And Then Tesco Dabbled In Housing...
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As housing developers struggled with rising house prices and raising capital, Tesco's were planning to build hundreds of homes centred around Tesco's stores. Britain's biggest supermarket has drawn up plans to build a number of these “mini-villages” in the South East. As well as a series of smaller mixed homes, shops and leisure developments in Ipswich and the North East.
Tesco's foray into property development has been met with much scepticism from critics
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who are concerned that Tesco's “tightening grip” on the economy will develop into a monopoly.
The plans raise the possibility of a Tesco customer buying or renting a home through its estate agent services, securing mortgages through its banking arm and kitting the property out with Tesco's products bought on its credit card.
Worries that the retailer would have access to more personal information than the Government were dismissed by a Tesco's spokesman who also denied that the developments would be "mini-villages". Tesco's have said they plan to create 1,000 new jobs in areas that many other developers cannot and will not invest in.
Tesco's are in advanced talks with Dartford Borough Council, where they hope to build 1,000 homes, the biggest housing scheme. They await approval for 400 homes, a primary school, hotel and park next to the Olympic's Park in Bromley-by-Bow, east London.
Work has already begun on a library and civic centre in Woolwich and Lambeth Council is working with the retailer to deliver the “Streatham Hub”, which includes a full-size ice rink and a new transport hub, alongside 200 new homes.
It's not the first time Tesco's have dabbled in the housing market, a smaller scheme of 73 apartments was built by them in Orpington, Kent last year. Proposals suggest that the homes will be high-quality but not necessarily luxury, and in keeping with the properties in the local market.
But what consumers really want to know is will they get double Clubcard points if they buy a Tesco home?
Tags: Tesco, Property, Investment, Market
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Forex Update - G20 Currencies
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USD: Dollar weakens as EURUSD clears resistance
The dollar weakened fractionally during the Asia session as yesterday's successful Spanish bond auction and a more hawkish SNB continued to keep risk appetite supported. Yesterday's commitment to eventually release European bank stress test results also likely played a part. Asian equities were broadly flat. EURUSD traded 1.2350-1.2414 and USDJPY 90.73-91.09.
Fed Vice-Chairman Kohn said that although Europe is still a risk "my best guess is that they'll make it through".
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He went on to predict that "the problems in Europe will have some effect on US growth over the balance of this year and next year."
The current activity index in the Philadelphia Fed manufacturing survey fell to 8.0 in June but details of the report were stronger. Jobless claims rose 12k to 472k But new hiring has picked up significantly even as layoffs persist. CPI fell 0.2% in May and core prices rose 0.1%. The current account deficit rose to $109B (UBSe $118.5B, cons $121.9B) from $100.9B.
EUR: Fed's Kohn comments on Europe
Fed Vice-Chairman Kohn said that the Eurozone "authorities are determined to stabilize the situation" and that as they implement those steps "things will become more stable." Russia's President Medvedev said the threat to the euro from the debt crisis "can't be underestimated".
IMF Managing Director Strauss-Kahn says that unless the Eurozone improves coordination and governance, the coming decades will see the dominance of the US and China, and Europeans will be absent. He added that the euro cannot work without more economic cooperation.
The Spanish government bond auction was well covered, although yields were significantly higher than those paid previously. But the relatively smooth auction helped buoy the euro. The 10 year notes had a bid to cover ratio of 1.88 (prev. 2.03) and were sold at an average yield of 4.86% (prev. 4.05%). The 30 year bonds were covered 2.44 times (prev. 1.4), and were priced to yield 5.91% on average (prev. 4.76%).
The auction results helped quell some concerns on the Eurozone but investor concerns remain. EU leaders agreed to publish bank stress test results in July and appeared in agreement on a bank levy. The EU also wants the G20 to discuss global transaction taxes. An IMF report also said that the French economic outlook is subject to high uncertainty but the French Finance Minister noted that the IMF conclusions also show that French banks are solid.
