Mick Davis has a new Everest to climb. The Xstrata chief executive says a proposed all-share merger with trading company Glencore represents the best possible deal for his shareholders. Yet Xstrata investors—excluding Glencore itself, which has a 34.1% stake—will own only 45% of the new company. And despite Xstrata contributing most of the assets and profits, it gets only a slim 8% premium.
Tuesday, February 7, 2012
Glencore-Xstrata CEO Loves A Challenge - And He's Got One On His Hands!
Mick Davis has a new Everest to climb. The Xstrata chief executive says a proposed all-share merger with trading company Glencore represents the best possible deal for his shareholders. Yet Xstrata investors—excluding Glencore itself, which has a 34.1% stake—will own only 45% of the new company. And despite Xstrata contributing most of the assets and profits, it gets only a slim 8% premium.
Glenstrata a big yawn in Hong Kong
News of a $90 billion merger between two of the world’s biggest miners should have investors trading shares with great excitement. But that hasn’t been quite the case in Hong Kong.
Glencore to pay $41B for all of Xstrata
LONDON — Glencore International, the largest commodities trading company in the world, said on Tuesday that it would buy the remaining stake in the mining company Xstrata that it did not already own, in a long-anticipated deal that would create a mining giant with a market value of nearly $90 billion. As commodity prices have soared, the mining industry has quickly consolidated, with leading players looking to capitalize on the rising demand in developing countries like China. In 2011, mining companies announced $168.6 billion of acquisitions, a 26 percent increase over the previous year, according to data from Dealogic.
Higher Gold Prices Supported By Competitive Currency Devaluations
After gold prices fell 10% in December, many investors wondered if the bull market in gold was running out of steam. That was before Federal Reserve Chairman Ben Bernanke swooped in with a “red cape” and fired the bulls back up.
For CTA's doing business with MF Global here is reporting guidance from the NFA
Frequently Asked Questions - Trading Program Performance Calculations and Presentation by CTAs with Client Assets held at MF Global, Inc.
As a result of the October 31, 2011 bankruptcy proceeding involving MF Global, Inc. (MFG), NFA has received a number of questions from CTAs regarding how to calculate and present performance information for Trading Programs with client managed accounts that were affected by the MFG bankruptcy proceeding. NFA is issuing this notice to address those frequently asked questions.
U.S. Close to Energy Self-Sufficiency
Feb. 7 (Bloomberg) -- The U.S. is the closest it has been in almost 20 years to achieving energy self-sufficiency, a goal the nation has been pursuing since the 1973 Arab oil embargo triggered a recession and led to lines at gasoline stations.
Cables Manufacturers Choose Aluminum Over Copper
Feb. 8 (Bloomberg) -- Copper has climbed to almost four times the price of aluminum, a record ratio that’s accelerating a switch by manufacturers to using the cheaper metal in electric cables and wires, a United Co. Rusal executive said.
Hot Cocoa or Not Cocoa? NOT!
The bull market in cocoa came unglued in early 2011 when it became apparent that the Ivory Coast was going to grow, harvest and export a record crop despite violent political turmoil that engulfed the country. Prices plunged as bullish bets were unwound.
Look for the DX to challenge November's lows
The greenback was weaker at the close of North American trade on Tuesday with the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) off by 0.46% on the session. Risk appetite rose sharply amid rumors that Greece was in the final stages of drafting a proposed agreement on austerity measures required by the Troika in order for the debt laden country to receive the next tranche of bailout funds to the tune of €130 billion. While early reports suggested a deal was at hand, the meeting between Greek Prime Minister Lucas Papademos and party leaders was later postponed until Wednesday. Reasons for the delay have not been cited as of yet. Nonetheless, the rally in risk helped equities pare early losses with the Dow, the S&P, and NASDAQ closing higher by 0.26%, 0.20%, and 0.07% respectively. Meanwhile the dollar has remained under tremendous pressure as improved risk appetite continued to see investors jettison the reserve currency in favor of higher yielding assets.
No One Wants to Bet Against the Aussie
The Reserve Bank of Australia caught foreign-exchange markets off guard Tuesday by leaving its base rates alone, when a majority of analysts thought it would cut them. This surprise pushed the Australian dollar to a six-month high against its American cousin, with the Aussie hitting US$1.0822 in early New York trading. In afternoon trading, it had slipped back to US$1.0788. The euro slid to a record low against the all-conquering Aussie, buying A$1.2134 before recovering to A$1.2281.
