Brazil’s economy could disappoint in 2011 30 Nov 2010 The public sector too big and too indebted has always been the country's weak link. Public spending has soared this year and under Dilma Rousseff is set to increase further. The risk that easier money may cause uncontrolled inflation and a debt crisis is escalating.
Russia’s Eurobond note bets on rouble’s bounce 30 Nov 2010 Moscow will tap a growing appetite for emerging markets and for yield with a $2 bln to $3 bln roubledenominated Eurobond issue. Investors could be convinced the Russian currency is set for a bounce after recent weakness. But they should also look at longerterm risks.
ABB’s fully priced $4.2 bln Baldor bid is worth it 30 Nov 2010 This SwissU.S. engineering tieup looks set to motor. ABB may not have got a bargain in agreeing to buy its U.S. rival. But the likely returns look tolerable and the industrial logic is convincing.
Italian armour has its chinks 30 Nov 2010 In the current febrile conditions, markets are testing all peripheral countries' vulnerabilities. Italy has three: debt, sluggishness and politics. Its main defence a stable base of domestic investors who fund state borrowing is strong but not invincible.
Why should Lisbon take one for the team? 30 Nov 2010 A preemptive bailout of Portugal wouldn't necessarily make things easier for Spain. But it would avoid weeks of highstakes political and financial drama and uncertainty. It would also help fend off a major bank crisis. But the Portuguese government might need some convincing.
If Uncle Sam won’t slim down, neither will public 30 Nov 2010 Americans are unlikely to accept austerity of any sort as long as they think Washington remains fat and happy. Obama's twoyear government pay freeze is a start. But he needs to commit to real hacking and slashing to get the rest of the country to begin tightening its belt.
The crisis isn’t global, it’s peripheral 30 Nov 2010 As the euro zone periphery runs out of cash, emerging economies are swimming in it. The big global picture remains one of recovery. That might change if Spain, too, were to sink. But at present the U.S. consumer is reviving, Germany is again exporting and China keeps motoring.
First Republic tale turns into buyout Goldilocks 30 Nov 2010 Merrill Lynch overpaid for the lender in toohot 2007. Then BofA offloaded it for too little in a cool market. Now, an IPO by new private equity owners Colony Capital and General Atlantic looks priced just right and delivers them a tasty 77 percent return to boot.
EU antitrust pile-on overshadows Google’s Groupon 30 Nov 2010 The European Commission is examining whether Google is using its dominance in search to unfairly extend its reach into related areas the way Microsoft once did. The probe is auspiciously timed: Google is contemplating a near$6 bln bid to enter the ecoupon business.
Bank structured products face critical court test 30 Nov 2010 Barclays is on trial over allegations that it exploited an Italian bank client's ignorance to profit from a supposedly lowrisk investment that subsequently blew up. If a judge decides this conduct was fraudulent, the entire industry will have to rethink the way it does business.
AIG won’t wriggle from government thumb cheaply 30 Nov 2010 The insurance giant is eager to put a $180 blnplus bailout behind it. Tapping bond markets is a good way to start, though AIG is paying for the privilege. The price of admission back to private life may be high but at least investors are cracking the door.
Spain running out of options to prop up its banks 30 Nov 2010 Investors are once again fretting about the scale of potential losses facing the country's lenders. Improved disclosure and increased capital ratios might help to restore confidence. But the government doesn't have the money readily available to deal with the problem.
German mellowing should keep ECB money flowing 29 Nov 2010 Berlin keeps talking tough but is worried about euro zone contagion and seems to be softening its stance. This means the ECB will feel less pressure to phase out its unconventional liquidity support for banks. It will dwindle eventually but won't stop soon.
Investors demand tweaks to globalization too 29 Nov 2010 WalMart wants hypermarkets covering the African savanna. Yet it settled for 51 pct control of South Africa's Massmart after pressure from shareholders. In a curious twist, international investors look to have feared losing a regional retail champion more than Pretoria did.
Ireland’s bailout costs are clear as a peat bog 29 Nov 2010 Irish and EU officials say the overall interest rate on the emerald isle's 85 bln euro rescue loan is 5.8 to 6 pct. But there is precious little transparency about how the various parts fit together. It's one reason the bailout is struggling to restore confidence in euroland.