JPY: BoJ minutes released
Concern was expressed in the minutes of the BoJ's May 20-21 meeting that the debt crisis in Europe could have knock-on effects, not just for Japan, but that the drag on the world economy could be significant if Europe tightens fiscal policy.
The government unveiled its growth strategy. Most of the details had already been released into the public domain over the last week. However, Reuters reported that the strategy noted that excess rises in the yen could be prevented by fiscal and monetary policy.
CHF: Exit strategy details emerge
The franc notched up significant gains against both the euro and the dollar after the a more hawkish than expected monetary policy assessment and accompanying speeches by board members.
SNB Chairman Hildebrand said that FX intervention had been an effective instrument to avert deflation risks and board member Danthine said that newly acquired FX reserves had been used to buy securities. Danthine went on to describe some of the methods by which these purchases could be sterilized and mentioned he was already seeing a lot of interest in liquidity draining operations. He said the that SNB is very far from the point where it might be prepared to consider measures such as negative interest rates, in a bid to discourage speculators.
GBP: Stronger retail sales
Sterling received a boost from stronger than expected retail sales. The headline figure which includes auto fuels rose +0.6% m/m in May (prev. 0.0%). After a particularly volatile 2010Q1, when retail sales fell by 2.2%, the performance for Q2 looks materially better.
Today, mortgage approvals for May are due, and are expected to climb to 50k, from 47k in April. Public finance data for May is also due - a key release ahead of Tuesday's Budget. Our UK economist expects Public Sector Net Borrowing to rise to GBP 17 billion in May, slightly less than the consensus forecasts of GBP 18 billion
Tags: Forex, Currency, Exchange, Update
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Microsoft To Invest In Handheld Devices
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Microsoft said it is making several key investments in the enterprise handheld device market, at the launch of Motorola's ES400 enterprise digital assistant in New York.
These include the new Windows Embedded Handheld software platform designed to meet business scenarios and boost productivity of the mobile enterprise workforce, according to US reports.
The first release under the brand is scheduled for later in 2010 and will build on the Windows Mobile 6.5 platform.
This means OEMs can take enterprise handheld devices and
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enhance key applications with touch or gesture response and connectivity to Windows-based PCs, servers and enterprise services.
Microsoft chief executive Steve Ballmer also announced that Windows Embedded will continue to support developer tools used in building applications, including Microsoft Visual Studio 2008 and Windows Forms.
This will help provide confidence that the existing investments will be protected over time as Microsoft releases new software platforms, he said.
An updated Windows Embedded Handheld platform based on Windows 7 technologies will be released in the second half of 2011, said Ballmer, offering enhanced features and functionality to meet the needs of networked enterprise devices.
The platform will also enable new key scenarios through support for rich user interfaces and natural input, he said.
Analyst firm VDC Research estimates there were 2.3m enterprise handheld device shipments in 2009, and expects this number to exceed 4.3m by 2014.
The Windows Embedded CE and Windows Mobile platforms accounted for 87% of these 2009 shipments, and the relationships with its partner ecosystem continue to strengthen, VDC said.
Tags: Microsoft, Investment, News
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Implications Of World Cup On SA Economy
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Many people are contemplating the effects of the world cup on South Africa's economy. Will the added attention and increased tourism help give South Africa a boost? There is certainly enough attention on the Vuvuzela horns at the moment with many being sold abroad in droves but sales of plastic horns aside, what else has gone up?
A previous interest rate cut has had its desired effect of spurring consumers to spend more, with the retail sector showing increased sales for the fourth consecutive month. From an annual rise of 2.7% in March, the figure for June shows a 3.2% rise, no doubt encouraged by football fans from all over the
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globe... asides from the U.S.A as their football fans are still at home. Happily, their soccer fans are in South Africa, more consumers at the ready.
Although the influx of tourists into South Africa has increased, the main point of increased spending is the decline in interest rates which has seen this steady rise in people buying. However, it is important to stress that even still, millions in South Africa are still in a state of poverty and the country is far from establishing a Green economy, which is still primarily fueled by coal (pardon the pun).
