Important news from Gwendolyn

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Next Week: The all or nothing trade

For many investment funds and money money managers, the fate of 2011 is now truly binary. The confluence of two key events — the Oct 23 EU summit in Brussels and G20 summit in Cannes on Nov 3-4 — will now define the rest of the financial year worldwide. If — as now seems possible — the European Union, backed by their G20 allies, finally unveil a package of credible measures to stabilise the euro zone sovereign debt and banking crisis, then there could be a whopping year-end rally in global equities, emerging markets high yield debt and even commodities. A policy accident and credit-fueled disaster will have been averted and the looming threat of double-dip global recession or even years of depression may recede again to allow businesses and households breathe again. Of course, it’s entirely possible the summits fail to deliver amid ever more national and ideological posturing and wrangling and the drawing of phony ‘red lines’. At which point, money will go to ground again and markets could easily tank ahead of Christmas to mark a bleak mid-winter of doom and gloom, further sharp rises in unemployment and business retrenchment. So far in the infant Q4, the tilt has been more hopeful. Just as the market mood hit its darkest all year, the Sarkozy-Merkel/Franco-German alliance appeared to wise up and admit a need to bite the bullet. This triggered significant market rallies everywhere. World stocks  bounced up to 10 percent  and European bank stocks alone snapped back 15%.  Dexia’s near collapse may have been the final straw to convince Germany to go the extra mile and France to acknowledge German grievances for the sake of a Sarkozy-led G20 deal. With French Presidential elections next year and France currently chairing G20, Sarkozy may want his own Gordon Brown “save the world” moment from April 2009 (although it didn’t do GB much good at 2010 UK general election). But, for investors, the parallels with the London G20 summit of April 2009 are obvious. Stock markets began recovering amonth earlier  in March of that year on signs of a significant series of global financial agreements on bank support, coordinated fiscal stimuli and IMF recapitalisation to underwrite early signs of a recovery in business activity that Spring. That stock market recovery, goosed by a series of money printing from the US and UK, lasted for two years. For some funds, markets are currently just priced for “muddle through” on the policy front, with all the attendant volatility, ‘event risks’ and double-dip risks. Like in 2009, valuations look relatively cheap barring full-scale systemic shocks. Therefore, most now reckon an EU/G20 deal involving a credibly deep Greek haircut of circa 50-60%, an adequate European bank recapitalisation facility via the EFSF/EBA etc and the prospect of ringfencing the rest of the euro zone with a medium-term joint euro bond plan could unleash signifcant buying over the six weeks to Christmas. It’s been a tough year for funds. Neither traditional institutional funds nor more nimble hedge funds have done terribly well and rally of  6 percent or less in world equity, junk bonds and commodities by January would take those indices out of the red for year.    And, just like 2009, if you’re looking for some underlying tailwind from the economy, then U.S. and European numbers continue to defy disastrous signals from business and household surveys. For example, a big 1.4% jump in euro zone industrial production in August (which marked the heart of the current wave of the crisis) stands in stark contrast to manufacturing PMI for the same month pointing to contracting activity. And that production surge was led by Italy, Portugal and Ireland. Also, for those who still look at shipping prices for a lead on trade activity, the Baltic Freight index (which dropped by two thirds at the end of last year) has surged about 70 percent since early August. That’s clearly not pricing for a Chinese hard landing or global trade collapse. So, next week is sandwiched between the Paris G20 finance ministers gathering this weekend and euro zone finmins next Friday before the big EU summit the following Sunday. And all this will be against the backdrop of a deluge of US Q3 earnings (Apple, Intel,  IBM, Microsoft, GE, Honeywell, Citi, Goldman Sachs, Bank of America Merrill Lynch, Morgan Stanley etc)  giving markets a reality check on how the mega multinational companies have been performing through all the macro policy hullabaloo. Chinese Q3 GDP and Sept production data Tuesday will also be critical for those fretting about the risk of a hard landings there. UK inflation data, BoE minutes and a set-piece Mervyn King speech will hold a mirror to the recent decision on QE2 in Britain. A major Bernanke speech, German and US business sentiment, Brazil and Turkey rate decisions complete the picture.

