Good morning, New York…
That Fed Comms problem: Cardiff highlights that an interesting discrepancy has appeared in the Fed’s most recent communications. While the statement was dovish, a hawkish tone emerged from the new federal funds rate projections. According to Credit Suisse, this suggests that the average hike date expectation has now shifted from June 2014 to march 2014.
When PSI is futile: Only 15 per cent of a eurozone sovereign’s debt not held by senior creditors or by banks whose public recapitalisation would cancel out their write-downs — in two years’ time, notes Joseph. It then stands to reason that, if Portugal needs it in the future, it will only get worthwhile debt relief from a restructuring.
Another eurozone sovereign is downgraded: And by now you should know the drill, says Societe Generale’s Sebastien Galy. Mostly, he adds, it’s reflective of a belated recognition of reality, and typically leads to some competition amongst rating agencies to capture headlines.
Your eurozone lending retreat, charted: David takes a closer look at developments in deleveraging among eurozone lenders in late 2011 with the help of some stats from the Bank for International Settlements.
China’s compulsive copper hoarding problem: Izzy makes the case that China is suffering from a compulsive hoarding problem when it comes to its stockpiles of copper and that a psychopharmacological intervention is now needed. Most of the country’s metal warehouses are experiencing inventory overflow, and in some cases having to use staff car parks to store the surplus metal.
Standard & Poor’s cuts Spain’s credit rating by two notches: The credit rating agency downgraded Spain from A to BBB-plus, putting the country on a negative outlook citing expectations that government finances might deteriorate even more than previously thought as a result of a contracting economy and an ailing banking sector, reports Reuters.
BoJ expands stimulus: Japan’s central bank announced further easing measures after economic data suggested slowing growth and persistent deflationary forces in the world’s third-largest economy would stifle recovery. The BoJ’s asset-purchasing programme was increased by Y5tn ($61.7bn) to Y70tn, with an adjustment to allow it to buy more government debt, and with longer maturities, the FT reports.
Amazon sales grow rapidly: Aggressive spending by the online retailer spurred another quarter of outsize growth, though profits fell by 25 per cent as operating expenses outstripped revenue growth. The WSJ reports that Amazon has been shelling out hundreds of millions of dollars to build new warehouses, develop new technology and expand its digital library of books and movies.
Exxon profits hit by lower production: The US oil major said first-quarter earnings fell 11 per cent due to lower oil-and-gas production and a drop in chemical profits, which more than offset the benefits of high crude prices and improved refining results. The company is also reducing the number of rigs drilling for natural gas in the United States after being hit by weak natural gas prices, says the WSJ.
Barclays and Deutsche Bank won an auction for a slice of the “Maiden Lane III” CDO portfolio held by the New York Fed, which originated fromthe controversial government bailout of AIG, reports the FT. Market participants said that the winning joint bid by the two banks for the so-called “Max CDOs” was more than 65 cents on the dollar on securities with a face value of $7.5bn. The price will be disclosed in July.
US prosecutors in California are investigating a Goldman Sachs banker for allegedly sharing confidential information about pharmaceutical mergers with an employee of Galleon, the hedge fund run by Raj Rajaratnam, the FT reports, citing a person familiar with the matter.
Nomura profits jump: The Japanese bank reports year-on-year net profit rose 86 per cent in the first quarter, on the back of a strong performance in its trading business and investment trust sales, says the Wall Street Journal.
Reformers within the Chinese Communist party are trying to exploit the recent ousting of Bo Xilai by making constitutional and political changes, reports the FT, citing senior officials and people close to party leaders.
Chesapeake Energy’s board of directors moved to cut off a controversial perk it has long granted to CEO Aubrey McClendon, and said it would review Mr McClendon’s personal financial interactions with firms that have a relationship with the company, the WSJ reports. Meanwhile the SEC has opened an informal inquiry into the programme, which granted Mr McClendon a share in each of the company’s natural gas wells, says Reuters, citing a source familiar with the matter.
Kelvin Woo and Joe Zhang are leaving GLG Partners to set up their own Asia-focused macro hedge fund, says Bloomberg, citing four people with knowledge of the matter.
In other earnings news: Britain’s WPP said that first quarter profit rose more than expected thanks to a solid performance in Asia Pacific and Latin America (WSJ) ; Daimler reported higher first quarter net profits due to rising vehicle sales, although new vehicle costs weighed (WSJ); PetroChina’s first-quarter profit rose unexpectedly after it ramped up oil and gas production, while Sinopec’s earnings slumped on losses from selling fuels at state-controlled prices (Bloomberg). Samsung Electronics’ Q1 profits exceeded expectations on surging sales of Galaxy smartphones (Bloomberg); Italy’s Eni reported a 13 per cent gain in first quarter profit after crude prices increased and Libyan output recovered (Bloomberg); Nintendo posted its first annual loss in 50 years as a public company, but said it expects a new version of its Wii console will drive a return to profit (Financial Times).
Markets: A clash of contrasting catalysts have seen markets struggleto carve out a distinct trend – though the bears had the upper hand as the European session kicked off with Eurozone angst weighing on sentiment, the FT reports. The FTSE Eurofirst 300 was down 0.8 per cent at the open, and, after a soft performance out of Asia, the FTSE All-World index was lower by 0.4 per cent. S&P 500 futures suggested Wall Street would lose 0.6 per cent, ahead of first-quarter GDP data to be released at 1330 BST.