Central bankers live in silent fear 3 Apr 2014 It’s scary to think what higher policy interest rates might do to a financial system accustomed to virtually free money. Stress tests aren’t foolproof. Yellen et al look calm. They may be overconfident. Or maybe they know that expressing worries could provoke panic.
Buyers bake fat growth into Just Eat IPO value 3 Apr 2014 London’s third sizeable e-commerce debut in weeks values the online takeaway firm at 1.5 bln stg. That’s an unpalatable 15 times 2013 sales. This business is harder than it looks and Just Eat has built a strong position. But investors’ hunger for growth has led them to over-order.
Blythe Masters could chair Glencore 3 Apr 2014 The derivatives mastermind is leaving JPMorgan’s commodities unit after its sale to Mercuria. Her next stop could be Glencore. The trading house’s all-male board looks anachronistic. It needs a chair to keep Ivan Glasenberg in check. And her banking nous would be useful.
Alibaba shopping spree needs better explanation 3 Apr 2014 The Chinese e-commerce group has spent $3.8 bln on acquisitions since 2013, but the strategic logic remains hazy. Other internet giants are making similar deals, and the land grab may excite prospective investors. Even so, Alibaba will eventually have to justify its purchases.
China stock market opening is opposite of Big Bang 3 Apr 2014 Investors are getting excited about mainland shareholders being allowed to buy Hong Kong stocks. But as with any loosening of China’s capital controls, progress will be gradual. Though Chinese cash will increasingly leak onto global markets, any breakthrough remains some way off.
Shrinking margins take bling off Prada valuation 3 Apr 2014 Shares in the Italian fashion house fell 8 percent after costs rose faster than revenue in 2013. Weak sales from its Miu Miu brand added to the gloom. The selloff scuffs Prada’s premium rating relative to rival luxury brands. But there may be further markdowns to come.
GM could use a tip from BP on contrition’s risks 2 Apr 2014 The automaker hinted it might compensate victims of faulty cars, despite the legal shield of its bankruptcy. The energy giant made similar concessions after the Gulf oil spill, with disastrous financial results. The cases differ, but both are reminders of conciliation’s perils.
Market health gives Obamacare long life 2 Apr 2014 The president’s insurance scheme secured the 7 mln registrants it was targeting. Stocks in the healthcare sector also have soared by 81 pct since the Affordable Care Act was enacted. The Republican budget may ignore the plan, but strong forces have entrenched it.
Chilean quake spares economy, as do tax reforms 2 Apr 2014 Tuesday’s huge tremor has brought blessedly limited loss of life and property. That’s good for all involved, including investors. President Bachelet’s tax plans, unveiled on Monday, also avoid harm to Chile’s prospects. Falling copper prices remain the biggest risk.
The question ECB hasn’t answered: why wait? 2 Apr 2014 The latest euro zone inflation numbers show that the European Central Bank is failing to provide price stability, its only mandate. The ECB may not believe that disinflation is here to stay, but even if that’s right, there’s little risk in acting now to help Europe’s economy.
French cabinet reshuffle creates policy confusion 2 Apr 2014 Francois Hollande has chosen an odd couple to tackle France’s economic malaise. Old hand Michel Sapin will be finance minister while anti-globalisation crusader Arnaud Montebourg will run the economy ministry. The crude effort to please both markets and the public will backfire.
Virtu IPO blocked by high-frequency trading cloud 2 Apr 2014 The “technology-enabled market maker” may say it’s different, but much of what it does sounds similar to the controversial trading method that’s back in the spotlight. Delaying the float could protect a mooted $3 bln valuation – and anyway, there’s no obvious rush to go public.
Edward Hadas: Wealth buys less lifestyle, more power 2 Apr 2014 President Obama calls inequality the defining issue of our time. The general public isn’t persuaded. That could be because the gap in lifestyles has hardly widened. The real problem is the relative power of the elite. That is dangerous – it threatens to undermine democracy.
ASOS’s glitzy rating assumes a lot goes right 2 Apr 2014 Even after a blip last month, the UK fashion and tech darling still fetches more than 75 times forward earnings. Ploughing money into new warehouses is vital, but could create supply disruptions. Global expansion is causing headaches. And other retailers won’t stand still.
Big German public pay hike is good news for Europe 2 Apr 2014 More than 2 mln civil servants in Germany will see their pay rise 5.7 pct over the next two years. That means real income growth, and it will be a benchmark for the private sector. But much hinges on what consumers will do with the extra money in a country where savings are high.
