Wall Street megadeal quest reaches end of rainbow 30 Aug 2013 Thousands of investment banker man-hours and a decade’s worth of lost evenings and holidays devoted to calling on Vodafone and Verizon could finally pay off. The fee pool may exceed $300 mln for the $130 bln wireless acquisition. The return on investment, though, will vary.
Botched Batista bankruptcy another risk for Brazil 30 Aug 2013 Having to restructure Eike Batista’s collapsing empire is embarrassing enough for Brazil. But Latin America’s most chaotic bankruptcy regime now threatens further harm to the country’s reputation. A high-profile fleecing of foreign creditors would imperil future investment.
Canadian bank shopping south of border paying off 30 Aug 2013 During the financial crisis, and at a time when Canada’s economy and housing market remained stable, some of the country’s big banks rolled the dice on a U.S. recovery. Among them, TD and BMO are reaping the fruits of their expansion just as things at home look decidedly wobbly.
Review: Thatcher’s determination battled her flaws 30 Aug 2013 Charles Moore’s biography shows the Iron Lady’s determination often helped overcome previous mistakes. The book shows her less in control than was widely believed, and her colleagues, especially Geoffrey Howe, as major contributors. Like Napoleon’s best generals, she was lucky.
KPN poison pill is odious but tactically useful 30 Aug 2013 A stakeholder foundation has blocked America Movil’s planned bid for the Dutch telco, before a hard offer has been made. That’s not the free market way. But the no could just possibly lead to an agreed deal – if Movil lifts its 7.2 bln euro proposal, and KPN responds sensibly.
Hugo Dixon: Cameron, UK hurt by Syria vote fiasco 30 Aug 2013 Never in modern history has a British prime minister lost a parliamentary vote authorising military force. Cameron may cling on to power, but his authority at home has taken a hit. So has his standing abroad, and Britain’s influence. The PM himself is largely to blame.
Xiaomi can’t afford to let its hype go to waste 30 Aug 2013 The Chinese smartphone maker, which just poached a top Google exec, has ballooned in value to $10 billion in just three years. Based on current sales, that isn’t a stretch. But scale brings risk: Xiaomi needs a “moat” if it is to become China’s Apple, and not its Palm Inc.
Belarus-Russia spat clears way for potash plunge 30 Aug 2013 A diplomatic row following Belarus’ arrest of a top Russian potash executive dashes chances that the former Soviet producers’ alliance can be revived. The rival North American cartel won’t survive much longer. Farmers and consumers should cheer at the prospect of lower prices.
Shadow bank leverage curbs need more work 30 Aug 2013 Regulators are right to want to curtail socially useless froth in opaque areas of markets. But proposals to enforce limits on lending against specific assets look overly rigid in some areas and too lax in others. What’s more, exempting sovereign debt entirely looks short-sighted.
China growth index: Good month for train-spotters 30 Aug 2013 Breakingviews’ forward guide to China’s economy has picked up, including rail freight volumes, an important sign of domestic demand. Summer’s PMI readings also improved. But most of the alternative growth indicators remain negative. Things are far from full steam ahead.
Edward Hadas: The overvaluing of overwork 29 Aug 2013 The death of an investment bank intern in London has raised a worthy reflection on the voluntary work ethics of the young elite. Their painfully long hours may reflect a desire to be socially valuable - the ultimate luxury when leisure is mass produced. Change would be welcome.
Stagnant wages make basic U.S. welfare look lavish 29 Aug 2013 A strike by fast-food workers highlights stingy low-end earnings. Government handouts often pay more, the Cato Institute says. They aren’t obviously too generous. Rather, entry-level pay has not kept pace. It’s a facet of rising inequality that makes policy tough to get right.
South Africa looks like grim shadow-BRIC 29 Aug 2013 The country is sometimes listed as a near member of the group of developing world giants. Alas, it comes close in the wrong direction: Russia’s one-party rule, Brazil’s corruption, China’s spiraling labor costs and India’s inefficiency. It desperately needs a better growth model.
Currency market’s rude wakeup call stirs Indonesia 29 Aug 2013 The collapsing rupiah has finally forced the country’s central bank to raise interest rates. It’s a step Jakarta should have taken much earlier. High inflation and a widening trade deficit have shown the country’s loose monetary policy for what it is: a risky growth obsession.
Vodafone needs to deliver on Verizon exit 29 Aug 2013 Shares in the UK telco have jumped on confirmation of talks to sell out of its U.S. venture with Verizon for a reported $130 bln. Recent U.S. consolidation may have made Verizon move on price. Vodafone boss Vittorio Colao won’t be forgiven if he now fails to secure a good deal.
