Capital Markets, Financial

BGC Partners eyes new platform to trade US Treasuries

BGC Partners plans to launch a new platform to trade US Treasuries early next year, in a bid to return to a market in the middle of evolution, according to people familiar with the plans.  The company, spun out of Howard Lutnick’s Cantor Fitzgerald in 2004, sold eSpeed, the second-largest interdealer platform for trading Treasuries, […]

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Financial

Sales in Rocket Internet’s portfolio companies rise 30%

Revenues at Rocket Internet rose strongly at its portfolio companies in the first nine months of the year as the German tech group said it was making strides on the “path towards profitability”. Sales at its main companies increased 30.6 per cent to €1.58bn while losses narrowed. Rocket said the adjusted margin for earnings before […]

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Currencies

Renminbi strengthens further despite gains by dollar

The renminbi on track for a fourth day of firming against the dollar on Wednesday after China’s central bank once again pushed the currency’s trading band (marginally) stronger. The onshore exchange rate (CNY) for the reniminbi was 0.28 per cent stronger at Rmb6.8855 in afternoon trade, bringing it 0.53 per cent firmer since it last […]

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Currencies

Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

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Property

Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

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Archive | November, 2016

UK companies lock in value of pound

Posted on 30 April 2012 by

UK importers are taking advantage of the strength of the pound to hedge their overseas currency exposure and lock into the value of sterling, which hit fresh annual highs this week.

Currency brokers said there had been unusually high demand from UK small and medium companies for currency tools that allow importers to fix their exchange rate in advance. Buying these so-called forward contracts when sterling has gained in value can reduce the real value of the bill in the overseas currency.

    Western Union’s business payments arm said that the value of dollar transactions among its clients rose 72 per cent last week, as the pound appreciated sharply against the US currency. Transactions in the euro were up more than a fifth.

    “We have seen a dramatic increase in clients purchasing the US dollar following the pound breaking the $1.60 barrier,” said Neil Graham, director at Western Union.

    Foreign exchange brokers say that corporates have tended to be more active in the currency markets when the pound hits $1.60 against the dollar, which is seen as a key psychological level.

    Sterling rose above $1.60 on March 30 for the first time since the end of November, buoyed by haven demand in Europe and hopes that the UK will not introduce any further monetary easing. So far this year, the pound has risen 4.5 per cent against the dollar and 2.3 per cent against the euro.

    “I’m keener to hedge now than I have been for a long time,” said John Dobson, finance director at Timbmet, a timber importer based in Oxford with an annual turnover of £80m.

    UK exporters have also been stepping up their hedging, according to Corporate FX, the foreign exchange broker, amid confusion over the rise in the value of sterling following figures last week indicating that the UK was in recession.

    “People are getting panicky that sterling might get stronger,” said Mark Thompson, head of the corporate desk. “The fact we didn’t see any weakness after the recession figures last week has frightened people on the export side.”

    However, corporate desks at investment banks said that larger clients, who can be slower to hedge currency exposure, were not yet stepping up their activity. HSBC reported that UK corporates were holding off from hedging at current levels in the belief that the pound could hit $1.65 against the dollar in the next few weeks.

    Bernie Sinniah, head of corporate sales at Citigroup, said that corporates were taking out shorter-term hedging contracts amid uncertainty about the global economy and the direction of currencies.

    Corporate desks at investment banks have also privately reported low levels of interest from large corporates in hedging currency exposure this year as the euro and the dollar have traded in a very tight range against each other.

    “The less they do, the less volatile it becomes,” said one banker.

    Trading slump dents NYSE Euronext profits

    Posted on 30 April 2012 by

    NYSE Euronext blamed regulatory uncertainty for holding back trading activity and new investments in technology, as low volumes continued to put pressure on its revenues.

    Duncan Niederauer, chief executive, told analysts on a conference call that potential new rules and investigations on high-frequency trading were a factor in the slowdown. High-frequency traders, who deal in millisecond speeds, contribute a large share of volume to US and European markets in equities, options and futures.

      “Whether an unintended consequence or not, the rhetoric from politicans…may be leading high-frequency trading firms [to] thinking about other alternatives and accelerating their move into other asset classes and geographies,” said Mr Niederauer.

      The US futures regulator, the Commodity Futures Trading Commission, recently began a broad review of potential abuses in speed trading. Other exchanges, such as Nasdaq OMX and Deutsche Börse, have increased the fees charged for data traffic generated by blasting buy and sell orders in millisecond increments.

