Yahoo’s Mayer nears post-Alibaba reckoning 31 Jul 2014 A stake in the Chinese e-commerce group makes up over half the U.S. internet firm’s value, a Breakingviews calculator shows. When investors can buy Alibaba shares directly - potentially next month - Yahoo chief Marissa Mayer will find herself under a narrower, brighter spotlight.
Flaky Iliad bid muddies T-Mobile US sale odyssey 31 Jul 2014 The $16 bln French telco has offered $15 bln for 57 pct of the No. 4 U.S. mobile operator. That’s bold, with financing not immediately to hand and the claimed premium reliant on improbable synergies. But the intervention may intensify antitrust objections to Sprint’s rival offer.
Too-big-to-fail at least hibernating, if not dead 31 Jul 2014 A new U.S. government study suggests giant banks have lost the big funding-cost advantage they had over smaller ones in the crisis years. That suggests some success in making bailouts a thing of the past. The problem, though, is whether it sticks next time markets turn nasty.
Corporate Europe parades bill of good health 31 Jul 2014 In a pre-August deluge, at least 50 companies worth a combined $2 trln reported results on Thursday. Good news trumped bad by a factor of two to one. Some of the strength is derived far from home, but it’s a fresh opportunity for global investors to revisit Plc, AG, NV and SA.
Exxon’s Q2 production slump not as bad as it seems 31 Jul 2014 The oil giant beat estimates. But a 6 pct output drop, the worst in years, wiped up to $9 bln off its market value. Exxon, though, has several projects coming online that should reverse the decline. With capital spending on these all but over, cash flow’s healthy again, too.
VW fights symptoms not root of profit woes 31 Jul 2014 Volkswagen is embarking on a 5 bln euro efficiency scheme. Tackling bloated costs and poor margins at the core brand is long overdue. But the group is shying away from addressing the real causes of the malaise. It is too complex, overly centralised, and badly governed.
Shock loss at BES makes bail-in a real risk 31 Jul 2014 The Portuguese bank made a 3.6 bln euro first-half loss and warned of possible illegal activity. The central bank suspended key staff. BES needs capital fast. But with Angolan issues unresolved, sourcing it from private investors rather than creditors just got much harder.
Only shareholders pay price for BNP’s sins 31 Jul 2014 The French bank has suffered its biggest-ever quarterly loss, at 4.2 bln euros, after a jumbo U.S. fine. BNP delivered a strong performance otherwise and says it has learned from the affair. And yet no one is being held accountable for the wrongdoing – or a weak valuation.
Interest rates may stay low in Freelance Britain 31 Jul 2014 The Bank of England is beginning to wonder why wages aren’t rising. Just delay? Or something structural? It’s both. Self-employment explains almost all the gain in jobs. Austerity cuts and recession have bitten hard. Pay, inflation and interest rates will take time to recover.
Line’s $13 bln valuation shows chat app exuberance 31 Jul 2014 The Japanese chat app reported a 26 pct jump in revenue from the previous quarter, pushing up valuation expectations ahead of its planned IPO. Yet Line’s valuation hangs on an assumption that new overseas users will spend like those back home. That seems like wishful thinking.
Workers get less, central banks get a dilemma 31 Jul 2014 The share of rich-nation GDP going to labour has fallen, and depressed the “natural” interest rate that maximizes employment at steady inflation. But if central banks peg rates at the new level, cheap money foments financial instability. It’s a problem only governments can solve.
REITs and MLPs make tax inversions a diversion 30 Jul 2014 U.S. authorities are letting Windstream call its telecom cables real estate, qualifying them for tax breaks. And a partnership will shield Hess assets from the IRS. Politicians, though, are indignant over firms that move overseas – even when home-grown tax loopholes are costlier.
GE’s $20 bln cards IPO puts a lot on credit 30 Jul 2014 The conglomerate is set to spin off Synchrony at some 11 times 2013 income, a small discount to Discover. But GE’s store-branded credit card business is riskier. A rise in charge-offs, currently near lows, could hit the unit quick and hard. That makes the offering look pricey.
BoE gives bosses new reasons to avoid UK banks 30 Jul 2014 UK bank regulators are mulling fresh ways to defer executive pay and clarify lines of accountability. The ideas mostly make sense, apart from clawback rules which may backfire. Yet they could worsen the already existing talent shortage at the top of British banks.
U.S. GDP gyrations obscure still slow, steady growth 30 Jul 2014 Q2 output rebounded strongly, with 4 pct annualized growth by early estimates, after shrinking in Q1. With 2011-13 expansion smoothed and pared to 2 pct on average, the underlying message – for everything from the economy to jobs and inflation – remains one of tame upward drift.
