India has rejected plans by Vedanta Resources to mine bauxite in a pristine mountain deemed sacred to an indigenous tribe, setting back the London-listed miner’s plans to produce 6m tons of aluminium in the eastern state of Orissa.
In a further blow to the Indian company, Jairam Ramesh, India’s environment minister, has threatened to cancel approval for Vedanta’s 1m ton Lanjigarh aluminium refinery – now operating at a fraction of capacity due to a bauxite shortage – citing “serious transgressions” at the site.
Mr Ramesh said that Vedanta, which invested $5.4bn (£2.9bn) in the aluminium complex as of the end of March, had started work to expand the refinery’s capacity to 6m tons a year without obtaining the required environmental clearance.
Separately, the minister said he was probing whether Vedanta had been sourcing bauxite from illegal mines in neighbouring states, while waiting for the go-ahead for the controversial mine in Orissa’s Niyamgiri Hills.
The rejection of the proposed Niyamgiri mine is the culmination of a protracted campaign to draw international attention to what activists claimed was Vedanta’s unethical conduct in Orissa’s remote Kalahandi region, home to a primitive 8,000 member Dongria Kondhi tribe.
India’s decision also comes a week after Vedanta revealed plans to convert itself into “India's natural resources champion” by paying up to $9.6bn for a majority stake in Cairn India, the British-owned oil exploration company that has emerged as one of the subcontinent’s largest private energy producers.
Mr Ramesh – who has made clear his intention to put teeth into India’s often- ignored environmental and social protection laws – said Vedanta’s violations of Indian law were “too egregious to be glossed over”.
A committee appointed by Mr Ramesh to review all the evidence against Vedanta and its defences, accused the company last week of “total contempt for the law”, of trampling the rights of illiterate tribal people – who form the cadre of India's Maoist insurgency – and of potentially serious consequences for national security if the project went ahead.
“There is no emotion, no politics in this decision,” Mr Ramesh said. “I have taken a decision in a purely legal approach.”
Vedanta on Tuesday denied any wrongdoing, saying “there has been no regulatory violations of any kind at the Lanjigarh refinery”.
Survival International, the UK-based group that led the global campaign against Vedanta, was jubilant at what it called a “stunning victory”.
“The era when mining companies could get away with destroying those in their path with impunity is thankfully drawing to a close”.
Tuesday, August 24, 2010
Carmakers Increase Voluntary Recalls
DETROIT — Most vehicle recalls used to happen only after long, drawn-out government inquiries had identified safety defects and required the car companies to fix them.
But in the wake of Toyota’s extensive recalls, automakers are initiating more themselves rather than waiting for government regulators to step in. The new mind-set has produced a flood of recalls, some occurring in reaction to just a few complaints from car owners, or maybe only one.
The numbers underscore the sudden shift. Two times as many cars and trucks have been recalled in the last 12 months than have been sold, although many of the recalled cars were from previous years. More than 22.4 million recall notices were sent to consumers in that period, including 10 million from Toyota and 428 from the luxury sports car-maker Lamborghini. By comparison, the industry has sold a little more than 11 million new cars and trucks in that time.
Industry analysts say that automakers in general are less insistent on disputing the need for a recall, and more aware of the harmful publicity that results from not addressing a safety problem quickly.
“Now they’re erring on the side of doing a recall, versus not doing a recall,” said Clarence Ditlow, the executive director of the Center for Auto Safety, a nonprofit consumer advocacy group. “All the manufacturers want to clean up their act and get defects and recalls behind them so the public doesn’t question the safety of their vehicles.”
Federal regulators have also stepped up their oversight efforts since Toyota’s sudden-acceleration recalls. Over all, the auto industry is on pace to recall more vehicles in 2010 than in any year since 2004, when a record 30.8 million vehicles were found to have defects.
“A higher proportion of recent recalls have been initiated voluntarily by automakers,” Olivia Alair, a Transportation Department spokeswoman, said.
The 2010 numbers do not include most of the vehicles covered by Toyota’s two big recalls, because the first began in late 2009. In addition, Ford expanded the largest recall in its history late last year, adding 4.5 million vehicles to an already long list of older models with faulty cruise-control deactivation switches.
From November through January, Toyota recalled more than eight million vehicles worldwide — six million of which are in the United States and included in the government data — in connection with reports of sudden acceleration. In some cases, Toyota said floor mats could interfere with the accelerator pedal, while in others the pedal itself was found to be defective. Some vehicles are covered by both recalls, and as a result are counted twice.
In April, the National Highway Traffic Safety Administration fined Toyota an unprecedented $16.4 million, the maximum allowed by law, for waiting too long to initiate a recall for the flawed pedals.
Though recalls inevitably create negative attention, especially after Toyota’s problems put a brighter spotlight on far more minor recalls, many of the companies have decided it is better to take action than to wait. When recalls are handled promptly and properly, consumers are generally more willing to forgive and forget, said David Champion, the director of auto testing for Consumer Reports.
“Many of the manufacturers don’t want to be caught in the situation that Toyota was, where they look like they’re covering it up,” Mr. Champion said.
