing, emotional stuff…

(Via Google translate; original here if you read Greek) Read more

Bachus faces insider trading inquiry

The chairman of the House Financial Services Committee is being investigated over possible violations of insider trading laws, the Washington Post reports. The Office of Congressional Ethics began the probe into trades by Rep. Spencer Bachus late last year. Bachus made a slew of stock options bets in 2008, executing the trades around major policy decisions over the financial crisis, the WSJ says. House Representatives have just passed Stop Trading on Congressional Knowledge Act to improve financial disclosures by politicians, the WSJ adds.

NY Fed gained $3.2bn on MBS sale

The New York Fed received $3.2bn from its Maiden Lane II vehicle of mortgage-backed securities in January, the same month it sold some of the SPV’s assets to Credit Suisse, the FT says. The bank bought securities with a face value of $7bn. Goldman Sachs bought a further $6.2bn from the portfolio in an auction held this week, according to Bloomberg. Maiden Lane II transferred proceeds to the Fed in partial repayment of the $19.5bn loan used to purchase the securities from AIG in 2008, as part of the insurer’s bailout, reports the WSJ.

Money market funds pile back into French banks

US money market funds have return to lending to French banks with force, owning $8.6bn of short-term loans issued by the institutions in January, up from $3.2bn in December, Bloomberg Risk reports. The figure is still far below the $78bn of French bank exposure held by money market funds at the end of 2010, but marks the first increase in lending in six months. Societe Generale’s funding from the sector rose to $3.4bn, a tenfold increase. Money market funds pulled dollar funding from French lenders as the eurozone debt crisis worsened in autumn, but have return on hopes that the ECB’s three-year euro liquidity will aid the banking system.

Profits dip at Barclays

Barclays has warned it may have to scrap its ambitious target of a 13 per cent return in equity in 2013, while profits at the bank fell eight per cent in the last three months of 2011, Reuters reports. Income at Barclays Capital fell 19 per cent on the quarter, and almost half on the year, to $2.84bn. Adjusted return on equity fell to 6.6 per cent from 6.8 per cent a year earlier, throwing doubt over chief executive Bob Diamond’s ambitions for the bank, the WSJ adds. While Barclays Capital has capped employees’ cash bonuses to one of the smallest among investment banks, total pay across the bank fell by just 15 per cent, and salaries rose 2 per cent even though headcount fell by more than 6,000, the FT says.

The EBA bank recap, broken down

No deleveraging because of our recapitalisation exercise, really — or if there is, you’ll hardly notice it. So says the European Banking Authority in a Thursday night release:

(Warning: pie charts follow) Read more

Further reading

Elsewhere on Friday,

— Alex, the leading indicatorRead more

Pink picks

Comment and analysis from the FT on Friday…

 Read more

Snap news

Breaking pre-market news on Friday,

— “Citizenship” from Barclays, along with year-end figures – statement Read more

China’s imports and exports fell in January

China’s exports fell and imports slid more than forecast in January, reports Bloomberg, the first declines in two years, as a weeklong holiday disrupted trade and commodity prices dropped. Overseas shipments decreased 0.5 per cent from a year earlier, according to the customs bureau said. Imports fell 15.3 per cent, compared with a median economist estimate compiled by Bloomberg for a 3.6 per cent fall. That left a greater-than-forecast trade surplus of $27.3bn, a six-month high, the data showed. Adjusted for the four fewer working days than last January, exports rose 10.3 per cent while imports were up 1.5 per cent, the customs burea said.  Commerce Minister Chen Deming said on Thursday that January exports “cannot make us optimistic”.

PepsiCo to boost marketing budget

PepsiCo is cutting 8,700 jobs and boosting its marketing budget by as much as $600m this year in an attempt to overhaul its struggling US beverage business, reports the WSJ. The company also warned Thursday that its profit will fall 5 per cent this year, in part due to commodity costs increasing by $1.5bn, even as it targets $1.5bn in new cost savings by 2014. Management expects to return to “high-single-digit” earnings growth in 2013 and beyond, on a constant-currency basis. Chairman and chief executive Indra Nooyi ruled out a Kraft-style breakup of the snack and drink giant.

Bakries open to Rothschild trade-off

The Indonesian shareholders in coal miner Bumi are open to a compromise that would see financier Nat Rothschild stand down as co-chairman of the company but remain on its board, the FT says, citing people familiar with the matter. Publicly, however, the shareholders – the businessman Samin Tan and the Bakrie family – are insisting on pushing through their proposal to drop Mr Rothschild and will launch a charm offensive next week to persuade others to back them. Chris Fong, a spokesman for the Bakrie family, justified the move against Mr Rothschild by describing him as the “financial engineer” who listed Bumi in London but was no longer needed as co-chairman. “We value him for bringing us to London, introducing us to the market, but we realise we need to be here and we can’t leave that to Nat,” Mr Fong said in an interview.

Overnight markets: Down

Asian markets were lower after European finance ministers held back a rescue package for Greece, setting out a fresh batch of conditions for Athens, says the FT. The MSCI Asia Pacific index slipped 0.6 per cent with Japan’s Nikkei 225 Stock Average off 0.2 per cent, Australia’s S&P/ASX 200 down 0.4 per cent, and South Korea’s Kospi Composite index 0.5 per cent lower. Hong Kong’s Hang Seng index slipped 0.1 per cent while China’s Shanghai Composite index edged up 0.3 per cent.

