Today's Financial News Courtesy of The Financial Times

Today's Financial News Courtesy of The Financial Times


Stocks inch higher in cautious trading
By Jamie Chisholm in London and Song Jung-a in Seoul
Copyright The Financial Times Limited 2010
Published: September 13 2010 06:14 | Last updated: September 14 2010 08:50
http://www.ft.com/cms/s/0/483c5a1a-bedf-11df-a755-00144feab49a.html


Tuesday 08:30 BST. Equity bulls are pausing for breath and waiting for fresh catalysts after enjoying a good gambol so far in September.

The FTSE All World index is up just 0.1 per cent – a fifth consecutive advance that takes the gains so far in September to 6.8 per cent as investors have welcomed better economic data out of China and the US and an apparently sympathetic deal on global banking regulation.

Commodities are slightly softer and core bond yields down a touch, with traders waiting for the outcome of Greece’s return to the debt markets and news of US retail sales later in the day. German economic sentiment data may also move the dial.

European bourses have opened flat, mirroring little change in US equity futures.

The main excitement at the start of the European trading day was the leadership vote in Japan, a contest won by incumbent Naoto Kan. This caused a flicker of excitement in the forex and Japanese bond market but that has not transferred across other assets as investors note that yen movements are currently a function of political factors rather than broader risk appetite, as has been the case in recent months.

● Asia-Pacific. Asian shares are mixed, with Japanese investors remaining cautious ahead of the results of the ruling party leadership election (the vote came after the close of Tokyo trading) while the rest of the region has risen slightly on increasing optimism about the global economic recovery.

The FTSE Asia-Pacific Index has gained 0.2 per cent, bringing it 7 per cent above the one-month low set on August 25. Japan’s Nikkei 225 is off 0.5 per cent while Australia’s S&P/ASX 200 is up 0.3 per cent. South Korea’s Kospi Composite has edged down 0.2 per cent.

Banking shares are extending gains as investors take relief from the newly announced Basel III rules.

In Shanghai, stocks have added 0.1 per cent after Premier Wen Jiabao said the China’s economy was in “good shape.”

● Europe. Stock markets are struggling to make headway, though given that major benchmarks such as the FTSE 100 in London have leapt 8.9 per cent in the previous 12 sessions, a period of reflection is understandable.

The FTSE 100 is nevertheless still up today by 0.2 per cent, to its best level since April, as banks continue to bask in the supposedly “benign” Basel III protocols. The FTSE Eurofirst 300 is up 0.1 per cent.

● Forex. The yen is the main mover in the the currency markets, pushing to a new 15-year high versus the dollar of Y83.10 shortly after it was revealed that Mr Kan would remain prime minister. Mr Kan is considered less likely to sanction intervention to stem the yen’s strength.

The Japanese unit’s continued strength over recent sessions is confusing those traders who like their risk appetite correlations nice and neat. The yen has of late been a clear beneficiary of risk aversion, but with both the yen and stocks rallying in September, this relationship has become skewed.

The yen is currently up 0.5 per cent against the dollar to Y83.25 and is up 0.4 per cent versus the euro at $107.33.

The renminbi touched its highest level since its revaluation in 2005 as US politicians increased pressure on the Obama administration to tackle the Chinese currency’s perceived overvaluation. The renminbi hit a recent peak of Rmb6.7441 to the dollar compared with Rmb6.7618 at Monday’s close.

● Rates. Bond benchmarks are little changed, in keeping with the muted start to the trading day. The US 10-year note – which had rallied off 5-week lows on Monday after the US Federal Reserve said it was accelerating its purchases of Treasuries to $3bn a week from $2bn – is slightly firmer, pushing yields down 1 basis point to 2.74 per cent.

● Commodities. Metals are giving back some of the previous session’s gains as a touch of profit taking sets in. Copper is off 0.6 per cent to $7,606 a tonne. Oil is 23 cents higher at $77.41 a barrel.

Gold is up 0.8 per cent to $1,255 an ounce, while silver is at its highest in 30 months after breaching the $20 an ounce level. It is now at $20.40 an ounce.