ECB could fight currency war – by buying Treasuries 2 Apr 2014 The euro is at uncomfortable levels partly because quantitative easing is pulling down other currencies. A radical idea is that the ECB could respond by adopting QE and buying U.S. Treasuries. Direct FX intervention would break the rules but might lead to discussion and disarmament.
Noble China joint venture still faces market test 2 Apr 2014 The Singapore trader is selling 51 pct of its agri business to a group led by state-backed COFCO. Noble gets $1.5 bln in cash and shrugs off some debt. China’s desire to control food supply should secure volumes. What’s less clear is whether that translates into healthy margins.
Convertible boom fuels China’s internet land grab 2 Apr 2014 Chinese tech companies with U.S. listings are building up their war chests by issuing bonds that convert into stock. A market rally, demand from investors for the securities, and an acquisition spree by Alibaba and Tencent is driving smaller rivals to raise cash while they can.
Rob Cox: GE should put itself up for sale 1 Apr 2014 April Fools’ Day joke? Nope. It’s a shareholder proposal on the ballot at GE’s annual meeting. Setting aside the absence of buyers for a $260 bln company, it illustrates the kind of shareholder democracy gone wild that many boards and an SEC commissioner would like to squelch.
GM can find small comfort in Toyota’s ride 1 Apr 2014 The U.S. automaker recalled more cars and doubled the estimated cost for the first quarter ahead of boss Mary Barra’s Capitol Hill grilling. Even so, Toyota’s recent fiasco suggests the financial fallout should be manageable. GM’s culture will be harder to repair.
Goldman’s NYSE exit further stokes HFT debate 1 Apr 2014 The Wall Street bank may yank its last humans from the exchange floor. It has also invested in electronic venues like BATS and is a big customer of newcomer IEX, which aims to neutralize high-frequency traders. Goldman’s timing is apt for the latest bout of market scrutiny.
BHP spinoff would swap one problem for another 1 Apr 2014 The miner wants to simplify its portfolio, possibly by demerging less attractive assets. But it’s not certain this would create shareholder value, and the move could cost financial and operational synergies. BHP may be better off patiently selling down as opportunities arise.
Banking goliaths can indeed be tamed 1 Apr 2014 No country has ended the problem of maybe needing to rescue a hulking financial institution. A new IMF report, though, shows the United States has done a better job than most with stronger rules and less concentration. A $600 bln subsidies figure also gives lawmakers a target.
Deflationary world can still stoke asset inflation 1 Apr 2014 The U.S. economy is a test case for the baffling coexistence of inflated asset prices and disinflation in consumer prices. Poor capital utilization and wonky income distribution – a sharp drop in workers’ share, a jump in financiers’ take – help resolve the mystery.
Weir may struggle to extract a merger from Metso 1 Apr 2014 The Scottish engineer has tentatively bid for its $5 bln Finnish rival. A merger makes sense. But Metso has just shed a problem unit, has clear self-help plans, and is at a cyclical low thanks to its focus on mining. With two powerful backers, the Finns can afford to be patient.
New French PM’s main challenge: his own party 1 Apr 2014 Manuel Valls will take over the French government after the ruling Socialist Party’s debacle in municipal elections. The interior minister’s free-market leanings suit President Hollande’s new supply-side views. But to conquer, Valls must fight off more traditional Socialists.
Telecom Italia renewal has further to go 1 Apr 2014 Under pressure from a dissident investor, Italy’s main phone company will soon get a strong, independent board. That’s good for outside shareholders. But the intentions of key stakeholder Telefonica remain opaque. TI’s undemocratic voting system needs an overhaul too.
How to avoid another second-class UK privatisation 1 Apr 2014 Royal Mail’s IPO looks awfully cheap in hindsight. So an official post-mortem will embarrass politicians and bankers alike. Still, there are lessons for future privatisations. Sell down slowly, be more flexible in book-building, and handle retail offers with extreme care.
Alstom warms up turnaround plans with $1 bln sale 1 Apr 2014 The ailing French engineering giant is selling its heat exchanger unit to private equity group Triton for 730 mln euros. It’s an important milestone, but Alstom’s asset disposal programme will have to go further. The group is also under pressure to deliver on cost cuts.
OCBC’s Chinese ambition comes with hefty price tag 1 Apr 2014 The Singapore bank is buying Hong Kong’s Wing Hang for $5 bln. Paying two times book value for a second-tier lender looks dicey when China is slowing and the Fed’s tapering is threatening to push up deposit costs. For OCBC investors, short-term pain may outweigh long-term gain.