Opening Bell: 06.08.11 - Dealbreaker

Opening Bell: 06.08.11

Author:
Updated:
Original:

Slasher street: The closing bell tolls for thousands of jobs (NYP, DB)
Barclays Capital, Goldman Sachs, Bank of America, JPMorgan Chase and Morgan Stanley currently are among those financial institutions either weighing staff cuts or actually paring payroll as they struggle to rein in costs and eke out profits in a choppy market, sources told The Post. The exact size of the layoffs across the industry could not be learned, but it's possible total jobs cuts could run into the thousands as firms assess the impact on their bottom lines of sweeping regulatory reform and a balky economic recovery.

Shrinking Valuations Drive Bank Payroll Cuts (Bloomberg)
Persistent low interest rates and stagnant loan growth are shrinking interest income as new regulations curtail fee revenue from retail banking. Analysts, including Meredith Whitney and Nomura Holding Inc.’s Glenn Schorr, expect the slow growth to result in job cuts on Wall Street in the coming months.

At Morgan Stanley, Focus Put on Costs (WSJ)
Morgan Stanley offered a glimpse into Wall Street's future, and the outlook has changed so much from the heady days of the past that the firm is planning to keep a close watch on BlackBerry usage…The overall expense-savings target: about $500 million in 2012, revving up to $1 billion in the next three years… Some job cuts are likely over time in the company's 62,000-person work force, though Morgan Stanley's investment-banking and trading division won't be touched for now, according to a person familiar with the situation. Ms. Porat also said the number of financial advisers in the firm's majority-owned Morgan Stanley Smith Barney joint venture with Citigroup Inc. might shrink below the previous target of 17,500 to 18,500.

Meredith Whitney: Muni Defaults Are Still Coming, But The Timing Is Unclear (CNBC)
"It's going to be big," she said. "What was troublesome is people took (the call) that it would have to be this year. I never said that. But that's the size we're looking at." Whitney recalled some of her previous forecasts that housing prices would double-dip, and that state and local governments would enact huge layoffs. While those developments didn't happen immediately, she said the accuracy was merely "a question of timing (over) the exact month or the exact quarter." She said the muni bond call may follow the same path, with governments able to forestall defaults in the near term but ultimately must pay the price of taking on more debt than their revenue can cover. "This is the sad reality of stuff that's going on, the sad reality of consequences of reckless spending," Whitney said.

Fears over UK’s AAA rating knock sterling (FT)
The pound dropped to a one-month low against the euro and lost ground against the dollar and the yen after a warning that the UK could lose its AAA rating. Rating agency Moody’s warned the UK could lose its top tier credit status if growth continued to slow and if the British government decided to slow down its fiscal consolidation plans.

Germany Seeks Extending Greek Maturities (Bloomberg)
German Finance Minister Wolfgang Schaeuble said bondholders must contribute a “substantial” share of a second aid package for Greece, proposing a swap that credit-rating companies may term a default. Schaeuble told European Central Bank President Jean-Claude Trichet and fellow euro finance ministers in a June 6 letter that maturities on Greek bonds should be extended seven years to give the debt-wracked nation time to overhaul its economy.

Dollar on defensive after Bernanke, falls below 80 yen (Reuters)
The dollar slipped to a one-month low under 80 yen on Wednesday as the yen was bought back broadly amid heightened risk-aversion reflecting general falls in Asian share prices. The U.S. currency was also weighed down due to comments by Federal Reserve Chairman Ben Bernanke that bolstered expectations for U.S. interest rates to stay low for now.

OPEC divided as Saudi pushes for oil increase (Reuters)
Under pressure from consumer countries to contain fuel inflation, Riyadh hopes to convince the Organization of Petroleum Exporting Countries to lift its production target by 1.5 million barrels a day at the meeting today, Gulf delegates said. Riyadh has support from its Gulf Arab allies Kuwait and the United Arab Emirates to meet rising demand in the second half of the year. But five countries -- long-time price hawks Iran and Venezuela plus Ecuador, Iraq and Angola -- have said they see no need to increase output.

World Bank Sees Global Overheating Risks (Bloomberg)
Emerging-market economies, growing almost three times faster than their developed counterparts, need to speed spending cuts and interest-rate increases as they fight inflation and overheating, the World Bank said…Developing countries “have put the crisis-fighting stage of the recovery behind them,” Andrew Burns, the World Bank’s manager of global macroeconomics, told reporters yesterday. “They now need to be reorienting themselves towards establishing the conditions that are going to allow them to have strong growth in years to come.”

China’s Net Purchases of Japan Long-Term Debt at Record as It Diversifies (Bloomberg)
China bought a net 1.33 trillion yen ($16.6 billion) in Japanese long-term bonds in April, the biggest amount since records began in January 2005, according to data released today in Tokyo by Japan’s Ministry of Finance. The nation sold a net 1.47 trillion yen of short-term debt, the data shows.

Axa Unit Agrees to Purchase Citigroup Buyout Fund Assets for $1.7 Billion (Bloomberg)
Citigroup Inc. (C) agreed to sell $1.7 billion of investments in leveraged buyout funds to Axa SA (CS)’s private equity unit as the third-biggest U.S. bank moves to shrink its balance sheet.

Prada Uses Catwalk to Pitch IPO (WSJ)
Prada SpA pulled out all the stops to interest Hong Kong's high society in its $3 billion-share sale, laying on a fashion show Tuesday evening and inviting a selection of the city's tycoons and their wives and daughters. People at the event say there were undignified pleas to secure one of the 300-plus tickets to the 11-minute catwalk show among the famously brand-conscious Hong Kong glitterati.

Russia Musters Its Credibility to Sell Fund (Dealbook)
As part of its drive to show foreign investors that Russia is a safe and profitable place to put their money, a government-owned bank has established a private equity fund with a former Goldman Sachs banker in charge and Prime Minister Vladimir V. Putin as rainmaker.

Fleeing to Foreign Shores (NYT)
Nearly one in 10 American companies that went public last year did so outside the United States. Besides Australia, they turned to stock markets in Britain, Taiwan, South Korea and Canada, according to data from the consulting firm Grant Thornton and Dealogic. The 10 companies that went public abroad in 2010 — and 75 from 2000 to 2009 — compares with only two United States companies choosing foreign exchanges from 1991 to 1999.

"Mullet bandit" robs another bank (Reuters)
The man federal authorities have nicknamed the "Mullet Bandit" robbed another bank in Ohio on Monday, his fourth heist in the area over the past month.

Related