Inversions start to spin out of control 30 Jul 2014 A quest for tax savings has made digestible overseas targets attractive to U.S. buyers. Hospira’s potential $5 bln deal for a Danone unit highlights a fresh supply, for so-called “spinversions.” The odd combination also reflects the perverse incentives distorting corporate decisions.
Spain’s import surge underlines need for reform 30 Jul 2014 Spain is growing faster than expected and creating more jobs. But exports are stalling due to the weak euro zone recovery, and growth is driven by a pickup in internal demand, which is boosting imports. The pattern isn’t sustainable over the long term.
Edward Hadas: Not all banks are alike 30 Jul 2014 Ideology and intellectual laziness have led politicians and regulators to think of banks solely as profit-maximising institutions which only pretend to care about the future. History, solid analysis and the thriving of state investment banks tell quite a different story.
EU will find Russian sanctions worth the pain 30 Jul 2014 Europe has coordinated with the U.S. on broad new measures that will hit Russia hard. The weak EU recovery will also be hit. If the sanctions help change Moscow’s policies, the suffering will have paid off. If not, it makes sense to put Russia in financial quarantine.
Barclays turnaround stays on the rails – for now 30 Jul 2014 The UK lender’s vital investment bank had a mixed second quarter. Fixed income trading was worse than peers on a sterling basis, but advisory and financing fees leapt. Barclays’ challenge is to stay in touch with rivals as its cuts start to really kick in. That won’t be easy.
Forex options hint at end of preternatural calm 30 Jul 2014 When daily action in most financial markets is so subdued, almost any signs of activity are noteworthy. Shifts in FX options prices, which suggest a future increase in currency volatility, are basically good news. Some investors are getting ready for choppier waters.
Bank of Cyprus picks good time to de-Russify 30 Jul 2014 The island-state’s lender is raising 1 billion euros of new capital to help it pass the euro zone’s upcoming stress tests. That will also reduce the percentage of Russian investors on its share register, and help it look slightly more like a normal bank.
Safeguarding the A380’s future will cost Airbus 30 Jul 2014 Investors welcomed the aircraft maker’s strong sales and improving margins. But the slow-selling flagship A380 needs a costly redesign and could benefit from Airbus’ expertise in modernising proven models. In the short run, that will dent profit.
China’s political purges call for financial sequel 30 Jul 2014 Investigating ex-security chief Zhou Yongkang shows China’s president is firmly in charge. That may help sustain faith in the Party. But other institutions need a scrub too. Exposing the money trail, and those who help the rich and mighty bypass the rules, is a logical next step.
India’s e-commerce prize may be spread thinly 30 Jul 2014 A $1 bln fundraising by Flipkart underscores a China-like opportunity. Yet rivalry will be fierce, because the market is more open than the Middle Kingdom. The ambitions of companies like Amazon and eBay make it unlikely India will create a home-grown answer to China’s Alibaba.
Twitter faces German-style reality in next round 29 Jul 2014 The microblogging site had a great World Cup quarter. Revenue rose 124 pct, users were more engaged and 16 mln new ones joined. A repeat showing next quarter will be tough – and justifying a 30 pct market-value spike even tougher. As in soccer, upstarts rarely win consistently.
Rob Cox: MetLife CEO should revel in his anonymity 29 Jul 2014 That almost no one knows ol’ so-and-so is good for shareholders. How he handles the mega-insurer’s likely designation as a systemic threat could change that. A Jamie Dimon-style fight would be foolish. Better to speak softly and keep the name Steve Kandarian out of headlines.
U.S. social security suffers from low-rate longevity 29 Jul 2014 The retirement and disability funds will run out by 2033, nine years earlier than projected 10 years ago. After that, benefits will have to go down – or taxes up by nearly 3 pct of income on average over 75 years. Low interest rates worsen the problem and make fixes more urgent.
Russia casts mid-sized shadow over BP 29 Jul 2014 The UK oil major’s results benefitted from strong upstream earnings, including a big contribution from its stake in Russian firm Rosneft. Sanctions and a court judgment have made Russia look less reliable, but the dividend looks safe. BP will have to rely more on self-help.
Mall rats join up to take on Zara and Amazon 29 Jul 2014 Klepierre is buying Corio, a weaker Dutch rival, for 7.2 bln euros including debt. That’s a reasonable price and will turn the French group into Europe’s biggest dedicated mall owner. With retail giants and e-commerce making life harder for shopping centres, scale matters.