Megastorm shows scope for U.S. infrastructure bank 31 Oct 2012 Any traveler knows America’s transport network is dilapidated. Now, devastation on the East Coast has underscored the lack of investment in defenses. Despite tight budgets, the world’s richest economy could afford more. A quasi-bank could provide the best bang for federal bucks.
Rare IPO find: luxury at a reasonable price 31 Oct 2012 Upscale U.S. furniture retailer Restoration Hardware is set to return to public markets after going private and thriving during the crisis. Despite concerns surrounding the co-CEO’s recent resignation, Restoration offers investors a taste of the high life at a fair value.
ArcelorMittal buys time by melting down dividend 31 Oct 2012 A 73 pct cut will save $850 mln. This is a small but logical step for the world’s biggest steelmaker, which is trying to avoid a rights issue. The aversion is understandable given the industry is at a nadir - and given the demands a capital hike might place on the Mittal family.
BG Group shows peril of sailing close to the wind 31 Oct 2012 The UK gas company’s shares fell 18 pct after predicting flat output next year due to project delays. That’s harsh. But without growth, richly valued BG is just another driller wrestling with debt and rising costs. A lost year will hurt credibility - and the trading multiple.
Can Spain, Italy keep their bailouts on the shelf? 31 Oct 2012 The mere threat of ECB bond buying has lowered yields for Spain and Italy. Markets are still under the spell and investors are scared to sell. Rome won’t burn if it declines a bailout, but Madrid should bite the bullet.
Israel may give Canada taste of own M&A medicine 31 Oct 2012 Potash wants to buy the rest of Israel Chemicals it doesn’t own. That would give a foreign firm control over one of the country’s few natural resources and a big role in the iconic Dead Sea. Canada has nixed such overseas takeovers for less - and may now be on the receiving end.
Uniting Calvin Klein’s top and bottom excites 31 Oct 2012 PVH shares surged on its $2.9 bln deal to acquire Warnaco, unifying the clothing designer’s licenses. But the $100 mln of annual cost savings alone don’t justify investors’ titillation. They don’t even cover the premium. Investors are counting on more to come.
Egypt tests investors’ risk tolerance 31 Oct 2012 The transition from the Mubarak era hasn’t been smooth for business. UK-listed miner Centamin has had a key contract annulled by an Egyptian court. Delays in government fees contributed to Abu Dhabi’s Dana Gas not repaying bondholders. The Arab Spring dividend is proving elusive.
Ethical economy: Admit economic ignorance 31 Oct 2012 Policymakers may still sound sure and pundits admit few doubts, but most key questions remain unanswered, even though it has been four years since Lehman Brothers’ collapse blindsided economic visionaries. Unless a new Keynes comes along, expect more stumbling in the dark.
Barclays needs a decisive UBS-style strategy shift 31 Oct 2012 The UK bank unveiled weak Q3 numbers in fixed income and two new regulatory probes. Next February’s prelims give CEO Antony Jenkins a chance to review businesses, reform culture and maybe settle with authorities. Unless he is bold, Barclays can’t move on from the Diamond era.
Disney puts faith and $4 bln in power of the Force 31 Oct 2012 That’s what CEO Bob Iger is paying for Lucasfilm - his latest attempt to purchase the creativity that Disney can’t seem to cultivate in-house. Like Marvel and Pixar, Lucasfilm’s returns remain on the dark side. But making at least three more Star Wars films may win over skeptics.
UBS lockout underlines woeful capitalist tale 31 Oct 2012 For traders, it may make sense to merit a six figure salary one day and be barred from the office the next. For the rest of the world, it looks like banking at its worst: where money alone justifies brutal employee relations. The Wild West approach is unsuited to the new times.
Europe, China holding back Asian export recovery 31 Oct 2012 Gains in September exports have buoyed hopes for a U.S.-led rebound in regional trade. But Asian economies have shifted their focus to Europe and responded to Chinese competition by supplying the manufacturing juggernaut. A U.S. upturn alone won’t revive Asia’s export engine.
Storm dents Wall Street but spares U.S. election 30 Oct 2012 The force of Hurricane Sandy left much of Lower Manhattan dark and could cost $20 bln or more. Luckily for voters, the weather arrived a full week before the Nov. 6 vote. The pundits will spin it, but the political impact of chaos in mostly Obama-leaning states is probably small.
UBS could charge rivals for cutback benefits 30 Oct 2012 The Swiss bank’s retreat from fixed income trading may eventually increase returns for its own shareholders. But competitors will gain right away from the reduction of capital in the business. By rights, they should all compensate UBS for making the sacrifice.
