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MS | ANALYSIS West cautious on Gulf sovereign funds plug gap | Corporate worries oil property cooling demand in Gulf
Local sovereign wealth funds helping to fill the gap
Short term losses likely longer term prospects better
By Carolyn Cohn
LONDON July 14 Reuters Western investors have grown
wary about investing in the once booming Gulf leaving markets
there at risk of further short term losses and increasingly
reliant on the region s own sovereign wealth funds
Collapsing property markets and volatile oil prices
have cooled some of the ardour which western investors had shown
towards the Gulf in recent years
But oil inspired sovereign wealth funds in the region have
in some cases grown despite the financial crisis and are
looking to add stimulus to their own markets rather than risk
money overseas analysts say
A lot of old western capital has effectively been
destroyed a lot of new capital is still there said Shanat
Patel global strategist at broker Liberum Capital
A lot more money is going into the Middle East from their
own sovereign wealth funds A lot of money is staying at home
they are much more happy to look at their own markets
For international investors the latest incident to rattle
the market has been corporate debt difficulties at two Saudi
conglomerates Saad Group and Ahmad Hamad Algosaibi Bros
Saudi banks may have between 4 billion and 7 billion in
lending exposure to the conglomerates HSBC said in a note At
least 5 banks in the United Arab Emirates have exposure to Saudi
firms according to banking sources or the banks themselves
These two instances definitely are sobering and are quite
heavy in terms of the magnitude said Amr Seif portfolio
manager for the Middle East and Africa at Investec Asset
Management
It has affected a wide range of banks including developed
banks
FLOWS DOWN
Global flows into Gulf equities have been falling in the
last year and are now at best at the same levels as at the
the beginning of 2007 and in some countries such as the UAE are
far lower according to data from funds tracker EPFR Global
The burst property bubble erratic oil price and corporate
woes have pushed investors away from the region
Daily volume in United Arab Emirates stocks has fallen to
around 80 million a day from around 300 million a few weeks
ago Seif said
Saudi stocks are trading at 10 week lows and have
underperformed this year s dizzying emerging market rally
rising only 12 percent compared with nearly 30 percent gains in
the broader index
Dubai stocks are trading at 6 week lows and have made no
gains at all this year
The combination of falling oil and real estate has been
a major problem for the region said Allan Conway global head
of emerging equities at Schroder Investment Management
In the very near term it s difficult to get too excited
CHANGE OF TACK
Investors looking to make returns will need to wait with
regional capital the main impetus for growth focusing on
longer term projects
There are 1 4 trillion in planned government investment
projects in the Gulf between 2009 and 2015 aimed at
diversifying local economies according to a report from
McKinsey Global Institute
We are cautious to underweight on financials and real
estate we are more positive on companies which have utilities
exposure said Scott Darling a regional equity research
analyst at Nomura in Dubai
We are going to see spending in that utilities area
where there was not sufficient spending in the past
While some sovereign wealth funds have lost value during the
financial crisis and oil is down 60 percent from its record
levels a year ago the Saudi Arabian Monetary Authority
increased its assets to 390 billion in 2008 from 350 billion
in 2007 due to fixed income investment the McKinsey report
said
Investment projects include Saudi Arabia s plans to expand
its petrochemical industry
We like the fact that petrochemicals are big in Saudi
Arabia that s cyclically exposed to the global recovery said
Michael Wang emerging equities strategist at Morgan Stanley
The local capital will help to switch the focus away from
previous hotspots for international investors such as property
I would probably stay away from real estate market sectors
in the Dubai market but rather put funds in energy companies
and domestic demand said Fredrik Nerbrand head of global
investment strategy at HSBC Private Bank
You need to have a timeframe that s more similar to 10
years than one year You are buying into structural risk change
is not going to happen soon
Editing by Ruth Pitchford |
MS | UPDATE 1 OECD countries seen losing 30 mln jobs 2007 2010 | OECD countries to lose about 30 mln jobs 2007 2010
Job cuts putting a lot of pressure everywhere Gurria
Adds OECD comments retail consumer data
BRASILIA July 14 Reuters Developed countries will lose
about 30 million jobs from the end of 2007 through the end of
2010 the Organization for Economic Cooperation and Development
said on Tuesday underscoring concerns the global economy has
yet to recover from its worst recession in at least seven
decades
The job losses were mainly a result of the global financial
crisis and the subsequent economic downturn that has pushed
most developed economies into recession Angel Gurria the
OECD s secretary general said on Tuesday
The massive unemployment numbers that we have talked
about are putting a lot of pressure everywhere Gurria said
at a news conference in Brasilia where the OECD released a
report on Brazil s economy
Labor markets typically lag the recovery in economic output
as employers squeeze more production out of workers through
longer hours before hiring more people
Many economists and government officials expect the global
economy to begin emerging from recession later this year or
early in 2010 while unemployment stays high
The unemployment rate in the United States rose to 9 5
percent in June the highest in 25 years and White House
economists are forecasting it may hit 10 percent in the coming
months
Consumer surveys in the United States and Germany have
shown people are likely to postpone purchases of homes cars
and other durable goods as companies continue to streamline
their headcount
German analyst and investor sentiment dropped in July for
the first time in nine months the Mannheim based ZEW economic
think tank said on Tuesday
U S Commerce Department data on Tuesday showed retail
sales rose more than economists had expected However
excluding autos and gas stations the sales results were
disappointingly weak indicating consumers remained wary of
stepping up discretionary spending despite some signs the
recession may be drawing to a close
Unfortunately employment declines won t end quickly in
the United States wrote Morgan Stanley economists Richard
Berner and David Greenlaw in a report distributed on Monday
Reporting by Ana Nicolaci da Costa and Guillermo
Parra Bernal Writing by Elzio Barreto Editing by Andrea
Ricci |
MS | UK review recommends big changes to bank governance | By Huw Jones
LONDON July 16 Reuters Banks who don t comply with what
will be the toughest remuneration regime in the world face big
trouble the author of a British government sponsored review
said on Thursday
The worst financial crisis since the 1930s forced Britain to
tap 1 3 trillion pounds of taxpayer money to nationalise two
banks Northern Rock and Bradford Bingley arrange a shotgun
wedding of Lloyds and HBOS and take a majority stake in RBS
David Walker a former chairman of Morgan Stanley bank s
international unit published 39 recommendations for changes in
the way banks are run from pay policies to selecting board
members in a bid to apply lessons from the credit crunch
He noted widespread failures in bank governance but rejected
the need for legislation despite critics who warn that when the
boom times return warnings about risk will be drowned out
Any bank which fails to conform with these recommendations
if they are all adopted is going to be digging a big hole for
itself Walker told Reuters
Those who neither comply nor explain are going to have to
go through the wringer with the Financial Services Authority
It s just daft to say this is voluntary You comply or you are
in deep trouble Walker said
The recommendations should be taken in tandem with measures
being taken by the FSA to stop banks betting the shop such as
far higher capital and liquidity requirements Walker said
In relation to remuneration the combination with what the
FSA is proposing gives the UK the toughest regime in the world
Walker said
He recommends that the bank s remuneration committee report
should state if any senior executive has the right or
opportunity to receive enhanced pension benefits
This follows public outrage regarding banks over Fred
Goodwin the former chief executive of RBS who walked away with
a huge pension despite the bank needing a government rescue
Walker said his recommendations give real detail to an area
where global efforts such as the Financial Stability Board
have focused too much on broad brush principles
His recommendations if adopted by the government will also
be given teeth by EU regulation which applies to Britain
The European Union s executive European Commission has
proposed a draft law that would give national regulators like
the FSA powers to fine or raise capital requirements on a bank
whose remuneration policies encourage too much risk taking
It will be up to the UK government how to take the
recommendations forward when they are finalised in November
Walker said they could be included in an existing code on
corporate governance enforced by the Financial Reporting Council
watchdog which operates on a comply or explain basis
NO SLACKERS
Board members and chairman would have to work harder in
future devoting far more time to the job and prove to the FSA
in an interview they have the experience to understand some of
the complex activities banks are involved in Walker said
Non executive board members should spend up to 50 percent
more time on the job or at least 30 to 36 days a year Chairmen
should devote probably not less than two thirds of their time to
the business of the entity
Many boards inadequately understood the type and scale of
risks they were running and failed to hold the executive to high
standards of sustainable performance Walker said
A bank s risk committee should have board level status and
oversee due diligence of major transactions like takeovers and
be able to challenge them
Remuneration committees should also have more power to
scrutinise company wide pay and ensure that at least half of a
bonus should be paid on a long term incentive basis subject to
performance conditions and deferred for up to five years
Bonus schemes contributed to excessive risk taking by
rewarding short term performance And shareholders failed to
exercise proper stewardship Walker added
To help shareholders hold boards and banking executives to
account Walker also recommends they be allowed to agree a
memorandum of understanding on collective action
This aims to overcome the difficulty of institutional
investors having a strong say when individually they hold only
a small percentage of the bank s stock
Reporting by Huw Jones editing by Toby Chopra |
MS | FACTBOX UK bank governance review recommendations | July 16 Reuters A review for the British government has
made 39 recommendations on how banks and other big financial
institutions should be governed in a bid to avoid another credit
crunch which has been partly blamed on poor bank governance
The review was conducted by David Walker a former chairman
of Morgan Stanley International bank and aims to improve the
quality of boards so they challenge risky behaviour by senior
bankers
Walker said no new legislation is needed and that the
recommendations could be included in the existing code on
corporate governance enforced by the Financial Reporting
Council
It will be up to the UK government in whether any
recommendations will be taken forward once they are finalised in
November
The review recommended
BETTER RISK MONITORING
the board of a bank should set up a board risk committee
separately from the audit committee and chaired by a
non executive director
risk committees to have power to scrutinise due diligence
and if necessary block big transactions
the chief risk officer should have a company wide
authority and independence with tenure and remuneration
determined by the board
SCRUTINY OF PAY
more power for remuneration committees to scrutinise
firm wide pay
not less than half of expected variable remuneration
should be on a long term incentive basis with vesting subject
to performance conditions deferred up to five years
increased public disclosure about pay of high paid
executives
chairman of remuneration committee to face re election if
remuneration report gets less than 75 percent approval
the report should disclose in bands the number of
executives whose total pay execeeds the executive board average
total pay
clawbacks should be used as the means to reclaim amounts
in limited circumstances of misstatement and misconduct
operations of foreign banks in Britain should also
disclose pay details of high end executives as well
BETTER BOARD MEMBER SELECTION
non executives to spend up to 50 percent more time on the
job with a minimum expected time commitment of 30 to 36 days
non executives to face tougher scrutiny under Financial
Services Authority FSA authorisation process such as an
interview to ensure they understand a bank s complex
activities
chairman of board to face annual re election and at least
two thirds of his or her time should be devoted to the job
INVOLVING BIG INVESTORS
Financial Reporting Council to sponsor institutional
shareholder code
FSA to monitor conformity and disclosure by fund
managers
institutional shareholders to agree a memorandum of
understanding on collective action
Editing by Toby Chopra |
MS | UPDATE 2 UK review recommends tougher bank governance rules | UK review recommends bank governance overhaul
PM Brown says the recommended changes are needed
Banks says many institutions already making changes on pay
No new legislation to implement recommendations
Adds Myners CBI BBA lawyer comments
By Huw Jones
LONDON July 16 Reuters Banks in Britain who don t
comply with what would be the toughest remuneration regime in
the world face being held to account by their regulators the
author of a UK government sponsored review said on Thursday
The worst financial crisis since the 1930s forced Britain to
tap 1 3 trillion pounds of taxpayer money to nationalise two
banks Northern Rock and Bradford Bingley arrange a shotgun
wedding of Lloyds and HBOS and take a majority stake in RBS
David Walker a former chairman of Morgan Stanley bank s
international unit published 39 recommendations for changes in
the way banks are run from pay policies to selecting board
members in a bid to apply lessons from the credit crunch
He noted widespread failures in bank governance but rejected
the need for legislation despite critics who warn that when the
boom times return warnings about risk will be drowned out
Any bank which fails to conform with these recommendations
if they are all adopted is going to be digging a big hole for
itself Walker told Reuters
Those who neither comply nor explain are going to have to
go through the wringer with the Financial Services Authority
It s just daft to say this is voluntary You comply or you are
in deep trouble Walker said
British Bankers Association Chief Executive Angela Knight
said some banks have made the recommended changes and the next
step was to get similar high standards adopted globally
Walker said the recommendations should be taken in tandem
with measures being taken by the FSA to stop banks betting the
shop such as far higher capital and liquidity requirements
In relation to remuneration the combination with what the
FSA is proposing gives the UK the toughest regime in the world
Walker said
He recommends that the bank s remuneration committee report
should state if any senior executive has the right or
opportunity to receive enhanced pension benefits
This follows public outrage regarding banks over Fred
Goodwin the former chief executive of RBS who walked away with
a huge pension despite the bank needing a government rescue
It will be up to the UK government how to take the
recommendations forward when they are finalised in November and
British Prime Minister Gordon Brown welcomed them
Walker has recommended bonuses and remuneration should be
over a five year period There s got to be far greater
transparency so that the public is aware of what s happening
Brown told parliament on Thursday
The Financial Services Authority will be issuing a revised
code on the standards of remuneration Brown said
Paul Myners a UK Treasury minister said the responsibility
for actions that led to the global crisis ultimately rests with
bank boards and weaknesses identified in the review must be
addressed nationally and globally
The consultation process now needs to look not just at the
proposals but also how to implement and if necessary take
them further including their applicability to non financial
sector firms Myners said
The FSA said the review complements its work
Walker said the recommendations could be included in an
existing code on corporate governance enforced by the Financial
Reporting Council watchdog which operates on a comply or
explain basis
Britain s business lobby the CBI said the recommendations
were sensible but must not distract from the need for regulators
to monitor systemic risk better
The European Union s executive European Commission has also
proposed a draft law that would give national regulators like
the FSA powers to fine or raise capital requirements on a bank
whose remuneration policies encourage too much risk taking
NO SLACKERS
Board members and chairman would have to work harder in
future devoting far more time to the job and prove to the FSA
in an interview they have the experience to understand some of
the complex activities banks are involved in Walker said
Non executive board members should spend up to 50 percent
more time on the job or at least 30 to 36 days a year Chairmen
should devote probably not less than two thirds of their time to
the business of the entity
A bank s risk committee should have board level status and
oversee due diligence of major transactions like takeovers and
be able to challenge them Walker said
Remuneration committees should also have more power to
scrutinise company wide pay and ensure that at least half of a
bonus should be paid on a long term incentive basis subject to
performance conditions and deferred for up to five years
To help shareholders hold boards and banking executives to
account Walker also recommends they be allowed to agree a
memorandum of understanding on collective action but sceptics
said this could be counterproductive
There must be a real concern that the heightened
expectations of shareholders for example being more activist
might lead to an actual or at least perceived dilution of
directors responsibilities and duties said David Berman a
partner at MacFarlanes lawfirm
Reporting by Huw Jones editing by Toby Chopra |
JPM | U S agency to cut mortgage insurance premiums | Reuters The U S Federal Housing Administration will reduce the annual premiums on mortgage insurance on home loans the agency insures by a quarter point on Jan 27 it said on Monday The FHA projected homeowners it insures would save an average of 500 a year with the new premiums The lower premiums will come after mortgage rates recently hit their highest levels in over two years and the FHA s Mutual Mortgage Insurance Fund has been recovering from the hit it took due to claims in the aftermath of the housing bust After four straight years of growth and with sufficient reserves on hand to meet future claims it s time for FHA to pass along some modest savings to working families Housing and Urban Development Secretary Juli n Castro said in a statement The agency which is part of the Department of Housing and Urban Development offers mortgage insurance often to first time home buyers and those with low income or below top notch credit The insurance protects lenders in case of defaults The premium reduction was projected to lower the cost of housing for about 1 million households that are expected to purchase a home or refinance their mortgages using FHA insured financing in the coming year according to HUD The planned cuts will lower FHA insurance premiums to 55 basis points from 80 basis points on mortgages with loan to value ratios of or below 95 Premiums on riskier mortgages will drop to 60 basis points from 85 basis points The move places FHA mortgage insurance premiums basically back to the pre crisis levels of 50 to 55 basis points the statutory floor JPMorgan NYSE JPM analysts wrote in a research note
After the housing crisis the FHA raised its insurance premiums numerous times to replenish the Mutual Mortgage Insurance Fund |
JPM | JPMorgan s Dimon says strong economy will speed interest rate hikes | SAN FRANCISCO Reuters Strength in the United States economy will drive interest rate hikes more quickly than many people expect JPMorgan Chase Co N JPM CEO Jamie Dimon said on Monday
Speaking at his investment bank s annual healthcare conference Dimon also said he anticipates market risk and volatility in 10 year U S Treasuries to increase as rates rise |
JPM | J P Morgan Securities to pay 900 000 for supervision failures CFTC | WASHINGTON Reuters The U S Commodity Futures Trading Commission said on Wednesday it ordered J P Morgan Securities LLC to pay 900 000 to settle charges it had failed to properly supervise employees over fees charged to customers trading on the Chicago Mercantile Exchange
The CFTC said in a statement the company a unit of JPMorgan Chase Co N JPM had failed to implement and maintain adequate systems for reconciling invoices from exchange clearinghouses with the amounts of fees actually charged to its customers from 2010 to 2014
J P Morgan Securities overcharged customers by about 7 8 million the statement said The company discovered the problem in 2014 and reported it to the CFTC the commission said
We have refunded nearly all affected customers and implemented new systems and pricing arrangements to improve the accuracy of the firm s exchange fee procedures and process JPMorgan Chase spokesman Brian Marchiony said in a statement |
C | Citi considering sale of Japan retail banking unit WSJ | Reuters Citigroup Inc N C is considering the sale of its retail banking business in Japan the Wall Street Journal said on Wednesday citing people familiar with the matter
Citigroup is considering a possible auction for the sale the Journal reported
A sale will leave the bank to focus on its corporate banking investment banking and trading business in Japan the report said
The bank has been scaling down its global operations ever since the financial crisis It said in December 2012 it was withdrawing from consumer banking in Pakistan Paraguay Romania Turkey and Uruguay
Citi was not immediately available for comment
Reporting by Avik Das in Bangalore Editing by Saumyadeb Chakrabarty |
C | Citigroup seeks to exit Japanese retail banking source | By Taiga Uranaka TOKYO Reuters Citigroup Inc N C is preparing to sell its Japanese retail banking operations a source with direct knowledge of the matter said on Wednesday as it waves the white flag on a venture plagued by regulatory troubles and anemic lending The company which pioneered 24 hour ATMs in Japan and was the only foreign bank to make a major push into its retail banking sector is throwing in the towel after failing to gain enough scale to justify its costs Citigroup has also signaled a desire to refocus its overseas strategy on growth markets and away from saturated mature markets such as Japan where it has been doing business for more than a century Citi has approached Japan s top three lenders Mitsubishi UFJ Financial Group MUFG T 8306 Mizuho Financial Group T 8411 and Sumitomo Mitsui Financial Group SMFG T 8316 about a sale as well as regional banks said the source who was not authorized to discuss the matter publicly A Citigroup spokesman declined to comment Representatives at MUFG and Mizuho also declined to comment while a representative at SMFG was not immediately available The U S bank will keep corporate and investment banking and trading businesses in Japan the source added Industry officials say it may be difficult to find a buyer for a modest retail banking operation with weak loan demand and falling interest margins and which has had regular run ins with regulators The company has been penalized three times by regulators so there are issues with compliance that would make us cautious a senior financial industry executive said He asked not to be named because of the sensitivity of the matter LAGGING IN LOANS Citigroup had 33 retail branches and 3 6 trillion yen 35 billion in deposits as of end March ranking 30th among 64 top tier regional banks in Japan But its loan book with an outstanding balance of 356 2 billion yen was near the bottom of the list For the latest year to end March it posted a 1 3 billion yen net profit on revenue of 68 3 billion yen Lending has been sluggish in Japan overall as corporations sitting on massive amounts of cash are reluctant to borrow or invest aggressively with domestic growth prospects looking limited while dull wage growth has left households cautious about spending Citibank Japan s deposits are split about evenly between yen and foreign currency denominated funds according to one source close to the bank who was not authorized to speak with the media While it offers domestic mortgages and loans its main appeal to customers has been global services such as local currency withdrawals from overseas ATMs industry officials say Prospects for a sale could be dampened by worries that customers would flee if their deposits changed hands to a Japanese lender and they lost access to Citi s global banking network A source with direct knowledge of Citi s management said the bank may need to offer a sweetener to attract buyers such as allowing customers continued access to overseas banking The bank has also faced persistent compliance problems It was penalized three times by regulators from 2004 to 2011 over inadequate monitoring of transactions under anti money laundering rules and insufficient disclosure of risks in marketing financial products After the latest regulatory action in December 2011 which resulted in a one month suspension of financial product sales the unit tapped former Sumitomo Mitsui Banking Corp executive Kazuya Jono to become Citibank Japan CEO in June 2012 Jono was replaced in June of this year by Peter Eliot CEO of Citigroup Japan Holdings Corp
1 US dollar 102 9300 Japanese yen Additional reporting by Taro Fuse Takahiko Wada and Emi Emoto in Tokyo and David Henry in New York Editing by Edmund Klamann Jan Paschal and Stephen Coates |
C | About 25 percent of Detroit s water and sewer bonds tendered so far | Reuters Just over a quarter of Detroit s 5 2 billion of outstanding water and sewer revenue bonds were returned to the city for repurchase on Wednesday 24 hours before the tender offer was due to expire
Bondholders have until 5 p m EDT 2100 GMT on Thursday to decide whether to accept repurchase prices offered by the city As of 5 p m Wednesday 25 07 percent or nearly 1 3 billion of the senior and second lien bonds were tendered according to tender agent Bondholder Communications Group
Some series of bonds had tender rates of less than 3 percent Others were much higher including 79 percent of 90 6 million of senior lien water bonds sold in 2004
Robert Apfel president of Bondholder Communications said a last minute posting of tenders was expected as brokers and banks working on behalf of their clients typically wait until just before the deadline expires The tender offer was launched on Aug 7
Detroit Emergency Manager Kevyn Orr and the city s Board of Water Commissioners will decide whether enough bonds were ultimately tendered and if sufficient savings can be achieved through a bond refunding to raise money for the tender The water board has scheduled a meeting for Friday
If U S Judge Steven Rhodes who is overseeing Detroit s historic bankruptcy case subsequently signs off on the bond plan the city could either sell up to 5 5 billion of the refunding bonds on the municipal market next week through Citigroup N C or privately place the debt with Citigroup and other financial institutions
Ahead of the tender expiration the city released preliminary sale documents late Tuesday for the possible bond issues
In a report this week Janney Capital Markets said that in some instances the tender price Detroit is offering to existing water and sewer bondholders is well below recent trading levels The bonds are rated at junk levels
Reporting By Karen Pierog Editing by Tom Brown |
C | Citigroup C Banks On Growth Restructure Initiatives | On May 18 we issued an updated research report on Citigroup Inc NYSE C The company exhibits decent fundamentals amid the ongoing issues Notably the New York based bank has recorded positive earnings surprises in the last four quarters with an average of 4 40 We are optimistic about Citigroup s efforts to drive revenue growth and streamline operations Though revenues declined in first quarter 2016 we expect the bank to record significant growth in revenues in the near term with continued economic recovery Citigroup is emphasizing on growth in core businesses through restructuring and streamlining operations internationally This strategy augurs well and we expect such efforts to help augment the company s profitability Further the company continues to optimize its branch network with focus on core urban markets improving digital channels reducing branches along with lowering headcount per branch Notably since the beginning of 2014 the company has closed or sold more than 200 branches and exited around 50 more including the Boston area branches Further the company is continuing to offload underperforming assets from its Citi Holdings unit to boost earnings and focus on core operations Notably Citi Holdings assets declined 44 from the prior year quarter to 73 billion and comprised only 4 of its total assets at the end of first quarter 2016 Despite the strengths we remain cautious owing to several issues faced by Citigroup These include low interest rate environment escalating litigation issues and the prevailing stringent regulatory landscape Moreover shares of this major regional bank have recorded a negative year to date return of 10 1 For 2016 the Zacks Consensus Estimate increased slightly to 4 75 per share over the past 30 days while that for 2017 inched down slightly to 5 44 per share Hence Citigroup currently carries a Zacks Rank 3 Hold Key Picks from the SectorSome better ranked finance stocks include KCG Holdings Inc NYSE C LPL Financial Holdings Inc NASDAQ LPLA and Enterprise Financial Services Corp NYSE C All three companies sport a Zacks Rank 1 Strong Buy Want the latest recommendations from Zacks Investment Research Today you can download 7 Best Stocks for the Next 30 Days |
MS | Energy rally fuels FTSE s early 1 4 pct gain | Commodity prices lift miners energy stocks
Broad based rally as Q3 gets underway
Marks Spencer up on trading news
By Simon Falush
LONDON July 1 Reuters Robust commodity prices boosted
energy and mining stocks which led a broad based rally at the
start of the third quarter lifting Britain s top share index
1 4 percent higher early on Wednesday
Crude rose nearly 2 percent to above 71 per barrel fuelling
a rise in heavyweight energy stocks which added most points to
the index
BP Royal Dutch Shell BG Group Tullow Oil and Cairn Energy
added between 1 3 and 2 3 percent
By 0755 GMT the FTSE 100 was up 60 11 points at 4 309 32
after closing 44 82 points or 1 percent lower on Tuesday at
4 249 21
The index ended up 8 2 percent on the quarter the best such
performance since the final quarter of 2003 and has gained 22 8
percent since touching a six year low on March 9
For a FACTBOX on European stock market performance in the
first half of 2009 double click on
The index s level is little moved since the start of May
however and investors are awaiting more concrete evidence on
the prospects for economic recovery before pushing the market
substantially higher
We ve been in a range for the last six weeks and I don t
expect huge moves people are looking at the famous shape of
recovery whether it will be V W or L shaped said Teun
Draaisma equity strategist at Morgan Stanley
Like energy stocks miners also benefited from firmer raw
materials with metal prices stronger across the board
Rio Tinto Kazakhmys Eurasian Natural Resources Anglo
American Lonmin and BHP Billiton added between 2 1 and 4
percent
RETAILERS RELIEF RALLY
Marks Spencer added 3 7 percent as analysts nudged up
their full year profit forecasts for the iconic high street
retailer after it posted a smaller than expected decline in
first quarter underlying sales
Peer Next also gained up 3 3 percent
Banks were broadly higher as the risk sensitive stocks
responded well to increased investor confidence
Barclays HSBC Standard Chartered Royal Bank of Scotland
and Lloyds Banking Group added 0 5 2 3 percent
Investors will look to the UK June manufacturing sector PMI
report due at 0828 GMT to provide further clues as to the
health of the domestic economy
U S June ISM data will be a focus later in the session
together with May U S pending home sales numbers and the June
ADP National Employment report a precursor to Thursday s
crucial U S jobs report
Man Group was the biggest faller among just a handful of
stocks in the red down 4 8 percent after going ex dividend
Alliance Trust and Compass Group also lost their payout
attractions denting their performance
Editing by Simon Jessop |
MS | ANALYSIS New Shell CEO has toughest task in European business | Shell CEO s top challenge growing robust earnings further
Investors want new generation of projects
Growth beyond 2013 eyed
By Tom Bergin
LONDON July 1 Reuters The new chief executive of Royal
Dutch Shell Plc faces the tallest order in European business
to make his company the continent s top earner this year next
year and well into the next decade
Peter Voser takes over as CEO of Europe s largest company by
market value on Wednesday In recent years Shell has set and
then smashed European records for corporate earnings notching
up net profits of 31 billion last year
A fall in oil prices hit first quarter profits but crude
has since more than doubled to above 70 a barrel leading
analysts to forecast that Shell is likely to top earnings tables
again this year
With a raft of big new projects coming onstream Goldman
Sachs reckons the oil major will have the best cash flow growth
in the oil sector over the next three to five years suggesting
Shell is well placed to out earn other European companies for
some time
However investors are looking for much more from Voser who
until his elevation was Shell s chief financial officer
The 50 year old Swiss who enjoys mountain hiking and
football will be immediately under pressure to start building a
pipeline of new projects that will drive Shell s growth into the
second half of the next decade
We regard visibility around production evolution
post 2013 without imminent new project sanction as low We are
worried that this leaves the investment thesis in stasis
analysts at Citigroup said in a research note
In the past two years Shell has pressed the button on few
big developments Instead the company chose to hold off until
rampant cost inflation in the sector which had put the
profitability of some planned ventures in doubt cooled
A raft of planned projects such as an expansion of its
Athabasca oil sands project in Canada the Sunrise liquefied
natural gas LNG project in the Timor Sea and the Gorgon and
Gladstone LNG projects in Australia now await sanction
However big drops in the costs of building such projects
have failed to materialise and the oil services sector is again
starting to show signs of tightness Martjin Rats oil services
analyst at Morgan Stanley said
Voser now faces the choice of stalling investments for even
longer or proceeding with projects which offer tighter margins
Either way future profits may be at risk
INVESTORS NON PLUSSED
Investors generally welcomed the selection of Voser last
year to replace Jeroen van der Veer
However for some this was more relief than joy
There was a dearth of viable candidates He was the best
but I don t think there was a strong competition Stephen
Thornber fund manager at Threadneedle said
The first major strategic move Voser has fronted was a
restructuring announced last month of Shell s main operating
divisions
This is aimed at cutting costs and ensuring more projects
are delivered on time and on budget
Such plans are usually well received by the market but
Shell s shares fell on the day of the announcement against a
rise in the sector partly because the company did not commit to
any firm targets
Voser who has spent all his career in business and finance
roles at Shell save for a two year stint as CFO of Swiss
engineering group ABB also takes the helm as Shell s reputation
on environmental and human rights issues frays
A lawsuit filed in New York accusing the oil giant of
complicity in the execution of human rights activists in Nigeria
in the 1990s which Shell settled earlier this month renewed
criticism of the company s activities in Nigeria often seen as
the poster child for how oil wealth can damage a country
Meanwhile Shell s investments in Canada s oil sands a
dirty energy intensive activity whereby crude is squeezed from
bitumen soaked soil and a row back from investment in renewable
energy have prompted the ire of environmentalists
ON THE OFFENSIVE
Shell has reacted to the attacks on its green record by
going on the offensive
After being rapped by Dutch and British advertising
watchdogs for making unfounded environmental claims the company
has stopped focussing on green energy in its commercials
Instead it is talking about its efforts and the world s
need to make hydrocarbons greener
Similarly Voser who is also a board member of Swiss bank
UBS is expected to go on the offensive against Shell s
financial challenges
Some oil executives have criticised Voser s lack of
experience in exploration and production traditionally the
powerhouse of an oil company Others say it is his strength
You have to have a clear view of the viability of what
you re going into so you can chose between projects It will be
a great help to him to have a financial background a senior
Shell insider said
Threadneedle s Thornber agreed saying that Shell has often
allowed its engineers too much free reign
The reputation in the industry is that Shell over engineers
solutions They pursue engineering excellence possibly at the
expense of shareholder return A man with a finance background
might make more rational decisions he said
Editing by Sitaraman Shankar |
MS | Xstrata Anglo lifts Goldman D Bank in M A tables | By Quentin Webb
LONDON July 2 Reuters Xstrata s unwanted approach to
rival miner Anglo American led to a late reordering of the
world s top mergers advisers in the first half restoring Anglo
adviser Goldman Sachs to the No 1 spot above Morgan Stanley
Deutsche Bank Lazard and UBS who are also advising on the
suggested stock for stock deal also climbed in the final
first half league tables from Thomson Reuters compared to
preliminary data released last week
The shifts highlight the impact a mandate on a single
mega deal can have on rankings in the prestigious mergers and
acquisitions M A tables and also the continued importance
of mining deals to investment bankers
Overall the final data showed announced M A fell 40 2
percent compared with the same period in 2008 to 941 billion
marking the slowest first half since 2004
Thomson Reuters ranks Xstrata s proposal which Anglo says
lacks strategic merit and has totally unacceptable terms
as the first half s fourth largest deal It classifies it as a
42 5 billion intended deal
That helped Goldman regain first place for announced mergers
and acquisitions M A advice which it held in the first half
of last year as it worked on 343 1 billion of deals Morgan
Stanley not an adviser on the deal slipped to second by deal
value with 331 1 billion of work
Fellow Anglo adviser UBS rose to 8th from 9th in the
preliminary data Among Xstrata s advisers JPMorgan remained in
third place Deutsche Bank gained two places to fourth and
Lazard rose one place to seventh
If a deal is eventually struck despite Anglo s rebuff it
could yield further mandates in M A and equity capital markets
for Xstrata s advisers even though as a stock for stock deal it
would not require debt financing
In a letter to Anglo Xstrata said a combined group would
immediately be able to access equity markets to raise further
capital and could potentially sell non core assets or seek
joint venture partners to raise extra liquidity
Rio Tinto s long running takeover tussle with BHP Billiton
and abortive link up with China s Chinalco involved a slew of
banks Seven of Rio s banks are now working on its 15 billion
rights issue for which Rio is paying about 430 million in
fees
Editing by Jon Loades Carter |
MS | WRAPUP 1 BoE s Miles sees no rapid return to growth | BoE s Miles says does not see fast return to growth
Miles banking sector on life support loan growth weak
Miles and Besley no rapid end to QE
Banks plan to ease credit conditions see low demand BoE
By David Milliken and Fiona Shaikh
LONDON July 2 Reuters New Bank of England policymaker
David Miles warned that any signs of a rapid economic recovery
were likely to prove a false dawn and joined BoE colleague Tim
Besley on Thursday in ruling out tighter monetary policy in the
short term
Miles in his first appearance before legislators since his
appointment to the BoE s Monetary Policy Committee last month
