Oil sustainably above $50 requires OPEC action 26 May 2016 Prices sneaked above a psychologically important marker. But given temporary geopolitical and climate drivers explain why, oil bulls can’t declare victory yet. Only a major reduction in global oversupply - the preserve of OPEC - can send oil markets much higher.
Sterling options market gets the hump over Brexit 26 May 2016 Traders are braced for big sterling swings around the EU referendum and then expect volatility to subside. But true calm may prove elusive whatever happens. Even if Britain votes to stay, there will be enough economic and political uncertainty around to ensure trading is lively.
European IPO market regains its senses 26 May 2016 Danish renewable energy utility DONG priced its initial public offering at up to $16 bln, suggesting a forward EBITDA multiple in line with stricken carbon-heavy peers. If it sounds dull, that’s the point. European IPOs are still a buyer’s market, but maybe now a rational one.
Banco Popular flags trials of holding bank equity 26 May 2016 The Spanish bank’s 2.5 bln euro rights issue better protects it against real estate losses, but is still a surprise for shareholders. Pain is also not being shared with equity-like CoCo holders. Dealing with the uncertainty would be easier if returns were more compelling.
Debenhams plucks new CEO from arms of its nemesis 26 May 2016 Amazon is the worst thing that could happen to stodgy old department stores. Yet that’s where Britain’s Debenhams found new boss Sergio Bucher. That makes it one of a handful of UK high-street names headed up by a digital ace. The hire sounds odd, but could be inspired.
U.S. probe forces Alibaba in the right direction 26 May 2016 The Chinese e-commerce giant’s accounting is under investigation. Depending on the outcome, Alibaba may have to consolidate its loss-making logistics business. If the scrutiny helps shed light on some of the group’s many blind spots, investors will be better off.
China “super-regulator” no match for foreign peers 26 May 2016 The People’s Republic may create a more powerful financial watchdog with the teeth to prevent a repeat of last summer’s policy missteps. The new body would boost policy coordination. But the power of top party leaders and provincial officials means it will still lack real bite.
Bank returns paradox cannot hold 25 May 2016 Why do banks seek double-digit returns when interest rates are so low? The Bank of England is among those wondering. Return expectations may be too high, or banks may still be too risky. Investors don’t appear to care. If they did, banks might face calls to break up.
Cox: The other European referendum to fret over 25 May 2016 While the world obsesses over Brexit, another perilous plebiscite looms in October. Italy’s leader has dangerously staked the future of his leadership over a constitutional reform vote. Its failure would present huge risks to Europe’s economy and global capital markets.
Health M&A’s shots of state oversight may be toxic 25 May 2016 Missouri trustbusters plan to oppose Aetna’s $37 bln union with Humana absent changes. That probably won’t kill the deal, but the U.S. insurers must still satisfy regulators in five crucial states and Uncle Sam. No wonder investors’ prognosis for this and similar mergers is grim.
Italian broadband has a new Romulus and Remus 25 May 2016 Utility Enel looks likely to win the bidding for fibre-optic group Metroweb, beating Telecom Italia. What follows may have shades of the twins who fought over the building of Rome. If so, Enel should be daunted, TI worried and Italian broadband users overjoyed.
Russia’s show of financial power fails to convince 25 May 2016 Moscow is selling its debt to foreigners and lending $25 bln - 2 pct of domestic GDP - to Egypt for a nuclear plant. Such shows of financial strength are all well and good. But the debt sale isn’t quite what it seems, and lending big sums at sub-market rates is risky.
Exxon, Chevron climate obstinacy comes at a price 25 May 2016 Both are rejecting pushes from big investors like CalPERS to beef up disclosure about business risks from global warming. It leaves them trailing peers and may put them at odds with U.S. officials and the G20. Refusing to adapt has serious consequences, now and in the future.
Facebook has new free-speech problem: Peter Thiel 25 May 2016 The venture capitalist has been revealed to be a secret backer of Hulk Hogan’s lawsuit against Gawker. That calls into question his media neutrality just as the social network is under fire for bias. As a director, Thiel’s First Amendment position is at odds with Facebook’s.
Lockheed-Boeing rocket JV feels competitive heat 25 May 2016 Elon Musk’s SpaceX just broke the monopoly on military satellite launches enjoyed by the defense contractors’ alliance. Congress may help the pricey venture by allowing it to buy more sanctions-tainted Russian rocket engines. That’d be a strike against efficiency and innovation.
