Posts Tagged ‘France’
Japan Stock Market Crash Leads To Global Sell Off
Thursday, 23 May 2013 05:51
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Yesterday afternoon, following the rout in the US stock market, we made a spurious preview of the true main event:

We had no idea how right we would be because the second Japan opened, its bond futures market was halted on a circuit breaker as the 10 Year bond plunged to their lowest level since early 2012, hitting 1% and leading to massive Mark to Market losses for Japanese banks, as we also warned would happen. (Read more…) That was just the beginning, and suddenly the realization crept in that the plunging yen at this point is not only negative for banks, but for the entire stock market, leading to what until that point was a solid up session for the Nikkei to the first rumblings of a ris-off.

Shortly thereafter we got the distraction of the Chinese Mfg PMI which dropped into contraction territory for the first time since late 2012, and which set the mood decidedly risk-offish, although the real catalyst may have been a report on copper from Goldman’s Roger Yan (which we will cover in depth shortly) and whose implications may be stunning and devastating and may have just popped the Chinese credit bubble (oh, btw, short copper).

And then all hell broke loose, with the Nikkei first rising solidly and then something snapping loud and clear, and sending the index crashing a massive 1,143 an intraday swing of 9% high to low, leading to an over 200 pips move lower in the USDJPY, and leading to a global risk off across the world. Looks like Mrs Watanabe’s infatuation with the “get rich scheme” known as the stock market is once again over, and it is time to start from scratch for Kuroda and Goldman proxy company.

Perhaps best summarizing things in the centrally-planned world is the chart of the overnight USDJPY:

… and offsetting this is our old friend, gold, which once again reminded that when the entire centrally-planned construct implodes, as it was on the edge of doing so in Japan last night, it will be the only thing standing:

But don’t worry: the short covering squeeze we warned about last night hasn’t started yet. Not even close.

All of this is hardly the ringing endorsement that central-planners have
everything under control despite all time highs in stock markets around
the world.

Speaking of stock markets around the world, what goes up always comes down. This is just the start:

  • Nikkei: -7.32%
  • Hang Seng: -2.54%
  • DAX: -2.64%
  • FTSE 100: -1.9%
  • CAC 40: -2.3%
  • FTSE MIB: -2.56%

And so on. And this excludes the plethora of secondary side-effects as US traders walk in and realize their positions have been devastated overnight, and that unless the PPT steps in, the world is facing a tsunami of index margin calls.

A quick summary of what happened from DB’s Jim Reid

So at the closing bell, the S&P 500 was 32pts off the highs at 1655 and the UST 10-year yield was 15bps above the lows at 2.0395%. These are big intraday moves. Indeed we haven’t seen such ranges for the S&P 500 and Treasuries since 7th November and 14th September last year, respectively. In other markets the US dollar clearly benefited from the hawkish interpretation of the Fed headlines with Dollar index up nearly 1.2% above the lows while Gold fell over 3% from the
intraday highs to close at $1370/oz.

The FOMC minutes that came later was also viewed to be less dovish than the Fed commentary we’ve seen recently as the minutes noted that “a number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting if the economic information received by that time showed evidence of sufficiently stronger and sustained growth”. Markets clearly seized upon the hawkish tone from yesterday’s Fed headlines even though the Chairman himself at the Q&A session made it clear that a step to reduce the flow of purchases will not be an automatic mechanistic process of ending the program
but rather that any change in the flow of purchases would depend on incoming data and Fed’s assessment of the outlook. Whilst a slowing of QE is possible in a few months we can’t help to think that the Fed could be forced to restart its QE in a beggar-thy-neighbour environment where central banks in most part of the developed world are still largely on an easing bias in order to steel a share of the global GDP. We think QE or derivations thereof will be around for many years to come.