“At one time, manufacturers considered recalls as sort of the kiss of death, but now there’s many more,” he said. “The average consumer realizes that this is a safety item and they’re fixing it for free, so on the whole they’re not particularly bothered by it, as long as it’s not one now, one three months later, and then another one.”
Toyota rarely has gone more than a few weeks this year without announcing a new recall. Since Feb. 1, it has started 12 additional recall campaigns covering 1.4 million vehicles for problems other than sudden acceleration.
Two Toyota distributors recalled more than 300,000 vehicles that had been sold without load-capacity labels, and regulators are investigating whether 1.2 million Toyotas should be recalled in response to complaints about stalling.
But in the wake of Toyota’s extensive recalls, automakers are initiating more themselves rather than waiting for government regulators to step in. The new mind-set has produced a flood of recalls, some occurring in reaction to just a few complaints from car owners, or maybe only one.
The numbers underscore the sudden shift. Two times as many cars and trucks have been recalled in the last 12 months than have been sold, although many of the recalled cars were from previous years. More than 22.4 million recall notices were sent to consumers in that period, including 10 million from Toyota and 428 from the luxury sports car-maker Lamborghini. By comparison, the industry has sold a little more than 11 million new cars and trucks in that time.
Industry analysts say that automakers in general are less insistent on disputing the need for a recall, and more aware of the harmful publicity that results from not addressing a safety problem quickly.
“Now they’re erring on the side of doing a recall, versus not doing a recall,” said Clarence Ditlow, the executive director of the Center for Auto Safety, a nonprofit consumer advocacy group. “All the manufacturers want to clean up their act and get defects and recalls behind them so the public doesn’t question the safety of their vehicles.”
Federal regulators have also stepped up their oversight efforts since Toyota’s sudden-acceleration recalls. Over all, the auto industry is on pace to recall more vehicles in 2010 than in any year since 2004, when a record 30.8 million vehicles were found to have defects.
“A higher proportion of recent recalls have been initiated voluntarily by automakers,” Olivia Alair, a Transportation Department spokeswoman, said.
The 2010 numbers do not include most of the vehicles covered by Toyota’s two big recalls, because the first began in late 2009. In addition, Ford expanded the largest recall in its history late last year, adding 4.5 million vehicles to an already long list of older models with faulty cruise-control deactivation switches.
From November through January, Toyota recalled more than eight million vehicles worldwide — six million of which are in the United States and included in the government data — in connection with reports of sudden acceleration. In some cases, Toyota said floor mats could interfere with the accelerator pedal, while in others the pedal itself was found to be defective. Some vehicles are covered by both recalls, and as a result are counted twice.
In April, the National Highway Traffic Safety Administration fined Toyota an unprecedented $16.4 million, the maximum allowed by law, for waiting too long to initiate a recall for the flawed pedals.
Though recalls inevitably create negative attention, especially after Toyota’s problems put a brighter spotlight on far more minor recalls, many of the companies have decided it is better to take action than to wait. When recalls are handled promptly and properly, consumers are generally more willing to forgive and forget, said David Champion, the director of auto testing for Consumer Reports.
“Many of the manufacturers don’t want to be caught in the situation that Toyota was, where they look like they’re covering it up,” Mr. Champion said.
“At one time, manufacturers considered recalls as sort of the kiss of death, but now there’s many more,” he said. “The average consumer realizes that this is a safety item and they’re fixing it for free, so on the whole they’re not particularly bothered by it, as long as it’s not one now, one three months later, and then another one.”
Toyota rarely has gone more than a few weeks this year without announcing a new recall. Since Feb. 1, it has started 12 additional recall campaigns covering 1.4 million vehicles for problems other than sudden acceleration.
Two Toyota distributors recalled more than 300,000 vehicles that had been sold without load-capacity labels, and regulators are investigating whether 1.2 million Toyotas should be recalled in response to complaints about stalling.
India warns about balance of payments
The Reserve Bank of India warned on Tuesday that volatile capital flows threatened to increase pressure on the country’s balance of payments, which is recording the widest current account deficit among large emerging economies.
Analysts identify the current account deficit – which will put downward pressure on the Indian rupee – alongside double-digit inflation as the biggest challenges for the Indian economy.
India’s current account deficit has widened in the past year as fast-paced economic growth drives greater demand for imported goods, and is forecast to grow larger in the year ahead.
The Reserve Bank of India said on Tuesday that the country’s current account deficit had grown to 2.9 per cent in 2009-10 from 2.4 per cent in the previous year. One reason, the central bank said, for the deterioration in the balance of payments was a decline in an “invisibles surplus”, caused in part by falling revenues to India’s prized outsourcing sector.
Subir Gokarn, the deputy governor of the RBI, said he detected risks with global capital flow volatility. He said there had been “a sharp change in the global scenario with a flight to safety [resulting in capital] exiting from Indian and other emerging markets, which put some pressure on what looks like a comfortable balance of payments.”
Current account balance
India’s current account deficit, the largest among Bric countries, could hit 3 per cent in the coming months to extend the widest margin for three decades.