said economic growth was likely to be anaemic and described the
banking system as still being on life support
Besley addressing a financial regulation conference at the
London School of Economics said it was still too early to tell
if the BoE s 125 billion pound 205 billion quantitative
easing programme was working let alone set detailed conditions
for reversing it
Both policymakers stressed the importance of bank lending
returning to normal and received only limited encouragement
from a BoE survey released earlier in the day which showed
banks more willing to lend but pessimistic about demand
ID nL2653322
The banking sector is on life support and the ability of
banks to lend is curtailed Miles told the treasury committee
of Britain s lower house of parliament
So the prospect of a rapid return to growth doesn t seem a
highly probable outcome But there are reasons for thinking the
period of the most rapid declines in output are behind us he
continued
Lawmakers asked him about the likelihood of a sharp
V shaped recovery on which government plans to bring down
Britain s record borrowing are based and Miles warned against
drawing too many conclusions from initial signs that the
downturn may be easing
It may be the case that we get what looks like a very sharp
rebound over the next few quarters One might interpret that as
a V shape but that doesn t really tell you an awful lot about
what the likely path of GDP growth will be
Sustained growth above a trend rate of 2 5 percent was
pretty unlikely over the years to come Miles added
QE UNCERTAINTY
Similarly Besley whose term on the MPC ends in August
said it was too soon to see the effects of quantitative easing
which started in March and has given a major boost to gilts
prices
We will not know for sure whether QE has been directly
effective in supporting nominal demand growth for some time
and a definitive assessment right now would certainly be
premature he said
This also meant it was too early to state under what
conditions the BoE would withdraw quantitative easing which
in any event was likely to be gradual he said
There is no sense in which there is a specific timing
discussion he said when asked about QE and how to get out of
the policy saying that the MPC looked at the data in the same
way that it did about interest rate decisions
In a way I think it s important not to think of this as a
discrete event in a sense that suddenly someone will say We re
in the exit strategy folks I think it will just be that
there will be a series of policy responses that happen at the
time and they will be whatever is considered appropriate
Miles made a broadly similar point saying that the balance
between raising interest rates and selling back gilts would
depend on which instrument was most effective at controlling
inflationary pressures
On regulatory issues Miles formerly chief UK economist
at Morgan Stanley said the BoE needed to play a central role
in future bank supervision though he was circumspect about the
precise institutional structure
He said there needed to be stronger tools to stop the
financial system overheating for example by having variable
capital requirements
I believe we have dramatically overestimated the cost of
having financial firms hold more capital and underestimated the
damage of their not having enough We assumed liquidity would
not be a problem for solvent banks That was a mistake he
said
For highlights of Miles s oral testimony see ID nMILES
For Miles s written submission see
For more on Besley s remarks see ID nLAC003353
Additional reporting by Keith Weir Adrian Croft and Christina
Fincher Editing by Andy Bruce |
MS | Europe stocks lower commods weigh but media rises | FTSEurofirst 300 index down 0 5 percent
Commods fall tracking weaker prices
Media stocks rise after Credit Suisse upgrade
By Joanne Frearson
LONDON July 3 Reuters European shares were down by
midday on Friday with commodity stocks the main drag on the
index as they tracked lower crude and metal prices
By 1030 GMT the pan European FTSEurofirst 300 index of top
shares was down 0 5 percent at 839 02 points after hitting a
one week low of 838 21 points earlier in the session
The U S market was closed on Friday for Independence Day
holiday
Historically July 4 in Europe tends to be a muted session
and we wouldn t expect today s session to be any different
said Joshua Raymond market strategist at City Index
Yesterday was a particularly poor trading day and the
disappointing jobs data in the U S may have convinced anyone
who thought about trading today to stay away he said
Mining stocks took the most points off the index as copper
fell 1 4 percent
Anglo American Antofagasta BHP Billiton Eurasian Natural
Resources Corporation Rio Tinto and Xstrata were 0 8 2 6
percent lower
Energy stocks were on the downside as crude slipped 0 5
percent BG Group BP Royal Dutch Shell and Total were down
0 2 1 1 percent
French utility EDF lost 5 4 percent after Morgan Stanley
downgraded its rating on the stock to equal weight from
overweight while both UBS and Citigroup trimmed their price
target on the stock
BANKS MEDIA STOCKS GAIN
Banks were the biggest risers on the index HSBC Barclays
Deutsche Bank and Banco Santander gained 0 5 1 9 percent
Media stocks were boosted after Credit Suisse upgraded the
sector to overweight from underweight
Professional information providers Reed Elsevier and Wolters
Kluwer rose over 3 percent while Vivendi WPP and Pearson were
0 4 0 9 percent higher
Defensive stocks were in favour with drugmakers
Sanofi Aventis Roche and AstraZeneca up 0 5 1 9 percent
Turning to macro economic data euro zone retail sales fell
further than expected in May dampening hopes an improvement in
consumer spending might ease the recession
On Thursday data showed U S employers shed nearly half a
million jobs in June when the unemployment rate surged to 9 5
percent the highest in nearly 26 years
Payrolls were a wake up call said Jacques Henry analyst
at Louis Capital Markets in Paris
The data showed that the economic recovery remains fragile
and more downbeat data is to be expected particularly on the
jobs front Stocks are ripe for a consolidation period
Across Europe the FTSE 100 index was down 0 2 percent
Germany s DAX was 0 5 percent lower and France s CAC 40 was down
0 5 percent
Additional reporting by Blaise Robinson Editing by Dan Lalor |
MS | UPDATE 3 CNPC eyes 14 5 bln bid for Repsol YPF stake sources | CNPC could pay 14 5 bln for 75 percent of Repsol unit
CNPC Repsol executives in talks sources say
Joint bid by CNPC CNOOC possible analysts say
Repsol shares lag oils sector
Adds analyst quotes background
By Joseph Chaney and Sui Lee Wee
HONG KONG LONDON July 7 Reuters China National
Petroleum Corp CNPC the country s largest oil company could
pay up to 14 5 billion for 75 percent of Spanish oil major
Repsol s Argentine unit YPF sources said on Tuesday
CNPC parent company of top Asian oil and gas firm
PetroChina and Repsol have begun talks sources with knowledge
of the matter told Reuters
The sources not authorised to speak publicly said an offer
from CNPC which in 2007 failed twice to buy all of YPF s
Latin American assets amid wrangling over terms had yet to be
put on paper or formally submitted
China s top offshore oil and gas producer CNOOC India s Oil
and Natural Gas Corporation and Russian companies are also
eyeing YPF newspaper reports said
Repsol ONGC and CNOOC all declined to comment and a CNPC
spokesman said he had no information the deal
Last week Repsol which is running short of reserves but has
been looking to sell YPF for some time said it had several
offers for a stake in the unit but none were firm
Analysts have valued YFP at around 15 17 bln so the around
19 bln implied by the bid CNPC is mulling would offer
shareholders only a modest premium
At 1000 GMT Repsol was trading up 0 6 percent at 16 39
euros underperforming a 2 8 percent gain for the European oil
and gas sector
We don t believe there is likely to be significant value
upside from a deal unless it implies a value well over 17
billion Gordon Gray oil analyst at Collins Stewart said
last week
FUELLING CHINESE GROWTH
Chinese state oil companies have been tasked with securing
energy supplies to fuel a fast growing economy and if the
Repsol deal went ahead it would mark the latest in a string of
foreign takeovers including a 7 2 billion bid for Swiss oil
explorer Addax Petroleum by Sinopec Group
Chinese firms have showed willingness to pay prices for
assets that Western oil companies are not prepared to match and
to invest in locations where political risks might their Western
peers
The country s National Development and Reform Commission
NDRC has historically decided which company can proceed with
deals involving multiple domestic bidders as China does not
want state backed companies bidding up the price of a deal
However CNOOC is reported to be eyeing the remaining 25
percent of YPF and analysts say CNPC and CNOOC could make a
joint bid although a clear timetable remains unclear
Both companies can work together CNPC can gain access to
the onshore exploration rights while CNOOC can gain access to
the offshore assets said Gordon Kwan a Hong Kong based
analyst at Mirae Asset Financial
CNOOC is being represented by JPMorgan while Morgan Stanley
is representing CNPC and Goldman Sachs is advising YPF on the
sale sources told Reuters
AGEING GIANT
YPF has more than 30 000 employees controls over half of
Argentina s refining capacity and nearly 40 percent of the
country s oil output It holds mineral rights to 21 exploration
blocks and 92 production blocks in Argentina according to the
company As of end 2008 YPF owned 1 678 service stations
Repsol which in 1999 bought 85 percent of YPF for 13 4
billion after it paid 2 billion for 15 percent of the firm
has been looking to sell a stake in YPF for some time and has
been considering a public share offer
Analysts at Morgan Stanley cautioned last week that Repsol
running short of reserves might not want to lose control of
YPF and that Argentina s Peronist government might also baulk
at allowing a fresh foreign buyer take it over
However CNPC usually seeks control in its overseas
acquisitions
Last year YPF s output at its ageing fields slipped 4 6
percent to 619 000 barrels of oil equivalent per day according
to media reports
It doesn t matter how old they are said Macquarie analyst
David Johnson The real question is what is the oil worth and
are you buying at a correct price Selling mature oil fields is
normal in the E P industry If they can buy reserves at a good
price it s better than taking the risks of exploring for oil
In February 2008 the Petersen Group run by Argentine
banker Enrique Eskenazi bought 14 9 percent of YPF for roughly
2 2 billion and has an option to buy another 10 percent
CNPC s efforts to buy YPF s Latin American assets in 2007
foundered on disputes over deal structure lack of conviction
about returns and Chinese fears about nationalisations in South
America according to media reports
Additional reporting by Tom Bergin in LONDON Jim Bai in
BEIJING Jesus Aguado and Jason Webb in MADRID and Sumeet
Chatterjee in MUMBAI Editing by John Stonestreet |
JPM | Indonesia bars JPMorgan from next dollar sukuk issuance official | By Hidayat Setiaji and Gayatri Suroyo JAKARTA Reuters Indonesia has barred U S bank JPMorgan Chase Co N JPM from submitting an underwriting proposal for its next issuance of dollar denominated Islamic bonds a finance ministry official said on Monday The government has asked other banks to submit proposals by Thursday for a planned dollar sukuk offering IFR a Thomson Reuters publication reported on Monday The government s exclusion of JPMorgan comes shortly after the Finance Ministry said it was penalizing the U S bank following its issuance of a negative report on Indonesia in November The point is JPMorgan will no longer do business with the government said Suahasil Nazara head of the Finance Ministry s fiscal policy office when asked if JPMorgan could make a proposal for the U S dollar sukuk offering A JPMorgan spokeswoman declined to comment In the report issued after Donald Trump s election as U S president JPMorgan downgraded its Indonesian stocks recommendation to underweight from overweight On Jan 4 Nazara defended the penalizing of JPMorgan saying its research was not credible and not objective RESEARCH RULE COMING Indonesia is planning to issue a rule to ensure primary bond dealers produce only factual research senior government officials said last week A primary bond dealer is a bank or a securities firm appointed by the finance minister that can buy government bonds in auctions and resell them in the secondary market Indonesia had 19 such dealers as of Nov 25 Officials have met with primary dealers to convey the message that they should help the government to maintain stability Nazara said on Monday In the JPMorgan case the Finance Ministry dropped the U S bank s services as a primary dealer for domestic sovereign bonds and as an underwriter for bonds sold to the global market The bank also no longer receives certain transfers of state revenue Before the punishment JPMorgan helped Indonesia to raise at least 11 billion by selling global bonds between 2012 and 2016 according to data from the Finance Ministry and the central bank JPMorgan was part of a syndicate of banks working on Indonesia s sale of 3 billion euros 3 16 billion worth of bonds last June but it was not listed for two more offerings in U S dollar and yen since then In 2015 JPMorgan was one of the lead managers for a dollar sukuk offering for Indonesia that raised 2 billion
Foreigners hold more than 37 percent of Indonesia s sovereign bonds while the local capital market lacks depth and liquidity making the perception of foreign investors particularly important for Southeast Asia s biggest economy |
JPM | Bitcoin exchange operator pleads guilty in U S case tied to JPMorgan hack | By Nate Raymond NEW YORK Reuters A Florida man pleaded guilty on Monday to charges that he conspired to operate an illegal bitcoin exchange which prosecutors said was owned by an Israeli who oversaw a massive scheme to hack companies including JPMorgan Chase Co N JPM Anthony Murgio 33 entered his plea in federal court in Manhattan to three counts including conspiracy to operate an unlicensed money transmitting business and conspiracy to commit bank fraud a month before he was to face trial Under a plea agreement Murgio agreed not to appeal any prison sentence of about 12 1 2 years in prison or less U S District Judge Alison Nathan scheduled his sentencing for June 16 The Tampa Florida resident is one of nine people to face charges following an investigation connected to a data breach that JPMorgan disclosed in 2014 involving records for more than 83 million accounts Prosecutors said Murgio operated Coin mx which without a license exchanged millions of dollars into bitcoin including for victims of ransomware a computer virus that seeks payment often in the virtual currency to unlock data it restricts Prosecutors said Coin mx was operated from 2013 to 2015 through several fronts including one called Collectables Club to trick financial institutions into believing it was a members only group interested in collectables like stamps Coin mx was owned by Israeli citizen Gery Shalon according to prosecutors who say he and Maryland born Joshua Samuel Aaron orchestrated cyber attacks on companies An attack on JPMorgan resulted in the information of more than 100 million people being stolen Prosecutors said the men carried out the cybercrimes to further other schemes with another Israeli Ziv Orenstein including pumping up stock prices with sham promotional emails Murgio who was not accused of engaging in the hacking scheme was tied not only to Shalon but also to Aaron Both men attended Florida State University and in 2008 they formed a business together On his website Murgio called Aaron my friend and said he showed me the ropes to online marketing Aaron was deported from Russia in December and taken into U S custody while Shalon and Orenstein were extradited from Israel in June All three have pleaded not guilty Five other individuals have been charged in connection with Coin mx including Murgio s father Two individuals linked to it are scheduled to face trial on Feb 6
The case is U S v Murgio et al U S District Court Southern District of New York No 15 cr 769 |
C | U S judge reluctantly approves SEC Citigroup 285 million deal | By Joseph Ax NEW YORK Reuters A U S judge on Tuesday reluctantly approved a 285 million fraud settlement between Citigroup Inc N C and the U S Securities and Exchange Commission two months after an appeals court voided his decision to reject it as inadequate
U S District Judge Jed Rakoff said he had little choice but to approve the deal which did not require the bank to admit to any wrongdoing But he said he feared the 2nd U S Circuit Court of Appeals decision would rob such settlements of any meaningful oversight
That court has now fixed the menu leaving this court with nothing but sour grapes he wrote in a brief opinion outlining his disappointment
Rakoff had objected to the SEC s decades old practice of letting some corporate defendants settle allegations without admitting or denying the charges a decision that is credited with altering the public debate over such deals
Last June SEC Chair Mary Jo White a former federal prosecutor adopted a policy of requiring admissions in certain major cases citing the need for more public accountability
The 2nd Circuit in June ruled that Rakoff had abused his discretion in rebuffing the settlement in November 2011 finding he had failed to give enough deference to the regulator
The appeals court said Rakoff was wrong to require the SEC to show the truth of its allegations Such fact finding is left for trials while consent decrees are primarily about pragmatism Circuit Judge Rosemary Pooler wrote for the court
The SEC complaint against Citigroup concerned a 2007 sale of mortgage linked securities debt that caused more than 700 million of investor losses
In his opinion on Tuesday Rakoff characterized the standard set forth by the 2nd Circuit for approving settlements to be very modest and warned that it left judges with little role
This court fears that as a result of the Court of Appeal s decision the settlements reached by governmental regulatory bodies and enforced by the judiciary s contempt powers will in practice be subject to no meaningful oversight whatsoever he said
A spokeswoman for Citigroup declined to comment But SEC Enforcement Division Director Andrew Ceresney said the settlement holds Citigroup accountable deprives the firm of its ill gotten gains and provides 285 million for harmed investors
The appeals court decision was seen among legal experts as a victory for the SEC even as they emphasized the impact Rakoff s ruling had on public opinion and the agency s enforcement policies
The iconoclastic Rakoff has questioned the SEC in the past in 2009 he rejected as too lenient the regulator s original accord with Bank of America Corp over the bank s purchase of Merrill Lynch
In recent years he also has publicly criticized U S prosecutors for failing to hold Wall Street executives accountable for the financial crisis
Under White the SEC has extracted several admissions of wrongdoing including from JPMorgan Chase Co N JPM over its 6 2 billion trading loss in London and from billionaire Philip Falcone over transactions at his hedge fund
In 2012 under White s predecessor Mary Schapiro the SEC decided to stop allowing settling defendants to neither admit nor deny charges when they acknowledge guilt in related U S Department of Justice criminal cases
The case is U S Securities and Exchange Commission v Citigroup Global Markets Inc U S District Court for the Southern District of New York No 11 cv 7387
Reporting by Joseph Ax Additional reporting by Jonathan Stempel Editing by Lisa Von Ahn Dan Grebler and Tom Brown |
C | Argentina bonds stocks firm on possible deal to exit default | By Richard Lough and Jorge Otaola BUENOS AIRES Reuters Argentine bond prices and stocks firmed on Thursday with news that international banks may be close to a deal to buy debt from holdout creditors that would resolve its debt crisis
The creditors are considering an offer from Citigroup N C JP Morgan N JPM HSBC L HSBA and Deutsche Bank DE DBKGn of 80 cents on the dollar for their roughly 1 66 billion of Argentine debt Thomson Reuters IFR reported on Wednesday
Argentina defaulted for the second time in 12 years last week after the government said it could not reach a deal with the holdout creditors New York hedge funds that have been demanding face value on bonds they bought on the cheap after the country s economic crash in 2002
Argentina s Economy Ministry declined to comment but has said previously there was nothing to prevent private parties from reaching an agreement
In New York Thomas Griesa the U S district judge at the center of the bitter legal feud between the two sides said he would hold a hearing on Friday at 3 p m 1900 GMT to address recent public statements by Argentina
In comments late Thursday night President Cristina Fernandez goaded Griesa calling him a district judge who is overriding the sovereignty of a nation
The decisions being made by this district judge don t make any sense at this point she added
Both the dollar denominated Par bonds and Discount bonds rose almost 1 percent while the country s blue chip Merval index MERV traded up 1 34 percent
Gustavo Ber an analyst at the Buenos Aires based financial consultancy Studio Ber said renewed hopes of a deal with international banks were driving Thursday s asset gains
Which banks would ultimately purchase the debt remained unclear a source close to the negotiations told IFR
It could turn out to be only two banks that go in for the final deal with all the jockeying and various simultaneous talks going on said the source close to the situation
JP Morgan Deutsche Bank and Citigroup declined to comment to IFR while HSBC was not immediately available for comment
ACCELERATION
Argentina fell into default after it missed a June 30 interest payment on restructured bonds following a ruling by Griesa that it could not service the performing debt until it had settled its legal battles with the holdouts
Buenos Aires made the 539 million payment to a U S intermediary bank to deliver to bondholders but Griesa blocked an onward transfer
There is no doubt whatsoever that the Republic of Argentina has duly paid the amounts due on the exchanged bonds in the manner required the government said on Wednesday in a legal notice to creditors who took part in 2005 and 2010 bond swaps
The blocked funds belonged exclusively to the bondholders said Argentina which has heavily criticized the judge and labeled him an agent of the New York hedge funds
Now that Argentina is in default the holdouts may have lost leverage If no deal is reached quickly other bondholders might demand advanced full payment of the principal value of their debt a process known as an acceleration
That would potentially leave the funds led by billionaire Paul Singer s Elliott Management Corp and Aurelius Capital Ltd with nothing to show for a years long courtroom fight
The funds paid 48 million for the debt from 2001 to 2008 and would make a 1 600 percent profit if repaid in full Argentina has said The government depicts the holdouts as vultures
Sources told IFR the banks were unwilling to absorb all the holdouts debt and were offering 80 cents on the dollar or roughly 1 32 billion
Brazil s state owned Caixa Economica Federal and development bank BNDES were supporting the talks said a source close to the institutions as they seek to avert contagion across the broader Latin American capital markets
The government on Thursday began proceedings against the United States over its sovereign debt crisis at the International Court of Justice the U N s highest court for disputes between nations the tribunal said
Additional reporting by Joan Magee in New York and Davide Scigliuzzo in London Editing by Grant McCool Steve Orlofsky and Bernard Orr |
C | Telecom Italia in talks to snap up Vivendi s GVT sources | By Pamela Barbaglia and Sophie Sassard LONDON Reuters Telecom Italia MI TLIT is in talks with Vivendi PA VIV to acquire the French media group s Brazilian broadband unit and trump a recent bid from Spanish rival Telefonica MC TEF sources familiar with the situation said
The plan which could be finalised over the next three weeks envisages a counter bid by Telecom Italia for the Brazilian unit GVT followed by an equity swap that would allow Vivendi to acquire a stake in Italy s biggest phone operator said the sources
Telecom Italia s executives are working on the transaction with Citigroup N C Mediobanca MI MDBI and Banco Bradesco SA BBDC4 several sources told Reuters
The news came soon after Telefonica Telecom Italia s biggest individual shareholder for the past six years made an unsolicited 6 7 billion euros bid for GVT earlier this week
Telefonica is working with J P Morgan N JPM on the deal the sources said
The Spanish telco also offered Vivendi the chance to acquire an 8 3 percent stake in Telecom Italia which owns 67 percent of Brazil s second largest mobile firm TIM Participacoes SA TIMP3
Telecom Italia aims to at least match the value of the Telefonica bid for GVT with cash and shares most likely in Telecom Italia but possibly in TIM Participacoes one of the banking sources said
MEDIASET
Vivendi s pay TV arm Canal Plus is also in talks for the purchase of a majority stake in Italian rival Mediaset Premium a subsidiary of Mediaset MI MS some of the sources said The business could ultimately be folded into Telecom Italia as telecom and media services converge the sources said despite Telefonica s agreeing last month to buy 11 percent of Mediaset Premium for 100 million euros
Deutsche Bank is advising Vivendi on Mediaset Premium while Barclays is working with rival Qatari owned bidder Al Jazeera one of the sources said
The ultimate game is the merger between Mediaset and Telecom Italia said one source who added that while such a deal has long been talked about it can now be achieved with Vivendi s impetus
A deal with Vivendi would allow Telecom Italia to break free from Telefonica and strengthen its position in Latin America Telecom Italia had approached Vivendi for a possible purchase of GVT in the past but walked away because of valuation issues a source with direct knowledge of the situation said
Vivendi s chairman Vincent Bollore is already one of Italy s most influential foreign investors thanks to a 9 percent stake in Mediobanca MI MDBI Italy s best known investment bank
Mediobanca which the sources said was advising Telecom Italia on the prospective tie up was also until recently one of Telecom Italia s core shareholders
Earlier on Thursday a Bloomberg report said that Telecom Italia was pursuing an alliance with Vivendi that could see the French group take a significant stake in it in exchange for GVT Telecom Italia could also offer cash or raise shares to fund the deal it said
The Italian company had said on Wednesday it was considering all options in Brazil
Several people familiar with the situation said on Thursday that talks had taken place between Telecom Italia s chief executive Marco Patuano and Bollore before Telefonica made its bid for GVT
Officials at Telecom Italia Vivendi Mediaset and the different banks all declined to comment
Telecom Italia s stock closed up 1 percent at 0 812 euro on Thursday having traded as low as 0 798 euro before the Bloomberg report Vivendi s shares initially rose on the report before falling back to close down 0 9 percent at 19 285 euros while Telefonica closed down 1 4 percent at 11 63 euros
Reporting By Francesco Canepa and Lionel Laurent in London Maya Nikolaeva in Paris and Paola Arosio in Milan Editing by Greg Mahlich and Leslie Adler |
C | Telecom Italia CEO to meet Vivendi s Bollore on GVT bid sources | ROME Reuters The head of Telecom Italia is set to meet Vivendi chairman Vincent Bollore on Wednesday or Thursday to discuss an offer for the French group s Brazilian broadband unit GVT two sources with knowledge of the matter said
Bollore and Telecom Italia CEO Marco Patuano will meet in Paris today or tomorrow to discuss the Telecom Italia offer for GVT though an offer won t be formalised before the Vivendi board meeting on August 28 one of the sources said
A second source said the meeting takes place on Wednesday
Telecom Italia and Vivendi declined to comment
French millionaire Bollore a long standing investor in Italy is a leading shareholder of Mediobanca the influential investment bank that has for long been at the heart of Italy s high finance Mediobanca used to control Telecom Italia along with Telefonica and other financial players
Sources told Reuters last week that Telecom Italia was in talks with Vivendi to buy GVT and beat a 6 7 billion euro 8 9 billion bid from Spanish rival Telefonica which is also Telecom Italia s biggest investor
The sources said the plan which could be finalised over the next three weeks would involve an equity swap to allow Vivendi to acquire a stake in Telecom Italia
Patuano has not ruled out a possible merger between the Italian group s local wireless unit TIM Brasil and GVT but said he will not make any crazy acquisitions in Brazil
The Latin American country is a crucial market for both Telecom Italia and Telefonica and still has growth potential in contrast to relatively saturated European markets
A tie up between TIM Brasil and GVT would create a stronger competitor to Telefonica s local unit Vivo If Telefonica s bid succeeds TIM Brasil s position would be weakened because it would remain the only mobile operator in Brazil without a large broadband business
Italian newspaper Il Messaggero said on Wednesday that Patuano would meet Bollore shortly to discuss an equity and industrial alliance between TIM Brasil and GVT
Telefonica last week made an unexpected 6 7 billion euros bid for GVT in a deal that would allow Vivendi to acquire an 8 3 percent stake in Telecom Italia
Heavily indebted Telecom Italia which is carrying out a series of asset disposals to fund investments may have to launch a capital increase to buy GVT analysts said
Given Telefonica s 6 7 billion euro offer for GVT we believe TI will likely need a sizeable capital increase to fund a competing offer Citigroup said in a note
1 US dollar 0 7488 euro
Reporting by Giselda Vagnoni and Gianluca Semeraro Additional reporting by Stephen Jewkes Editing by Erica Billingham and Pravin Char |
C | Argentina slams U S judge holdouts see no private debt deal | By Hugh Bronstein and Daniel Bases BUENOS AIRES NEW YORK Reuters Prospects for a private sector solution to Argentina s sovereign debt dispute deteriorated on Wednesday after holdout investors said they entertained no realistic offers from bankers while the government dashed hopes it might soon agree to restart talks
The country s peso currency hit a record low on fears that the already years old debt saga would linger on indefinitely
Addressing rumors in the marketplace of offers from big international banks to buy up its position in defaulted debt one lead holdout investor said after many meetings nothing presented made sense for a settlement on bonds dating back to a near 100 billion default in 2002
That engagement has convinced us that there is no realistic prospect of a private solution Aurelius Capital Management said in a statement
Aurelius is run by Mark Brodsky who along with his former firm Elliott Management Corp have waged a decade long battle in the U S courts to collect on the defaulted Argentine debt they have owned and purchased at steep discounts over the last 12 years The holdouts spurned two prior restructurings holding out for better terms
No proposal we received was remotely acceptable The entities making such proposals were not prepared to fund more than a small part if any of the payments they wanted us to accept One proposal was withdrawn before we could even respond And no proposal made by us received a productive response the statement said
Citigroup N C Deutsche Bank DE DBKGn HSBC L HSBA and JP Morgan N JPM offered the holdout hedge funds 40 cents on the dollar for the roughly 1 66 billion of bonds including interest and raised the offer to 50 cents on Monday sources told Thomson Reuters IFR
A second default occurred after Argentina missed a July 30 deadline for coupon payments on bonds restructured in 2005 and 2010 After the deadline passed hopes turned toward proposals drawn up first by Argentina and then by large international banks to work out a solution
By clearing up the default with the holdouts from the 2002 Argentina would be able service its restructured debt
Argentina claims it cannot pay the holdouts on what would be better terms than the investors who exchanged their defaulted bonds under the so called RUFO clause Rights Upon Future Offers
Argentine officials hide behind the RUFO provision but make no effort to seek waivers from it despite being offered them by many of the exchange bondholders Aurelius said
U S District Court Judge Thomas Griesa who has presided over the long running legal battle said on Friday he would issue a contempt order unless Argentina stopped claiming it had met its obligations and was not in default
COMES OUT SWINGING
Argentina came out swinging on Wednesday against Griesa defying the threatened contempt order
Far from backing off Cabinet Chief Jorge Capitanich said Griesa had not grasped the case s complexities and that no new talks had been scheduled with the hedge funds
The proper conditions do not exist to negotiate Capitanich told reporters in Buenos Aires
Argentina s peso weakened more than 1 5 percent on Wednesday to a record low 13 15 per U S dollar in unofficial trade Foreign exchange controls force most Argentines to buy dollars on the black market which is widely seen as a truer rate of exchange than the official rate of 8 2750 per greenback
In 2012 Griesa ordered Argentina to pay the holdout group led by Aurelius and Elliott 1 33 billion plus interest and barred it from repaying the holders of exchanged debt without paying the holdouts too
In June Argentina deposited 539 million into the account of an intermediary bank to make a June 30 coupon payment Griesa ruled the deposit illegal and ordered the money frozen
As a result Argentina effectively missed the payment The International Swaps and Derivatives Association ISDA will hold an auction on Aug 21 to settle Argentina s default swaps Thomson Reuters IFR reported
Holders of the restructured bonds have asked Griesa to allow the intermediary bank to release the money and Capitanich criticized the judge for not acting on those requests
His lack of decision clearly comes from not understanding the process not understanding Argentina s status as a sovereign country Capitanich said
Argentina derides the holdout funds as vultures out to wreck the country s finances in their pursuit of huge profits Opinion polls show most Argentines side firmly with the government
Economy Minister Axel Kicillof on Tuesday posted a drawing on his Facebook page of a beady eyed vulture wearing a shirt with the letters U S A and emblazoned with the U S flag Next to the drawing are written the words greed and cruelty
Over the counter sovereign bonds traded in Buenos Aires fell by an average 1 3 percent on the day
Additional reporting by Davide Scigliuzzo of Thomson Reuters IFR in New York Daniel Bases in New York Sarah Marsh and Walter Bianchi in Buenos Aires Editing by Jonathan Oatis Paul Simao Chizu Nomiyama Peter Galloway and Bernard Orr |
C | Cohen Point72 must face SAC insider trading lawsuit judge | By Jonathan Stempel NEW YORK Reuters A federal judge rejected billionaire investor Steven A Cohen s bid to dismiss lawsuits by Elan Corp and Wyeth shareholders who claimed they lost money because his firm SAC Capital Advisors LP conducted insider trading in the drugmakers stocks
In a decision made public on Thursday U S District Judge Victor Marrero in Manhattan allowed the entire case against Cohen and SAC to go forward apart from claims that investors agreed should be dismissed because they were brought too late
He also rejected dismissal requests by defendants Mathew Martoma a former portfolio manager at SAC s CR Intrinsic unit found guilty in February of insider trading and Sidney Gilman a University of Michigan medical professor
SAC is now called Point72 Asset Management and invests Cohen s fortune from its Stamford Connecticut offices A spokesman Jonathan Gasthalter declined to comment Ethan Wohl a lawyer for the investors declined to comment
The lawsuit stemmed from U S charges that Martoma generated 275 million of illegal gains for SAC by trading on Gilman s confidential tips about an Alzheimer s drug trial before results were released on July 29 2008
Investors claimed to suffer damages by trading in Elan and Wyeth stock and options at the same time as SAC but without the benefit of inside information Elan is now part of Perrigo Co and Wyeth is now part of Pfizer Inc
SAC was also implicated in other insider trading eventually pleading guilty to fraud and paying 1 8 billion in settlements with U S authorities Cohen has not been criminally charged
In seeking to dismiss the investor lawsuit SAC said contemporaneous traders are not harmed by insider trading and that it had already given up illegal gains in its 602 million settlement with the U S Securities and Exchange Commission
But Marrero who delayed approving that pact because it did not require SAC to admit or deny wrongdoing said the settlement did not establish to a scientific truth what SAC should owe
He also said it was too soon to dismiss damages claims over a plunge in Elan s stock price two days after the Alzheimer s drug trial results were released over problems with its multiple sclerosis drug Tysabri
Even if SAC didn t know about the problems Marrero said it was unclear whether the investors had sufficient time after the results were released to avoid more losses by selling shares A lawyer for Martoma could not immediately be reached for comment Marc Mukasey a lawyer for Gilman said We will continue to press forward and defend the civil suit
Martoma faces a Sept 8 sentencing Prosecutors said he deserves more than eight years in prison Gilman was not criminally charged
The cases are Kaplan et al v SAC Capital Advisors LP et al U S District Court Southern District of New York No 12 09350 and Birmingham Retirement and Relief System et al v SAC Capital Advisors LP et al in the same court No 13 02459
Additional reporting by Emily Flitter Editing by Meredith Mazzilli and Chizu Nomiyama |
C | Argentina dubs holdouts an international mafia as deal hopes fade | By Hugh Bronstein and Davide Scigliuzzo BUENOS AIRES Reuters Argentina branded the hedge funds suing the country over their debt holdings an international mafia on Thursday after talks to bring a swift end to its latest default collapsed and sent Argentine bond prices tumbling
A group of international banks had appeared to be nearing a deal to buy a chunk of the debt held by holdout creditors whose legal battle against Argentina tipped Latin America s No 3 economy into default on July 31
But holdout fund Aurelius Capital Ltd said on Wednesday there was no realistic prospect of a private solution dealing a heft blow to market optimism Argentina s second default in little over a decade could be swiftly cured
Argentine bonds extended losses in local over the counter trading The dollar denominated Par bond slumped 4 percent to a bid price of 48 4 while the dollar denominated Discount bond shed 1 7 percent to end at 82 55
Today we are in the hands of an international financial power comprised of small voracious interests that form a real international mafia Argentine Cabinet Chief Jorge Capitanich told reporters
Although Argentine bond prices remained way off prices typical of distressed debt the sharp falls pointed to fading confidence on Wall Street of a quick end to the country s latest debt saga
Talks between Citigroup N C Deutsche Bank DE DBKGn HSBC L HSBA and JP Morgan L JPM appeared to collapse over disagreements over the price the banks would pay and the absence of a guarantee from the government it would honor payments on them sources told Thomson Reuters IFR
ACCELERATION RISK
IFR also reported that owning just 25 million of bonds may be enough to trigger a demand for the accelerated payment of restructured bonds worth up to 30 billion
Creditors representing 25 percent of a bond series nominal value can demand the principal value and interest on a bond series be immediately due a move known as acceleration
The dollar denominated Par series maturing in 2038 on which the sovereign has just 95 3m outstanding has been the focus of investor attention IFR said
Daniel Kerner director of Latin America and Eurasia Group said the acceleration scenario was looking increasingly likely
Argentina s peso fell 0 5 percent on Thursday to hit a new all time low of 13 17 per dollar on the informal market known as the Blue Tight capital controls mean Argentines are often forced to resort to the black market when they cannot get hold of greenbacks through official channels
The country s latest debt crisis stems from its default on nearly 100 billion in sovereign bonds 12 years ago and is blocking its return to the international bond market
Holdout funds led NML Capital Ltd and Aurelius bought Argentine bonds at a discount between 2001 2008 and have pressed their demand for payment of 100 cents on the dollar
The lead attorney for NML Robert Cohen said on Thursday the firm could begin scouring the Nevada desert for Argentine money after a Nevada court on Aug 11 compelled representatives of 123 companies registered in the state to comply with NML s searches