      Though Mr Niederauer said that NYSE could not report high-frequency activity precisely, he suggested that more of their trading was shifting into “dark pools” away from public exchanges, “from regulated to less regulated markets”.

      US off-exchange trading volume hit a record 34 per cent in the fourth quarter, though many analysts have cited falling volatility as the driver. Dark pools allow traders to place orders at undisplayed prices as they wait for someone to trade at the same price.

      NYSE Euronext reported a 44 per cent drop in quarterly net profits from a year ago to $87m, including $31m of costs related to its failed merger with Deutsche Börse, which was blocked by EU antitrust authorities.

      Net revenues fell 17 per cent to $952m. Turnover at NYSE Technologies rose 4 per cent to $121m in the first quarter, but below its target of 10 per cent quarterly growth.

      Results were also depressed by financial groups holding off on new investments, slowing NYSE Euronext’s transformation from relying on trading into a diversified tech vendor.

      “A lot of our big customers who are the most obvious users are going through their own business reinvention,” said Mr Niederauer, referring to rising capital requirements under Basel III, and the shift of over-the-counter trading to central platforms via new rules in the US and Europe.

      Mr Niederauer said the group was seeing “unused cabinet inventory in Mahwah and Basildon”, its data centres built in the US, outside New York, and the UK, outside London.

      But he committed to the group’s 2015 target of $1bn in revenues from tech, citing the possibility of “bolt on” acquIsitions and “deals in the hopper”.

      “Success in that arena will determine the long-term success of our enterprise,” he said.

      Critical drug trials boost Actelion

      Posted on 30 April 2012 by

      jean calude clozel

      Jean-Paul Clozel, Actelion chief executive and co-founder

      Actelion shares leapt as investors celebrated positive results from a crucial drug trial, removing uncertainties about the future of Europe’s biggest biotech group by sales.

      Basel-based Actelion said a late-stage clinical test of Macitentan, the potential successor to its blockbuster Tracleer treatment, had met expectations. 

        The positive outcome meant Actelion would seek worldwide regulatory approval for the drug by the fourth quarter of this year and could potentially have a product on the market by the end of 2013. 

        That would remove deep uncertainties over the Swiss group, which depends on Tracleer, a breakthrough treatment for pulmonary arterial hypertension (PAH), for the overwhelming majority of its sales. As Tracleer patents start to expire from 2015, the company needs a successor product, in the shape of Macitentan, or other innovations, to prevent decline. 

        Once no longer under patent protection, drugs generally lose much of their sales to cheaper “copy cat” generic rivals. While manufacturers generally try to maintain market share by reducing prices, neither sales or margins match former levels.

        The positive trial result follows a bruising battle last year with Elliott Advisors, a US hedge fund. Elliott had called for a “strategic review” – widely understood as putting Actelion up for sale – after disappointments for other new products had increased the group’s dependence on the success of Macitentan. 

        Actelion’s management rejected Elliott’s claims of excessive costs and over-dependence on a single product and eventually faced down the challenger. But analysts conceded that bringing Macitentan, which Actelion says has significant benefits over Tracleer, promptly to market was critical for the group’s future.

        “With these trial data, Macitentan outpaces other PAH drugs in the market for efficacy as well as safety or those in development,” said Olav Zilian of Helvea, the Swiss brokerage. 

        “Macitentan is likely to gain significant market share in the years after 2015,” noted David Kägi at Sarasin.  

        The trial was called Serphin. “I am extremely pleased with the outstanding Serphin results. We are committed to working with the health authorities to bring this potentially important advancement in pulmonary arterial hypertension to patients as soon as possible.

        “Submission of the registration dossier to health authorities worldwide is expected by the fourth quarter of 2012,” said Jean-Paul Clozel, Actelion chief executive and co-founder.

        Pulmonary arterial hypertension is a chronic, life-threatening disease characterised by unusually high blood pressure in the arteries between the heart and lungs.

        Macitentan is undergoing other long-term clinical trials to assess its efficacy in other clinical indications.

        Actelion shares jumped more than 21 per cent before settling up almost 18 per cent at SFr39.86 in early afternoon trading. 

        Eurozone inflation falls to 2.6% in April

        Posted on 30 April 2012 by

        Eurozone annual inflation fell only slightly to 2.6 per cent in April, increasing the European Central Bank’s discomfort as a further slowdown in bank lending to the private sector showed stubborn price pressures combining with weaker economic activity.

