MARKET CURRENTS
real-time news and commentary for investors
MARKET CURRENTS
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Wednesday, May 23
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8:01 PM The first day of talks between Iran and world powers show a "fair amount of disagreement" but also areas of common ground , says a senior U.S. official. Iran was "engaged" in the discussions, and the meeting would continue into a second day on Thursday, the official said, adding that there was "plenty to go on" for a potential further round of talks. 6 Comments
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7:49 PM As part of a larger restructuring effort, Japan's Renesas Electronics (RNECY.PK) enters into a chip production tie-up with Taiwan Semiconductor (TSM), the world's largest contract chip maker. TSM will produce chips for use in automobiles and home appliances for Renesas as it looks for alternatives to lower costs. Comment!
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7:37 PM Tokyo Electric Power (TKECY.PK) become the first utility to hike power rates for its customers in response to Japan's looming power crisis. The utility behemoth plans to raise rates for some heavy users by 12% starting in July, while the average rate increase for typical household customers will come to 6.9%. Comment!
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7:01 PM The latest patch for Europe's woes, the Eurobond, may be hailed by some as the "Kentucky do-all" solution for fixing the Greek debt crisis, but don't count on it. The very thought of issuing bonds backed by 17 fiercely nationalistic and independent-minded European nations simply reeks of potential problems. Off the top, issues such as duration, how they're guaranteed and getting them to market without violating euro zone membership requirements - will all prove to be a tough sell. Comment!
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4:45 PM It's got to be some sort of bottom (or top depending on point of view) when bond fund managers hit the WSJ en masse to talk about how they've cut exposure to Europe and bulked up their holdings of "safe" Treasurys. Comment!
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4:35 PM Goldman doubts a "credible" pan-eurozone deposit scheme can be introduced in short order. Forgetting how unpopular the move would be in Germany, the country's constitutional court has limited the scope for Germany to widen its financial obligations to the EU. Then there's the rest of the eurozone, which would have to accept a substantial loss of sovereignty. (earlier) Comment!
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3:57 PM Take it for what it's worth, but chatter across the wires says Angela Merkel has made a verbal bank deposit guarantee for the entire eurozone. 8 Comments
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2:56 PM Italy's Mario Monti has joined France's Hollande and climbed aboard the eurobond train, according to a Dow Jones report. If so, he would join Spain's Rajoy who has also offered guarded support for same and establish a solid bloc to counterbalance German opposition to jointly issued bonds. Maybe this news, maybe not, but stocks are bouncing, S&P -0.7%. 2 Comments
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2:40 PM Cove Energy (CNVGF.PK) shares end +11.2% in London to 249p, above the new 240p/share bid from Thailand's PTT and indicating investors think Royal Dutch Shell (RDS.A -2%) may raise the offer. Heard On The Street's Andrew Peaple calculates Shell could yet pay up to $2.5B for Cove; it also has more firepower than PTT, with net debt to equity of 9.9% vs. PTT's 33%. Comment!
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12:48 PM Major brokerage reforms underway in China point to the desire to nurture its own investment banks to compete with the Goldman's and Morgan's of the world. Previously limited to trading and underwriting, brokerages will be allowed to expand into derivatives (CDO squared for Chinese mortgages!), asset management, and private equity. 3 Comments
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12:36 PM Though Burger King trails restaurant chains McDonald's (MCD -0.5%) and Yum Brands (YUM -1.4%) by a wide margin in China, it's sticking to a plan to offer premium food that caters to local tastes in a bid to make a splash in the market. Truffle burgers in Hong Kong and Sichuan pepper-spiced burgers on the mainland are two products the company will offer in hopes that what it calls its "taste of royal delicacy" will resonate with consumers. Comment!
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12:23 PM Angela Merkel hits the wires saying eurobonds would not contribute to growth and EU treaties forbid such joint liabilities. No decisions are expected at today's summit (other than scheduling the next one, of course). Fiscal union, she says, remains a long way off ... "roughly another 500-600 S&P points," snipes ZH, giving us the laugh of the day. 1 Comment
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12:19 PM SNC-Lavalin (SNCAF.PK) reportedly receives the go-ahead to work on the Cobre Panama copper mining contract worth ~$355M in fees for a group led by the Canadian engineering and construction company. The overall cost of the project is expected at ~$6.2B, including $3.2B of infrastructure to be overseen by the SNC-led group. Comment!