British fans in South Africa are being goaded by the UK to watch what they spend, with Sainsbury's Finance warning Brits that they will be forced to pay a sizeable amount for their stay and claiming that many are visiting South Africa with pre-conceived misconceptions about simple things like the price of a hotel room. Others have speculated that these calls are only given by organisations such as Sainsbury's Finance to reign in the spending of British money on foreign soil. Their interests lie solely with the British economy and their own personal investments.
But investing is South Africa has reached its desired effect as stocks have risen to a 1-month high, with shares in Wine, Spirits and Beer showing the most significant increases. As the tournament progresses there will be no doubt a higher influx of people interested in the South African retail and leisure sector, meaning the boost in infrastructure may acheive further rises over the next month.
But all in all, the figures do not seem to add up. Pre-World Cup expenditure by the South African government on ifrastructure, stadiums and jobs for the unemployed reads an impressive USD 5.5 billion, with a further USD 5.5 billion spent on rail and airport services. South Africa's fiscal defecit has therefore suffered a mighty blow, rising to 6.7% of the GDP and with South Africa 2010 expected to add only USD 10 million into the economy, everyone will be looking closely at South Africa post-World Cup.
Tags: South Africa, World Cup, 2010, Economy
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What The Papers Are Saying
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Chancellor Osborne confirmed his plan to split the FSA in his speech at Mansion House last night. The FSA will lose much of its role to a new Consumer Protection and Markets Authority, charged with regulating the conduct of banks, while the rump of the organisation will be refocused as a prudential regulator in charge of ensuring that banks, building societies and insurance companies operate safely. This second organisation, as yet unnamed, will become a subsidiary of the BoE, and will report to a new Financial Policy Committee to be chaired by Governor King. (FT)
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FSA chief executive Hector Sants, who resigned prior to the election, has agreed to stay on in order to oversee the disbandment of the tripartite system. (Telegraph)
Over a third of people surveyed by Aon Consulting said they would retire five years later than planned in light of the recession. 69% of those aged 35-44 said they expected to have to work longer due to the economic climate. (FT)
J Sainsbury provided further proof that lower food price inflation is affecting the UK grocery sector when it reported that underlying sales growth slowed in Q1. Chief executive Justin King cited uncertainty over taxes as a possible cause for consumers holding back their purchases in Q1. (FT)
Defence secretary Liam Fox has warned the defence industry that its long-term prosperity rests on offering "better value for money", as he attempts to cut costs in the defence budget without axing programmes. (FT)
Tags: Newspaper, Headlines, Brief, Stories, June
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The Latest Word On The Spanish Banking Crisis
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Spain's central bank has thrown down the gauntlet to bank regulators elsewhere in Europe, saying it plans to publish the results of “stress tests” on the country's financial institutions to clear up doubts about Spain's banking system.
Spanish officials and bankers believe that international investors and speculators are harbouring exaggerated fears about the potential problems of Spanish banks, when the banks of other countries are often weaker than Spanish lenders or have already been bailed out with massive injections of government money. Miguel Angel Fernández
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Ordóñez, governor of the Bank of Spain, said on Wednesday in a speech to launch the Bank's 2009 annual report, that it had carried out stress tests to verify that commercial banks, savings banks and co-operative lenders had enough capital available to support even difficult growth scenarios.
“The Bank intends to make public the results of these stress tests, showing estimated loan losses, the consequent capital requirements and the contribution of promised balance sheet reinforcements, so that the markets have a perfect understanding of the circumstances of the Spanish banking system,” he said. As a result of strict regulation by the central bank, and a cushion of reserves arising from counter-cyclical “dynamic” provisions built up during profitable years, the stronger Spanish banks have so far weathered the crisis in relatively good shape.
Several of the 45 unlisted savings banks, or cajas, however, have proved vulnerable to the collapse of the domestic property market and are being forced into mergers to cut costs and rationalise operations. The Bank of Spain has seized control of two small, struggling cajas, one in the centre of the country and one in the south.