Although India is unlikely to face difficulties financing its current account deficit provided one of the fastest growing large economies attracts capital inflows, some senior policymakers have urged action to reduce the deficit.
They warn that although the Indian economy is forecast to grow at 8.5 per cent this year, it is imprudent to widen the deficit at a time of global economic uncertainty and financial volatility.
“A higher current account deficit led to a stronger absorption of foreign capital,” the RBI acknowledged in a statement at the release of its annual report for 2009-10.
India’s own foreign exchange reserves, a cushion against volatile capital flows, have fallen over recent months to $278bn from a high of $315bn in May 2008.
Shyamala Gopinath, another RBI deputy governor, told the Financial Times the central bank did not have a target “comfort range” for its foreign reserves but that an internationally recognised yardstick was one year’s cover for imports.
A current account deficit occurs when a country's imports of goods and services is greater than its exports of goods, services and transfers. A wide current account deficit is not necessarily a bad thing for a fast-growing developing country provided that it is attempting to boost local productivity and exports.
Brazil’s current account deficit has widened to $43.76bn, or about 2.24 per cent of GDP, on strong demand for imports. Data released this week showed that Brazil had also suffered a steep fall in foreign exchange inflows.
China and Russia, by comparison, both run current account surpluses.
The RBI on Tuesday issued a cautious assessment of the global economy, observing that uncertainty had deepened in the US and Europe in recent months and the economic recovery was in danger of faltering.
“Capital flows in the initial months of 2010-11 moderated somewhat, reflecting the drop in appetite of global investors in response to the sovereign risk concerns in the eurozone,” it said. “Given the stronger growth outlook of India and the probability of monetary exit being delayed by the advanced economies, capital flows could be expected to accelerate, which will have to managed.”
Earlier this week, Anand Sharma, the commerce minister, warned of the difficulties faced by India’s exporters, describing them as “not out of the woods” of the global financial crisis.
To boost export performance, Mr Sharma announced a raft of export incentives to help garment, leather and handicraft sectors, worth about $225m.
Analysts identify the current account deficit – which will put downward pressure on the Indian rupee – alongside double-digit inflation as the biggest challenges for the Indian economy.
India’s current account deficit has widened in the past year as fast-paced economic growth drives greater demand for imported goods, and is forecast to grow larger in the year ahead.
The Reserve Bank of India said on Tuesday that the country’s current account deficit had grown to 2.9 per cent in 2009-10 from 2.4 per cent in the previous year. One reason, the central bank said, for the deterioration in the balance of payments was a decline in an “invisibles surplus”, caused in part by falling revenues to India’s prized outsourcing sector.
Subir Gokarn, the deputy governor of the RBI, said he detected risks with global capital flow volatility. He said there had been “a sharp change in the global scenario with a flight to safety [resulting in capital] exiting from Indian and other emerging markets, which put some pressure on what looks like a comfortable balance of payments.”
Current account balance
India’s current account deficit, the largest among Bric countries, could hit 3 per cent in the coming months to extend the widest margin for three decades.
Although India is unlikely to face difficulties financing its current account deficit provided one of the fastest growing large economies attracts capital inflows, some senior policymakers have urged action to reduce the deficit.
They warn that although the Indian economy is forecast to grow at 8.5 per cent this year, it is imprudent to widen the deficit at a time of global economic uncertainty and financial volatility.
“A higher current account deficit led to a stronger absorption of foreign capital,” the RBI acknowledged in a statement at the release of its annual report for 2009-10.
India’s own foreign exchange reserves, a cushion against volatile capital flows, have fallen over recent months to $278bn from a high of $315bn in May 2008.
Shyamala Gopinath, another RBI deputy governor, told the Financial Times the central bank did not have a target “comfort range” for its foreign reserves but that an internationally recognised yardstick was one year’s cover for imports.
A current account deficit occurs when a country's imports of goods and services is greater than its exports of goods, services and transfers. A wide current account deficit is not necessarily a bad thing for a fast-growing developing country provided that it is attempting to boost local productivity and exports.
Brazil’s current account deficit has widened to $43.76bn, or about 2.24 per cent of GDP, on strong demand for imports. Data released this week showed that Brazil had also suffered a steep fall in foreign exchange inflows.
China and Russia, by comparison, both run current account surpluses.
The RBI on Tuesday issued a cautious assessment of the global economy, observing that uncertainty had deepened in the US and Europe in recent months and the economic recovery was in danger of faltering.
“Capital flows in the initial months of 2010-11 moderated somewhat, reflecting the drop in appetite of global investors in response to the sovereign risk concerns in the eurozone,” it said. “Given the stronger growth outlook of India and the probability of monetary exit being delayed by the advanced economies, capital flows could be expected to accelerate, which will have to managed.”
Earlier this week, Anand Sharma, the commerce minister, warned of the difficulties faced by India’s exporters, describing them as “not out of the woods” of the global financial crisis.
To boost export performance, Mr Sharma announced a raft of export incentives to help garment, leather and handicraft sectors, worth about $225m.
