Germany Backs Raising EIB Capital-Merkel Spokesman

BERLIN (Dow Jones)–In a move to promote economic growth in Europe, Germany is prepared to back an increase in the capital of the European Investment Bank, government spokesman Steffen Seibert said Monday.

“We are talking about raising fresh capital for the EIB,” Seibert told Dow Jones Newswires.

Chancellor Angela Merkel said over the weekend that it made sense to “strengthen” the EIB’s possibilities to lend, but did not elaborate. Seibert said European finance ministers agreed in January to look into raising the EIB’s capital.

“That is a direction that we think is worth pursuing. Now it’s up to finance ministers to work out the details,” he said.


By William Boston, Dow Jones Newswires, +49 30 2888 4128;

William.Boston@dowjones.com

Annunci

TIP SHEET: RiverPark Long/Short Offers Hedge Fund Strategy For Masses

By Andrew Johnson Jr.

Of DOW JONES NEWSWIRES

CHICAGO (Dow Jones)–RiverPark Long/Short Opportunity Fund’s (RLSIX) flexible approach to investing and managing risk could help it prosper in good times and bad.

The fund is a new open-end mutual fund launched by RiverPark Advisors LLC on March 30 from an existing hedge fund. It is designed to provide long-term capital appreciation while protecting against downside risk by investing long in equity securities that RiverPark Advisors believe have above-average growth prospects and being short equity securities the adviser believes are competitively disadvantaged over the long term.

Fund manager Mitch Rubin said the focus is to bring a hedge-fund strategy to the mass affluent investor. The concept of taking both long and short positions improves the ability of the fund to make money over time, unlike long only mutual funds that suffer in poor economies.

“The hedge-fund approach of changing market exposure by adding value via the long side or short side allow us to generate higher returns with lower volatility and lower risk of loss,” said Rubin.

As of Thursday’s close, the fund is up 21% year-to-date, according to Morningstar, compared to a 12.6% rise for the fund’s benchmark, the S&P 500 Index. Since its inception in October 2009, it’s up 39%, according to data from RiverPark Advisors.

“The fund does it all, and by being nearly 50% hedged, the fund’s positions (are) not as prone to lose money in down markets as traditional mutual funds,” said Morty Schaja, chief executive officer of RiverPark Advisors.

He said it offers hedge-fund exposure to investors without the typical $1 million minimum that’s traditionally required. RiverPark Long/Short Opportunity Fund has a minimum $1,000 investment with no performance fees or lock up and sales fees that traditional hedge funds charge.

And, compared with traditional mutual funds that are locked into one of the equity sector boxes, the fund has a more flexible structure — managers can invest across large cap and small cap equities as well as take short positions.

“What’s most important, we want to own growth companies of tomorrow,” said Rubin. “We want to invest in businesses your kids will work at and short businesses where your parents use to work at.”

The fund, which has $20 million in assets, is invested in ecommerce and internet media, mobile computing, consumer brands with global appeal, alternative asset management and global agriculture.

Rubin said ecommerce is growing at 15%, compared to overall U.S. economic growth of about 2%. Goggle (GOOG), Priceline.com (PCLN) and eBay (EBAY) are companies Rubin likes.

In agriculture, the fund is high on Monsanto (MON), which produces highly engineered crop seeds. There’s a finite amount of farmland, while demand for food continues to rise, making high yielding crop seeds critical to feeding the world’s population, he said.

The funds short positions are spread across sectors ranging from apparel, U.S. domestic big box retail, food and drug retailers, for-profit education companies and companies in the personal computer and server industry.

In terms of its shorting strategy, the manager said the retail industry is a mature one that’s vulnerable to further revenue declines. “The 10,000 foot view on retail is the U.S. is massively over stored,” said Rubin. The U.S. has went through massive explosion of retail space footage in the last two decades, at a time when high unemployment has left average consumers with less disposable income.

Commoditized server companies like Hewlett Packard and Dell are also targets for short positions, as the profit pool in PC servers is drying up as tablets and desktops continue to take market share, Rubin said.