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NYSE Euronext D.Boerse clients fearful over costs

By Luke JeffsLONDON, Oct 17 (Reuters) - Deutsche Boerse's planned $9 billion takeover of NYSE Euronext faces growing opposition from its largest clients who fear the merger will lead to increased trading costs, a concern the exchanges reject."I don't see clear benefits from mergers. I see increased complexity and increased complexity rarely implies increased savings," said Philippe Guillot, head of trading at broker Cheuvreux."Nothing has led us to believe that savings will be passed on to the end investors," Guillot told the European Exchanges Summit in London on Monday.Europe's largest share-trading firms, including the world's top investment banks, fear a merger between Deutsche Boerse and NYSE Euronext will give the combined entity an effective monopoly in some areas, which could lead to increased costs."They've not offered us much in the way of assurances over trading fees, our main outlay, instead they are talking up connectivity savings," said one head of electronic trading at a large investment bank.NYSE Euronext sought to allay these concerns on Monday, saying costs would come down for clients, though it did not rule out higher trading fees."The merger will lead to infrastructure savings. Clients will have less to do to connect to our platforms and less to do in clearing and settlement. It does not equal lower fees but it will mean overall savings," said Roland Bellegarde, group executive vice president and head of European cash and listings at NYSE Euronext.The exchange partners are keen to stress clients will make hefty savings in their technology budgets because the merger will mean they need to maintain just one set of infrastructure links to trade products which today require two sets of pipes.The European Commission is currently studying the exchange mega-merger, particularly derivatives trading and clearing services, with a view to announcing whether it has decided to back or block the deal in December.Deutsche Boerse and NYSE Euronext hoped to avoid tricky questions over the combination of the two top European futures platforms by arguing the vast over-the-counter (OTC) futures market should be factored into any anti-trust deliberations.But three people familiar with the matter said last week the Commission told the exchanges at the start of the month it had opted not to include OTC derivatives in its review of the planned merger, a potential blow to the deal.NYSE Euronext and Deutsche Boerse have until Nov.8 to address formally the European Commission's specific concerns, including the suggestion that the merged firm will have an effective monopoly in European listed futures trading.Deutsche Boerse's Eurex and NYSE Euronext's Liffe have between them 93 percent of European futures trading and 86 percent of European options activity, World Federation of Exchanges data shows.

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NYSE Euronext D.Boerse clients fearful over costs

By Luke JeffsLONDON, Oct 17 (Reuters) - Deutsche Boerse's planned $9 billion takeover of NYSE Euronext faces growing opposition from its largest clients who fear the merger will lead to increased trading costs, a concern the exchanges reject."I don't see clear benefits from mergers. I see increased complexity and increased complexity rarely implies increased savings," said Philippe Guillot, head of trading at broker Cheuvreux."Nothing has led us to believe that savings will be passed on to the end investors," Guillot told the European Exchanges Summit in London on Monday.Europe's largest share-trading firms, including the world's top investment banks, fear a merger between Deutsche Boerse and NYSE Euronext will give the combined entity an effective monopoly in some areas, which could lead to increased costs."They've not offered us much in the way of assurances over trading fees, our main outlay, instead they are talking up connectivity savings," said one head of electronic trading at a large investment bank.NYSE Euronext sought to allay these concerns on Monday, saying costs would come down for clients, though it did not rule out higher trading fees."The merger will lead to infrastructure savings. Clients will have less to do to connect to our platforms and less to do in clearing and settlement. It does not equal lower fees but it will mean overall savings," said Roland Bellegarde, group executive vice president and head of European cash and listings at NYSE Euronext.The exchange partners are keen to stress clients will make hefty savings in their technology budgets because the merger will mean they need to maintain just one set of infrastructure links to trade products which today require two sets of pipes.The European Commission is currently studying the exchange mega-merger, particularly derivatives trading and clearing services, with a view to announcing whether it has decided to back or block the deal in December.Deutsche Boerse and NYSE Euronext hoped to avoid tricky questions over the combination of the two top European futures platforms by arguing the vast over-the-counter (OTC) futures market should be factored into any anti-trust deliberations.But three people familiar with the matter said last week the Commission told the exchanges at the start of the month it had opted not to include OTC derivatives in its review of the planned merger, a potential blow to the deal.NYSE Euronext and Deutsche Boerse have until Nov.8 to address formally the European Commission's specific concerns, including the suggestion that the merged firm will have an effective monopoly in European listed futures trading.Deutsche Boerse's Eurex and NYSE Euronext's Liffe have between them 93 percent of European futures trading and 86 percent of European options activity, World Federation of Exchanges data shows.