        Inflation dropped from 2.7 per cent in March but remained above the ECB’s target of an annual rate “below but close” to 2 per cent for a 17th consecutive month. Separately, the ECB reported on Monday that eurozone bank lending to the private sector had decelerated significantly in March – which economists said reflected weaker demand for credit from businesses and consumers.

          The data strengthened expectations that the ECB will make no policy changes at its governing council’s interest rate-setting meeting in Barcelona, Spain, on Thursday. While high inflation rates would normally fuel speculation of interest rate hikes, the weak lending data highlighted the fragility of economic activity, especially in much of crisis-hit southern Europe.

          Some economists – and candidates in France’s presidential elections – have argued for fresh ECB action to stimulate growth. But the ECB has been encouraged by signs that its injections in December and February of more than €1tn in three-year loans into the eurozone financial system have reduced constraints on the supply of credit.

          “The ECB is sitting back – not necessarily very comfortably – and doing nothing,” said Erik Nielsen, chief economist at UniCredit.

          Eurozone inflation was driven higher last year by surging energy and commodity prices. Last week, Mario Draghi, ECB president, warned in the European parliament that the annual rate was likely to remain above 2 per cent for much of this year, before falling below 2 per cent in 2013.

          ECB policy makers would become alarmed if high inflation fed through into higher wage and other costs: in Germany, IG Metall, the powerful industrial trade union, has started strikes in pursuit of a 6.5 per cent wage increase. But the recessionary conditions across much of the eurozone are generally expected to keep pay deals firmly in check.

          Eurozone bank lending to the private sector grew at an annual rate of just 0.6 per cent in March, the slowest since June 2010. Annual growth in loans to businesses was just 0.3 per cent. But the ECB has warned that its three-year liquidity injections will take time to feed through into the real economy and Julian Callow, European economist at Barclays, said the central bank was “seeing the weakness as a demand related issue, rather than a supply-related issue”.

          Meanwhile, the ECB could take comfort from a pick-up in M3, the broad money supply measure, which it watches as an indicator the financial system’s functioning as well as a guide to future inflation trends. Annual growth in M3 accelerated from 2.8 per cent in February to 3.2 per cent in March – the highest since June 2009. That pointed to some improvement in confidence in the financial system, while remaining well below growth rates that would point to longer term inflation dangers.

          Pru eyes Rudd in search for next chairman

          Posted on 30 April 2012 by

          Sir Nigel Rudd, the veteran industrialist, has emerged as a leading candidate to head the board of Prudential, one of the highest-profile positions in the UK insurance sector.

          The chairman of airports operator BAA and engineering company Invensys has been approached to replace 60-year-old Harvey McGrath, who was heavily criticised for his role in the FTSE 100 insurer’s aborted $35bn takeover of Asian rival
          AIA two years ago. Several shareholders felt he should have been better able to check the ambitions of Tidjane Thiam, chief executive.

            It was not clear whether Sir Nigel would accept the position and no appointment was imminent, people familiar with the matter said.

            Glen Moreno, chairman of Financial Times owner Pearson and a director of Lloyds Banking Group, has also been shortlisted for the position, the Sunday Times reported. People familiar with Mr Moreno’s thinking said he was committed to his role at Pearson and was not currently considering another role.

            The Pru, Britain’s biggest insurance company by market capitalisation with extensive operations in the UK, US and Asia, is in particular need of a heavy-hitter, amid speculation among bankers and analysts that it is heading for a break-up.

            The incoming chairman will also have to steer Prudential through important regulatory changes, including forthcoming capital requirements that Mr Thiam has warned could make its US arm uncompetitive.

            Sir Nigel was once nicknamed “Britain’s busiest chairman”, leading the boards of companies including Alliance Boots and Pendragon, but has more recently scaled back his directorships. He made his corporate mark as founder of Williams in 1982, which went on to become one of the UK’s largest industrial holding companies until its demerger in 2000, which created Chubb and Kidde. He is also a former deputy chairman of Barclays.

            In spite of his credentials the 65-year-old has a relative lack of experience of Asia, which has been of increasing importance to the Pru.

            Prudential declined to comment. It said in December that Mr McGrath, who became chairman in January 2009, would retire this year once a successor had been found.

            Economic outlook: Focus on US jobs data

            Posted on 30 April 2012 by

            US jobs data are once more destined to define market sentiment at the end of a week that will also feature monetary policy decisions for the eurozone and by the Reserve Bank of Australia.

