Frontrunning: June 22
- Mario Monti: We Have a Week to Save the Eurozone (Guardian)
- Europe Central Bank Prepares to Relax Collateral Rules (WSJ)
- EU Banks' Risk in Eyes of Beholder: Worry Is That Lenders Are Boosting Gauge of Their Health (WSJ)
- Europe finally learns about subordination: Bailouts' Creditor Hierarchy Scares Private Bondholders (WSJ)
- Merkel Isolated in Race for Euro Crisis Solution (Spiegel)
- Fed’s Re-Twist May Lift Treasury Repurchase Agreement Rates (Bloomberg)
- China Said to Propose Keeping Limit on Local Government Loans (Bloomberg)
- Moody’s Downgrade Hits 15 Top Banks (FT)
- IMF Challenges Berlin’s Crisis Response (FT)
- Colombia to Auction Rights in 2013 to Gold and Coal, Not Coltan (Bloomberg)
Overnight Media Digest:
* Moody's downgraded more than a dozen global banks, including the five largest U.S. banks with global trading arms, as the industry grapples with a soft economy and tougher regulations.
* The ties between a top Goldman Sachs manager and the controversial hedge fund Galleon Group were closer than previously known.
* Regulators and investors are concerned that some European banks are artificially boosting a key measure of their financial health, their capital ratios, through the way they assign "risk weightings" to assets.
* Some 150 private investment advisers opted to mask the real names of their individual funds when they complied with new rules that forced many hedge-fund firms to register with the SEC this year.
* Sales of previously owned homes in May rose sharply compared with a year ago, but dipped from April, underscoring the fragility of the housing market's recovery.
* Daniel Rice III, co-manager of $4.4 billion in energy assets at BlackRock Inc, will leave the firm at year end, the world's largest asset-management firm announced Thursday.
* A $1.1 billion acquisition of Norit NV, a Dutch maker of carbons for filtration equipment, announced Thursday is expected to mark the onset of a new round of deal activity in the chemicals sector, an industry that so far this year has seen a dearth of deals.
* When the U.S. economy began to strengthen earlier this year, companies cut back on layoffs and posted more job openings. What they didn't do was actually step up their hiring.
* Business activity in the euro zone contracted sharply in June, a closely watched survey showed, underscoring the currency bloc's deepening economic malaise as it confronts an escalating debt crisis along its southern fringe.
* The European Central Bank is poised to relax its collateral rules for central-bank loans in a bid to ease strains on commercial banks in Spain and the rest of Southern Europe, according to people familiar with the matter.
* Chesapeake Energy Corp chose former Conoco Inc Chief Executive Archie Dunham to head its retooled board of directors, as the embattled natural-gas giant made good on a pledge to change its leadership in response to intense shareholder pressure.
MOODY'S DOWNGRADES TOP BANKS
Fifteen of the biggest global banks were downgraded by Moody's Investors Service on Thursday, adding to pressure on their borrowing costs and triggering multi-billion dollar collateral calls.
MADRID MOVES TO EASE BAILOUT FEARS
Spain has sought to ease investors' fears that it needs a full-scale international bailout of its economy by publishing two "stress tests" showing that Spanish banks need between 16 billion euros ($20.17 billion) and 62 billion euros in new capital.
IMF CHALLENGES BERLIN'S CRISIS RESPONSE
The International Monetary Fund on Thursday challenged Berlin's game plan for pulling the eurozone out of its crisis by advocating a series of short-term fixes that the German government has resisted.
PAY STORM THREATENS XSTRATA MERGER
Xstrata's $65 billion merger plan with Glencore is facing a fresh threat after a leading UK investor group admonished the miner's plans to pay 173 million pounds to retain its senior management if the deal goes through.
ECB TO RELAX LOAN RULES FOR SPANISH BANKS
The European Central Bank is expected to give Spanish banks a much-needed boost with a significant loosening of rules on collateral required to obtain its liquidity, which could be followed by steps to reduce the role of credit-rating agencies in its operations.
