U.S. elections cash delivers mixed returns at best 3 Feb 2015 Donors stuffed candidate coffers with $1.6 bln in the 2014 midterm contests alone. Contenders backed by a right-leaning Koch brothers fund won at a 90 pct clip, but only 20 pct of a big Democratic group’s choices succeeded. It’s yet another reason to spend less on campaigns.
Big airports IPO requires faith in Spain’s future 3 Feb 2015 Aena, the $9 bln operator of airports in Madrid, Barcelona and beyond, needs flocking tourists to mint money. For now, it’s a safe bet. Low capex needs and ample capacity are a plus. But the state still calls the shots and a new regulatory regime stores up some uncertainty.
Market calm sends wrong signals on Grexit 3 Feb 2015 Bonds issued by the euro zone’s weaker nations have been immune to the Greek crisis. The European Central Bank’s new quantitative easing may limit the fallout for now. Yet Europe’s crisis defences aren’t perfect, and the trauma from a Greek exit would be serious.
Memo to Tsipras: How to win over Merkel 3 Feb 2015 Greece’s new government has put forward some sensible ideas in addressing the country’s debt burden. But any deal needs the backing of a reluctant Germany. Some crucial Dos and Don’ts – many of them symbolic, but some substantial – can make it easier to sway Angela Merkel.
S&P’s $1.4 bln deal reawakens watchdogs’ dilemma 3 Feb 2015 The credit rater isn’t admitting to any illegality, but at more than half of 2013 revenue the settlement is painful. If Uncle Sam really thinks S&P defrauded bondholders, it’s crazy to regulate raters more tightly - investors are more likely to be taken in by any shenanigans.
Radical Greek finance minister sounds sensible 3 Feb 2015 Yanis Varoufakis dropped calls for an explicit debt haircut and made plausible proposals on debt and deficits. The “erratic Marxist” is growing into the job. Still, investors and foreign politicians will take some persuading that his government can deliver major economic reforms.
BP hunkers down for prolonged oil slump 3 Feb 2015 The UK oil and gas major is cutting capital spending by 20 pct. That’s a robust response to cheaper oil for a company with a strong balance sheet, but BP has more problems than most. If such spending cuts keep coming from the industry, the oil price might rebound further.
Santander’s next task: sustainable profit growth 3 Feb 2015 After raising capital and trimming the dividend, new boss Ana Botin has proved her leadership credentials. The Spanish bank’s results show provisions and costs down, and net profit up. The real test will be maintaining the momentum even as key economies like Brazil falter.
Hugo Dixon: Give Greece’s Alexis Tsipras time 3 Feb 2015 If the Greek prime minister is backed into a corner, the chances of Grexit and contagion will rise. If he is given time, there’s less risk of Athens quitting the euro. And even if Greece leaves, delay will make it easier to contain the political and financial backlash.
Australia underscores urgency of Asian rate cuts 3 Feb 2015 The Reserve Bank’s quarter-point cut, which traders dismissed as a remote possibility just days ago, shows how vital monetary easing has become across the region. From Sydney to Singapore to Seoul, policymakers risk falling behind the curve and hurting investment and growth.
Shopping mall merger adds low rates to M&A toolkit 3 Feb 2015 Australia’s Federation Centres is buying larger local rival Novion Property Group for $6.1 billion. Cost savings don’t fully justify the tie-up. But the two will also reduce expenses by refinancing their debt. As rates head south, it’s a rationale that others may adopt.
Obama makes deficit control harder than necessary 2 Feb 2015 His new budget increases federal outlays by 6.4 pct a year. So to rein in borrowing, tax revenue has to grow at over 7 pct annually. Of course some proposals are pure politics. But a solid U.S. economy could handle less government spending, taking heat out of the revenue fight.
Small print debases $41 bln U.S. spectrum sale 2 Feb 2015 The biggest bandwidth auction in years raised about twice as much as expected for Uncle Sam. But a 25 pct “small business” discount claimed by Dish Network is helping the $33 bln pay-TV company add to its unused stockpile and outbid rival operators that badly need capacity.
Banker pay cut deceleration may have wider effects 2 Feb 2015 Investment banks have held steady the slice of revenue paid out to employees in recent years, an industry-sponsored study finds. Higher pay at buyout firms and hedge funds acts as a brake. But with returns tepid everywhere, finance sector-wide compensation may fall further.
Shareholders give Exxon the benefit of the doubt 2 Feb 2015 The oil major is keeping mum on spending plans even as rivals cut back. And it only beat Q4 estimates thanks to tax and legal breaks. Unlike Chevron, though, Exxon is still buying back stock, if less than before. Such relative resilience appeals to investors, but might not last.
Low-growth consumer stocks are pushing the limit 2 Feb 2015 Yield-starved investors are chasing reliable dividend payers. Beside near zero-yield sovereign bonds, 3 pct from stocks such as Procter & Gamble, Diageo and Unilever is easy to like. But there’s little growth in their emerging or developed markets. The stocks look expensive.
Negative yields can go much more negative 2 Feb 2015 Investors now pay for the privilege of owning almost a quarter of euro zone government debt. The practice sounds strange, but monetary theory calls for it. If deflation sets in, yields could keep falling. The result might be the end of cash, or a new theory about interest rates.
CRH’s $7.4 bln buy reveals M&A tolerance 2 Feb 2015 It’s a big bet. The Irish building group will increase leverage – even with a big equity issue – to buy surplus assets from Lafarge worth a third of its market cap. CRH got sucked into an auction too. Yet investors cheered. It’s how things work in a low-return, low-growth world.
Hugo Dixon: Renzi still living on borrowed time 2 Feb 2015 The Italian prime minister did well to secure the election of a president against the wishes of his quasi-partner, Silvio Berlusconi. Matteo Renzi’s victory could allow him to accelerate reforms. He mustn’t waste the chance. Italy’s serious problems have not gone away.
Ryanair finds it harder to get “always better” 2 Feb 2015 Europe’s largest low-cost carrier upped its fiscal-year forecast again, eyeing a 60 pct net profit jump. But sober days lie ahead. Hedges limit the impact of lower oil prices. Other costs will rise. After gaining nearly 50 pct lately, the richly valued stock looks vulnerable.
India’s "improved" GDP statistics strain credulity 2 Feb 2015 Revised data shows the economy grew 6.9 pct in the year to last March, just as fiscal and monetary tightening was taming inflation and narrowing the current account deficit. That’s something no major economy has experienced in recent history. Investors are right to be sceptical.
Chinese companies lose assets money can’t replace 2 Feb 2015 Developer Kaisa and lender Minsheng Bank have both lost senior executives for unexplained reasons, at a time when the government is stamping on graft. Investors are helpless when companies’ political capital dwindles: there’s often no warning, and adding more funds doesn’t help.