Posts from Monday May 28 2012

M&A flows and the (slippy) FX market

M&A flows and their impact on currencies are an especially hard thing to get a grip on – cause and effect can get quite muddied.

A recent note from UBS analyst Chris Walker took another shot at discovering  how M&A flows influence the FX markets. He argues that while M&A flows do influence FX markets, they do so largely because of expectations and speculation — not because of flows directly related to M&A transactions (UBS’ emphasis): Read more

German slackers vs toiling Greeks…

In the (relative) absence of news, we should share this tweet from @presseurop

 Read more

Sonia says: ‘UK rates are (possibly) coming down’

With all the excitement in Spain and Greece of late, it’s been easy to miss a rather big move in British interest rate expectations.

Consider this chart of the November MPC SONIA index future. According to friends in sterling overnight markets, the pricing here suggests a roughly 45 per cent chance of a UK base rate cut, come November. Read more

How much an implicit banking subsidy?

The Bank of England has taken another crack at estimating the cost (or value, depending on your point of view) of the implicit subsidies given by the state to various banks.

The full paper, with a much more detailed look at methodology, is here. We will just bring you a little snapshot of Noss and Sowerbutts’ work. Read more

Markets Live transcript 28 May 2012

Live markets commentary from FT.com 

The (early) Lunch Wrap

Good morning, New York…

FT ALPHAVILLE Read more

Bankia’s influence spreads

After a weekend with lots of Bankia news, the spread between Spanish and German 10-year debt reached new euro-era highs:

 Read more

Bankia going GUBU … but what about the rest?

Oh, Bankia” has become a common refrain around these parts and this morning Joseph pointed out a few of the oddities surrounding Spain’s incipient bailout and a similarity or two with Ireland’s.

(What’s Spanish for GUBU again?  H/T Conor Cruise O’Brien and Nomura’s Daragh Quinn). Read more

Is Chinese real estate nearing a tipping point?

China’s property developers — who last year contributed a collective 13 per cent of GDP — seem determined to hang on.  Despite months of falling prices in most cities, completions are powering ahead.

Chinese real estate investment reportedly rose 23.5 per cent in Q1, year-on-year. And yet new construction rose only 0.3 per cent and sales of residential and commercial property fell 14.6 per cent. As Patrick Chovanec points out, despite accounting for the aforementioned 13 per cent of GDP, there was little questioning of the incongruence of these Q1 2012 numbers which showed steeply rising investment in a sector that was actually shrinking in terms of revenue. Read more

Entwined, with Bankia

Starring A. Spanish Banker as the Cookie Monster, bank assets as cookies, and Mario Draghi as the Count:

Both: Eat! Count! Eat! Count! Eat! Count! Read more

Further reading

Elsewhere on Monday,

- China is building 70 new airports. Read more

The 6am Cut London

Spain is considering directly injecting its own government debt into BFA-Bankia to help fund the stricken lender’s €19bn nationalisation, in an attempt to sidestep high bond market rates, reports the FT. The plan involves Madrid issuing Spanish government guaranteed debt to Bankia in return for equity, with the bank then able to deposit the bonds with ECB as collateral for cash.

Newedge is abandoning the Greek stock market. The broker has told clients that it will process only sell orders, and stop extending margin loans for existing positions in Greek securities, according to a memo obtained by the FT. Securities subject to the new restrictions include foreign-listed shares and American depositary receipts for Greek companies. Read more

Overnight markets: Mixed

Asian shares and the euro edged up from lows on Monday as opinion polls showed a lead for Greece’s pro-bailout parties, says Reuters. The MSCI Asia Pacific ex-Japan index was up 0.4% after hitting its lowest level since late December on Friday, and Japan’s Nikkei index was flat. Speculators also were net short on the Australian dollar, having cut their net long positions all month. The Hang Seng swung between profits and losses on reports of falling Chinese industrial profits, and more stimulus pledges from Wen Jiabao, says Bloomberg.

Asian markets
Nikkei 225 up +15.82 (+0.18%) at 8,596
Topix down -0.58 (-0.08%) at 721.53
Hang Seng up +68.22 (+0.36%) at 18,782 Read more

Weekend news catch-up

Weekend headlines from the FT and other UK media:*

From The FT,
-       European leaders should create a vehicle to inject state equity into undercapitalised banks, according to the head of HSBC
-       The former head of fraud and security for digital banking at Lloyds Banking Group, which is 40% owned by the taxpayer, faces a criminal charge for allegedly claiming nearly £2.5m in fake invoices
-       Rexam, the FTSE 100 packaging specialist, is in final-stage negotiations over a sale of its personal care division, in a deal that is estimated to be worth about £350m
-       Oil and commodities prices stabilised following a sell-off during the week triggered by fears of a worsening eurozone crisis. The benchmark Reuters-Jefferies CRB index fell during the week to its lowest level since September 2010, dropping to 280.35
From The Sunday Times,
-       Europe fund to rescue bust banks: Secret plans are being drawn up in Brussels for a European rescue fund that could seize control of struggling banks across the Continent
-       Apple’s £36m bonus for former Dixons Boss: The former Boss of PC World and Currys will receive a $56m (£36m) golden hello from Apple for taking charge of its retail arm
-       Nuclear subsidy ‘illegal’: Britain’s plans for new nuclear power stations have suffered a blow with a warning from Centrica that a subsidy scheme is illegal
-       Cowdery in £1bn bid for Dutch fund Robeco: The insurance tycoon Clive Cowdery is ready to grab an Asset Manager put on the block by Holland’s Rabobank
-       BSkyB mulls mobiles move: BSkyB has held talks with the Owner of Orange and T-Mobile over an audacious assault on Britain’s mobile phone industry
-       Monsoon rains cash on founder: Monsoon Holdings, the Jersey company through which Peter Simon owns the retailer, received £76.2m in dividends for the 12 months to August 2011
-       Watchdog threatens to cap Wonga fees: The City regulator could cap the interest rates charged by controversial short-term loan companies such as Wonga, sources say Read more