Our 2018 predictions on Reuters TV 31 Dec 2017 From the CEOs who should run for U.S. president, to the banks that ought to be sizing up mergers, our writers give their take on the coming year in a series of Reuters video reports.
Viewsroom: Investors target sexual misconduct 29 Dec 2017 Companies that sweep settlements for bad behavior under the carpet will feel shareholder ire in 2018, Breakingviews predicts. Plus, Apple will float past the EU’s roving eye, splintering political parties are a ticking U.S. time bomb and bank bosses may hang up their hats.
America better at finding natural gas than using it 29 Dec 2017 Booming production has made the country a net exporter. But consumers are on pace to use less electricity from natural gas in 2017. As issues from Atlanta to Florida pressure the grid, shale’s promises of “energy independence” hit policy and infrastructure obstacles.
Goldman loses on tax swings, gains on roundabouts 29 Dec 2017 President Trump’s tax reform will knock $5 bln off the Wall Street firm’s bottom line, two-thirds of it from a one-time hit to foreign earnings. That’s just noise for investors to filter out. Other goodies, like a lower overall rate, should leave Goldman substantially better off.
Icahn wins SandRidge battle but war isn’t over 29 Dec 2017 The oil driller has dropped its $746 mln bid for rival Bonanza, something the activist and others wanted. But its poison pill – which bars Icahn from upping his stake and makes a takeover more difficult – remains in place. The investor should see this fight through to the end.
U.S. junk bonds are time bomb with a long fuse 29 Dec 2017 Low default rates, a lack of alternatives and foreign demand will support high-yield bonds in 2018. Yet with spreads near record lows, covenants weak and leverage rising, the seeds of a bear market are plentiful. Investors should keep a wary eye for the first shoots of trouble.
Trump tax cut is sack of coal for foreign banks 29 Dec 2017 The U.S. president says reduced corporate taxes are a Christmas present. But a levy on interest payments to overseas companies could hit lenders with U.S. subsidiaries. The provision, the base erosion and anti-abuse tax, might even cancel out the benefit of a lower headline rate.
Wanted: Italian-American carmaker seeks new driver 29 Dec 2017 CEO Sergio Marchionne will soon head for FCA’s off ramp. A blizzard of well-timed deals helped spark stellar returns, but the group has low margins and big gaps. Marchionne also wears too many hats. Breakingviews imagines a consultant advising the board on picking his successor.
European soccer’s spending splurge will intensify 29 Dec 2017 Transfer fees like the $263 mln Paris St Germain paid Barcelona for Neymar have stoked talk of a bubble. But increased spending is mostly justified by the soaring value of broadcasting rights. If U.S. tech giants join the action in 2018, players will reap the benefits.
Best of Breakingviews 2017: Our readers’ top picks 28 Dec 2017 From Snap's IPO to Saudi's economic transformation, readers’ taste for agenda-setting insight was diverse and voracious. Donald Trump's first year as U.S. president jostled for attention with bitcoin's coming wipeout, Chinese tech and, naturally, anything on Wall Street bonuses.
As Macau welcomes the humble gambler, bet on MGM 29 Dec 2017 In 2018, poorer customers will outshine high-rollers, who have had an impressive run for the world's largest wagering hub. That would signal a reversal of fortunes for some Macau operators. As it opens a new casino targeting the masses, laggard MGM is poised to hit the jackpot.
Man City can narrow the deficit in Chinese soccer 29 Dec 2017 When it comes to mainland investment in European soccer and vice versa, the score is $3bln-nil. China’s splurge is over, but connecting old teams and new fans still makes sense. The Abu Dhabi-owned group behind Manchester City could be the first heavyweight to go the other way.
The Exchange: Professor Anand Menon 28 Dec 2017 The “Brexit and British Politics” author explains how last year’s vote to leave the EU became the UK’s defining political issue. He says longer-term political undercurrents helped tip the balance towards Leave – and will dictate the type of Brexit the country ends up with.
Apple and Saudi test out their comfort zones 28 Dec 2017 Saudi Arabia’s large population and income make it logical that the smartphone giant is in talks to open a shop. Enticing a cutting-edge global tech firm would also gloss the crown prince’s rule and modernizing campaign. There are risks for both; Saudi’s gamble may be bigger.
U.S. buyback surge will incinerate wealth in 2018 28 Dec 2017 Companies will get a windfall from Republican tax cuts and repatriated profits. The White House claims the money will spur jobs and wages, but a similar Bush policy mostly fueled share repurchases. If GE’s experience is any guide, the largesse will burn value on a grand scale.
