Good morning New York,
FT ALPHAVILLE
What's supporting China's stressed borrowers, and their banks: The bull/bear arguments about China are evolving — or so we'd like to think — into a more nuanced debate about how the country's leaders are going to respond to the pressing need for change (which they themselves have acknowledged), and how these responses might play out. One of the key questions is how the large amounts of risky debt in China will be addressed. And, asks Kate, how are the riskier borrowers being kept afloat, and how are banks managing their non-performing loans?
NEWS
Forward guidance BoE style: Flashes hitting the tape at pixel. (Money Supply preview) (FT Live blog)
Evans, Lockhart comments support September taper possibility: Chicago Fed president Charles Evans said he "would clearly not rule" out a decision to begin reducing purchases next month September. Evans is a staunch defender of QE and is an FOMC voting member this year. Meanwhile Atlanta Fed president Dennis Lockhart, who is not currently a voting member, told Market News International also suggested tapering could begin next month if data improve. (Bloomberg) (Financial Times)
ICBC closes in on Standard Bank deal: Executives from Standard Bank are in Beijing for intensive meetings with Industrial and Commercial Bank of China (ICBC) to hammer out details of a deal to sell the South African lender's London-based commodity trading business to its biggest shareholder. The talks have been off and on for nearly a year, but the visit to China by a large Standard Bank team signals that the two are near to closing the sale, according to two bankers familiar with the meetings. (Financial Times)
TPG asks investors for an extra year to spend $3bn: The private equity company's unusual step underscores the difficulty finding good deals in the aftermath of the global recession. (Financial Times)
The US government sued Bank of America on Tuesday, alleging it committed fraud by packing MBS with loans that it knew to be "toxic waste". Separate lawsuits filed by the Department of Justice and the SEC claimed the bank understated the risk in $850m worth of MBS sold in 2008. (Financial Times)
"Glencore Xstrata and JPMorgan Chase face a U.S. lawsuit, along with the London Metal Exchange, alleging they artificially inflated aluminum prices, in the second legal challenge related to metal warehousing in a week. The suit, which also names Goldman Sachs (GS.N) and subsidiaries of both Goldman and JP Morgan, accuses the firms of engaging in anti-trust and racketeering practices. The latest case, filed by Florida-based aluminum user Master Screens and an individual plaintiff, expands the geography and number of companies being sued in the unfolding legal battle over warehousing." (Reuters)
SEC officials won't recommend civil charges be filed against Magnetar Capital, the Illinois hedge fund involved in creating dozens of CDOs. The regulator has for over a year been investigating whether Magnetar violated federal law because of its influence over the selection of assets bundled in one CDO, according to people close to the probe. (Wall Street Journal)
China fines foreign formula makers over pricing probe: "Mead Johnson of the US agreed to pay Rmb203.7m ($33m) to the National Development and Reform Commission, which enforces aspects of China's 2008 antitrust law. New Zealand's Fonterra was fined Rmb4.4m. Neither company intends to contest the fines." Nestle last month said it was cooperating with authorities on the probe, and several companies including Danone are cutting their China formula prices. (Financial Times) "In one futures contract—for the delivery of skim-milk powder in October—Fonterra's premium over products of U.S.-based DairyAmerica Inc. narrowed to 14% from 20% in the previous auction two weeks ago." (Wall Street Journal)
Spain's "bad bank", Sareb, has sold its first package of real estate assets, to private equity group HIG Capital, in a transaction expected to set a precedent for a string of other deals. Sareb said said it had sold 51 per cent of a portfolio including 939 homes to HIG, in a deal valuing the assets at €100m. (Financial Times)
Disney's revenue was in line with expectations and profits were flat at $1.85bn for the three months to June 29. The company will write down up to $190m on its summer flop The Lone Ranger. (Financial Times)
The Chinese yuan hit a record high against the U.S. dollar in intraday trading on Wednesday as higher interest rates in China drove investors to bet on the nation's currency...The yuan hit 6.1203 versus the dollar in early trade, the strongest level in the modern era... Despite China's slowing economy, the yuan has strengthened in recent weeks. At its strongest level of 6.1203, the yuan had risen by around 0.7% since May, and 1.8% year to date. (Wall Street Journal)
Markets: The dwindling appetite for growth-focused assets is hurting industrial commodity prices, with copper off 0.4 per cent to $3.16 a pound and Brent crude slipping 25 cents to $107.93 a barrel. Money is moving into fixed income, nudging yields lower. Gold is slipping $1 to $1,280 an ounce. The FTSE All-World equity index, which this week came within a fraction of hitting fresh five-year highs of around 250.0, is off 0.6 per cent to 246.8 as the FTSE Eurofirst 300 sees a fall of 0.5 per cent and the Asia-Pacific region slides 1.9 per cent. Much of the damage to sentiment at the start of the global session originated from Japan, where the Nikkei 225 slumped 4 per cent, forcing funds to flee into the supposed safety of government bonds, where 10-year yields fell to 0.76 per cent, a near three-month trough writes the FT's Global Markets wordsmith Jamie Chisholm.