Greek deal is rational, predictable, messy 25 May 2016 Both the IMF and Europe have compromised in Greece’s new debt plan. Athens’ fiscal targets are looser, but less so than the IMF wanted. Its debt costs will fall, but the relief is vague. There’s a hoary cliche about kicking the can down the road. This doesn’t even go that far.
New M&S boss fashions disappointing revamp 25 May 2016 Turnaround plans unveiled by new chief Steve Rowe have one big wrinkle. His makeover for the UK retailer involves short-term pain but may not solve its main problems - fierce competition for customers and a muddled offering. Bolder thinking is needed in such a tough sector.
Meg Whitman sullies good deal with fuzzy math 25 May 2016 The HP Enterprise CEO is merging its services unit with Computer Sciences. It’s a decent way to salvage an awful 2008 acquisition. At best shareholders might manage to get half the $14 bln value implied by the cost and other benefits HPE is touting. But even that’s a stretch.
Sony’s lowball forecasts are oddly reassuring 25 May 2016 Shares rallied despite a profit outlook that fell below expectations. Setting $1 bln of quake damage aside, the Japanese group is faring well. Consoles are humming along, handsets are stabilising, and a duff project has been nixed quickly. Sony’s turnaround is almost complete.
India’s $120 bln of bad debt is ripe for picking 25 May 2016 Global funds such as KKR and J.C. Flowers are eyeing stressed assets. Indian authorities are pressuring lenders to acknowledge bad loans and, in turn, raise capital. A new bankruptcy code helps too. After years of false starts, India’s bad debt business could finally take off.
Snapchat’s $20 bln worth could have staying power 24 May 2016 That’s the figure implied by new funding. Evan Spiegel’s firm has raised cash regularly and avoided some of the bells and whistles that distort the numbers. Unlike its messages and the stratospheric price tags on some other startups, Snapchat’s value may not evaporate.
Monsanto can push Bayer only so far 24 May 2016 The U.S. seed producer rejected a $62 bln offer from the German chemical giant, but said it was open to talks. Bayer’s shareholders reacted poorly to the initial bid while Monsanto investors are skeptical about chances for a deal. Negotiating power is limited on both sides.
Toyota, VW jump on cartech desperation bandwagon 24 May 2016 The Japanese automaker’s deal with Uber and its German rival’s with Gett come after GM invested in Lyft and Fiat Chrysler hooked up with Google. Each can learn from the other, but the technologists see opportunity while the manufacturers have more to fear about their fate.
Wells Fargo gives rivals more bad news than good 24 May 2016 Wall Streeters may be relieved to learn the California-based titan isn’t growing in securities, at least not yet. More worrisome is a decision by boss John Stumpf to cut overall return targets. Unlike Wells Fargo, most lenders already are struggling to beat their cost of capital.
Saudi’s three great pillars are showing cracks 24 May 2016 Oil, Islam and the ruling family of Al Saud bind the kingdom together. But low commodity prices and disruptive economic reforms risk opening up divisions within the ruling class. That in turn could unpick the all-important 80-year pact between religious leaders and the state.
Strikes upset France’s reform calculus 24 May 2016 Labour law changes forced through by the Socialist government are sparking strikes in refineries, ports, and railways. The benefits of the measures were watered down when the reforms were diluted. Protracted social unrest could deter investment and push up the costs.
Bayer’s synergy hopes fall on stony ground 24 May 2016 The German pharma group’s stock fell more than $14 billion as it made an approach for U.S. seed maker Monsanto. It’s almost as much as the premium Bayer is offering, and suggests shareholders expect next to no cost savings. The deal looks value destructive, but that seems harsh.
Wanted: CEO for Italy’s could-be national champion 24 May 2016 UniCredit needs a new chief executive. The bank’s ideal candidate has credibility to raise capital, gumption to lead a break-up or buy local rivals, and nous to schmooze shareholders from Verona to Libya. Share options cheap. Contact Breakingviews executive search.
1MDB scandal stings Singapore’s banking pillar 24 May 2016 The city has shut down BSI as Swiss authorities open a criminal probe into the private bank relating to the Malaysian state fund. The battle against illicit money flows is global. But Singapore is only now properly facing up to the risks of its push into wealth management.
Supercell sale would mark reboot for SoftBank 24 May 2016 Chinese giants are reportedly circling the SoftBank-owned developer of mobile gaming hits like Clash of Clans. A $5 bln-plus sale would seal a good return. It would also suggest President Nikesh Arora is making SoftBank more disciplined about selling, as well as buying, assets.