Posts from Wednesday Feb 29 2012

Further further reading

For the commute home,

- More on the big Treasury futures, gold, et al, sell-off, from the WSJ… Read more

A downTic in China’s holdings? Doesn’t matter

FT Alphaville has written plenty of “explainer”-type posts on the relative accuracy of the monthly Tics data — i.e. who holds US Treasuries — versus the annual revisions (listed below if you’re fantastically bored).

Since it’s late in the day and we’re feeling lazy, we’ll risk charges of navel-gazing and just quote ourselves from last year’s editionRead more

European banks tap €530bn in ECB loans

Eight hundred European banks borrowed €529.5bn in three-year liquidity from the European Central Bank in the last LTRO, the FT reports. More than half of the banks tapping funds came from Germany, according to people familiar with the auction. But Italian lenders also took down €130bn of funds in return for collateral, with Spanish borrowing also likely to be heavy, Reuters says. FT Alphaville has a list of individual lenders who revealed their involvement, and the amount borrowed. The ECB is apt to watch for whether the funds are used to lend to the real economy or to refinance bank debts.

Tesco attacks South Korea’s ‘watermelon economy’

Tesco’s chairman in South Korea has launched an unusually caustic attack on Seoul’s policymakers, accusing them of being “red” for attempting to protect small family-run shops from the expansion of supermarkets, according to the FT. South Korea is a ‘green’ market economy on the outside but red on the inside, making it a ‘watermelon economy’, said Lee Seung-han. The country is Tesco’s largest market outside the UK, but South Korean politicians have recently passed laws restricting the opening of supermarkets in areas close to small stores.

Iran oil in Asia: Japan close to import cut deal, logistics loom

Japan is “in the final stages” of talks with the US on a deal to make deeper cuts to its Iranian oil imports, its foreign minister has said, according to the FT. A deal to reduce reliance on Iran’s crude would be made in return for Japanese banks avoiding tough US sanctions on dealings with Iranian financial institutions. Amid the clampdown on Iranian exports, more and more questions are being asked about the true extent of Saudi Arabia’s “spare capacity” to replace lost supply, the FT adds. A Western release of strategic crude reserves, also to meet demand, would meet the logistical problem of the oil market being tightest in Asia, Reuters says.

Fed: “modest to moderate” US growth

The Federal Reserve’s Beige Book has reported an unexciting but continuing pace of growth in the US since the beginning of the year, Bloomberg reports. “Manufacturing continued to expand at a steady pace across the nation,” the Fed survey added. Ben Bernanke’s tempered view of the jobs recovery in Congressional testimony earlier on Wednesday gave no clues on further QE, however, Reuters says. Gold tumbled on the remarks by the Fed chair, dropping more than 3 per cent, the FT reports. Treasury futures also plummeted, with traders unsure whether a fat finger or a large algo-driven trade provided the cause, Dow Jones adds.

North Korea agrees nuke moratorium

North Korea has agreed to suspend its activities in nuclear enrichment, bomb tests and launching long-range missiles, in a surprise accord with the United States, says Reuters. The Kim Jong-eun regime will receive 240,000 metric tons of food aid in return for the deal, which also allows the return of IAEA inspectors to Pyongyang, the WSJ adds. The agreement will ease fears that Kim Jong-eun would instead seek to stamp his authority through another missile test or military manoeuvre that could have threatened peace in the region, the FT reports.

The growth of EM local-currency debt markets

A horribly-fonted chart from Ashmore Investment showing the development of local-currency emerging market fixed income debt…

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US consumer: not so “unsustainable” now, am I?

Previously we looked at US consumption trends in the second half of last year. Spending had outpaced incomes as the savings rate fell, and consumer credit expanded, leading to questions of “sustainability” and the like.

Well, apparently income growth and the savings rate were both meaningfully understated. Read more

When you’ve been Humphrey-Hawkinsed

The chairman of the Federal Reserve, listening intently to the House Committee on Financial Services, at pixel time. Ron Paul already brandished a silver ounce. It’s just not the same now that Ben does his own press conferences…

(C-SPAN feed here. Bernanke’s prepped testimony — free of QE hints, which seems to have surprised some — here. Caption the above if you wish…)

Financial markets: the EM swing voter

Many politicians and despots agree that democracy can be really annoying.