            Friday’s non-farm payroll report from Washington is likely to exert an influence over sentiment for much of the week as markets continue to weigh the strength of the US recovery against the threat to global growth posed by the rekindled eurozone debt crisis.

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            Economists expect a net addition of 170,00 to the number of jobs in the US outside the agricultural sector, after April’s rise of 120,000 disappointed. Analysts said the steep declines in the number employed in the retail sector in March and April were unlikely to be repeated, although the rate of hiring in the manufacturing sector could ease.

            The overall unemployment rate is expected to remain above 8 per cent, with the most optimistic predictions suggesting it could slip from 8.2 per cent to 8.1 per cent.

            Both sets of jobs data will shape the Federal Reserve’s thinking on the need for more stimulus, meaning a significantly downbeat number could lift market sentiment by making a third round of quantitative easing more likely.

              One of the Fed board’s more dovish members, Daniel Tarullo, will be making a speech to the Council on Foreign Relations in New York on Wednesday.

              Traders will be alert for any signs of a more determined advocacy for more stimulus as they shape their own expectations on US monetary policy ahead of the non-farm payrolls report.

              The Reserve Bank of Australia looks poised to cut interest rates tomorrow in response to low inflation and growth rates easing.

              “Inflation is low and growth is slightly below trend so we expect the RBA to cut rates by 25 basis points next week to 4 per cent,” said Paul Bloxham, chief economist for Australia and New Zealand at HSBC. “We [also] expect the RBA to leave the door open for further rate cuts.”

              The European Central Bank is likely to leave eurozone monetary policy on hold at its meeting on Thursday. Mario Draghi, its president, is likely to face questions afterwards on his comments to the European Parliament last week that the eurozone is in need of a growth compact.

              In the UK, attention will centre on purchasing managers’ index data for insight into the chances of a return to growth. Tomorrow’s April manufacturing PMI is expected to remain stable month on month after March’s reading of 52.1. Any reading above 50 indicates expansion.

              The April PMI reading for the dominant services sector of the UK economy, due on Thursday, is expected to fall from March’s strong 55.3 to 54.1.

              But most attention will focus on the reading for the construction sector, due on Wednesday, after its sharp slowdown in activity in the first quarter dragged the UK back into recession. It is expected to ease back to 55.0 after coming in at 56.7 in April, a 21-month high.

              The numbers will influence the Bank of England’s stance on monetary policy.

              Howard Archer, chief UK and European economist at IHS Global Insight, said: “If the April purchasing managers’ surveys point overall to faltering activity, pressure will mount on the Bank to provide further help to the economy.”

              London strength boosts housing market

              Posted on 30 April 2012 by

              House prices in England edged up slightly in April for the second successive month, propped up by the relative strength of the London market, according to a survey published on Monday.

              A monthly report by Hometrack, a property researcher, of house prices in England and Wales reported gains of 0.1 per cent overall in April, down from a rise of 0.2 per cent in March.

                The strongest price rises were in London, which saw a 0.3 per cent increase.

                Regional disparities in the housing market persist, with the higher prices in the capital and the rest of the south offsetting falls across the north of England and Wales. House prices were flat in the Midlands.

                Homes in London also sell far more quickly. The average time a property is on the market in the capital is less than six weeks, compared with 12 weeks across all regions away from the south of England.

                Richard Donnell, director of research at Hometrack, said: “While the time to sell has fallen slightly across all areas in the last quarter, the relative position of the time to sell between regions has remained broadly unchanged for the last three years.”

                Research by Hometrack earlier this year suggested there were also stark differences between London postcodes.

                Researchers found homeowners in some of the capital’s poorest areas had experienced price falls of as much as a fifth in recent years, while owners in wealthier areas had benefited from demand from overseas for prime London properties.

                Claire Jones

                Cyprus replaces bank head amid crisis

                Posted on 29 April 2012 by

                Cyprus has replaced its internationally respected central bank governor amid a deepening banking crisis that could make the island the next eurozone member-state to seek a bail-out from its European partners.

                Panicos Demetriades, a professor of financial economics at Leicester University in the UK, will take up the post this week, a government spokesman said.

                  He succeeds Athanasios Orphanides, who steered Cyprus into the eurozone in 2008 but clashed publicly with the communist government over its reluctance to adopt fiscal and structural reforms following the global financial crisis.

                  President Demetris Christofias declined to re-appoint him as governor despite intense lobbying by other Cypriot politicians, including several in his own party, according to people familiar with the discussions.

