Argentina’s leader sabotages her own energy goals 7 Aug 2012 YPF needs funds to lift production and develop shale deposits. Yet Cristina Fernandez already scared investors by seizing Repsol’s stake in the state-controlled energy group and she is still holding back the industry. That makes YPF’s ambitious targets look far-fetched.
Chesapeake’s spendthrift chief can’t help himself 7 Aug 2012 Investors in the cash-strapped gas company were cheered by promises of belt tightening. A new shareholder-selected board adds credibility to this pledge. Yet with CEO McClendon boosting spending on new energy-rich land by 25 pct this year, owners shouldn’t get too excited yet.
StanChart sanction crisis poses cultural questions 7 Aug 2012 The bank strongly rejected a U.S. regulator’s claim it hid $250 bln of payments for Iranian clients. But communications quoted in the probe suggest an arrogant, dissembling culture. With StanChart’s top team little changed since then, the burden of proof lies with the bank.
Xstrata figures sustain hope for sweetened merger 7 Aug 2012 The miner’s first-half results were worse than last year, but better than expected thanks to cost cutting. The resilience may harden Xstrata shareholders’ expectations of improved merger terms from Glencore. But it is still far from a done deal.
Japan Inc’s earnings tell worrisome global story 7 Aug 2012 Yes, operating profits at the country’s four biggest manufacturers - Toyota, Nissan, Honda and Hitachi - quintupled in the latest quarter as U.S. and in Japanese growth overwhelmed weaker economies in Europe and China. But the post-tsunami rebound is unlikely to last.
Merger boost looks short-lived for China’s Youku 7 Aug 2012 Revenues at the leader in the Chinese internet video market almost doubled in the last quarter, but losses widened even more. The planned merger with smaller rival Tudou should help lower costs, but deep-pocketed diversified players are catching up. The pair looks vulnerable.
Brent triumph a high point for imperfect benchmark 7 Aug 2012 Trading in the North Sea blend’s futures hit a record in June. London-traded Brent contracts outsold New York-traded WTI for the first quarter ever. The U.S. benchmark is a flawed gauge of global demand. But Brent, already a reference for most global oil trades, has problems too.
StanChart joins banking march into mire 6 Aug 2012 New York regulators accuse the UK-based lender of covering up $250 bln of sanctions-busting transactions with Iran. It’s a big setback for one of the last global banks to have dodged financial and legal woes. Even just a fine for StanChart will leave the industry lacking halos.
Facebook’s market meltdown is far from over 6 Aug 2012 All the red flags apparent at the IPO - overpriced stock, shoddy governance, huge challenges to the business and a damaged brand - still fly today. The most shocking thing about the social network’s $50 bln conflagration of shareholder wealth is that anyone might be surprised.
Nasty Petrobras surprise won’t be its last 6 Aug 2012 The Brazilian oil giant’s first quarterly loss in 13 years reflects harmful state meddling. President Rousseff seems happy for Petrobras to miss production targets if fuel prices stay low. Big well writedowns may help reset expectations, but policy damage will be tough to gauge.
Itaú’s aims would be badly served by Citizens 6 Aug 2012 The Brazilian bank has been tipped as a possible buyer for the U.S. retail arm of RBS. While Citizens might come cheap relative to Itaú’s own valuation, competing in a saturated country with the likes of Wells Fargo and BofA would be unwise. Better to stick with emerging markets.
Best Buy bid looks about as shaky as its target 6 Aug 2012 Richard Schulze, the U.S. electronics chain’s founder, wants to take it private for up to $8.8 bln. His 20 pct Best Buy stake adds credence to the offer, but financing and backers remain elusive. And given where it’s based, going hostile for the embattled retailer could be tough.
Knight makes most of an abysmal situation 6 Aug 2012 The $400 mln rescue underscores the painful cost of its trading debacle and dilutes existing investors. But the saviors CEO Tom Joyce assembled include a good mix of rivals and clients. That should give him scope to rebuild Knight without having to bow to a rapacious cabal.
Hugo Dixon: How to clean the banking cesspit 6 Aug 2012 Faced with a stream of financial scandals, the public is growing impatient with the slow pace of change. Some pundits want to clear out the entire old guard and break up the banks. While something must be done, these knee-jerk approaches are not the best way forward.
‘Peak’ resource nationalism could get messy 6 Aug 2012 Miners see a silver lining in the fading super-cycle: it lets them be pickier about working with grabby governments. But existing projects will always be vulnerable to expropriation. And populist pandering doesn’t necessarily wax and wane in lock-step with commodity prices.