(Andrew Johnson Jr. writes about agricultural commodities for Dow Jones Newswires. He can be reached at 312-347-4604 or andrew.johnsonjr@dowjones.com.)

EUROBONDS: Roadshows May Enliven Lackluster Primary This Week

By Sarka Halas

Of DOW JONES NEWSWIRES


LONDON (Dow Jones)–There were no new deals in the European primary bond market Monday, but a decent number of companies roadshowing could result in some activity later this week.

Iceland is meeting with investors Monday ahead of a potential bond, which would be only its second since the government returned to international debt markets last July. Iceland was locked out of international markets after it was forced to turn to the International Monetary Fund for a $2.1 billion bailout following the collapse of its major banks.

In July, the government sold $1 billion worth of five-year bonds in an issue that was twice oversubscribed.

Also meeting with investors Monday, is travel management company Carlson Wagonlit B.V. The European and U.S. roadshows are ahead of a potential two-part $850 million euro- and dollar-denominated, senior secured bond. Pricing is expected May 9.

Monier Bond Finance & Co. S.C.A. has planned a EUR250 million, seven-year senior, unsecured bond. The manufacturer and supplier of pitched roof products is starting to meet with investors Monday and ending Thursday. Proceeds of the bond will be used to refinance bank debt.

Also meeting with investors this week is France-based Europecar Groupe SA. The company is planning a series of investor meetings for a EUR335 million five-year senior subordinated bond. The bond will be non-callable for the first three years, with proceeds used to repay existing debt.

Elsewhere, the cost of insuring European corporate and sovereign debt again default was mixed in trading Monday. Markets seem to have brushed aside gross domestic product data that showed Spain is back in recession. This news, coupled with a credit-rating downgrade from Standard & Poor’s Corp. Friday, a subsequent downgrade of some of its banks early Monday and anti-austerity protests over the weekend, will keep Spain in sharp focus over the week.

However, markets will remain in a wait-and-see mode early this week as Tuesday, May 1, is a Labour Day holiday in most of Europe.

Around 1110 GMT, the SovX Western Europe index, which investors can use to buy or sell credit default swaps on a basket of 15 sovereign borrowers, was one basis point tighter from Friday’s close at 270/275 basis points, according to data-provider Markit.

The iTraxx Europe index, which comprises 125 high-grade borrowers, 25 of which are banks and insurers, was flat at 138/139 basis points, while the Crossover index of 40 mostly sub-investment-grade European corporate borrowers was three basis points tighter at 641/644 basis points.


-By Sarka Halas, Dow Jones Newswires; +44 (0) 207 842 9236; sarka.halasova@dowjones.com

(Art Patnaude and Carol Dean contributed to this report.)

MONEY WEEK AHEAD: Managers Brace For Money-Losing Bills, Welcome Floaters

By Cynthia Lin and Anusha Shrivastava 
   Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)–The prospect of having to accept negative yields at Treasury-bill auctions going forward isn’t sitting well with money-fund managers, who are already scraping the bottom of the yield barrel.

Wednesday, the U.S. Treasury Department will issue its quarterly refunding report, in which some analysts expect to see a green light to sell short-term bills at negative yields at auctions. The Treasury also said it will announce its decision about introducing floating-rate notes to its menu of debt offerings.

Either move would bring forth some firsts for a market in which investors have grappled with an era of suppressed yields and calls for heightened regulation.

For now, the pressure on these yields has eased relative to last summer, with one-month bills offering 0.068%–considered a safe distance away from zero. The potential for a move below zero, meanwhile, has worried some investors.

If the government gets the ability to pay negative yields on bills, “It would present a lot of challenges for money-market investors,” said Peter Yi, head of short-term fixed income at Northern Trust. The Treasury “is certainly aware of the constraints…and how it could cause some internal problems for investors to be purchasing at negative yields.”

Final decisions on either prospect aren’t guaranteed, but both have been investigated extensively and recommended by the Treasury Borrowing Advisory Committee. At the very least, market participants expect more details to be released about the structure and timing for both.

Nomura Securities said there is a “decent probability” the Treasury will remove the zero-yield barrier on T-bill auctions at this refunding. As it stands, the government can’t sell short-term paper below a zero yield, a condition that already has been lifted for sales of Treasury Inflation Protected Securities.