Sunday, August 22, 2010
Most Asian Stocks Fall on Economy Concerns; Mining Shares Gain
Aug. 23 (Bloomberg) -- Most Asian stocks fell amid mounting concerns over the global economy after calls by a European Central Bank official to maintain stimulus measures.
Canon Inc., which receives 32 percent of its revenue from Europe, sank 2.1 percent in Tokyo. Honda Motor Co., which gets 84 percent of its sales outside Japan, lost 2.1 percent before a report today that may show U.S. home sales declined in July. Rio Tinto Group, the world’s third-largest mining company, rose 1.1 percent in Sydney on speculation a proposed mining tax may be scrapped in Australia as investors awaited the results of a national election.
Two stocks dropped for each that rose in the MSCI Asia Pacific Index, which was little changed at 118.25 as of 10:41 a.m. in Tokyo. Stocks in the region extended the MSCI World Index’s 1.2 percent slump on Aug. 20 after ECB council member Axel Weber said the bank should help lenders through end-of-year liquidity tensions before determining in the first quarter when to withdraw emergency lending measures.
“The ECB official’s comments are making the market focus on Europe’s economic problems again,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which oversees $104 billion. “Uncertainty about the economic recovery is making the market wary of taking risks.”
Japan’s Nikkei 225 Stock Average fell 0.8 percent, while South Korea’s Kospi index was little changed. New Zealand’s NZX 50 Index slipped 0.5 percent. Australia’s S&P/ASX 200 Index fell 0.1 percent after the nation’s federal election failed to deliver a majority government for the first time in 70 years.
Futures on the Standard & Poor’s 500 Index added 0.2 percent. The gauge declined 0.4 percent on Aug. 20 as a drop in commodities pulled oil and metals producers down amid concern the economic rebound may be flagging.
Canon Inc., which receives 32 percent of its revenue from Europe, sank 2.1 percent in Tokyo. Honda Motor Co., which gets 84 percent of its sales outside Japan, lost 2.1 percent before a report today that may show U.S. home sales declined in July. Rio Tinto Group, the world’s third-largest mining company, rose 1.1 percent in Sydney on speculation a proposed mining tax may be scrapped in Australia as investors awaited the results of a national election.
Two stocks dropped for each that rose in the MSCI Asia Pacific Index, which was little changed at 118.25 as of 10:41 a.m. in Tokyo. Stocks in the region extended the MSCI World Index’s 1.2 percent slump on Aug. 20 after ECB council member Axel Weber said the bank should help lenders through end-of-year liquidity tensions before determining in the first quarter when to withdraw emergency lending measures.
“The ECB official’s comments are making the market focus on Europe’s economic problems again,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which oversees $104 billion. “Uncertainty about the economic recovery is making the market wary of taking risks.”
Japan’s Nikkei 225 Stock Average fell 0.8 percent, while South Korea’s Kospi index was little changed. New Zealand’s NZX 50 Index slipped 0.5 percent. Australia’s S&P/ASX 200 Index fell 0.1 percent after the nation’s federal election failed to deliver a majority government for the first time in 70 years.
Futures on the Standard & Poor’s 500 Index added 0.2 percent. The gauge declined 0.4 percent on Aug. 20 as a drop in commodities pulled oil and metals producers down amid concern the economic rebound may be flagging.
Stock Swing Still Baffles, Ominously
It sounds like “Wall Street” meets “The X-Files.”
The stock market mysteriously plunges 600 points — and then, more mysteriously, recovers within minutes. Over the next few weeks, analysts at Nanex, an obscure data company in the suburbs of Chicago, examine trading charts from the day and are stunned to find some oddly compelling shapes and patterns in the data.
To the Nanex analysts, these are crop circles of the financial kind, containing clues to the mystery of what happened in the markets on May 6 and what might have caused the still-unexplained flash crash.
The charts — which are visual representations of bid prices, ask prices, order sizes and other trading activity — are inspiring many theories on Wall Street, some of them based on hard-nosed financial analysis and others of the black-helicopter variety.
To some people, like Eric Scott Hunsader, the founder of Nanex, they suggest that the specialized computers responsible for so much of today’s stock trading simply overloaded the exchanges.
He and others are tempted to go further, hypothesizing that the bizarre patterns might have been the result of a Wall Street version of cyberwarfare. They say high-speed traders could have been trying to outwit one another’s computers with blizzards of buy and sell orders that were never meant to be filled. These superfast traders might even have been trying to clog exchanges to outflank other investors.
Jeffrey Donovan, a Nanex developer, first noticed the apparent anomalies. “Something is not right,” he said as he reviewed the charts.
Mr. Donovan, a man with a runaway chuckle who works alone out of the company’s office in Santa Barbara, Calif., poses a theory that a small group of high-frequency traders was trying to introduce delays into the nation’s fractured stock-market trading system to profit at the expense of others. Clogging exchanges or otherwise disrupting markets to gain an advantage may be illegal.
Mr. Donovan indulges Wall Street’s increasing fascination with the charts by christening more of them each day, with names like Continental Crust, Broken Highway and Twilight.
