Good morning New York,
FT ALPHAVILLE
On what really is different this time around: Izzy suggests we may just be living in an economy in which profits no longer remotely resemble a "natural" aspect of the economy. They are, one might say, somewhat synthetic.
Bad-banking RBS, a PCBS side-track: Joseph picks up on some of the cons of creating an RBS bad bank, from the Parliamentary Commission on Banking Standards' final report on Wednesday. Until recently it was going to be all about the pros. They're now calling for "detailed" analysis by the autumn. It's slightly confusing...
Vacancy for fig leaf: If you are the "politically astute" person to run UK Financial Investments — then hurry! The application deadline ends on June 21 though, and the job mightn't be around for all that long. Joseph's post has more.
NEWS
China cash crunch deepens as PBOC withholds funding: China's cash crunch deepened on Wednesday after the central bank withheld funding from the financial system, putting pressure on overextended lenders. Short-term interbank rates jumped more than 200 basis points, setting a record high at nearly 8 per cent for loans of one month or less, the latest indication of how credit has suddenly become very tight in China. The main reason for the tightness has been the central bank's reluctance to pump liquidity in to the money market, wrongfooting banks that had expected Beijing would support them with large cash injections, as it had regularly done before. (Financial Times)
Cyprus president calls for bailout overhaul to save economy: Mr Anastasiades has asked EU leaders to unwind the complex restructuring and partial merger of its two largest banks, which account for 80 per cent of the domestic banking sector, backed by further eurozone loans.He asks for part of the €9bn given to Laiki in so-called emergency liquidity assistance by the eurosystem's central banks to be converted into long-term bonds. These bonds would be used to unwind the partial merger of the "good" bit of Laiki with Bank of Cyprus. (Financial Times)
Traders try to game Platts oil-price benchmarks: The European Union says it is searching for evidence that oil traders manipulate prices. Oil trader Halis Bektas says "such a trading strategy works this way: He might be scheduled to buy perhaps 80,000 metric tons of fuel oil, its price pegged to the daily benchmark published by Platts, a division of McGraw Hill Financial Inc. MHFI +1.87% In the days before the purchase, he could offer to sell smaller quantities at discount prices—sometimes $3 to $5 a metric ton below market rate—and report those offer prices to Platts." (Wall Street Journal)
"Two of the largest independent U.S. high-frequency-trading firms are in early merger discussions, as a downturn in trading opportunities has spurred cutbacks and tie-up talks among rivals. RGM Advisors LLC and Allston Trading LLC have discussed a deal that would combine their respective strengths in automated stock trading and futures markets, according to people close to the talks." (Wall Street Journal)
Abenomics watch: The yen value of Japan's exports rose by the biggest margin in three years in May, aided by policies that have softened the country's currency, in the latest evidence that the government's "Abenomics" revival campaign is lifting earnings at global manufacturers. Japanese exports fetched Y5.768tn ($60.5bn) in May, an increase of 10.1 per cent compared with the same month a year earlier, Ministry of Finance data showed on Wednesday. (Fincancial Times)
Shinzo Abe claimed G8 backing for his stimulus policies:"This is a policy to achieve domestic objectives and this is not targeted at the foreign exchange rate of Japan," the Japanese prime minister said following the G8 summit at Lough Erne. Other leaders had a "clear understanding" of the need for stimulus, Abe added (Financial Times).
Alcatel overhaul aims to cut costs by €1bn: Alcatel-Lucent will reveal a restructuring plan to cut costs by €1bn and raise €1bn via asset sales to try to reverse the decline of the once mighty French-US telecoms equipment maker. The proposals, to be announced today by new chief executive Michel Combes, are the biggest corporate overhaul of the group since the $13.4bn merger of France's Alcatel and Lucent of the US in 2006. (Financial Times)
Markets: Equities edge lower and the dollar and high-grade government bonds have climbed as investors make their positions as secure as possible ahead of Wednesday's meeting of the board of the Federal Reserve. In London, the FTSE 100 is down 0.2 per cent as investors await minutes from the Bank of England's Monetary Policy Committee meeting earlier this month – Sir Mervyn King's last as governor – for details on the current thinking behind Britain's QE programme. In Tokyo – the source of much recent equity market volatility – the Nikkei 225 index advanced 1.8 per cent after strong export data and a fall in the yen says the FT's Global Markets Overview.