On Wednesday, Spanish financial officials denied repeated suggestions from hedge funds and bank analysts that the Fund for Orderly Bank Restructuring known as the Frob from its Spanish acronym, will need to raise tens of billions of euros to recapitalise the country's lenders. They said the Frob was likely to pay out €11bn in loans to support mergers among the cajas, including €4.5bn for the merger among seven lenders led by Caja Madrid. To cover this, the Frob has €12bn of funds available – €9bn from its initial capital and a further €3bn from a bond issue last November. The Frob is expected to try to raise a few billion euros more after the summer to give it extra funds for emergencies.
Tags: Bank, Spain, Euro, Finance, Crisis, Debt
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Marketwatch - Latest Update
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U.S. stocks swung between small losses and gains Thursday as weaker-than-expected jobs data offset an encouraging Spanish debt auction, soothing eurozone concerns.
The Dow Jones Industrial Average (DJIA 10,410, +0.07, +0.00%) was recently down 1 point to 10408, in early trading.
Leading the Dow, Microsoft (MSFT 26.41, +0.09, +0.36%) gained 1.1% one day after declaring its quarterly dividend. Bank of
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America (BAC 16.02, +0.15, +0.95%) rose 0.8% after The Wall Street Journal reported that the bank, as well as its peers, are preparing new fees on basic banking services as they try to replace revenue lost to regulatory rules.
Other technology components also strengthened as ebbing eurozone concerns lifted hopes for global demand. Hewlett-Packard (HPQ 47.90, -0.11, -0.22%) rose 0.7%, while Cisco Systems (CSCO 23.43, +0.14, +0.60%) gained 0.5% and Intel (INTC 21.47, -0.02, -0.09%) gained 0.4%.
Weighing on the Dow, Pfizer (PFE 15.35, -0.13, -0.84%) slid 0.5%. Energy components weakened. Exxon (XOM 62.43, -0.08, -0.13%) fell 0.4% and Chevron (CVX 74.85, -0.10, -0.13%) slipped 0.2% as crude-oil prices were under pressure from inventory data posting a surprise rise in the week ending June 11.
The Nasdaq Composite (COMP 2,313, +6.93, +0.30%) slipped 0.5% to 2305. The Standard & Poor's 500-share index (SPX 1,116, +1.19, +0.11%) edged down 0.2%, to 1113.
Dampening the jobs market outlook, the Labor Department said Thursday that the number of U.S. workers filing new claims for unemployment benefits increased last week as states reported more claims in the construction, manufacturing and educational-service sectors. Initial claims for jobless benefits rose by 12,000 to 472,000 in the week ended June 12. Economists surveyed by MarketWatch had expected claims would fall. The previous week's level was also revised upward, from 456,000 to 460,000.
Separately, U.S. consumer prices fell for the second consecutive month in May and underlying inflation rose slightly, leaving the Federal Reserve with room to support the economy with record-low interest rates. The consumer price index dropped 0.2% last month, in line with expectations. Underlying consumer prices, which strip out volatile energy and food items, rose 0.1% in May, also matching forecasts.
But Spain eased some of the concerns swirling around Europe after the country successfully sold EUR3 billion ($3.69 billion) of 10-year bonds, with yields below the 5% level that the European Union and the International Monetary Fund have committed to lending to euro-zone countries. A bond auction with yields above 5% wouldn't immediately trigger EU assistance to Spain but would signal concerns over the country's ability to raise financing in international markets.
American depositary shares of BP (BP 32.41, +0.56, +1.76%) were flat after the oil giant agreed to set up a $20 billion fund and stop at least three dividend payments, after meeting with President Obama on Wednesday. BP CEO Tony Hayward will appear before a House Energy and Commerce panel later Thursday.
Among stocks in focus, aerospace and electronics manufacturer Northrop Grumman (NOC 61.68, +0.60, +0.98%) rose 1% after approving a plan to spend $2 billion to buy back up to 11 percent of the company's shares.
In other economic data, the U.S. current account deficit widened for the third straight quarter during the first three months of the year, as imports of goods such as energy products outpaced rising exports.