Cohen said the shell companies were allegedly hiding 65 million in embezzled Argentine assets and were just the tip of a very large iceberg
He said NML is owed just under 3 billion by Argentina when taking into account all of the cases it has won against the Latin American nation in the U S courts stemming from the 2002 default
There was no immediate reaction from the Argentine government
Additional reporting by Walter Bianchi and Richard Lough in Buenos Aires and Joan Magee of Thomson Reuters IFR and Daniel Bases in New York Writing by Richard Lough Editing by Bernard Orr |
C | Atlas Crumbles Under Weight Of Italian Banks | On April 12 in one of the easiest financial predictions in history I challenged the notion that a 5 billion slush fund dubbed Atlas could possibly prop up 360 billion of non performing loans in Italian banks
Less than a month later Atlas is already a notable failure
I seek no credit for my call and none is due Failure was a certainty from the start
Instead I question the sanity of anyone who thought such a preposterous scheme could work in the first place
Please consider
A government orchestrated privately backed 4 25bn fund rushed into place last month as investors fretted about Italy s vast pile of bad loans run up during a long recession has not proved the silver bullet Italian bankers and officials had hoped
Italian bank shares plunged again this week alongside a wider fall in banking stocks taking their losses since the start of the year to more than 30 per cent This wiped out hopes of bank bosses that the fund dubbed Atlante or Atlas the mythological titan who held up the sky would swiftly cause a re rating of their stocks
Rattling investors Atlante made its first rescue mission at the weekend taking ownership of scandal hit regional bank Popolare di Vicenza after the failure of its 1 5bn capital increase seen as a bellwether of investor sentiment about Italian banks failed to attract investors
Italian banks are already saddled with the highest proportion of bad loans the most branches per capita and the lowest profitability of any G20 country As their revenues are squeezed by low interest rates and weak economic growth the situation could deteriorate further
Citigroup NYSE C analysts described Italy s banks as fundamentally challenged in a report this week predicting they could require 10bn 30bn of extra provisions to deal with their bad loans
Matteo Renzi Italy s 41 year old reformist prime minister on Wednesday sought to rally markets
Thanks to Atlante Vicenza is saved To the investors I say that finally the market rules in Italy he told reporters in Rome
Vicenza Saved
Others disagree For example If it were me I would ask for my money back said one senior banker
Non Performing Loans
Thanks Atlas
First Step
European regulators including Mario Draghi chairman of the ECB have described Atlante as a first step
Say what
Are we saved or not How many more steps are there
Is one of them a bail in |
MS | UPDATE 2 Chemoil in stake sale talks Glencore tipped sources | Glencore frontrunner to buy 51 pct stake valued at 240
mln
Family advised by UBS stake sale means offer for firm
Chemoil shares up 20 pct on news
Adds Itochu comment details link
By Luke Pachymuthu and Yaw Yan Chong
DUBAI SINGAPORE June 24 Reuters The family of Chemoil
Energy founder Robert Chandran is in talks to sell
its 51 percent interest in the marine fuel supplier with
trading giant Glencore the frontrunner for a stake worth 240
million sources familiar with the deal said on Wednesday
Chemoil s Singapore listed shares rose 20 percent on news
of the talks prompting a regulatory query from the exchange
Glencore International AG the world s biggest commodity
trader is still in negotiations after a bidding process began
in February when it vied with Europe based oil trader Vitol and
Wall Street bank Morgan Stanley one source who was
involved in the process told Reuters
Buying Chemoil would give Glencore the second largest
independent oil trader a valuable marine fuels business in the
United States and a wealth of fuel storage assets in Singapore
Asia and the Middle East strengthening its physical trading
playbook at a time when global storage tanks are at a premium
For a related FACTBOX click ID nSP352924
Two sources familiar with the talks said Vitol was no
longer in the running while three industry sources said
negotiations were now focused on concluding a deal with
Glencore
The value of the bids was not disclosed
It is highly inappropriate for us to comment or speculate
on any of our shareholders activities Chemoil spokeswoman
Karen Escobar told Reuters We have nothing material to
disclose at this time
Morgan Stanley and Glencore declined to comment Vitol was
not available to comment
The Chandran family is being advised by UBS two
other sources familiar with the deal told Reuters
Under Singapore law anyone buying a 30 percent stake in a
company must make an offer for the rest
OFFER ON FOR A YEAR
The family has been looking to sell for at least a year
after founding chairman Chandran was killed in a helicopter
crash in Indonesia in January 2008
Japan s Itochu through Itochu Corp 8001 T and Itochu
Petroleum holds a combined 37 5 percent stake The remaining
11 69 percent of Chemoil is in public hands
When asked about any changes in stake ownership an Itochu
spokesman declined to comment
Itochu Petroleum along with Chemoil and Brazil s Petrobras
now occupies the Helios terminal in Singapore
having taken up tankage for its fuel oil trading business a
month ago
There is synergy in the four markets between Chemoil and
the bidders especially Glencore said another source close to
the companies adding Chemoil s assets in Singapore India and
the Middle East would boost the buyer s trading activities and
profile there
Glencore a major player in the East Asia fuel oil market
has leased three floating storage facilities with a combined
capacity of more than 800 000 cubic metres offshore Malaysia
Having storage capabilities is a major advantage in oil
trading as it allows traders to store their cargoes in a bear
market or impact prices in trading plays
Most major players in the Asian market lease rather than
own commercial storage facilities
It would be a major advantage if a trader owns the
terminal and have full control and access over it allowing a
lot of flexibility to move vessels and cargoes a veteran
fuel oil trader said But of course the player has to be of a
certain size in terms of volume like Glencore
Glencore which may seek a public listing for more
financial leeway but not for a few years does not have a
presence in the Middle East marine fuels market and trades only
refined fuel such as diesel gasoline and naphtha a
petrochemical feedstock
It would make sense that Glencore wants to be a major
presence in the growing Fujairah market another trader said
In the past year or so the market has seen new entrants
including Vitol and Chemoil
Glencore moves large volumes of fuel oil in the United
States and Chemoil s position as the biggest marine fuels
supplier in the ports of Los Angeles and New York would boost
its activities now focused in Latin America and the Panama
Canal
Vitol has 800 000 cu m of leased landed storage facilities
in Singapore and plans to build its own 750 000 cu m terminal
for crude and oil products in neighbouring Malaysia by 2011
It also has 500 000 cu m of fuel oil storage in Fujairah
with its purchase of an 82 000 barrels per day bpd refinery
that was restarted in December after being mothballed for four
years
Morgan Stanley has no presence in Asia s physical fuel oil
market having exited last year after leasing a floating
storage facility and trading from it for one year
Additional reporting by Saeed Azhar Jennifer Tan and Seng Li
Peng in SINGAPORE Michael Flaherty in HONG KONG and James
Topham in TOKYO Editing by Ian Geoghegan and Ramthan Hussain |
MS | Financials commodities boost European shares | FTSEurofirst 300 index up 0 6 percent
Commodity shares track higher crude metals prices
Sanofi tumbles 9 percent on concerns over diabetes drug
For up to the minute market news click on
By Atul Prakash
LONDON June 26 Reuters European shares climbed in
morning trade on Friday after slipping in the previous session
with a rise in crude and metals prices boosting commodity
stocks while financial stocks recovered after recent losses
At 0840 GMT the FTSEurofirst 300 index of top European
shares was up 0 6 percent at 855 65 points after falling 0 9
percent on Thursday The index which slumped 45 percent in
2008 has jumped 32 percent since hitting a lifetime low in
early March
Energy stocks tracked crude oil prices which rose more than
1 percent to trade above 71 a barrel BP Royal Dutch Shell BG
Group Tullow Oil Repsol Total and StatoilHydro added 0 5 3 3
percent
Most people will agree now that we won t revisit the low
point that we have seen this year again any time soon said
Luc Van Hecka chief economist at KBC Securities
But there are still some problems to be resolved in the
financial sector and as long as that is not out of the way in a
convincing manner we could still have intermediate
corrections he said
UBS AG fell 1 percent after the Swiss lender said it planned
to raise about 3 8 billion Swiss francs by selling stock and
expected to post a second quarter net loss
But the banking sector was in a positive territory after
falling in 7 out of 11 previous sessions HSBC Royal Bank of
Scotland BNP Paribas Societe Generale Credit Suisse and
Deutsche Bank gained 1 3 3 8 percent
The Bank of England said British banks looked in better
shape than six months ago but were still vulnerable to economic
shocks
Miners got strength from higher metals prices BHP Billiton
Anglo American Antofagasta Rio Tinto Xstrata and Eurasian
Natural Resources rose 0 4 2 9 percent
Sanofi Aventis shares tumbled 9 percent extending the
previous day s sharp losses while Novo Nordisk lost 2 5
percent on continuing concerns about the safety of Sanofi s
diabetes drug Lantus and modern insulins in general
Morgan Stanley downgraded Sanofi to equal weight from
overweight in the light of a debate among diabetologists over
the potential cancer risk of insulin analogues like Lantus
while JPMorgan cut its rating on Sanofi to neutral from
overweight
Roche gained 0 5 percent as it filed its MabThera cancer
drug for approval in Europe as a first line biologic treatment
for rheumatoid arthritis
Peugeot fell 2 8 percent after Standard Poor s said it may
cut its ratings on the carmaker into junk territory saying weak
demand is likely to worsen the French company s financial
profile
Across Europe Britain s FTSE 100 index Germany s DAX and
France s CAC 40 were up 0 4 0 8 percent
Editing by Dan Lalor |
MS | Sanofi may suffer whatever final Lantus verdict | Fear that damaging safety analysis will be published soon
Potential parallel seen to scare over Glaxo s Avandia
Lantus is key driver for Sanofi as other drugs decline
Sanofi shares fall 7 percent Novo Nordisk down 4 percent
By Ben Hirschler European Pharmaceuticals Correspondent
LONDON June 26 Reuters The history of past drug scares
suggests concerns over the safety of Sanofi Aventis s diabetes
treatment Lantus will hit sales whether or not a suggested link
to cancer proves real
Shares in the French drugmaker sank 7 percent on Friday
extending losses from the previous session on growing concern
that researchers are about to publish a damaging analysis of the
company s modern or analogue insulin drug
Our information is that indeed a study is likely to be
published soon raising the possibility of a link between
Lantus use and a certain cancer type Sanford Bernstein analyst
Tim Anderson said in a research note
We understand this will not come out in a small medical
journal but rather one of the major medical journals and it
will be the first time that such a high profile analysis has
been published linking the drug to cancer in humans
Although nothing is in the public domain yet the widespread
talk is likely to negatively influence both doctors and
patients perceptions and uptake of Lantus
Even if Lantus were cleared of a potentially increased
cancer risk media focus will likely dramatically alter the
growth profile said Andrew Baum of Morgan Stanley
Sanofi is relying on Lantus which many analysts expect to
be its second biggest seller this year to offset a fall in
sales of other products such as Plavix and Lovenox that could
soon face generic competition
It cannot afford for Lantus sales to stall
Sanofi has not commented on future studies about the safety
of the drug but a spokesman reiterated that past data from
trials involving more than 70 000 patients as well as data from
post marketing surveillance showed a good safety profile
AVANDIA AGAIN
The fear is that Sanofi might suffer the same fate as
GlaxoSmithKline in 2007 when safety concerns over its diabetes
drug Avandia saw prescriptions tumble almost 50 percent in the
United States within six months
JP Morgan analyst Alexandra Hauber estimates that a 50
percent reduction in global Lantus sales forecasts from 2010
onwards would cut 2010 13 earnings by between 7 and 13 percent
Most industry analysts expect Lantus to generate sales of
around 4 billion this year and consensus forecasts compiled by
Evaluate Pharma suggest this will rise to 6 4 billion in 2014
making it the world s fifth biggest selling medicine by then
At the moment analysts are holding fire on revising their
forecasts but that could change when any long term safety data
is published
A link between Lantus and cancer does make some sense at a
scientific level according to analysts and the issue could
also affect other insulin analogues such as Novo Nordisk s
Levemir
In fact the theoretical possibility of Lantus being a
mitogenic cancer causing compound has been around for nearly a
decade said Bernstein s Anderson noting that U S Food and
Drug Administration review documents dating back to 2000
mentioned findings of malignancies in rodents
For Denmark s Novo Nordisk whose shares fell nearly 4
percent on Friday the issue is something of a two edged sword
according to Sam Fazeli of Piper Jaffray
Novo could potentially gain from problems at its rival and
it might also benefit from any shift in demand towards its
short acting insulins But there is a risk that users will be
wary of all modern insulins and there may be a more general
switch to older cheaper insulin products
1 7177 Euro
Editing by Jon Loades Carter |
MS | Market Chatter Corporate finance press digest | LONDON June 29 Reuters The following corporate
finance related stories were reported by media on Monday
Anglo American is building its defences against a 41
billion pound 67 74 billion merger approach from Xstrata by
plotting talks about a major Chinese investment the Sunday
Telegraph reported
British mobile phone operator Vodafone Group Plc is
considering a bid for T Mobile UK even though any deal could be
stopped by regulators the Financial Times reported on Monday
Switzerland s UBS is to pay 3 to 5 billion Swiss francs
2 77 4 62 billion in the next two weeks to settle a U S tax
probe into the bank Swiss newspaper Sonntag reported on Sunday
China National Offshore Oil Corp CNOOC and Petrochina
are planning bids for a stake in Canadian oil firm InterOil
Corp s natural gas project that could be worth up to 500
million the South China Morning Post reported on Monday
Microsoft has hired Morgan Stanley to sell Razorfish its
digital agency and French marketing company Publicis Groupe SA
is thought to be a possible bidder the Financial Times said on
Sunday
The potential buyer of General Motors Corp s Hummer
division will begin formal talks with Chinese regulators on
Monday in an effort to win approval for its acquisition The
Wall Street Journal said on Saturday
British train and bus operator National Express Group Plc
has rejected an unsolicited takeover bid from rival FirstGroup
Plc the Financial Times reported on Monday without citing
sources
For deals of the day click on
Compiled by Douwe Miedema Editing by Jon Loades Carter |
JPM | Indonesia tries to assure banks they won t be penalized if research is credible | By Hidayat Setiaji and Eveline Danubrata JAKARTA Reuters Indonesia s finance ministry sought on Wednesday to assure banks and research firms that they will not be sanctioned for their assessment of the country as long as it is credible Indonesia cut its business ties with JPMorgan Chase Co N JPM because its research was not credible and not objective Suahasil Nazara head of the Ministry of Finance s fiscal policy office told reporters Some analysts have said that the decision has raised concern about whether the government would penalize other research providers for reports that are deemed to be negative Nazara dismissed such worries There is no need to be afraid as long as it s credible he said The point is don t worry go ahead with an analysis of Indonesia s economy that is as credible as possible by using the available data and facts In a note dated Nov 13 JPMorgan analysts downgraded their investment recommendation on Indonesia stocks to underweight from overweight citing higher risk premiums for emerging markets after Donald Trump won the U S presidential election Indonesia has dropped JPMorgan s services as a primary dealer for domestic sovereign bonds and as an underwriter for bonds sold to the global markets Nazara said The U S bank is also no longer what Indonesia terms a perception bank The government said in a 2006 decree that perception banks are appointed by the finance minister to receive transfers of state revenue not related to imports including tax onshore excise and non tax revenue JPMorgan is allowed to continue its business in the private sector Nazara said The government assurances are unlikely to dispel the worries
This has made us more cautious although we ll still try our best to safeguard our research independence said a Jakarta based analyst at a foreign bank who declined to be identified |
C | Citi s Banamex regulator clash over who played key role in loan fraud | By Elinor Comlay Alexandra Alper and David Henry MEXICO CITY NEW YORK Reuters Preliminary findings of a probe by Citigroup s Mexican unit Banamex into how it lost more than 500 million in a corporate loan fraud differ markedly from the results of a separate investigation by the Mexican banking regulator Banamex has zeroed in on Jose Ortega a middle manager the bank fired in 2012 as a key person in the fraud involving Mexican oil pipeline maintenance company Oceanografia according to two people familiar with its probe But the Mexican bank regulator Comision Nacional Bancaria y de Valores CNBV has poured scorn on this suggestion and says Ortega probably played only a bit part The real problem was with the bank s institutional failure to have proper controls in place the CNBV says Reuters has learned that Banamex accuses Ortega of changing a manual that employees used when deciding whether to make loans to suppliers to Mexico s state owned oil company Pemex That meant Banamex staff stopped calling Pemex to verify invoices reducing their level of scrutiny of loans to Oceanografia and other suppliers the people familiar with the probe said Because Citigroup has different lending protocols for different types of borrowers employees are expected to follow steps in manuals to safely make loans to clients Ortega who was in charge of lending to companies that supply services to Pemex was the only employee at his level entitled to edit the Pemex manuals the two sources familiar with the bank probe said Reuters couldn t independently verify whether or not Ortega had altered the manuals The bank fired Ortega in 2012 for having an outside business relationship with Oceanografia creating a conflict of interest because it discovered he had received 200 000 from the company s CEO Amado Yanez one of the sources said Reuters could not ascertain what the arrangement was between Ortega and Oceanografia Ortega told investigators at the time that the payments were for his wife a fine art dealer who had sold art and property to Yanez the source said Ortega went to work for Oceanografia as a consultant after being fired by Banamex the source added Ortega could not be reached for comment One lawyer said he has been in touch with Ortega adding that the former Banamex employee has not selected legal representation That lawyer said he passed along Reuters request for comment but Ortega did not respond The name of Ortega s wife could not be determined and Reuters was unable to reach her to seek comment Citigroup s New York based spokesman Mark Costiglio declined to comment Calls to Oceanografia s headquarters rang to an outgoing message Calls to Pemex were not returned REGULATOR CRITICIZES EXECUTIVES Citigroup executives have not accused Ortega of acting alone And it is unclear whether the preliminary findings of the on the ground investigation in Mexico will end up in any Citigroup report on the fraud Citigroup this year has fired about a dozen staff members who either were directly involved or failed to stop the alleged fraud One of the fired employees allegedly spirited away key documents early in the bank s internal probe according to two sources familiar with the matter Citigroup CEO Michael Corbat said in a memo in May that he expected more employees to be disciplined But the people familiar with the Banamex investigation told Reuters the Mexican bank believes the Oceanografia losses would not have been possible if not for the actions that they attribute to Ortega That is not the view of the regulator In a report that Reuters has reviewed the CNBV said its own investigation found that Banamex failed to follow internal protocols that hadn t been changed That failure was the main problem and not material changes to the procedures the 77 page report said The CNBV sent its report to Mexico s attorney general s office They Banamex executives should have been more effective and if they had been they would have found these problems beforehand said Jaime Gonzalez president of the CNBV in an interview with Reuters In the CNBV report Ortega is not accused of wrongdoing He is barely mentioned Think about what a brilliant guy Ortega is Gonzalez said as he questioned the idea that Ortega was some kind of rocket scientist behind the fraud He deceived everyone from Banamex he changed the way of operating and no one realizes He goes to Oceanografia and keeps doing the same thing He is a brilliant guy who should be at NASA Gonzalez joked referring to the U S space agency Gonzalez said the Banamex protocol was changed to allow Oceanografia to borrow against estimates of payments from Pemex instead of being based on invoices approved by the state oil company But the procedure that required Banamex staff to call the state oil giant to check the documents was still in place the problem was employees did not follow it he said Oceanografia collapsed in February around the time that Citigroup said Oceanografia had defrauded Banamex of 400 million a figure that later rose to more than 500 million The Mexican government has taken over Oceanografia s affairs
Oceanografia CEO Yanez was arrested in June on charges of fraud and is currently out on bail awaiting trial A lawyer identified as representing Yanez by Mexican media did not respond to calls from Reuters seeking comment Reporting by Elinor Comlay and Alexandra Alper in Mexico City and David Henry in New York Editing by Dan Wilchins and Martin Howell |
C | Citi to hire 100 bankers in Asia eyes more business from smaller clients | By Lawrence White HONG KONG Reuters Citigroup plans to hire as many as 100 bankers in a renewed push into Asia Pacific commercial banking following in rival HSBC s footsteps with a strategy that focuses on selling smaller corporate clients a wider range of products
Global banks like Citi and HSBC are now concentrating on small to medium sized clients due to a dwindling number of 10 billion plus IPOs from Chinese state owned companies deals which had sustained investment banks in the region over the last decade
The increase in headcount which represents a 10 percent boost for Citi s Asia Pacific commercial banking unit is aimed at offering firms with annual sales of between 10 million and 500 million additional services such as foreign exchange and cash management
This is not about adding hundreds of new clients in the region but winning more wallet share from commercial banking clients who have cross border business by providing them with more loans FX cash and trade products Citi s Asia Pacific commercial banking head Ashish Bajaj said in an interview
He noted that Citi s role as joint global coordinator on Luye Pharma Group Ltd s IPO this month came from a commercial banking relationship with the Chinese pharmaceutical company saying this was an example of the kind of deal the bank is hoping to do more of
Citi also plans to target suppliers to major Asian firms such as China s Lenovo Group Ltd and India s Tata Motors Ltd and build relationships with start ups that have the potential to develop into large companies
Bajaj cited the example of Indian search engine Just Dial Ltd a commercial banking client that had capital of only 1 000 in 1996 but which now has a market value of 1 9 billion after listing last year
Banking revenue from small and medium sized companies in emerging markets is set to grow at a rate of 20 percent per year and could reach over 350 billion by 2015 up from 150 billion in 2010 according to a survey by McKinsey Company
Citi created its commercial banking unit as a separate entity just over two years ago operating in 32 of the more than 100 countries in which the U S bank has a presence and employing around 4 000 staff
A source at Citi says its revenues from commercial banking in the region last year were around 1 billion Bajaj declined to comment on that figure
Although earnings figures are not directly comparable as banks include different businesses in their commercial banking units HSBC s is much larger It had profits before tax for its commercial bank in Asia Pacific of 4 4 billion last year according to its annual report
Citi also said it will begin commercial banking in Vietnam adding around 18 staff to the 600 it has there It will focus on companies from countries such as Korea and Taiwan who have manufacturing businesses in Vietnam
Reporting by Lawrence White Editing by Edwina Gibbs |
C | After China port fraud probe messy legal fight chills metal trade | By Polly Yam and Fayen Wong HONG KONG SHANGHAI Reuters As global banks and trading houses fire off lawsuits over their estimated 900 million exposure to a suspected metal financing fraud in China the tangled legal battle to recoup losses is set to drag on for years and hinder a swift recovery in metal trade
HSBC L HSBA is the latest bank to launch legal action since Chinese authorities started a probe into whether the firm at the center of the allegations Decheng Mining used fake warehouse receipts to obtain multiple loans
Several banks had already ditched their commodity trading divisions due to low returns The scandal centered on the eastern port of Qingdao means those remaining in the commodity financing business will have to consider their future or at least bring in new controls on lending requirements
It has also acted as a warning over murky business practices in China and highlighted the difficulties of navigating the Chinese legal system for foreign companies some of which have since frozen new financing business
In the next six to twelve months the impact would likely be reduced appetite for lending on metal collateral said Daniel Kang Asia head of basic materials equity research at JP Morgan Copper imports may come under pressure in the second half partly related to smaller traders going bankrupt
China s imports of refined copper the most widely used metal in financing fell 8 percent in June from a year earlier to hit a 13 month low as banks reduced lending for metals imports following the Qingdao probe which was first reported at the start of that month Using commodities as collateral to raise finance is common in China and not illegal but duplicating receipts to repeatedly mortgage the full value of an asset is fraud and could leave more than one creditor holding claims to the same collateral
MULTIPLE CLAIMANTS
With multiple claimants cross country jurisdictions involvement of state owned entities and a separate corruption probe into Chen Jihong the chairman of Decheng s parent firm the lawsuits stemming from the alleged fraud are unlikely to be wrapped up soon
The problem is that court judgments attained outside of China are not recognized on the mainland Companies cannot simply take the judgments into China and have Chinese courts freeze assets said William McGovern a lawyer at Kobre Kim who specializes in international commercial disputes
Firms may also try to recoup losses via arbitration as China recognizes international arbitration awards but that process typically takes at least two to three years
The other question is where are the assets said McGovern Obtaining an arbitration award against a fraudulent entity is only valuable if the defendant s assets can be located and seized to satisfy the judgment In the Qingdao case a problem for some Western banks trying to retrieve cash is that their contracts were signed with global warehousing firms acting as collateral managers leaving them no direct way of claiming in Chinese courts
To seek redress some are teaming up with their collateral managers which have local units holding contracts at the port
It s a strategic alliance said a source at a global warehousing company The collateral managers have said to the banks Let s join hands to get the real enemy
Decheng and its parent could not be reached for comment while attempts to contact Chen Jihong by his mobile phone were also unsuccessful It was not clear if he has appointed lawyer to represent him
POTENTIAL LOSSES
The full financial impact of the Qingdao case is unclear but publicly traded banks and trading firms have been forced to disclose potential losses
HSBC Standard Chartered L STAN Citi Standard Bank J SBKJ Mercuria Energy Trading SA and Citic Resources Holdings Ltd HK 1205 have more than 880 million of exposure according to company statements and reports
In addition Chinese media reported on June 18 that Chinese banks have a total exposure of about 16 billion yuan 2 58 billion on loans to Decheng Mining and its related companies
Qingdao Port whose listed Hong Kong unit faces a lawsuit brought by Citic Resources Holdings HK 1205 claiming damages of 108 million declined to comment on the state of the investigation
Chen chairman of Dezheng Resources the parent company of Decheng Mining had been detained by the Communist Party s anti corruption body as part of an unrelated corruption probe linked to the state controlled Western Mining Group
He was only recently transferred to police custody in Qingdao for questioning said a source who works at one of Chen s companies
A native of China s Guangdong province Chen has since taken Singapore citizenship
For Standard Chartered and HSBC which have filed various suits either in Hong Kong or Singapore against Chen and his main overseas financing vehicle Zhong Jun Resources S PTE a resolution could take years lawyers said
Standard Chartered and HSBC declined to comment
Others hoping to lay claim on Dezheng s China assets will have to wait in line behind the Chinese banks as they may be given the first claim on assets lawyers said
You can never fully protect against somebody who is all set out to cheat McGovern said
But you can protect yourself by doing thorough checks on both the individuals and the business and by using enforceable agreements including having credible third party guarantors who can assume the liability
Additional reporting by Melanie Burton in Sydney Editing by Ed Davies and Alex Richardson |
C | Citigroup loses North America head of Treasury and Trade Solutions | NEW YORK Reuters Citigroup Inc N C North America head of Treasury and Trade solutions Andrew Gelb leaves memo
Citigroup Inc N C memo says Gelb will leave Treasury and Trade Solutions at end of this week for outside opportunity
Citigroup Inc N C memo says Michael Fossaceca will be interim head of North America Treasury and Trade Solutions
Reporting by David Henry in New York |
C | Oil Drives Loonie Rally | It s giddy times in Canada with newly installed Prime Minister Justin Trudeau winning rave reviews at home and abroad the nation s economy generating some of the best positive surprises in the world and the domestic stock market soaring again
And yet all foreign exchange traders seem to want to know is what s the latest price for crude oil While Canada has made progress to lessen its dependence on the commodity the local dollar s correlation to oil has climbed hovering near record high levels touched in 2012 according to data compiled by Bloomberg
Though that hasn t been a bad thing as the rebound in crude since mid February has helped push the loonie higher it shows that amid all the optimism ushered by Trudeau and his plans for deficit spending economic stimulus energy prices remain the major driver of Canada s currency The risk for bullish traders that have ridden the more than 15 percent rally in the exchange rate since mid January is that the glut in oil that hasn t gone away causes a reversal in prices
The Canadian dollar is all about oil said Jennifer Vail head of fixed income research in Portland Oregon at U S Bank Wealth Management which oversees about 125 billion Monetary policy growth outlook inflation outlook all of those are certainly a component of the Canadian dollar but the primary driver remains oil
The 120 day correlation between Canada s currency and oil has climbed to 0 67 up from 0 52 four months ago according to data compiled by Bloomberg A reading of 1 implies two markets trade in lockstep
As recently as December the Canadian dollar and crude were the most highly correlated among all major currencies and their country s key commodity export While the loonie s link to the commodity has since been topped by the Russian ruble it s still more closely associated to oil than Mexico s peso or Norway s krone and more than Brazil s real is to soy beans or Australia s dollar to iron ore
No Group of 10 currency has been a better performer than Canada s during the past three months The loonie closed Thursday at C 1 2555 per U S dollar in Toronto up 16 percent from its Jan 19 low for the year Crude oil ended at 47 92 a barrel up 67 percent during the same period
The currency s Sharpe ratio which measures returns adjusted for price swings shows the Canadian dollar had the best results among 16 major currencies tracked by Bloomberg in the span Citigroup NYSE C Economic Surprise Indices show Canada is second best behind Switzerland based on above forecast economic reports The benchmark Standard Poor s TSX Composite Index of Canadian stocks has gained almost 7 percent this year
The loonie rally follows an unprecedented slump in the currency After reaching parity with the U S dollar three years ago it plummeted 25 percent to touch a 13 year low in January as oil prices collapsed It was the longest deepest rout since Canada lifted the currency s peg to the U S dollar in 1971
The slide in oil and global commodity prices proved a powerful drag on the Canadian economy pulling the country into recession and wiping out 40 000 energy jobs It sent the economies of oil producing provinces including Alberta grinding to a halt as energy firms cancelled projects while exposing the decline of Canada s traditional manufacturing base in Ontario and Quebec
The oil shock exposed the lack of diversity within the Canadian economy said Bipan Rai executive director of foreign exchange strategy at Canadian Imperial Bank of Commerce in Toronto Retooling the economy away from its dependence on energy will be challenging given that our manufacturing sector has been hollowed out over the past ten years That means that businesses need stronger reasons to invest back in expanding capacity in Canada
Election Change
Voters seeking change kicked out the Conservative Party that had been in charge since 2006 handing a victory to Trudeau and his Liberal party After sweeping to office in October Trudeau became an advocate for deficit spending to revive economic growth retooling away from oil dependence
Trudeau s initial budget presented on March 22 included employment insurance measures for workers affected by the crude price shock What it didn t include were any major measures to spur investment in the oil and gas sector
The strong linkage to oil prices puts Canada in the company of some of the most volatile economies in the world Among a total 42 countries tracked by Bloomberg the loonie s risk reward return was only bested by the Qatari riyal Bahraini dinar and UAE dirham
Oil s outsized pull creates challenges for Canada s central bank which held its interest rate target unchanged on April 13 partially based on optimism the federal government s added spending would help offset last year s oil induced slump The nation s economy is forecast to grow 1 6 percent this year after contracting during the first half of 2015
While recent data show the underlying resilience of Canadian economy may eventually feed through into higher growth and upward pressure on the loonie for now the currency s advance continues on a path to track oil s recovery
I would continue to expect that the Canadian dollar is heavily influenced by the price of oil Finance Minister Bill Morneau said in a March interview at Bloomberg s New York headquarters That is a relationship that I don t think is likely to go away |
MS | European stocks fall energy firms miners weigh | FTSEurofirst 300 falls 0 7 percent at midday
Energy firms miners drag index lower
UK May retail sales fall unexpectedly
By Harpreet Bhal
LONDON June 18 Reuters European stocks extended losses
to a fifth day at midday on Thursday pressured by falls in
energy firms and miners while defensive tobacco and telecoms
stocks gained on further risk aversion
At 1103 GMT the FTSEurofirst 300 was 0 7 percent lower at
839 68 near the day s low having reversed earlier gains
The index has fallen 4 9 percent over the past week as the
rally which pushed it 30 percent higher than its lifetime low on
March 9 fizzled out
We ve gone back below a few of the major moving averages
That alone will focus the mind on the fact that there is some
scope for profit taking said Mike Lenhoff chief strategist at
Brewin Dolphin Securities
The rebound that we did see from the March lows was really
fast and furious and there wasn t really much pause for breath
while it was underway he said
Oil majors took the most points off the index though the
price of crude remained above 71 a barrel more than double
their level in February
Total BP and Royal Dutch Shell shed between 1 1 and 0 6
percent
Miners were also under pressure with Anglo American
Kazakhmys Rio Tinto and Lonmin falling between 3 1 and 0 6
percent as metals prices turned negative
Xstrata bucked the trend to rise 1 9 percent after an
upgrade by Citi and Morgan Stanley
UBS and Credit Suisse suffered after the Swiss National
Bank said it may have to create rules to split off parts of the
two dominant banks if needed to fend off risks to the economy
UBS pared gains and was up 0 4 percent Credit Suisse was
down 0 6 percent
Defensive telcos perceived as safe bets helped provide
support to the index Vodafone was up 2 3 percent extending
recent gains while British American Tobacco added 1 7 percent
FALLING RETAIL SALES
In a further sign of the deteriorating economic outlook
data on Thursday showed British retail sales fell unexpectedly
in May driven by falls in clothing and footwear
Retail sales numbers for May came in lower than analysts
had expected throwing doubt on any near term economic recovery
Those green shoots aren t looking so green now said Manoj
Ladwa senior trader at ETX Capital in London
HeidelbergCement jumped 16 9 percent after the debt laden
German cement maker secured a 8 7 million euro loan
restructuring plan from its banks giving it until the end of
2011 to sell assets and cut costs to overhaul its strained
finances
Across Europe Britain s FTSE 100 Germany s DAX and
France s CAC 40 were between 0 5 and 0 9 percent lower
Later in the session investors will be looking at U S
weekly jobless claims due at 1230 GMT for signs of the health
of the U S economy
Additional reporting by Blaise Robinson in Paris Editing by
Elaine Hardcastle |
MS | FTSE down 0 8 pct at midday retail sales disappoint | Stores fall after weak May UK retail sales data
Oils miners down as commodity prices dip
Banks lower led down by HSBC
By Jon Hopkins
LONDON June 18 Reuters Britain s leading share index
was down 0 8 percent at midday on Thursday weighed on by falls
in oils miners and banks with weak retail sales numbers
hitting store owners
By 1059 GMT the FTSE 100 index was 35 83 points lower at
4 242 63 having closed down 50 11 points or 1 2 percent in the
previous session
Trading has lacked energy this week with summer holidays
and the end of the quarter approaching there is a fear that
investors will start to shut up shop and walk away said Joshua
Raymond Market Strategist at City Index
Retailers featured among the biggest FTSE 100 fallers with
Home Retail Group shedding 2 4 percent while Next Marks
Spencer and Kingfisher shed between 1 2 and 2 3 percent
British retail sales fell unexpectedly in May as shoppers
tightened their belts after splashing out over the Easter
holidays while government borrowing hit a record high official
data showed on Thursday
The Office for National Statistics said retail sales volumes
fell 0 6 percent on the month against a forecast of a 0 4
percent gain That left them 1 6 percent lower than in the same
month a year ago
Sterling fell to a one week low against the euro on the data
while gilt futures rallied as investors tempered some of their
