Posts from Monday Feb 20 2012

ECB bond buying on pause, Greece deal in the air

The European Central Bank did not buy any government bonds last week, the first halt in its purchases since August, the FT reports. The ECB’s long-term liquidity operations with eurozone banks has largely taken on the job of thawing markets in 2012, with its weekly bond-buying totals having recently dwindled. But the future of ECB bond-buying has also been thrown into doubt by plans to include its Greek holdings in the country’s debt restructuring. Eurozone officials have worked until late into Monday night to put the finishing touches to a second Greek bailout, which may involve even higher losses for private bondholders, Reuters reports.

Concern over Sumitomo role in Olympus shake-up

Sumitomo Mitsui Bank’s position as Olympus’ largest creditor and shareholder has ignited another row about corporate governance at the company, ahead of key board changes, says the FT. Olympus is set to nominate a chairman and board members chosen by Sumitomo this week. Foreign shareholders fear that the bank is pushing through its own candidates rather than the best people to lead Olympus out of its accounting scandal. Olympus will promote its head of development as president in April, Reuters reports.

Crude prices at eight-month high

Supply fears over Iran sent oil prices above $121 a barrel in Monday trading, the FT reports. Brent for April delivery rose to its highest level since June, with geopolitical tensions in Yemen and South Sudan also threatening disruption to the market. Total’s chief executive has nevertheless insisted that the world could easily replace the 0.7m barrels of oil a day that Iran exports to Europe and Japan. An International Energy Agency official has also said that alternative supplies are available, the WSJ reports. Crude’s current “price spike” mirrors fears over Libyan oil in 2011 — but that year, prices then posted a record one-day in fall in May, John Kemp warns in his Reuters column. The enormous weight of long positions in crude — 7.3 for every one short — provides a warning of another sharp reversal, Kemp says.

Samsung to spin off LCD unit

Samsung has approved a plan to spin off its loss-making LCD business into a new company by April 1, Bloomberg reports. Samsung Display Co will receive $668m of capital under the proposal.  The new entity may eventually merge with the company’s more profitable OLED business, which creates brighter and faster screens for the TV and tablet markets at a high margin, the WSJ adds. LCD manufacturers have struggled in recent years as the technology became ubiquitous.

More legal setbacks for Apple in China

A Chinese court has ordered a retail chain to stop selling Apple’s iPad in the city of Guangdong, ruling that the rights of an electronics company in a trademark dispute have been infringed, the FT reports. While limited to one city and subject to appeal, Proview has struck a victory against Apple in its legal battle, which is under way in other Chinese cities where retailers sell the iPad. Apple enjoys a 76 per cent share of China’s tablet market, but the Proview affair could embolden its rivals Lenovo and Samsung, Reuters says.

Walmart to take majority stake in Yihaodian

Walmart is to take a controlling stake in Yihaodian, the Chinese e-commerce retailer, Reuters reports. The 51 per cent stake will deliver Yihaodian’s logistics network across Chinese cities into Walmart’s hands, and also follows a series of leadership changes at the US retailer’s China unit. Walmart first announced plans to take a minority stake in Yihaodian in May last year. Yihaodian sales hit Rmb2.7bn ($429m) in 2011, compared with Rmb805m in 2010, the FT says. The Chinese consumer ecommerce market is dominated by homegrown online retailer Taobao.

Metaphors to while the night away

With a long night of Euro-deal watching ahead we thought we would leave you some mixed-metaphors to mull over.

This is from Gabriel Sterne over at Exotix (emphasis his): Read more

Dash for trash, Hellenic edition

Amid the bailout suspense, the Athens stock index chugs higher…

 Read more

Hedge funds exit stage left, pursued by bearishness

LONDON—World-renowned news and opinion magazine The Economist announced plans to suspend any new online and print content for the next month in an effort to finally allow subscribers a chance to catch up. “It’s only fair to our readers,” said Economist editor Winthrop Parker, adding that there was no reason for subscribers to feel ashamed for not necessarily knowing every last detail about the current economic and geopolitical climate.