Ford’s Q3 power puts Europe woes in perspective 30 Oct 2012 The automaker’s North American unit had its best showing in at least 12 years. With core operations consistently profitable, CEO Alan Mulally has more than enough breathing room to fix the ailing European business. Even if that takes time, Ford still looks undervalued.
Apple infighting may be sign of golden age waning 30 Oct 2012 The company’s genius has been the smooth integration of art and engineering. Steve Jobs kept an uneasy peace between the two. With mobile software chief Scott Forstall out, design guru Jony Ive will rule over hardware and software. Apple needs mastery of both.
UK nuclear deal a step forward in challenging slog 30 Oct 2012 Hitachi’s $1.1 billion purchase of a big nuclear power project is a victory for the UK government. The Japanese group is an attractive partner, with a reputation for delivering on time and on budget. But policymakers need to deliver in three big areas for the project to succeed.
Spain needs to do more to tempt bad bank investors 30 Oct 2012 Stinky property assets will be transferred to a new state-backed Spanish bad bank at around half their par value. Madrid hasn’t yet found the private investors it needs to keep the entity off the state’s books. The discount may not be enough to lure them.
UBS euphoria overdone 30 Oct 2012 The Swiss bank says its restructuring will boost returns and capital. Investors agree: UBS’s market cap is up SFr 4.4 bln ($5 bln) since the plan emerged. But the stated SFr 3.3 bln one-off charge ignores the real costs of transformation, most of which are hostage to fortune.
Deutsche evolution outshone by UBS revolution 30 Oct 2012 The German bank had a strong third quarter, driven by fixed income and equities trading. But its recent three-year strategy to improve capital and returns now looks less decisive against the Swiss bank’s wholesale restructuring. Investors may want Deutsche to be more radical.
Three reasons China’s banks deserve their derating 30 Oct 2012 The biggest lenders trade at just 1.2 times book value, despite returns on equity above 20 percent. Why? Because healthy reported numbers don’t reflect the risk of bad debts rising, the squeeze on bank deposits, or the likelihood that some will need more capital.
Bank of Japan fails the shock-and-awe test again 30 Oct 2012 The central bank’s decision to print an additional 11 trillion yen was neither impressive nor surprising. The BOJ’s own gloomy assessment of the economy suggests that the predictable timidity of its moves is blunting its ability to fight deflation.
Activism undermines Beijing’s investment-led model 30 Oct 2012 Violent protests in Ningbo forced Sinopec to cancel a planned petrochemical plant. The latest in a series of demonstrations could further embolden resistance to new projects and forced relocations. Less compliant citizens are another reason China needs to find new ways to grow.
Petronas return may herald Canada M&A clarity 30 Oct 2012 Ottawa botched its initial veto of the Malaysian oil group’s $5.2 bln bid for gas producer Progress. Nerves over CNOOC’s bigger offer for Nexen played a part. Petronas is back, but if the government wants the benefit of the doubt next time it needs to make the rules less fuzzy.
Euro zone drifts towards a real recovery 29 Oct 2012 Gyration between modest GDP growth and shallow recession is probably the best that can be expected while periphery economies rebalance and institutions gain strength. It will take at least another few quarters before a breakthrough is possible. But progress is being made.
Rule of law finally catches up to Argentina 29 Oct 2012 The nation exploited fuzzy language to stiff debt-swap holdouts. As Breakingviews predicted, a U.S. court ordered it to pay up, saying a promise to treat creditors equally is plenty clear. Rather than spark market chaos, the ruling sends the message that deal terms have teeth.
Ailing Greek banks need better Troika oversight 29 Oct 2012 After an 18 bln euro bailout, Greece’s four biggest lenders will be mostly owned by the Greek state’s HFSF entity. But if Greek insiders run the HFSF, it may not be able to fight against poor corporate governance. The euro zone, which is footing the bill, should have more say.
Financial shrinkage gets helping hand from UBS 29 Oct 2012 The Swiss bank has found that it can’t make bond trading pay. That will be tough on employees and a slow exit would be costly for shareholders. But the pain is just collateral damage from the financial sector’s deleveraging, a steady process which is making the world less dangerous.
Hong Kong’s anti-foreigner property tax may spread 29 Oct 2012 Non-resident buyers have been whacked with an extra 15 percent stamp duty as the territory battles the effects of cheap money and capital flight. The political appeal is likely to outweigh the bad side effects. Other urban hot spots, like London, may be tempted to follow suit.