recent optimism over Britain s economic outlook
Adding to the negative tone for the outlook on the economy
British factory orders fell slightly more than expected in June
as export orders had their biggest drop in more than a decade
the Confederation of British Industry said
Weak energy shares were the biggest drag amongst the blue
chips as oil prices held below the 72 per barrel level with BP
Royal Dutch Shell and BG Group losing 0 4 to 1 8 percent
Miners saw some early gains reversed as metal prices
remained weak amid demand concerns
Rio Tinto was the worst off down 3 2 percent reflecting its
recent rights issues while Vedanta Resources Antofagasta and
Kazakhmys lost 1 4 to 2 2 percent
Xstrata however held firm up 1 2 percent supported by two
broker upgrades Morgan Stanley raised its rating for the miner
to overweight from equal weight while Citigroup upped its
stance to buy from hold
BANKS MIXED
Among the banks part nationalised Lloyds Banking Group
gained 3 percent reflecting index re weighting factors while
Royal Bank of Scotland gained 0 8 percent and Standard Chartered
added 2 2 percent
But overall the sector was lower with Barclays down 1 9
percent and heavyweight HSBC off 1 4 percent
The largest shareholder in HSBC Legal General Investment
Management has offered for the first time public support for
activist investor Eric Knight and urged the bank to answer
questions he has raised over the bank s strategy
U S stock futures pointed to opening falls in New York on
Thursday after a mixed showing with banks in focus after the
U S government s extensive proposals for regulatory reform were
unveiled by President Barack Obama on Wednesday Defensive
stocks were in favour with mobile telecoms group Vodafone in
demand up 2 1 percent while British American Tobacco and
Imperial Tobacco gained 1 7 and 1 3 percent respectively
BAE Systems saw good support up 1 5 percent after UK
newspaper the Daily Mail said that Saudi Arabia was considering
placing an order for a further 72 Typhoon jets worth about 5
billion pounds 8 20 billion
Aircraft engine producer Rolls Royce benefitted as well
adding 1 1 percent
Editing by Greg Mahlich |
MS | FTSE tiptoes higher Vodafone tobacco strong | FTSE 100 ends 0 1 percent higher
Stores fall after weak May UK retail sales data
Oils miners down as commodity prices dip
By Simon Falush
LONDON June 18 Reuters Strength in Vodafone and
defensive tobacco stocks pushed Britain s top share index into
positive ground by close on Thursday but gains were muted and
offset by sliding commodity stocks
The FTSE 100 index closed 2 40 points lower at 4 280 86
having closed down 50 11 points or 1 2 percent the previous
session
Heavyweight mobile phone operator Vodafone was the biggest
positive impact on the index gaining 2 4 percent equivalent to
a 6 points on the index as investors looked to buy into stocks
perceived as safe havens
People are rotating in and out of different sectors and
into stocks like Vodafone but the market is a bit lifeless and
the market is struggling for direction said Tim Rees fund
manager at Insight Investment
The index is down 3 5 percent this year but has gained
23 7 percent since its trough in March although it has
retreated by 3 6 percent so far this week
There s a realisation that the nature of the underlying
problems mean that any recovery will be subdued and drawn out
Rees said
Defensive stocks and banks were also in demand with British
American Tobacco up 1 8 percent Lloyds Banking Group gained 3 3
percent reflecting index re weighting factors while Royal Bank
of Scotland gained 2 7 percent
RETAIL GLOOM
British retail sales fell unexpectedly in May as shoppers
tightened their belts after splashing out over the Easter
holidays while government borrowing hit a record high official
data showed on Thursday
The Office for National Statistics said retail sales volumes
fell 0 6 percent on the month against a forecast of a 0 4
percent gain That left them 1 6 percent lower than in the same
month a year ago
Retailers were mostly weaker with Home Retail Group Next
and Kingfisher shedding between 0 4 and 2 3 percent But Marks
Spencer bucked the trend adding 1 1 percent
Adding to the negative tone for the outlook on the economy
British factory orders fell slightly more than expected in June
as export orders had their biggest drop in more than a decade
the Confederation of British Industry said
Weak energy shares were the biggest drag amongst the blue
chips as oil prices held around 71 per barrel with BP Royal
Dutch Shell and BG Group losing 0 5 to 1 2 percent
Miners saw some early gains reversed as metal prices
remained weak amid demand concerns
Rio Tinto was the worst off down 4 9 percent reflecting its
recent rights issues while Lonmin Antofagasta and Kazakhmys
lost 0 6 to 1 3 percent
Xstrata however held firm up 1 7 percent supported by two
broker upgrades Morgan Stanley raised its rating for the miner
to overweight from equal weight while Citigroup upped its
stance to buy from hold
BAE Systems saw good support up 2 5 percent after UK
newspaper the Daily Mail said that Saudi Arabia was considering
placing an order for a further 72 Typhoon jets worth about 5
billion pounds 8 20 billion
Aircraft engine producer Rolls Royce benefitted as well
adding 1 7 percent
Reporting by Simon Falush Editing by Hans Peters |
MS | UPDATE 1 JC Flowers Fubon eye bid for AIG Taiwan unit sources | Adds details background
By Michael Flaherty and Rachel Lee
HONG KONG TAIPEI June 19 Reuters Several U S private
equity firms and Taiwanese financial groups are showing early
interest in the sale of AIG s Taiwan life insurance unit banking
sources said on Friday in a deal the seller hopes could raise
around 2 billion
U S private equity firm JC Flowers Co and Taiwan s Fubon
Financial were expected to pursue a bid for the unit Nan Shan
Life according to sources close to the process
The official auction for the business began within the last
week sources said with sellside adviser Morgan Stanley
distributing key financial data to potential buyers
U S private equity firm Kohlberg Kravis Roberts Co was
also expected to participate in the auction the sources told
Reuters
JC Flowers did not immediately return a message The fund is
focused on financial sector deals and run by former Goldman Sachs
banker Christopher Flowers KKR declined to comment
Another Taiwanese competitor Cathay Financial was also seen
as possible bidder according to the sources
Executives at Fubon declined comment while Cathay officials
were not immediately available for comment
Sources and local media have said AIG hopes to fetch around
2 billion for Nan Shan
But the sources say that putting a value on the life insurer
is difficult An auction for this kind of business is tough to
price given the way insurance companies are structured
Life insurance policies are the liabilities with commitments
to pay out later and the premiums are the assets But returns on
each side can vary
There are lots of moving pieces Unless you have a very
detailed view of the assets and liabilities it s educated
guessing said a source involved with the deal
AIG had put Nan Shan up for sale earlier this year along with
other Asian divisions but the processes were temporarily pulled
after the insurer and U S government hammered out new aid
terms
A source at one Taiwan bank said it declined to participate
in the previous auction after AIG asked for over T 60 billion
1 82 billion for Nanshan a price many considered too high
Dutch financial group ING Groep sold its Taiwan business last
October to Fubon for 600 million making it the first foreign
insurer to leave Taiwan s market as it aims to shore up its
capital needs at home in the grip of the global financial crisis
Britain s Prudential followed suit disposing of its Taiwan
operation to Taipei based China Life last month to meet capital
needs at home
Reporting by Michael Flaherty and Rachel Lee Editing by
Jacqueline Wong and Chris Lewis |
MS | REFILE FTSE tiptoes higher Vodafone tobacco strong | Refiles Thursday s report to make clear in the second
paragraph that FTSE closed up not down
FTSE 100 ends 0 1 percent higher
Stores fall after weak May UK retail sales data
Oils miners down as commodity prices dip
By Simon Falush
LONDON June 18 Reuters Strength in Vodafone and
defensive tobacco stocks pushed Britain s top share index into
positive ground by close on Thursday but gains were muted and
offset by sliding commodity stocks
The FTSE 100 index closed 2 40 points higher at 4 280 86
having closed down 50 11 points or 1 2 percent the previous
session
Heavyweight mobile phone operator Vodafone was the biggest
positive impact on the index gaining 2 4 percent equivalent to
a 6 points on the index as investors looked to buy into stocks
perceived as safe havens
People are rotating in and out of different sectors and
into stocks like Vodafone but the market is a bit lifeless and
the market is struggling for direction said Tim Rees fund
manager at Insight Investment
The index is down 3 5 percent this year but has gained
23 7 percent since its trough in March although it has
retreated by 3 6 percent so far this week
There s a realisation that the nature of the underlying
problems mean that any recovery will be subdued and drawn out
Rees said
Defensive stocks and banks were also in demand with British
American Tobacco up 1 8 percent Lloyds Banking Group gained 3 3
percent reflecting index re weighting factors while Royal Bank
of Scotland gained 2 7 percent
RETAIL GLOOM
British retail sales fell unexpectedly in May as shoppers
tightened their belts after splashing out over the Easter
holidays while government borrowing hit a record high official
data showed on Thursday
The Office for National Statistics said retail sales volumes
fell 0 6 percent on the month against a forecast of a 0 4
percent gain That left them 1 6 percent lower than in the same
month a year ago
Retailers were mostly weaker with Home Retail Group Next
and Kingfisher shedding between 0 4 and 2 3 percent But Marks
Spencer bucked the trend adding 1 1 percent
Adding to the negative tone for the outlook on the economy
British factory orders fell slightly more than expected in June
as export orders had their biggest drop in more than a decade
the Confederation of British Industry said
Weak energy shares were the biggest drag amongst the blue
chips as oil prices held around 71 per barrel with BP Royal
Dutch Shell and BG Group losing 0 5 to 1 2 percent
Miners saw some early gains reversed as metal prices
remained weak amid demand concerns
Rio Tinto was the worst off down 4 9 percent reflecting its
recent rights issues while Lonmin Antofagasta and Kazakhmys
lost 0 6 to 1 3 percent
Xstrata however held firm up 1 7 percent supported by two
broker upgrades Morgan Stanley raised its rating for the miner
to overweight from equal weight while Citigroup upped its
stance to buy from hold
BAE Systems saw good support up 2 5 percent after UK
newspaper the Daily Mail said that Saudi Arabia was considering
placing an order for a further 72 Typhoon jets worth about 5
billion pounds 8 20 billion
Aircraft engine producer Rolls Royce benefitted as well
adding 1 7 percent
Reporting by Simon Falush Editing by Hans Peters |
MS | Banks commodities lift European shares 1 3 pct | FTSEurofirst 300 rises 1 3 percent but down for the week
Banks commodity shares gain
Volkswagen Porsche fall
By Dominic Lau
LONDON June 19 Reuters European shares rose on Friday
on prospects that the global economic recovery was still on track
following recent improving economic data with banks and
commodity stocks leading the gainers
The FTSEurofirst 300 index of top European companies closed
1 3 percent higher at 861 63 points on a triple witching day
after rising 0 6 percent on Thursday to snap a four session
losing run
Triple witching is the expiry of stock index futures stock
index options and single stock options
The index however lost 2 7 percent this week the second
weekly loss since early March which was the start of current
rally that has seen the pan European benchmark up 33 5 percent
from the lifetime low hit on March 9
The third quarter when we start seeing the earnings coming
through and the corporate statements that come with it will be
the most interesting time said Philip Lawlor chief portfolio
strategist at Nomura
Lawlor said any indication from major companies that things
were not as bad as they had thought or order books were starting
to firm up would send the market higher
Banks were among the top gainers with Barclays Banco
Santander Standard Chartered BBVA Credit Agricole and Societe
Generale up between 1 2 and 5 percent
European Union leaders agreed more steps to avert a repeat
of the banking crisis that has sapped the world economy and the
International Monetary Fund said 2010 might deliver stronger
growth than earlier forecast
Morgan Stanley downgraded its euro zone growth forecast for
2009 to minus 4 4 percent from minus 3 3 percent but said it was
starting to see upside risk building on its 2010 forecast of 0 5
percent growth
Insurers were also higher helped by a positive sector note
from Deutsche bank The broker upgraded price targets for Aviva
and AXA which gained 5 8 percent and 1 1 percent
respectively
Index heavyweight oil producers were in demand buoyed by
firmer crude prices BP Royal Dutch Shell Total Repsol and BG
Group put on 0 6 percent to 3 8 percent
Firmer metal prices also lifted mining shares with Xstrata
Vedanta Resources BHP Billiton Fresnillo Lonmin and Anglo
American rising 2 percent to 5 6 percent
Across Europe Britain s FTSE 100 rose 1 5 percent
Germany s DAX was flat and France s CAC 40 advanced 0 9 percent
Volumes on the FTSEurofirst 300 were nearly 140 percent of
its 90 day average daily volume
VOLKSWAGEN PORSCHE DOWN
Porsche was down 1 4 percent after the car maker said big
gains on derivatives bets linked to Volkswagen shares offset a
decline in nine month earnings at its core sports car business
Volkswagen ordinary shares shed 3 percent
Within the auto sector Daimler slipped 2 7 percent and BMW
lost 1 5 percent
Telenor dropped 4 percent after Russia s bailiffs service
said it had passed an order to auction off Telenor s shares in
mobile firm Vimpelcom to cover a 1 7 billion fine for holding
back Vimpelcom s entry into Ukraine
Editing by Sue Thomas |
MS | UPDATE 2 NAB eyes wealth mgt growth with 660 mln Aviva buy | To buy Aviva s Australia businesses for A 825 mln
Sees annual pre tax synergies of A 70 million
Price looks OK synergies may be unrealistic analyst
NAB shares rise 1 4 pct beating broader market
Adds details
By Denny Thomas
SYDNEY June 22 Reuters National Australia Bank Ltd
will pay 660 million for most of British insurer
Aviva Plc s Australian businesses to become the
country s dominant investment platform provider and insurance
underwriter
NAB the country s biggest lender pipped AMP Ltd
and others to clinch the deal its first acquisition under
new CEO Cameron Clyne
NAB which has identified wealth management insurance and
its advisory business as key growth areas said on Monday the
purchase would dent its Tier 1 capital by about 15 basis
points but forecast A 70 million in annual pre tax savings
Aviva the world s fifth biggest insurer joins a growing
list of global companies exiting Australia to focus on their
domestic markets in the grip of a global financial crisis
A sale could help Aviva ease worries about its capital
position which has been a cause of investor concern after the
group left its 2008 dividend unchanged in March ID nLR64522
The price they paid looks OK but I don t think their
synergy estimates are realistic said Chris Halls analyst
with Argo Investments Ltd which owns A 110 million worth of
NAB stock
NAB shares were up 0 9 percent at A 22 30 by 0131 GMT
while the benchmark share index was up 0 4 percent
NAB s move comes at a time when the Australian government
is taking a hard look at the fee structure in financial advice
industry
The fees are heading down and the whole profitability of
platforms becomes more under pressure What that means is that
you need scale That s the strategic rationale This is a
scale cost savings play in the existing business line Halls
added
The deal would lift NAB s earnings from wealth management
to about 10 percent of the group s total from about 7 percent
now Halls estimated noting Commonwealth Bank of Australia Ltd
CBA earns about 14 percent of its profit from wealth
management
Australian lenders have largely dodged the global financial
crisis and are better placed to grow their businesses with
their focus on domestic markets In contrast some big U S and
European banks have left Australia to better focus elsewhere
Australia and New Zealand Banking Group Ltd is in
talks to buy the Asian business of Royal Bank of Scotland
Last year British lender HBOS Plc sold its
Australian unit to CBA
Aviva s Australian operations were non core and contributed
just 2 6 percent to 2008 group profit
NAB said the acquisition which is subject to regulatory
approvals and should complete in the fourth quarter would add
about A 12 billion to the bank s funds under management and
complement its MLC wealth management business
Aviva had appointed Morgan Stanley and JP Morgan to advise
on the sale
1 A 1 25
Editing by James Thornhill Ian Geoghegan |
JPM | Swiss watchdog fines banks almost 100 million over rate cartels | By Joshua Franklin ZURICH Reuters The Swiss Competition Commission COMCO fined several European and U S banks almost 100 million Swiss francs 97 3 million over interest rate cartels the latest punishment dished out in connection with rate rigging scandals COMCO began its investigation in December 2012 after Barclays LON BARC Plc became the first bank to settle allegations it had attempted to manipulate the London Interbank Offered Rate LIBOR paying a 450 million fine to U S and UK authorities The COMCO penalties announced on Wednesday the largest of which was a 33 9 million franc fine for JPMorgan Chase Co NYSE JPM are relatively small compared to other sanctions doled out in rate rigging cases But they are a further sign of the collusion which took place in the setting of interest rate derivatives used by banks and companies to manage the risk of interest rates fluctuations COMCO said several banks had participated in cartels over Swiss franc LIBOR the bid ask spread on Swiss franc interest rate derivatives Yen LIBOR Euroyen TIBOR and EURIBOR The JPMorgan fine came after COMCO concluded it operated a bilateral cartel with Royal Bank of Scotland LON RBS with the aim of influencing the Swiss franc LIBOR benchmark between March 2008 and July 2009 COMCO said in a statement RBS received full immunity for revealing the existence of the cartel to the COMCO Barclays was fined 29 8 million francs for participating in a cartel in euro interest rate derivatives COMCO said Proceeding are ongoing against BNP Paribas PA BNPP Credit Agricole PA CAGR HSBC JPMorgan and Rabobank over the euro interest rate cartel COMCO said For full information on the COMCO decisions see
1 1 0273 Swiss francs |
JPM | Door closing on ultra long euro zone government borrowing | By John Geddie and Abhinav Ramnarayan
LONDON Reuters A once in a lifetime opportunity for euro zone governments to borrow for half a century or more at rock bottom interest rates might be coming to an end
A chorus of state debt office chiefs bank dealers and investors are warning that sharp rises in long term bond yields in recent months could make it hard for countries to repeat the unprecedented volume of 50 70 and 100 year debt sold in 2016
The era of ultra low rates has been a boon for euro zone governments allowing them to fund their budget deficits remarkably cheaply since the global financial crisis a number have now locked in funds for very long periods on top of the more traditional 10 to 30 year maturities
But this golden moment for governments hasn t necessarily extended to investors especially since Donald Trump s U S election victory prompted a bond market sell off
Not only are some funds still nursing around 10 percent losses on some of their long bond investments but the demand and the financial logic behind these sales may be waning
Even Belgium which said in its 2017 funding plan that it was exploring the possibility of launching a new very long term benchmark seems unsure
Next year it might be more difficult to do something in the longer end given the possible immediate gain that an investor can make is not foreseeable said Anne Leclercq head of the Belgian debt office which manages the country s bond issuance
Belgium launched a multi billion euro 50 year bond in 2016 as did Spain Italy and France Austria issued a 70 year bond in October and has started the legislative process to permit issuance of up to 100 years to match smaller private placements sold by Ireland and Belgium in 2016
But for the investors who bought those bonds from pension schemes to hedge funds the results have been mixed
Current trading levels on the Austrian and Italian debt suggest around a 10 percent loss while France s bond has returned around 1 percent and Belgium and Spain s offer an 8 and 10 percent profit respectively according to Reuters data
All have shed value since Trump s presidential victory in November which set off the drop in bond prices on expectations of higher growth and inflation in the world s largest economy Those losses deepened after the European Central Bank this month scaled back the pace of its planned bond purchases under its program of monetary stimulus
The yield on Europe s benchmark German 30 year bond hit an 11 month high after the ECB meeting up nearly half a percentage point from before the U S election
Some analysts say the fact that some of these bonds are still trading at a profit means more deals could come early next year at least until the focus shifts to the possibility of further reductions in the ECB s bond buying program due to expire next December
If you want to do it do it in the first half of next year ING strategist Martin van Vliet said In the second half the tapering talk will revive and the door will be nearly fully closed by then
For borrowers the rationale for ultra long issuance could fade quickly as rates rise Already some analysts have questioned the cost of raising this debt saying it would be cheaper for a government to issue for example 30 year bonds and then return to the market when they mature
STEPPING BACK
A broad range of investors have poured money into ultra long bonds in the past year hoping they would offer better returns than the record low rates on more conventional maturities Asset managers joined the pension and insurance funds which traditionally buy long dated bonds to match their liabilities
Then there were the hedge funds looking for a quick buck on these bonds that are vulnerable especially at very low yields to sharp price swings and investors who bought them to hedge against the risk of a Japan style decade of deflation
But bankers who sold these landmark deals told Reuters on condition of anonymity that demand may be drying up as interest rates generally start to rise
The fact that rates are higher reduces the needs for some real money investors for these products They were forced to go longer to get yield one banker said Conditions should be less conducive for long dated issuance now
JPMorgan NYSE JPM Asset Management has already cut its exposure to ultra long debt and for the first time in two years has a bias towards shorter dated bonds
We would be cautious about those bonds if we are in an environment where yields are going higher those are the types of bonds that are particularly sensitive its chief investment officer for fixed income Nick Gartside said
The world s biggest asset manager BlackRock while saying it would not rule out buying ultra long debt is also cautious about what its head of global bonds Scott Thiel called the double whammy of very low yields and longer duration
Countries are doing the right thing by issuing long dated bonds when there s a lower level of interest rates said Thiel But when you get to a very long dated bond the return is currently so low you have to be careful
For a graphic on long bond performance click |
JPM | Monte dei Paschi board meets over state aid request | By Silvia Aloisi and Giuseppe Fonte MILAN Reuters The board of Monte dei Paschi di Siena MI BMPS is expected to approve a request for state aid when it meets later on Thursday after Italy s third biggest bank raised less than half of the 5 billion euros 5 2 billion it needs by the end of the year Parliament on Wednesday authorized the Rome government to borrow up to an extra 20 billion euros to prop up failing banks starting with the Tuscan lender that for years has been at the forefront of Italy s banking woes In an effort to avoid being wound down because of a huge bad loan pile Monte dei Paschi has managed to raise 2 billion euros in capital by asking junior bondholders to convert their debt into equity However a share offer that ended at 1300 GMT on Thursday has failed to attract demand partly due to rising political risks in Italy after a Dec 4 referendum unseated the reformist government of Prime Minister Matteo Renzi Political sources said new Prime Minister Paolo Gentiloni is ready to call a cabinet meeting late on Thursday or early Friday to approve a decree authorizing state aid to the bank the world s oldest still in business Italian financial newspaper Il Sole 24 Ore said the bailout plan could take two to three months to be arranged starting with a government guarantee of Monte dei Paschi s own borrowings to ensure it does not run out of cash The bank has been bleeding deposits heavily and on Wednesday it said its liquidity could run out after four months Only days earlier it had estimated it would last for 11 months Monte dei Paschi s failure would shake the foundations of Italy s banking industry the euro zone s fourth largest and home to a third of the bloc s bad debts But also a state bailout carries risks due to EU rules that require private investors to suffer losses before taxpayer funds can be tapped a politically explosive issue given 40 000 retail investors hold bonds in Monte dei Paschi The Siena based bank has been laid low by ill judged acquisitions and mismanagement and it is saddled with the largest proportion of bad debts among Italian lenders compared to its capital It needs money to cover losses from a planned 27 billion euro bad loan sale needed to comply with a request by the European Central Bank It has arranged its rescue plan with the help of Wall Street investment bank JPMorgan N JPM betting on a 1 billion euro investment by Qatar s investment authority Confirming an earlier Reuters report the bank said late on Wednesday it had failed to secure an anchor investor for its offer of new shares For the state to step in Monte dei Paschi would need to force at least some of its creditors to convert their bonds into equity Economy Minister Pier Carlo Padoan said on Wednesday the impact on retail savers would be absolutely minimized or inexistent Ordinary Italians have already suffered billions of euros of losses due to a string of bank crisis after a harsh recession weakened the country s lenders exposing the damages wrecked by crony lending and inefficient management Other banks also need to strengthen their balance sheets including Banca Popolare Di Vicenza Veneto Banca and Banca Carige Italy is also struggling to find a buyer for four small banks rescued from bankruptcy a year ago Banca Etruria Banca Marche CariFerrara and CariChieti If the government uses all the 20 billion euros it is authorized to spend on the banking sector it will worsen the country s already difficult debt position Italy s debt stands at some 133 percent of gross domestic product GDP second only to Greece in the euro zone A further 20 billion euro of debt will push the ratio above 134 percent |
JPM | U S housing consumer confidence data bolster economic outlook | By Lucia Mutikani
WASHINGTON Reuters New U S single family home sales rose more than expected in November and consumer sentiment hovered near a 13 year high this month strengthening the view that the economy will gain further momentum next year
President elect Donald Trump s plan to cut taxes and increase infrastructure spending is expected to boost economic growth though it already has sparked a surge in mortgage rates that could hurt the housing market in the long term
Home buyers are confident in their futures and this means the outlook is likely to be brighter next year than we thought said Chris Rupkey chief economist at MUFG Union Bank in New York
The Commerce Department on Friday said new home sales increased 5 2 percent to a seasonally adjusted annual rate of 592 000 units last month That was the second highest pace since 2007 Economists had forecast single family home sales which account for about 9 5 percent of overall home sales rising 2 1 percent to a 575 000 unit rate last month
Sales rose 16 5 percent from a year ago boosted by a 43 8 percent jump in the Midwest to a nine year high Sales surged 7 7 percent in the West their highest level since January 2008 but fell 3 1 percent in the South They were unchanged in the Northeast
Separately the University of Michigan said its consumer sentiment index edged up to a reading of 98 2 from 98 earlier this month That was the highest reading since January 2004
The University of Michigan said a record 18 percent of respondents spontaneously mentioned the expected favorable impact of Trump s policies on the economy Consumers anticipated that a stronger economy would create more jobs with the share expecting higher income rising to a one year high
Greater income growth prospects for consumers serves as a good leading indicator of real spending activity said Michael Brown an economist at Wells Fargo NYSE WFC in Charlotte North Carolina
U S financial markets were little moved by the upbeat data in light pre holiday trading The U S dollar DXY was steady against a basket of currencies while prices of U S Treasuries rose Stocks on Wall Street were little changed
RISING MORTGAGE RATES
While Trump s envisaged policies have boosted confidence among households and businesses his agenda to increase spending is expected to stoke inflation Mortgage rates have risen rapidly since the business mogul s Nov 8 election victory
The interest rate on a fixed 30 year mortgage has increased more than 70 basis points to an average of 4 30 percent the highest level since April 2014 according to data from mortgage finance firm Freddie Mac
Mortgage rates are likely to rise further after the Federal Reserve raised its benchmark overnight interest rate last week by 25 basis points to a range of 0 50 percent to 0 75 percent The U S central bank forecast three rate hikes for next year
Higher mortgage rates in the near term could boost home sales by luring in buyers who fear further increases in borrowing costs A report on Wednesday showed sales of previously owned homes rose to near a 10 year high in November
We have yet to see any clear signs in the housing data reported to date that higher rates have depressed activity said Daniel Silver an economist at JPMorgan NYSE JPM in New York That said we think that at some point higher rates will weigh at least somewhat on the housing market
Higher borrowing costs come at a time when house price increases are outstripping wage gains which could make purchases unaffordable for many first time buyers
Despite the rise in sales last month the inventory of new homes on the market increased 1 6 percent to 250 000 units the highest level since September 2009 Still the supply of new houses for sale remains about half of what it was at the peak of the housing market boom
The inventory rise if sustained could slow the pace of house price increases At November s sales pace it would take 5 1 months to clear the supply of houses on the market down from 5 2 months in October A six month supply is viewed as a healthy balance between supply and demand |
C | Why You Should Buy Citigroup C | Citigroup Inc NYSE C is a global financial services company It provides consumers corporations governments and institutions with a broad range of financial products and services including consumer banking and credit corporate and investment banking securities brokerage transaction services and wealth management The company also offers various wholesale banking products and services including fixed income and equity sales and trading foreign exchange prime brokerage and equity and fixed income research services Citigroup Inc is based in New York
It s been quite a ride for the big C Citigroup one of the more infamous banks of the Bush era Great Recession The bank was in tatters after the housing bubble blow up and was a major recipient of bailout monies Now however some analysts find that it is a good time to buy the shares
The company has done a great job managing their recovery and now the stock is trading at a discount compared to peers The giant bank has a low P E a much stronger balance sheet and they enjoy a big advantage thanks to their heavy losses from a few years ago
Now that the company has recovered and good times are back they can reap significant tax advantages thanks to their use of various write offs accrued during the times of big losses These deferred tax assets DTAs are estimated to total up to 30 billion by some analysts
That s a lot of cushion against taxes on profits moving forward Higher profits thanks to the recovery tax savings and other factors should lead to strong dividends for shareholders And if the firm uses some of that excess to bolster the share price via a buyback program the benefits could be even more significant for those who bought the stock at a decent valuation
We continue our BUY recommendation on Citigroup Inc for 2016 03 14 Based on the information we have gathered and our resulting research we feel that Citigroup has the probability to outperform average market performance for the next year The company exhibits attractive company size and P E ratio |
C | What s Doha Got To Do With FX | By Kathy Lien Managing Director of FX Strategy for BK Asset Management
This weekend s meeting of OPEC and non OPEC members in Doha is important for currencies because when oil bottomed at the beginning of the year it set a peak for the U S dollar If you recall the greenback was trading strongly when oil prices hit a 10 year low of 26 20 a barrel and when oil started to recover the dollar index lost its momentum and began trading sharply lower So not only is the dollar s value important for oil but in recent years we ve also seen how it can impact currencies and equities Oil is particularly important to the Canadian dollar but it can also affect the market s overall risk appetite For the past few months investors have been patiently waiting for oil producing nations to officially freeze production In mid February Saudi Arabia and Russia the world s two largest oil producers made a preliminary deal to freeze output but it was contingent on Iran s participation Unfortunately Iran supported the deal but refused to comply until its production returned to pre sanction levels This weekend we ll see if oil producers are willing to move forward without Iran s cooperation If they agree to freeze production relieved investors will reward the decision with higher oil prices rallies for stocks a lower U S dollar and stronger commodity currencies But in order for there to be any real continuation oil producers need to cut output and that s unlikely Saudi Arabia and Russia are producing oil at record levels and an output halt would still mean 300 million extra barrels of oil per year for the world excluding the added inventory provided by Iran The International Energy Agency believes that a deal would not rebalance supply before 2017 A production cut was far more likely when oil was below 30 a barrel but at 40 the pressure to make any drastic change is limited Of course in the event of no deal oil prices will collapse commodity currencies will fall stocks will extend lower and the dollar will rise as risk aversion returns to the markets Either way the Doha meeting is an extremely important event risk for the FX market this weekend The U S dollar traded lower against all of the major currencies Friday on the heels of mostly softer U S data Although manufacturing activity in the NY region expanded at its fastest pace in more than a year industrial production contracted sharply and consumer sentiment hit its lowest level in 7 months Americans are concerned about the upcoming election wage growth and household finances which may explain why spending has been so weak Outside of a few upside surprises most of this week s U S economic reports highlight the ongoing challenges in the U S economy Not only will the Federal Reserve refrain from raising interest rates in 2 weeks but the FOMC statement could contain slight downgrades to their assessment of the economy We expect the dollar to resume its slide in the days and weeks ahead USD JPY is looking particularly vulnerable as more earthquakes hit the south of Japan Friday prompting a tsunami warning Both the euro and British pound traded higher against the greenback on Friday There was no data out of the U K and the euro shrugged off softer trade numbers The big news for the pound was the announcement of a replacement for Martin Weale one of the more hawkish members of the central bank Former Citigroup NYSE C economist Michael Saunders will be joining the policymaking committee starting on August 9 Considering that he sees the first rate hike in the second quarter of next year he has a far more dovish posture than Weale Europe will be in focus next week with the U K releasing employment and consumer spending numbers The Eurozone has a central bank meeting and PMI numbers Manufacturing Composite and Services The ECB is expected to leave interest rates unchanged but as usual the tone of Mario Draghi s press conference will have a great impact on the euro At the last monetary policy meeting Draghi signaled that rates were at their lower bound which sent EUR USD sharply higher He sounded slightly less optimistic Friday morning While he indicated that the region is on track for gradual recovery he also said the outlook for growth is faced with uncertainty and the risks are to the downside On Thursday the New Zealand dollar underperformed the Australian dollar and Friday we saw the reverse although stronger Chinese data drove both currencies higher China s GDP growth slowed to 6 7 in the first quarter which was right in line with expectations and therefore provided no significant damage to the comm dollars Instead forex traders latched onto the healthier industrial production and retail sales numbers two indicators that reinforce the signs of stabilization in China s economy As we said if Chinese data is good AUD will see new highs It failed to reach those levels Friday but the trend is strong and AUD USD still appears poised for additional gains |
MS | Morgan Stanley expected to repay TARP on Wednesday | NEW YORK June 16 Reuters Morgan Stanley is
expected on Wednesday to begin repaying billions of dollars in
bailout funds received from the U S Treasury a person familiar
with the situation said
Last week Morgan Stanley said it was among ten major banks
who would be allowed to repay loans they received from the U S
Treasury s Troubled Asset Relief Program known as TARP Morgan
Stanley received 10 billion under the program
The results of a government stress test of the major banks
released last month showed that Morgan Stanley needed to raise
1 8 billion in capital The bank has raised more than 10
billion through equity debt and asset sales
Reporting by Steve Eder Editing by Derek Caney |
MS | UPDATE 3 Greece s NBG to propose 1 25 bln eur rights issue | NBG plans 2 for 9 rights issue at 11 3 euros a share
Credit Suisse Goldman Sachs are joint global coordinators
NBG wants to pre empt possible capital boosts in sector
Shares down nearly 10 percent
Adds CEO CFO comments paragraphs 3 5 6 7
By George Georgiopoulos
ATHENS June 16 Reuters Greece s largest lender
National Bank said it would propose a capital boosting rights
issue of up to 1 25 billion euros 1 74 billion at its June 18
board meeting sending its shares sharply lower
NBG shares fell 10 percent to 18 44 euros on Tuesday s
announcement with analysts citing the rights issue price and
resultant share dilution The bank plans to issue two new shares
for every nine held at a price of 11 3 euros each
Chief Executive Takis Arapoglou told an analyst conference
call that the cash call was not due to a business downturn but
was a preemptive move given banking sector dynamics in Europe
as European peers also look to raise fresh funds
The rights offering is not reflective in any way of any
deterioration in our business It is not needed to strengthen
our provision buffer Arapoglou said
The offering provides us with a high degree of strategic
flexibility and is a prudent response to global conditions in
the event green shoots wilt in the summer sun he said
NBG s cash arsenal will allow the group to take advantage of
growth opportunities as part of a wider strategy to strengthen
its presence in southeast Europe The bank has operations in
Bulgaria Serbia Romania Albania Cyprus Egypt and Turkey
Arapoglou told analysts NBG had no intention to exit
southeast Europe Any moves on the acqusisitions front would
not be transformatory and nothing was imminent
Greece clearly is not within our scope of acquisitions
CFO Anthimos Thomopoulos said
REGULATOR S DELIGHT
Greek central bank chief George Provopoulos welcomed the
rights issue National Bank s share capital increase is a
positive move in this environment Provopoulos told reporters
at the sidelines of a press conference on climate change in
Athens
It s a regulator s delight to see banks boosting their
capital he added
Asked by reporters whether the rights issue would better