The argument is that bills should sell at a rate the market deems fair, which would increase efficiency. During last year’s historic flight to quality into U.S. government debt, it wasn’t unusual to see T-bills trade at negative yields in the secondary market. A negative yield means the buyer pays more for a piece of debt than the amount that will be repaid when held to maturity.

That created feeding frenzies at T-bill auctions that paid near-zero yields instead of the negative rates offered at market.

Floating-rate notes are seen as providing one way to avoid imposing more challenges on money managers while still increasing the U.S.’s flexibility in raising debt. Investors expect the Treasury to move forward on this new product Wednesday.

During the Treasury’s request for comment that ended April 18 about potentially selling so-called floaters, 88% of respondents said money-market funds would be natural buyers of the product and 44% felt corporate treasurers would also be interested.

Ronald Desautels, head government-bond trader and portfolio manager at Babson Capital, said the built-in protection from rising interest rates makes floating-rate notes of interest for his short-duration funds. He expects quarterly issuances of $8 billion to $9 billion to start.

In January, J.P. Morgan ran analyses via the basis-swap market to test pricing. It found a hypothetical two-year floater priced at an average 0.117 percentage point above three-month T-bills–small but meaningful for conservative investors these days.

“The big question is what the benchmark would be and what the issuance cycle would be,” said Alex Roever, money-market strategist at J.P. Morgan. “The trickier thing is some of the mechanics.”

Unlike negative T-bill yields, floaters are widely considered a welcome development by the money-market community because they would offer yield and diversification at a time when the selection of high-grade investments is dwindling.

From the Treasury’s perspective, however, one risk is that floaters can quickly become expensive to finance when yields start climbing as the economy recovers and the Fed begins normalizing policy.


-By Cynthia Lin and Anusha Shrivastava, Dow Jones Newswires; 212-416-4403; cynthia.lin@dowjones.com

FOREX WEEK AHEAD: Euro To Come Back Into Focus On Data, ECB

By Anusha Shrivastava 
   Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)–The euro will come back into focus as euro-zone growth data are released and the European Central Bank meets.

Euro-zone April manufacturing-purchasing-managers data are slated for Wednesday, providing clues about economic momentum in the area and the impact of austerity measures. A recession would worsen the ongoing sovereign-debt crisis and hurt the common currency.

The ECB’s monthly policy briefing is Thursday. While no interest-rate change is expected, ECB President Mario Draghi’s press conference will be scrutinized for indications of fresh stimulus after he proposed a “growth compact” in Europe with parts of the euro zone locked in a recessionary cycle.

The euro, which has been resilient even after Spain was hit by a credit downgrade, will have trouble strengthening in the week ahead, said Alan Ruskin, global head of G-10 foreign-exchange strategy at Deutsche Bank. Even if the common currency gets into the $1.33 area, “it will have a hard time getting above $1.3325 ahead of the French and Greek elections. No one will want to be long euros ahead of the elections,” he said.

Even though the common currency strengthened in the past week, it is still within the broad range of $1.30 to $1.35 in which it has been trading since February.

Spain will hold its first bond auction since being downgraded two notches by Standard & Poor’s April 26. France will hold a bond auction Thursday. The results of the auctions will show how much risk investors are willing to take when they buy this debt.

Meantime, the big event for the dollar will be the monthly payrolls figure due Friday. If the data show the unemployment situation worsening, the Federal Reserve would be seen as more likely to come in with another round of easing to boost the economy. This would hurt the dollar as such moves would increase the supply of dollars.

While the Federal Open Market Committee left policy unchanged at its latest meeting, it suggested rate increases may be near. Market participants will get a chance to hear what Fed bankers were thinking as several speak in the week ahead. These include voting members of the policy-setting FOMC: Atlanta Fed President Dennis Lockhart, Fed Gov. Daniel Tarullo and San Francisco Fed President John Williams.

Another central bank whose actions will be watched closely is the Reserve Bank of Australia, which is expected to cut its overnight cash rate by 25 basis points at its May 1 policy meeting. Lower-than-expected first-quarter inflation numbers effectively cleared the way for the RBA to ease after it signaled in April there was scope to lower the cash rate to help sectors of the economy left out of the mining boom.

