Good morning New York,
FT ALPHAVILLE
Capital controls and the Cypri-outlier: Even if the barn door is closed before the horse bolts, the horse will find another way to escape. That's the starting point for Cardiff's deep-dive into capital controls. His real point however is that, if used judiciously, capital controls are not so much an obstacle to globalisation but simply another tool for managing it. Well, maybe — that's a big if.
NEWS
The world's pool of Aaa-rated government debt has fallen 60 per cent since the start of the financial crisis. The loss of top ratings by the US, UK, and France have helped shrink the stock of debt deemed Aaa by Fitch, Moody's and Standard & Poor's from almost $11tn at the start of 2007 to $4tn in 2013 (Financial Times).
European regulators to charge banks over derivatives: "European antitrust authorities are moving soon to bring a case against some of the world's largest banks alleging collusion in the $27 trillion dollar market for credit derivatives, people familiar with the investigation said. The probe by the European Commission involves 16 financial groups. It focuses on whether they sought to stifle competition from exchanges in the market for credit-default swaps, which pay out when a country or a company defaults on its debts." (Wall Street Journal)
Cyprus readies capital controls: With banks due to reopen on Thursday, Finance Minister Michael Sarris said he expected the control measures to be ready by noon (1000 GMT) on Wednesday: "I think they will be within the realms of reason," he said, without going into details. "Banks will open on Thursday ... We will look at the best way to limit the possibility of large sums of money leaving, and not imposing punitive conditions on the economy, businesses and individuals," Sarris said in a Cyprus television interview. (Reuters) In broad terms, they will limit the ability to withdraw money, or shift it between accounts or across borders, according to officials. The measures might also delay the processing of cheques. Mr Sarris said some foreign banks that were not short of liquidity and which held "transient funds" that tended to cycle in and out of the country to make payments and satisfy other business operations could be exempted. (Financial Times)
Fund manager bonuses cap set to be eased: Brussels' plan to cap fund managers' bonuses is likely to be eased after a member of the European parliament leading the charge on pay restrictions signalled his willingness to soften his position. Sven Giegold, a prominent German green MEP promoting a plan to curtail bonuses for bankers and fund managers, told the Financial Times he was open to allow fund managers to raise the cap on their bonuses to as much as twice their base salaries. (Financial Times)
Warren Buffett will become one of Goldman's largest shareholders,after a deal to convert billions of dollars of warrants into common stock. Berkshire Hathaway was originally issued the warrants as part of investing $5bn in the bank during the crisis, giving it the right to purchase about 9 per cent of the bank for $115 per share before October 1 this year. Tuesday's revised deal will see Goldman issue Berkshire stock equivalent to the company's paper profit on the position (Financial Times,Goldman statement). Buffett's gain of a 2 per cent stake from the deal will making him a top 10 Goldman shareholder (Wall Street Journal, Bloomberg).
Credit Suisse is to buy Morgan Stanley's wealth management arm in Europe, the Middle East and Africa, with total assets under management of $13 billion. "Details of the deal - one of Credit Suisse's first notable acquisitions since it bought out the remainder of Brazilian investment fund Hedging-Griffo in 2011 - were not disclosed. It said it expected to complete the purchase later this year." (Reuters)
US crackdown on Citi laundering laws: "The US Federal Reserve has ordered Citigroup to improve its compliance with anti-money laundering rules, citing deficiencies at an affiliate of Banamex, its prized Mexican banking arm. Citi is required to develop plans to strengthen its anti-money laundering procedures and adequately fund its risk-management programmes. There were no fines as part of the Fed order." (Financial Times)
Commodities trading rule call rejected: "Switzerland has sought to protect its central role in the commodities trading industry, rejecting calls for stringent regulation in the sector and opting instead to launch a consultation over a set of voluntary principles for the industry. The Swiss government will publish on Wednesday a long-awaited report on the commodities industry, which includes groups such as Glencore, Vitol and Cargill with big offices in cities such as Geneva, Zug and Lugano. The report will stop short of calling for strict mandatory regulation, as campaigners have demanded, instead proposing a wide-ranging consultation about transparency and human rights, according to three people familiar with the discussions." (Financial Times)
FSA hits Prudential with £30m fine: The UK's Financial Services Authority will levy a £30m fine on Prudential and censure its chief executive, Tidjane Thiam, over the way it handled its abortive $35.5bn bid for AIA, the rival insurer, in 2010. The penalty, expected to be announced later on Wednesday, relates to the Pru's failure to inform the City regulator punctually of its intention to take over AIA, according to people close to the situation. (Financial Times)
A potential rail boom is underway: "Welcome to the revival of the Railroad Age. North America's major freight railroads are in the midst of a building boom unlike anything since the industry's Gilded Age heyday in the 19th century—this year pouring $14 billion into rail yards, refueling stations, additional track. With enhanced speed and efficiency, rail is fast becoming a dominant player in the nation's commercial transport system and a vital cog in its economic recovery." (Wall Street Journal)
Improving home prices help drive US economy: "Home prices rose 8.1 percent in January, the fastest annual rate since the peak of the housing boom in summer 2006. Demand for longer-lasting factory goods increased 5.7 percent in February, the biggest gain in five months." (New York Times)
Secret HQ set up in London to fight cyber crime: "Britain's security services are to open a new unit in London to work with business to protect UK companies from the growing threat of cyber attacks by China, Russia and Iran. The new initiative – formally called the Cyber Security Information Sharing partnership – will be established at an undisclosed location in London, where around a dozen officers from the Government Communications Headquarters and MI5 will work with business representatives to monitor potential threats." (Financial Times)
Bank of Spain sees deeper gloom in 2013: "The Spanish economy will shrink by 1.5 per cent this year and unemployment is set to rise above 27 per cent, the Bank of Spain has predicted. The central bank's latest annual forecast leaves little doubt that 2013 will be an even tougher year for Spaniards than last year, with housing prices also heading for yet another sharp fall. The economy will again be marked by weak domestic demand, a fragile labour market and tight financial conditions, the bank said." (Financial Times)
Poland opens way to euro referendum: "Donald Tusk, Poland's prime minister, took a big political gamble on Tuesday when he opened the door to a referendum on joining the euro, in the face of strong public opposition to the common currency. The move is part of a campaign to prepared Poland to begin the final stages of accession to the single currency by 2015. Mr Tusk had previously opposed a public vote, arguing that Poles had already bound themselves to the euro when they voted in 2003 to join the EU." (Financial Times)
Markets: Stocks are firmer, with Wall Street closing in on record levels, as investors express optimism over the US economy. But the euro remains at four-month lows, a sign the market also remains wary about the impact on the eurozone of the Cypriot banking crisis. This leaves mixed moves in growth-focused barometers, with copper up 0.1 per cent to $3.45 a pound and Brent crude off 26 cents at $109.10 a barrel. A muddle can be seen in supposed havens, where gold is off $4 to $1,595 an ounce, the dollar index is advancing 0.2 per cent, and Treasury prices are slightly firmer, nudging 10-year yields down 1 basis point to 1.90 per cent. writes the FT's Global Markets Interlocutor Jamie Chisholm.