                  The new central bank governor’s first task will be to oversee the rescue of Cyprus Popular Bank, the island’s second-largest lender, which is heavily exposed to Greece’s crumbling economy. Managers are seeking a capital injection of €1.5bn – equivalent to almost 10 per cent of Cyprus’s national output.

                  Mr Christofias is understood to be considering a proposal for a state takeover of the ailing bank, although it is unclear how the cash-strapped government would fund a recapitalisation without resorting to a European Union bail-out .

                  The departure of Mr Orphanides is a blow for the European Central Bank, which loses an accomplished monetary policy expert from its 23-strong governing council – and gains a potentially outspoken member on ECB policy.

                  Mr Demetriades, a Cambridge University-trained economist, last year called for Germany to re-adopt the Deutschemark to prevent a costly restructuring of the debt of peripheral member states, arguing in a letter to the Financial Times that “without Germany in the eurozone, the euro would quickly depreciate to a level that would help reinstate the competitiveness of the periphery”.

                  Mr Orphanides was previously a senior economist at the US Federal Reserve and increased the ECB’s intellectual fire power considerably during the economic crises of the past few years. The risk facing Mario Draghi, ECB president, is of greater dissent within the council.

                  The influence of the new Cypriot central bank governor over ECB policy is likely to be minimal, however. The ECB tries to reach decisions by consensus but he would quickly lose sympathy from other council members if he clashed publicly with them on policy. Cyprus is one of the eurozone’s smallest member states, reducing its weight in discussions.

                  Credit Suisse fund plans London float

                  Posted on 29 April 2012 by

                  A specialist catastrophe insurance team at Credit Suisse is planning a flotation on London’s main market of a closed-ended version of a fund they run in an attempt to raise up to £200m in long-term capital.

                  A presentation for the structure, a copy of which was seen by the Financial Times, outlines a provisional launch date in June.

                    The Credit Suisse team already runs a $3.7bn portfolio of catastrophe insurance funds on behalf of bank clients and hopes the flotation will be the first of several equity capital raisings for them in London.

                    The listed vehicle will be called DCG IRIS and is being launched by Dexion, a specialist alternatives fund manager that has several closed-ended funds trading on the London stock market. DCG IRIS will invest money raised from its initial public offering in Credit Suisse’s Iris Plus fund – a portfolio of insurance linked securities such as catastrophe bonds.

                    Typically, the portfolio’s instruments cover costly and rare losses and are sold to large reinsurers looking to cap risks in their own portfolios.

                    According to marketing materials, DCG IRIS will target an annual dividend of 5 per cent, with a total projected net return to shareholders, including share price appreciation, of as much as 7 per cent over Libor.

                    Last year the underlying Credit Suisse Iris plus fund, which counts institutional investors as clients, weathered the worst year on record for catastrophe insurance with a return of about 1 per cent overall.

                    Spanish banks: pass the parcel

                    Posted on 29 April 2012 by

                    So Spain is thinking about a bad bank scheme, except that the government doesn’t want to call it that or, much more importantly, put up any money. Not a good start. Of course, moving bad property loans off Spanish banks’ balance sheets without troubling taxpayers looks superficially attractive. But someone will have to acquire them, and that, in turn, is going to crystallise valuations.

                    Spanish-debt-chart

                    Madrid’s thinking on who the acquirer should be is vague but seems to envisage a corporate entity financed either by local deposit guarantee fund money or by the domestic banking sector collectively. Unfortunately, the first solution would simply impinge further on funds designed to protect depositors in the event of bank failures. The latter would risk spreading the toxic asset problem to even more banks, some of which are in better shape. As the International Monetary Fund noted last week when reviewing Spain’s burden-sharing plans (vis a vis problem banks) “greater reliance on public funding may be needed”.

                      Nor is crystallising valuations a panacea, especially if the banks in question (plus some healthier national peers) remain exposed to further price declines through participation in the bad loan entity. As the Irish can attest, setting correct prices is extremely difficult when there is huge amount of surplus property and an ailing economy. Ireland’s bad bank, the National Asset Management Agency, acquired its first loans at an average 47 per cent discount in February 2010. But by end-2011, residential property prices had fallen another 24 per cent. Nama has sold only €7bn of assets so far, mainly outside Ireland. Worse, the overhang of Nama-owned assets is arguably one factor preventing stabilisation of the Irish property market. But at least the Nama model offered Ireland’s banks some protection, although at heavy cost to taxpayers. Madrid’s plan, on scant detail available, wouldn’t even achieve that.

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