Good morning New York,
FT ALPHAVILLE
Bernanke and markets, crazed and confused: As Cardiff quite rightly pointed out, Bernanke answered the market's question about whether he would start slowing the pace of asset purchases soon. He was much less clear about when, how, and even why.
NEWS
Chinese interbank rates eased after reports of central bank support. China pulled back from the brink of a severe cash crunch on Friday, with money rates falling after reports that the People's Bank of China, the central bank, had acted to alleviate market stresses. Local media reported that the central bank had provided targeted cash injections to the country's biggest banks after the interbank market almost froze on Thursday, though there was no official announcement of any special provisions. One bond trader told the Financial Times that the PBoC had given verbal instructions to major banks to resume lending to each other, in order to get the interbank market working again. (Financial Times)_
The ESM has been authorised to 'directly recapitalise' eurozone banks but only if governments make their own investments in stricken lenders first, and with retroactive application of the new powers to be decided on a 'case by case' basis. Eurozone financial ministers also confirmed the size of the direct recap funds to be €60bn, unless later expanded by the ESM board. The ESM expects the tool to become operational in the second half of 2014 (Financial Times).
Bond market sell-off causes stress in $2tn ETF industry: A wave of selling caused many exchange traded funds to tumble below the value of their underlying assets as a bond market sell-off caused stress in the $2tn ETF industry. ETFs track baskets of underlying assets, such as emerging-market stocks or municipal bonds, but discounts widened sharply on Thursday as dealers struggled to keep up with the sell orders. Emerging-markets ETFs were among the worst affected, as investors took fright that the end of Federal Reserve monetary easing would lead to outflows from developing countries. (Financial Times)
Oracle's revenue growth stagnated for another quarter. Revenues from new software licenses and cloud offerings increased by only 1 per cent in the second quarter. Oracle shares fell 8 per cent after the close, despite a doubling of its dividend and authorisation for a $12bn stock buyback (Wall Street Journal).
The IMF has warned eurozone creditors of gaps in financing Greece's bailout, placing its distribution of aid in July in doubt. National eurozone central banks' refusal to roll over their maturing holdings of Greek bonds has compounded the €3bn-€4bn shortfall (Financial Times).
Softbank's chief executive revealed the ambition behind its $21.6bn bid for Sprint Nextel. "We want to be the world's No.1 company in various terms including profit, cashflow and market value," Masayoshi Son told shareholders on Friday (Bloomberg).
UK prosecutors alleged that former Libor trader Tom Hayes conspired with employees at eight banks and interdealer brokers. The companies named at a court appearance by Hayes, who has been charged with eight counts of "conspiring to defraud", included Tullett Prebon. The broker said on Thursday that it has been asked to provide information to investigators, but that it has not been told that it or its employees are being investigated (Wall Street Journal).
Markets: Equity markets in Europe recovered some calm after the previous session's heavy sell-off, but Asian and emerging markets suffered further falls after a broad sell-off on Wall Street. The pace of the selling nearly everywhere appeared to be slowing, although Asian emerging market equities continued to feel the strain. The dollar was a winner against some of its rivals; however, many managed to claw back some losses. Government bonds lost ground as yields pushed higher, but gold and silver regained some poise. European equities opened with some modest gains. The pan-European FTSE Eurofirst 300 index climbed 0.5 per cent in the first hour of trade, while London's FTSE 100 added 0.5 per cent and Frankfurt's Xetra Dax inched 0.2 per cent higher. Overnight, the Dow Jones Industrial Average on Wall Street lost 2.3 per cent while the S&P 500 fell 2.5 per cent, which set the tone for much of Asian trade. But in Tokyo, the Nikkei 225 turned around its morning losses to climb 1.7 per cent as investors looked to the benefits of a further slide in the Japanese currency on the country's exporters according to the FT's Global Markets Overview.