Back to markets, the overnight session is basically seeing a continuation of the risk-off flow that dominated the second half of the US session. Asian equities are mostly in the red and the latest Chinese flash PMI is clearly not helping. The HSBC May Flash PMI for China fell to a 7-month low of 49.6 versus a final April reading of 50.4. The May print was not only the first sub-50 print in 7 months but also extends the downward trend that we’ve seen since the end of Q1 as for this particular series the final reading for March, April and May were 51.6, 50.4 and 49.6 respectively. The rise in Treasury yields is also having an impact on Asian
rates markets which saw the 10-year part of the Australia and Japanese curve trace 8bp and 1bp higher. Asian and Australian credit spreads are also 2-4bp off overnight as markets digest the disappointing Chinese PMIs. Other Chinese growth related assets including copper (-2.2%) and AUDUSD (-0.6%) are also coming under selling pressure. The AUD in particular is at its lowest level versus the USD since Q3 2010.

Turning to the day ahead, the flash Euroarea manufacturing and service PMIs for May will be a focal point of the European session. The consensus is for a small 0.2  to 0.4pt improvement in PMIs across the Euroarea, France and Germany. The UK’s Q1 GDP revisions and Euroarea advance consumer confidence data are also worth watching. Across the Atlantic, the US preliminary PMI is out today together with April new home sales, the house price index for March and weekly jobless claims. Mario Draghi and the Fed’s Bullard will be speaking today in London – Draghi’s speech is scheduled towards the end of the US session.

    



 
Germany Fires Live Ammo In Sino-European Trade War … At Brussels
Tuesday, 21 May 2013 12:10
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Wolf Richter   www.testosteronepit.com   www.amazon.com/author/wolfrichter

(Read more…)

The solar-panel industry, once fattened by taxpayer subsidies and false hopes, has been in a death spiral around the world. In the US, a slew of photovoltaic standouts like Solyndra went under, taking billions of subsidies and investor capital with them. In Germany, it has been just as brutal. Even large companies are licking their wounds.

Bosch Solar Energy AG will shut down production early next year, after having burned through €2.4 billion; 3,000 jobs are at risk. Siemens is trying to shed its solar units, if it can find a buyer. Victims of Chinese companies that flooded world markets with cheap solar panels. But even Chinese companies are going bankrupt, including one of the big four, Wuxi Suntech, subsidiary of US-listed Suntech Power.

Companies in the US and Europe complained about these cheap imports, and anti-dumping proceedings were initiated. In Europe, it started last summer. And last week, reports surfaced that the European Commission was ready to act. On June 5th, if no solution materialized, the Commission would slap Chinese-made solar panels, cells, and wafers with punitive import duties of on average 47%.

It was part of the Commission’s campaign to defend the sacred European soil against cheap imports of all kinds – despite the EU’s widening trade surplus (€22.9 billion in March). It has already initiated 31 trade investigations, 18 against China alone. Last week, the Commission fired another shot, launching an investigation into anti-competitive behavior by Chinese telecom equipment makers Huawei and ZTE, China’s high-tech crown jewels. But the 47% punitive duties on solar panels were the harshest measure yet in the trade war, hitting €21 billion worth of Chinese imports.

China accused the EU of protectionism. It “would seriously harm China-Europe trade relations,” Ministry of Commerce spokesman Shen Danyang said at a news conference. “Provoking trade friction with China” would be like “dropping a boulder on one’s own foot”; it certainly wouldn’t help Europe escape from its economic crisis, he said ominously.

Even Greek Prime Minister Antonis Samaras, who happened to be in Beijing, was drawn into the fray when Chinese Premier Li Keqiang asked him to stop the EU’s protectionist attacks.

While Samaras may not be much of a factor, Germany is. And it has been lining up the big guns. But they’re not directed at China, though German solar-panel makers suffered perhaps the most from Chinese competition. They were effectively silenced by Germany Inc., which is now furiously firing round after round – at Brussels.

On Sunday, it was German Economy Minister Philipp Rösler, who warned of a trade war with China and lambasted the European Commission for its decision to start an anti-dumping procedure against Chinese telecom equipment makers. A “grave mistake,” he called it. And punitive duties against Chinese solar makers where “the wrong instrument,” he said. “The German industry is deeply worried, and rightly so.” The Commission must do “everything” to prevent an escalation of the trade war. It “must rely on a negotiated solution and dialogue, not on threats,” he said.