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New Issue-EIB adds 250 mln Russian ruble to 2015 bond

Borrower European Investment Bank (EIB)Issue Amount 250 million Russian rubleMaturity Date December 15, 2015Coupon 6.5 pctIssue price 98.375Yield 6.956 pctPayment Date October 21, 2011Lead Manager(s) JPMorgan Chase BankRatings Aaa (Moody's), AAA (S&P),AAA (Fitch)Listing LuxFull fees 1.625 pct (Selling 1.4 pct , 0.225 pct M&U)Denoms (K) 50Governing Law EnglishNotes Launched under issuer's EMTN programmeThe issue size will total 8.8 billion Russianruble when fungibleISIN XS0523712791Security details and RIC, when available, will beonCustomers can right-click on the code forperformance analysis of this new issueFor ratings information, double click onFor all bonds data, double click onFor Top international bonds newsFor news about this issuer, double click on the issuer RIC,where assigned, and hit the newskey (F9 on Reuters terminals)Data supplied by International Insider.

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UPDATE 1-WSJ Europe publisher quits in ethics flap

* Andrew Langhoff became publisher in 2009 (New throughout)By Robert MacMillan and Yinka AdegokeOct 11 (Reuters) - The publisher of the Wall Street Journal's European edition quit over ethical issues raised by the newspaper's relationship with a Dutch consultancy.The resignation of Andrew Langhoff comes as News Corp, the paper's parent company, fights accusations of misbehavior in a UK telephone hacking scandal.The nature of the relationship was unclear, but News Corp's Dow Jones unit said on Tuesday that the issue related to two articles involving the Dutch firm, the Executive Learning Partnership (ELP).The agreement between the paper and the firm, now expired, was not disclosed to readers of the articles, the Journal said in a note attached to the articles on its website."The impetus for writing the article was the agreement, but the reporting and writing were solely the responsibility of the News Department with no input or review prior to publication by the Circulation Department or ELP," the note said."However, any action that creates an impression that news coverage can be influenced by commercial interests is a breach of the ethical standards of Dow Jones & Co," it said.Langhoff resigned because the publisher "has the ultimate responsibility for this matter," Dow Jones said in a separate statement.The Journal, in an article on its website on Tuesday, said an internal investigation had found that Langhoff personally pressured two reporters into writing articles featuring ELP.Dow Jones has been fighting accusations of ethical violations tied to phone hacking at its News of the World newspaper in London. Those allegations, which have led to a number of arrests, have prompted critics to demand the resignation of Chairman and Chief Executive Rupert Murdoch and other executives, including his son James.One of the Wall Street Journal Europe articles, which ran in October 2010, is called "A New Leaf: Beyond personal use, businesses are waking up to the possibilities of social media." (r.reuters.com/fyd44s)The article relies on a poll conducted by ELP and features interviews with two ELP executives, including Rien van Lent, identified by the Journal as ELP's chief executive.FORMER DOW JONES PUBLISHERELP's website says van Lent worked for Dow Jones as publisher of the Wall Street Journal Europe and head of Dow Jones's European newspaper, Internet and conference activities. He then joined Amsterdam's Telegraaf Media Group in 2006, before News Corp bought Dow Jones.He and another ELP official did not respond to email messages seeking comment.Another article, which ran in March 2011, (r.reuters.com/dyd44s) is headlined "Investing in women: Men still dominate boardrooms, but more women at the top could boost returns." The article is a question-and-answer interview with an ELP partner.A Dow Jones spokeswoman declined to comment on whether Langhoff was aware of or blessed the arrangement, when and why the arrangement ended, or how the ethics issue reached the attention of Dow Jones and News Corp officials.Langhoff, who became publisher of WSJ Europe in January 2009, based in London, also was the chief executive of Ottaway, a Dow Jones unit that publishes several local U.S. newspapers. He did not return an email message seeking comment.Dow Jones competes with Thomson Reuters.

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M & A wrap: What’s Buffett saying about the price of stocks?

“Warren Buffett’s determination that Berkshire Hathaway shares are cheap enough to buy back may mean the Standard & Poor’s 500 Index is also a bargain,” reports Bloomberg. London Stock Exchange head Xavier Rolet has won the backing of LCH.Clearnet’s board for his planned $1.3 billion takeover of Europe’s largest independent clearing house, a source familiar with the situation said. In the year since United Airlines and Continental Airlines merged business has been surprisingly rosy. But things may become difficult in the coming months as the new United tries to clear three tall hurdles: new labor contracts, a new reservations system and government approvals, reports the WSJ.