Frontrunning: January 13
- China’s Forex Reserves Drop for First Quarter Since 1998 (Bloomberg) - explains the sell off in USTs in the Custody Account
- Greek Euro Exit Weighed By German Lawmakers, Seen as Manageable (Bloomberg)
- Greek bondholders say time running out (FT)
- Housing policy to continue (China Daily)
- Switzerland’s Central Bank Returns to Profit (Reuters)
- US sanctions Chinese oil trader (FT)
- Obama Starts Clock for Congress to Vote on Raising Federal Debt Ceiling (Bloomberg)
- Turkey defiant on Iran sanctions (FT)
- ECB’s Draghi Says Weapons Working in Debt Crisis (Bloomberg)
- Greece to pass law that could force creditors in bond swap (Reuters)
Press Digest via Reuters
* Bank of America Corp has told US regulators that it is willing to retreat from some parts of the country if its financial problems deepen, according to people familiar with the situation.
* Delta, US Airways and private-equity firm TPG are studying bids for American Airlines parent AMR , which is in Chapter 11.
* PepsiCo's strategic review is unlikely to result in a breakup of the company or a rebuke of CEO Indra Nooyi but more marketing dollars are expected to flow into sodas, and cost cuts-including layoffs-are expected.
* Coca-Cola Co said Thursday it has been contacted by a "relatively small number" of consumers with questions about an unapproved fungicide the company reported finding in orange juice sold by it and competitors in the US.
Brazilian orange juice producers say the use of the fungicide carbendazim, which was discovered in some major U.S. orange juice brands, is widespread in Brazil, raising concerns that most deliveries to the U.S. could contain the substance.
* Federal prosecutors have opened an inquiry into whether financial practices at Diamond Foods Inc involved criminal fraud, people familiar with the matter said, a development that raises the stakes for the snack maker and could jeopardize its acquisition of Pringles from Procter & Gamble Co .
* The European Central Bank left its key interest rate on hold at 1 percent, suggesting officials aren't overly concerned about the severity of the downturn gripping the euro-zone economy.
ECB President Mario Draghi expressed a slightly more upbeat view of the currency bloc's economy than he had in recent months, suggesting business activity is stabilizing.
* Acacia Research Corp agreed to buy Adaptix Inc from private-equity firm Baker Capital for $160 million in cash, a move by Acacia to bulk up on its portfolio of next-generation wireless patents.
* Goldman Sachs recently approached the New York Fed and offered to buy a multibillion-dollar bundle of risky mortgage bonds that the Fed acquired in the 2008 bailout of AIG .
* Credit markets have a message for European officials wrangling with investors to cut Greece's debt: You will get a deal, but it may not be the one you want.
Trading in Greek bonds and credit-default swaps suggests that while investors are betting an agreement will be reached, some bondholders are unlikely to enter into it voluntarily. That could lead to a technical default under the arcane rules of the credit markets, an outcome that European officials have been working hard to prevent.
UNICREDIT CASH CALL TO HIT CORE INVESTORS
Aabar, the Abu Dhabi investment fund, the Libyan Investment Authority and the Libyan Central Bank, all core investors in UniCredit, are expected to be heavily diluted in the 7.5 billion euros cash call by the Italian bank.http://www.ft.com/cms/s/0/9e3c3a46-3d2a-11e1-8129-00144feabdc0.html?ftca...
SFO TO TARGET CRIMINAL COMPANY DIVIDENDS
Britain's fraud investigator intends to confiscate shareholder dividends paid by companies convicted of criminal offences, after it won approval for a landmark court action.http://www.ft.com/cms/s/0/f2f7cedc-3d17-11e1-8129-00144feabdc0.html#axzz...
TESCO PLUNGES AFTER "HISTORIC" PROFIT WARNING
Tesco signalled an end to Britain's supermarket "space race" as it shocked the market with its first profit warning in 20 years following poor Christmas trading.http://www.ft.com/cms/s/0/1ff03ae2-3cef-11e1-ae07-00144feabdc0.html#axzz...
GREEK BONDHOLDERS SAY TIME IS RUNNING OUT
Private holders of Greek bonds said time was running out to conclude a deal on banks and other investors voluntarily accepting losses as they tried to put pressure on eurozone governments.http://www.ft.com/cms/s/0/95c47f4e-3d44-11e1-b0e4-00144feabdc0.html#axzz...