Even pretexts are good, for example when Anton Börner, president of the Federation of German Wholesale, Foreign Trade and Services (BGA), claimed to be worried about thousands of jobs in the industry of PV panel installers, which might be pushed out of existence by higher panel prices. But Germany Inc. isn’t worried about panel installers. It’s worried about exports!

Börner acknowledge that: German equipment manufacturers whose technologies are used in the production of solar panels in China would be harmed. And he was worried about a further escalation and broadening of the trade war. “Other industries must now tremble,” he said.

Ulrich Grillo, president of the Federation of German Industries (BDI), admonished the Commission to exhaust “all options to find a negotiated solution” before launching anti-dumping cases against China. “German industry with its high proportion of exports is dependent on open markets.”

That’s the European dilemma. With many countries mired in recession, and some sinking into depression-like conditions, the Commission wants to protect certain industries. While it can’t protect Spanish companies from German competition, it can protect them from Chinese competition. Given how much German solar-panel makers have suffered under Chinese pressure, and how many billions in subsidies and investments have gone up in smoke, the Commission might have counted on German support.

But for Germany Inc., China is one of the two big economic engines that are still pulling. Exports to the Eurozone, particularly to top trade partner France, have stalled, and the industry is looking to China for growth. Chinese money is also flowing into Germany as Chinese companies are on a shopping spree, paying top euros for 98 firms in 2012, including Putzmeister, a world brand for concrete pumps [my article on the aftermath]. Germany Inc. sees in China an escape route from the economic mayhem of the Eurozone; it sees a booming market with over twice the population of the EU. For Germany Inc., China is the future – and Europe a drag. One more treacherous rift across Europe.

And here is my interview with Voice of Russia. Read…..  ‘ECB’s Desperation Is Taking On Epic Dimensions’ 

    



 
Frontrunning: May 21
Tuesday, 21 May 2013 06:48
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  • IMF Tells Central Europe to Spend More (WSJ)
  • Tornadoes Blast Oklahoma (WSJ)
  • Frenetic search for survivors as 91 feared dead in tornado-hit Oklahoma (Reuters)
  • JPMorgan investors on edge over vote on Dimon; what if they win? (Reuters)

    • (Read more…)

  • Wealthy bank depositors to suffer losses in EU law (Reuters)
  • Yen Slips as Amari Backtracks (BBG)
  • Japan Ready for More Yen Weakness Despite Recent Comments (WSJ)
  • IRS officials back on Capitol Hill hot seat over targeting (Reuters)
  • Li Keqiang pledges China boost to India trade (FT)
  • Europe’s Recession Sparks Grass-Roots Political Push (WSJ)
  • Obama and Xi to meet in effort to calm growing US-China rivalry (FT)
  • Berlin plans to streamline EU but avoid wholesale treaty change (FT)
  • France must reform or face punitive measures – EU’s Oettinger (Reuters)
  • Tumblr’s 26-Year-Old Founder Celebrates $1.1 Billion Deal (BBG)
  • SocGen Joins UniCredit in Warsaw as Equity Sales Surge (BBG)

 

Overnight Media Digest

WSJ

* JPMorgan Chase & Co is preparing for a shake up of its board even if every director wins re-election at Tuesday’s shareholder meeting and James Dimon keeps his dual job as chairman and chief executive.

* Even in the fast growing realms of the consumer Internet, some businesses are best served by old fashioned consolidation. GrubHub and Seamless, two nationwide startups used for ordering restaurant takeout by smartphone and computer, said they would merge. GrubHub Chief Executive Matt Maloney, who will lead the combined company, declined to discuss valuation.

* Here is a glimpse at the future of finance. When Deutsche Bank AG set out to win a role on Apple Inc’s $17 billion bond, it eschewed Wall Street’s traditional tactics. Instead of flying well-groomed bankers to Cupertino, California, to charm Apple’s top executives with powerpoint presentations, Deutsche relied on iTunes. The German bank has handled the back office work for Apple’s online store in recent years, according to people familiar with the situation.