There is also the Bandsaw, a zigzag pattern of prices that appear and then abruptly vanish. There is the Knife, a sharp, narrowing price sequence. There is the Crystal Triangle, the Bar Code, the Mountain Range, each one stranger than the last.
The truth of what happened on May 6 could be hiding somewhere in those mysterious configurations. Or it may lie somewhere else entirely. But 15 weeks later, the authorities are still looking for it. The Securities and Exchange Commission and the Commodity Futures Trading Commission plan to issue a final report on their findings in September.
A preliminary report in May blamed a confluence of factors, including worries over rising sovereign debt and a lack of marketwide circuit breakers, but the new report is expected to go further.
For now, this much is known: The markets were already down and on edge that morning as Europe’s debt crisis seemed to be spiraling out of control.
As markets fell, a mutual fund manager in Kansas made a big sale of stock futures. The rout, some say, was worsened by a lack of coordination among the dozens of exchanges that make up the modern-day stock market. As the New York Stock Exchange slowed trading, rival exchanges that were more automated allowed the selling to continue.
“It’s just madness to say we don’t know what caused it. We do,” said Steve Wunsch, a market structure consultant. “The crash was an inevitable consequence of creating multiple market centers.”
That is one explanation. Others have pointed to the high-frequency traders, who use powerful computers to transmit millions of orders at lightning speed. Some of these traders, who now dominate the stock market, appear to have fled the market as prices went haywire.
Then their computer programs might have dragged down exchange-traded funds, popular investment vehicles that fell sharply during the crash, said Thomas Peterffy, chief executive of Interactive Brokers.
“Computerized arbitrage kicked in,” he said.
But if Nanex’s theory is to be believed, computer algorithms might have been at work as well, knowingly or unknowingly wreaking havoc and creating data crop circles.
“There is a credible allegation that there is seriously abusive practices going on,” said James J. Angel, a financial market analyst specialist at Georgetown University, “to the extent that somebody is firing in a very high frequency of orders for no good economic reason, basically because they are trying to slow everybody else down.”
At a Washington hearing on the flash crash last week, Kevin Cronin, director of global equity trading at Invesco, a big fund manager, warned about “improper or manipulative activity” in the stock market.
Traders at BMO Capital Markets in Toronto said they had also identified a “data deluge” a few minutes before the crash. They said people in the markets were poring over Nanex’s colorful charts.
“Whether they are intentional or not, the regulators should be looking into it closely,” said Doug Clark, managing director of BMO Capital Markets.
In an Aug. 5 letter to the Securities and Exchange Commission, Senator Edward E. Kaufman, Democrat of Delaware, warned about a “micro-arms race that is being waged in our public marketplace by high-frequency traders and others.” He said that the traders were moving so fast that regulators could not keep up.
The idea that shadowy computer masterminds were trying to disrupt the nation’s stock trading struck many people as ridiculous. Wall Street experts generally characterize it as a conspiracy theory with little basis in fact.
But some of the patterns suggested that traders might have been testing their high-speed computers, perhaps to see how rivals would react.
Or it may just be that the computers produced so much data so quickly that exchanges simply could not cope with the onslaught.
“We live in a day when things are measured in milliseconds,” said Sang Lee of the Aite Group, a financial services consulting company. “It is meant to be a level playing field, but if you have better technology you will have the edge.”
Back in Chicago, Mr. Hunsader of Nanex is still not sure what his crop circles mean. But that does not stop him from admiring them.
“The patterns are quite beautiful,” he said. “We can’t see any economic reasons for what they are doing.”
The stock market mysteriously plunges 600 points — and then, more mysteriously, recovers within minutes. Over the next few weeks, analysts at Nanex, an obscure data company in the suburbs of Chicago, examine trading charts from the day and are stunned to find some oddly compelling shapes and patterns in the data.
To the Nanex analysts, these are crop circles of the financial kind, containing clues to the mystery of what happened in the markets on May 6 and what might have caused the still-unexplained flash crash.
The charts — which are visual representations of bid prices, ask prices, order sizes and other trading activity — are inspiring many theories on Wall Street, some of them based on hard-nosed financial analysis and others of the black-helicopter variety.
To some people, like Eric Scott Hunsader, the founder of Nanex, they suggest that the specialized computers responsible for so much of today’s stock trading simply overloaded the exchanges.
He and others are tempted to go further, hypothesizing that the bizarre patterns might have been the result of a Wall Street version of cyberwarfare. They say high-speed traders could have been trying to outwit one another’s computers with blizzards of buy and sell orders that were never meant to be filled. These superfast traders might even have been trying to clog exchanges to outflank other investors.
Jeffrey Donovan, a Nanex developer, first noticed the apparent anomalies. “Something is not right,” he said as he reviewed the charts.
Mr. Donovan, a man with a runaway chuckle who works alone out of the company’s office in Santa Barbara, Calif., poses a theory that a small group of high-frequency traders was trying to introduce delays into the nation’s fractured stock-market trading system to profit at the expense of others. Clogging exchanges or otherwise disrupting markets to gain an advantage may be illegal.