Follow Jamie Chisholm’s market comments on Twitter: @JamieAChisholm






Bankers fear race to overtake Basel III
By Brooke Masters and Jennifer Hughes in London, and Nikki Tait in Brussels
Copyright The Financial Times Limited 2010
Published: September 13 2010 19:34 | Last updated: September 13 2010 23:23
http://www.ft.com/cms/s/0/be491ff6-bf64-11df-965a-00144feab49a.html


Top bankers in the UK, US and Switzerland are braced for their national regulators to impose tougher capital requirements than those required by Sunday’s landmark global agreement, even as investors bid up bank shares on relief that the standards were not more rigorous.

The 27 member countries of the Basel Committee on Banking Supervision agreed on Sunday that banks would in effect be required to triple core tier one capital ratios from 2 per cent to 7 per cent by 2019. This ratio measures the buffer of highest-quality assets that banks hold against future losses.

The agreement was hailed by regulators and industry groups as a vital step that would go a long way towards preventing a repeat of the financial crisis without endangering the nascent economic recovery.

Investors welcomed the agreement, sending bank shares higher. Those banks considered to be the best capitalised gained the most, including France’s Société Générale, up 4.3 per cent, and JPMorgan of the US, up 3.4 per cent.

But critics of the deal complained that the capital definitions, timetable and overall ratio had been watered down to win over Germany and others. They also warned that putting off new rules on liquidity standards until 2015 could endanger the financial system.

“The regulators appear to have given in to pressure from the banking industry. I do not think that the core tier one ratio is high enough to cope with another similar downturn,” said Jacqui Hatfield, regulatory attorney at Reed Smith.

The long timetable and the frank admission by some countries that they would have liked tougher standards have awakened concerns about unequal implementation and regulatory arbitrage. Global banks based on Wall Street, in the City and Switzerland fear they will face the toughest rules.

They point to the “Swiss finish” that regulators there have traditionally applied on top of global standards and the UK’s willingness to be tougher on other issues, such as pay. They also said US regulators were likely to consider shorter timetables and may face pressure from Congress to be tougher.

That sets up a potential conflict with investors, who are already pushing the best capitalised banks in the US and Europe to consider share buy-backs and higher dividends.

Though analysts called the agreement “benign”, German public sector banks said the deal risked harming the German economy because they would have to add capital too quickly.

Additional reporting by Patrick Jenkins




BofA searches for assets to sell
By Justin Baer and Francesco Guerrera in New York
Copyright The Financial Times Limited 2010
Published: September 14 2010 00:24 | Last updated: September 14 2010 00:24
http://www.ft.com/cms/s/0/47d268be-bf7d-11df-b9de-00144feab49a.html


Bank of America plans to identify tens of billions of dollars in assets and businesses that it wants to sell or wind down, in the latest effort to ease investors’ concerns about its holdings of risky securities and loans.

The move could set the stage for more aggressive steps to shrink the bank’s $2,300bn-plus balance sheet at a time when regulators and shareholders are putting pressure on lenders to slim down.

Executives at BofA, the largest US bank, have told analysts and fund managers in recent meetings that they were weighing detailed disclosures on the loans, businesses and stakes that do not fit in their long-term plans, according to people who attended the gatherings. Although the plans have not been made public, analysts said that the non-core assets could exceed $100bn, and include both complex structured-credit products and impaired loans that came with its 2008 acquisition of Countrywide Financial, the mortgage lender.

BofA declined to comment.

“BofA intends to provide more details on its non-core assets at some point in the future,” said Betsy Graseck, a Morgan Stanley analyst who recently met the bank’s management. “BofA would do itself and investors a great service if it gave greater clarity and details on the size and composition of its non-core assets.”

Other analysts confirmed that executives at BofA, which also bought the investment bank Merrill Lynch during the financial crisis, had spoken about more disclosure on non-core assets.

BofA’s plans go beyond previous announcements that designated assets such as the Balboa credit insurance arm and its stake in the asset manager BlackRock as non-core.

However, BofA is unlikely to go as far as Citigroup, which has assigned executives to manage and sell non-core assets and provides investors with a quarterly income statement for the portfolio, analysts said.

As part of its agreement to repay bail-out funds from the US government during the crisis, BofA pledged to add $3bn in equity through asset sales.

BofA has already sold some businesses, including shares in Brazil’s Itau Unibanco, MasterCard and Grupo Financiero Santander.

By the end of the second quarter, the bank had reaped $10bn in gross proceeds from the sales and $1.9bn in after-tax gains that it can apply towards the $3bn mandate.