* Aware that it needs China’s sweet tooth, Hershey Co is rolling out a Chinese brand designed for the world’s fastest growing candy market. In a first launch beyond the U.S. market, Hershey is unveiling on Tuesday a candy known in English as the Lancaster and in Chinese as Yo-man. Hershey will officially open its Shanghai-based Asia Innovation Center on Wednesday. It will be company’s second-largest research and development center world-wide.

 

FT

The U.S. Senate accused Apple Inc of paying little or no taxes to governments around the world by using loopholes and Irish units that are not tax residents of any country.

Actavis said it would by rival Warner Chilcott in a $5 billion deal that would see the combined company become the world’s third-largest generic drug company by sales.

ENRC’s co-founders, who are bidding to take control of the miner, are likely to be able to buy the company for a low price, analysts said.

India’s Essar Oil will sign a loan-for-oil deal with state-run China Development Bank under which the bank will provide the company with a loan in exchange for oil shipments to PetroChina.

The European Commission is seeking new information from trading houses, including Glencore, as part of its probe into the manipulation of energy price benchmarks.

 

NYT

* Yahoo’s $1.1 billion proposed acquisition of Tumblr is a huge coup for the young founder of the even younger start-up and a splashy move by Marissa Mayer to shake up her company. It also heralds a larger shift in social media. Facebook arguably invented modern social networking, and is still the king. But increasingly its approach is seen as passive and outdated as people flock to sites like Tumblr where they can be more actively engaged in creating personal, expressive content to share – and which could potentially translate to advertising dollars.

* Even as Apple became the nation’s most profitable technology company, it avoided billions in taxes in the United States and around the world through a web of subsidiaries so complex it spanned continents and went beyond anything most experts had ever seen, Congressional investigators disclosed on Monday.

* SAC Capital Advisors is bracing for another round of withdrawal requests as fears grow that insider trading investigations could further damage Steven Cohen and his firm.

* Courts are looking to Urban Dictionary, a crowd sourced website, as one way to define words on which a case may turn.

* While companies weigh bids for Hulu and industry heavyweights complain that TV Everywhere isn’t going much of anywhere, another way to watch time-shifted television is quietly gaining traction: video-on-demand, or VOD.

* The Obama administration and the European Union have each decided to negotiate settlements with China in the world’s largest anti-dumping and anti-subsidy trade cases involving China’s roughly $30 billion a year in solar panel shipments to the West, officials and trade advisers in Beijing, Brussels and Washington said.

* Last week’s disclosure by Ronald Machen Jr, the United States attorney for the District of Columbia, that his office had secretly seized telephone records of Associated Press reporters as part of a leak investigation surprised and shocked many people. But to some on Wall Street, Machen’s involvement in a phone records case had a familiar ring. They recalled the case of Allied Capital, a formerly high-flying business development company based in Washington whose shares collapsed in 2009. Two years earlier, Allied had admitted that one of its investigators had stolen the phone records of a prominent hedge fund manager who had been critical of the company’s accounting practices. The chief outside lawyer counseling Allied was Machen, then a partner at WilmerHale.

* Japan’s Prime Minister Shinzo Abe’s economic shock therapy, which combines a flood of cheap cash, fiscal stimulus and deregulation, is getting early results.

 

Canada

THE GLOBE AND MAIL

* When Toronto city council meets Tuesday morning to formally kill the proposal for a downtown casino, it will end for good what was once a pet project for mayor Rob Ford.

The meeting will also be the first time the beleaguered mayor must face his council colleagues since accusations he was videotaped smoking crack cocaine surfaced last week. (http://link.reuters.com/heg38t)

Reports in the business section:

* Alaska proposed a multiyear, multimillion dollar plan aimed at determining the true oil and gas potential in the Arctic National Wildlife Refuge. State officials hope the plan will reinvigorate and reshape the debate over whether to drill on the refuge’s coastal plain. (http://link.reuters.com/peg38t)

NATIONAL POST

* Canadian Prime Minister Stephen Harper will head to South America this week to suss out membership in a new trading bloc he has been working to join for many years.