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12:08 PM 46 hours. That's the amount of time from a Friday NYC close to Monday's Wellington, NZ open - the amount of time Greece's (and Europe's) leaders will have to handle the issues surrounding a Greek exit from EMU. From calming civil unrest to recapitalizing the banks to getting a new currency going, "leaving is messy," says a former ECB member. Comment!
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11:59 AM Agreements signed by India and Pakistan to begin an estimated $7.6B project to pipe natural gas from Turkmenistan's massive Galkynysh field through Afghanistan mark a milestone in regional relations. But given Taliban control of large areas along the planned route and a separatist rebellion in southwest Pakistan, security problems make the timeline for construction a bit unclear. 1 Comment
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11:48 AM Brazil's HRT says it has hired a semi-submersible drill rig from Transocean (RIG -1.7%) to drill prospects later this year or early next year off the coast of Namibia. The rig will be on charter for 280 days, “enough to drill at least four exploration wells." HRT estimates it has 28B bbl of potential oil and natural gas resources in the African country. 1 Comment
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11:39 AM Europe closes sharply lower as the momentum towards a Greek exit builds. Not to be discounted are ideas of EU leaders playing chicken to push Grecians into voting for establishment parties in June. Stoxx 50 -2.7%, Germany -2.3%, France -2.5%, Italy -3.5%, Spain -3.4%, U.K. -2.5%. The euro hits a 2-year low, -0.9% to $1.2565. 2 Comments
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11:25 AM Canadian Labor Minister Lisa Raitt warns that the government will introduce back-to-work legislation on Monday if the stoppage at Canadian Pacific Railway (CP) continues and damages the economy. The government action will depend on how the strike, which began today, affects sectors such as potash, coal and autos. Comment!
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11:20 AM Shocker from Ernst & Young's new Global Fraud Survey: 15% of CFOs worldwide are willing to make cash payments to win or retain business. E&Y says companies are talking the talk but not walking the walk: “Even if management is strongly communicating that bribery and corruption isn’t OK, they don’t ever see anyone being punished for that.” 2 Comments
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11:19 AM America Movil (AMX -2.1%) slips after being downgraded to Neutral from Overweight on valuation at JPMorgan. The firm also lowers its price target to $27 from $28. Comment!
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10:40 AM German bond yields continue to fall to astonishing lows, the 30-year off 11 bps to 1.99% - the first-ever time with a one handle (Japan's is 1.82%). The 10-year is off 9 bps to 1.38% (Japan 0.87%). The 2-year yields all of 5 basis points, towering over Japan at 11 bps. Comment!
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10:32 AM Europe rapidly deteriorates, the Stoxx 50 -3%, led by Italy, -3.8%, and Spain, -3.2%. The euro goes bidless, sliding under $1.26 for the first time since August 2010. S&P 500 -1.1%. 7 Comments
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9:53 AM The ECB has set up a working group to focus on worsening financial conditions due to Greece, reports Die Welt, citing sources. Leading the panel is Germany's Joerg Asmussen. Further market deterioration is likely to instigate new anti-crisis measures from the ECB, they say. Comment!
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9:05 AM Veolia Environnement (VE) is in advanced talks to sell its ailing bus division to the Afikim group, according to reports. The French conglomerate is seeking to sell off its various transportation businesses all over the world. VE -1.5% premarket. Comment!
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9:02 AM Emerging from a meeting with Spain's Rajoy, French President Hollande says he's unaware of any call for EU states to come up with contingency plans for a Greek exit. Putting a slight bid into European shares are sketchy comments over the wires about Greece getting more lenient bailout terms from the EU. Stoxx 50 -2%. S&P futures well off session lows, -0.5%. 1 Comment
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8:43 AM Italian May consumer confidence falls to 86.5 from 88.8 previously, and against expectations for a rise to 90. It's the worst print since 1996. A gauge of unemployment expectations rises to 113 from 106. Milan -3%. Comment!