RBS SUFFERS BLOW OVER BRANCHES DEAL
Royal Bank of Scotland is set to receive up to 300 million pounds less than it expected for a package of branches it is selling to Santander UK because the business has failed to hit a number of targets outlined in the deal.
CHESAPEAKE NAMES DUNHAM CHAIRMAN
Chesapeake Energy, the U.S. gas producer, has appointed Archie Dunham, former head of ConocoPhillips, as its new chairman in a boardroom shake-up intended to address investors' concerns over corporate governance and give large shareholders more influence.
TRITON IN EUROPEAN DIRECTORIES OFFER
Triton, the northern Europe-focused private equity firm, has offered to take over European Directories after accumulating a sizeable share of the directory company's debt.
- Moody's Investors Service, which had warned banks that a downgrade was possible, cut credit scores to new lows to reflect changes in the industry since the financial crisis.
- The Securities and Exchange Commission has opened an investigation into Nasdaq for its role in the initial public offering of Facebook, according to people briefed on the inquiry.
- Euro area countries must share debt and use rescue funds to recapitalize troubled banks directly to ensure the survival of the currency union, Christine Lagarde, the managing director of the International Monetary Fund, said late Thursday.
- To resolve a class-action suit, Facebook has agreed to give its users the choice to avoid potentially appearing in advertisements just for clicking the social network's like button.
- The Supreme Court on Thursday declined to address whether the government still has the authority to regulate indecency on broadcast television, but it ruled in favor of two broadcasters who had faced potential fines for programs featuring cursing and nudity on narrow grounds.
- John Bryson announced his resignation as President Obama's commerce secretary on Thursday following an incident in which he had a seizure and was involved in a sequence of automobile accidents.
- Is the music industry like other businesses, and thus subject to concerns about market concentration, or is it an anomaly in which nothing matters but hits?
That was one of the central questions on Thursday at a Senate hearing about a proposed $1.9 billion deal in which the Universal Music Group would acquire the record labels of EMI.
- The United States Supreme Court on Thursday overturned an $18 million penalty against pipeline operator Southern Union for illegally storing mercury, ruling that a jury must determine any facts that increase a defendant's maximum potential sentence, even a criminal fine.
- Anna Schwartz, a research economist who wrote monumental works on American financial history in collaboration with the Nobel laureate Milton Friedman while remaining largely in his shadow, died on Thursday at her home in Manhattan.
- No one is sure what would happen to programs meant to help the uninsured get medical care if the Affordable Care Act were to be struck down by the Supreme Court.
THE GLOBE AND MAIL
- Jim Flaherty is singling out Toronto's overheated condo market as one of the main reasons Ottawa is tightening the rules for insured mortgages.
The average price of a Toronto condo - C$334,952 - was up in the first quarter of the year, as were total condo sales. In spite of anecdotal evidence of some cooling since, Canada's Finance Minister decided it was time to step in.
Report in the business section:
- A string of needed reforms in the past year to Canada Mortgage and Housing Corp, capped by Thursday's decision by Finance Minister Jim Flaherty to further limit mortgage insurance availability, means that for the first time in the recent housing boom the Canadian taxpayer's risk of loss is set to decline.
- UN special rapporteur Maina Kiai listed Canada - along with Belarus, Ethiopia, the Russian Federation and Jordan - as countries where 'the laws are particularly harsh in terms of restricting the freedom of association.'
- Canada's relatively healthy economy has been largely based on borrowed money, but the situation cannot go on indefinitely, Bank of Canada governor Mark Carney warned.
European economic summary:
- German IFO – Business Climate (June) 105.3 – lower than expected. Consensus 105.6. Previous 106.9.
- German IFO – Current Assessment (June) 113.9 – higher than expected. Consensus 112.0. Previous 113.3. Revised 113.2.
- German IFO – Expectations (June) 97.3 – lower than expected. Consensus 99.8. Previous 100.9. Revised 100.8.
- Italian Consumer Confidence Index (June) 85.3 – lower than expected. Consensus 86.0. Previous 86.5.