The Pacific Alliance was formed by Chile, Colombia, Mexico and Peru in 2011 and Canada took a spot on the sidelines the next year, along with several other countries as observers. (http://link.reuters.com/reg38t) (Compiled by Avik Das in Bangalore)

 

China

PEOPLE’S DAILY

- Chinese Premier Li Keqiang’s visit to India, his first foreign trip since taking office in March, has enhanced the strategic partnership of the two countries, the ruling Communist Party’s newspaper said in a report.

CHINA SECURITIES JOURNAL

- China is expected to further increase supervision of local government debt to prevent risk of defaults.

- Chinese wine makers have applied to the Ministry of Commerce to launch an anti-dumping investigation into sales by European counterparts in China.

SHANGHAI SECURITIES NEWS

- Experts believe the Chinese currency yuan has the potential to rise further in the near term as China steps up exchange rate reforms. Driven by strong capital inflows into China, the central bank has guided the yuan to a slew of record highs since early April.

- Bank stocks are still being favoured by Chinese investors and have led a recent rally in China’s stock market, although foreign investors have been withdrawing from the Chinese sector.

CHINA DAILY

- China’s marine economy will account for 13 percent of the country’s GDP by 2020, a government think-tank said on Monday. The China Institute for Marine Affairs said the sector would be worth more than 10 trillion yuan ($1.63 trillion) by then.

- Many of China’s first-tier cities are “barely suitable for living”, according to a report released on Sunday by a top Chinese think-tank. Beijing, Shanghai and Guangdong all failed to make the list of “habitable cities”.

SHANGHAI DAILY

- The number of weddings in Shanghai skyrocketed more than 800 percent to 3,766 on Sunday alone, as happy couples flocked to tie the knot. May 20 is seen as an auspicious date in China.

Corporate Finance

* Charlie Ergen, the chairman of U.S. satellite company Dish Network Corp, has offered to buy bankrupt broadband company LightSquared Inc’s wireless airwaves, a source close to Ergen told Reuters. Bloomberg reported the offer to be valued at $2 billion, citing people familiar with the bid.

* U.S. private equity firm Riverstone Holdings LLC is planning to invest as much as $1 billion in a new commodities venture run by Deutsche Bank AG former head of commodities David Silbert, the Financial Times reported.

* India’s Essar Oil Ltd will sign a $1 billion loan deal with China on Tuesday that sources with knowledge of the matter said would be backed by supply of refined products to top state oil producer PetroChina Co Ltd.

* Specialty chemicals producer Rockwood Holdings Inc’s pigments businesses have attracted offers from buyout firms including Blackstone Group LP and Advent International Corp, several people familiar with the matter said.

* Italian motorway operator Atlantia SpA is close to selling its transmission towers to U.S. investors for almost 100 million euros ($128.56 million), a source close to the matter said on Monday.

 

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

American Tower (AMT) upgraded to Outperform from Neutral at Macquarie
BlackRock (BLK) upgraded to Outperform from Neutral at Macquarie
Con-way (CNW) upgraded to Buy from Hold at Wunderlich
Cubist (CBST) upgraded to Hold from Sell at Cantor
Felcor Lodging (FCH) upgraded to Buy from Neutral at SunTrust
IntercontinentalExchange (ICE) upgraded to Outperform from Neutral at Macquarie
Stifel Financial (SF) upgraded to Market Perform from Underperform at Wells Fargo
T. Rowe Price (TROW) upgraded to Outperform from Market Perform at Bernstein
Wet Seal (WTSL) upgraded to Buy from Hold at KeyBanc

Downgrades

Acquity Group (AQ) downgraded to Neutral from Buy at Roth Capital
Beazer Homes (BZH) downgraded to Neutral from Buy at Sterne Agee
CME Group (CME) downgraded to Neutral from Outperform at Macquarie
Carnival (CCL) downgraded to Neutral from Buy at UBS
Coach (COH) downgraded to Equal Weight from Overweight at Morgan Stanley
Deutsche Bank (DB) downgraded to Neutral from Overweight at JPMorgan
First Republic Bank (FRC) downgraded to Hold from Buy at Jefferies
Franklin Resources (BEN) downgraded to Neutral from Outperform at Macquarie
Life Technologies (LIFE) downgraded to Underperform from Outperform at CLSA
Oil States (OIS) downgraded to Neutral from Buy at Sterne Agee
Raymond James (RJF) downgraded to Market Perform from Outperform at Wells Fargo
VF Corp. (VFC) downgraded to Market Perform from Outperform at Wells Fargo
WellCare (WCG) downgraded to Neutral from Buy at Goldman

