Good morning New York,
FT ALPHAVILLE
Why new leverage ratios rules could stifle repo markets: Earlier this month (July 9) the Federal Reserve Board, the Office of the Comptroller of the Currency and the FDIC released a notice of proposed rulemaking on the supplemental leverage ratios of the largest banks, which will be open for comment for 60 days. Now, says Izzy, JP Morgan is now worried about the punitive effects such ratios might have on repo.
China's interest rate liberalisation: more complicated than it looks? You probably heard on Friday that China took some steps towards liberalising lending rates. Although this was reported so widely that it sounded like a very big deal, most reports also pointed out that's really because of what it might signify about the new leadership's intentions. In themselves, the changes announced on Friday are expected to have very limited effects. But, says Kate, that might not be entirely accurate.
NEWS
Sweeping victory for Japan's LDP: The victory, which had been widely predicted, will put the coalition in charge of both houses of parliament for the first time since 2007. (Financial Times)
Deutsche plans to shrink balance sheet by up to a fifth: "Deutsche is expected to tell investors that it aims to achieve a minimum 3 per cent ratio of overall equity to loans by the end of 2015, people briefed on the plans said." Its estimated leverage ratio was 2.1% at the end of Q1, according to Morgan Stanley analysis. The bank has is considering issuing at least €6bn in hybrid equity capital such as convertible bonds, once the regulatory capital status of such instruments is clarified in Germany. (Financial Times)
Fed reconsidering banks' physical commodities activities: the Fed is reviewing a 2003 precedent 2003 precedent that let deposit-taking banks trade physical commodities. Sources told the FT the Fed's discussions with bank executives in recent weeks included whether the banks should be barred from owning such assets. Meanwhile a Senate subcommittee will hold a hearing tomorrow to explore whether financial firms such as Goldman Sachs Group and Morgan Stanley should continue to be allowed to store metal, operate mines and ship oil. (Bloomberg) (Financial Times)
GlaxoSmithKline says Chinese laws may have been violated: British drugmaker GlaxoSmithKline said on Monday that some of its China executives appear to have violated Chinese laws, as the British drugmaker also pledged to reduce its prices in China after a high-profile investigation by Chinese police into alleged bribery and corruption.Glaxo's admission comes as AstraZeneca said Chinese police have visited its Shanghai office, "regarding a local police matter focused on a sales representative", making it the latest western pharmaceutical company to be investigated. Belgian drugmaker UCB said last week it had also been as been visited by Chinese authorities. (Financial Times)
At least six other global pharma companies used the Chinese travel agency implicated in GSK bribery claims. (New York Times) The travel agency's address is "which appears to be almost fully occupied by Third Branch of Shanghai's Finance and Taxation Bureau". (WSJ ChinaRealtime)
UBS agrees to settle US housing claims: UBS is facing a fine of more than SFr700m to settle US claims relating to the alleged mis-selling of mortgage-backed securities in the run-up to the financial crisis. The Swiss lender is one of 18 banks against which the Federal Housing Finance Agency has filed cases, as it seeks to recoup money owed to government-controlled housing giants Fannie Mae and Freddie Mac following their near-collapse in 2008. (Financial Times)
BoJ governor says more stimulus is an option; two-year inflation target not rigid: The Japanese central bank is prepared to inject more stimulus if the economy's recovery is threatened, BoJ board member Takehiro Sato said in a speech today, as he pointed to risks such as the slowdown in Chinese growth. (Reuters)
Portugal's prime minister ruled out calling a snap general election two years ahead of schedule: "President Aníbal Cavaco Silva said on Sunday night that he had been given "additional guarantees" from the two government parties that they would keep their coalition together to see through the country's €78bn EU bailout programme." (Financial Times)
BP failed in its attempt to freeze compensation payments under the settlement it agreed last year over the 2010 Deepwater Horizon disaster: The cost of the settlement is on course to be more than double the original $7.8bn estimate. (Financial Times)
US vulture funds swoop on Co-op debt: "Aurelius Capital Management and Silver Point Capital are understood to have built the stake in one set of the bank's loans, putting them in a strong position as the lender works to fill a £1.5bn capital hole." (Financial Times)
British fraud investigator held in China: "Peter Humphrey, founder of Hong Kong-based risk advisory company ChinaWhys, was detained earlier this month in Shanghai, according to British officials who said Mr Humphrey is being provided with consular services." The company website said Humphrey had worked with GSK in the past. (Financial Times)
Markets: European stocks are on the front foot after a choppy Asian session dominated by Japan's election result. Gold is rallying as the dollar weakens and Treasury yields inch lower, in a market where bullish sentiment is underpinned by another record close for Wall Street. US index futures suggest the S&P 500 will add 5 points, leaving the most-followed stock index just 3 points shy of trading above 1,700 for the first time writes the FT's Global Markets cosmonaut Jamie Chisholm.