Unfortunately, it isn’t true — the above is from The OnionRead more

The case for ECB debt certificates

How much will be tapped at this month’s ECB three-year LTRO operation?

Estimates are increasingly being revised lower. Read more

Markets Live transcript 20 Feb 2012

Live markets commentary from 

Investors seek hedge against euro split

Leading investment banks are considering creating currency products that would protect companies and investors in the event of a partial break-up of the euro. Banks report that some clients have asked them to provide a hedging tool that would protect their exposure in countries that reintroduced their national currency, reports the FT. Creating the instruments would involve risks for the banks, which would have to promise to deliver new or returning European currencies in a market that could be volatile and illiquid. Banks said it would be difficult to put a price on such contracts because there was no way to predict how a revived European currency would be valued. The price that clients would have to pay for the protection could be significant, the banks added.

Pfizer weighs plans for $3bn part-IPO

The FT reports that Pfizer is weighing plans to raise about $3bn this year through a part-flotation of its animal health division, as the drugs giant examines the best way to spin off a business valued at as much as $18bn. The pharmaceuticals group, the world’s second largest by market capitalisation, has been talking to bankers about arranging an initial public offering that would look to place up to 19.9 per cent of the unit’s shares in the autumn, in what is known as an equity carve-out or partial spinoff, people familiar with the talks said. Floating a stake in a business ahead of a spinoff is a common tactic to help establish a shareholder following for a unit, improving its ability to trade as a standalone company. It comes as the value of spinoffs globally is set to double this year.

Japan trade deficit rises to new record

Japan’s trade deficit widened to a record in January, as falling exports combined with surging imports of energy. Imports rose 9.8 per cent from a year earlier, while exports were down 9.3 per cent, resulting in a record monthly deficit of Y1.48tn ($19bn), according to Monday’s data from the finance ministry, the FT reports. Last year Japan’s trade balance fell into an annual deficit for the first time since 1980, driven by subdued global demand and soaring fossil fuel imports since the Fukushima nuclear crisis. Analysts noted that Japan’s trade performance is historically weak in January, which has fewer business days. Adjusted for seasonality, the monthly deficit still hit a record Y613bn but was only marginally wider than the deficits in November (Y542bn) or December (Y569bn). Of the total deficit, 40 per cent was with Japan’s biggest export market China, Reuters reports. The Chinese authorities cut the reserve requirement of banks on Saturday – a move that may be reflect concern about weakening demand.

Risk assets jump on China and Greek optimism

Global stocks advanced to fresh six-month highs while crude oil hit nine-month peaks as risk assets rallied across the board after China loosened monetary policy and optimism grew over a bail-out deal for Greece, according to the FT’s Global Market Overview. Beijing’s move to cut the reserve requirement ratio by 50 basis points pushed commodity-linked currencies higher while the havens of the dollar and yen sold off. The FTSE All World index climbed 0.4 per cent to 217.23, powered by a near 1 per cent rise for Asian stocks. Japan’s Nikkei 225 Average pushed 1.1 per cent higher to close at its highest level for more than six months. With markets closed in the US for the Presidents’ Day holiday, the focus will be firmly on Europe today and the meeting of eurozone finance ministers in Brussels, with a positive resolution being increasingly priced in by investors.

When nobody expects a Chinese RRR cut

On Saturday, China’s central bank cut its reserve requirement ratio (RRR) for the second time in less than three months, a move which was expected — though just not now.

Societe Generale’s Wei Yao earlier this month said a cut was unlikely before March, given the fuzzy picture painted by data affected by the lunar new year. Wei believes Saturday’s move was unlikely to have much of an effect, because of the leverage limits applying to smaller banks: Read more

Finance for Xboxers

Nice to see that one European bank is not too concerned about the eurozone teetering on the edge of a bail-out-agreement-cum-sovereignty-crisis-slash-civil-uprising:

Saxo Bank, the online trading and investment specialist, has successfully executed, what is believed to be the first FX trade ever during a base jump at terminal velocity. Read more