Mr. Donovan indulges Wall Street’s increasing fascination with the charts by christening more of them each day, with names like Continental Crust, Broken Highway and Twilight.
There is also the Bandsaw, a zigzag pattern of prices that appear and then abruptly vanish. There is the Knife, a sharp, narrowing price sequence. There is the Crystal Triangle, the Bar Code, the Mountain Range, each one stranger than the last.
The truth of what happened on May 6 could be hiding somewhere in those mysterious configurations. Or it may lie somewhere else entirely. But 15 weeks later, the authorities are still looking for it. The Securities and Exchange Commission and the Commodity Futures Trading Commission plan to issue a final report on their findings in September.
A preliminary report in May blamed a confluence of factors, including worries over rising sovereign debt and a lack of marketwide circuit breakers, but the new report is expected to go further.
For now, this much is known: The markets were already down and on edge that morning as Europe’s debt crisis seemed to be spiraling out of control.
As markets fell, a mutual fund manager in Kansas made a big sale of stock futures. The rout, some say, was worsened by a lack of coordination among the dozens of exchanges that make up the modern-day stock market. As the New York Stock Exchange slowed trading, rival exchanges that were more automated allowed the selling to continue.
“It’s just madness to say we don’t know what caused it. We do,” said Steve Wunsch, a market structure consultant. “The crash was an inevitable consequence of creating multiple market centers.”
That is one explanation. Others have pointed to the high-frequency traders, who use powerful computers to transmit millions of orders at lightning speed. Some of these traders, who now dominate the stock market, appear to have fled the market as prices went haywire.
Then their computer programs might have dragged down exchange-traded funds, popular investment vehicles that fell sharply during the crash, said Thomas Peterffy, chief executive of Interactive Brokers.
“Computerized arbitrage kicked in,” he said.
But if Nanex’s theory is to be believed, computer algorithms might have been at work as well, knowingly or unknowingly wreaking havoc and creating data crop circles.
“There is a credible allegation that there is seriously abusive practices going on,” said James J. Angel, a financial market analyst specialist at Georgetown University, “to the extent that somebody is firing in a very high frequency of orders for no good economic reason, basically because they are trying to slow everybody else down.”
At a Washington hearing on the flash crash last week, Kevin Cronin, director of global equity trading at Invesco, a big fund manager, warned about “improper or manipulative activity” in the stock market.
Traders at BMO Capital Markets in Toronto said they had also identified a “data deluge” a few minutes before the crash. They said people in the markets were poring over Nanex’s colorful charts.
“Whether they are intentional or not, the regulators should be looking into it closely,” said Doug Clark, managing director of BMO Capital Markets.
In an Aug. 5 letter to the Securities and Exchange Commission, Senator Edward E. Kaufman, Democrat of Delaware, warned about a “micro-arms race that is being waged in our public marketplace by high-frequency traders and others.” He said that the traders were moving so fast that regulators could not keep up.
The idea that shadowy computer masterminds were trying to disrupt the nation’s stock trading struck many people as ridiculous. Wall Street experts generally characterize it as a conspiracy theory with little basis in fact.
But some of the patterns suggested that traders might have been testing their high-speed computers, perhaps to see how rivals would react.
Or it may just be that the computers produced so much data so quickly that exchanges simply could not cope with the onslaught.
“We live in a day when things are measured in milliseconds,” said Sang Lee of the Aite Group, a financial services consulting company. “It is meant to be a level playing field, but if you have better technology you will have the edge.”
Back in Chicago, Mr. Hunsader of Nanex is still not sure what his crop circles mean. But that does not stop him from admiring them.
“The patterns are quite beautiful,” he said. “We can’t see any economic reasons for what they are doing.”
Australia Dollar Falls on Hung Parliament; Resource Stocks Gain
Aug. 23 (Bloomberg) -- Australia’s dollar fell after the nation’s federal election failed to deliver a majority government for the first time in 70 years.
Neither Australian Prime Minister Julia Gillard nor opposition leader Tony Abbott gained an outright majority in the Aug. 21 vote, meaning one side must win negotiations with independent lawmakers to form a government. Stocks of mining companies including Melbourne-based BHP Billiton Ltd. and London-based Rio Tinto Group rose on optimism the election results will result in a proposed mining tax will be either scrapped or diluted.
“The Australian dollar is going to stay heavy,” said Phil Burke, chief dealer for global foreign exchange and rates at JPMorgan Chase & Co. in Sydney. “Markets don’t like uncertainty, and there’s also a risk that the offshore markets haven’t focused too much on this election -- so it could be the case of a late awareness to potential problems.”
The nation’s currency slid 0.6 percent to 88.87 U.S. cents as of 11:12 a.m. in Sydney and has declined 1.7 percent this month as opinion polls foreshadowed an increased chance of a minority government.
Australian bond futures fell, with the 10-year contract for September delivery at 95.065 on the Sydney Futures Exchange from 95.095 on Aug. 20. The implied yield on the futures rose three basis points to 4.935 percent.
