Cox: Brace for America’s version of Saudi Aramco 5 May 2020 And that’s just a start. After the pandemic, governments will foster the creation of national champions. Bigger, supposedly safer and more diversified will be in. Conglomerates may even be fashionable again. In the hardest-hit sectors, like the oil patch, anything can happen.
ECB firefighters can circumvent German roadblock 5 May 2020 A ruling by Teutonic judges challenged the European Central Bank’s long-standing efforts to use bond buying to stimulate the euro zone economy. Inventive rate-setters will find ways to plough on to achieve their aims. But it’s a very German way to test their independence.
Corona Capital: Apple bonds, DuPont’s priorities 5 May 2020 Concise views on the pandemic’s corporate and financial fallout: Cash-rich Apple capitalizes on the Fed’s largesse to raise $8.5 billion in cheap debt; DuPont looks past massive demand for PPE materials to a tough second quarter.
Virus state aid needs taper to avoid tantrum 5 May 2020 As governments lift restrictions, they face tough choices about weaning companies and workers off public support. Different industries require different timetables. Withdrawals should also be phased. The state can’t help indefinitely, but a sudden break would be too big a shock.
BNP CEO’s “trust me” routine is only half credible 5 May 2020 First-quarter earnings at the French bank fell 33%, driven by losses in equities trading. Boss Jean-Laurent Bonnafé argues that superior risk control means 2020 profit could fall by just one-fifth. Investors are rightly dubious that the lender’s bad debt charges will stay so low.
Deal squawkers spread their remorseful wings 5 May 2020 A flock of buyers is citing Covid-19 to wriggle out of acquisitions. Legal flaps may determine the fates for targets Moss Bros, Delphi, Metlifecare and a Bed Bath & Beyond business. Despite some questionable arguments, negotiating power favours the yellow-bellied birds of prey.
Virus offers Pakistan grim bargaining opportunity 5 May 2020 Debt payments suck up the largest chunk of its budget. Islamabad’s $8 bln crisis support package is measly, yet will push the fiscal deficit to 10% of GDP. Pakistan needs more than repayment deferral from creditors, especially China. And it’s better positioned to ask than most.
Tyson races to fix just one of two long-term woes 4 May 2020 The $20 bln meat processor is finally doing more for workers after Covid-19 infections shut down plants. It may mark the end of cheap labor as a crutch for U.S. food-industry titans. But their other big problem is the concentrated, environmentally unfriendly supply chain itself.
Lack of bailout guardrails creates vicious cycle 4 May 2020 U.S. politicians bashed big firms like Ruth’s Chris for getting aid in the previous small-business bailout. But they were just capitalizing on loopholes. The latest $310 bln is also susceptible to abuse. Until problems are fixed, more bailouts will be required.
The Exchange: Blue-collar China 4 May 2020 Pandemic and recession are making the lower strata of the labour force crankier than they’ve ever been. Author Dexter Roberts explains to Pete Sweeney how Beijing is struggling to manage worker dissatisfaction, and points to rising economic costs and political risks.
Brazil’s finance minister: right place, wrong time 4 May 2020 Chicago-trained Paulo Guedes helped achieve needed pension reform and topped privatization goals. But Covid-19 torpedoed plans to shrink the state’s role in the economy, and presidential chaos has undermined his efforts. His agenda is mostly dead, so he’ll probably jump ship.
Chancellor: Big is beautiful will also be ugly 4 May 2020 The clamour to save jobs and a prolonged shift to low interest rates will give big companies the upper hand in consolidating the small and the weak. This ever-greater concentration of industry and power will ultimately exacerbate the sorts of shortages now hurting big economies.
Warren Buffett may have met his match: the Fed 4 May 2020 For the unflappable billionaire, moving Berkshire Hathaway’s annual meeting online and suffering a $50 bln loss from stock swings are minor bumps. His bet-on-America philosophy faces a bigger challenge. Easy money does no favors for an insurance company with $130 bln of cash.
