Robust output data boost markets Stock markets surged on Monday as robust manufacturing data raised hopes that the global economy could soon pass the worst of the recession. The S&P500 index closed up 2.6% - a seven-month high – after a surge in Asian stock prices; the FTSE Eurofirst 300 index rose 2.8% to a five-month high and the price of crude oil jumped to more than $68 a barrel to a seven-month high. The improvement in risk appetite helped drive the dollar'to its lowest level of the year against the euro. Government bonds also fell as investors flocked to equities. See this article online.
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| GM files for bankruptcy General Motors filed for bankruptcy on Monday as the Obama administration took the first steps to try to revive a failed icon of American industry by extending unprecedented federal funding and oversight, reports Reuters. The bankruptcy filing was the third-largest in US history and the largest ever in US manufacturing. The decision to push GM into a fast-track bankruptcy and provide $30bn of additional taxpayer funds to restructure the automaker is a huge gamble for the Obama administration. See this article online.
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| Citi, GM tumble out of Dow Citigroup and General Motors, once two of the biggest flag-bearers of US business, were on Monday dumped from the Dow Jones Industrial Average and were replaced by Travelers, which includes Citi's former insurance assets, and Cisco Systems. GM, which on Monday filed for bankruptcy, and Citi, recipient of $45bn of government aid, are the first to leave the Dow since AIG was removed in September. Their shares have lost more than 90% since early 2007. See this article online.
http://ftalphaville.ft.com/blog/2009/06/02/56487/citi-gm-tumble-out-o
| 'Lean' Chrysler set to emerge A slimmed-down Chrysler is set to emerge from bankruptcy this week as the automaker's board prepares to appoint Fiat's chief Sergio Marchionne to the helm. US president Barack Obama praised the carmaker's "quick, surgical" bankruptcy process. Chrysler gained court approval for the sale of most its operations roughly one month after it filed Chapter 11 and the night before General Motors' petition on Monday. Chrysler's speedy trip through court is key for the US government to quell fears about the implications of a bankruptcy at its larger and more complex rival. See this article online.
http://ftalphaville.ft.com/blog/2009/06/02/56486/lean-chrysler-set-to
| Goldman to sell ICBC shares Goldman Sachs on Monday activated plans to sell up to $1.9bn worth of shares in Industrial and Commercial Bank of China, in the latest high-profile divestment of stock in a mainland lender. Goldman is in advanced talks with institutional investors to sell up to 3.03bn Hong Kong-listed shares in ICBC, the world's biggest bank by market cap. The sale will leave Goldman with a 4% holding in ICBC, which it will retain until at least April 2010 Goldman has offered the shares – around a fifth of its overall holding – at HK$4.80 to HK$4.90 each, and expected to close the sale later on Monday. See this article online.
http://ftalphaville.ft.com/blog/2009/06/02/56485/goldman-to-sell-icbc
| Gulf investor to sell Barclays stake One of Barclays' largest Middle Eastern shareholders announced plans on Monday night to offload its stake in the British bank, reaping a large profit less than seven months after making its £3.5bn investment. International Petroleum Investment Corp, a vehicle of the Abu Dhabi royal family, was finalising a placing of 1.3bn Barclays shares with institutional investors. The group also invited offers for its entire £1.5bn holding of Barclays capital notes in a process to be completed by Wednesday. Both sales are being handled by Credit Suisse. See this article online.
http://ftalphaville.ft.com/blog/2009/06/02/56484/gulf-investor-to-sel
| JPMorgan, Amex push to repay Tarp JPMorgan Chase and American Express both plan to sell ordinary shares as a way to satisfy conditions for repaying loans from the US government's TARP scheme. JPMorgan, which received $25bn in Tarp funds, said Monday it hoped to sell $5bn in equity in an offer that could be priced as early as Tuesday. Amex said it also planned to sell $500m of common stock to help repay $3.4bn of bail-out funds. See this article online.
http://ftalphaville.ft.com/blog/2009/06/02/56483/jpmorgan-amex-push-t
| China official backs US dollar A key Chinese financial official on Monday rejected suggestions the US dollar could be replaced quickly as the global reserve currency, as US Treasury secretary Tim Geithner arrived in China on his first official visit. In an FT interview, Guo Shuqing, chairman of China Construction Bank and former head of China's foreign exchange administrator, raised doubts about a proposal from China's central bank governor to replace the dollar with a "super-sovereign reserve currency" based on IMF special drawing rights, and also raised concerns about the health of western banks. See this article online.
http://ftalphaville.ft.com/blog/2009/06/02/56482/china-official-backs
| EMC in bidding war for Data Domain EMC, the world's largest maker of storage systems and software, on Tuesday entered a bidding war with rival NetApp over Data Domain, making a surprise $1.8bn all-cash offer for the smaller data de-duplication company. Its offer of $30 per share in cash represents a 20% premium over the offer from NetApp, which on May 20 announced plans to buy Data Domain for $1.5bn, or $25 per share in cash and stock. Analysts said that EMC is likely to prevail in the bidding. See this article online.
http://ftalphaville.ft.com/blog/2009/06/02/56481/emc-in-bidding-war-f
| Candover faces possible run-off Candover faces a crucial month as the ailing UK private equity group pushes to raise capital and cut costs before a key test of its debt covenants on June 30. The group needs cash urgently and is considering options including an outright takeover, selling a minority stake, and tapping existing shareholders via a rights issue. But already at least one potential bidder - Eurazeo, the French investment house owned by Michel David-Weill, former Lazard chairman - has walked away, making it more likely that Candover may be forced into run-off. See this article online.