Iran struggles to find new oil customers

Iran is struggling to find a buyer for nearly a quarter of its annual oil exports as looming western sanctions targeting the country’s nuclear programme start to bite the world’s third-biggest crude exporter, reports the FT. Tehran is trying to sell an extra 500,000 barrels a day of oil, or nearly 23 per cent of what it exported last year, to Chinese and Indian refiners, according to two industry executives familiar with the talks. “Iran is facing severe problems finding a new buyer,” one of the executives said, explaining that Tehran was not offering discounts for the oil, which is for delivery from the start of April. If it cannot find customers by mid-March for the oil, which is equal to the amount European refiners bought last year, Iran would be forced to put unsold barrels into floating storage in supertankers, or reduce output. Either measure could push oil prices higher. Reuters reports that United Nations inspectors have arrived in Iran on Monday for two days of talks about Iran’s nuclear programme. However, diplomats are not anticipating any breakthroughs as a result of the discussions.

Central bank aid sought in Greek bail-out

Eurozone governments are looking to the European Central Bank and national central banks to help pare back the cost of a second rescue package for Greece which would otherwise amount to €170bn. Figures seen by the FT reveal Greece needs €136bn in fresh bail-out funding from the European Union and International Monetary Fund – in addition to the €34bn left over from Greece’s first bail-out. This is €6bn more than EU leaders agreed in October. Germany, the Netherlands and Finland have insisted on paying no more than €130bn. Eurozone finance ministers, who meet in Brussels on Monday to hammer out a deal to save Greece from default, hope the ECB can contribute by forgoing some of the future profits it would earn on its Greek bondholdings, which it has said it is willing to do. Senior officials said they would also discuss a possible contribution from eurozone national central banks whose bondholdings could be included in a €200bn debt restructuring to be launched alongside the bail-out.

Widows and orphans, meet GKP

Here’s another opportunity for the FSA to clarify its rules on premium listings in London for companies that are outside the full UK regulatory regime.

From the SindyRead more

Further reading

Elsewhere on Monday,

This weekend in Greece, China, and Foxxconn. Read more

Pink picks

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

Edward Luce: Obama nears his nuclear moment
At the start of Barack Obama’s term, few moments better crystallised America’s change of face than his “New Day” video address to the Iranian people, writes the FT’s Edward Luce. Ending with a salutation in Farsi, Mr Obama offered Iran a new era of “co-operation”. It followed from the promise in his inaugural address to “extend a hand if you are willing to unclench your fist”. Unhappily, Tehran has ignored Mr Obama’s overtures. Not only is Iran thought to be within striking distance of how Israel defines its “zone of immunity” – the point at which Iranian nuclear weapons capability is irreversible – it has also threatened to block the Strait of Hormuz. Nothing spells global recession faster than $200-a-barrel oil prices. And nothing will bring a colder sweat to Mr Obama’s electoral strategists than the thought of conflict with Iran. Read more

Snap news

Breaking pre-market news on Monday,

– Inmarsat reoprts non-payment by LightSquared – statement. Read more

Pfizer weighs plans for $3bn part-IPO

Pfizer is weighing plans to raise about $3bn this year through a part-flotation of its animal health division, as the drugs giant examines the best way to spin off a business valued at as much as $18bn, the FT reports, citing people familiar with the talks. The pharmaceuticals group, the world’s second largest by market capitalisation, has been talking to bankers about arranging an initial public offering that would look to place up to 19.9 per cent of the unit’s shares in the autumn, in what is known as an equity carve-out or partial spinoff. Floating a stake in a business ahead of a spinoff is a common tactic to help establish a shareholder following for a unit, improving its ability to trade as a standalone company. It comes as the value of spinoffs globally is set to double this year.