Turkey’s lira bluff will need creative backup 29 Aug 2013 The central bank has ruled out raising interest rates to defend the lira but can only count on a thinning cushion of foreign reserves. Governor Erdem Basci hinted at expanding his unorthodox policy tool kit. In such uncertain times, such creativity will have to be compelling.
Italian tax deal shows Berlusconi’s still kicking 29 Aug 2013 The Letta government has struck a deal on Rome’s mansion tax. Berlusconi’s political career may be ending, but his legal wrangles and populist antics threatened the government and rattled markets. Failure to implement serious reform could ruin the country’s weak chances to grow.
The euro’s serene summer may come to an abrupt end 29 Aug 2013 Europe’s single currency has risen against the dollar in the last two months, avoiding the gyrations which have plagued global bond and equity markets. But the mood is souring. Investors are flocking to the options market to bet the euro will fall. The odds are it will.
Co-op’s gory details aid case for creditor bail-in 29 Aug 2013 A 709 million stg pre-tax loss in the first half shows why regulators have told the UK bank to find 1.5 billion stg in new capital. But for Co-op’s new bosses, the bad news is also good news. It makes it easier to persuade angry creditors that burden-sharing is fair and inevitable.
Fracking may change U.S. foreign policy for good 28 Aug 2013 The abundant supply of hydrocarbons made accessible by hydraulic fracturing has brought America much closer to energy independence and created a buffer for the global oil price. The shift gives Uncle Sam new latitude in handling problems in Syria and throughout the Middle East.
New U.S. mortgage bond rules at least are simpler 28 Aug 2013 Regulators have reworked proposals for how much of their own structured finance cooking banks must eat. Though the feds have given ground on down payments, the streamlined requirements – despite their 500 pages – are a step toward greater mortgage market confidence.
Carney to market: Go ahead, make my day 28 Aug 2013 OK, the new Bank of England head isn’t so aggressive. But he used his first speech to reassert that the BoE would act to curb rising market rates if they hamper a UK recovery. Carney looks more in control. Still, he needs supportive data, and co-policymakers, to take such action.
G4S cash call shows need for speed 28 Aug 2013 Equity markets are soft yet the UK security contractor is placing around 350 mln stg of new shares to swerve a credit downgrade. Any more would have required a rights issue. With Syria creating uncertainty, and interest rates rising, there was virtue in taking a speedy solution.
West faces only high-cost options in Syria 28 Aug 2013 Surgical strikes against the Assad regime’s military facilities may aim to undermine its ability to deploy chemical weapons. There would be a price for doing nothing, but action is fraught with risks and could exacerbate regional instability.
China’s consumers aren’t living up to sales pitch 28 Aug 2013 Purchases of almost everything have slowed sharply; some retailers are struggling to pay back debts. The most likely culprit is decelerating investment, which drags on incomes. China’s consumers will have their day, but the idea they alone can sustain growth looks threadbare.
Loss of prime broking diversity could hurt 28 Aug 2013 Lehman taught hedge funds to spread business across multiple prime broking units in investment banks. But leverage and liquidity rules may make the banks hike prices and become pickier about custom. That could mean fewer brokers, bigger hedge funds – and costlier blowups.
Industrialist hat suits Bill Ackman better 27 Aug 2013 Retailing clearly isn’t his thing. A big bet on $22 bln Air Products, however, is the uppity investor’s second effort in heavier production after Canadian Pacific. As at the railway, better management could go a long way. A lot has to go right, though, to replicate that success.
Lawyers need to brake their bribe-case gravy train 27 Aug 2013 Wal-Mart shelled out $80 mln last quarter alone on an internal corruption probe. Others have paid out far more in total. Wasteful legal tactics inflate costs, and potentially ruinous U.S. fines make companies scared to skimp. Smarter lawyering could slow the runaway spending.
Hugo Dixon: West mustn’t rush into Syrian conflict 27 Aug 2013 Before it takes any military action, the West needs to present compelling evidence that Bashar al-Assad gassed his people. Any intervention must also be a specific response to the gas attack rather than suck the West into the civil war. In the process, refugees should not be forgotten.
Emerging market woes support higher U.S. yields 27 Aug 2013 Treasuries are a leading component of foreign currency reserves. Central bank intervention in strained emerging markets - which sometimes involves selling reserves - is becoming more prevalent. That suggests U.S. bond yields may climb further.