Good morning New York,
FT ALPHAVILLE
Japan's open goal: Whatever the final results of Abenomics, says Cardiff, at least it has refocused attention on a longstanding problem in Japan: the tremendous difference in labour force participation between men and women. It's an especially significant problem for Japan because of the country's ongoing population decline so the push to get more women into the labour force would have real benefits.
Some UK bank shortfalls: Joseph brings you the Prudential Regulation Authority's table on UK bank capital shortfalls… One sting in the PRA statement for Barclays: it's been told to come up with "a plan to reach 3% CET1 leverage after adjustments to be submitted… by end-June".
NEWS
Bernanke sees 2014 end for QE3: The end is in sight for US Federal Reserve easing that has dominated financial markets for half a decade after it set out an optimistic economic outlook that would lead to the end of asset purchases in mid-2014. Markets plunged as Ben Bernanke, Fed chairman, said it would be "appropriate to moderate the monthly pace of purchases later this year" as long as the economy grows as expected. It is the first time the Fed has set out a framework for ending its third round of quantitative easing, known as QE3, which Mr Bernanke said could come to a complete halt when the unemployment rate is around 7 per cent. The yield on 10-year Treasuries hit its highest since March 2012 at 2.36 per cent, up sharply from 1.60 per cent at the start of May, while equities stumbled with the S&P 500 closing 1.4 per cent lower. (Financial Times)
Chinese interbank rates spiked again, to their highest level since 2006.The seven-day repurchase rate rose 1.24 percentage points on Thursday, to hit 12 per cent. The central bank again declined to conduct liquidity operations (Bloomberg).
And that's as... Chinese manufacturing activity slumped further in June. The HSBC-Markit flash PMI came in at 48.3, lower than forecasts of 49.1, and May's reading of 49.1 (Bloomberg). The Australian dollar fell to its lowest level against the US dollar since September 2010, below $0.93, following the PMI release (Wall Street Journal).
Eurozone PMI improvemet: "Private-sector activity in the euro zone fell again in June, although at a slower pace than previously, while Germany's economy continued to expand, according to surveys of purchasing managers released Thursday. The surveys are in line with other recent evidence suggesting that the euro zone's longest postwar contraction may have stretched out to a seventh quarter in the three months to June, but may also be coming to an end." (Wall Street Journal)
Japan considers fiscal boost in face of consumption tax: Japan's government is ready to provide extra spending if a sales-tax increase next year damps economic growth, a senior finance ministry official said. "Naturally, there will be a decline in economic growth" following the tax increase planned for April, Yuzuru Takeuchi, 54, parliamentary secretary for finance and a lower house legislator, said in an interview today in Tokyo. "We must take appropriate action to counter this" and it's possible to provide more spending, possibly using extra tax collected this year, he said. (Bloomberg) Abenomics paradox #2341678
Rupee hits all-time low after Bernanke comments: The Indian rupee hit an all-time low of Rs59.94 to the US dollar at the start of trade on Thursday, amid concerns about the end of a US programme that has pumped billions of dollars of liquidity into emerging markets. The rupee's precipitous slide at the start of trade on Thursday morning prompted the Reserve Bank of India to intervene to stop the currency from breaching Rs60, the psychologically important threshold, according to currency traders and market observers. (Financial Times)
UK bank capital hole: RBS is £10bn-£12bn short, Lloyds £8bn-£9bn, and Barclays £3bn-£5bn according to Prudential Regulation Authority findings out early on Thursday (Financial Times).
The UK government will launch an "urgent investigation" into creating a bad bank from RBS's toxic assets, Chancellor George Osborne said in his annual Mansion House speech. "We will see whether it's right for Britain to, in effect, see RBS broken up," the Chancellor said, indicating that the bank's Irish and UK commercial estate exposures, or £65bn-£130bn of its balance sheet, could be bad-banked (Financial Times). The bad-bank proposal has gathered momentum after a Treasury rethink of its effects on RBS's capital, but one key drawback is the time a split would take (Financial Times).
The Treasury is also "actively considering options" for how to begin selling its Lloyds shares, the Chancellor said, but warned no fixed timescale was in place (Wall Street Journal).
Sony will study Third Point's proposal for the company to spin off its entertainment arm, its chief executive told shareholders. But Kazuo Hirai reiterated that the business was not for sale (Reuters, Dealbook).
Microsoft recently came close to buying Nokia's handset business. The 'advanced' talks ran aground over price, which was not disclosed (Wall Street Journal).
The UK's Financial Conduct Authority has begun to vet senior appointments to hedge funds, including US funds with operations in London. Several candidates for positions have been informally vetoed after interviews with the regulator. "The FCA is looking more closely at US hedge funds than the SEC is," according to one lawyer (Financial Times).
Markets: European stocks joined the heavy sell-off seen across Asia on Thursday which started overnight in the US and was triggered by the Federal Reserve's confirmation that it expects to start easing its asset purchases later this year. Equities, particularly those in Asian emerging markets, are down heavily after the Fed set out its path to reduce gradually its $85bn monthly purchases, and possibly end the quantitative easing programme by mid-2014, when the unemployment rate is expected to be down to 7 per cent. London's FTSE 100 is down 1.5 per cent, while Frankfurt's Xetra Dax drops 2 per cent. The pan-European FTSE Eurofirst 300 index is 1.5 per cent lower. In late Asian trade, Tokyo's Nikkei 225 finished 1.7 per cent lower, while haven currencies such as the dollar and yen have climbed strongly against emerging market currencies. The biggest equity losses are among Asia's emerging markets. Jakarta's Composite index is down 3.7 per cent, while Manila's PSE index is 2.9 per cent lower. On Wall Street the Dow Jones Industrial Average ended down more than 200 points, or 1 per cent lower, at 15,112.19. The S&P 500 closed 1.4 per cent lower at 1,628.93 according to the FT's Global Markets Overview.