position NBG for buyouts Provopoulos said It obviously has a
comparative advantage to make acquisitions I m not saying that
anything like that will happen
Investors were more sceptical analysts said
The share dilution and the lower rights issue price are the
reason behind the share s drop today said analyst Constantinos
Manolopoulos at Marfin Analysis
The shares immediately shed 8 percent of their value and
were trading 9 3 percent down at 1325 GMT compared with losses
of about 3 9 percent for the Athens general index They are up
39 percent year to date
The company s stock trades about 9 5 times estimated 2009
earnings compared with a P E ratio of about 14 for the
pan European FTSE banking sector
Credit Suisse and Goldman Sachs will be the joint global
coordinators with JP Morgan and Morgan Stanley the joint
bookrunners should there be shares unsubscribed
NBG will issue 110 4 million new shares each with a par
value of 5 euros The shares will trade ex rights July 1
The bank is taking part in the Greek government s 28 billion
euros support scheme to keep Greece s economy adequately funded
The lender already received a capital boost of 350 million euros
by selling the government preferred shares
1 7197 euros
Editing by Simon Jessop |
MS | Europe stocks fall banks slip defensives gain | FTSEurofirst 300 falls 0 1 percent
Retailers telecoms healthcare stocks climb
Banks sag NBG s rights issue revives concerns
For up to the minute market news click on
By Brian Gorman
LONDON June 16 Reuters European shares fell marginally
on Tuesday with weak banking shares offsetting a rise in
defensive sectors and amid mixed signals for economic recovery
The FTSEurofirst 300 index of top European shares fell 0 1
percent to close at 862 41 points having been as high as
870 47 The index is up 33 6 percent from the lifetime low it
hit on March 9
The benchmark fell 2 5 percent on Monday and some analysts
say the rise has gone too far relative to the tangible evidence
of an economic recovery
We ve had a surge in equities on the basis that there will
be a recovery but that hasn t been borne out by the data so
far said Jeremy Batstone Carr strategist at Charles Stanley
in London
Benchmark indexes are struggling to break through key
resistance levels with the exception of the Nikkei in Japan
U S economic data was mixed on Tuesday
New U S housing starts and permits rebounded in May from
record lows as ground breaking for multifamily units surged
after tumbling the prior month a government report showed
But industrial production slid a steeper than expected 1 1
percent in May from the prior month with output off sharply at
factories utilities and mines a Federal Reserve report showed
Back in Europe defensive stocks were the biggest gainers
Tesco closed 1 5 percent higher after the world s
third biggest retailer posted its best quarterly sales rise in
Britain for two years and said it was closing the gap on recent
stronger growth rates at its main domestic rivals
Rival J Sainsbury rose 1 1 percent ahead of an update on
Wednesday
Telecoms rose including BT up 8 percent after being
upgraded by Morgan Stanley to overweight Vodafone finished
1 6 percent higher
Pharmaceuticals to rise included GlaxoSmithKline and
Sanofi Aventis up 0 7 and 1 1 percent respectively
BANKS FALL
Shares of NBG tumbled 10 percent after Greece s largest
lender said its board would convene this week to decide on a
rights issue of up to 1 25 billion euros
Other financial institutions retreated trimming some of
their recent strong gains UBS BNP Paribas Societe Generale
and UniCredit lost between 2 3 and 4 1 percent
The European Central Bank said on Monday that euro zone
banks would probably need to write down another 283 billion
this year and next on bad loans and securities
Across Europe Britain s FTSE 100 rose 0 1 percent
Germany s DAX was flat and France s CAC 40 fell 0 2 percent
We re not out of the woods yet said Batstone Carr The
data says there s a gigantic amount of spare capacity in the
U S economy
German analyst and investor sentiment rose in June to its
highest level since May 2006 a survey showed on Tuesday but
economists warned that Europe s largest economy remained in a
tough spot
Additional reporting by Blaise Robinson Editing by Rupert
Winchester |
MS | Reuters Summit WRAPUP 1 Dollar vulnerable as countries diversify | For other news from the Reuters Investment Outlook Summit
click on
By Walter Brandimarte
NEW YORK June 16 Reuters The U S dollar whose
leading role in world currency markets has faced increasing
questions will remain under pressure for years as more
countries diversify their reserve holdings top analysts and
strategists said this week
Still no other currency appears ready to take over the
dollar s dominant role in foreign exchange markets in the
foreseeable future which will likely prevent any precipitous
fall in the greenback the analysts and strategists said at the
Reuters Investment Outlook Summit in New York
Comments by Russian President Dmitry Medvedev on Tuesday
suggesting a need for a global reserve currency other than the
greenback highlighted the challenges facing the dollar and
sent it sliding across the board Just a few months ago China
had suggested how the dollar could be replaced as the world s
main reserve currency
The United States expansionist fiscal and monetary
policies which are raising fears of inflation down the road
that could erode the value of the dollar is surely driving
diversification out of dollar denominated assets analysts
said
What you are seeing is dissatisfaction with the dollar as
the world s reserve currency said Steven Englander chief
foreign exchange strategist for the Americas at Barclays
Capital
Nouriel Roubini the economist known for predicting the
current financial crisis said the main fear haunting investors
is that the United States could allow inflation to return or
the dollar to devalue as a way out of its debt problems
Over time the willingness of the U S creditors to
finance U S spending and buy dollar reserves is going to be
reduced said Roubini chairman of New York based economics
research firm RGE Monitor
The dollar has weakened whenever talk about an alternative
reserve currency makes the headlines Calls for currency
diversification have come mainly from emerging economies such
as Brazil Russia India and China or the BRIC nations
In their first summit held on Tuesday in Russia leaders of
the BRIC countries called for a stable predictable and more
diversified international monetary system
They did not make any direct reference to the dollar in
their final statement
Although the dollar had strengthened considerably against
the euro from March through the beginning of June it has
weakened in the last two weeks since talk of diversification
away from the greenback reemerged
CANDIDATES WANTED
Despite its growing weaknesses the dollar will retain its
reserve currency status for a considerable period of time for
lack of better candidates
That diversification is happening very slowly but it is
important to recognize that the dollar has that position as a
reserve currency because so much trade in the world takes place
in the form of dollars Abby Joseph Cohen senior investment
strategist at Goldman Sachs told the Reuters summit
She expects most global trade will likely remain
denominated in dollars for a long time despite diversification
efforts by some countries
The United States also has a deeper and broader
fixed income market than any other nation which is essential
for a global reserve currency Cohen added
Robert Prechter founder and president of Elliott Wave
International said potential substitutes for the dollar would
face problems similar to those haunting the greenback now
All the currencies all the credit created in the various
currencies is in trouble That means dollar credit euro
credit yen credit all types he said
Prechter is one of the few economists who is extremely
bullish on the dollar He believes the U S currency which
has been a traditional safe haven investment is poised for a
major move up as soon as financial markets crash again after
investors realize the global economy is not recovering as
expected
Others such as Greg Peters Morgan Stanley s head of
global fixed income and economic research say that lack of
credibility in U S policies will keep undermining the value of
the dollar
Right now I m not convinced that we have the proper
credibility to say that we have a strong dollar policy I think
the markets are capitalizing on that said Peters
For summit blog
Editing by Leslie Adler |
MS | HK shares head for third day of losses China stocks slip | Updates to midday
HONG KONG SHANGHAI June 17 Reuters Hong Kong shares were
headed for a third straight day of losses dropping 1 3 percent
by midday Wednesday after a batch of mixed U S economic data
stoked investor doubts about an early recovery in the world s
largest economy
China shares shed 0 7 percent led by financial counters as
the market remained weighed down by the expected near term
resumption of initial public equity offerings
Here are the index moves and top stock moves by midday
HONG KONG
The benchmark Hang Seng Index was down 239 78 points at
17 925 72
The 18 600 point major support level for the Hang Seng
Index collapsed yesterday which is a likely indication of a more
meaningful correction The next key support trend line is at
16 330 points said CIMB GK analyst Nigel Foo
The China Enterprises Index of top mainland companies fell
1 4 percent to 10 565 68
Turnover dropped to HK 40 4 billion from midday Tuesday s
HK 43 7 billion
Commodity stocks battered by weak oil and metals prices on
Tuesday fell further in another rocky session as crude oil fell
for a fourth day to below 70 per barrel after industry data
showed U S crude stocks dropped less than expected last week
Asia s largest energy producer PetroChina fell 2 4 percent
to HK 8 55 while offshore oil producer CNOOC dropped 2 8
percent
Jiangxi Copper gave up 3 3 percent while the world s No 3
alumina producer Chalco pulled back 2 5 percent
China Resources Gas tumbled 13 percent to HK 5 10 after
Credit Suisse and Morgan Stanley sold down a combined 11 7
percent stake in the company to raise around 98 million The
banks each sold a 5 85 percent stake in the urban gas
distributor at HK 4 6 per share which represents a 21 5 percent
discount to Tuesday s closing price
Ping An slid 3 5 percent to HK 52 35 falling for a third
straight day after announcing a deal to increase its stake in
mid sized lender Shenzhen Development Bank to up to 30 percent
The stock has given up more than 10 percent or 2 billion
in market value this week as analysts deemed the deal expensive
and cut their rating on China s second largest insurer
Bigger rival China Life fell 1 7 percent to HK 28 35
tracking losses on the mainland Chinese bourses
SHANGHAI
The Shanghai Composite Index ended the morning down 0 74
percent at 2 755 509 points
Losing Shanghai A shares outnumbered gainers by 507 to 398
while turnover in Shanghai A shares slipped to 52 5 billion yuan
7 7 billion from Tuesday morning s 59 3 billion yuan
Financial shares were weak with Shenzhen Development Bank
sinking 3 10 percent to 21 89 yuan giving back part of a 13
percent gain in the previous two sessions that followed news of
Ping An Insurance s plan to boost its stake in the bank to close
to 30 percent
Ping An slipped 1 48 percent to 43 20 yuan extending
Tuesday s 4 9 percent drop as investors were wary about the
deal s likely benefits for the insurer
Brokerage stocks were also weak with CITIC Securities
sagging 2 0 percent to 28 00 yuan after rising 3 5 percent on
Tuesday
Investors will remain cautious until the new share
offerings come out The index is expected to continue
consolidating said Huatai Securities analyst Li Wenhui
He said sluggish overseas markets also weighed down
sentiment The benchmark index has held within a 2 700 to
2 800 point range so far this week
PetroChina the most heavily weighted stock in the index
dropped 1 74 percent to 13 54 yuan A provincial news site
reported that part of an LNG tank under construction at
PetroChina s first LNG terminal in eastern China collapsed and
killed eight people
Several health product stocks gained as the H1N1 flu virus
spread Guilin Layn Natural Ingredients a health food products
maker surged by its 10 percent daily limit to 31 85 yuan as the
number of confirmed H1N1 flu cases in China climbed to 226 as of
Monday The company s share price has surged by more than
two and a half times in less than two months
Reporting by Parvathy Ullatil in HONG KONG and Claire Zhang in
SHANGHAI Editing by Edmund Klamann and Chris Lewis |
MS | HK shares drop for third day China stocks bounce back | China banks help HSI off early lows energy stocks drag
Ping An drops in HK for 3rd day edges up in Shanghai
China property stocks rise on signs of improving sales
Updates to close
By Parvathy Ullatil Claire Zhang
HONG KONG SHANGHAI June 17 Reuters Chinese stocks rose
1 23 percent in light turnover on Wednesday led by a surge in
property shares with China Vanke jumping nearly its 10 percent
daily limit on signs of strong real estate sales
Hong Kong shares finished lower for third straight day on
Wednesday as resources linked stocks weighed but the main index
bounced off early lows led by a late rally in Chinese banks
CHINA BANKS EASE SLUMP
The benchmark Hang Seng Index was down 80 90 points or 0 5
percent at 18 084 60 The index fell to 17 833 77 during the
morning session
Despite the nearly 1 000 point correction so far this week
it s pretty clear the selling pressure is still not very high
But what is noticeable is that we are losing momentum because of
the strength in the dollar and U S rate concerns said First
Shanghai Securities strategist Linus Yip
China Construction Bank rose 1 3 percent to HK 5 69 while
top lender ICBC advanced 2 1 percent to HK 5 32 as investors
chased up stocks that have lagged the recent rally
The China Enterprises Index of top mainland companies slipped
16 17 points or 0 2 percent to 10 700 15
Dongfeng Motor Group vaulted 11 percent after reporting a
124 6 million profit for the first quarter of 2009
Turnover dropped to HK 74 5 billion from Tuesday s HK 76 5
billion
Commodity stocks battered by weak oil and metals prices on
Tuesday fell further in another rocky session even as crude oil
inched up to 71 per barrel on a weaker U S dollar
Asia s largest energy producer PetroChina fell 1 3 percent to
HK 8 65 while offshore oil producer CNOOC which was the biggest
drag on the main index dropped 2 percent
China Resources Gas tumbled 8 5 percent to HK 5 36 after
Credit Suisse and Morgan Stanley sold down a combined 11 7
percent stake in the company at HK 4 6 per share which
represents a 21 5 percent discount to Tuesday s closing price
Link REIT jumped 3 2 percent after reporting a 13 5 percent
increase in its total distributable income for the year ended
March 2009
Ping An slid 2 3 percent to HK 53 falling for a third
straight day after announcing a deal to increase its stake in
mid sized lender Shenzhen Development Bank to up to 30 percent
The stock has given up more than 10 percent or 2 billion
in market value this week as analysts deemed the deal expensive
and cut their rating on China s second largest insurer
In Shanghai Ping An edged up 0 36 percent to 44 01 yuan
stabilising after dropping 4 9 percent on Tuesday while Shenzhen
Development Bank lost 1 73 percent to 22 20 yuan giving back
part of a 13 percent gain in the previous two sessions
CHINA PROPERTY STOCKS SHINE
The Shanghai Composite Index ended up 34 101 points at
2 810 123 its highest close in a week and near a 10 month
closing high of 2 816 247 hit last week
Gaining Shanghai A shares outnumbered losers by 712 to 204
while turnover in Shanghai A shares rose to 117 6 billion yuan
17 21 billion from Tuesday s 107 9 billion yuan
Vanke climbed 9 7 percent to 11 88 yuan after the official
China Securities Journal quoted Vanke Board Secretary Tan Huajie
as saying that the proportion of real estate purchased for
investment purposes rather than for individual use had risen
Advisers CB Richard Ellis on Tuesday said Chinese property
prices would stabilise over the rest of 2009 supported by
government stimulus measures
Analysts added that stronger than expected property sales
were lifting the sector and the index now appeared likely to
touch a new high for the year in the short term
Demand and sales in the property sector both seem strong
encouraging money to pour into the sector s shares said Haitong
Securities analyst Zhang Qi
Several health product stocks gained as the H1N1 flu virus
spread Guilin Layn Natural Ingredients a health food products
maker surged by its 10 percent daily limit to 31 85 yuan as the
number of confirmed H1N1 flu cases in China climbed to 226 as of
Monday The company s share price has surged by more than 2
times in less than two months
Reporting by Parvathy Ullatil in HONG KONG and Claire Zhang in
SHANGHAI Editing by Edmund Klamann and Chris Lewis |
MS | European Markets Continue To Trade Below The Break even Line | The Forex Trader Portal
Current Futures Dow 29 00 S P 4 00 NASDAQ 8 25European markets continue to struggle below the break even line as the major indexes from the Euro zone region opened again lower and held lower on Wednesday even though U S futures advanced and Asian markets closed mixed on the Wednesday trading session The financials continued to advance in Europe similar to the trend set during the Asian trading hours The gains in the financial sector came after Goldman Sachs announced that it would pay the TARP loan on Wednesday being the first major bank to do so Further optimism was induced in the financial sector after JPMorgan and Morgan Stanley announced they will no longer issue debt backed by the FDIC while other banks are expected to announce similar measures soon TheLFB Forex com Trade Team notes that the news coming recently from the financial sector is very positive something that will probably be reflected in the XLF index the exchange traded fund for the U S financial sector Commodity stocks and retail companies were among the sectors that declined in Europe this morning Commodity stocks continued their downwards path as some investors consider the current valuation as too expensive Retail companies declined after Unilever one of the largest European makers of consumer goods was downgraded to sell by UBS Moreover TheLFB Forex com Trade Team argues that the whole retail sector is projected to under perform the major stock market indexes as the unemployment rate is set to soar to multi year highs in Europe and in the U S Overnight the U K Ftse lost 9 84 points 0 23 to 4 318 73 while the German Dax declined 13 31 points 0 27 to 4 877 41 Crude oil for July delivery was recently trading at 71 05 per barrel higher by 0 50 Gold for July delivery was recently trading higher by 5 30 to 937 50 TeamLFB provides forex related market analysis and trade signals |
JPM | American charged in bank hacking turned down Russian asylum lawyer | By Nate Raymond NEW YORK Reuters The Russian government offered asylum to a Maryland born man facing U S charges he was part of a computer hacking scheme targeting financial firms including JPMorgan Chase Co NYSE JPM but he turned down the offer his lawyer said on Thursday Joshua Aaron s lawyer Benjamin Brafman made the remarks during a hearing in federal court in Manhattan a day after his client was arrested at John F Kennedy International Airport after being deported from Russia Aaron is one of nine people facing charges following an investigation connected to a data breach that JPMorgan disclosed in 2014 involving records of more than 83 million accounts Brafman told U S District Judge Laura Taylor Swain that Aaron 32 had been trying for months to return to the United States from Russia and came back after having turned down an offer of asylum in Russia Reuters could not independently confirm the asylum offer The Russian embassy in Washington did not respond to a request for comment According to Brafman the offer came after Aaron applied for refugee status in June a month after he was detained for a visa violation Aaron who was born in Maryland and attended Florida State University withdrew the refugee request many months ago after he consulted with lawyers in the United States and learned more about the U S justice system Brafman said He began trying to return to the United States to face the charges Brafman said But someone in Russia was trying to keep him in the country It took us several months of fighting with the Russian authorities to actually get him on a plane Brafman said In that period he was offered full asylum by Russian authorities and he rejected it Brafman s claims followed reports on Friday that the U S Central Intelligence Agency had concluded that Russian hacking during the U S election was aimed at helping Republican President elect Donald Trump win the 2016 election Aaron was indicted along with two Israeli men Gery Shalon and Ziv Orenstein in November 2015 for his alleged role in hacking crimes targeting several U S financial services firms and media outlets including JPMorgan Prosecutors said the scheme dated back to 2007 and stole the personal information of more than 100 million people Prosecutors said they engaged in the hacking spree to further other schemes including pumping up stock prices with sham promotional emails running online casinos and operating an illegal bitcoin exchange Aaron Shalon and Orenstein have pleaded not guilty The case is U S v Shalon et al U S District Court Southern District of New York No 15 cr 00333 |
JPM | Monte dei Paschi in last ditch effort to lure retail investors | By Stephen Jewkes and Silvia Aloisi MILAN Reuters Troubled Italian bank Monte dei Paschi di Siena MI BMPS sought on Friday to convince 40 000 retail investors to take part in its last ditch rescue plan warning them they could face bigger losses if they did not convert their bonds into shares Italy s third biggest bank has until the end of this month to raise 5 billion euros 5 2 billion in equity or face the risk of being wound down potentially triggering a wider banking and political crisis in Italy Should the privately funded plan fail the government is ready to step in with state money to keep the Siena based bank in business though such a move would require both retail and institutional investors to share in losses Monte dei Paschi said on Friday market watchdog Consob had given the go ahead to the extension of a voluntary debt to equity offer to retail investors owning 2 1 billion euros of its junior debt The offer runs from December 16 to 21 The bank noting there could be no certainty Rome would pump in public money warned that any state aid could force bondholders to convert their securities on worse conditions than those of the lender s voluntary debt swap offer Underscoring its vulnerability the bank said on Friday deposits had fallen by 6 billion euros between September 30 and December 13 Outflows have totaled 2 billion euros since a December 4 referendum on constitutional reform which triggered the resignation of Prime Minister Matteo Renzi throwing the bank s rescue plan into disarray With the clock ticking the chances of the bank pulling off the fundraising look slim and bankers and analysts say state intervention looks increasingly on the cards to help restore confidence Sources close to the matter said on Thursday Italy was ready to inject 15 billion euros into the Tuscan lender and other weak banks An emergency decree could be approved next week as soon as the results of Monte dei Paschi s debt swap and share sale are known In its prospectus for the reopened debt swap offer the bank said the European Central Bank had told it that under a negative stress test scenario the lender has a 29 day time horizon in which it can meet its liquidity needs without resorting to new intervention The stress test scenario assumes a liquidity outflow of 10 3 billion euros within a month Shares in the bank fell 3 percent by 1513 GMT Besides the bond conversion the bank s last attempt to avert state aid also envisages selling shares to cornerstone investors and on the market However a source close to the matter said on Thursday that Qatar s sovereign wealth fund which bankers had said could invest 1 billion euros had yet to make up its mind about whether to put money in the bank Qatar is still at the window the source said Following the political turmoil triggered by Renzi s resignation JPMorgan NYSE JPM and other investment banks that had made a preliminary commitment to underwrite the share sale walked out of the deal citing adverse market conditions Monte dei Paschi estimates the cost of its rescue deal including fees paid to investment banks at 558 million euros it said in the prospectus published on Friday
The ECB last week rejected Monte dei Paschi s request for more time to raise the funds saying a delay could trigger a further deterioration in the bank s liquidity and capital position putting its survival at risk |
JPM | Italy court acquits four former JPMorgan execs in Parmalat case source | PARMA Italy Reuters An Italian court on Tuesday acquitted four former JPMorgan N JPM executives from accusations of fraudulent bankruptcy in a probe over the U S bank s role in the 2003 collapse of dairy group Parmalat MI PLT a judicial source said A judge in the northern Italian town of Parma where the Parmalat is headquartered ruled in favor of a request from prosecutors to acquit JPMorgan s former Italy head Federico Imbert his deputy Gabriele Schiavi as well as top executives Alessandro Mitrovich and Alessandro Rombelli Parmalat collapsed at the end of 2003 with a 14 billion euros hole in its accounts The crisis erupted when the company said a 4 billion euro bank account held by a Cayman Islands unit did not exist forcing management to seek bankruptcy protection and triggering a criminal fraud probe The JPMorgan former executives had been accused of hastening the bankruptcy of Parmalat by helping the company issue bonds when it was already facing financial problems |
C | Foreign investors shrug off Nigeria security risk Citibank | By Chijioke Ohuocha LAGOS Reuters Worsening security in Nigeria has not deterred foreign investors from buying its assets Citigroup s N C country head said on Wednesday citing 1 1 billion worth of Eurobonds it had traded for three local lenders so far this year
But any spread of attacks further south or to the commercial hub of Lagos could start to put even established investors off Omar Hafeez told Reuters in an interview
A violent Islamist insurgency in Nigeria has killed hundreds this year with the abduction of more than 200 schoolgirls by Boko Haram making world headlines in April and overshadowing the country s rise to overtake South Africa as the continent s top economy
Africa s top oil producer also faces polls in 2015 that are likely to be the most closely fought since the end of military rule in 1999 with many fearing political violence and rampant spending on patronage as usually happens in election cycles
The investment community is very well informed Nigeria is a loan market and financial investors have been tapping into treasury bills and bonds for a very long time Hafeez said
The way the market looks at Boko Haram it s still relatively restricted in terms of geographic presence but an increase of attacks to anywhere in the major centres will have consequences he said
Nigeria is growing as an investment destination attracting capital equity and debt investors but security and political risks cloud its outlook
Hafeez said Nigeria was witnessing an increase in both foreign direct investments and portfolio flows
Hafeez said Citi was the largest arranger of Eurobonds in Nigeria and had sold 500 million for Zenith Bank LG ZENITHB 400 million for Access Bank LG ACCESS and 200 million for Diamond Bank LG DIAMONB in the first half of the year
FCMB LG FCMB last week mandated Citi and Standard Chartered Bank L STAN to raise Eurobonds Hafeez said he expected more to follow
The demand for long term dollars is increasing in Nigeria as industries such as oil and gas and power develop he said adding that the demand could not be met locally
He said banks were tapping Eurobonds to bolster their capital bases and also to finance big ticket deals in the oil and gas and newly privatised power sectors
Elections next year could become a worry if they affect the naira exchange rate to the dollar and interest rates
I think we could expect a certain amount of volatility pre election but have I seen people sitting on the fence Not really he said
Commercial realities determine the strategies so it s really not elections per say it s what elections will do to the FX interest rate market
Incoming central bank governor has said he will work to maintain a stable exchange rate and will not lower interest rates before 2015
He said Nigeria was Citibank s biggest operation across sub Saharan Africa and that it was expanding its footprint to bank more local firms especially as multinational oil firms divest from the oil industry to domestic companies
Editing by Tim Cocks and Andrew Roche |
C | U S Targets Germany s Commerzbank In Latest Sanctions Busting Probe | By The U S is continuing to pursue fines against European banks for continuing to do business with nations it s sanctioned and the latest target id Germany s Commerzbank XETRA CBKG
That s the latest from Reuters which on Tuesday cited a source with direct knowledge of the regulatory investigations and said that state and federal officials have begun talks with the Commerzbank but there is no sign of an impending settlement If it does settle Reuters said it s likely the bank would face a chance to avoid criminal prosecution in exchange for paying a hefty fine a so called deferred prosecution
News of the probe comes little more than a week after French banking firm BNP Paribas PARIS BNPP pleaded guilty to felony charges in a U S court for doing business with Iran and other U S sanctioned countries including Sudan and Cuba The bank will pay a record 8 8 billion fine
Commerzbank is 17 percent owned by the German government and according to the New York Times is accused by the Washington transferring money through the U S for clients Iran and Sudan
Another big German bank Deutsche Bank NYSE DB is also being investigated according to Reuters as well as France s Credit Agricole PARIS CAGR Societe Generale PARIS SOGN and Citigroup Inc s NYSE C Banamex unit |
C | U S futures rise as sentiment improves Dow Jones up 0 33 | Investing com U S stock futures pointed to a higher open on Monday as markets recovered from the previous week s global sell off due to worries over Portugal s banking sector and as trading volumes were expected to remain thin in the absence of any major U S economic reports
Ahead of the open the Dow 30 futures pointed to a 0 33 gain S P 500 futures signaled a 0 33 rise while the Nasdaq 100 futures indicated a 0 46 increase
Concerns over the fiscal stability of Portugal s Banco Espirito Santo fuelled a sharp selloff in markets on Thursday amid fears over the risk of contagion Concerns eased after Portugal s central bank said Friday it was satisfied that the lender is able to fulfill its capital requirements
Traders were awaiting fresh indications on the future direction of monetary policy after last week s minutes of the Federal Reserve s June meeting revealed little new information on when rates could start to increase
AbbVie NYSE ABBV was expected to come back into focus as the drugmaker reportedly moved a step closer to buying Shire LONDON SHP after the Dublin based company said it is willing to back a fifth offer of 53 7 billion which would be the biggest pharmaceutical takeover outside of the U S this year
In the financial sector Citigroup NYSE C was likely to be active as the lender and U S authorities were set to announce a 7 billion agreement later Monday to end probes of the bank s sales of mortgage backed bonds
Citigroup was also set to report second quarter earnings before the opening bell
Elsewhere Aecom Technology NYSE ACM was said to have agreed to acquire URS Corporation NYSE URS up 2 88 pre market for about 4 billion to gain new services in markets including oil and gas The engineering and construction management company had initially been targeted by activist hedge fund Jana Partners LLC
In similar news Bloomberg reported that Whiting Petroleum NYSE WLL s 3 8 billion purchase of Kodiak Oil Gas Corp NYSE KOG will create the dominant crude oil producer in the northern Great Plains the richest U S shale region
Across the Atlantic European stock markets were higher The DJ Euro Stoxx 50 gained 0 56 France s CAC 40 advanced 0 48 Germany s DAX climbed 0 71 while Britain s FTSE 100 rose 0 64
During the Asian trading session Hong Kong s Hang Seng gained 0 49 while Japan s Nikkei 225 Index advanced 0 88 |
C | Citi Agrees To Pay 7 Billion To Settle Securities Investigation | By Citigroup Inc NYSE C said it agreed to pay 7 billion to settle a U S government investigation into mortgage backed securities the bank sold in the run up to the 2008 financial crisis The settlement figure was more that twice what many analysts expected earlier this year but less than the 12 billion the government had sought in negotiations with the bank Citigroup said on Monday it would pay 4 5 billion in cash and provide 2 5 billion in consumer relief The bank said it would take a related pre tax charge of about 3 8 billion in the second quarter The bank is scheduled to report results before the market opens on Monday Citigroup s shares were up 1 4 percent at 47 65 before the bell
Citigroup is the second major bank to settle with authorities since President Barack Obama ordered the formation of a task force to investigate the sale and packaging of toxic home loans The penalty is appropriate given the strength of the evidence of the wrongdoing committed by Citi U S Attorney General Eric Holder said in a statement on Monday
Despite the fact that Citigroup learned of serious and widespread defects among the increasingly risky loans they were securitizing the bank and its employees concealed these defects Holder added Citigroup said in a statement the 4 5 billion cash portion consisted of a 4 billion civil payment to the Justice Department and 500 million in compensatory payments to state attorneys general and the Federal Deposit Insurance Corp Reporting by Anil D Silva in Bangalore Editing by Saumyadeb Chakrabarty |
C | Citi shares up more than 3 premarket after Q2 earnings beat | Investing com Shares in U S bank Citigroup Inc NYSE C rallied more than 3 in premarket trade on Monday after its latest earnings report showed that the bank achieved larger than expected earnings in the second quarter
Citigroup reported earnings of 1 24 per share in the last quarter ahead of forecasts of 1 05 per share
The bank said total revenues declined to 19 34 billion in the quarter down from 20 49 billion a year ago
The lender said earnings fell to just 0 03 per share once the cost of settling its mortgage backed securities probe was included
The bank agreed Monday to a 7 billion settlement to resolve a probe into allegations that it misled investors by selling securities linked to toxic loans in the lead up to the 2008 financial crisis
The bank said it would pay 4 5 billion in fines and provide 2 5 billion in compensation to consumers Citigroup said it will take a 3 8 billion pre tax charge to help cover the penalty
Citigroup s shares were up 3 79 at 48 78 before the bell |
C | Citigroup Earnings Mortgage Settlement Costs Eat Up Profits | By Citigroup Inc NYSE C reported a 96 percent drop in quarterly earnings after taking a charge of 3 8 billion related to a 7 billion settlement with the U S Department of Justice over the sale of shoddy mortgage based securities The settlement figure announced early on Monday was more than twice what many analysts expected earlier this year but less than the 12 billion sought by the government in negotiations with the bank The bank s second quarter adjusted net income which excludes the settlement charge and some changes to the value of the bank s debt was 3 93 billion or 1 24 per share compared with 3 89 billion or 1 25 per share a year earlier
But total net income under Generally Accepted Accounting Principles which includes legal expenses fell to 181 million or 3 cents per share from 4 18 billion or 1 34 per share a year earlier Reporting by Tanya Agrawal and David Henry Editing by Ted Kerr |
C | U S stocks open higher in risk on trade Dow Jones up 0 59 | Investing com U S stocks opened higher on Monday as market sentiment improved following the previous week s broad sell off due to concerns over the health of Portugal s banking sector
During early U S trade the Dow 30 gained 0 59 the S P 500 advanced 0 49 while the NASDAQ Composite rose 0 35
Concerns over the fiscal stability of Portugal s Banco Espirito Santo fuelled a sharp selloff in markets on Thursday amid fears over the risk of contagion Concerns eased after Portugal s central bank said Friday it was satisfied that the lender is able to fulfill its capital requirements
Traders were awaiting fresh indications on the future direction of monetary policy after last week s minutes of the Federal Reserve s June meeting revealed little new information on when rates could start to increase
In the financial sector Citigroup NYSE C saw shares surge 3 57 as the lender and U S authorities were set to announce a 7 billion agreement later Monday to end probes of the bank s sales of mortgage backed bonds
Citigroup also reported better than expected second quarter earnings
Aecom Technology NYSE ACM added to gains up 0 96 as it was said to have agreed to acquire URS Corporation NYSE URS up 7 54 for about 4 billion to gain new services in markets including oil and gas The engineering and construction management company had initially been targeted by activist hedge fund Jana Partners LLC
In similar news Bloomberg reported that Whiting Petroleum NYSE WLL s 3 8 billion purchase of Kodiak Oil Gas Corp NYSE KOG will create the dominant crude oil producer in the northern Great Plains the richest U S shale region
Shares in Whiting Petroleum soared 5 68 at the open of the U S trading session while Kodiak climbed 5 76
On the downside AbbVie NYSE ABBV tumbled 1 20 amid reports the drugmaker moved a step closer to buying Shire LONDON SHP after the Dublin based company said it is willing to back a fifth offer of 53 7 billion which would be the biggest pharmaceutical takeover outside of the U S this year
Across the Atlantic European stock markets were higher The DJ Euro Stoxx 50 gained 0 88 France s CAC 40 advanced 0 76 Germany s DAX jumped 1 05 while Britain s FTSE 100 climbed 0 94
During the Asian trading session Hong Kong s Hang Seng gained 0 49 while Japan s Nikkei 225 advanced 0 88 |
MS | EMERGING MARKETS Pause as eyes on US yields lat at 1 yr high | Emerging stocks flat after U S Treasury yields rise
Lat stays at one year high vs euro in illiquid trade
BTA CDS settlement may set stage for big investor haircut
By Sujata Rao
LONDON June 11 Reuters Emerging stock markets were
range bound at slightly weaker levels on Thursday after a sharp
rise in U S Treasury yields and a pause by core equities while
in Latvia the currency hovered at a one year high versus euro
A rebound in oil prices to eight month highs and a weak
dollar in recent weeks boosted emerging stocks and currencies
despite a devaluation scare in Latvia but a Treasuries slide
this week has made investors hesitant to advance further though
most analysts rule out a major reversal
Some of the sell off we saw in the past week was related to
bond yields going up and some inflation concerns but on the
other hand we also had whispers of very strong numbers that
will come out in China and that has kept some investors
constructive on emerging markets said Michael Wang emerging
markets strategist at Morgan Stanley in London
It will be about what we get in terms of retail sales in
the United States he added referring to data due at 1230 GMT
that are expected to show a U S retail sales rise for the first
time in three months
Emerging equities were broadly flat staying off the
eight month highs hit at the start of June and have gained less
than 2 percent so far this month
Emerging sovereign debt on the JP Morgan EMBI Plus index
11EMJ saw spreads tighten five basis points versus Treasuries
to 408 bps
Investors are watching to see the results of a 30 year
Treasuries auction later on Thursday
LAT FEAR FADING
In eastern Europe currencies see sawed around flat as fears
about Latvia s currency abated slightly and the Hungarian
forint hovered just off the three week high hit against the euro
in the previous session
The lat stayed at a one year high versus the euro albeit in
illiquid trade and is now close to the level at which
the central bank would step in to sell lats
Traders say that will be key to kick starting trade as the
central bank s recent lat buying has left banks short of lats
Lats have been taken out of the system and that is the main
reason for the strength of the lat We are close to the
intervention level the only way out will be some intervention
said Kristaps Strazds head of money and FX trading at SEB in
Riga
As risks fade the cost of buying insurance against a Baltic
default continued to slip Estonian credit default swaps fell
20 basis points while Lithuania slipped 13 bps
The dollar crosses however were benefiting from the weak
greenback with the lira up 0 7 percent and the rand
gaining about 0 3 percent by 1045 GMT
Emerging currencies are doing reasonably well but 90
percent of this is down to dollar moves For instance the
lira rand cross is stable which is indicative that not much is
happening specific to these markets said a trader in London
In bond news investors were still digesting news that