“They have been fairly dovish and there is some capacity for them to ease further,” said Aroop Chatterjee, foreign-exchange strategist at Barclays in New York.

As a result, the Australian dollar may have a pullback heading into the decision, he said. Friday, the Australian dollar was at $1.0473, up 0.80%.


-By Anusha Shrivastava, Dow Jones Newswires; 212-416-2227; anusha.shrivastava@dowjones.com; @djfxtrader

WORLD FOREX: Dollar Recovers Poise; Pound Briefly Extends Gains

By William Kemble-Diaz 
   Of DOW JONES NEWSWIRES

LONDON -(Dow Jones)- The dollar recovered some ground in European trading Monday as traders revisited the potential for more U.S. monetary easing ahead of a busy week of economic data, while the pound added to its recent gains.

The Australian dollar was slightly weaker ahead of an expected interest rate cut.

Strategists said the underlying tone of the market remained positive after its reaction Friday to U.S. data that showed the world’s biggest economy grew just 2.2% in the first quarter.

Rather than lift the buck, which often happens when investment sentiment turns cautious, traders piled into growth-sensitive currencies deemed riskier, such as the Australian, Canadian and New Zealand dollars. This suggests the market is more fixated on the possibility of more U.S. easing than worried about global economic conditions.

“What it shows is that, although the data in the U.S. may disappoint this week, that doesn’t mean that risk appetite won’t remain buoyant,” said Michael Sneyd, a currency strategist at BNP Paribas.

“It probably means that the dollar is going to end the week slightly softer,” he said, citing U.S. manufacturing and services sector data due Tuesday and Wednesday and the U.S. employment report on Friday.

The euro slipped but remained above $1.32 against the dollar after data provided more evidence that the European Central Bank’s extraordinary bank refinancing operations are still not trickling down to the real economy, with bank lending growth to the private sector slowing to 0.6% in March from a 0.8% pace in February.

Against the pound it fell to a fresh 22-month low of 0.8125, hurting U.K. exporters and creating a headache for the Bank of England as it struggles to breathe life into the recession-hit U.K. economy.

Sterling suffered a little vertigo against the dollar after a brief foray above $1.63 for the first time in eight months.

Sneyd said it looked like a case of too much too soon for the currency, citing internal client flow data that could yet drive the pound back down as traders reversed pro-pound bets.

The Australian dollar also drifted back down against the greenback amid widespread expectations for an Australian interest rate cut of at least a quarter percentage point and possibly double that.

Analyst Todd Elmer of Citigroup said he was inclined to buy into any Australian dollar weakness, whatever the RBA did.

“In the present context, with risk appetite generally well-supported, this means it should be difficult to sustain any decline in the Australian dollar,” Elmer said.

In emerging markets, the Hungarian forint made fresh seven-month highs against the euro as traders pinned their hopes on a potential loan deal between the country’s government and the European Union and International Monetary Fund.

The Romanian leu hit a new low against the euro above RON4.40 after Romania’s government lost a confidence vote on Friday.

At 1052 GMT, the euro was trading at $1.3220 against the dollar, compared with $1.3252 late Friday in New York, according to trading system EBS. The dollar was at Y80.170 against the yen, compared with Y80.26, while the euro was at Y105.974 compared with Y106.38. The pound was trading at $1.6258 against the dollar, compared with $1.6260 late Friday in New York.

The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was trading at 78.856, compared with 78.710 late Friday in New York. It hit a two-month low in early European trade.

