Fading reform hopes take gun shares with them 10 Dec 2013 As the chances of new firearms legislation dissipate a year after the Sandy Hook school shooting, so too should the anxieties that propelled gun sales and the stocks of Smith & Wesson and Sturm, Ruger. Short sellers already have their sights set on a downturn.
Pru throws down gauntlet to taper doomsayers 10 Dec 2013 Having hit four-year growth targets, the UK insurer plans to double cash generated from fast-growing Asian operations by 2017. The worry is that Fed tapering leads to a slowdown in the region. But Pru’s market position is so entrenched that it would be wrong to bet against it.
Mandela’s successors can shape his economic legacy 10 Dec 2013 As world leaders remember a great statesman, they may ponder South Africa’s middle-income trap. Compared with other post-colonial economies, even stagnation would be a tribute to Mandela’s peace-making. It’s up to those who followed him to buck recent trends and escape the trap.
Narendra Modi could be India’s Shinzo Abe 10 Dec 2013 The opposition politician is the favourite to become prime minister in next year’s polls. His victory would give Indian assets a big boost and signal revived growth, just like it did for his Japanese counterpart. Structural reforms, though, will remain difficult for both leaders.
Alibaba dips cautious toe into logistics 10 Dec 2013 Investing in white-goods maker Haier is a new direction for the e-commerce group, whose high margins come partly from eschewing hard assets like unsold goods, trucks and warehouses. But e-commerce hinges on timely delivery – which explains Alibaba stepping down from its pedestal.
Spain makes a hash of energy policy 10 Dec 2013 The country’s energy sector has accumulated a 26 billion euros deficit due to the gap between production costs and consumer bills. Now the government is pulling the money it had promised to reduce the shortfall this year. Its constant flip-flops are worrying investors.
Mexico’s bold move may end 10-year oil decline 9 Dec 2013 The Senate is debating removing the state monopoly on drilling and creating a sovereign wealth fund. Letting outsiders control wells and log reserves should appeal to Big Oil. It’s a smart way to reverse the past decade’s 25 pct output drop while keeping proceeds.
Silicon Valley healthcare hubris no match for DC 9 Dec 2013 Google-backed genomics startup 23andMe harnessed the twin philosophies guiding the new economy: technological disruption and regulatory arbitrage. Selling unproven medical tests and ignoring regulators failed to impress the FDA, which essentially shut down the service last week.
Bob Diamond’s African punt needs strong governance 9 Dec 2013 The ex-Barclays boss is said to be preparing a $250m London cash shell to buy African financial institutions. Scandals involving Libor and Bumi have hurt both Diamond and his proposed way of investing. Rehabilitation via M&A could succeed – but only if the governance is spot on.
Eddie Lampert’s shrinking empire takes another cut 9 Dec 2013 The Sears boss and hedge fund manager is shedding Lands’ End, 11 years after the retailer bought the clothing brand for $1.9 bln. Leaving the division trapped inside Sears was bad portfolio management. Shareholders will be lucky if a spun-off Lands’ End is worth half that.
Food deal shows how investors eat up synergies 9 Dec 2013 Sysco’s $3.5 bln purchase of US Foods received a rapturous reception with the buyer’s stock surging by as much as a quarter, or $5 bln. Hefty cost savings help the merger math. With this sort of reaction to deals, acquirers’ animal spirits won’t remain suppressed for long.
WTO’s small victory saves it from irrelevance 9 Dec 2013 The Bali deal to simplify customs rules lacks the drama of previous rounds. But after more than a decade of fruitless negotiation, it shows global agreements are still possible. The next challenge is to prevent future progress being confined to competing regional blocks.
FX increasingly slave to other markets’ moves 9 Dec 2013 Currencies have been especially tough to call in the past year. When global rates are so uniformly low, moves in the mammoth FX market seem to be a by-product of what’s happening in other, smaller, assets classes. That makes predictions almost impossible.
Banks’ taper rehearsal gives emerging markets hope 9 Dec 2013 Global banks’ loans to developing countries fell by just 2 percent in the second quarter. Exclude Brazil, Russia, India and Mexico and credit actually rose. Lenders’ early calm response suggests the withdrawal of the Federal Reserve’s cash glut may be less painful than feared.
Thai poll gives jittery investors a short-term fix 9 Dec 2013 Calling an election helps Prime Minister Yingluck Shinawatra break the political deadlock. But it won’t solve Thailand’s deep divisions. Investors who turned optimistic after the country found a modicum of stability in 2011 should remember its fading long-term prospects.