Tags: Markets, Stocks, Global, Updates, Figures
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Equity Futures Trading Lower
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After surpassing a key technical resistance level, 1108 for the S&P 500 yesterday, markets are pulling back slightly (S&P futures are down about 5 points), with wires citing concerns in Europe (particularly Spain) after a newspaper report said the E.U., IMF and the U.S. Treasury are talking about a 250 billion euro credit line for the euro-zone country beset by unemployment over 20%. Spain and the IMF denied the report. Nevertheless, the report gave investors a reason to sell the euro (which has bounced from lows of around 1.19 last week to as high as 1.2347 overnight). The energy sector also in the spotlight after President Barack Obama gave a nationally
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televised address blasting BP, calling for the oil giant to set up an independently administered escrow account to pay claims from the Gulf of Mexico oil spill. Obama also talked of the need for more renewable energy (more details below). On the economic front today, May Housing Starts and Building Permits at 8:30 ET (consensus of 648K and 625K; April was 672K and 610K), May PPI and core PPI at 8:30 ET (consensus -0.5% and 0.1%, April was -0.1% and 0.2%), May Capacity Utilization and Industrial Production at 9:15 ET (consensus 74.5% and 0.9%; April was 73.7% and 0.8%), Crude Inventories from 06/12 at 10:30 ET (prior -1.83 mln)
Spain concerns have European markets/euro trading lower…--The European Union today “firmly” denied a report that the International Monetary Fund, the EU the U.S. Treasury are putting together a credit line of as much as 250 billion euros ($307 billion) for the Spanish government. “I can firmly deny it,” European Commission spokesman Amadeu Altafaj said. Finance Minister Elena Salgado told reporters at the Spanish parliament in Madrid that the report in newspaper El Economista “has been denied by the Spanish government, by the European Commission, and by the IMF.”
- Spanish and Portuguese bonds fell relative to German bunds amid deepening concern the nations’ growth will be curtailed by spending cuts needed to reduce their budget deficits. The premium that investors demand to hold Spanish 10-year government bonds over German bunds rose to a euro-era record
- The euro dropped against the dollar amid renewed concern that the debt crisis in the euro region is spreading to Spain. However (as noted above) an EU spokesman denied a report that the International Monetary Fund, the EU the U.S. Treasury are putting together a credit line of as much as 250 billion euros (EUR/USD last 1.2287 after overnight high of around 1.2347)
Plenty of news on BP/oil front after President Obama speech last night… --BP PLC must set aside "whatever resources are required" to pay back workers and businesses damaged by the Gulf Coast oil disaster, President Barack Obama said Tuesday night, both chastising the oil giant and laying out new energy goals in the wake of one of the worst environmental disasters in U.S. history. Obama said that a third party and not BP will control an escrow fund to compensate victims of the spill, now in its 57th day
- The government significantly increased the estimate of oil flowing from the runaway well, spewing between 35,000 and 60,000 barrels of oil a day (up from prior estimate of 20K-40K). Obama said BP should be able to capture up to 90% of the oil leaking from the well "in the coming days and weeks. The oil major is deploying a second containment option Tuesday and expects to be able to handle 80,000 barrels a day by mid-July
- Five of the industry's top executives told lawmakers at a House Energy subcommittee hearing they need to keep drilling in U.S. waters, even in the wake of the disastrous BP spill, which began after the April 20 explosion of the Deepwater Horizon rig. But Obama stuck to a six-month moratorium on Tuesday night (may be seen as potential weakness of drillers such as RIG, NE, DO, RDC, PDE, which lifted on Tuesday amid hopes of a softening moratorium
- Bank of America Merrill Lynch has ordered its traders not to enter into oil trades with BP that extend beyond June 2011, a market source familiar with the directive told Reuters. The order to the bank's traders came from a high-level executive and was made on Monday
Other top stories…--Credit-rating agencies like Moody's (MCO) and Standard & Poor's (MHP) dodged a bullet as lawmakers decided to strip out a provision in the Wall Street reform bill that would have upended their business model. Negotiators from the House of Representatives and Senate agreed to remove a measure that would have set up a new clearinghouse to eliminate perceived conflicts of interest in the ratings industry. Instead, they ordered regulators to study the issue and take action only if they think it is necessary.