credit default swaps of Kazakh bank BTA were valued at just
10 25 percent in a Wednesday settlement auction meaning
protection sellers must pay out over 700 million
The number came as a surprise as BTA s cash bonds have been
trading at 20 to 30 cents to the dollar and the clearing price
likely indicates a 90 percent haircut for bondholders
These will inevitably put some pressure on the bonds loans
recovery but not to the extent of dampening it to much lower
levels Barclays Capital said in a client note
BTA Kazakhstan s largest bank defaulted in April and has
been trying to restructure up to 15 billion in debt
Additional reporting by Carolyn Cohn Editing by Toby Chopra |
MS | ANALYSIS Markets addled over central bank exit strategies | By Mike Dolan
LONDON June 11 Reuters If you were looking for signs
that financial markets have overcooked the economic recovery
story one set of prices stands out like a sore thumb
Interest rate futures markets were suddenly infected this
week by the three month old stock market rally latching on to
growing signs of a stabilisation of the ailing world econony
So much so that at one point prices were discounting a rise
of up to half a percentage point in the U S Federal Reserve s
target interest rate this year at least a quarter point rise in
the Bank of England s key rates by January and a reversal of a
possible autumn rate cut from the European Central Bank
The trigger ironically appeared to be the May U S
employment report last Friday Although it recorded a loss of
only a third of million jobs during the month instead of the
half million payroll cuts expected it also revealed a surge in
the U S unemployment rate to 26 year highs of 9 4 percent
Given the Fed s dual mandate to pursue both price stability
and full employment plus the fact it has never started a
rate rise campaign while the jobless rate was rising that was
a brave some may say foolish market twist
To be sure futures market have calmed down a bit since but
they still point to some tightening of interest rates by all
three of these central banks by January
Yet to put the backdrop in context both the International
Monetary Fund and the Organisation for Economic Cooperation and
Development as recently as six weeks ago forecast output
contractions of up to 4 percent this year for all three areas in
question and none of the regions was forecast to grow in 2010
Although markets are frequently a step ahead of official
forecasters and the past month has thrown up more signs of
stabilisation will there be enough of a recovery in the months
ahead to justify policies that restrict credit this year
What makes the futures move doubly peculiar is that many
analysts are also convinced the Fed will this month expand its
quantitative easing programme of purchasing government bonds
in part to put a lid on creeping long term Treasury and mortgage
borrowing rates
A poll of U S primary dealers conducted by Reuters after
the U S employment report last Friday showed seven of the 11
respondents expected the Fed to increase the size of its
existing 300 billion Treasury bond purchase programme
With any Fed rate rise almost certain to exaggerate rising
long term bond and mortgage borrowing rates these two outlooks
are completely at odds
SQUARING THE CIRCLE
Many economists flatly dismiss the short term rate moves
Barclays Wealth advised its clients this week The spare
capacity that has built up should keep price pressures subdued
for longer so we doubt rate hikes will begin this soon
Morgan Stanley economists Joachim Fels and Manoj Pradhan
told their customers on Wednesday that rate hike pricing for
this year was premature
So why then did futures markets move so dramatically
The answer seems to lie in an investment world struggling
with very low visibility on the medium term economic outlook and
no consensus on whether inflation or deflation will be the
lasting legacy of one of the biggest financial shocks of the
past century
What they do know is central banks must end their super easy
zero interest rate policies as soon as the recovery takes hold
to prevent a supercharged money supply fuelling inflation But
they simply cannot afford to do that if the ructions caused by
that very exit is likely to send the economy back into tailspin
Predicting the turning point will be a fine call and it is
virtually impossible to be confident of the timing right now
Policymakers themselves most likely have no idea yet on the
timing of their normalisation of policy and the uncertainty
surrounding this will likely ensure some wild swings and
persistently high volatility for many months to come
Rising volatility in fixed income and interest rate swaps
markets are a testament to the confusion
Fels and Pradhan at Morgan Stanley said rising uncertainty
about the macroeconomic outlook defined by the deviation of
growth and inflation forecasts around a mean in the Survey of
Professional Forecasters has risen to its highest in nearly
four decades
Most worryingly for central banks uncertainty about the
long term inflation outlook over the next 10 years is at its
highest level since the survey began in the early 1980s
And the Morgan Stanley economists reckon this fog is
manifesting itself in a sharp rise in the term premium yield
compensation demanded by holders of long term bonds for the
macroeconomic risks over long maturities
The term premium shows a sharp rise recently and we expect
this premium to stay in place if not rise further
And it is these elevated government bond yields along with
the resultant boost to long term mortgage and corporate
borrowing rates that may themselves be enough to rein in
runaway speculation of a sudden return to world growth
Editing by Ruth Pitchford |
MS | TOPWRAP 1 China factory output lifts hopes for world economy | China May factory output up 8 9 percent retail sales up
Asian shares gain on growing optimism for economy
U S retail sales up jobless claims down
IMF ups 2010 growth view World Bank cuts it for 2009
By Langi Chiang and Simon Rabinovitch
BEIJING June 12 Reuters China s May factory output
rose more than forecast and retail sales growth accelerated
giving new impetus to investor hopes the world s third largest
economy can lead a global revival
The data followed figures from the United States on
Thursday that showed a rise in retail sales in May for the
first time in three months and a fall last week in workers
claiming jobless benefits to the lowest level since January
A growing conviction that the global economy is starting to
claw its way out of the deepest recession in six decades has
seen stock markets rallying strongly from the depths plumbed in
March while hopes of burgeoning demand have driven prices of
oil and industrial metals to multi month highs
Asian shares rose with Tokyo s Nikkei up 0 8 percent and
MSCI s index of shares elsewhere in Asia Pacific gaining 0 1
percent although market players said momentum was slowing
The market probably ran a bit too hard over the past two
weeks led by miners The consumer sentiment has improved but
some of the economic challenges still remain said Lucinda
Chan a director at Macquarie Equities in Australia
CHINA BOOST
China s National Bureau of Statistics said annual
industrial output growth rebounded to 8 9 percent in May from
7 3 percent in April outpacing a median forecast of 7 5
percent
Annual growth in retail sales rose to 15 2 percent in May
from 14 8 percent in April slightly ahead of forecasts partly
due to a moderate pace of deflation
Together the two read outs suggested a 4 trillion yuan
585 billion government stimulus plan allied with consumer
spending is starting to overcome weak global demand for the
exports that powered China s breakneck growth in recent years
We expect the economy to accelerate in the remainder of
the year because currently we see policy driven investment
growth but at the same time we expect that exports should have
bottomed and will gradually improve said Qing Wang an
economist with Morgan Stanley in Hong Kong
CAUTIOUSLY OPTIMISTIC
Speaking at a banking conference in Beijing European
Central Bank Governing Council member Christian Noyer said
there were several reasons to be cautiously optimistic about
economic prospects for the euro zone
Noyer the governor of the Bank of France said the decline
in inflation to date could boost disposable income in the bloc
by as much as 3 5 percentage points by the middle of this year
The International Monetary Fund has raised global growth
estimates for 2010 to 2 4 percent from 1 9 percent and
confirmed its April forecast for a 1 3 percent contraction in
2009 a G8 source who has seen the latest figures said on
Thursday
But underscoring the opacity of the outlook World Bank
President Robert Zoellick said the global economy was set to
contract by close to 3 percent this year worse than the IMF
figure and its own previous estimate of a decline of 1 75
percent
I personally believe you might be able to see some aspects
of recovery in 2009 and 2010 but from a policy point of view
that isn t the core question because we have a large degree of
uncertainty Zoellick told reporters
Writing by Alex Richardson Editing by Jan Dahinten |
MS | INTERVIEW Barclays Joshi says hiring top equities talent | Market turmoil making for attractive hiring environment
Demand for structured products picking up strongly
Client service levels have dropped
By Simon Falush
LONDON June 15 Reuters Barclays is taking advantage of
the finance sector upheaval to hire the best talent and is
quickly building a competitive European and Asian share trading
operation head of equities Dixit Joshi told Reuters
The bank has taken on 450 staff in its equities trading
business and will hire a further 300 by the end of the year and
the recent market turmoil means it will be able to pick the
cream of the crop said Joshi speaking at his office in
Barclays Canary Wharf headquarters
He said hiring in Europe and Asia would complement the
strong position the bank took on when it bought the U S
operations of Lehman Brothers last September
Top talent on the street are really seeking opportunities
where they can operate their franchise in the way they were used
to Joshi said
With many of the firms across the street somewhat
dislocated top talent is looking to move We ve hired from
Goldman from UBS from Citigroup from Merrill Morgan Stanley
the top equity players And from within those firms we ve
attracted some of the top talent out there
He said that with the large number of redundancies and scant
competition from other banks for talent offering top flight
remuneration packages was no longer necessary to get the best
people
This is a great hiring environment Joshi said I don t
want to talk about money but you can read between the lines
There are more candidates out there than ever before Top talent
is looking to move for a variety of reasons
TUMBLING VOLUMES
Trading volumes which took a tumble after Lehman Brothers
collapse and the intensifying financial crisis have been slow
to recover and this is forcing banks to look at their business
models Joshi said
Volumes have come off a lot and that s put pressure on all
participants across the industry to become more efficient
We saw a massive deleveraging in the hedge fund space and
the drop off in asset values has a knock on effect on
commissions
One factor making it easy to build up business is client
dissatisfaction caused by standards dipping in the wake of the
financial crisis Joshi said
The industry has been in turmoil and the client hasn t been
looked after in this period Client service across the street
has taken a dive Clients are not getting called they are not
getting service frequently enough the people they spoke to are
no longer there
Joshi said volumes were starting to pick up and that
looking to build an operation at this point of the cycle leaves
it well positioned to pick up market share from competitors
We have seen growth in structured products which has
picked up in the last three months as investors want to start
generating alpha and want to get their portfolios in shape to
take advantage of conditions that they are seeing right now
Reporting by Simon Falush editing by Will Waterman |
JPM | Italy regulator only got generic info on Monte dei Paschi s board meeting source | ROME Reuters Italy s market regulator Consob has only received preliminary and generic information regarding Monte dei Paschi s board meeting on Sunday which sought to breathe new life into a privately funded rescue plan a source close to the watchdog said on Monday Italy s third biggest lender said on Sunday it would press ahead with a last ditch plan to raise 5 billion euros 5 32 billion on the market by year end after the European Central Bank refused to give it more time to recapitalise The eleventh hour private solution being drawn up by the bank advised by JPMorgan NYSE JPM and Mediobanca involves reopening a debt to equity swap offer This needs Consob s approval |
JPM | Italy ready to bail out Monte dei Paschi if needed Treasury source | By Giuseppe Fonte ROME Reuters Italy is ready to pump capital into Monte dei Paschi di Siena MI BMPS if the ailing bank fails to get the 5 billion euros 5 3 billion it needs to remain in business from private investors a Treasury source said on Monday Italy s third biggest bank is pressing ahead with a last ditch attempt to raise the cash on the market this year despite a government crisis triggered by Prime Minister Matteo Renzi s resignation following his defeat in a Dec 4 constitutional referendum However its chances of success are slim and the state is likely to have to step in to make up for the shortfall bankers say A failure of the world s oldest bank would threaten the savings of thousands of Italians and could have repercussions on Italy s wider banking sector which is saddled with 360 billion euros of bad loans a third of the euro zone s total If the operation failed the state would carry out a precautionary recapitalisation the Treasury source said The bank s existence and its clients savings will be preserved under any circumstances However the source said that any injection of public money would involve the mandatory conversion of subordinated bonds into shares including for 40 000 retail investors in line with European rules for dealing with bank crises The government well aware of the unpopularity of such a move is looking at ways to compensate ordinary Italians who invested their savings in the bank s junior debt Monte dei Paschi shares closed up 3 7 percent with traders saying the prospect that the state might act as an investor of last resort was helping the stock DECREE Rome is fearful of triggering a so called precautionary recapitalisation after retail investors at four small banks had their money wiped out in a government led rescue scheme last year leading to protests and at least one suicide New Italian Prime Minister Renzi loyalist Paolo Gentiloni unveiled his government on Monday keeping almost all former ministers in place in a move aimed at reassuring financial markets The new government may then be asked to sign off on the emergency decree needed to authorise a bailout of the bank Even so Renzi said on Monday that elections should be held as quickly as possible The opposition anti establishment Five Star movement which is ahead in opinion polls has accused Renzi of dragging his feet on a nationalisation of Monte dei Paschi it says should have taken place months ago The bank had sought a three week extension to Jan 20 from the European Central Bank of a deadline for completing its capital raising plan citing the political turmoil However this was rejected on the grounds that a delay would be of no use and it was time for Rome to step in according to a source With little left to lose the bank is pressing ahead with an eleventh hour privately funded scheme that includes the reopening of a voluntary debt swap offer to retail investors this week The initial offer which has so far raised 1 billion euros from institutional investors had been deemed too risky for ordinary investors It seems a reckless operation said consumer group Aduc How is it conceivable that in two weeks with Christmas in the middle 40 000 people can be called in and given all the information they need to make a considered decision Another 1 billion euros should come from Qatar s sovereign wealth fund a source close to the bank s board said on Sunday while a consortium of banks led by JPMorgan NYSE JPM and Mediobanca would try to sell shares for the remainder in the market but without underwriting the issue The bank aims to launch the private placement and the new debt swap offer on Thursday a source close to the matter said However another source added that as of Monday evening market watchdog Consob which needs to approve the reopening of the conversion offer to retail investors had only received preliminary and generic information regarding the bank s plans and it seems unlikely that the offer could start on Thursday
A public intervention is becoming more and more probable as conditions worsen and time lessens Kepler Cheuvreux said in a note This will be one of the new government s first priorities aditional reporting by Stefano Bernabei writing by Silvia Aloisi Editing by David Stamp and Philippa Fletcher |
JPM | Cumulus Media sues JPMorgan over refinancing plan | By Nate Raymond NEW YORK Reuters Cumulus Media Inc O CMLS has sued JPMorgan Chase Co N JPM seeking a court order declaring that the second largest U S radio network is allowed to proceed with a refinancing that it says would deleverage the company by up to 305 million In a lawsuit filed late on Monday in Manhattan federal court Cumulus accused JPMorgan of breaching a 2013 credit agreement and unreasonably withholding consent to certain components of the Atlanta based company s planned refinancing Cumulus said that JPMorgan s actions in its role as administrative agent under the credit agreement are threatening a deal it recently reached with bondholders which was contingent upon the refinancing being completed by Jan 27 Cumulus needs to proceed with its proposed refinancing and it needs to do so quickly Cumulus said in the complaint A spokesman for JPMorgan did not immediately respond to a request for comment According to the lawsuit in response to an industry wide decline in business Cumulus which owns 447 radio stations has launched a series of initiatives aimed at improving ratings and revenues But Cumulus said its ability to follow through on these initiatives is hindered by a heavy debt load of 2 4 billion including 610 million of senior notes due in 2019 As a result Cumulus reached a deal with a majority of bondholders in which they would refinance those senior notes using borrowings from Cumulus s 200 million revolving line of credit the lawsuit said The deal allows Cumulus to retire the notes at a discount of up to 50 cents on the dollar and avoid a springing maturity on a 1 84 billion loan that occurs if more than 200 million of the notes are outstanding in January 2019 the lawsuit said But Cumulus said JPMorgan has refused to take various steps required under the plan including allowing the transfer of the revolving credit line to new lenders and executing a loan amendment allowing the company to access the credit line The lawsuit seeks a court order declaring among other things that Cumulus s credit agreement permits it to use the revolving credit line as part of its refinancing plan and may amend a restriction that would enable it to access the credit line It also seeks an order requiring JPMorgan to consent to the assignment of the credit line to the new lenders and undertake other actions necessary to effectuate the refinancing
The case is Cumulus Media Holdings Inc et al v JPMorgan Chase Bank N A U S District Court Southern District of New York No 16 09591 |
JPM | Frustrated SWFs cast eyes over West s plans to upgrade crumbling assets | By Claire Milhench
LONDON Reuters Sovereign wealth funds are queuing up to finance the West s overhauls of crumbling roads bridges and ports as public purse strings are loosened after a period of austerity but they still face project delays and fierce competition for deals
Offering strong and stable cashflows generated by service users these investments hold huge appeal for a 6 5 trillion industry that with its focus on future generations is able to lock up capital for years
Qatar s sovereign fund was first off the blocks this week promising 10 billion for U S infrastructure after President elect Donald Trump floated plans to spend up to 1 trillion on projects that will take years to complete
Britain has flagged projects worth nearly 500 billion pounds 632 billion including expanding Heathrow airport and high speed rail European governments are backing more spending on energy transport and telecoms and Canada is speaking to SWFs and pension funds to create an infrastructure bank
Among developing economies India has huge power and expressway projects under way
But there are few signs yet that the imbalance between SWF demand for infrastructure assets and accessible supply is easing
Never have I seen such a global infrastructure deficit particularly in the OECD countries at a time when a lot of these governments are struggling financially Adrian Orr chief executive of the New Zealand Super Fund told Reuters Yet third party capital is struggling to get access
The fund has 3 percent of its investments in infrastructure
Since the global financial crisis cash strapped Western governments have been forced to put projects on ice Some have also resisted foreign ownership of strategic assets with an outcry over national security forcing UAE based DP World to sell management leases for six U S ports in 2006
This summer Britain held up a 24 billion power project on concerns over Chinese investment in nuclear infrastructure
The difficulty that SWFs have encountered sourcing deals whose appeal has risen as bond yields have sunk and equities turned more volatile means that almost two thirds are underweight infrastructure relative to their target allocation according to a study by asset manager Invesco
A second study by research provider Preqin found that infrastructure funds which raise money from investors including SWFs had accumulated 141 billion in dry powder to invest in 2016 an all time high
HIGHER PRICES
With so much capital chasing a limited number of deals prices have risen particularly for the most attractive assets
Preqin found the average infrastructure deal size hit a record 528 million in 2015 up from 486 million in 2014 as many winning bids came in higher than expected
These included the 7 4 billion paid by a consortium involving SWFs for a 99 year lease of Australia s TransGrid electricity network and the 7 3 billion paid by another group for a 50 year lease of the Port of Melbourne
To get into the biggest deals many SWFs co invest with peers and consortia comprising SWFs and major infrastructure funds such as the one that bought a majority stake in Britain s gas pipe network are typical
Now the changing mood music from Western governments heralds a flood of new opportunities though this will in many cases mean taking on the extra risk involved in construction projects
Therefore investors will typically look for a higher return component than if they are improving existing facilities said Declan Canavan head of alternatives EMEA at JPMorgan NYSE JPM Asset Management
Investors may also have to prepare for lengthy delays as governments will still need to raise funds for new projects via taxation or borrowing while local municipalities have shown little appetite for privatization
There s a limit to what a population is prepared to pay and that won t suddenly rise in huge amounts said Gershon Cohen head of infrastructure at Aberdeen Asset Management
Cohen who is skeptical about how much Trump can achieve says infrastructure is a hard sell for politicians who are often reluctant to commit to long term projects they may not get to cut the ribbon on
There s a mismatch between long term investment decisions and short term political thinking he said They need to bring projects forwards waiting 30 years for a runway is quite clearly an error
Successive British governments have spoken about a new airport or runway in South East England since the late 1970s |
JPM | American in Russia returns to face U S charges in JPMorgan hacking case | By Nate Raymond NEW YORK Reuters An American was taken into U S custody on Wednesday after arriving from Russia to face charges that he helped orchestrate a massive computer hacking and fraud scheme that included an attack against JPMorgan Chase Co NYSE JPM prosecutors said Joshua Aaron 32 was arrested at John F Kennedy International Airport in New York after being deported from Russia to the United States where he will face charges pending since last year U S authorities said Aaron came back to the United States voluntarily said Benjamin Brafman his lawyer During a court hearing Aaron pleaded not guilty to charges including computer hacking and securities fraud Aaron who was born in Maryland and attended Florida State University is one of nine people to face charges following an investigation connected to a data breach that JPMorgan disclosed in 2014 involving records for more than 83 million accounts He was charged along with two Israeli men Gery Shalon and Ziv Orenstein in an indictment filed in November 2015 for his alleged role in crimes targeting 12 companies including nine financial services firms and media outlets like the Wall Street Journal Manhattan U S Attorney Preet Bharara in a statement said Aaron worked to hack into the networks of dozens of American companies ultimately leading to the largest theft of personal information from U S financial institutions ever Prosecutors said the scheme dated back to 2007 and compromised more than 100 million people s personal information Prosecutors said the enterprise included pumping up stock prices with sham promotional emails running online casinos operating an illegal bitcoin exchange and laundering money through shell companies and accounts around the world The scheme also involved a massive attack on JPMorgan affecting 83 million customers the largest theft of customer data from a U S financial institution authorities said A separate indictment in Atlanta in November 2015 against Shalon and Aaron said that brokerages E Trade Financial Corp and Scottrade were also targets and personal information of more than 10 million customers was compromised
The case is U S v Shalon et al U S District Court Southern District of New York No 15 cr 00333 |
JPM | Exclusive Inside the BOJ rate hikes are back on the radar Really | By Leika Kihara TOKYO Reuters Interest rate hikes are back on the radar at the Bank of Japan for the first time in a decade as the U S Federal Reserve s tightening cycle pushes global bond yields higher heralding a new era for central banks retreating from post crisis stimulus With inflation stubbornly adrift of its 2 percent target and having just revamped its policy framework the BOJ is in no rush to raise its 10 year bond yield target and sees any talk of such a move as hypothetical and more a long term option But the central bank is more open to discussing the idea and may contemplate raising the target as early as next year if long term rates keep rising reflecting clear improvements in the economy say people familiar with the bank s thinking The BOJ s focus next year may not be about whether to ease more but to possibly raise its yield target said one of those people adding that a small hike next year cannot be ruled out There s a possibility the BOJ could lift the target before inflation hits 2 percent another person said adding though that the threshold for doing so would be quite high While any BOJ rate hike would be some way off it would underscore a shift in global central banking as the Fed and the European Central Bank gradually wind down their extraordinary stimulus plans deployed after the 2008 global financial crisis It would also be a landmark shift in the BOJ s prolonged battle with deflation The last time it tightened policy was in 2007 when it raised its short term rate target to 0 5 percent after ending a previous spell of quantitative easing COMMUNICATION NIGHTMARE Under a new policy framework adopted in September the BOJ pledged to guide short term rates to minus 0 1 percent and the 10 year Japanese government bond yield around zero percent The BOJ sees no need to raise the targets for now and has stressed that its priority is to cap 10 year yields around the target via huge bond purchases But as expectations of Fed rate hikes and inflation stoking policies by U S President elect Donald Trump push up global yields there is a growing awareness inside the BOJ that it may not be able to keep 10 year yields around zero for long without expanding an already huge balance sheet As global trade picks up central bank policymakers are increasingly confident of Japan s recovery and thus more comfortable brainstorming the idea of taking steps that could be perceived as monetary tightening the sources say Analysts are split on how quickly the BOJ could act Those who see a fairly strong chance of a rate hike next year point to an expected rebound in consumer inflation driven by rising oil prices and a weak yen that pushes up import costs The BOJ may consider raising the yield target if the yen falls too much and begins to hurt consumption by raising the cost of living said Masaaki Kanno chief Japan economist at JPMorgan NYSE JPM Securities BOJ officials say talk of a rate hike is very premature and stress that such a move becomes a real possibility only when there are clear signs that inflation expectations are heightening on the back of a strong economic recovery There is also no consensus within the nine member BOJ board on what would justify raising rates with some more cautious of pulling the trigger than others Communicating the BOJ s policy intention to markets would also be challenging particularly if inflation remains short of the target Some BOJ officials are already thinking how best to justify raising the yield target without giving the impression it s eyeing full blown tightening no easy task for a central bank known to wrong foot markets By raising the yield target the BOJ risks opening a Pandora s box because once you do so bond yields might spike on expectations of more rate hikes ahead said Izuru Kato chief economist at Totan Research
However the BOJ explains the move markets will see it as monetary tightening It would be hard to explain why you re doing this before inflation hits 2 percent |
JPM | Italy prepared to pump 15 billion euros into ailing banks sources | By Giuseppe Fonte and Paola Arosio ROME MILAN Reuters Italy s government is ready to pump 15 billion euros into Monte dei Paschi di Siena MI BMPS and other ailing banks sources said as the country s third largest lender pushes ahead with a private rescue plan that is widely expected to fail The world s oldest bank has until Dec 31 to raise 5 billion euros 5 2 billion in equity or face being wound down by the European Central Bank potentially triggering a wider banking and political crisis in Italy If needed the government will pump 15 billion euros into the Siena based lender and several other smaller banks to prevent that two sources close to the matter said on Thursday One source said unlisted regional banks Banca Popolare di Vicenza and Veneto Banca which were rescued this year by a state backed fund would also get support from the state The government would make the 15 billion euros available in a decree on Dec 22 La Repubblica newspaper said on Thursday adding that Banca Carige MI CRGI could also benefit Italy s banking sector is saddled with 356 billion euros of bad loans around a third of the euro zone s total and a legacy of the 2008 2009 global financial crisis when unlike Spain or Ireland Italy did not act to help its banks Monte dei Paschi di Siena advised by investment banks JPMorgan N JPM and Mediobanca MI MDBI plans to raise equity to remove 28 billion euros in bad loans from its books Italy s opposition 5 Star Movement has called for JPMorgan s fees to be voided if taxpayers have to come to the rescue We would have never done a deal like that with JPMorgan In any case we would not pay the commissions if the bank had to be nationalized Alessio Villarosa a 5 Star lawmaker said FEE NEGOTIATION The JPMorgan led plan calls for Monte dei Paschi to raise 5 billion euros in equity through a share sale and an offer for holders of its subordinated bonds to convert them into shares Monte dei Paschi is in the process of renegotiating fees with JPMorgan and the other banks that will try to sell the bank s stock after they walked out of a deal to underwrite the share issue sources have said Monte dei Paschi said on Thursday that 65 percent of the share sale would be reserved for institutional investors It would also extend its debt swap offer to include investors who hold 1 billion euros in hybrid securities known as Fresh 2008 It also wants retail investors to convert their subordinated bondholdings totaling 2 1 billion euros into shares but this depends on approval from Italian market watchdog Consob In a sign of doubts still surrounding the plan Monte dei Paschi said it had set a range of one to 24 9 euros per share for the new equity Even at 1 euro the bank would be demanding a higher valuation than nearly all its domestic rivals If Rome bails out the lender European Union rules require that private investors share in its losses a politically dangerous condition for Italy s main ruling Democratic Party given early elections are looming next year Hundreds of thousands of ordinary Italians have invested in shares and bonds of local banks A bailout of four small banks last year hit thousands of small savers Italy is in talks with the European Commission over ways to shield retail bondholders who would see their notes converted into shares in the event of a state bailout sources have said
As in the case of the four rescued banks the commission would allow the government to spare small bondholders only if they can prove they were victims of mis selling and did not understand the risk in their investment one source said 1 0 9602 euros |
C | US To Sue Citigroup Over Faulty Mortgage Bonds Sources | By The U S Department of Justice is preparing to sue Citigroup Inc NYSE C on charges that the bank defrauded investors on billions of dollars worth of mortgage securities in the run up to the financial crisis after talks to resolve the probe broke down people familiar with the matter said on Friday
A lawsuit could be filed in U S District Court in Brooklyn as early as next week the people said as the bank and civil prosecutors stood far apart in reaching an agreement on the size of any deal
The settlement negotiations had involved penalty numbers of 10 billion or more another person familiar with the talks said
Bloomberg News reported earlier on Friday that the Justice Department had asked the bank to pay more than 10 billion and that the bank had offered less than 4 billion
Citigroup shares were down 1 7 percent in New York trading following the report
A Citigroup spokesman declined to comment Robert Nardoza a spokesman for the U S attorney for the Eastern District of New York declined comment
The developments come as the Justice Department is preparing a similar lawsuit against Bank of America s BAC N Merrill Lynch unit after discussions over a 12 billion to 17 billion settlement did not produce an agreement
The 10 billion figure for Citigroup was greeted with disbelief by some on Wall Street because the bank had marketed fewer mortgage securities than did some other banks
Fred Cannon an analyst at Keefe Bruyette Woods said in a research note that he estimates Citigroup may have to pay 6 billion to reach a deal with the Justice Department which could exceed the bank s legal reserves and require it to record additional expenses this year Citigroup s share price likely already reflects a 3 billion addition to reserves he said
While Wall Street analysts base settlement estimates on the dollar amount of the securities banks sold it is much harder for them to know if prosecutors have evidence that a bank was especially egregious in packaging poor quality loans and marketing the instruments as safe and arguably should have to pay more than other banks Prosecutors also consider the level of banks cooperation in investigations and other factors
Reuters reported in December that the Justice Department was preparing a civil fraud lawsuit against the bank that alleged investors lost tens of billions of dollars on the securities at issue
U S attorney s offices in Brooklyn and Colorado have been investigating the bank as part of a larger task force probing faulty mortgage securities that helped fuel the housing bubble in the mid 2000s and contributed to its collapse |
C | After BNP U S targets range of firms in crackdown on illicit money flows | By Aruna Viswanatha WASHINGTON Reuters BNP Paribas guilty plea and agreement to pay nearly 9 billion for violating U S sanctions is part of a larger U S Justice Department shift in strategy that is expected to snare more major banks and other firms across the financial food chain Two other major French banks Credit Agricole and Societe Generale Germany s Deutsche Bank AG and Citigroup Inc s Banamex unit in Mexico are among those being investigated for possible money laundering or sanctions violations according to people familiar with the matter and public disclosures The Justice Department and other U S authorities including the Manhattan District Attorney are probing Credit Agricole and Societe Generale for potentially violating U S economic sanctions imposed against Iran Cuba and Sudan one of the sources said Credit Agricole and SocGen have disclosed that they are reviewing whether they violated U S sanctions SocGen said in its latest annual report that it is engaged in discussions with the Treasury Department s Office of Foreign Assets Control over potential sanctions violations The two banks could not be immediately reached for comment Another source said the Justice Department s bank integrity unit is deep into a probe of whether Citigroup s Banamex operation failed to police money transfers across the U S Mexico border Citigroup has said it is cooperating with the inquiry which also involves the Federal Deposit Insurance Corp Citigroup spokeswoman Molly Meiners declined comment Separately Citigroup is investigating an alleged fraud involving 565 million in loans at Banamex and as a result of that has fired a dozen employees Prosecutors have also investigated potential sanctions breaches at Deutsche Bank according to people familiar with the probe though it is unclear how far that has progressed The bank said in its last annual report that it had received requests for information from regulatory agencies and is cooperating with them It didn t immediately respond to a request for comment The timing of any possible legal action or related settlement negotiations is unclear The pipeline of cases has built up as U S prosecutors have pivoted from focusing on specific criminals to also vigorously pursuing the financial institutions that move money for them At the heart of this effort is a 12 prosecutor Money Laundering and Bank Integrity Unit within the Justice Department that was created in 2010 It handled the investigation into BNP for U S sanction law violations primarily involving Sudan deals as well as large money laundering and sanctions cases in recent years against HSBC Holdings Plc ING Bank N V and others Leslie Caldwell who leads the criminal division at Justice Department said in an interview that the unit has its sights set on a range of firms potentially involved in illicit money flows I think that we ll probably see other financial institutions regional banks maybe some smaller banks and I think we re also going to be seeing as we have already started to see more online activity Caldwell said during an interview on Friday speaking of cases in the pipeline She declined to name specific firms or confirm any particular investigations BANK SECRECY ACT Historically prosecutors have used money laundering laws to go after low level money mules said Caldwell in reference to lower level employees and others who weren t playing critical roles in instigating or allowing the money laundering The Justice Department about five years ago decided to switch tactics and to more aggressively exploit the Bank Secrecy Act which dates back to the 1970s and was expanded to include criminal penalties in the wake of the September 11 2001 attacks The law which requires financial institutions to have robust anti money laundering programs was little used for criminal prosecutions until the Money Laundering and Bank Integrity Unit known internally as mlbiu was created in 2010 to focus on enforcing it This is a way to attack that problem in a much bigger and more effective way said Caldwell a prosecutor for 17 years who was confirmed to her current post in May The old school way of attacking money laundering really didn t get at the problem which was that many banks did not have adequate controls in place to prevent those transactions from happening The shift has put the financial industry on watch after prosecutors failed to land high profile criminal cases stemming from the financial crisis and turned their attention to other types of criminal activity within the financial industry Banks have responded by hiring thousands of new compliance experts and spending millions of dollars to improve their programs I would put the investigation of financial institutions for laundering proceeds of official corruption pretty high on the list of risks said Michael Dawson who coordinates the global compliance practice at the consulting firm Promontory Financial Group After you look at the sanctions cases official corruption looms large as a risk on the horizon MOVING DOWN THE FOOD CHAIN As the unit finishes a series of money laundering and sanctions cases against some of the world s largest banks prosecutors fear that criminals have shifted to using mid level financial institutions and other types of companies who may not have the controls that large institutions now have Sources said the unit is increasingly investigating actors across the two dozen types of companies covered by the Bank Secrecy Act Among the sectors covered by the act are broker dealers jewelry and auto dealers casinos insurance companies and shipping companies The Justice Department has already gone after a handful of such institutions including check cashers in Brooklyn Philadelphia and Los Angeles who assisted healthcare fraudsters by failing to report 50 million in transactions and money transfer company MoneyGram whose agents were allegedly involved in 100 million in fraud schemes targeting the elderly MoneyGram agreed to forfeit 100 million and enter a deferred prosecution agreement over the conduct in November 2012 It said at that time that it takes compliance seriously and had created a new anti fraud program Virtual currencies have also emerged as a major focus in the wake of the unit s 2013 indictment of digital currency exchange Liberty Reserve its founders and other employees who allegedly helped criminals launder more than 6 billion in proceeds