Initiations

Aetna (AET) reinstated with a Buy at Goldman
BioScrip (BIOS) initiated with a Buy at Jefferies
Cray (CRAY) initiated with a Buy at Sterne Agee
Harris (HRS) initiated with a Hold at Stifel
Hasbro (HAS) initiated with an Overweight at Piper Jaffray
JAKKS Pacific (JAKK) initiated with a Neutral at Piper Jaffray
LeapFrog (LF) initiated with an Overweight at Piper Jaffray
Mattel (MAT) initiated with an Overweight at Piper Jaffray
Sony (SNE) initiated with a Buy at Jefferies
Summer Infant (SUMR) initiated with an Overweight at Piper Jaffray
Taylor Morrison (TMHC) initiated with a Hold at Deutsche Bank

HOT STOCKS

Dish (DISH), Sprint (S) to engage in talks
Softbank (SFTBF) confirmed waiver, expects Sprint (S) deal to close in six weeks
Cadbury Schweppes (CSG) begins modified $125M “Dutch Auction” tender offer
Apple (AAPL) has used Ireland as a tax-haven for the past five years by creating “No-shore” tax entities, said Senator Carl Levin (D-MI)
S&P lowered Dell (DELL) ratings to ‘BBB’ from ‘A-’, remains on watch negative
Carnival (CCL, CUK) lowered FY13 EPS to $1.45-$1.65 from $1.80-$2.10, consensus $1.97
General Cable (BGC) initiated dividend and extended $125M repurchase authorization
DOJ reached settlement with Cinemark (CNK) in Rave Holdings deal
Wausau Paper (WPP) agreed to divest specialty paper business for about $110M
Regeneron (REGN), Bayer (BAYRY), Genentech (RHHBY) resolved certain patent disputes

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
hhgregg (HGG), TiVo (TIVO), Urban Outfitters (URBN)

NEWSPAPERS/WEBSITES

  • JPMorgan Chase (JPM) plans to shake-up of its board even if every director wins re-election at today’s shareholder meeting and James Dimon keeps his dual job as chairman and CEO, the Wall Street Journal reports
  • Mutual-fund firms are joining activist investors in getting more aggressive over demands for change in how board members are paid at U.S. companies. Activist investors have been experimenting more frequently with incentive pay packages for the board members they nominate in proxy fights, the Wall Street Journal reports
  • Specialty chemicals producer Rockwood Holdings’s (ROC) pigments businesses have attracted offers from buyout firms including Blackstone Group (BX) and Advent International, sources say, Reuters reports
  • The Asian prime brokerage unit of Credit Suisse (CS) replaced Morgan Stanley (MS) as the second largest firm servicing the region’s $148B hedge funds industry, according to a survey by AsiaHedge. Goldman Sachs (GS) remains Asia’s top prime broker with 179 clients and total assets under management of $24.6B, Reuters reports
  • Bank managers in the U.S. are less likely to engage in mergers and acquisitions this year as regulators heighten scrutiny on potential deals and sellers wait for higher valuations, according to a KPMG survey, Bloomberg reports
  • PIMCO’s Bill Gross says the bull market for bonds may have ended last month. But investors are staying put. Four years into the biggest rally in U.S. stocks since 2000, bond mutual funds are attracting more money than their equity counterparts, Bloomberg reports

SYNDICATE

Cimatron (CIMT) files to sell ordinary shares
First Potomac (FPO) files to sell 6M shares of common stock
Ironwood (IRWD) files to sell 10.5M shares of common stock
Laclede Group (LG) files to sell 8.7M shares of common stock
NPS Pharmaceuticals (NPSP) files to sell 6M shares of common stock
Oaktree Capital (OAK) files to sell 6M shares of common stock
TCP Capital (TCPC) files to sell 4M shares of common stock
Wesco Aircraft (WAIR) files to sell 15M shares of common stock