Fed has a spreading inflation problem 11 May 2022 U.S. consumer prices rose at an annual rate of 8.3% in April. While that was lower than the four-decade high seen a month earlier, food costs leapt by the most since 1981 and shelter grew more expensive. Broadening price pressures mean there’s no respite for Chair Jerome Powell.
Stablecoin crash drags crypto ideals back to earth 11 May 2022 TerraUSD, a digital token supposedly pegged to the U.S. dollar, slumped to a fraction of that. The popular store of value is vulnerable because its design is based on trading incentives, not hard reserves. For crypto fans there’s a tradeoff between decentralisation and stability.
Capital Calls: Coinbase is conjoined to crypto 11 May 2022 Concise views on global finance: The exchange saw users and volumes fall, revenues slashed and lost over $400 mln in the first quarter. When cryptocurrencies slump, Coinbase has no choice but to follow.
“Temptation Island” SPAC dangles drama and sequels 11 May 2022 Banijay, maker of the reality TV show, will merge with betting firm Betclic through a blank-cheque firm, valuing both at 7 bln euros. It’s an odd mix with few synergies, offset by a reasonable valuation. Founder Stéphane Courbit gets a cleaner balance sheet for more deals.
Reinvention tops returns in Philip Morris snus bet 11 May 2022 The tobacco giant has agreed a $16 bln takeover of nicotine pouch maker Swedish Match. The deal brings it closer to being mostly smoke-free by 2025. But only rapid growth or big cost cuts can justify the 39% premium. CEO Jacek Olczak has scant room for legal or regulatory snafus.
Marcos clan’s return to Manila is awkwardly timed 11 May 2022 The Philippines’ president-elect Ferdinand Marcos Jr, son of the late strongman, inherits an economy that grew 7.7% last quarter, but faces mounting headwinds. He will have to find drivers beyond the infrastructure spending that made his predecessor – and father - so popular.
Super-car SPAC tests EV hype’s reset expectations 11 May 2022 A $1.7 bln bid to resurrect a battered Chinese electric automaker comes as other upstarts are under pressure. Buyer Liu Suying likes a comeback story: he recently relisted Playboy. But CH-Auto’s failure to flog sporty coupes means it’s unlikely to be the next Tesla or Nio.
Twitter board is dangling over hot water 10 May 2022 The social media company’s directors did not conduct an auction to seek rival offers to Elon Musk’s $44 bln bid, and some have overlapping interests. That leaves them open to accusations of conflicts of interest. Whether the deal goes ahead or not, the board looks exposed.
Pfizer plucks Biohaven out of biotech bears’ lair 10 May 2022 Like tech firms, speculative drugmakers flooded the market in recent years, and valuations rose to unsustainable highs. Now stocks like migraine-specialist Biohaven have crashed back to earth. Pfizer’s cleverly structured $12 bln swoop suggests that’s an opportunity for some.
Grindr’s SPAC profile picture is a blur 10 May 2022 The LGBTQ community’s favoured dating app is listing via a merger with a blank-cheque firm run by a major shareholder. The $2.1 bln price tag looks chunky next to peers like Bumble. Besides data security and governance, investors can fret about potential conflicts of interest.
Fed manages to hurt both rich and poor 10 May 2022 Past tardiness in tackling surging inflation means low-income U.S. households face huge increases in the cost of living. Now, Fed Chair Jay Powell may have to hike rates so much that growth falters – a prospect hitting stocks and richer households’ net worth. Misery has company.
Capital Calls: Turkey, Nintendo/Sony, India IPO 10 May 2022 Concise views on global finance: President Erdogan makes another ham-fisted monetary intervention; the Switch maker weathers supply chain ructions better than its larger rival; New Delhi needs to be even more generous in its landmark listing of Life Insurance Corp of India.
Renault’s Russia exit plans mix logic and delusion 10 May 2022 The French carmaker could sell its Russian assets for a symbolic euro with a plan to buy them back at a later date. Its hope for a “return to normal” after the war in Ukraine sounds optimistic, if not delusional. But for now, Renault sheds a burden and avoids the Kremlin’s ire.
BlackRock spikes guns of green activists 10 May 2022 Larry Fink’s group will back more oil and gas production. After COP26, institutional money looked set to phase out fossil fuels, but an energy crisis has intervened. Rivals may follow the $10 trln fund giant, propping up driller valuations and complicating the green transition.
Zimbabwe borrows from bank of bad ideas, again 10 May 2022 With inflation at 96%, Harare plans to stop further currency slumps by a ban on bank lending. That stymies a sly trade where insiders play the spread between official and black-market FX rates. But as with prior moves it’s a blunt tool that erodes rather than builds confidence.