U.S. economic malaise may at last be wearing off 6 Dec 2013 America added 203,000 jobs last month and the unemployment rate dropped to 7 pct, adding to strong data like the third-quarter GDP growth rate of 3.6 pct. Reduced labor participation and sluggish wages are headwinds to a full-on recovery. But even a little normality is a relief.
Anti-troll bill missing patently obvious fixes 6 Dec 2013 Congress has made a good start on reining in firms that buy intellectual property just to file infringement suits. But true reform would block the vague and self-evident patents that fuel such claims. Lawmakers know the problem. If only they could muster the will to address it.
Benefits of being "G-SIFI" seem to outweigh costs 6 Dec 2013 Since regulators published a list of systemic institutions in 2011, the banks concerned have boosted capital and tamped down their balance sheets. But smaller lenders, particularly in Europe, have done the same. The “too big to fail” club turns out not to be too harsh after all.
Cheap money wrong cure for West’s long-term stasis 6 Dec 2013 Larry Summers seems to think years of negative real interest rates can end “secular stagnation”. That’s too optimistic. If the torpor is demographic and technological, it’s probably incurable. In that case, more money-printing will only bring new financial messes.
Thai infrastructure IPO comes with padding 6 Dec 2013 It’s a bad time for Dhanin Chearavanont’s telco to try and plug its finances with a $1.8 bln spin-off. Political turmoil has added to uncertainty about global interest rates. But the lure of a tax-free yield twice that of 10-year Thai bonds may rope in sufficient local investors.
Mandelanomics was too conventional to shine 5 Dec 2013 Nelson Mandela, dead at 95, was a brave leader who was too timid economically. Avoiding the errors of others, he set post-apartheid South Africa on course toward being a mostly free market with stable finances. Unfortunately, he also left the country slow-growing and unequal.
Deutsche ditch divines commoditized commodities 5 Dec 2013 The German bank is quitting energy and base metals trading. That should free up capital without hurting results. It’s a helpful step that others like Barclays and BNP Paribas may follow. It won’t, however, fully solve the bigger problem of a swoon making profits elusive for all.
U.S. trading overseer goes a little rogue 5 Dec 2013 Wall Street firms are suing the CFTC for bypassing standard practice when it issued tough guidance last month on overseas buying and selling of derivatives. U.S. dealers may suffer as a result. Absent the usual analyses and consultation, it’s hard for the agency to make its case.
Osborne lets UK recovery ease austerity’s pain 5 Dec 2013 Stern responsibility remains the British Chancellor’s watchword. With jobs increasing and GDP rising faster than expected, it’s easy to resist calls to abandon his austere course. Small shifts, like tax cuts for young workers and a new attack on tax dodges, are useful ornaments.
Healthy U.S. GDP growth more mirage than reality 5 Dec 2013 Revising the Q3 estimate up to 3.6 pct sounds promising, but much of the gain came from inventory buildup. That suggests a return to sluggish expansion this quarter. Fueling sustainable growth requires more jobs and less Washington interference for the wealth effect to spread.
China anti-bitcoin ruling will shake believers 5 Dec 2013 Beijing won’t allow currency competition. The central bank has barred financial institutions from trading the pseudo-money, while reining in anonymous users. Bitcoin can still be traded, but the authorities are wary. The virtual asset has just lost a lot of its speculative appeal.
Merck’s pricey deal will make material difference 5 Dec 2013 Germany’s drugs group Merck has made a toppy 1.6 bln stg offer for the UK’s AZ Electronic Materials. The deal offers synergies and diversification, and deploys otherwise idle cash. Since pharma valuations are rich, the speciality electronics firm offers relatively cheap growth.
BNP Paribas pays up for Polish promise 5 Dec 2013 The $1.4 bln deal for Rabobank’s retail business in Poland is what cross-border banking M&A looks like post-crisis. BNP is paying a premium to book value for a business with low returns. The French bank avoided a costly auction but needs synergies and growth to make the deal pay.
Qantas needs help to escape financial nosedive 5 Dec 2013 The Australian carrier, which warned on profits, is a political hybrid. As a national champion it faces limits on raising foreign capital, but it lacks the financial advantage openly state-backed rivals enjoy. Something has to give, but Qantas could also do more to help itself.
Japan’s yen glut is failing to lift global bonds 5 Dec 2013 With the central bank printing money at home, Japanese investors were supposed to be big buyers of global bonds. Instead they have been net sellers this year. While that’s changing, a yen deluge looks unlikely as long as investors remain afraid of the Federal Reserve’s next move.