Cheap natural gas makes coal a loser
Cheap natural gas creates winners and losers. Coal miners fall into the latter camp. Low-price gas encourages electricity generators to use gas-fired plants more and their coal-fired plants less. In the 12 months through November, 24.4% of U.S. electricity came from gas, against 42.8% from coal. In 2008, the figures were 21.4% and 48.2%. A decade ago, they were 17.9% and 49.8%.
ECB gives key concessions to Greece
The European Central Bank has made key concessions over its holdings of Greek government bonds, which will contribute to a reduction of the country's debt burden and smooth the path toward a new bailout for the country, said people briefed on Greece's debt-restructuring negotiations.
Will We See More Secret Currency Interventions?
NEW YORK (Dow Jones)--The Bank of Japan's disclosure Tuesday that it secretly sold yen for several days in November has been followed by relative stability in the yen's exchange rate. That has prompted analysts to suggest an invisible-hand approach might be a better alternative to massive interventions that ultimately fall short. On Oct. 31, the BOJ -- acting at the behest of the Ministry of Finance, which sets currency policy -- entered markets to sell yen after it surged to a record high against the dollar. But analysts were caught off guard by MOF's admission that between Nov. 1 and Nov. 4, it conducted an additional $13.3 billion worth of "stealth intervention" by using a limited number of commercial banks sworn to secrecy.
Stealth intervention limits yen
The Japanese government has confirmed that it intervened unannounced in foreign exchange markets to weaken the yen last year, the first time it had done so since 2004. Finance ministry data released on Tuesday showed Japan carried out Y1.02tn ($13.3bn) worth of unannounced intervention during the first four days of November after selling a record Y8.07tn on October 31, when the yen climbed to a postwar high of Y75.35 against the dollar.
Why is Canadian crude half the price of Brent???
Crude oil from Canada is being offered for half of international prices as increasing output from the world’s sixth biggest producer threatens to overwhelm regional pipelines and refineries.
Greece misses deadline
Greece missed another deadline to approve conditions for a second €130bn bail-out on Tuesday night, after a meeting with political leaders was postponed until Wednesday because of last-minute haggling with international lenders over emergency spending cuts.
Large shareholders threaten to block Glencore and Xstrata merger
Several large investors have threatened to block Glencore and Xstrata’s proposed all-share merger, which would create a $90bn commodities giant in the largest global mining deal on record.
Gold futures higher
Gold for April delivery GC2J -0.07% rose $23.50, or 1.4%, to settle at $1,748.40 an ounce on the Comex division of New York Mercantile Exchange. It overcame a weak start, picking up momentum as the dollar turned lower on the Greek reports. Investors also parsed U.S. Federal Reserve Chairman Ben Bernanke’s hearing in Congress.
Weak demand takes natural gas futures lower
NEW YORK (Dow Jones)--Natural-gas futures fell Tuesday as traders worry that time is running out for cold weather to eat into massive U.S. gas stockpiles. Natural gas for March delivery settled 7.8 cents, or 3.1%, lower at $2.472 a million British thermal units on the New York Mercantile Exchange. The benchmark contract fell as low as $2.452 in earlier trading. Futures fell as investors questioned whether forecasts for colder weather across the Northeast U.S. will dip low enough to substantially lower inventories of gas.
Bonds fall on oversupply and prospects for a Greece deal
NEW YORK, Feb 7 (Reuters) - U.S. Treasury debt prices
fell on Tuesday as investors set up for this week's $72 billion
quarterly refunding and a safety bid waned following a report
Greece was close to agreeing terms of a financial bailout.
Currency funds miss the boat
NEW YORK (Dow Jones)--It's been a glorious year for global markets, but currency funds have largely missed out. Foreign-exchange-focused investment managers gained 1.2% on average in January, according to Parker Global Strategies, which invests in currency funds and tracks programs with a total of roughly $10 billion under management. That's below the 2.3% gain for hedge funds in general, based on the Dow Jones Credit Suisse Core Hedge Fund Index, part of a series of indexes tracking over 8,000 hedge funds. The lagging performance comes after many currency funds stuck to U.S. dollars at the end of 2011, after taking heavy losses betting on riskier currencies during a bumpy period in financial markets. They were slow to emerge when emerging market currencies like the Mexican peso began to take off in the new year. By focusing solely on currency, specialty funds also are missing out on even more impressive growth in stocks and European bonds.
