Flash crash brings no answers, just questions 7 May 2010 U.S. equity markets are among the most scrutinized anywhere, yet a day after a stomachchurning bungee jump in prices there's still more fingerpointing than explanation. The episode raises crucial questions about superfast trading, exchanges and market structures in general.
Dangerous moment doesn’t have to spell disaster 7 May 2010 Bad news seems to be everywhere: fat fingers on Wall St, growing contagion in the euro zone, renewed stress in the interbank markets and an inconclusive UK election. Toxic feedback loops heighten the risk. But decisive leadership can still stop the rot.
HSBC sees light at both ends of the tunnel 7 May 2010 The banking giant made its first quarterly profit in the U.S. since the crisis started. Asia is improving, and HSBC looks betterplaced than most peers to ride the global recovery. But contagion in Europe remains a concern and new regulation will squeeze returns.
Market turmoil recalls 1987’s electric nightmare 7 May 2010 The finger is pointing at computerdriven trading after Thursday's brief 9 pct dive in U.S. stocks. So much for the lessons of Black Monday two decades ago, when automatic trading exacerbated panic selling, and for claims that highly automated markets smooth volatility.
Goldman’s new standards watchdog needs real teeth 7 May 2010 Boss Blankfein told shareholders the committee's task is rigorous selfexamination of the firm's business. It's a smart idea that could help shore up Goldman's reputation with clients but only if its members have the power to say no to traders focused on shortterm greed.
U.S. economy kicks butt – relatively speaking 7 May 2010 Despite the uptick in the unemployment rate, healthy job creation underlines the economy's resurgence in a tough world. Along with productivity growth, that shows the benefit of the U.S. labor market's flexibility and its competitiveness even in the face of a weak euro.
Goldman must defend its reputation in China 7 May 2010 Local press have seized on the Wall Street firm's problems at home. That may not cost it mandates today, but could affect its future access to juicy deals. With Goldman mired in an $80 mln derivatives dispute, other clients may now be emboldened to tear up their contracts too.
Buyout barons may exit mega-LBOs with aplomb 7 May 2010 At least that's the implication of HCA's planned IPO. KKR and other backers are taking the U.S. hospital operator public in a deal that could nearly double their investment and chalk up annual returns of some 20 pct. Perhaps there's a place for gigantic buyouts after all.
Trichet tries to shore up the euro zone’s levees 6 May 2010 The European Central Bank head says he will remain inflexible on inflation, doesn't want to talk about sovereign defaults in the euro zone, and seems to rule out buying government bonds. That's for today. But as always, he's keeping all his options open for the future.
Gamblers beat pollsters as election oracles 6 May 2010 Time and again, punters have proved more reliable than the polls in forecasting election results. That should not come as a surprise. The smart money not only has something at stake. It can also take a view based on all available information polls included.
Pulled Chinese IPO sign of troubled times 6 May 2010 Swire has abandoned its $3 billion property listing. The Hong Kong conglomerate was not a desperate seller, and investors may have balked at the price, especially as China is trying to cool real estate fever. But fearful markets Chinese and global look like the real culprit.
Investor assault on Transocean looks like overkill 6 May 2010 Deep sea driller Transocean has justly been set in the stocks alongside BP over the spill. But bashing the rig owner more brutally than BP, as investors have done, seems odd. A $6 bln slide in value looks excessive for a wellinsured firm with strong prospects.
Pre-emptive support for Greek banks is smart 6 May 2010 The EU and IMF were slow in finalising Greece's bailout. But the creation of a 15 billion euro fund to support ailing lenders is welcome. Though Greek banks are still exposed to government bonds and the ailing economy, the fund reduces the risk of a deadly loss of confidence.
Fannie, Freddie bailout plays like Greek tragedy 6 May 2010 The U.S. has now blown $136.5 billion keeping Fannie Mae and Freddie Mac alive. That puts it on par with Greece s latest bailout. Yet, Washington policymakers continue to dither on what to do with the failed housing giants, ensuring the price tag will be far higher.
Why the euro zone must reform — and why it won’t 6 May 2010 The Greek financial crisis has been worsened by long months of haggling between euro zone members, and their denial that the worst could happen. But the reforms needed to put in place a crisisprevention and resolution mechanism are unlikely to see the light of day.