Attorneys from the Justice Department s asset forfeiture and money laundering section which oversees the mlbiu unit have also worked closely with a new FBI unit to help trace the assets of corrupt foreign leaders traveling to Ukraine to help recover assets allegedly stolen by former president Viktor Yanukovich s government Those efforts could also unearth information about which banks may have looked the other way to move proceeds of corruption or may not have had required procedures in place sources said Reporting by Aruna Viswanatha Editing by Karey Van Hall and Martin Howell |
C | China s Three Dizzying Factors | It makes for quite the juxtaposition though perhaps not so jarring given that global banks are still enormous and disparate operations On the one hand Citigroup s CEO was eminently confident from within the confines of Davos and
The market is adjusting to a series of headwinds that can be overcome Citigroup N C CEO Michael Corbat said Thursday a day after theS P 500 fell to its lowest level in nearly two years
We view what s going on really as more a repricing than any big fundamental shift he told CNBC s Squawk Box at the World Economic Forum in Davos Switzerland
The question is who is the we to which he is referring It was just a year ago that no bank would even contemplate the possibility of recession entering Janet Yellen s perfect year especially as it was setup by unquestionable growth in the middle of 2014 best jobs market in decades This January however while Citi s CEO downplays recent turmoil the staff inside his very own bank is thinking
The global economy is on the brink of a recession with central bank stimulus less forthcoming and growth weakened by the slowdown in China Citigroup warned on Thursday
The bank cut its 2016 global growth forecast to 2 7 percent from 2 8 percent and slashed its outlook for the U S U K and Canada plus several emerging markets including Russia South Africa Brazil and Mexico emphasis added
That s a lot of slashing in order to be so sanguine I don t agree with the premise namely that this is all or even mostly due to China the Chinese sell their industrial production to whom but the condition of the Chinese economy offers more universal interpretations upon these kinds of circumstances That starts with the idea that China is slowing but within a more cheering transition to consumer rather than investment led activity and margins It is this idea that manufacturing and production matter but not nearly as much as they used to and thus not enough to make a full recessionary difference right now
After some minor encouragement in December industrial factors in January have turned yet again to the depressively concerning Yesterday it was
Profits earned by Chinese industrial firms in December fell 4 7 percent from a year earlier the seventh straight month of declines as the slowing economy hits sales and forces many companies to cut prices to win business
The weak performance is bound to spark fresh concerns about investment cuts job losses and bad loans in the world s second largest economy and could put more pressure on China s stock markets which have been pummelled sic to 14 month lows
China s stock market is a small relative matter the more troubling imbalances lie and remain elsewhere This change in production profitability is concerning on three fronts first in terms of where China s economy even in just industry might actually be at right now GDP says slowing but rather steady these figures and many others suggest
China saw annual industrial profits fall for the first time in more than a decade prompting calls for strong stimulus to boost growth even as Premier Li Keqiang on Wednesday vowed to cut loans to zombie firms and increase financial support for high tech industries
The gloomy figures add to the economy s grim start to the year coming amid growing panic over the depreciation of the yuan and state media reports on short sellers attacks in manipulating the market for the renminbi and other Asian currencies
For the first time in more than a decade is becoming a consistent qualifier for these sorts of economic indications A week ago China reported electrical output and steel production now at just such
China s output of electric power and steel fell for the first time in decades in 2015 while coal production dropped for a second year in row illustrating how a slowing economy and shift to consumer led growth is hurting industrial consumers
China s economy grew at its weakest pace in a quarter of a century in 2015 and efforts to restructure have not only slashed demand but also exposed massive overcapacity in industrial sectors such as coal steel and power
Despite these dire results and measurements there is still this tug of consumer led transition that as noted in the quote above remains as a bulwark optimistic sentiment It can be distilled as if an economy operates in completely discrete and replaceable fashion as if when industry struggles then services will just continue on that much better until industry no longer matters at all and if industry really really struggles consumption and the service economy should only factor a minor nuisance being so separated There are no such Chinese walls pun intended within an economic system which extends globally
That brings up the second contradiction noted by persistently decreasing industrial activity in China and elsewhere To this point despite production and output cuts and to capex and capacity growth there has yet to be the major transition to across the board resource reduction including and especially labor In other words consumption in China might not look as bad as production but only because there are time lags and frictions as economists call them that forestall synchronization even in these downward recessionary legs Once production stalls and contracts long enough especially in profitability terms businesses will eventually seek to harmonize production with their resources the very bad news of total cutbacks including and especially pay and then labor in full
China s business confidence and recruitment activity slipped to record lows in January a survey showed adding to signs of weakness in the world s second largest economy that could prod policymakers to roll out more support measures
The staffing index fell to 50 3 in January near the 50 no change mark from 50 8 in December hitting its lowest since the survey began as businesses have become more hesitant to recruit as economic activity weakens the survey showed
The slowdown in the Chinese economy has spread its tentacles to China s white collar workers who have received fewer year end bonuses according to a survey carried out by a recruitment company
The study by Zhaopin a Beijing based recruitment website said 66 per cent of the 10 615 white collar workers polled had not received or expected a year end bonus
That compares with the 61 2 per cent who gave the same answer when polled the previous year
About 14 per cent of the people surveyed did get a bonus for 2015
The average paid out was over 10 000 yuan HK 12 000 nearly 3 000 yuan down from 2014 the survey showed Workers were polled in 32 cities across China
The production decay is only perhaps just now starting to impact the wider Chinese economy It counts not just in resource management and eventual capitulation on those terms but also financial terms precisely the problem with This is the third worrisome notice from China s industrial profitability namely that defaults or at least perceptions of default risk will only exacerbate an already tenuous position for China s financial networks especially its dollar short
As the eurodollar standard built China in what looked like hot money inflows that created lending formation and chained liabilities predicated on China being China forever not China placing all its hopes and dreams on an unproven and hardly detected consumer transition that wasn t really specified until economists started to belatedly recognize something was wrong with industry where they were sure nothing ever could be wrong There are enormous financial implications in the slowdown as it reaches unknowable trigger points some of which we have undoubtedly If you are a dollar provider into China s banks as NPL s rise with this production massacre you are not going to remain statically attached while it all seems to get worse and worse especially as central bankers and experts continue to protest there isn t anything wrong in the first place that temporary tweaks won t alleviate
Economics becomes finance and finance only furthers those negative economics Financial distress in and of China both confirms the onrushing economic disaster as it was while suggesting because financial imbalance has not yet relented not even close much more to come
Our three parts then sum to China s industry persists at only getting worse even though it has already reverted to a state not seen in a decade or more consumer appearances may seem generally optimistic despite all that but only because industrial activity has yet to fully make adjustments through resources and labor and financial trends are likely already at the stage of self reinforcement within and without You can see why China s problems might trouble Citi s economists and staff researchers in a way that perhaps the bank s CEO might rather gloss over and around
Our problem is that these trends and analytics are not just for and of China There are no discrete pockets of fortified economic resolve with which to withstand a global manufacturing recession There are only interconnections between individual economic circumstances that are augmented amplified and affected by reflexivity in financial markets and conditions That Citigroup this as a very real possibility in sharp contrast to last January s transitory commandment shows how truly far along the economic and financial disease has infiltrated globally After all China s vast industrial might was built through eurodollars to service global consumers of which Americans account for the bulk upward as well as downward |
C | Invest With A Telescope Not A Microscope | It was another bloody week in the stock market S P 500 index dropped 3 1 and any half glass full data was interpreted as half empty The week was epitomized by a Citigroup N C report entitled World Economy Trapped in a Death Spiral A sluggish monthly jobs report on Friday which registered a less than anticipated addition of 151 000 jobs painted a weakening employment picture Professional social media site LinkedIn Corp N LNKD added fuel to the fire with a soft profit forecast which resulted in the stock getting almost chopped in half 44 in a single day ouch
It s funny how quickly the headlines can change just one week ago the Dow Jones Industrial index catapulted higher by almost 400 points in a single day and we were reading about soaring stocks
Coherently digesting the avalanche of diverging and schizophrenic headlines is like attempting to analyze a windstorm through a microscope A microscope is perfect for looking at a single static item up close but a telescope is much better suited for analyzing a broader set of data With a telescope you are better equipped to look farther out on the horizon to anticipate what trends are coming next The same principle applies to investing Short term traders and speculators are great at using a short term microscope to evaluate one shiny attention grabbing sample every day The investment conclusion however changes the following day when a different attention grabbing headline is analyzed to a different conclusion As Mark Twain noted If you don t read the newspaper you are uninformed If you do read the newspaper you are misinformed
Short termism is an insidious disease that will slowly erode short run performance and if not controlled will destroy long run results as well This is not a heretic concept Some very successful investors have preached this idea in many ways Here are a few of them
We will continue to ignore political and economic forecasts which are an expensive distraction for many investors and businessmen Warren Buffett Annual Newsletter 1994
If you spend more than 14 minutes a year worrying about the market you ve wasted 12 minutes Peter Lynch
Excessive short termism results in permanent destruction of wealth or at least permanent transfer of wealth Jack Gray Grantham
On the flip side those resilient investors who have succeeded through investment cycles understand the importance of taking a long term view
Whatever method you use to pick stocks or stock mutual funds your ultimate success or failure will depend on your ability to ignore the worries of the world long enough to allow your investments to succeed Peter Lynch
The farther you can lengthen your time horizon in the investment process the better off you will be David Nelson Legg Mason
Long term owners are more relaxed more informed more patient less emotional John Templeton
If you are really a long term investor you will view a bear market as an opportunity to make money John Templeton
Long term is not a popular time horizon for today s hedge fund short term mentality Every wiggle is interpreted as a new secular trend Don Hays
In the long run one of the greatest risk to your net worth is not owning stocks Bonds do not grow They can only return their face value at maturity Inflation is a silent insidious tax that erodes your net worth Fortunately there is an easy way to keep pace with and even beat inflation and this is stocks John Spears
In the short term the stock market is a voting machine in the long term a weighing machine Benjamin Graham
There has been a lot of pain experienced so far in 2016 and there may be more to come However trying to time the market and call a bottom is a fruitless effort Great companies and investments do not disappear in a bear market At times like these it is important to stick to a systematic disciplined approach that integrates valuation and risk controls based on where we are in an economic cycle Despite all the recent volatility as I ve repeated many times the key factors driving the direction of the stock market are the following 1 Corporate profits 2 Interest rates 3 Valuations and 4 Sentiment Doom and gloom Death Spiral headlines may currently rule the day but the four key stock driving factors on balance remain skewed towards the positive if you have the ability to put away your microscope and take out your telescope |
MS | European stocks climb led by oils techs | FTSEurofirst up 0 3 percent pares gains after German data
Oils advance on strong crude
Techs buoyed by Texas Instruments raised outlook
For up to the minute market news click on
By Brian Gorman
LONDON June 9 Reuters European stocks were higher at
midday on Tuesday led by energy companies as crude prices rose
to 69 a barrel and technology firms gaining from Texas
Instruments upbeat outlook
At 1045 GMT the FTSEurofirst 300 index of top European
shares was up 0 3 percent at 867 46 points down from a high of
875 75 after gloomy German macroeconomic data
The index fell 0 8 percent on Monday but is up more than 34
percent from the lifetime low it hit on March 9
German industrial production fell unexpectedly by 1 9
percent month on month in April hit by a sharp fall in capital
goods output the Economy Ministry said
German exports resumed their slide in April and imports fell
even more sharply tempering hopes that Europe s largest economy
will soon recover from its deepest recession since World War
Two
The market is taking a bit of a breather said Georgina
Taylor equity strategist Legal General Investment Management
in London The data has been mixed with German industrial
production worse than expected
We re past that stage of all news being good news We need
to sit back and reassess how strong the recovery is going to be
how quick it is going to be
Oil was hovering around 69 a barrel just below its highest
in seven months as the dollar retreated and ahead of weekly
stocks data forecast to show a fall in U S crude inventories
BP gained 1 5 percent while ENI Royal Dutch Shell and
Total rose between 0 7 and 1 1
percent
Tech stocks got a boost from U S firm Texas Instruments
which raised its targets for second quarter earnings and
revenue signalling improving demand in the chip market
Index heavyweight Nokia climbed 3 9 percent while
STMicroelectronics and Alcatel Lucent added 3 7 and 1 7 percent
respectively
We expect other companies to also beat their initial
guidance when they report their second quarter revenues in
July Credit Suisse analysts wrote in a note
U S FUTURES FALL
Wall Street was set for a lower open Futures for the Dow
Jones S P 500 and Nasdaq were flat to down 0 3 percent
The Spring rally has produced a big gap in valuations
between cyclicals and defensives But the market is now heading
into a consolidation phase and we should see a rotation in
favour of utilities healthcare and the likes said Jacques
Henry analyst at Louis Capital Markets in Paris
Around Europe Britain s FTSE 100 index was down 0 1
percent Germany s DAX index was 0 2 percent lower and France s
CAC 40 was up 0 03 percent
French electrical components firm Legrand gained 3 8 percent
after UBS upgraded its rating on the stock to buy from
neutral while food group Danone upgraded to overweight
from equal weight by Morgan Stanley rose 3 8 percent
Banking shares were on the rise led by Lloyds Banking Group
up 2 6 percent regaining some of the ground it lost on
Monday The lender will close all branches of its Cheltenham
Gloucester mortgage unit and cut some 1 500 jobs
Spain s Banco Santander was up 1 6 percent and Credit
Suisse rose 0 9 percent
Air France KLM was 3 8 percent lower down for a fifth day
after Europe s biggest airline unveiled an 8 1 percent drop in
passenger traffic in May and after RBS cut its rating on the
stock to hold from buy
Additional reporting by Blaise Robinson editing by Simon
Jessop |
MS | GLOBAL MARKETS Oil tops 72 Asia resource stocks soar | Oil rises to highest since October as commodities climb
Australia dollar climbs near 0 81
US Treasury yields tick lower after 10 yr jumps to 4 pct
Asia ex Japan resource stocks outperform
Corrects to show U S oil stocks drawdown was larger not
smaller than expected
By Kevin Plumberg
HONG KONG June 11 Reuters Asian stocks edged higher
powered by a sharp rise in commodity related shares as oil
prices extended gains on Thursday keeping a rising trend in
raw materials prices intact and boosting the Australian dollar
Major European stock markets were expected to open as much
as 0 3 percent higher according to financial bookmakers ahead
of U S retail sales data Wall Street futures were up 0 3
percent indicating a higher open later
U S Treasuries edged higher after the benchmark 10 year
yield advanced to 4 percent overnight the highest since Oct
16 on concern about how expensive it will be for the U S
government to finance its growing budget deficit
The U S dollar fell against the euro ahead of an 11
billion auction of 30 year bonds later though some analysts
expected foreign investors to continue to snap up Treasuries
with higher yields supporting the currency
Meanwhile tight inventories were squeezing crude prices
which rose to the highest since October last year
Oil prices continue their march to and then beyond 75
per barrel Our forecast of an average 85 a per barrel for
2010 appears well on track and we believe further upside price
risk exists incoming quarters Barclays Capital analysts said
in a research note
U S light crude for July delivery was up 1 1 percent to
72 15 following U S data showing a larger than expected
drawdown of inventories
Commodity prices have been broadly supported by signs of
sustained domestic demand in China Despite a slightly larger
than expected annual decline in Chinese exports in May urban
fixed asset investment rose 32 9 percent last month compared
with a year ago
Japan s Nikkei share average briefly poked above the
psychologically key 10 000 to an eight month high but closed
down 0 1 percent on worries that rising interest rates in U S
bond markets could thwart an economic recovery
Still shares of Nippon Steel Corp and other steel
companies jumped and held on to gains after Morgan Stanley
upgraded its ratings of the sector
The benchmark S P ASX 200 index in resource rich Australia
edged up 0 6 percent buoyed by a 19 percent surge in shares of
Fortescue Metals on market rumours of Chinese interest in
resource companies
The MSCI index of Asia Pacific stocks outside Japan rose
0 5 percent but the materials sector index was up 2 1 percent
The sub index has risen 79 percent in the last three
months and the 90 day correlation with the Australian dollar
has tightened to 0 98
U S DOLLAR DOWN BUT NOT OUT
The Australian dollar was up around 1 1 percent at 0 8102
boosted after a report showed national employment fell much
less than expected in May The data was interpreted by the
market to mean the Reserve Bank of Australia has fewer reasons
to lower interest rates further to support the economy
The New Zealand dollar rallied more than 1 2 percent to
0 6365 after the central bank kept its interest rate steady at
a record low 2 5 percent and pledged to keep it there through
next year a move seen ending its aggressive easing cycle to
combat recession as the economy shows tentative signs of
bottoming out
The euro rose about 0 5 percent to 1 4040 but trends were
unclear with the market s focus torn between higher U S
yields pronouncements from reserve managers on their Treasury
holdings and the trajectory of interest rates in the euro zone
Some analysts were positive about the dollar s outlook
because of sustained interest by foreign official investors as
well as private investors looking for higher yields
The dollar gained following the steepening of the U S
yield curve which is certainly good news as it suggests the
dollar can do well in an environment of rising yields
particularly should sovereign concerns abate said Brian Kim
currency strategist with UBS in a note to clients
The benchmark 10 year U S Treasury yield slipped to 3 93
percent after rising as high as 4 percent on Wednesday This
week Treasuries have been under pressure because of 65 billion
in new supply coming to the market
Higher Treasury yields have a domino effect on the economy
since key rates for loans like mortgages are benchmarked to
them In the last three weeks the 30 year U S mortgage rate
has risen 88 basis points according to the Mortgage Bankers
Association at a precarious time when the housing market is
slowly stabilising
Japanese government bonds also sold off pushing up the
10 year yield to the highest since late October at 1 56
percent
Additional reporting by Maryelle Demongeot in SINGAPORE
Editing by Lincoln Feast |
MS | CORRECTED CORRECTED RPT GLOBAL MARKETS Oil tops 72 Asia resource stocks | Oil rises to highest since October as commodities climb
Australia dollar climbs near 0 81
US Treasury yields tick lower after 10 yr jumps to 4 pct
Asia ex Japan resource stocks outperform
Corrects to show U S oil stocks drawdown was larger not
smaller than expected
By Kevin Plumberg
HONG KONG June 11 Reuters Asian stocks edged higher
powered by a sharp rise in commodity related shares as oil
prices extended gains on Thursday keeping a rising trend in
raw materials prices intact and boosting the Australian dollar
Major European stock markets were expected to open as much
as 0 3 percent higher according to financial bookmakers ahead
of U S retail sales data Wall Street futures were up 0 3
percent indicating a higher open later
U S Treasuries edged higher after the benchmark 10 year
yield advanced to 4 percent overnight the highest
since Oct 16 on concern about how expensive it will be for the
U S government to finance its growing budget deficit
The U S dollar fell against the euro ahead of an 11
billion auction of 30 year bonds later though some analysts
expected foreign investors to continue to snap up Treasuries
with higher yields supporting the currency
Meanwhile tight inventories were squeezing crude prices
which rose to the highest since October last year
Oil prices continue their march to and then beyond 75
per barrel Our forecast of an average 85 a per barrel for
2010 appears well on track and we believe further upside price
risk exists incoming quarters Barclays Capital analysts said
in a research note
U S light crude for July delivery was up 1 1
percent to 72 15 following U S data showing a larger than
expected drawdown of inventories EIA S
Commodity prices have been broadly supported by signs of
sustained domestic demand in China Despite a slightly larger
than expected annual decline in Chinese exports in May urban
fixed asset investment rose 32 9 percent last month compared
with a year ago ID nLB158202
Japan s Nikkei share average briefly poked above
the psychologically key 10 000 to an eight month high but
closed down 0 1 percent on worries that rising interest rates
in U S bond markets could thwart an economic recovery
Still shares of Nippon Steel Corp 5401 T and other steel
companies jumped and held on to gains after Morgan Stanley
upgraded its ratings of the sector
The benchmark S P ASX 200 index in resource rich
Australia edged up 0 6 percent buoyed by a 19 percent surge in
shares of Fortescue Metals on market rumours of
Chinese interest in resource companies
The MSCI index of Asia Pacific stocks outside Japan
rose 0 5 percent but the materials sector
index was up 2 1 percent
The sub index has risen 79 percent in the last three
months and the 90 day correlation with the Australian dollar
has tightened to 0 98
U S DOLLAR DOWN BUT NOT OUT
The Australian dollar was up around 1 1 percent at 0 8102
boosted after a report showed national employment fell
much less than expected in May The data was interpreted by the
market to mean the Reserve Bank of Australia has fewer reasons
to lower interest rates further to support the economy
ID nSYD423590
The New Zealand dollar rallied more than 1 2 percent
to 0 6365 after the central bank kept its interest rate steady
at a record low 2 5 percent and pledged to keep it there
through next year a move seen ending its aggressive easing
cycle to combat recession as the economy shows tentative signs
of bottoming out ID nWEL502629
The euro rose about 0 5 percent to 1 4040 but
trends were unclear with the market s focus torn between
higher U S yields pronouncements from reserve managers on
their Treasury holdings and the trajectory of interest rates in
the euro zone
Some analysts were positive about the dollar s outlook
because of sustained interest by foreign official investors as
well as private investors looking for higher yields
The dollar gained following the steepening of the U S
yield curve which is certainly good news as it suggests the
dollar can do well in an environment of rising yields
particularly should sovereign concerns abate said Brian Kim
currency strategist with UBS in a note to clients
The benchmark 10 year U S Treasury yield slipped to 3 93
percent after rising as high as 4 percent on
Wednesday This week Treasuries have been under pressure
because of 65 billion in new supply coming to the market
Higher Treasury yields have a domino effect on the economy
since key rates for loans like mortgages are benchmarked to
them In the last three weeks the 30 year U S mortgage rate
has risen 88 basis points according to the Mortgage Bankers
Association at a precarious time when the housing market is
slowly stabilising
Japanese government bonds also sold off pushing up the
10 year yield to the highest since late October at 1 56
percent
Additional reporting by Maryelle Demongeot in SINGAPORE
Editing by Lincoln Feast |
MS | FTSE flat early on miners oils down pharmas up | Miners oils retreat after recent rally
Pharmas higher boosted by broker upgrade
Invensys lifted By Goldman upgrade
By Jon Hopkins
LONDON June 11 Reuters Britain s leading share index
was flat in early trade on Thursday with weakness in heavyweight
oils and miners balanced by gains in pharma issues supported by
a Morgan Stanley sector upgrade
At 0804 GMT the FTSE 100 index was 1 53 points or 0 1
percent lower at 4 435 22 having closed up 31 96 points or
0 7 percent at 4 436 75 the previous session
I think it s sensible that the market should consolidate
after the very strong rally it s had because although some of
the economic news has improved it is not yet clear it has
improved enough to lead to growth in corporate profits said
Andrew Bell European strategist at investment managers
Rensburg Sheppards
Oil majors retreated after recent gains as crude prices
consolidated around 71 a barrel with BP Royal Dutch Shell BG
Group Cairn Energy and Tullow Oil losing 0 2 to 1 0 percent
Miners also saw a recent rally curbed as metal prices came
off the boil as well with Rio Tinto Eurasian Natural Resources
Xstrata Antofagasta Vedanta Resources and Lonmin losing
between 1 2 and 2 4 percent
Rio Tinto offered a share in a planned iron ore alliance
with BHP Billiton to Chinalco as a peace offering following the
collapse of Rio s 19 5 billion deal with the Chinese firm the
Australian Financial Review said on Thursday
Banks were weaker weighed down by falls in global
heavyweight HSBC down 0 9 percent with Standard Chartered also
losing 0 9 percent
However Barclays gained 0 5 percent while Royal Bank of
Scotland and Lloyds Banking Group added 2 1 and 1 9 percent
respectively
The company managing Britain s stakes in Royal Bank of
Scotland and Lloyds Banking Group could sell an exchangeable
bond in the two banks according to the Daily Telegraph
Sentiment is a bit like a water bed you never know quite
which way it s going to bulge in the short term but for the
market to go significantly higher we need to see evidence
that economies have turned the corner and that actual
economic growth has arrived
DRUGS WANTED
GlaxoSmithKline was a strong blue chip gainer up 1 7
percent as Morgan Stanley raised its rating to equal weight in
a review of European drug stocks with the broker raising its
sector view to attractive from in line
Peer AstraZeneca gained 0 8 percent Three widely used
antipsychotic medications including AstraZeneca s Seroquel
appear safe and effective overall in treating children and
teenagers with schizophrenia or bipolar disorder a U S
advisory panel said
Engineering blue chip Invensys was also in demand adding
2 4 percent while mid cap peer Tomkins took on 3 7 percent as
Goldman Sachs hiked its rating for both to buy
Thomas Cook was the top blue chip riser as ongoing
speculative interest swirled around the tour operator with a
battle expected for the stricken German retailer Arcandor s 53
percent stake in the travel firm
With no UK economic data due on Thursday U S May retail
sales and weekly jobless claims both due at 1230 GMT may
provide investors with further clarity on the world s largest
economy as the pace of the economic deterioration has moderated
British Prime Minister Gordon Brown said recent economic
data suggested government action to tackle the recession was
starting to have some effect
Editing by Simon Jessop |
MS | European shares flat trade thin ahead U S data | FTSEurofirst 300 index rises 0 3 percent
Trading thin ahead U S data
Health care top gainer Morgan Stanley upgrades Glaxo
Recent outperformer Rio Tinto down Shanghai copper falls
By Peter Starck
FRANKFURT June 11 Reuters European shares traded
slightly higher early on Thursday led by healthcare stocks
with trading thin ahead of U S economic data due later in the
session
U S weekly jobless claims and retail sales for May are due
at 1230 GMT both sets of data expected by analysts to shed more
light on whether the world s largest economy is on the mend
Everything depends on the U S retail sales data said
Heino Ruland analyst at Ruland Research
Economists polled by Reuters expect a 0 5 percent rise in
retail sales compared with a 0 4 percent decline in April
Excluding automobiles sales are expected to rise 0 2 percent
compared with a 0 5 percent drop the month before
The U S weekly jobless claims will be under scrutiny after
last week s divergence in payrolls versus the unemployment
data CMC Markets said in a note ID nN05274048
ID nNYS005129
European Central Bank governing council member Christian
Noyer said the global economy could start growing again between
the end of this year and the middle of 2010 ID nHKG272308
The global equity market can continue to rally while bond
yields are below 5 6 percent Citigroup said in an equity
strategy note
The yield on 10 year U S Treasuries briefly
rose above 4 0 percent overnight after a higher than expected
yield in an auction of the paper on Wednesday ID nN10564782
At 0830 GMT the FTSEurofirst 300 index of top
European shares was up 0 3 percent at 882 91 points having
closed 1 2 percent higher on Wednesday
Pharmaceuticals added the most points to the index with
GlaxoSmithKline rising 1 7 percent after positive
analyst comments
Morgan Stanley upgraded the stock to equal weight from
underweight and Cazenove which rates Glaxo outperform
said GSK s risk profile for the remainder of 2009 is
relatively benign and as the generic hits begin to wash out we
should see the start of an earnings recovery
The DJ STOXX healthcare index rose 1 1 percent
CAPITAL GOODS ATTRACTIVE
Industrial engineering was another sector showing
strength up 0 6 percent after Goldman Sachs upgraded capital
goods to attractive from neutral
Current share prices offer an attractive entry point into
the capital goods sector Goldman said in a sector note
British diversified engineering group Tomkins one
of the stocks upgraded by Goldman Sachs rose 4 5 percent
Also among the gainers Allied Irish Banks climbed
9 3 percent on news that it would exchange up to 2 7 billion
euros 3 79 billion worth of bonds in a swap programme to
boost its core Tier 1 capital ratio ID nLB374127
Mining group Rio Tinto was the top blue chip loser
down 0 7 percent The stock rose as much as 20 percent between
June 4 and 10 distinctly outperforming the DJ STOXX European
basic resources index
Shanghai copper fell half a percent on Thursday with
investors hesitant to buy into the recent rally fearing a
downward correction in prices on weak fundamentals
ID nSHA154461
The rally in base metals has been partly boosted by economic
data showing positive signs for a recovery in the global
economy
Chinese investment surged in May feeding hopes the world s
third largest economy may lead a recovery but foreign trade
fell more sharply than expected underscoring warnings that
China s economic recovery is not yet on solid ground
ID nLB158202
Back in Europe shares in Givaudan fell 3 8
percent after the Swiss flavours and fragrances maker announced
plans to raise around 420 million Swiss francs 391 million by
issuing 1 million shares to reduce debt and increase
flexibility ID nLB136316
A rights issue has been rumoured for some time given the
company s indebtedness but the 40 percent discount no doubt
to ensure it gets away appears steep there is a 13 percent
earnings per share dilution Kepler Research said in a note
1 1 077 Swiss francs
1 7126 euros
Editing by Mike Nesbit |
MS | European stocks rise banks gain eyes U S data | FTSEurofirst 300 index up 0 6 percent
Banks rise investors focus on U S data
Health care stocks gain Morgan Stanley upgrades Glaxo
By Farah Master
LONDON June 11 Reuters European stocks were up at
midday on Thursday with banks bolstered by investor optimism
over prospects for economic recovery but markets awaited U S
economic data due later in the session
At 1008 GMT the FTSEurofirst 300 index of top European
shares was up 0 6 percent at 885 11 points having closed 1 2
percent higher on Wednesday
The index has gained around 37 percent since it hit a record
low on March 9 as investors have warmed to prospects for
economic recovery
U S weekly jobless claims and retail sales for May are due
at 1230 GMT with both sets of data expected by analysts to shed
more light on whether the world s largest economy is on the
mend
The U S retail sales will probably be the main agenda item
in a day that seems to be devoid of major news flow said
Jeremy Batstone Carr analyst at Charles Stanley in London In
order to make further progress we need to see further
confirmation of economic recovery
Economists polled by Reuters expect a 0 5 percent rise in
retail sales compared with a 0 4 percent decline in April
Excluding automobiles sales are expected to rise 0 2 percent
compared with a 0 5 percent drop the month before
European Central Bank governing council member Christian
Noyer said the global economy could start growing again between
the end of this year and the middle of 2010
Banks added the most points to the index with Barclays up 2
percent BNP Paribas up 1 6 percent HSBC Holdings up 2 9
percent UBS up 2 4 percent and Swedbank up 3 1 percent
Allied Irish Banks climbed 6 9 percent on news that it would
exchange up to 2 7 billion euros worth of bonds in a move to
boost its core Tier 1 capital ratio The DJ STOXX banking index
rose 1 5 percent
Pharmaceuticals were large gainers with GlaxoSmithKline
rising 2 1 percent after positive analyst comments
Morgan Stanley upgraded the stock to equal weight from
underweight and Cazenove which rates Glaxo outperform
said GSK s risk profile for the remainder of 2009 is
relatively benign and as the generic hits begin to wash out we
should see the start of an earnings recovery
The DJ STOXX European healthcare index rose 1 3 percent
CAPITAL GOODS ATTRACTIVE
The DJ Stoxx European industrial goods and services index
was another sector showing strength up 0 8 percent after
Goldman Sachs upgraded capital goods to attractive from
neutral
Current share prices offer an attractive entry point into
the capital goods sector Goldman said in a sector note
British engineer Invensys one of the stocks upgraded by
Goldman Sachs rose 2 9 percent
Shares in Givaudan fell 2 5 percent after the Swiss flavours
and fragrances maker announced a deeply discounted rights issue
to raise around 420 million Swiss francs 391 million by
issuing 1 million shares to reduce debt and increase
flexibility
A rights issue has been rumoured for some time given the
company s indebtedness but the 40 percent discount no doubt
to ensure it gets away appears steep There is a 13 percent
earnings per share dilution Kepler Research said in a note
Additional reporting by Peter Stark Editing by Greg Mahlich |
MS | FTSE up 0 5 pct banks pharmas higher oils down | Banks rally HSBC upgraded by Credit Suisse
Pharmas higher boosted by broker upgrade
Miners oils retreat after recent rally
By Jon Hopkins
LONDON June 11 Reuters Britain s top share index was up
0 5 percent approaching midday on Thursday with gains in banks
and pharma issues driven by broker upgrades countering
weakness in heavyweight oils and miners
At 1034 GMT the FTSE 100 index was up 20 24 points at
4 456 99 having closed up 31 96 points or 0 7 percent at
4 436 75 in the previous session
While there is a skip in the step for the wider UK economy
the markets continue to trundle feebly from one end of a
narrow range to the other said Anthony Grech market
strategist at spread betters IG Index
For now at least trading on the stock market is still very
much a waiting game But once the floodgates open we may see
some impressive movements after weeks of purposeless
meandering Grech added
Banks were the best performing blue chips by midday pulled
higher by a rally from earlier falls by sector heavyweight HSBC
up 2 9 percent after Credit Suisse raised its rating to
outperform from neutral
In a sector review the broker said it thinks funding is a
key challenge for the European banks but believes that HSBC is
well placed for that challenge
Royal Bank of Scotland was the top FTSE 100 gainer up 5 3
percent while Lloyds Banking Group added 3 1 and Barclays took
on 2 8 percent
The company managing Britain s stakes in Royal Bank of
Scotland and Lloyds Banking Group could sell an exchangeable
bond in the two banks according to the Daily Telegraph
GlaxoSmithKline was also a strong blue chip gainer up 2 2
percent as Morgan Stanley raised its rating to equal weight in
a review of European drug stocks with the broker raising its
sector view to attractive from in line
Peer AstraZeneca gained 0 9 percent Three widely used
antipsychotic medications including AstraZeneca s Seroquel
appear safe and effective overall in treating children and
teenagers with schizophrenia or bipolar disorder a U S
advisory panel said
COMMODS RETREAT
Oil majors retreated after recent gains as crude prices