SNB Will Defend The Franc
Feb. 7 (Bloomberg) -- Swiss central bank interim Chairman Thomas Jordan said the franc remains “very strong” and policy makers can’t allow the currency to appreciate further. “Given this difficult environment, we remain firmly committed to defending the minimum exchange rate of 1.20 francs per euro,” Jordan said at an event in Geneva today. “This commitment applies at any time, from the moment the market opens in Sydney on Monday to when it closes in New York on Friday. We will not tolerate any trading below the minimum rate.”
WTI crude up 1.6% while Brent-WTI spread narrows
NEW YORK (Dow Jones)--Crude oil futures prices settled higher Tuesday after a volatile session in which global benchmarks shifted from their recent trajectories. For more than a week, North Sea Brent crude oil prices--the European benchmark--have been climbing, as widening sanctions over Tehran's nuclear weapons program have caused buyers of Iranian crude in Asia and Europe to scramble to look for alternate supplies. The buying frenzy pushed ICE Brent crude oil futures up for seven straight days, to a six-month high at Tuesday's settlement.
Global sugar market is expected to see a smaller surplus
Kingsman: Global Sugar Market Surplus Seen At 4.5 Mln Tons In 2012-13. DUBAI (Zawya Dow Jones)--The global sugar market is expected to see a smaller surplus of 4.5 million tons in 2012-13, according to Jonathan Kingsman, the chief executive of the Kingsman SA consultancy. China Oct-Jan Sugar Output Falls 8% To 5.22 Mln Tons - Association. BEIJING -(Dow Jones)- China's sugar production in the October-January period totaled 5.22 million metric tons, down 8% from a year earlier, the China Sugar Association said.
Copper bounces on Greek deal optimism as well
NEW YORK (Dow Jones)--Copper futures ended slightly higher Tuesday, reversing earlier losses as signs Greece was nearing a debt-restructuring deal lifted the euro. The most actively traded contract, for March delivery, rose 1.15 cents, or 0.3%, to settle at $3.8760 a pound on the Comex division of the New York Mercantile Exchange. Anticipation of positive news from Athens buoyed the euro and helped copper prices recover in afternoon trading, Sucden Financial said in a note to clients. Greek Prime Minister Lucas Papademos and the political leaders backing his interim government are set to meet later Tuesday to discuss cutbacks needed to win a new bailout deal and avoid a default. Papademos is expected to announce the details of the loan deal after the meeting.
Gold up 1.5% on optimism over Greece
NEW YORK/LONDON, Feb 7 (Reuters) - Gold prices rose
1.5 percent on Tuesday as expectations that a Greek
rescue deal will be completed drove the dollar down sharply
against the euro. Bullion, which had dropped in early trade on nervousness
about Greece, rebounded and headed for its biggest daily gain in
two weeks as Greece's government was preparing a list of reforms
needed to clinch a new financing package.
MF Global's Robbing Peter to pay Paul began on Oct. 26
The MF Global Inc. trustee released a preliminary report that pegs the beginning of the shortfall in segregated customer funds to Wednesday, Oct. 26. The report indicates that segregation was violated a day prior than where CME Group pegged it in a timeline presented by Executive Chairman Terry Duffy in Congressional hearings. On Nov. 2 CME released the following statement. “With respect to the apparent shortfall in customer segregated funds held by MF Global (and which were not on deposit with CME Clearing), it appears that any transfer of such funds occurred following the completion of CME audit procedures respecting such funds and in violation of CFTC Regulations and CME rules. CME completed its on-site review last week. At that time, the results of our review indicated that MF Global was in compliance with its segregation requirements. It now appears that the firm made subsequent transfers of customer segregated funds in a manner that may have been designed to avoid detection insofar as MF Global did not disclose or report such transfers to the CFTC or CME until early morning on Monday, October 31, 2011.”
Will the yuan be the next currency reserve?
In a new Brookings Institution study, Esward Prasad and Lei Ye of Cornell University say China’s currency will become an international reserve currency within the next decade, “eroding but not displacing the dollar’s dominance.” On some key criteria for becoming a reserve currency, such as government debt, China performs well. It’s far behind on others: Its exchange rate doesn’t trade freely (as other reserve currencies do). China still maintains extensive capital controls, limiting the yuan’s trading in global markets. And the country still has “relatively shallow and underdeveloped” bond markets, the study says.
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