Fear trade storms back into view 6 May 2010 U.S. stocks plunged 9 pct on Thursday before cooler heads prevailed. The obvious source for this echo of 2008 volatility is concern over fallout from Greece's woes, despite a 110 billion euro rescue package. Rational or not, it shows financial markets are nowhere near home free.
Euro may be due for rebound 6 May 2010 The Greek crisis has made the single currency less safe, but market talk of dissolution is exaggerated. Politicians are waking up and growth will be helped by the euro's fall. The ECB may change its rules but that should be seen as a sign of flexibility rather than weakness.
Supertax gives Rio excuse to ditch bad BHP deal 5 May 2010 The big joint venture with BHP Billiton was agreed when Rio was in worse shape and iron ore was cheaper. The deal makes less sense now and the longer the delay, the more that is. A controversial new Australian tax may give Rio a chance to renegotiate, or exit gracefully.
Reform needs care to avoid financial trichinosis 5 May 2010 The legislation has officially entered the U.S. Senate sausage factory, where lawmakers are trying to stuff the bill with myriad amendments. Most aim for porky local projects or piggishly prey on populist sentiment. Herein are three proposals that could sicken the system.
Euro zone faces Bear Stearns moment 5 May 2010 After Bear was rescued, there was six months of drift and then Lehman popped. Will Spain, Portugal and others drift now that Greece has been bailed out? If they do, the consequences could be horrendous. To avoid being sucked into the whirlpool, weak countries need to act now.
Chinese stocks start to look cheap 5 May 2010 Mainland indices have performed badly this year, on a par with Spain and Greece. But valuations now look cheap by past measures. While fears over inflation and property bubbles remain, ample liquidity should help equities recover some momentum.
Market bulls need clear UK election result 5 May 2010 The immediate impact of a UK general election on shares and sterling is usually modest, as opinion polls have become better at predicting the outcome. This time it's a three horse race, so there are some combinations which would spook the markets.
Goldman CDO buyer evinces financial roundabout 5 May 2010 The German bank allegedly duped on the Abacus deal must itself now defend against charges of dumping securities onto unsuspecting customers. The facts of the cases are different, but the IKB link illustrates the passtheparcel game that characterized the end of the boom.
Picasso separates the finance haves from have-nots 5 May 2010 The buyer who paid $106.5 mln for Nude, Green Leaves and Bust was probably an oligarch or hedge fund mogul. The new art price record for Picasso's oneday masterpiece underlines the disparate fortunes of the much recovered financial world and the still limping broader economy.
Pru investors need answers on AIA shambles 5 May 2010 The UK insurer has delayed details of its $35.5 bln Asian acquisition after its regulator raised concerns over capital. The episode casts further doubts on Pru's ability to handle such a big deal. It will need to offer a watertight explanation in order to win investors' support.
Ex-Bear boss still blowing same old smoke 5 May 2010 Jimmy Cayne repeated his shortselling conspiracy to the commission scrutinizing the crisis, saying he couldn't have saved the firm. Panel members resisted cheap shots about his outofoffice antics, but Cayne revealed his time off hasn't put him any more in touch with reality.
What Lazard should say to Greece 5 May 2010 The investment bank can't help Athens deal with fatal protests, but those only make the government's fiscal challenge greater. The bailout will not solve Greece's problems. Default belongs on the grim menu of options, along with devaluation, drastic change and despair.
Banks must walk fine line on Pru rights issue 4 May 2010 Underwriters of the UK insurer's $20 bln share offer want to price it at a big discount amid increased market volatility. But investors have had two months to price in the share sale. With UK antitrust watchdogs on the prowl, Pru can afford to push its banks for a tighter price.
Greece vindicates UK on euro but warns on debt 4 May 2010 Crisis in Greece and other euro zone economies shows the UK was wise to stay out of the euro experiment. But the UK's fiscal deficit, almost as bad as Greece's and bigger than in Spain and Portugal, shows the UK is in a mess of its own and risks a debt downgrade all the same.
Pearson must show it won’t fritter IDC windfall 4 May 2010 The UK media group has got a fair $2 bln for the sale of its 61 pct stake in Interactive Data Corp to private equity. The deal suggests that leverage is back helping buyout firms outgun trade bidders. But a slimmer Pearson now faces questions about its strategic priorities.