Australia’s benchmark S&P/ASX 200 index was little changed at 4,429.90 from 4,430.90 late last week. The materials index, which includes resources stocks, climbed 0.8 percent. BHP advanced 0.7 percent, rising for the first time in four days, while Rio climbed 1 percent.
‘Political Uncertainty’
Australia’s dollar “will bear the brunt of the uncertainty,” said Su-Lin Ong, senior economist at RBC Capital Markets Ltd. in Sydney. “Political uncertainty, a more unstable government, an obstructionist Senate, and the risk of medium term fiscal slippage as the minor parties exert their influence in a new government are clearly negative for the markets.”
Gillard’s Labor Party has 71 seats out of 150, and Abbott’s Liberal-National coalition has 72, as of 10:34 a.m. according to the Australian Electoral Commission’s website in Canberra, after officials counted 74.93 percent of the vote on a two-party preferred basis.
Four seats are undecided while two independents and one Greens party member were elected. Seventy-six seats in the lower house are needed to form a government.
Mining Tax
Talks with independent law makers, which may last for days as election officials count postal votes, have stoked uncertainty about issues including the proposed mining tax, infrastructure investment and carbon trading. Abbott has vowed to scrap Labor’s proposed 30 percent levy on iron ore and coal producers.
“A hung parliament and negotiations with the independents should not necessarily be a negative for the resources sector,” said Stephen Roberts, a senior economist at Nomura Australia Ltd. in Sydney. “If anything it should be a small positive,” as the Labor party may be forced to moderate the tax to win support from the independents.
The final result of the election, called by Gillard five weeks ago within a month of her ousting former Prime Minister Kevin Rudd, may not be known for days, analysts said.
‘Very Stable’
“We don’t know for sure what the outcome is going to be, but there is no reason why we couldn’t have a successful period ahead with a minority government,” Graham Bradley, president of the Business Council of Australia, said in an interview on the Australian Broadcasting Corp.’s Inside Business program yesterday. “I don’t think business wants any further hesitation when it comes to the reform priorities” such as securing Australia’s electricity and gas supplies, Bradley said.
A key issue during the election campaign was management of Australia’s economy, one of the few to skirt last year’s global recession, after the Labor government spent A$42 billion ($38 billion) distributing cash to households and on schools, railways and hospitals.
Helped by a rebound in demand from China for raw materials such as coal and iron ore, investment in Australia’s mining industry has intensified, driving down the jobless rate to 5.3 percent, almost half the level of the U.S. rate.
The rebound in employment was among reasons policy makers led by Reserve Bank of Australia Governor Glenn Stevens raised the benchmark lending rate six times between October and May to 4.5 percent, the most aggressive monetary policy tightening by a Group of 20 member.
Acting as caretaker Prime Minister, Gillard told reporters yesterday in Melbourne that Australia has a “very stable” democracy with “clear conventions” on the continued operation of government.
Neither Australian Prime Minister Julia Gillard nor opposition leader Tony Abbott gained an outright majority in the Aug. 21 vote, meaning one side must win negotiations with independent lawmakers to form a government. Stocks of mining companies including Melbourne-based BHP Billiton Ltd. and London-based Rio Tinto Group rose on optimism the election results will result in a proposed mining tax will be either scrapped or diluted.
“The Australian dollar is going to stay heavy,” said Phil Burke, chief dealer for global foreign exchange and rates at JPMorgan Chase & Co. in Sydney. “Markets don’t like uncertainty, and there’s also a risk that the offshore markets haven’t focused too much on this election -- so it could be the case of a late awareness to potential problems.”
The nation’s currency slid 0.6 percent to 88.87 U.S. cents as of 11:12 a.m. in Sydney and has declined 1.7 percent this month as opinion polls foreshadowed an increased chance of a minority government.
Australian bond futures fell, with the 10-year contract for September delivery at 95.065 on the Sydney Futures Exchange from 95.095 on Aug. 20. The implied yield on the futures rose three basis points to 4.935 percent.
Australia’s benchmark S&P/ASX 200 index was little changed at 4,429.90 from 4,430.90 late last week. The materials index, which includes resources stocks, climbed 0.8 percent. BHP advanced 0.7 percent, rising for the first time in four days, while Rio climbed 1 percent.
‘Political Uncertainty’
Australia’s dollar “will bear the brunt of the uncertainty,” said Su-Lin Ong, senior economist at RBC Capital Markets Ltd. in Sydney. “Political uncertainty, a more unstable government, an obstructionist Senate, and the risk of medium term fiscal slippage as the minor parties exert their influence in a new government are clearly negative for the markets.”
Gillard’s Labor Party has 71 seats out of 150, and Abbott’s Liberal-National coalition has 72, as of 10:34 a.m. according to the Australian Electoral Commission’s website in Canberra, after officials counted 74.93 percent of the vote on a two-party preferred basis.
Four seats are undecided while two independents and one Greens party member were elected. Seventy-six seats in the lower house are needed to form a government.