Pandemic stalls Ferrari’s Formula 1 turboboost 4 May 2020 Bans on mass events are disrupting this year’s racing season. That’s bad for the luxury carmaker, which in 2019 made 14% of its revenue from Grand Prix events and branding. While the core auto business should hold up, a lack of action on the tracks leaves growth in the slow lane.
Corona Capital: Baseball and robo-taxis 4 May 2020 Concise views on the pandemic’s corporate and financial fallout. Taiwan hits on a way to please baseball fans, with the help of some people-shaped placards. Meanwhile, chipmaker Intel finds a deal amid a crisis.
Cable cowboy’s UK round-up puts Vodafone in corner 4 May 2020 U.S. billionaire John Malone is in talks to merge his Virgin Media broadband outfit with mobile operator O2. A joint venture could let Spain’s Telefonica, O2’s indebted parent, extract 4 bln pounds. Without a fixed-line partner in its home market, Vodafone faces a lonely future.
Offices will get roomier when the virus passes 4 May 2020 Conventional wisdom seems to be that after the pandemic commercial landlords will be crushed as staff stay home. But there’s a counterargument that cooped-up workers will crave interaction, employers will need to space them further apart and put an end to unhealthy hot-desking.
Poor-country central banks will go awry aping Fed 4 May 2020 Rate-setters from Indonesia to Hungary are copying Fed Chair Jay Powell by buying bonds. Others could well follow. That will curb borrowing costs at a time of rising public spending. But these policymakers run bigger inflation and credibility risks than their developed peers.
America could actually shirk its debts to China 3 May 2020 It would cause market chaos and give a clear reason to avoid the dollar. But Donald Trump would find it surprisingly easy to effectively renege on China’s $1.1 trln of U.S. Treasuries, using broad powers he already has. It’s only a matter of time before the idea gains traction.
Mukesh Ambani gives Saudis a run for their money 4 May 2020 A $7 bln rights issue backstopped by the Reliance Industries boss will help keep his promise to cut debt. Although smaller than a delayed deal with Aramco, the discounted stock sale is a record for India. The symbolic significance should instil more confidence amid the pandemic.
Tech’s lucky few virtually detach from economy 1 May 2020 There’s no snazzy acronym to replace the FAANG stocks, but Amazon, Shopify, Netflix and Microsoft have seen their stocks blast off, while Facebook and Apple lag. While plenty of tech services can be consumed at home, a big differentiator is subscriptions and revenue certainty.
Restructuring gurus face embarrassment of riches 1 May 2020 While fees from advising on M&A are drying up, helping companies navigate cash crunches and bankruptcy will be a big pandemic money-spinner, probably larger than past crises. Experts like Lazard don’t break out how much they make from such activities. That’s probably wise.
U.S. oil giants play chicken with shareholders 1 May 2020 Shell cut its dividend on Thursday and took a realistic outlook towards the fossil fuel’s future. But U.S. drillers are forging ahead as if the commodity’s only challenge is price. Without a thoughtful 30-year plan, Exxon and Chevron can only hope to tread water, at best.
Review: A grim look at bad American exceptionalism 1 May 2020 “Deaths of Despair” analyses the sharp rise in U.S. mortality from suicide, alcohol and drugs, especially among poor whites. As Covid-19 further widens social divisions, the lament of economists Anne Case and Angus Deaton looks prescient. America fails its weakest residents.
Corona Capital: Exxon, Clorox 1 May 2020 Concise views on the pandemic’s corporate and financial fallout: Exxon is getting clean by manufacturing much-needed medical-grade hand sanitizer while bleach maker Clorox will likely continue its winning streak.
Free ECB money is little use for battered banks 1 May 2020 President Christine Lagarde launched yet another programme to slash funding costs for lenders. History suggests much of the benefit will flow straight to borrowers, as intended. Loading up on southern European debt would be profitable but risky, and may irk supervisors.
Business interruption fight is black box of risk 1 May 2020 Giant companies and small businesses are demanding compensation for lockdown-related closures. Though some insurers excluded pandemics, others left grey areas. Legal and political fights cloud the vast liability. Uncertainty will be a drag on the industry – and on its customers.