A summary of key levels for chart-watching technical strategists is below:

 
Forex spot:       EUR/USD    USD/JPY    GBP/USD    USD/CHF 

Spot 1033 GMT     1.3213     80.17      1.6281     0.9063 
3 Day Trend       Bullish    Bearish    Bullish    Bearish 
Weekly Trend      Bullish    Bearish    Bullish    Range 
200 day ma        1.3396     79.70      1.5852     0.9083 
3rd Resistance    1.3338     81.45      1.6355     0.9172 
2nd Resistance    1.3297     80.75      1.6321     0.9134 
1st Resistance    1.3277     80.40      1.6302     0.9114 
Pivot*            1.3227     80.64      1.6233     0.9086 
1st Support       1.3190     80.08      1.6259     0.9051 
2nd Support       1.3157     79.75      1.6208     0.9002 
3rd Support       1.3104     78.80      1.6156     0.8931 

Forex spot:       EUR/GBP 

Spot 1034 GMT     0.8129 
3 Day Trend       Bearish 
Weekly Trend      Bearish 
200 day ma        0.8449 
3rd Resistance    0.8221 
2nd Resistance    0.8184 
1st Resistance    0.8150 
Pivot*            0.8148 
1st Support       0.8100 
2nd Support       0.8067 
3rd Support       0.8000

(Technical analyst Francis Bray contributed to this article)

– By William Kemble-Diaz, Dow Jones Newswires; 44-20-7842-9347; william.kemble-diaz@dowjones.com; @djfxtrader

Al’s Emporium: A Wall of Integrity

By Al Lewis

Wal-Mart Stores insists it did not lobby U.S. lawmakers to alter laws against bribing foreign officials while it was allegedly bribing officials throughout Mexico.

It’s just that some lobbying organizations where the company just happens to have a membership did.

“Simply because Wal-Mart is a member of an organization does not mean we agree with every position they take,” Wal-Mart spokesman David Tovar explained last week.

This is what makes membership in groups like the U.S. Chamber of Commerce and the Retail Industry Leaders Association so valuable. You never have to stop lobbying on any issue where you may be fatally conflicted. These powerful groups do the lobbying for you. This is particularly useful for anyone accused of breaking the law. Do something illegal, then lobby to make it legal, after the fact.

These membership groups serve as a handy wall. They allow everyone to plausibly claim that no one was lobbying against laws they may have already built a very profitable business around breaking.

Never mind that top Wal-Mart executives served on the boards of both groups which have lobbied to ease the Foreign Corrupt Practices Act. Never mind the membership pitches on these groups’ websites:

“More than 3 million businesses . . . all share one thing in common,” the U.S. Chamber site boasts. “They count on the Chamber to be their voice in Washington, D.C.”

“We are member driven,” the retail leaders group says. “Our board drives the organization, and senior executives on our councils and committees help set our priorities.”

This is the way business gets done in Washington. It is far more civilized than making an illicit offer to some petty bureaucrat in a developing country. People wearing $100 ties do the talking.

Democratic Reps. Henry Waxman and Elijah Cummings have asked the two industry groups how much influence Wal-Mart had on their positions regarding the antibribery law. This inquiry will go nowhere. Wal-Mart, you see, is just one of millions of companies affected by this onerous law that unreasonably insists companies just can’t go around the world bribing everybody.

Look how much trouble this silly rule caused just in the last week. Wal-Mart stock lost more than $10 billion in value after the New York Times hammered the company with a lengthy investigative piece claiming its impressive expansion in Mexico depended on bribes.

As Republican Rep. Darrell Issa told Reuters: “Bashing private enterprise for trying to expand and make a profit on behalf of their stockholders seems to me to be a goal that I don’t really understand.”

It makes you wonder why the Feds bothered to shut down Al Capone. That’s all he was trying to do. Expand. “Capitalism . . . gives each and every one of us a great opportunity if we only seize it with both hands,” Mr. Capone once said.

The Prohibition-era businessman did not belong to the U.S. Chamber or the retail leaders group. Nor did he have a public-relations guy to more credibly make his point.

As Wal-Mart’s Mr. Tovar told the New York Times: “If these allegations are true, it is not a reflection of who we are or what we stand for.”

Can you imagine Mr. Capone keeping a straight face and saying that the allegations against him, even if true, were no reflection of who he was or what he stood for?

Too bad he didn’t pay someone else to say it. He might have gone down in history as a saint instead of for that St. Valentine’s Day Massacre.

Al Lewis is a columnist for Dow Jones Newswires in Denver. He blogs at tellittoal.com; his email address is al.lewis@dowjones.com