Euro zone still faces 2013 cliff-hanger 29 Nov 2010 Germany's sovereign debt resolution mechanism may only take hold from mid2013. But debt issued before that cutoff point, including some bailout cash, would still be on the hook if governments can't get back in the markets. Lots of old debt would then make restructuring messy.
CNOOC’s back door to Latin America opens wider 29 Nov 2010 The Chinese oil group's purchase in March of a stake in Argentina's Bridas looked like a risky resource grab. Now as part of its postspill strategy BP is selling control of a key asset to Bridas for $7 bln. That bit of luck makes CNOOC's foray into LatAm look more sensible.
Irish bank bailout raises bar for rest of Europe 29 Nov 2010 Ireland is injecting 10 bln euros into its lenders to raise core capital ratios to 12 percent. With a further 25 bln euros in reserve if needed, the latest plan may just reassure depositors and the ECB. Other European countries with large banks will have to take similar steps.
Mary Meeker well suited to the VC life 29 Nov 2010 The queen of the net courted controversy as Morgan Stanley's web guru and backed her share of doozies. But she also has a sterling track record for spotting new trends and huge successes like eBay, Amazon and Google. That makes her a good fit for new employer Kleiner Perkins.
It’s the funding, stupid 29 Nov 2010 Running out of cash rather than insolvency causes financial crises such as the euro zone's. Yet the lion's share of the effort by policy makers has been to shore up solvency not funding. Unless that changes, the world will lurch from crisis to bailout and back again.
i-banking expansion makes sense for StanChart 29 Nov 2010 While many rivals are reducing their exposure to volatile ibanking, StanChart plans to boost the division with 1,800 hires. Its earlier push into high finance is already bearing fruit. With emerging market trading and dealmaking volumes growing quickly, the plan looks sound.
Global risk of U.S. impotence at heart of Wikileak 29 Nov 2010 The site's classified document dump gives the impression the cozy 1990s world of American hegemony and peaceful globalization is irrevocably ending. The risk is that without U.S. leadership, regional rivalries turn nasty, trade barriers rise and fiscal policies destroy wealth.
Starbucks can afford cost of break-up with Kraft 29 Nov 2010 The US consumer giant helped build Starbucks' grocery business, with coffee now sold through thousands of stores. But times and tastes have changed since the partnership began 12 years ago. It's worth the coffee chain's while to go it alone, even if it has to pay to ditch Kraft.
Irish cure may not be enough to stop rot 28 Nov 2010 The EU/IMF bailout has some marketfriendly measures: no haircut for senior bank creditors; and longterm financing. But sovereign bondholders could face haircuts after 2013. There's not much to stop contagion to Portugal and possibly Spain.
VTB will benefit from Moscow power shift 26 Nov 2010 VTB, the statecontrolled Russian bank, is looking to acquire a 46 percent stake in Bank of Moscow. It's the latest sign that business interests linked to Yuri Luzhkov, the capital's dismissed mayor, are losing influence. Despite the shady politics, the acquisition makes sense.
Irish bank debt-for-equity plan is no magic bullet 26 Nov 2010 Imposing a haircut on senior creditors in Ireland's stricken banks could panic markets. But inviting them to tender some of their holdings for equity might prove more appealing, and would effectively create capital. Even so, it would still amount to crossing a line.
Portuguese banks: innocent victims of a weak state 26 Nov 2010 The market is wary of Portugal's lenders. But they have not been profligate. Rather, their ability to roll over wholesale funding is tied to the solvency of the sovereign. And that makes them part of the problem.
Spain can learn from its big companies 26 Nov 2010 The Spanish prime minister has summoned the heads of the country's largest groups to enlist their help in shoring up the economy. It may just be a photo op, but Madrid could learn a thing or two from these companies about how to stabilise debts and deal with fickle markets.
Lone Star chalks up painful success in Korea 26 Nov 2010 The private equity firm has made at least a 25 percent IRR from investing in Korea Exchange Bank. Absent a string of government spoilers, it could have made closer to 40 percent in half the time. Lone Star's followers may be thankful for this more modest outcome.
Berlin wants early takeoff of bondholder pain plan 25 Nov 2010 Germany wants euro zone sovereign bonds to include clauses enabling debt restructurings as soon as 2011. This would be the first step in a plan to force bondholders to take losses in bailouts. But there s a fine line between creating a fair rescue mechanism, and roiling markets.