Posts from Tuesday May 22 2012

The Closer


After a strong session for global equities, the mood turned sour again as fears over Greece’s potential exit from the euro region mounted after the country’s former prime minister, Lucas Papademos, said risks of a departure were “real””, the FT reports. (Financial Times)
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Tourist-trapped, in the Greek bailout

Or the Greek-German relationship, told through tourism.

I ask Germans to choose Greece for their summer holidays.

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Greenshoes, Facebook phantoms and ETF magic

Successful or not, Facebook’s IPO has taught us one very important thing over the last two days.

The blogosphere/Twittersphere knows extremely little about greenshoe IPO mechanics. And yet, because who shouts loudest makes the most waves…the idea that Morgan Stanley had “lost face” on the IPO due to its commitment to take on shares at $38 “at a burden” to itself managed to linger around far too long for comfort. Read more

Eurozone exposures charted (a.k.a. Malta’s sorrow)

The little guy always gets ignored, as these charts from Nomura’s Jens Nordvig and Dimitris Drakopoulos show:

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Oh Schatz! No coupon

This. Is. Marktverwerfung:

That’s a 0.00 per cent coupon on €5bn of two-year German debt to be sold this Wednesday. Read more

Pershing Square’s presentation on JC Penney

Hat tip to Dan McCrum for passing along. Ackman’s bullishness on JC Penney is mostly about CEO Ron Johnson and his new management team, but there’s a lot in here on pricing models, sales trajectories, etc… Click the image for the full doc:

ELA, a life in the public eye

Finally, we have seriously reiterated our request to take advantage of a direct financing line from the Greek Central Bank, via the ELA (emergency liquidity assistance), the public tool of access to banking liquidity...

That’s Crédit Agricole’s chief executive at Tuesday’s shareholder meeting, on the funding options for the bank’s Greek albatross, Emporiki. Via Reuters. We smell no fear of stigma here. Read more

A formula to end the dollar’s reserve currency domination

One reserve currency to rule them all.

But does it need to be this way? Or is it indeed possible to have two, or even several such currencies? Or to get straight to the heart of it: can the euro or Chinese yuan ever have the status of the US dollar? Read more

Depressing eurozone summary du jour

Another day… another round of eurozone soul searching. This time UBS has sent out a Tuesday triptych of eurozone angst.

The first note, from Paul Donovan, covers off the flaws in the eurozone’s conception (little new ground but always worth remembering) and touches on Target2 liabilities and parallels: Read more

Markets Live transcript 22 May 2012

Live markets commentary from 

The (early) Lunch Wrap

Good morning, New York…


Real estate won’t be supporting Chinese steel demand much longer

Something is up with China’s steel production. It reached record levels in March, driving up expectations of rising coking coal and iron ore prices. As the FT and Reuters have reported, there are accounts of both thermal coal and iron ore shipments being deferred or even defaulted on, and prices of both commodities have fallen 12 per cent since the beginning of April. To an extent, China’s steel production growth has also slowed: April’s production only increased 1.9 per cent compared to a year earlier, versus March’s rate of 2.5 per cent compared to a year previous.

So why is China still producing steel at relatively high rates? There are a few theories. Wood Mackenzie says that even very thin margins are enough to keep privately-owned steel mills operating, while the state-owned operators had no incentives to stop production. The research house also says about 58 per cent of Chinese steel is typically used for construction. Read more

Flat-line Britain

What headline factoid to use?

Hands-Off policy fails UK Read more

The not-so-creeping process of de-euroisation

The de-euroisation continues and is, in Italy at least, getting faster… these charts show foreigners running away from Italian liabilities in March at their fastest pace ever, and illustrate just how quickly the LTRO sheen has faded.

Italy’s March balance of payments, out on Monday, showed its biggest ever decline in portfolio liabilities and while Italian repatriation flows show no consistent sign of slowing they are not keeping up with the foreign pull-out from Italian portfolio instruments. Read more

Further reading

Elsewhere on Tuesday,

– JP Morgan has an excess deposit problem (although it’s not just JP Morgan who has that problem). Read more

The 6am Cut London

France is determined to push the idea of jointly guaranteed bonds as a new form of borrowing for eurozone countries despite Germany’s opposition, the FT reports. Pierre Moscovici, finance minister, told a press conference on Monday that it was a “strong idea” and that Francois Hollande intended to “put everything on the table”. European Council President Herman Van Rompuy wrote to EU leaders urging them not to have any “taboos” at Wednesday’s summit, reports Reuters.

Meanwhile, commonly-backed “project bonds” pilot to fund pan-European infrastructure projects was approved by EU diplomats on Monday and will be discussed by EU leaders at a summit meeting on Wednesday, reports the FT. The small trial, the first element of a new “growth compact”, would see about €230m in EU funds allocated through 2013 to back the bonds, which would finance cross-border transport, communications and energy infrastructure programmes that are frequently ignored by individual member states. The plan is backed by French president Francois Hollande but documents seen by the FT suggest that the trial was original intended to run to 2015, but Germany requested a shorter trial. Read more

Overnight markets: Up

Asian markets extended gains with technology shares and exporters leading the rally, mirroring an advance for US stocks ahead of this week’s EU summit, says the FT. The MSCI Asia Pacific index gained 0.8 per cent with Japan’s Nikkei 225 Stock Average up 1.1 per cent, South Korea’s Kospi Composite 1.2 per cent higher and Australia’s S&P/ASX 200 index adding 0.4 per cent. Hong Kong’s Hang Seng index rose 0.8 per cent while China’s Shanghai Composite index gained 0.6 per cent. Technology stocks rose across the board on expectations policy makers will take steps to boost growth. In Tokyo, Advantest jumped 3 per cent, Sharp gained 1.4 per cent and Panasonicadvanced 1.3 per cent. Renesas Electronicsclimbed 7.4 per cent after the Yomiuri Shimbun reported that the company plans to raise fresh capital. In Seoul, Samsung Electronics rose 3.4 per cent and LG Electronics gained 3.5 per cent higher. Lenovo Group rose 2.8 per cent in Hong Kong.

Asian markets
Nikkei 225 up +71.07 (+0.82%) at 8,705
Topix up +7.63 (+1.05%) at 732.78
Hang Seng up +151.85 (+0.80%) at 19,074 Read more