S&P 500 drop implies nine months of no revenue 27 Mar 2020 That’s one simplified way to think about the amount of value destroyed by the over 20% plunge in U.S. stocks in 2020. It sounds too pessimistic – but it's less extreme if part of the problem was that shares were overvalued before the Covid-19 pandemic started.
Bond ETF turmoil exposes credit’s faulty wiring 27 Mar 2020 The share price of some of these funds plummeted below the value of the less liquid assets underpinning them, upping selloff fears. But ETFs aren’t really to blame; rather it’s the corporate debt market’s opaque pricing. Uncle Sam’s new role as a buyer could spur change.
Ford, GM can ride out lockdown till September 27 Mar 2020 The two U.S. automakers are bringing in almost no revenue with factories and sales on hiatus. And they have huge fixed costs. But they’re awash with cash and don’t need to buy parts. Throw in some austerity, and each has around six months before no or slow sales threaten a crash.
Trump dealmaking powers may grease free markets 27 Mar 2020 The U.S. president invoked an act that could ramp up production of critical medical supplies and equipment. Given the drastic healthcare needs, mobilizing federal execution makes sense. It would stop state bidding wars but corporate America won’t suffer.
EU divisions risk inflating crisis bill 27 Mar 2020 European leaders failed to agree a joint fiscal response to the pandemic. Despite European Central Bank support, EU inaction makes it harder for Italy and other indebted euro zone nations to ramp up spending to support their stricken economies. That will raise the ultimate cost.
Mitsubishi is too mild a mediator for Nissan 27 Mar 2020 Mitsubishi Corp, second-largest shareholder in the eponymous carmaker, is mulling a 10% stake in Renault, Reuters reports. It’s a small step, but could signal an overdue adjustment within the troubled troika. The French group will have to give more to get Nissan on board.
Rice jitters suggest nations can panic-buy too 27 Mar 2020 Iraq wants to stock up on the staple, while Vietnam may curb exports to ensure enough food to ride out the coronavirus storm. It’s not yet out of hand, but prices are creeping up. And unlike with shoppers, there’s no global policeman to man the checkout if hysteria takes hold.
Corona Capital: Cirque du Soleil, Airlines, France 27 Mar 2020 Concise views on the pandemic’s corporate and financial fallout: Cirque du Soleil may leave TPG sunburnt. Airlines get a sweet bailout. And France joins the campaign against dividends.
Singapore Airlines secures business-class bailout 27 Mar 2020 State investor Temasek is supporting a whopping $13 bln funding package. Deeply discounted equity and a zero-coupon convertible bond provide other shareholders a chance to bet on a post-crisis recovery. The hard-to-copy playbook could even give the carrier a longer-term edge.
China throws savers under bus full of bankers 27 Mar 2020 The government might cut interest rates on deposits, buttressing lenders’ margins as defaults rise. Ordinarily that would encourage people to invest more and hoard less. Unfortunately Beijing has deliberately made it hard to find decent returns elsewhere in the system.
Review: China’s brewing blue-collar rebellion 27 Mar 2020 Foreign investors are entranced by the Chinese middle class; the proletariat less so. In “The Myth of Chinese Capitalism”, Dexter Roberts lays out the increasing plight of the latter, to the benefit of the former. Beijing is struggling to manage this big, hidden political risk.
America should bail out airlines the American way 26 Mar 2020 A $50 billion government lifeline hardly sounds like capitalism. But the U.S. has been an outlier in not propping up its airlines. Bank bailouts already showed the public can emerge better off. The key is to strike a good deal, even if that means taxpayers end up holding equity.
Virus makes water shortages everyone’s problem 26 Mar 2020 The quest to protect clean water supplies has lacked the snappy targets and big corporate backers of the climate-change movement. A global obsession with handwashing amid the Covid-19 pandemic may change that. When one region can’t take simple steps to sanitize, all are at risk.
Virus leaves all landlords under same leaky roof 26 Mar 2020 Blackstone, British Land and Intu’s differing financial shapes mean they can cut coronavirus-hit firms varying degrees of slack on their rent. But major tenants like Primark are refusing to pay. If everyone follows suit, landlords won’t have much in the way of comeback.
Cox: Virus-ebbed tide exposes the better leaders 26 Mar 2020 Politicians, central bankers and CEOs will soon be judged by their handling of the health crisis. Impressive new options who have shown courage, effectiveness and moral purpose have started to emerge. Preconceived choices – like Biden vs. Trump – are rapidly becoming passé.