Unfortunately for them, there will be around 60 political transitions of one kind or another in 2012. Happily for investors, markets seem to like the idea. Read more

Did Portugal not get the memo?

Just a curio, given that all other sovereign eurozone debt was tightening on Wednesday. Here’s Portugal’s 5 year paper (the ECB has bought, subordinated — what have you — in the market on Wednesday, Reuters said):

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A Murdoch out of the UK newspaper biz…

NEW YORK–(BUSINESS WIRE)–News Corporation today announced that, following his relocation to the Company’s headquarters in New York, James Murdoch, Deputy Chief Operating Officer, has relinquished his position as Executive Chairman of News International, its UK publishing unit. Tom Mockridge, Chief Executive Officer of News International, will continue in his post and will report to News Corporation President and COO Chase Carey…

“I deeply appreciate the dedication of my many talented colleagues at News International who work tirelessly to inform the public and am confident about the tremendous momentum we have achieved under the leadership of my father and Tom Mockridge,” said James Murdoch. “With the successful launch of The Sun on Sunday and new business practices in place across all titles, News International is now in a strong position to build on its successes in the future. As Deputy Chief Operating Officer, I look forward to expanding my commitment to News Corporation’s international television businesses and other key initiatives across the Company. Read more

LTRO names n’ numbers (so far) [updated]

Not all 800 banks who tapped the ECB’s second three-year liquidity op — obvs. But…

[DJ] Intesa Sanpaolo Took Up EUR24B Of ECB’s LTRO – CEO Read more

Space opera, beyond finance edition

FT Alphaville spent a lot of last week hanging out at Lift12, a Geneva-based technology conference exploring the social implications of new technologies.

We were particularly drawn to the Beyond Finance session last Thursday, which tried to take a peek at how technology might change the world of banking and money in the years to come. Read more

Markets Live transcript 29 Feb 2012

Live markets commentary from FT.com 

Don’t panic (much) about the Irish referendum

The announcement of  an Irish referendum on the European Stability Treaty put the euro cross-rate into a brief tizz on Tuesday. The reason, as the FT explains:

A no vote would mean Ireland was not eligible for funds from the European Stability Mechanism, the eurozone’s new bail-out fund. The pact can enter force with the support of 12 of the 17 countries that use the euro, effectively removing any single nation’s veto over the accord. Read more

LTRO.2 €530bn [updated]

That’s €530bn with 800 bidders — 277 more than participated last time, when the uptake was €489bn.

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Wells and Goldman may face SEC charges

Wells Fargo and Goldman Sachs may face civil charges for allegedly misleading investors in the sale of mortgage-backed securities, marking the next phase of cases tied to the financial crisis. The two banks said in their annual reports that they had received “Wells” notices from the Securities and Exchange Commission, alerting them that the staff planned to recommend civil charges, reports the FT. They have an opportunity to respond to the SEC before any decision is made. The disclosures come as the SEC has stepped up its investigation of Wall Street firms’ sale of residential mortgage-backed securities. Robert Khuzami, director of the SEC’s enforcement division, has said the agency’s investigation is looking at firms that may have mislead investors about the quality of the loans packaged in the securities.

NY Fed ends sale of AIG bail-out portfolio

The Federal Reserve Bank of New York said on Tuesday that it had completed the sale of a portfolio of risky mortgage securities once held by AIG, the insurer, for a profit. The sale marks a “milestone” for the New York Fed’s efforts to liquidate distressed assets it accepted at the height of the financial crisis, the FT says. It said the public will receive a “net gain” of $2.8bn, including $580m of accrued interest on the $19.5bn loan the New York Fed made to Maiden Lane II, a special entity created to buy securities as part of the bail-out of AIG. Credit Suisse on Tuesday won the bidding for theremaining securities in Maiden Lane II, which have a face value of $6bn.