RBS JOB CUTS PLAN LIFTS SHARE PRICE
John Hourican, head of Royal Bank of Scotland's investment bank, made a paper profit of more than 250,000 pounds on the day the UK lender revealed it was closing more than a third of his division and cutting 3,500 jobs.http://www.ft.com/cms/s/0/76797b40-3cee-11e1-8129-00144feabdc0.html#axzz...
FOOD INFLATION ABATES AS GRAIN STOCKS RISE
The threat of food inflation, a serious concern for emerging countries last year, is starting to recede as high prices for grains restrain consumption and better crop yields in Europe and Russia replenish stocks.http://www.ft.com/cms/s/0/11e310be-3d30-11e1-ae07-00144feabdc0.html#axzz...
GROUPAMA TO SELL BROKERAGE AND UK ARM
Groupama has put its brokerage operations and UK business up for sale as the troubled French insurer seeks to shore up its capital position.http://www.ft.com/cms/s/0/ea8cc20c-3d3a-11e1-8129-00144feabdc0.html#axzz...
* Target Corp said on Thursday that it planned to test Apple centers at 25 of its retail locations this year.
A Target spokeswoman, Dustee Jenkins, described the tests as "expanded displays" of Apple products, but declined to say how the merchandise would be arranged or whether there would be Apple Store-like displays to showcase it.
* As American Airlines trudges through its bankruptcy proceedings, potential suitors are coming out of the woodwork.
Delta Air Lines and TPG Capital, the private equity firm, are considering separate bids for AMR Corp , American's parent company, according to two people briefed on the matter.
* Financial information giant Bloomberg L.P. lost about 600 subscriptions to its computer terminals - which translates to nearly $1 million in monthly revenue - after MF Global filed for bankruptcy.
* Solid government bond sales in Italy and Spain indicated that efforts by the European Central Bank to avoid a regional credit freeze were still showing at least short-term benefits.
* After more than two years of investigation, CVS Caremark agreed on Thursday to pay $5 million to settle charges by the Federal Trade Commission that the company had misrepresented the price of certain prescription drugs in one of its Medicare drug plans, causing many older consumers to pay significantly higher prices than advertised.
* Edward Lampert, who controls just under 60 percent of Sears, added another $130 million of the retailer's stock to his personal holdings, buying the shares from his hedge fund.
* A profit warning on Thursday from Britain's largest retailer by sales was the latest sign that the British economy might be heading for a recession, or be in one already.
The retailer, Tesco, warned that profit growth in the coming year would be "minimal" after a disappointing holiday season. The chain, which is the world's third-largest retailer after Wal-Mart Stores and Carrefour, said it was caught by surprise by consumers' reluctance to spend and by aggressive price cuts at rivals.
* Foxconn Technology, a major supplier to several electronics giants, said on Thursday that it had resolved a pay dispute with scores of workers at one of its factories in central China after a large protest that involved threats from some workers to commit suicide.
* Sales of Lipitor, the biggest-selling drug in history, have leveled off after a steep plunge after the start of generic competition. New figures from the data firm IMS Health show that at the end of December, sales of Lipitor, made by Pfizer , were at just above 37 percent of market share.
* Roy Ash, who used tough-minded analytic acumen to build a multibillion-dollar conglomerate, Litton Industries, and to become a force in the Nixon White House, where he headed the creation of agencies like the Environmental Protection Agency, died on Dec. 14 at his home in Los Angeles. He was 93.
European Economic Data
- Eurozone Trade Balance s.a. 6.1B. Previous 0.3B. Revised 0.5B.
- Eurozone Trade Balance 6.9B. Previous 1.1B. Revised 1.0B.
- UK PPI Input n.s.a. for December -0.6% m/m 8.7% y/y – lower than expected. Consensus -0.2% m/m 9.1% y/y. Previous 0.1% m/m 13.4% y/y. Revised 0.3% m/m 13.6% y/y.
- UK PPI Output n.s.a. for December -0.2% m/m 4.8%y/y – lower than expected. Consensus 0.1% m/m 5.0% y/y. Previous 0.2% m/m 5.4% y/y.
- UK PPI Output Core n.s.a. for December -0.1% m/m 3.0% y/y – lower than expected. Consensus -0.0% m/m 3.2% y/y. Previous 0.0% m/m 3.2% y/y. Revised -0.1% m/m 3.1% y/y.