Good morning, New York,
FT ALPHAVILLE
About China’s capacity to absorb capital: Kate looks in more depth at China’s over-investment problem. What’s the missing ingredient that would enable the country to absorb the kinds of capital levels seen in developed economies? Featuring Michael Pettis and Quakers.
BoJ maintains, but Abenomics is still hard: No changes and no explicit reference to watching JGB moves from the Bank of Japan. Oh well. The last set of minutes did suggest that the current BoJ board isn’t keen on trumpeting its own awesomeness says Kate who notes that the weak yen cuts both ways, particularly where energy imports are concerned.
Jamie fatalism: JPMorgan investors were treated to a rendition of “The Way It Is” on the webcast, after hearing shareholders at the bank’s annual meeting vote against splitting the chairman and chief executive roles… Joseph’s post has more.
NEWS
Bank of Japan maintains asset-buying programme: The May monetary policy statement made no mention of recent rises in JGB yields, and said its decision came amid signs of “positive movement” in the economy. (Financial Times)(Statement)
Sony board discusses Daniel Loeb proposal: Shares in the Japanese electronics and entertainment group jumped nearly 6 per cent before Mr Hirai’s comments, after reports surfaced in the Japanese press that the board was considering the plan submitted last week by Daniel Loeb, founder of the US hedge fund Third Point. “Third Point’s proposal involves the way we manage a core business of the Sony Group, so naturally the board will reply after engaging in sufficient debate,” Kazuo Hirai, chief executive, said. (Financial Times)
Taxing Apple: Tim Cook, Apple‘s chief executive, mounted an emphatic and unapologetic defence of the US technology group’s tax practices, as US senators quizzed him over congressional charges that the company avoided billions of dollars in taxes on international profits. “We pay all the taxes we owe, every single dollar. We not only comply with the laws, but we comply with the spirit of the laws,” Mr Cook said. “We don’t depend on tax gimmicks.” (Financial Times)
US prosecutors weigh case for charging SAC: “US authorities are considering filing criminal charges against SAC Capital as part of their investigation into insider trading at the $15bn hedge fund run by Steven Cohen, people familiar with the matter say. A criminal case against the hedge fund is likely to mean it would no longer manage money for outside investors. About 60 per cent of SAC’s assets are owned by Mr Cohen and the company’s employees.” (Kara Scannell and Dan McCrum of the Financial Times)
A follow-up to Kara and Dan’s story in the WSJ: “It is rare for investment firms to be charged criminally under the Racketeer Influenced and Corrupt Organizations Act, commonly known as RICO. Such a step would require approval from top Justice Department officials.” (Wall Street Journal)
Gupta challenges U.S. wiretaps in appeal: Former Goldman Sachs director “Mr. Gupta, in a bid to stay out of prison, is trying to convince a federal appeals court to set aside his conviction or at least grant him a new trial. His lawyers say the trial judge was wrong to allow wiretaps of Raj Rajaratnam’s cellular telephone into the case, including two phone calls in which Mr. Gupta didn’t participate.” (Wall Street Journal)
Japanese trade data disappoints: Exports rose in April by 3.8% compared to a year earlier, the second consecutive month of gains, but fell short of median forecasts of a 5.9% increase. Imports rose at a faster rate, 9.4%, and the trade deficit was Y879.9bn, the biggest since comparable records began in 1979. (Reuters)
Dimon prevails on dual role: Just 32.2% of JP Morgan shareholders voted for a resolution to split the two positions of chairman and chief executive. Investors instead targeted their disapproval of the whale affair at the bank’s independent directors in a vote against the re-election of Ellen Futter, David Cote and James Crown; they received 53.1%, 59.3% and 57.4% votes in favour of their positions, respectively. The bank’s shares jumped 1.4% to a six-year high on news of the Dimon vote. (Wall Street Journal)
“The Senate Judiciary Committee passed a sweeping reworking of immigration laws on Tuesday evening, giving a bipartisan bill its first formal stamp of approval in Congress. After five days reviewing the more than 800 pages of the bill and accepting 100-plus amendments, the committee voted 13-5 to send the legislation to the full Senate, which is expected to take it up in early June.” (Wall Street Journal)
Temasek raises stake in ICBC as Goldman exits. A purchase of ICBC shares yesterday raised Temasek’s stake to 7.04% from 6.71%. The Singaporean state-owned investment company also bought a 10% stake in Markit yesterday. (Bloomberg)
“Fiat Industrial aims to move its tax residency to the UK from Italy after a merger with US business CNH to take advantage of a lighter fiscal regime, according to a regulatory filing. The move is the latest blow to Italy where the new coalition government of Enrico Letta is seeking to staunch an outflow of investment.” (Financial Times)
Italy considers plan for older workers to ‘handoff’ to younger generations: Labor Minister Enrico Giovannini said that he planned to discuss the idea of allowing older workers to reduce their work hours while mentoring younger employees with union leaders, who so far have been strongly supportive. (Wall Street Journal)
Markets: Global stocks are at their highest in nearly five years with investors betting on an equity market “sweet spot” of meek economic growth alongside massive central bank support. Trading is a tad tentative, with the dollar index becalmed and Treasury yields barely changed, as the market waits to hear what Federal Reserve chairman Ben Bernanke might say about his policy trajectory in testimony before Congress later on Wednesday. Gold is up $11 to $1,387 a troy ounce while industrial commodities speak to the demand uncertainty. Copper is adding 1.3 per cent to $3.38 a pound, but Brent crude is easing 60 cents to $103.31 a barrel after the American Petroleum Institute said crude inventories rose, unexpectedly, in the week to May 17. The FTSE All-World index is gaining 0.1 per cent to 250.2, on course for its best close since early June 2008, after the Asia-Pacific region was flat and as the FTSE Eurofirst 300 slips 0.3 per cent from its own cyclical high writes the FT’s Global Markets maester Jamie Chisholm.