- S&P is warning that U.S. corporate defaults and bankruptcies could explode in coming years as companies have difficulty refinancing their debt, according to the New York Times
- Oil prices edged down to hover below $77 a barrel after a surprise hike in crude inventories in the world's top energy consumer the United States dampened risk appetite for commodities. U.S. crude inventories jumped 579,000 barrels in the week to June 11 and oil product stocks rose across the board (as per API). U.S. crude for July fell 27c to $76.67 a barrel
- Covidien (COV) and Somanetics (SMTS) have signed a definitive merger agreement under which Covidien will acquire all of the outstanding shares of Somanetics Corporation for $25.00 per share in cash, for a total of $250M, net of cash acquired
- ABT has agreed to pay as much as $575 million as part of a deal to help develop and commercialize NBIX endometriosis treatment. The deal follows Neurocrine's announcement last month of positive data from a Phase 2 study of the drug. The drug developer said it would be ready for Phase 3 clinical trials later this year
Tags: Equity, Markets, Trading, June
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Hedge Funds: What The Experts Have To Say
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Finding a definition of Hedge Fund is a bit of a nightmare as there is no firm definition available that tells you exactly what a hedge fund is. It is therefore up to amicable folks who have experience in the field of investment banking to explain what a hedge fund is. The following comes from Joseph B. Larocco whose full explanation can be read here
"A hedge fund operating in the United States is an investment vehicle, usually formed as a limited partnership, with a separate entity acting as the manager or adviser. The manager or adviser usually receives a 2% management fee based on a percentage of the assets under management, as well as some form of
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performance fee usually 20% of the increased value in the assets based on the investments being made. The hedge fund can either use one style or investment strategy or can use a multi-strategy approach. To truly "hedge" its positions, however, it must use some technique such as derivative instruments, shorting, convertible securities or reset provisions otherwise it is not really a hedge fund it is just an "investment fund" or “investment company."
Andrew Crain, Manager of the Alternative Investments and Asset Management Team of FSA shares his insights on the FSA's approach to hedgefund supervision and its development:
"You need to begin with disasters. That is how a lot of regulation and supervision comes about. I think you could go back to Long Term Capital Management. People were worried but not so much about what LTCM did, but rather what the knock-on effects could be to counterparties and markets and why it wasn’t on regulators’ radar. Then the Asian crisis provided more evidence that participants which were not ordinarily looked at very closely had positions that in stress situations became significant. The FSA's supervisory approach is to determine the risk firms pose to our regulatory objectives and do what is necessary to mitigate those risks. Applying specific resources to supervision of hedge funds came about before I joined and was prompted by a desire to understand and manage the potential knock-on or ripple effect to prime brokers and other market participants of a large hedge fund or group of smaller hedge funds failing. "
George Van, Chairman of Van Hedge Fund Advisors, INC, speaks about the topic in his article titled 'The Smartest Way To Invest In Hedge Funds', which offers further advice:
"The classic form of hedging, used by the first hedge funds, was to invest in an approximately equal number of long and short positions. The long positions were intended to be undervalued stocks and the short positions chosen were overvalued. In a rising market, the long positions rose more than did the short positions, thus creating a net profit. In a falling market, the short positions dropped more than the longs so that the manager made more on the shorts than he lost on the longs - and again made a profit.
The above type of classic hedge fund, with variations, is still very popular. However, a large number of hedging techniques, as well as a large variety of hedge fund strategies, have evolved over the years. Some hedge funds today use derivatives, in addition to short selling to hedge their portfolios. Other hedge funds use arbitrage strategies to extract value from market inefficiencies. These arbitrage strategies have very low correlations to the overall markets because inefficiencies generally exist in all market cycles."
Tags: Hedge Fund, Funds, Investments, Explained, Defini...
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