Wells Fargo boss will vault over bank’s woes 28 Dec 2017 Tim Sloan will contend for banking’s comeback award in 2018. He struggled in his first year to contain fallout from the lender’s fake-accounts fiasco, but he’s cleaning up the company and, crucially, its culture. That should get investors, regulators and customers back onside.
Ambani’s debt cure is no elixir for shareholders 28 Dec 2017 Anil Ambani says he has rescued his Reliance Communications with a $6 bln firesale. That’s a relief for lenders, assuming buyers turn up as promised. But it’s not the moral victory the tycoon claims. Even if creditors play ball, investors are left with a much diminished company.
Temperance is the new craft beer for drinks groups 28 Dec 2017 Health awareness and restrained young drinkers are driving demand for booze-free tipples. Growth in volumes of low-alcohol beer will outstrip traditional drinks fivefold next year. It’s a new source of expansion for global companies as the craft beer craze loses its froth.
Bank clients will learn the value of data in 2018 28 Dec 2017 New EU regulations will force lenders to share account information with competitors - subject to savers’ consent. Up to two-fifths of banks’ revenue could be at stake. New entrants will need to overcome privacy concerns. Even so, customers will discover what their data is worth.
China will pull private capital into state orbit 27 Dec 2017 Beijing's mixed-ownership policy push will see private firms fed shares in government-owned enterprises like oil giant CNPC. Further blurring lines between public interest and profit won't do much for efficiency, but buyers will get insurance against political risk.
Samsung soups up for car race of the future 28 Dec 2017 Slowing growth in smartphones and chips will steer the tech giant to focus on autonomous vehicles. But its 2016 purchase of parts-maker Harman and small stakes in upstarts aren’t enough to catch up to Intel, Delphi and others. That’ll require bolder driving skills.
GE exits 3D-printing fight only slightly bruised 27 Dec 2017 The U.S. group ended a 15-month tussle for ownership of Sweden’s Arcam by buying hedge fund Elliott’s stake at a modest premium. GE should benefit from having full control of a technology critical to its aviation business, even if it nets Elliott’s Paul Singer a handsome profit.
Hulu’s slimmed-down ownership adds complexity 27 Dec 2017 Disney will have a majority stake in the streaming service after absorbing Fox’s 30 pct share. A further 30 pct sits with Comcast, currently muzzled because of an antitrust deal struck with regulators. It’s likely one will end up owning Hulu outright – but not without a fight.
Once-stodgy banks will gain upper hand in fintech 27 Dec 2017 Scandals hit SoFi and Lending Club. Earnest’s down-round sale showed building scale is hard. Such ill fortune is a boon for traditional players as they start cranking out more of their own tech-enabled tools to improve customer service and cut costs. It’s their battle to lose.
Geely could be useful back-seat driver at Volvo 27 Dec 2017 Seven years after buying Volvo Cars, the Chinese group is acquiring Cevian’s 8.2 pct stake in the Swedish truckmaker. The activist gets a decent exit after 11 years, while Volvo gets help with electric vehicles and China. The risk is Geely is getting in at the top of the cycle.
Unilever and Nestlé will sidestep supermarkets 27 Dec 2017 The duo’s decade-high operating margins are being squeezed between grocers, who are bargaining harder on price, and new ways of shopping. Selling direct to consumers is one way to reach ambitious profit goals that were set to appease activists. But the strategy is risky.
Regulators will drive next wave of EU bank mergers 27 Dec 2017 Past disasters, fragmented rules and limited cost savings rightly make European lenders wary of cross-border deals. The European Central Bank, however, is eager to see fewer and bigger banks in the euro zone. Mergers will please regulators more than shareholders.
Mega-miners will find good things in small packages 27 Dec 2017 They still depend on moving tonnes cheaply. But with green energy changing demand, big producers must increasingly think like small ones. For companies like Rio Tinto and BHP that will require a change of mindset – and in some cases, leadership.
Xi’s tighter grip will tax Chinese real estate 26 Dec 2017 The president will sideline traditional policy shops, in particular the Ministry of Finance, and assign policymaking to opaque smaller groups. That will accelerate some reforms, in particular the long-discussed national property tax, which could squeeze the housing market.
Credit markets will enjoy one last hurrah 26 Dec 2017 Healthy global growth will make chief executives and buyout firms more willing to take risks and keep a lid on defaults. There’s also a case for locking in cheap borrowing costs before central banks become less generous. But the next wave of blowups is building.