China’s private cloud giants sail into storm 10 May 2022 Alibaba and Tencent want to dominate the country's $35 bln data storage and services market. But cybersecurity hawks are pushing contracts toward state-backed firms. Trying to identify and back China's answer to Amazon Web Services may not turn out the way investors expect.
Philip Morris’ snus deal looks doubly defensive 9 May 2022 The U.S. cigarette maker could beat a faster path to becoming a mostly smoke-free company if it snags the $12 bln Swedish Match and its chewable tobacco packs. A tie-up would be pricy, but investors’ growing yen for recession-proof stocks gives the Marlboro Man an added edge.
Capital Calls: Ford wisely trims its electric bets 9 May 2022 Concise views on global finance: The Detroit automaker is selling part of its stake in stumbling electric startup Rivian, just as its own costly electric turnaround takes hold.
Toronto can teach aspiring tech hubs some lessons 9 May 2022 Many places try to replicate aspects of Silicon Valley. Favorable immigration rules and cheaper labor costs have made the Canadian city a strong contender. Some of these advantages may not endure. But success in luring giants like Meta Platforms means that may not matter for now.
Uber’s CEO has right idea, wrong valuation 9 May 2022 Boss Dara Khosrowshahi said he’s focused on cutting costs to up free cash flow. That sounds like a great idea. The trouble is Uber’s $50 billion valuation is too high even assuming better margins. And it’s harder to square if top line growth slows when expenses are slashed.
Property tie-up puts London landlords in charge 9 May 2022 Capco, owner of retail hub Covent Garden, is planning a 3.6 bln pound merger with West End neighbour Shaftesbury. Capco’s 25% stake in its larger rival helps explain the absence of a premium. If regulators approve, the main benefit will be greater bargaining power with tenants.
Chelsea buyer will struggle in financial league 9 May 2022 A group led by LA Dodgers owner Todd Boehly and U.S. buyout firm Clearlake will pay $3 bln for the UK soccer club. Unlike current owner Roman Abramovich, they’ll be eyeing a return on their investment. Yet $2 bln of pledged spending, including a new stadium, make that tricky.
Europe may swap one energy dependency for another 9 May 2022 The bloc is ramping up investment in renewable sources to help kick its addiction to Russian oil and gas. Yet China currently controls at least 75% of the solar panel supply chain. To gain its energy freedom, Europe will also need to invest in manufacturing at home.
Post Roe-leak, it’s not the economy, stupid 6 May 2022 Republicans were in a sweet spot ahead of November’s U.S. elections. Joe Biden’s early presidency has brought inflation, a failed attempt to tax the rich, and little help for the middle class. A leaked Supreme Court opinion on abortion, though, changes the calculus.
Big Tech valuations are re-entering the real world 6 May 2022 Amazon hit supply-chain snags. Netflix’s growth is slowing. Alphabet and Microsoft face wage inflation. The tech giants' price-to-earnings ratios are converging with industrials like Caterpillar. That makes sense: Minus recent euphoria, they're tools for everyone else's business.
Capital Calls: Business travel, Adidas China woes 6 May 2022 Concise views on global finance: British Airways owner IAG faces stormy UK skies; Chinese lockdowns and boycotts are slowing down the German sneaker maker.
CATL’s woes will sap others’ batteries too 6 May 2022 The $130 bln battery maker goofed in the first quarter: net profit fell 24% and it revealed a 1.8 bln yuan derivative liability. Shrinking margins suggest its size isn’t a protection against supply chain chaos and commodity price hikes. It’s even worse news for smaller rivals.
Stars align for UAE to become a global crypto hub 6 May 2022 Big exchanges Binance, FTX and Kraken are expanding in Dubai and Abu Dhabi as local regulators grant licences to trade virtual assets. The world’s leading financial regulators have been wary of cryptocurrencies. A variety of factors give UAE the chance to steal a march on them.
Japan bank agitator set to prove a sad point 6 May 2022 UK hedge fund Silchester wants $3 bln Bank of Kyoto and three peers to pay higher dividends using income from absurdly outsized equity stakes. It would sensibly deploy cash and put a spotlight on weak lending activities. Alas, being right in Japan is less than half the battle.
Selloff shows China’s lack of investment traction 6 May 2022 U.S.-listed Chinese stocks underperformed during Thursday’s New York bloodbath, tumbling 8%. Beijing still hasn’t convinced global funds it’s more than just another volatile emerging market. Slowing growth and an inflationary environment will make it hard to change their minds.