Mining Tax
Talks with independent law makers, which may last for days as election officials count postal votes, have stoked uncertainty about issues including the proposed mining tax, infrastructure investment and carbon trading. Abbott has vowed to scrap Labor’s proposed 30 percent levy on iron ore and coal producers.
“A hung parliament and negotiations with the independents should not necessarily be a negative for the resources sector,” said Stephen Roberts, a senior economist at Nomura Australia Ltd. in Sydney. “If anything it should be a small positive,” as the Labor party may be forced to moderate the tax to win support from the independents.
The final result of the election, called by Gillard five weeks ago within a month of her ousting former Prime Minister Kevin Rudd, may not be known for days, analysts said.
‘Very Stable’
“We don’t know for sure what the outcome is going to be, but there is no reason why we couldn’t have a successful period ahead with a minority government,” Graham Bradley, president of the Business Council of Australia, said in an interview on the Australian Broadcasting Corp.’s Inside Business program yesterday. “I don’t think business wants any further hesitation when it comes to the reform priorities” such as securing Australia’s electricity and gas supplies, Bradley said.
A key issue during the election campaign was management of Australia’s economy, one of the few to skirt last year’s global recession, after the Labor government spent A$42 billion ($38 billion) distributing cash to households and on schools, railways and hospitals.
Helped by a rebound in demand from China for raw materials such as coal and iron ore, investment in Australia’s mining industry has intensified, driving down the jobless rate to 5.3 percent, almost half the level of the U.S. rate.
The rebound in employment was among reasons policy makers led by Reserve Bank of Australia Governor Glenn Stevens raised the benchmark lending rate six times between October and May to 4.5 percent, the most aggressive monetary policy tightening by a Group of 20 member.
Acting as caretaker Prime Minister, Gillard told reporters yesterday in Melbourne that Australia has a “very stable” democracy with “clear conventions” on the continued operation of government.
Chinese pharma finds partner in India
With a fast-growing and lucrative domestic market, most Chinese pharmaceutical companies have spurned the costs and complexities required to sell their drugs abroad, but Desano has more global ambitions with the help of an unusual foreign backer.
Founded in 1996, the Shanghai-based company expanded rapidly in the production of active pharmaceutical ingredients, the raw materials of drugs, with much of its sales going to Cipla of India for the manufacture of anti-retroviral medicines for HIV and anti-malarials.
That helped establish Desano as a producer of the finished drugs for the domestic market, while the know-how provided by Cipla has helped it win supply contracts with other companies and certification of its plants by the US Food & Drug Administration.
Now, with Cipla funding and support, it is building factories to produce far more complex biological drugs, with the aim of selling cut-price versions of such cancer treatments such as Avastin and Herceptin in developing countries.
The Indian connection is unusual. “You very seldom have partnerships, but mainly trading relationships,” says Zhengping Wang, chief executive of the pharmaceutical arm of the group, who worked in the US and joined after a stint in the Beijing office of a German company. “I received a lower salary but felt I had more challenges.”
More generally, Indian companies have struggled to gain a foothold in China. Ranbaxy, one of India’s largest generic companies that was bought in 2008 by Daiichi Sankyo of Japan, sold out of its Chinese joint venture at the end of last year.
“There’s a cultural tension between the Chinese and the Indians,” says one western pharmaceutical executive based in Shanghai. “Their prices are very low and they don’t have the contacts.”
Until recently, India’s drug companies have been more integrated into the global economy, expanding their sales of low-cost generic medicines around the world. But the shift to China of the lower margin chemical drug ingredients business is now kindling interest in the growth in higher value activities, from biological production and even gradually towards more basic research that could threaten over time to usurp India.
Founded in 1996, the Shanghai-based company expanded rapidly in the production of active pharmaceutical ingredients, the raw materials of drugs, with much of its sales going to Cipla of India for the manufacture of anti-retroviral medicines for HIV and anti-malarials.
That helped establish Desano as a producer of the finished drugs for the domestic market, while the know-how provided by Cipla has helped it win supply contracts with other companies and certification of its plants by the US Food & Drug Administration.
Now, with Cipla funding and support, it is building factories to produce far more complex biological drugs, with the aim of selling cut-price versions of such cancer treatments such as Avastin and Herceptin in developing countries.
The Indian connection is unusual. “You very seldom have partnerships, but mainly trading relationships,” says Zhengping Wang, chief executive of the pharmaceutical arm of the group, who worked in the US and joined after a stint in the Beijing office of a German company. “I received a lower salary but felt I had more challenges.”
More generally, Indian companies have struggled to gain a foothold in China. Ranbaxy, one of India’s largest generic companies that was bought in 2008 by Daiichi Sankyo of Japan, sold out of its Chinese joint venture at the end of last year.
“There’s a cultural tension between the Chinese and the Indians,” says one western pharmaceutical executive based in Shanghai. “Their prices are very low and they don’t have the contacts.”
Until recently, India’s drug companies have been more integrated into the global economy, expanding their sales of low-cost generic medicines around the world. But the shift to China of the lower margin chemical drug ingredients business is now kindling interest in the growth in higher value activities, from biological production and even gradually towards more basic research that could threaten over time to usurp India.
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