Resource groups seek to dilute anti-corruption rules

Royal Dutch Shell and other natural resources companies have stepped up efforts to counteract planned anti-corruption rules that would force them to disclose payments to governments in countries where they operate, says the FT. The Anglo-Dutch group, Europe’s largest oil and gas company by market capitalisation, has put forward a series of alternatives, arguing that the current proposals will have “limited impact and unclear benefits”. The new requirements for US and EU quoted businesses are designed to highlight regimes that receive large sums from selling oil, gas, minerals and forests but then siphon off the proceeds rather than reinvest locally for public benefit. The EU has proposed a series of amendments to existing rules on transparency, including detailing payments on a project-by-project basis. The union’s Competitiveness Council meets this week to agree a general approach.

Fujitsu plans European smartphone entry

Fujitsu will launch a wide range of smartphones and tablets for the first time in Europe, as the Japanese electronics company seeks to stake a claim in the fast-growing and high-margin mobile device market, the FT reports. Competition in the smartphone market is set to further intensify next week when manufacturers launch the latest generations of handsets at Mobile World Congress, an annual telecoms conference in Barcelona. Fujitsu has lined up a range of high-end mobile devices for both Android and Windows operating systems to challenge the dominance of market leaders in Europe such as Apple and Samsung .

Truce in battle over Bumi

Financier Nat Rothschild and Samin Tan, the Indonesian mining entrepreneur, called a truce in their power struggle for control of UK-listed coal miner Bumi, agreeing at talks in London that Mr Rothschild would step down as co-chairman but remain on the Bumi board, reports the FT. At talks held at the Four Seasons Hotel in Park Lane, the two agreed that Mr Rothschild would stay on as a director, and that Mr Tan would also join the board, the newspaper says, citing a person familiar with the situation. Discussions as to who would replace Mr Rothschild as co-chairman were put off till a later date, he added. “They agreed they wanted harmonious relations,” the person said.

Thai economy shrinks 9% in Q4 due to floods

Thailand’s economy contracted last quarter as the worst floods in almost 70 years disrupted output by manufacturers from Western Digital to Honda Motor, reports Bloomberg, putting pressure on policy makers to revive growth. GDP fell 9 per cent in the three months through December from a year earlier, after climbing a revised 3.7 per cent the previous quarter, the National Economic and Social Development Board said. The median of 14 estimates in a Bloomberg News survey was for a 5 per cent drop. The economy grew 0.1 per cent in 2011. Southeast Asia’s second-largest economy shrank for the first time since 2009 after floods that killed more than 700 people and inundated two-thirds of the country dented exports already hurt by weaker European demand. Prime Minister Yingluck Shinawatra has pledged to spend 350bn baht ($11bn) on infrastructure and the Bank of Thailand cut the benchmark interest rate for a second straight meeting in January.

Overnight markets: Up

Asian shares jumped on higher risk appetite after China eased monetary policy over the weekend and optimism on Greece securing a second bail-out package, says the FT. The MSCI Asia Pacific index rose 0.9 per cent with Japan’s Nikkei Stock Average up 1.3 per cent at a six-month high, Australia’s S&P/ASX 200 1.0 per cent higher and South Korea’s Kospi Composite adding 0.7 per cent.

Chinese shares rallied as the monetary easing step is expected to boost lending capacity by an estimated Rmb350bn-Rmb400bn. Hong Kong’s Hang Seng index was up 1 per cent and China’s Shanghai Composite index gained 0.8 per cent. Property shares, sensitive to monetary policy, surged in Hong Kong, with China Resources Land jumping 2.7 per cent, Agile Property Holdings climbing 5.3 per cent and New World Development up 2.9 per cent. Resource stocks also posted solid gains, with Angang Steel advancing 2.8 per cent, and Aluminum Corp. of China adding 2.4 per cent. Read more

Japan’s January trade deficit a record high

Japan logged a record trade deficit in January, government data showed on Monday, Reuters reports. Exports slumped 9.3 per cent in January from a year earlier, slightly less than the median market estimate of 9.5 per cent but still the fourth straight month of decline, in a sign the economy could struggle to recover even as reconstruction from last year’s earthquake and tsunami proceeds. Seasonal factors influenced the data, and economists expect exports to recover soon as global growth picks up. Still, the figures could feed into concerns about how much longer Japan can rely on exports to help offset its huge public debt.