Good morning, New York…
FT ALPHAVILLE
The conspiracy channels continue to make a big deal about the backwardation of gold — which is a situation in which gold prices for today are higher than for tomorrow. The thinking is that this must indicate rampant demand for physical gold. In reality, since gold is a highly financialised commodity, the backwardation signal doesn’t actually indicate the bullishness they imply it does. Rather, it suggests something entirely different: that interest rates in conventional money markets are turning increasingly negative. Click through to Izzy’s post for the full explanation and discussion.
The great Aussie bank share price bubble. Neil outlines the bullish and bearish points of view on Australian banks, following a note from analysts at UBS. It seems one would be brave to bet against further share price appreciation. After all, markets can remain irrational longer than you can remain solvent — especially when the world’s biggest central banks are determined to drive down yields on haven assets.
A possible step towards numerical guidance for QE? During the presser following the March FOMC meeting, Ben Bernanke made two comments suggesting that its communications policy regarding asset purchases would shift in the direction of its policy for interest rates. First, in response to a question from the FT’s Robin Harding, Bernanke said that a more-flexible approach to asset purchases would be sensible. Second, in response to a question from the NYT’s Binyamin Appelbaum, Bernanke said that numerical guidance would indeed be more effective than tying purchases to the vague notion of “substantially”. In this post, Cardiff outlines his interpretation of Wednesday’s statement as possibly softening the ground for just such a move.
Ze price stability: David looks some charts from Deutsche’s George Saravelos, who unsurprisingly argues a refi-rate cut by the ECB on Thursday will be fairly insignificant — but that the risk of disinflation in the eurozone, and how the ECB responds to this threat to ‘ze price stability’ matters.
NEWS
The European Central Bank’s governing council was discussing a possible interest rate cut for the eurozone on Thursday, with a growing number of economists predicting action despite doubts over the effectiveness of loosening. Meeting in the Slovakian capital Bratislava for one of its two monthly meetings per year that are held outside Frankfurt, the 23-person governing council is due to announce its rate decision at 12:45 BST. Mario Draghi, ECB president, will hold a press conference at 1:30pm. (Financial Times)
The Chinese renminbi marched to a record high against the US dollar on Thursday, adding to a recent burst of appreciation and spurring talk that Beijing is poised to soon let the currency trade more freely. Over the past three weeks the renminbi has gained 0.6 per cent against the dollar, an unusually fast rise for the tightly controlled Chinese currency and one that has come even as the dollar has been relatively strong. (Financial Times)
The US Federal Reserve is willing to increase its $85bn-a-month of asset purchases as the central bank shifted to a more neutral stance on its next move. In a new line added to its regular statement, the rate-setting Federal Open Market Committee said it could move the rate of asset purchases up as well as down depending on what happens to prices and jobs. The committee had previously hinted that it might reduce its monthly purchases. (Financial Times)
Peter Voser is to step down as chief executive of Royal Dutch Shell next year after four years in the post, in a surprise move that could herald a period of uncertainty at the Anglo-Dutch oil major. The announcement was made as Shell unveiled first-quarter profit of $7.5bn, a 3 per cent increase on a year ago. (Financial Times)
Apple will avoid a potential tax bill of up to $9bn by using the proceeds from its $17bn blockbuster bond issue to pay shareholders rather than bringing back cash from abroad. The technology group would have paid as much as 35 per cent in tax to bring that amount of cash back into the US, according to lawyers and accountants. (Financial Times)
Ad tools boost Facebook: New advertising products intended to help small businesses find customers on Facebook contributed to better than expected revenues for the first quarter, though the social network’s profit fell just short of estimates. Revenues from tools released last year, including ads for mobile app developers to urge Facebook users to download their apps, and “paid posts” which allow small businesses to pay to send status updates to more users, are starting to appear in Facebook’s top line. (Financial Times)
Global tablet shipments rose 142 per cent year-on-year in the first quarter, according to the IDC research company, as consumers increasingly preferred them to PCs. The growth was at the other end of the scale from PC shipments, which slumped 14 per cent in the first quarter, according to earlier IDC figures. (Financial Times)
Google has made a rare incursion into the financial services industry, taking an undisclosed stake in fast-growing online loans company Lending Club. The investment values the company at $1.55bn, according to chief executive Renaud Laplanche, capping a rapid rise that has seen Lending Club emerge as one of the leaders among a new generation of internet-based financial services concerns. (Financial Times)
Transocean plans to pay a rising dividend in future years, its chief executive has said as the offshore drilling contractor attempts to rebuff Carl Icahn, the activist investor. Steve Newman, Transocean’s chief executive, told the Financial Times that the board’s proposed dividend of $2.24 per share, worth about $800m in total, was “sustainable” for the future, and was intended to increase as earnings rose. (Financial Times)
Goldman Sachs is facing sharp criticism over its potential profits for arranging a $3bn bond deal for a Malaysian government fund ahead of Sunday’s national elections. In March, a Malaysian government-controlled fund called 1MDB raised capital in a deal that involved Goldman buying $3bn of bonds for $2.71bn, roughly 90 per cent of their face value, according to documents obtained by the Financial Times. (Financial Times)
A deal that would have seen IBM sell parts of its server business to Chinese computer maker Lenovo has broken down on Tuesday night, according to people familiar with the matter. Talks between the two companies emerged last month, sending shares of Lenovo up 9 per cent. (Financial Times)
Kodak plans to emerge from Chapter 11 bankruptcy proceedings as early as July, as a profitable commercial printing and packaging company with far fewer staff andstripped of the film business that defined it for most of the past 133 years. (Financial Times)
Markets: European stocks are following Asian peers lower as worries about global economic prospects weigh on “risk” assets. Monetary policy attempts to tackle waning growth are in focus as traders await an interest rate decision from the European Central Bank and the market absorbs the latest comments on strategy from the US Federal Reserve. (FT’s Global Market Overview)