http://ftalphaville.ft.com/blog/2009/06/02/56480/candover-faces-possi
| Morgan Stanley, Citi start JV Morgan Stanley's wealth management joint venture with Citigroup's Smith Barney unit began operations on Monday, launching a new firm of the scale of industry leader Merrill Lynch. The firm, Morgan Stanley Smith Barney, is 51% owned by Morgan Stanley and has 6.8m client households and about $14bn in projected revenues. The launch comes five months after Bank of America acquired Merrill Lynch and merged their wealth management businesses. See this article online.
http://ftalphaville.ft.com/blog/2009/06/02/56478/morgan-stanley-citi-
| BofA wins in $1bn-plus lawsuit California's highest court on Monday ruled that Bank of America need not pay a potential $1bn or more to customers who claimed the bank illegally raided Social Security benefits to collect fees, reports Reuters. Plaintiffs in the class-action case had accused BofA of dipping into their Social Security direct deposit accounts between 1994 and 2003 to collect fees for overdrafts and other debts. See this article online.
http://ftalphaville.ft.com/blog/2009/06/02/56477/bofa-wins-in-1bn-plu
| Berlin set to win HRE control Germany's government is expected on Tuesday to win majority control of Hypo Real Estate, ending the threat of expropriation hanging over investors. Berlin has clashed with private shareholders over the fate of the lender, which needs billions of euros in fresh capital to avoid being closed down by regulators. Berlin insists that HRE - which authorities believe poses a systemic risk to the banking system – should be entirely controlled by the state so it can be restructured more easily and at lower cost. See this article online.
http://ftalphaville.ft.com/blog/2009/06/02/56479/berlin-set-to-win-hr
| Neptune Orient to raise $1bn Shares in Neptune Orient Lines, Southeast Asia's largest container carrier, surged the most in more than eight months after the company announced plans to raise S$1.44bn ($1bn) selling new shares to repay debt, reports Bloomberg. Investors will be able to buy three new shares for every four held at S$1.30 apiece, a 15% discount from the May 29 closing price, the company said. Sinagapore's state investment agency Temasek, Neptune's largest shareholder, will sub-underwrite the entire issue. See this article online.
http://ftalphaville.ft.com/blog/2009/06/02/56476/neptune-orient-to-ra
| FSA extends short-selling rules Financial stocks still need the protection afforded by forcing short sellers to reveal their positions, the UK's FSA securities watchdog said on Monday, as it extended its disclosure regime indefinitely. Under the rules, anyone with a short position equal to 0.25% of the outstanding stock in one of 30 prescribed companies must publicly disclose their holdings. The FSA banned short-selling of financial stocks last September, triggering a series of similar bans globally, but it reduced its requirements to disclosure in January. See this article online.
http://ftalphaville.ft.com/blog/2009/06/02/56475/fsa-extends-short-se
| GMAC, banks, clash over Ally Bank GMAC and a bank lobby group have clashed over the high interest rates GMAC's bank unit is paying for deposits, with bankers saying GMAC is unfairly subsidised by federal funds, reports the WSJ. In the latest salvo, GMAC, the lender long affiliated with General Motors and now Chrysler, said Monday that a complaint last week by the American Bankers Association was "highly inappropriate," and accused the lobby group of stifling competition among banks. GMAC became a bank holding company last year and recently announced a new name for its online bank, Ally Bank. See this article online.
http://ftalphaville.ft.com/blog/2009/06/02/56490/gmac-banks-clash-ove
| Overnight markets: Surge Asian markets rose on Tuesday after US economic data added to signs the global recession is abating and GM's bankruptcy raised optimism that Asia's automakers will gain market share. Futures on the S&P500 Index lost 0.1% after the gauge climbed 2.6% in New York on Monday as reports on personal income, manufacturing and construction beat economists' forecasts. Yields on 10-year Treasuries surged the most in eight months as demand for the safety of government debt fell.
Asian markets (Tues)
03:10 BST
Nikkei up 60.24 (0.62%) at at 9,737.99
Topix up 9.02 (0.99%) at 921.54
Hang Seng up 717.59 (3.95%) at 18,888.59 US markets (Mon)
S&P500 up 23.73 (2.58%) at 942.87
DJIA up 221.11 (2.60%) at 8,721.44
Nasdaq up 54.35 (3.06%) at 1,828.68
European markets (Mon)
Eurofirst 300 up 24.10 (2.80%) at 886.27
FTSE100 up 88.25 (2.00%) at 4,506.19 Currencies
03:45 BST
€/$ 1.4155 (1.4160)
$/¥ 96.30 (94.80)
£/$ 1.6431 (1.6236) Commodities
04:00 BST
Brent Crude (ICE) down $0.57 at $67.40
Light Crude (Nymex) down $0.76 at $67.82
100 Oz Gold (Comex) down $3.30 at $976.70
Copper (Comex) down $0.10 at $231.80 10-year government bond yields (%)
04:05 BST
US 3.66 (3.51)
UK 3.83 (3.80)
Germany 3.59 (3.68)
Japan 1.51 (1.48) Sources: FT, Bloomberg See this article online.
http://ftalphaville.ft.com/blog/2009/06/02/56474/overnight-markets-su
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