Strong third Indian party could be game-changer 6 Aug 2012 Anti-corruption campaigner Anna Hazare is developing a political party. His cobbled-together group doesn’t look credible, but a well structured force could be kingmakers – and would be a constructive alternative to the regional parties which have paralysed Indian coalitions.
BYD caught in two Chinese economic traps 6 Aug 2012 Warren Buffett bought into the automaker, but insiders are now selling amid falling profits. BYD expanded too fast after Beijing’s 2009 stimulus. The downturn is hurting its mostly low-end customers. Besides, a fatal tragedy has reinforced the Chinese love of foreign brands.
U.S. jobs data reinforce sluggish new normal 3 Aug 2012 The U.S. added an unexpectedly strong 163,000 jobs in July, even though the jobless rate ticked up to 8.3 pct. Job creation of late is matching population growth but reducing unemployment only slowly. It’s more evidence that recovery is stuck on the slow train.
Bank breakups – a guide for the perplexed 3 Aug 2012 Sandy Weill created the Citigroup financial supermarket in 1998 by calling the bluff of U.S. lawmakers and ignoring the Glass-Steagall Act, which limited what banks could do. Washington soon repealed the law. Now, Weill says big banks should be broken up. What gives?
Heineken’s $6 bln deal should trigger aftershocks 3 Aug 2012 The Dutch brewer is paying a hefty 17 times EBITDA to take control of Asia Pacific Breweries from partner F&N. Heineken had little choice, as it couldn’t let APB slip through its fingers. This sets up F&N’s next act - the dismemberment of the rest of the conglomerate.
Review: Banks bet their lives on neurochemistry 3 Aug 2012 John Coates shows that trader activity is heavily subject to their neurochemistry. High testosterone brings more profit and risk and cortisol shuts traders down in crashes. The obvious regulatory implication: too-big-to-fail banks need women traders, paid flat salaries.
What hedge funds share with rock’n’roll festivals 3 Aug 2012 Not a lot, at first sight. But both are subject to the law of large numbers. Festivals like this weekend’s Pickathon are limiting entry to make the experience less mundane. And the likes of Moore Capital are seeking better-than-average returns by shrinking, too.
Shale writedown tarnishes BHP’s street cred 3 Aug 2012 The miner isn’t the only company to overpay for U.S. shale. But a $2.8 bln writedown on acreage it bought for $4.75 bln last year is embarrassing for a group that trades on its canny reputation. Gas may pay off for BHP eventually, but Marius Kloppers is right to waive his bonus.
Europe and world are down but not out 3 Aug 2012 With economic data bad in Europe and soft elsewhere, markets want salvation from central banks. But the ECB and the Fed have disappointed. Still, Europe’s policy-makers are not out of weapons and the euro zone is more resilient than it may seem. The global economy may be, too.
Investors may be happy to ride on renovated JAL 3 Aug 2012 The airline’s plans to raise roughly $8.5 bln in an IPO may seem a heavy lift amid weak markets and a perennially limping industry. But big funds will likely clamor for seats on a flight fueled by a mix of government largesse and one of Japan’s most promising turnaround stories.
Time for UK government to hold its nerve over RBS 3 Aug 2012 Weak domestic growth and redressing mis-selling and technical glitches pushed the UK bank further into the red in H1. Though rate-rigging liabilities are a concern, RBS’s shift from shaky to secure bank is almost complete. Strengthening the state’s grip would be a costly error.
No easy fix for Baghdad’s oil policy 3 Aug 2012 More oil majors have decided it’s worth taking a chance on signing deals with the semi-autonomous Kurdish region, against the will of Iraq’s central government. Gazprom, Total and Exxon Mobil may have less to lose than Baghdad. A new approach is needed to maintain a unified Iraq.
Italians railroad China’s PLA on soccer pitch 2 Aug 2012 How else to explain an investment in Inter Milan by China Railway Construction, a state group with origins in the People’s Liberation Army? Bragging rights are limited and industrial rationale non-existent. At best it’s a quid pro quo for the contract to build Inter’s new stadium.
Draghi denies governments and markets a free lunch 2 Aug 2012 The ECB chief’s pledge to buy short-dated government bonds is positive, but there’s a catch - countries need to ask for help. Markets’ disappointment at the lack of immediate action makes bailouts more likely. Spain and Italy could always ease the shame by jumping together.
Knight shows that next creative loss is never far 2 Aug 2012 The market-maker’s unlikely $440 mln hit may put its future in doubt. The software error behind it, fresh on the heels of UBS’ head-scratching Facebook blunder, proves investors can never be too imaginative about the potential to lose money. Risk just can’t be regulated away.