consolidated around 72 a barrel with BP Royal Dutch Shell
and Cairn Energy losing 0 6 to 0 7 percent
Selected miners also saw a recent rally curbed as metal
prices came off the boil with BHP Billiton Xstrata Anglo
American and Vedanta Resources losing between 0 3 and 1 2
percent
Rio Tinto however gained 0 4 percent turning round from
earlier falls Rio offered a share in a planned iron ore
alliance with BHP Billiton to Chinalco as a peace offering
following the collapse of Rio s 19 5 billion deal with the
Chinese firm the Australian Financial Review said on Thursday
Engineering blue chip Invensys was in demand adding 3 2
percent while mid cap peer Tomkins took on 4 1 percent as
Goldman Sachs hiked its rating for both to buy
Intertek however lost 0 8 percent after Cazenove cut its
stance to in line from outperform after reducing estimates
for the testing equipment firm for currency factors
U S stocks futures were pointing to a higher open on
Thursday with investors eyeing U S May retail sales and weekly
jobless claims numbers both due at 1230 GMT which may provide
further clarity on the world s largest economy
Sentiment is a bit like a water bed you never know quite
which way it s going to bulge in the short term but for the
market to go significantly higher we need to see evidence
that economies have turned the corner and that actual
economic growth has arrived said Andrew Bell European
strategist at investment managers Rensburg Sheppards
Editing by Rupert Winchester |
JPM | Philippines outsourcing firms hit by Trump and Trump East | By Neil Jerome Morales and Karen Lema MANILA Reuters When Philippines President Rodrigo Duterte the man dubbed Trump of the East told U S businesses to pack their bags if they didn t like his anti American rhetoric the huge and growing outsourcing industry got a little nervous It s now the real Donald Trump who has businesses worried here after the U S president elect vowed to bring offshored jobs home from places such as the Philippines a big provider of back office services for corporate America The Southeast Asian country accounts for 12 6 percent of the global market for business process outsourcing BPO which has been growing 10 percent a year for the past decade according to the IT Business Process Association of the Philippines IBPAP The industry body predicts the BPO industry could be adding 100 000 jobs annually with earning revenues of 38 9 billion by 2022 although global outsourcing consultants believe that could even reach 48 billion within four years Three quarters of the 23 billion sector services U S firms It s a U S centric business said Manuel Pangilinan president of PLDT PS TEL which provides telecoms for the sector To the extent that Trump compels persuades or incentivises the BPO businesses to return it will impact our business or the industry as a whole It s going to be a tough one not only for us but for the economy as a whole TRUMP TWEETS In a string of tweets on Sunday Trump threatened retribution or consequences for companies that move operations out of the country as well as a 35 percent tariff on their goods sold back to the United States That could leave the Philippines exposed with companies such as Citibank JPMorgan N JPM Verizon N VZ Convergys N CVG Genpact N G and Sutherland Global Services key to jobs that were forecast to increase to 1 8 million full time Filipinos by 2022 It s not just companies in the Philippines that are worried Anticipating a more protectionist U S technology visa program under a Donald Trump administration India s 150 billion IT services sector will speed up acquisitions in the United States industry sources there say Companies also plan to recruit more heavily from college campuses expecting the Trump administration to tighten up on temporary visas for India s high tech workers WAIT AND SEE Philippine businesses and BPO firms that spoke to Reuters said some trade delegations had deferred visits and potential foreign investors in the industry were taking longer with their due diligence procedures And they were doing so even before Trump won the U S presidential election on Nov 9 Duterte s volatility has drawn comparisons to Trump and his hostility towards Manila s long time ally the United States has shocked investors and even his own cabinet He told President Barack Obama to go to hell over the U S president s concern about Duterte s war on drugs threatened to scrap U S Philippines defense pacts and in October announced before China s political elite his separation from the United States That remark rattled some U S firms said Juan Victor Hernandez an IBPAP trustee who told Reuters that four companies put their decisions on hold immediately He declined to name them Hernandez said uncertainties over Trump s policies affected potential investors rather than existing ones such as JP Morgan which is staying put So far they are still hell bent on the Philippines number one he added PACK YOUR BAGS Philip Goldberg who until recently was the U S ambassador in Manila said he took more calls from investors in his last three months than during his whole tenure All were about Duterte s anti American vitriol They are very nervous Goldberg told news channel ANC They don t know what it means While aware of those concerns about him Duterte was defiant Go ahead Pack your bags he told reporters before flying to Japan in October We will sacrifice We will recover Julius Guevara head of research at Colliers Philippines said while U S investors were concerned about Duterte and Trump firms that are already in the Philippines are unlikely to leave If it s more profitable for them to continue having operations here in the Philippines I don t think Trump can do anything about it he said Charito Plaza an ally of the president and director general of the Philippine Economic Zone Authority said Duterte would ask Trump to be kind to U S firms looking at the Philippines But it wasn t clear if Duterte did that when the two spoke last Friday Duterte said he felt a rapport with Trump and assured him of our ties But the only policy issue Duterte mentioned afterwards was his drugs crackdown which he said Trump understood GROWTH DRIVER Policy makers have been banking on BPO overtaking remittances as the mainstay of one of the world s fastest growing economies The BPO sector s recent growth plan said it wasn t Trump or Duterte that posed the biggest challenge to the industry but automation The plan aims to boost mid to high skilled labor from 53 percent of the workforce to 73 percent by 2022 to meet that challenge That would push annual incomes from 19 100 to 21 600 with jobs that diversify beyond voice services and focus on higher value IT support Economic planning minister Ernesto Pernia told Reuters he was optimistic the Philippines competitive costs and services would insulate its BPO sector from Trump and the BPO jobs that Filipinos do might not appeal to Americans Duterte s talk shouldn t be taken too seriously either Pernia said
I think investors should listen to the economic planners and not the president he said Writing and additional reporting by Martin Petty Editing by Bill Tarrant |
JPM | Italy awaits ECB verdict on Monte Paschi rescue delay | By Silvia Aloisi and Paola Arosio MILAN Reuters The European Central Bank s supervisory board meets again on Friday to discuss Monte dei Paschi di Siena s MI BMPS request for more time to raise capital with banking sources saying its members are split over the decision Should the ECB reject the extension the Italian government is expected to intervene to recapitalize the country s third biggest bank to avert the risk of it being wound down Such a move to pump in state cash could happen within days banking and government sources say The Tuscan lender has asked the ECB to give it until January 20 from a previous year end deadline to try to wrap up a privately backed 5 billion euro 5 3 billion rescue plan that was thrown into doubt by Prime Minister Matteo Renzi s defeat in a referendum at the weekend and subsequent resignation Italy must come up with a solution quickly to avoid the crisis at Monte dei Paschi threatening the savings of thousands of retail investors and spreading across the wider banking sector but the power vacuum created by Sunday s vote is not helping A financial crisis in the euro zone s third biggest economy would also risk creating contagion across Europe a region already reeling from Britain s decision to leave the EU Renzi quit on Wednesday and a new government is expected to be appointed in coming days but most parliamentary factions are pushing for an early election in a few months time A long meeting on Thursday of the supervisory body of the ECB the euro zone s banking supervisor could not agree on what to do with Monte dei Paschi s request for extra time A source close to the matter said some members of the board were pushing to reject the request so that the Italian government would have to act immediately to save the bank rated the weakest lender in a European stress test this summer Sources told Reuters on Tuesday that the government could take a 2 billion euro controlling stake in Monte dei Paschi hoping that would persuade private investors to come on board ECB BOARD DIVISIONS But if the ECB were to reject the extension request it would be left exposed to accusations that it is effectively pulling the plug on the lender by undermining the credibility of its rescue plan and potentially trigger a deposit outflow the source close to the matter said Other members of the ECB committee think the central bank should not directly respond to Monte dei Paschi s request but talk to the Italian government first This would buy Rome a bit more time to pass a decree authorizing a precautionary recapitalization of the lender and including measures that would help other ailing Italian banks However Renzi s outgoing government is unlikely to want to pass such a decree because under EU rules state intervention would entail losses for the bank s junior bondholders It may therefore be necessary to wait for a new administration to be appointed which could happen on Monday Either way state intervention is increasingly likely as the bank s hopes of pulling off the private rescue plan are fading Investment banks that must decide whether to back the cash call led by JPMorgan NYSE JPM and Mediobanca are due to hold talks again on Friday after putting the deal on hold this week Investors including the Qatar Investment Authority which could inject 1 billion euros in the bank are reluctant to commit money until they know which government will succeed Renzi and whether there is a real possibility of early elections Opinion polls put the anti establishment 5 Star movement neck and neck with the center left Democratic Party PD Rome is keen to protect 40 000 retail investors that hold 2 1 billion euros of subordinated bonds in the bank and the state intervention plan being drafted envisages the purchase of those bonds by the government But it is not clear whether EU authorities would allow that |
JPM | Exclusive ECB rejects Monte Paschi s request for more time to raise cash source | By Silvia Aloisi and Paola Arosio MILAN Reuters The European Central Bank has rejected a request by Italy s Monte dei Paschi di Siena MI BMPS for more time to raise capital a source said on Friday a decision that piles pressure on the Rome government to bail out the lender Italy s third largest bank and the world s oldest had asked for a three week extension until January 20 to try to wrap up a privately funded 5 billion euro 5 3 billion rescue plan in the face of fresh political uncertainty The ECB s supervisory board turned down the request at a meeting on Friday on the grounds that a delay would be of little use and that it was time for Rome to step in the source said The Italian government is likely to intervene in the next few days possibly as early as this weekend to bail out the bank to prevent it being wound down banking sources said Some bankers say the government could seize the opportunity to bolster other ailing Italian banks not just the Tuscan lender A failure of the bank could erase the savings of thousands of retail investors jolt the wider banking sector and spark a financial crisis in the euro zone s third biggest economy The treasury declined to comment but a government source said Rome was ready to use an emergency decree to authorize a bank rescue if necessary A Monte dei Paschi spokesman said the bank had not received any communication from the ECB The bank s board was meeting on Friday night and may continue its deliberations into Saturday a source with knowledge of the matter said The source said CEO Marco Morelli could still launch an 11th hour attempt to raise money on the market by reopening an offer for retail investors to swap 2 1 billion euros of subordinated bank debt into equity even though the market watchdog has deemed the offer too risky for ordinary investors In addition Qatar s sovereign wealth fund could invest another 1 billion euros while a consortium of banks would try to raise additional capital through a share sale on the market without committing to underwrite it the source said However other bankers said state intervention remained the most likely option Monte dei Paschi shares fell as much as 15 percent following the Reuters report that the ECB the euro zone s bank supervisor had rejected its request for more time They ended down 10 6 percent PASSING BATON TO ROME The ECB has effectively invited Rome to step in at a time when the Italian government is in disarray with a caretaker administration in charge after Prime Minister Matteo Renzi quit this week in the wake of a heavy referendum defeat Renzi had resisted calls for a state bailout of Monte dei Paschi because EU rules would require the lender s bondholders to suffer losses Italy s president is holding talks with political parties over the weekend with the aim of appointing Renzi s successor on Monday and a new government soon after Italy would still face the risk of early elections as early as next spring with the prospect of the anti euro Five Star Movement coming to power One banking source said the consortium of investment banks looking to support Monte dei Paschi s privately funded rescue plan did not believe there was enough time or willing investors to execute the deal by the year end deadline imposed by the ECB That leaves little option other than a so called precautionary recapitalization by the state Under tough European rules for banking crises losses would have to be imposed on the bank s junior bondholders first most likely through a mandatory debt conversion into shares Rome is keen to spare the bank s 40 000 retail investors who hold its subordinated debt but it may have to include them in the forced debt swap and find ways to reimburse them later Earlier on Friday the bank s senior management met Economy Minister Pier Carlo Padoan and the leading investment banks behind the private rescue plan JPMorgan N JPM and Mediobanca MI MDBI a treasury source said
1 0 9291 euros |
JPM | Red means stop Banking app cuts customer spending | By David Henry NEW YORK Reuters Traffic lights don t just work for drivers some bank customers obey them on their smartphones too A transaction tracking app using red yellow and green messages to warn account holders when they are paying out more or less than usual has resulted in some users spending less a potentially powerful new weapon in the battle for customers Toronto Dominion Bank TO TD did not set out to change consumer habits when it offered its TD MySpend app in April Canada s second largest bank just wanted to offer more information to customers who use their phones to check account balances But its ease of use has caught on Customers don t have to make up a budget to start using the app and it sends notices immediately with each purchase showing them whether they are spending more or less each month in categories such as dining out entertainment and travel The real time nature encourages customers to change their behavior toward their financial goals Rizwan Khalfan chief digital officer at TD Bank told Reuters in his first interview about customers using the app We were not expecting this About 750 000 or 20 percent of TD s 3 5 million mobile banking customers in Canada have downloaded the TD MySpend app since April Khalfan said Of those 30 percent were using it at least twice a month and on average reducing their spending by 4 percent to 8 percent Overall that means about 6 percent of TD s mobile banking customers have been using TD MySpend and spending less Rizwan said the bank plans to put more marketing muscle behind the app as it learns how initial customers are using it See how TD Bank in Canada pitches its app here It is too early to know Rizwan said whether TD MySpend could improve TD s ability to hold onto deposits a key consideration as interest rates rise and banks compete more aggressively for customers Consumer deposits are a relatively stable source of funds for lending which is more important in light of new global regulations They tend to be cheaper than deposits from businesses especially when interest rates rise The success of new apps is also vital to bankers who fear technology companies will offer better tools to win customers and snag more of the fees and marketing information that come with handling payments CYBER RISK For decades financial advisers self help authors and software firms have come up with systems to help spendthrifts budget and save money only to see the vast majority drop them like New Year gym memberships Whether using separate envelopes of cash to limit spending by category or installing programs on personal computers the rule of thumb is that only about five to 10 percent of people are determined enough to stick with a plan said Greg Midtbo chief revenue officer at Moven the financial technology company that developed and licensed MySpend to TD Bank One big hurdle facing spending apps is their inability to safely and quickly pull together data from accounts at different institutions at the same time TD MySpend combines spending from different deposit and credit card accounts only at TD Bank Khalfan said the bank is considering how it might safely bring transaction details from accounts outside of TD into the app Doing so would require contracts and technical agreements with rival banks JPMorgan Chase Co and others in the industry have complained that customers increase the risk of cyber theft when they give account passwords to outside firms There are moves to collaborate on a solution In October the Center for Financial Services Innovation which is funded by U S banks and foundations issued principles for sharing account data TAKE CONTROL The Moven app underlying TD MySpend was not immediately a success Moven initially offered the app directly to consumers but too few people were willing to connect it to their accounts so the company decided to provide the technology through banks instead Since turning on TD MySpend in April Moven started an app in September called CashNav for the New Zealand branch of Australia s Westpac Banking Corp AX WBC So far 20 percent of Westpac New Zealand mobile banking customers have downloaded the app a spokeswoman said adding that about three quarters of those people said it is helping them control their spending BBVA MC BBVA Spain s second largest bank and owner of consumer franchises in the Americas picked up a similar app and experience in the field with its 2014 acquisition of financial technology startup Simple which still markets itself directly to the public BBVA s Compass bank in the United States plans to introduce its own app to track spending next year said Alex Carriles its executive director of mobile and online banking B By David Henry NEW YORK Reuters Traffic lights don t just work for drivers some bank customers obey them on their smartphones too A transaction tracking app using red yellow and green messages to warn account holders when they are paying out more or less than usual has resulted in some users spending less a potentially powerful new weapon in the battle for customers Toronto Dominion Bank TO TD did not set out to change consumer habits when it offered its TD MySpend app in April Canada s second largest bank just wanted to offer more information to customers who use their phones to check account balances But its ease of use has caught on Customers don t have to make up a budget to start using the app and it sends notices immediately with each purchase showing them whether they are spending more or less each month in categories such as dining out entertainment and travel The real time nature encourages customers to change their behavior toward their financial goals Rizwan Khalfan chief digital officer at TD Bank told Reuters in his first interview about customers using the app We were not expecting this About 750 000 or 20 percent of TD s 3 5 million mobile banking customers in Canada have downloaded the TD MySpend app since April Khalfan said Of those 30 percent were using it at least twice a month and on average reducing their spending by 4 percent to 8 percent Overall that means about 6 percent of TD s mobile banking customers have been using TD MySpend and spending less Rizwan said the bank plans to put more marketing muscle behind the app as it learns how initial customers are using it See how TD Bank in Canada pitches its app here It is too early to know Rizwan said whether TD MySpend could improve TD s ability to hold onto deposits a key consideration as interest rates rise and banks compete more aggressively for customers Consumer deposits are a relatively stable source of funds for lending which is more important in light of new global regulations They tend to be cheaper than deposits from businesses especially when interest rates rise The success of new apps is also vital to bankers who fear technology companies will offer better tools to win customers and snag more of the fees and marketing information that come with handling payments CYBER RISK For decades financial advisers self help authors and software firms have come up with systems to help spendthrifts budget and save money only to see the vast majority drop them like New Year gym memberships Whether using separate envelopes of cash to limit spending by category or installing programs on personal computers the rule of thumb is that only about five to 10 percent of people are determined enough to stick with a plan said Greg Midtbo chief revenue officer at Moven the financial technology company that developed and licensed MySpend to TD Bank One big hurdle facing spending apps is their inability to safely and quickly pull together data from accounts at different institutions at the same time TD MySpend combines spending from different deposit and credit card accounts only at TD Bank Khalfan said the bank is considering how it might safely bring transaction details from accounts outside of TD into the app Doing so would require contracts and technical agreements with rival banks JPMorgan Chase Co NYSE JPM and others in the industry have complained that customers increase the risk of cyber theft when they give account passwords to outside firms There are moves to collaborate on a solution In October the Center for Financial Services Innovation which is funded by U S banks and foundations issued principles for sharing account data TAKE CONTROL The Moven app underlying TD MySpend was not immediately a success Moven initially offered the app directly to consumers but too few people were willing to connect it to their accounts so the company decided to provide the technology through banks instead Since turning on TD MySpend in April Moven started an app in September called CashNav for the New Zealand branch of Australia s Westpac Banking Corp AX WBC So far 20 percent of Westpac New Zealand mobile banking customers have downloaded the app a spokeswoman said adding that about three quarters of those people said it is helping them control their spending BBVA MC BBVA Spain s second largest bank and owner of consumer franchises in the Americas picked up a similar app and experience in the field with its 2014 acquisition of financial technology startup Simple which still markets itself directly to the public BBVA s Compass bank in the United States plans to introduce its own app to track spending next year said Alex Carriles its executive director of mobile and online banking BBVA banks in other countries are on similar paths said Jose Olalla head of business development for BBVA Compass The tools Olalla said build loyalty with customers The sense of control is the benefit they are getting he said PAYDAY EFFECT Despite the urge to spend many people would be better off with more control over their discretionary spending A survey by the U S Federal Reserve found 46 percent of adults said they could not cover a 400 emergency expense without selling something or borrowing money While some of those do not make enough money to have emergency cash even people with means have trouble keeping their spending on an even keel The so called payday effect in which people spend more after receiving a surge of money occurs across income groups according to an April 2016 study by scholars at the Columbia Business School and Copenhagen Business School The swings weigh on people emotionally said Josh Reich chief executive and co founder of BBVA s Simple It shoots people s confidence when one day they are feeling rich and two weeks later they are feeling poor Instead of showing people only the ups and downs of their balances better to let them see their spending trends and they will temper impulse spending Reich said
If you give people the tools to feel in control they will take control |
JPM | Monte dei Paschi to press ahead with last ditch private capital increase | By Elisa Anzolin and Silvia Aloisi MILAN Reuters Italy s third biggest lender Monte dei Paschi di Siena said on Sunday it would press ahead with a last ditch plan to raise 5 billion euros on the market by year end after the European Central Bank refused to give it more time to recapitalize The decision by the ECB s supervisory board piles pressure on the Italian government to inject money into the bank but the Tuscan lender on Friday said it would carry on with its own private sector scheme despite signs of scant investor interest Rome is ready to intervene with an emergency decree to rescue the bank if needed a government source said on Friday The crisis at the world s oldest bank is playing out against a backdrop of political instability in Italy after Prime Minister Matteo Renzi s resignation last week following a heavy defeat in a referendum on constitutional reform Italy s president on Sunday asked Renzi s foreign minister Paolo Gentiloni to form a government and he could be ready as early as Monday to present his list of proposed cabinet members to the head of state Monte dei Paschi which fared the worst in European stress tests this summer had asked the ECB for a three week extension to Jan 20 to raise the money it needs to avert collapse because of the political turmoil unleashed by Renzi s resignation But the ECB on Friday rejected the request on the grounds that a delay would be of little use and that it was time for Rome to step in a source close to the matter said The bank says it has not received a formal communication from Frankfurt The eleventh hour private solution being drawn up by the bank advised by JPMorgan NYSE JPM and Mediobanca involves reopening a debt to equity swap offer to 40 000 retail investors holding 2 1 billion euros of the bank s subordinated bonds Monte dei Paschi said in a statement after a board meeting on Sunday But this needs the approval of market watchdog Consob The initial offer which raised 1 billion euros from institutional investors had been deemed too risky for the vast majority of ordinary investors CONFIDENCE Under the plan Qatar s sovereign wealth fund could put in another 1 billion euros while a consortium of banks would try to sell shares for the remainder in the market but without underwriting the issue a senior banker said As Monte dei Paschi di Siena s board met on Sunday a source close to the board said the fact that Gentiloni had been asked to form a government gave the bank confidence it could still pull off the privately funded capital raise There s still time Qatar is in the game and available to put in the amount that is being talked about the source said However another source close to the matter acknowledged the bank s bid for cash on the market was a desperate move The ECB has not responded yet There s no government yet The bank has got nothing to lose the source said The bank had been in contact with Consob since Friday to discuss the reopening of the debt swap a politically sensitive move that could expose the lender and the market watchdog to accusations of bending the rules Consob s preliminary reaction to the plan was positive two sources said However another source said no decision would be taken before the ECB formally communicates its rejection of the bank s request for an extension which should happen early this week According to the senior banker the lender would argue that under European rules retail investors risked losing all their money if the state had to intervene so they would be better off converting their bonds The bank s fate is a political hot potato in Italy Luigi Di Maio a leader of the anti establishment 5 Star Movement that is ahead in opinion polls said on Sunday the bank should be nationalized while accusing Renzi s Democratic Party PD of using the crisis to rebuff calls for snap polls and justify the need for a quick unelected government
PD Chairman Matteo Orfini said The market solution is the best Should it not succeed the bank must be stabilized while respecting EU rules additional reporting by Stefano Bernabei writing by Silvia Aloisi editing by Ros Russell Bernard Orr |
C | Citigroup Cuts Nearly 300 Jobs | By Citigroup Inc NYSE C cut between 200 jobs to 300 jobs in its stock and bond trades division in order to reduce costs news reports said Sunday
According to a report by the Wall Street Journal Steve Prince the younger brother of Citi s former CEO Charles Prince who was fired in 2007 was among the nearly 300 people who left the firm The job cuts which have not been confirmed by Citi amount to nearly 2 percent of the total workforce in the company s global markets business
We continue to tightly manage expenses making targeted headcount reductions in light of current market conditions Danielle Romero Apsilos a spokeswoman for Citigroup said according to Bloomberg At the same time we are adding some talent strategically
The job cut comes as bond trading has seen a slump and the bank too expects to see some decline in trading revenue According to Bloomberg Citigroup s chief financial officer John Gerspach had reportedly said last month that he estimates the trading revenue to drop by high mid teens
The banking industry has been cutting jobs across business segments as it adjusts to new regulations and loan demands
Citigroup which had 251 000 employees at the end of 2013 down from 323 000 in 2008 has been slashing expenses and abandoning entire business units since it was forced to take a government bailout following the financial crisis Last week the bank stated that it agreed to pay 1 13 billion in cash to settle claims against legacy mortgage securities which are said to have been at the center of the global financial crisis of 2008
The bank is slated to announce quarterly earnings Monday which is expected to be lower than projections just like JPMorgan Chase Co s NYSE JPM whose trading revenues fell 17 percent in the first quarter according to the Journal |
C | Australian Dollar Hit By Consumer Confidence | The Australian dollar is trading lower today after disappointing local data raised the stakes of another interest rate cut by the RBA
At 6 19pm GMT The Aussie dollar was trading at US68 67c down from US69 04c in yesterday s trade
The Westpac consumer confidence index from Australia released earlier in the day came in at 97 3 well down on last month s figure of 100 8 which caused the Australian dollar to tumble around US1c against its US counterpart
The index is seen as a key indicator of consumer sentiment and with shoppers tightening their belts bets are rising for a further interest rate cut from the Reserve Bank of Australia in the nearest future
According to analysts at Citigroup N C the chances of the RBA cutting interest rates in the first half of the year stand at 88 percent while a move in the 2nd half of the year is sitting around 100 percent
Although the Australian dollar has been hammered in recent weeks it has held up pretty well after reaching a 7 year low last Friday fending off oil prices at a 12 year low and continued weakness in the country s biggest commodity iron ore
Probably helping the Aussie dollar s resilience today was the release of the latest CPI numbers from the US which came in slightly below expectations at 0 7 percent while the yearly figure was in line with consensus at 2 1 percent |
MS | UPDATE 2 German May car sales up 40 pct on tax steroids | Germany sales up 40 percent vs 34 percent decline in U S
Car scrappage incentive scheme seen boosting sales
Analyst forecasts Germany slump to return in 2010
Recasts adds background detail
FRANKFURT June 3 Reuters German auto sales rose 40
percent in May spurred by government scrappage incentives but
auto shares fell with investors unconvinced that the measures
were generating a sustainable turnaround in demand
Germany s KBA motor vehicles agency said May car
registrations rose to 384 578 units up 39 7 percent from the
same month last year
The boost in demand in Europe s largest auto market stands
in stark contrast to a 34 percent slump in May in the U S the
world s biggest vehicle market
In February the Berlin government launched a subsidy that
pays motorists 2 500 euros 3 310 to scrap cars at least nine
years old if they buy a new model from any automaker in
exchange The scheme runs until the end of 2009
Shares in VW had slipped 4 1 percent to 242 92 euros by 1500
GMT despite the fact that it was the clear beneficiary of the
scheme among German auto makers VW s new vehicle registrations
in May rose 60 2 percent in Germany figures show
People know it s steroids it s not real Morgan Stanley
analyst Adam Jonas said It s pleasure upfront with the pain
coming next year
Shares in luxury auto makers were also down The incentive
scheme benefited mainly makers of smaller cars
Daimler shares were down 3 5 percent at 26 06 euros Its May
vehicle registrations fell 2 4 percent
BMW shares were down 1 1 percent following news of a 6 7
percent fall in registrations
The incentive scheme proved so popular that the government
agreed to boost it to 5 billion euros from the initial 1 5
billion but Morgan Stanley s Jonas said demand would drop off
once the incentive scheme runs out
In the absence of strong incentives unit volume in Germany
in May 2010 could be down as much as 30 percent year on year he
said
Car importers association VDIK raised its 2009 forecast for
new car registrations in Germany to 3 45 million units It
previously forecast registrations in Europe s largest car market
would top the nearly 3 1 million units sold in 2008
For a story on the sale process for Opel click on
For a story on Porsche seeking a loan from state bank KfW
click on
Reporting by Edward Taylor in Frankfurt and Jan Schwartz in
Hamburg editing by Will Waterman
Edward Taylor thomsonreuters com Reuters Messaging
Edward Taylor reuters com reuters net |
MS | Pharma oil help lift FTSE 0 4 ahead of BoE vote | FTSE gains on oil banks pharma
Market eyes BoE policy review
British house prices rose 2 6 percent in May Halifax
By Catherine Bosley
LONDON June 4 Reuters Britain s top share index was up
0 4 percent late Thursday morning helped by oil pharma and
banking shares as investors eyed the outcome of the Bank of
England s interest rate decision at midday
At 1018 GMT the benchmark FTSE 100 index was up
19 41 points at 4 402 83 The blue chip index closed 96 60
points or 2 1 percent lower on Wednesday at 4 383 42
Oil majors led the rise rebounding after recent falls with
Royal Dutch Shell up 0 8 percent BP up 1 6
percent and BG Group up 0 3 percent
All eyes on the Bank of England said Jeremy
Batstone Carr analyst with Charles Stanley The market s
adopting a mildly positive approach to the fact that we re not
getting much of an update on monetary policy
The results of the Bank of England s Monetary Policy
Committee meeting were due at 1100 GMT ID nL393918
The Bank is expected to keep interest rates steady at a
record low of 0 5 percent and refrain from expanding its
quantitative easing plan
House prices in Britain rose by 2 6 percent in May ahead of
analysts expectations the Halifax house price survey showed
underscoring hope the recession may be easing ID nLAC003306
Although the FTSE has fallen 0 6 percent this year it has
jumped 28 percent since its trough on March 9
In order to see a further kicker from these kinds of stock
market levels we need to see confirmation that a lasting
revival is underway not merely recovery built on improving
stock levels Batstone Carr said
Anything that central banks can do to help that would
be regarded as a positive he also said
On Wednesday U S Federal Reserve Chairman Ben Bernanke
said he expected to see some positive growth later this year
adding that corralling government debt was vital to ensuring
long term U S economic health ID nN03107471
SUPERMARKETS RISE
Pharmaceuticals and banks were also among the risers
Barclays Lloyds Banking Group Standard
Chartered and Royal Bank of Scotland gained
3 9 4 2 percent HSBC however was flat
AstraZeneca and GlaxoSmithKline rose 1
percent and 1 7 percent respectively
Given the uncertainty in the wider economy the cash
generative nature of the business makes the sector look pretty
defensive Batstone Carr said of pharmaceutical shares
Food retailers also gained strength after Morrison
Supermarkets beat forecasts with a big rise in
underlying first quarter sales ID nL31013972
Morrison gained 1 5 percent while J Sainsbury and
Tesco both added more than 2 percent Sainsbury was
helped by a Morgan Stanley upgrade to overweight
Heavyweight miners were the biggest drag on the index with
BHP Billiton and Anglo American both dropping
2 5 percent
The European Central Bank announces its interest rate
decision at 1145 GMT It is expected to keep rates at 1 percent
with the market keen to see detail of its covered bond purchase
plan ID nL3669427
Editing by Dan Lalor |
MS | UPDATE 3 J J upbeat on drugs business cites new medicines | To seek approval for HIV hepatitis C drugs by next year
To seek U S approvals for 8 drugs between 2011 2013
Wall St counting on pharma to restore profit growth
Shares down 0 6 percent
Recasts adds details on drug timelines shares
By Ransdell Pierson
NEW BRUNSWICK N J June 4 Reuters Johnson Johnson
said on Thursday it will seek approval for HIV and hepatitis C
drugs by next year as it looks to its pharmaceuticals business
to revive flat earnings this year
The diversified health products maker also plans to seek
U S approvals for eight drugs between 2011 and 2013 including
treatments for diabetes tuberculosis attention deficit
disorder pain and obesity
During a meeting for analysts to review pharmaceutical
operations executives said J J had an industry leading
experimental drugs pipeline and they outlined plans to address
five therapeutic areas
We are very optimistic about our future Sheri
McCoy worldwide chairman of pharmaceuticals said at the
meeting in
J J s hometown of New Brunswick New Jersey
With its overall prescription drug sales falling because of
patent lapses J J has projected flat earnings this year in
contrast to the double digit earnings growth it has
consistently achieved in past years
J J is relying on its array of consumer products and
medical devices to keep at least on an even keel
But Wall Street is optimistic that J J s prescription drugs
will again be an engine of revenue and earnings growth starting
next year
EARNINGS OPTIMISM
Morgan Stanley analysts expect earnings to rise by 12
percent in 2010 10 percent in 2011 and 12 percent in 2012
with new medicines and other products adding about 6 billion
to sales by 2012
By next year J J plans to seek European approval for
hepatitis C drug telaprevir a high profile drug that it
licensed from Vertex Pharmaceuticals Inc and U S approval for
HIV drug TMC 278
It plans to advance its Type 2 diabetes drug
canagliflozin into late stage clinical trials later this
year
Analysts are optimistic about recently approved arthritis
drug Simponi and expect U S approvals in coming months of
psoriasis drug Stelara and blood clot preventer Xarelto being
developed with German drugmaker Bayer AG
The company is expected to soon launch a new treatment for
moderate to severe pain called Nucynta that has been approved
by U S regulators
J J whose first quarter earnings fell slightly due to
generic competition for its Risperdal schizophrenia drug and
waning demand for its anemia medicines is now under even
greater pressure due to the expiration in March of the U S
patent on its 2 5 billion a year Topamax epilepsy drug
Credit Suisse analyst Catherine Arnold said earlier this
week that investor reaction to J J s pharmaceutical review
could move its shares close to 60 or bring them back down
below 55
J J shares fell 31 cents to 55 85 in morning trading on
the New York Stock Exchange They are down about 6 5 percent
this year a slightly worse decline than that of the American
Stock Exchange Pharmaceutical index
Reporting by Ransdell Pierson and Lewis Krauskopf Editing by
Lisa Von Ahn Dave Zimmerman and Ted Kerr |
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