Xerox-HP deal is dead for now 26 Mar 2020 The smaller printer maker's hostile $35 bln offer for its rival looks even more like a fool’s errand in today's market. It would pile on debt, and HP’s resistance suggests a friendly deal won't happen. As with other pending mergers, industrial logic will still exist in a year.
Corona Capital: Ackman’s hedge, Oil stockpiles 26 Mar 2020 Concise views on the pandemic’s corporate and financial fallout, including investor Bill Ackman’s surprise reversal of fortune, and the U.S. shale oil bailout that wasn’t.
Why 150% is the new 100% for public debt/GDP 26 Mar 2020 Governments are splurging to fight the economic havoc wrought by the coronavirus. For example, France’s debt will exceed its annual output by the end of 2020. Investors may not mind as much as before: Every country is affected, and central banks are the backstops.
Virus audit crunch can be mitigated, not averted 26 Mar 2020 Covid-19 uncertainties may force accountants to raise red flags on companies’ financial statements. Delaying reports by two months, as in Britain, provides only partial relief. Investors and banks will still have to make calls on solvency, with less help from auditors.
Crisis gives activism new drive in Lagardère spat 26 Mar 2020 Amber Capital is pressing ahead with its campaign to oust the French company’s supervisory board. Long-term share underperformance and messy governance provide the justification. With Covid-19 giving companies an excuse to shelve reforms, constructive criticism is still needed.
Chinese video-game deal is fight for extra life 26 Mar 2020 Tencent-backed iDreamSky wants to take over larger rival Leyou for $1.3 bln with CVC’s help. The suitor’s Nasdaq delisting and subsequent relisting in Hong Kong have not gone well, but owning the Warframe developer makes strategic sense. The financial logic is less compelling.
China plays chicken with property market 26 Mar 2020 Indebted developer Evergrande warned 2019 profit could drop 50%, and is slashing prices as sales tank. Rivals are in trouble, too. A real estate crash poses an unprecedented economic threat, but Beijing is maintaining curbs on speculation. That hard line risks hobbling recovery.
$2 trln U.S. aid offers postcrisis blueprint 25 Mar 2020 The Senate plan expands jobless support to gig workers while Congress approved sick pay for small businesses. But benefits expire, as do virus-focused policies at firms like Walmart. This is a chance for workers and policymakers to nudge companies to provide long-term help.
Holding: Lawyers proving prepared if not prescient 25 Mar 2020 Covid-19 has thrown them for a loop like anyone else. Yet recent innovations in corporate law, from M&A to insider trading, have put companies and the public in a better position to face the virus fallout. It’s a change from the lousy advice that helped prompt the 2008 crisis.
Virus clarifies case for universal U.S. healthcare 25 Mar 2020 The debate in America tends to get bogged down in how to change the system, losing sight of why. Other developed-country governments guarantee basic medical care for everyone. The Covid-19 pandemic shows why the benefits transcend wealth, politics and geography.
Viewsroom: Lives under lockdown 25 Mar 2020 From Milan to Mumbai to Manhattan, Breakingviews journalists are staying put to help stop the spread of coronavirus. Editor Rob Cox checks in with columnists in India, where 1.3 bln people are housebound; New York City, the epicenter of the U.S. crisis; and hard-hit Italy.
M&A will be lasting casualty of post-viral world 25 Mar 2020 Notions of national security will broaden as companies are expected to do their bit to keep stricken economies afloat. Buyers will face greater onus to show they won’t strip away assets and jobs. And as countries recover at different speeds, accusations of opportunism will fly.
Oil storage crisis is new threat to OPEC 25 Mar 2020 The double whammy of a Saudi Arabia-led price war and a virus-fuelled collapse in demand points to a huge oversupply of crude this year. Space to store the surplus may run out at this rate. If that’s exhausted, a barrel of the commodity could soon be worth less than $20.
Bank of Japan gives lesson in perils of ETF buying 25 Mar 2020 Unrealised losses on its exchange-traded fund holdings could be as high as $27 bln. Governor Haruhiko Kuroda has reserves that would likely cover that. And in a real pinch, governments can recapitalise central banks. But that may call into question rate-setters’ independence.
Margin calls to deliver double body blow in crisis 25 Mar 2020 Fiscal and monetary bailouts targeted at sustaining ordinary workers may not help entrepreneurs who used their stock to lever up. WWE boss, and Donald Trump chum, Vince McMahon looks like the first casualty. But he’ll have plenty of company in the ring for this finance smackdown.