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8:35 AM Each eurozone country must draw up its own contingency plan should Greece leave EMU, decides the Eurogroup Working Group (EWG). It's a significant step as nothing like this has previously been ordered for fear of leaks. Among the elements to consider are what support the EU/IMF should give. 1 Comment
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8:00 AM If Greece exits the eurozone, writes The Tell, the EU should consider replacing it with Turkey. The country's speedy growth and youthful demographics would help a union sorely in need of both. One wonders if the reason Turkey's economy is perky (even overheating) is because it's not part of the eurozone. The EU may want the country, but has anybody checked with Ankara? 3 Comments
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7:56 AM Industry analysts see the move by Sears Holdings (SHLD) to reduce its stake in Sears Canada to 51% as clearing the path for a host of U.S. retailers to jump in to take advantage of the void as Sears Canada trims its operations. Both Nordstrom (JWN) and Saks (SKS) could jump into a Canadian market that boasts 50% higher sales per square foot at malls than in the U.S., while Target (TGT) might accelerate its own expansion plans. 3 Comments
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7:47 AM The rupee hits an all-time low for the 6th consecutive day, now requiring 56.18 of them to purchase one dollar. Traders believe the RBI intervened, temporarily sending the rupee as high as 55.52, but the currency soon weakened anew. Given global risk aversion at the moment, the RBI doesn't have a shot. Comment!
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7:31 AM Spanish PM Rajoy will use the occasion of a meeting of EU leaders today to ask the ECB to purchase his country's bonds, reports El Mundo. "Enough is never enough," says Adam Johnson, recalling Spanish banks took down 47% of the recent LTRO. Madrid -2.1%. 1 Comment
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7:21 AM Constant chants of "catastrophe" should Greece exit EMU "borders on political blackmail," writes Ambrose Evans-Pritchard. It will only be so if the EU and IMF choose that path, thus making catastrophe not a fait accompli, but a political decision. The catastrophe, he says, comes from those clinging to failed ideology (fixed exchange rate). 1 Comment
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7:06 AM The euro hits a new low for 2012 and the lowest level since the summer of 2010 as panic once again hits the continent. The common currency touched $1.2615 earlier, now buying $1.2655, -0.2% for the session. The euro bottomed at about $1.25 during the financial crisis and $1.19 in the summer 2010 bear market. Comment!
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7:01 AM Germany sells €4.56B of 2-year notes carrying a coupon of 0%, and priced to yield 0.07%. There was strong demand for the paper as investors see value even at these prices. How low can the yield go? Well, Swiss 2-year paper currently yields -0.10%. Comment!
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6:47 AM Mazda (MZDAF.PK) and Fiat (FIATY.PK) join forces for the first time with plans to develop a lightweight sports car and explore strategic opportunities in Europe. The linkup between the two automakers leaves Ford (F) with one less partner as a longstanding relationship with Mazda peters out. 1 Comment
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5:56 AM EU leaders are due to meet in Brussels today as Germany comes under increasing pressure to agree to a softening of austerity and to eurobonds, ideas favored by Francois Hollande. However, as an EU diplomat says: eurobonds are "the equivalent of ringing the bell for a happy hour so the inebriated can postpone their hangover indefinitely." 3 Comments
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4:41 AM European stocks extend their losses following ugly U.K. retail numbers and BoE minutes. London -1.4%. Paris -1.8%. Frankfurt -1.5%. Comment!
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4:36 AM Horrible retail figures out of the U.K.: Sales fell 2.3% M/M in April, far exceeding the expected 0.8% drop. Sales -1.1% Y/Y vs. expectations of +1%. Comment!
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2:55 AM Some blunt eurozone truths from Jin Liqun, chairman of CIC's supervisory board: Eurozone leaders have demonstrated a "lack of leadership" on the region's debt crisis, "too much time has been wasted on endless bargaining... for piecemail bailouts," and the core eurozone nations will have to "keep an eye out for possible copycats should the Greeks be allowed to escape from the crisis unscathed." 2 Comments
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2:48 AM The Bank of Japan keeps its monetary policy unchanged, leaving rates in the 0-0.1% band and holding asset purchases steady at a total of ¥70T ($880B). Analysts expect an increase in asset purchases to come soon, either during a meeting next month ahead of Greek elections, or in July, when the bank gives its updated inflation forecast. Comment!
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2:38 AM Japan's trade deficit widened to ¥520.3B ($6.5B) in April from a shortfall of ¥84.5B in March, as exports rose a less-than-expected 7.9%. Finmin Jun Azumi calls for the Bank of Japan to "take appropriate steps in a timely manner;" analysts believe BOJ may boost asset purchases in the coming months. 3 Comments
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