Asian markets
Nikkei 225 down -32.71 (-0.36%) at 8,970
Topix down -3.29 (-0.42%) at 781.20
Hang Seng down -121.33 (-0.58%) at 20,889 Read more

Canaccord and China plan $1bn resources fund

Canaccord is to establish a $1bn fund with the state-owned Export-Import Bank of China to invest in Canadian natural resources, as a trade mission to Beijing led by Canada’s prime minister prompts a flurry of deals between the two countries, reports the FT. The Canadian investment bank has been trying to expand its presence in Asia, acquiring the Balloch Group, a Chinese boutique investment bank in 2010, and forming a strategic agreement with Eximbank in the same year. It is also expanding in London with the £253.5m acquisition of Collins Stewart , the stockbroker and wealth manager, which was agreed in December.

European banks offer new capital proposals

European banks are proposing capital-raising measures that go beyond regulators’ demands and would cut only a small amount of lending to the real economy, according to a preliminary assessment of the plans by the European Banking Authority, reports the FT. In December the EBA identified a capital shortfall of €115bn at 30 banksand told the institutions to come up with plans to raise their core tier one capital ratios to 9 per cent of their risk-weighted assets by July.


House passes curbs on insider trading

The US House of Representatives on Thursday overwhelmingly passed new curbs on insider trading by lawmakers and other government officials despite complaints from Democrats and some Republicans that key anti-corruption provisions were dropped, reports Reuters. The legislation, aimed at ensuring lawmakers do not profit from non-public knowledge they gain through their positions, is the most extensive effort to clamp down on Congress’ personal business dealings in years. Lawmakers have seized upon it amid approval ratings that continue to plumb new lows. The House bill did not include a Senate-passed plan to impose new regulations on Washington insiders who collect “political intelligence” about pending legislation from lawmakers and their aides and sell it to Wall Street. It also lacked Senate proposals to equip prosecutors with new legal tools to pursue public corruption cases and ban all gifts to public officials valued over $1,000. The WSJ says the bill picked up unexpected support from some lawmakers who actively trade stocks.

US mortgage deal may cause short-term pain

Five big US banks accused of abusive mortgage practices have agreed to a $25bn government settlement that may help roughly one million borrowers, says Reuters, but is no magic bullet for the ailing housing market. Thursday’s announcement brings an end to 16 months of negotiations that culminated in a tense week of round-the-clock dealmaking. The result is a record state-federal settlement that will deliver wide, but not deep, relief to US homeowners. The settlement is good news for the economy – but it could actually drag house prices down in the short term if banks start to seize homes again, says the FT, adding that the overall result should help the housing market get back to normal, but the immediate consequences are less clear.

Alibaba to take HK unit private

Chinese e-commerce company Alibaba Group plans to take its Hong Kong-listed unit private, says Reuters, citing two sources familiar with the matter said. The news agency says Alibaba is working with Yahoo on an asset-swap deal that may result in Yahoo owning a direct stake in one of Alibaba Group’s operating businesses. The sources told Reuters that taking private was only one of the proposals being discussed and a final solution to the saga is still being hammered out. Alibaba Group’s plans are part of an overall deal being discussed by the board of Yahoo, which has come under fire from investors impatient with the company’s lackluster performance. The deal under discussion is that Alibaba would use borrowed money and internal cash as well as an asset swap to buy back most of a 40 percent stake that Yahoo owns in Alibaba Group, the sources said.

Citigroup takes $50m loss in Libor probe

Citigroup was forced to write off $50m after two traders accused of attempting to influence global lending rates left the bank, says the FT, citing people familiar with a worldwide investigation that is gathering pace. Nine separate enforcement agencies in the US, Europe and Japan have been probing whether US and European banks manipulated the London Interbank Offered Rate or Libor, the benchmark reference rate for $350tn worth of financial products, and other interbank lending rates. So far, only Japan’s Financial Services Agency has formally sanctioned banks in connection with the probe.

Gross lifts Treasury holdings

Pimco’s Bill Gross has increased his holdings of Treasuries to the highest level since July 2010, a year after banishing US government debt from the world’s biggest bond fund, reports Bloomberg. Mr Gross boosted the proportion of US government and Treasury debt in Pimco’s $250.5bn Total Return Fund in January to 38 percent from 30 per cent in December, according to a report placed on the company’s website. He raised mortgages to 50 per cent, the highest since June 2009, from 48 per cent in December.

Bundesbank casts doubt on LTRO expansion

Mario Draghi has run into Bundesbank resistance over easing access to ECB offers of three-year liquidity for eurozone banks, reports the FT, highlighting German unease over the measures the ECB president has taken to turn the region’s fortunes. The ECB’s 23-strong governing council gave the go-ahead on Thursday for seven national central banks to expand the assets that can be used as collateral when obtaining liquidity. The rule changes would temporarily allow the broader use of bank loans, boosting by about €600bn the pool of assets that can be used as collateral in ECB operations, before haircuts were applied. However, Jens Weidmann, Bundesbank president, voiced concern about a lowering of credit standards and Mr Draghi admitted the council decision had not been unanimous. The Bundesbank’s concern is significant because Mr Draghi has tried to repair the damage created by conflicts with sceptical German policymakers over eurozone crisis measures under Jean-Claude Trichet, his predecessor.