Semiconductor stocks drive Nasdaq rally

The Nasdaq Composite index hit fresh 11-year highs as Apple shares reached record levels and semiconductor stocks continued to rally on hopes that the bankruptcy filing of Japanese chipmaker Elpida would drive up prices of computer memory, the FT reports. The Philadelphia index of semiconductor stocks climbed 1.6 per cent with three-quarters of its constituents posting record gains. Micron Technology, which stands to benefit from an Elpida retreat from the dynamic random access memory (D-Ram) market, rose 3.7 per cent to $8.88. Its shares are up 14 per cent this week and at their highest level since last June. Novellus Systems also climbed 3.7 per cent to $47.02. However, Nomura analysts – who on Monday had said D-Ram prices would not recover until late in 2012 because of continued disruption to the supply chain for personal computers – posted another downbeat note. They forecast weak demand for semiconductor chips from android smartphone makers, which they said would lose market share to Apple’s iPhones.

Stocks firm ahead of ECB loan results

The FT’s Global Markets Overview reports that demand for riskier assets remains firm, pushing global stock barometers to fresh highs, as investors await news of the latest liquidity injection by the European Central Bank. The FTSE All-World equity index is up 0.4 per cent to its best level in nearly seven months. The benchmark has been helped by a 0.8 per cent advance for the Asia-Pacific region, despite China breaking the trend with a 1 per cent fall as property stocks struggled on news Shanghai would crimp real estate speculation. Europe’s FTSE Eurofirst 300 is up 0.5 per cent in early skirmishing, with the banking sub-index leading the charge on a gain of 1.5 per cent. S&P 500 futures suggest Wall Street will open at a new post-financial crisis high, rising 0.2 per cent at the bell. The Nasdaq Composite looks set to challenge the 3,000 mark – it closed on Tuesday at 2,987 – and that would be the first time the tech-heavy gauge has broken that level since the dotcom frenzy in 1999.

Strange world, etc

LTRO trending on twitter, worldwide.

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Romney wins Michigan and Arizona primaries

Mitt Romney has won the crucial Michigan primary, fending off a strong challenge from Rick Santorum after a bitter contest that has left Republicans anxious about damage to the party from the prolonged presidential nomination race, the FT reports. Mr Romney also won the second primary held on Tuesday, in Arizona, this time easily beating Mr Santorum into second place. The WSJ says that the two wins have given Romney a welcome momentum going into Super Tuesday, during which 10 states will vote for their preferred candidate. Separately, the WSJ reports on Obama’s criticism of Romney with regards to the bailout of American auto manufacturers. President Obama stated that not bailing them out would have lead to an economic depression across the Midwest, and yet Romney has not be supportive of them.

How deep are the ECB’s pockets?

The below is from the FT’s Money Supply blog that covers all things central banky.

The ECB’s exposure to peripheral sovereign debt and a host of other assets of dubious quality has sparked concerns about the central bank’s solvency. Read more

An unexpected LTRO reaction?

That wasn’t quite our last pre-LTRO/Ltro/L-Troh  post.

On Tuesday Marc Chandler, global head of currency strategy at Brown Brothers Harriman, ventured an interesting hypothesis on what the market’s response might be to the LTRO-II take-up, in relation to the consensus expectations of roughly €500bn. Read more

Further reading

Elsewhere on Wednesday,

- Ireland brings out the vote, EU fiscal pact stylee. Read more

Pink picks

Comment, analysis and more from Wednesday’s FT,

Martin Wolf: China is right to open up slowly
The next big global financial crisis will emanate from China, writes the FT’s Wolf. That is not a firm prediction. But few countries have avoided crises after financial liberalisation and global integration. Think of the US in the 1930s, Japan and Sweden in the early 1990s, Mexico and South Korea in the later 1990s and the US, UK and much of the eurozone now. Financial crises afflict every kind of country. As Carmen Reinhart of the Peterson Institute for International Economics and Kenneth Rogoff of Harvard have remarked, they are “an equal opportunity menace”. Would China be different? Only if Chinese policymakers retain their caution. Read more

Snap news

Breaking pre-market news on Wednesday,

– International Airlines, aka BA – statement Read more

Romney wins crucial Michigan primary

Mitt Romney has won the crucial Michigan primary, reports the FT, fending off a strong challenge from Rick Santorum after a bitter contest that has left Republicans anxious about damage to the party from the prolonged presidential nomination race. Mr Romney is also on track to win the second primary held on Tuesday, in Arizona, this time easily beating Mr Santorum into second place.

  Read more