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Opening Bell: 08.08.13

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Wall Street banks see dollar signs in forex business (Reuters)
A surge in currency trading earlier this year and favourable regulatory treatment of the foreign exchange business have unleashed an intense fight on Wall Street, with banks battling one another for a larger share of an increasingly fractured market. ... Competition is particularly intense among banks because the foreign exchange sector is under fewer new regulations than other areas of trading, like derivatives or corporate bonds. That means banks can fund currency trading with less capital than they need for other businesses.

Banks Struggle With Proprietary Bond-Trading Networks (WSJ)
Morgan Stanley hasn't held a scheduled bond-trading session on its "Bond Pool" network for a few weeks, said people familiar with the platform. The firm typically ran two bond auctions per week, after launching the service last summer. Goldman Sachs Group Inc. has slowed the number of sessions on its "GSessions" platform to a trickle, having typically run several each week since its launch last June, these people said. ... Some investors said they were reluctant to use the bank-owned networks because, while innovative, they appeared designed to benefit banks.

JPMorgan Faces Criminal Probe as Bank Says U.S. Faults MBS Sales (Bloomberg)
JPMorgan Chase & Co., the biggest U.S. bank, said it’s under federal criminal investigation for practices tied to sales of mortgage-backed bonds that the Justice Department has already concluded broke civil laws. The department’s civil division told the bank in May of its preliminary finding after examining securities tied to subprime and Alt-A loans, which were sold to investors from 2005 through 2007, JPMorgan said yesterday. The office of U.S. Attorney Benjamin Wagner in Sacramento, California, has been conducting civil and criminal inquiries, the bank said. “It would be a major decision for them to indict a major U.S. bank, and frankly I would not predict it,” said John Coffee, a professor at Columbia Law School in New York. “You can often bring dual investigations, civil and criminal, in order to maximize pressure for a global civil resolution.”

Bond Wars (Pimco / Bill Gross)
The Germans, it seems, had burrowed themselves for weeks, 50–100 feet underground, surviving the mortars relatively intact. And their generals were well-versed in British tactics – always charging at the break of dawn, always blowing loud shrieking whistles, always advancing three feet apart with horses and bayonets of a bygone era. But the Germans believed in machine guns, not horses. Within the first few minutes there were 30,000 dead and wounded. By the end of the day there was not a single British soldier alive that had penetrated German barbed wire. Machine guns cut them down like scythes harvesting wheat. The few that reached German trenches were incinerated by German flamethrowers, another 20th century technological invention. ... PIMCO will not go down at the Somme.

NYC comptroller candidate arrested for illegal drug sales (Reuters)
A former Manhattan madam who is running for New York City comptroller was arrested and charged with selling prescription pills for cash, the FBI said on Tuesday. In the latest twist to the city's scandal-hit campaign season, Kristin Davis, 38, allegedly sold prescription pills to a federal informant four times in four months this year, the FBI said. Davis is running for the post of comptroller - in effect the city's chief financial officer - also being sought by former Democratic New York Governor Eliot Spitzer. Spitzer is attempting a political comeback after resigning as governor in 2008 amid a prostitution scandal. Davis has said Spitzer was one of her customers and that she provided him with prostitutes.

China trade shows signs of recovery (FT)
China’s exports and imports grew strongly in July, a sign that the economy may be stabilising after a shaky first half of the year. Exports rose 5.1 per cent year on year, rebounding from a 3.1 per cent drop in June. Imports increased 10.9 per cent year on year, up from a 0.7 per cent fall in June. Both figures were much stronger than analysts had forecast, pointing to a steadying of the country’s growth outlook after a sharp slowdown in exports and imports over the previous few months. The big jump in imports was especially notable as it is an indication that Chinese domestic demand is holding up well.

Pimco, BlackRock Seek to Bar California Mortgage Seizures (Bloomberg)
Pacific Investment Management Co. and BlackRock Inc. are among bond investors seeking a court order blocking Richmond, California, and Mortgage Resolution Partners LLC from seizing mortgages through eminent domain, saying the initiative would hurt savers and retirees. The city’s plan is unconstitutional, according to a complaint filed yesterday by mortgage-bond trustees in federal court in San Francisco. The trustees, Wells Fargo & Co. and Deutsche Bank AG, were directed to take the action by investors in the debt that also include Jeffrey Gundlach’s DoubleLine Capital LP, said John Ertman, a partner at Ropes & Gray LLP. “Mortgage Resolution Partners is threatening to seriously harm average Americans, including public pension members, other retirees and individual savers through a brazen scheme to abuse government powers for its own profit,” Ertman said in an e-mailed statement on behalf of investors.

Commerzbank Sees Signs of Growth (WSJ)
Commerzbank AG said Thursday parts of its business were growing again even as it set aside more money for souring loans and lowered the value of its investments, moves which had threatened to overshadow improvements in the German lender's restructuring efforts. Commerzbank has said that 2013 will be a year of transition in its four-year restructuring plan to strengthen its four main business units by 2016, while shedding other assets that were transferred to an internal "bad bank" a year ago. ... "The early signs indicate that we are in fact on the right path, although there is certainly still a long way to go up to 2016," said Chief Executive Martin Blessing.

Hilton Said to Plan Debt Restructuring Before Offering (Bloomberg)
Hilton Worldwide Inc., the hotel operator owned by Blackstone Group LP, hired four banks for a $13 billion debt refinancing later this year in anticipation of going public in early 2014, according to a person with knowledge of the matter. The hotelier, based in McLean, Virginia, hired Deutsche Bank AG, Goldman Sachs Group Inc., Bank of America Corp. and Morgan Stanley for the refinancing as well as the initial public offering, said the person, who asked not to be identified because the information is private. The refinancing would encompass bank debt, commercial mortgage-backed securities, high-yield bonds and time-share financing, the person said.

Why European junk debt’s US sales are hitting record highs (CNBC)
Sales of European non-investment grade debt to the U.S. have hit a record high this year, despite the continued issues in the euro zone. U.S. investors have snapped up $106.6 billion of European corporate debt in 2013 so far, 11 percent higher than the same time in 2012.This has been driven by a 67 percent rise in sales of high-yield junk debt, to $28.8 billion for the year so far, according to figures from Dealogic.

Covert war in the workplace... over the holiday rota: Staff deliberately book time off to scupper colleagues' holiday plans (DM)
Online office experts asked around 500 office workers about their holiday booking habits in June this year. The anonymous poll found that as many as one in 20 people had strategically booked their holidays to annoy a fellow worker. Another 13 per cent said they never revealed their holiday intentions for fear of co-workers booking the same time, while around 7 per cent admitted lying about their holiday plans in order to ‘double bluff’ colleagues.

Suspect: Alleged victims 'haters' mad about his 'way with the ladies' (UPI)
Fort Piece police said officers responded July 27 to a report of a man with a knife threatening customers at the Cobb's Landing restaurant in Fort Pierce, reported Wednesday. "He then began saying he didn`t do anything wrong, the people who were complaining on him were just haters because he had a way with the ladies and they should be arrested, not him," the police report states. "Then he stated he would use the Zimmerman defense because he was streetwise and he knew how to work the system."