Job losses add turbulence to Fed’s softish landing 24 Jun 2022 The central bank reckons taming inflation means doubling interest rates and unemployment rising to 4.1% in 2024. Yet it expects GDP to keep growing despite the loss of about 1 mln jobs. Even if the Fed is right, the risk is that cooling consumer confidence squashes growth.
Zendesk’s sad exit shows tech bubble madness 24 Jun 2022 The customer service software firm agreed to a $10 bln offer – 40% lower than the one it nixed in February. Yet the private equity buyers aren’t getting an obvious bargain either, at over 50 times estimated EBITDA. Readjusting to reality can take a while.
Peter Thiel-tied fund fights China fire with fire 24 Jun 2022 A nonprofit fund backed by Silicon Valley bigwigs wants to invest in tech that serves national interests. It raises conflicts, security issues, and takes a page from Beijing's playbook. But given China’s market meddling, it’s not a horrible solution.
Barclays adds risky spice to insipid valuation 24 Jun 2022 The UK bank is scooping up specialist lender Kensington for nearly $3 bln. It’s small, and CEO C. S. Venkatakrishnan is right to try to gee up his low-valued shares with retail assets. Still, he’s also bulking up in the riskier end of the market amid a potential house price dip.
Germany’s gas action plan pulls its punches 24 Jun 2022 As Gazprom restricts supplies, Berlin is switching coal power plants back on and squabbling over nuclear energy. But it’s still shielding Germans from high prices. A better ploy would be to use fiscal buffers to protect poorer citizens, thus incentivising everyone to use less.
Cost of Asia’s recurring floods will trickle down 24 Jun 2022 Swathes of Bangladesh and India’s Assam state were swamped this week, affecting 9 mln people. Insurers shy away from offering cover for such disasters if they’re too frequent. For countries on the front lines as climate change worsens, the burden on the public purse will rise.
Lithium landgrab sparks new electric-car risk 24 Jun 2022 Tesla, Stellantis and others want to lock in long-term supplies of the battery component. Elon Musk might even try mining it. Such steps are enticing after the metal’s price rose tenfold in two years. But deals struck under duress can be a shock to the system down the road.
Buffett puffs heavily on oil cigar butts 23 Jun 2022 Berkshire keeps upping its energy bets, now owning a quarter of $52 bln shale driller Occidental, counting warrants. That’s a change from his past commodity producer skepticism, reinforced by oily slips. Waning prospects, and lower investment, make it more of a Buffett business.
Too bad Netflix isn’t on the block 23 Jun 2022 Boss Ted Sarandos is exploring an advertising partnership to supplement the $80 bln firm’s subscription service. Yet media alliances – Netflix, Hulu, others – have turned ugly. Netflix’s valuation has fallen steeply, and it needs deep cash coffers. A better idea would be a sale.
Investors need to learn to ride inflation cycle 23 Jun 2022 Bonds and shares are tumbling as prices soar, just as in the 1970s. The experience of that decade suggests value stocks, commodities and safe-haven currencies offer the best protection, says Edward Chancellor. But wild swings in inflation can still catch markets off-guard.
Private equity’s short-termism has a rising cost 23 Jun 2022 Volatile markets mean firms like Blackstone and KKR will increasingly have to sell assets to each other and themselves before funds expire. Such deals layer on extra costs and can have iffy governance. Investment vehicles with longer lives is one solution for the $3 trln sector.
LIV Golf finds that Saudi money can’t buy love 23 Jun 2022 The rebel league is Riyadh’s latest PR pitch to the global business crowd. Fairways lined with gold have managed to hook a handful of names. But a lack of major broadcast deals and top drawcards like Tiger Woods or Rory McIlroy means LIV is likely to miss the financial cut.
Gulf pot of gold, China’s unemployment problem 23 Jun 2022 Investment banks like HSBC and Citigroup are beefing up teams in the Middle East to rake in juicy IPO and M&A fees. In this Viewsroom podcast, Breakingviews columnists discuss why early investment is paying off. Also, the People’s Republic’s jobs crisis is likely to worsen.
Capital Calls: Bank stress tests, Japan inflation 24 Jun 2022 Concise views on global finance: U.S. lenders passed the latest Federal Reserve capital exams, but they’re bound to be more stressful next time; the country’s consumer prices rose 2.1% in May, intensifying a standoff between the central bank and bond investors.
Drug sellers brave clinic on China’s tech habits 23 Jun 2022 Alibaba and JD.com's drug units fell nearly 15% on fears of a ban on marketplace operators from acting as vendors. In theory, companies could oust third party sellers without much self-harm but consumers may pay more. It’s a timely test of Beijing’s support for the platform economy.
Aussie energy crisis demands both carrot and stick 23 Jun 2022 Electricity trading restarted after a week-long hiatus. Canberra wants to pay generators to guarantee supply from 2025. Until then, outages will linger. A windfall tax, or the threat of one, on coal miners and gas drillers like Exxon Mobil and Santos could spark short-term fixes.
Altria begins to look like tobacco’s bad bank 22 Jun 2022 The Marlboro-maker’s value fell by around $7 billion over a U.S. crackdown on nicotine and potential ban for e-cigarette partner Juul. Altria is starting to look like the riskiest parts of the tobacco industry, rolled up into a single bundle.
Gas tax holiday accomplishes little, costs a lot 22 Jun 2022 Joe Biden’s call to suspend U.S. federal gas taxes will shave some cents off costs at the pump. But it's regressive, works against long-term goals to reduce fossil fuel use and could even stoke inflation. That’s a high price to pay for a pre-election popularity bump.
Sam Bankman-Fried bailouts flag crypto’s fragility 22 Jun 2022 The wunderkind’s businesses coughed up $750 mln to help ailing brokers Voyager Digital and BlockFi. The rescues suggest the sector cannot easily withstand the failure of just a few players. And winners like Bankman-Fried may not save the $900 bln industry if prices tank again.
Canada’s climate pledges are too light on detail 22 Jun 2022 Justin Trudeau’s government has laid out how the world’s fourth-largest oil producer intends to get to net zero. But the details outlining how Canada’s prime minister plans to get there are pretty flimsy. Unless they materialize, Ottawa’s climate credibility will stay low.
Green investors need to get their hands dirty 22 Jun 2022 Most money managers fight climate change by shunning stocks of polluting companies. By contrast, so-called transition funds target dirtier assets to clean them up. Though the approach brings risks, it could also deploy trillions of dollars of green capital in a smarter way.
Rolls-Royce showcases flexible pay’s ups and downs 22 Jun 2022 The $9 bln UK engineer is offering its staff a one-off payment to match soaring inflation, instead of a bigger salary hike. The flexibility works for employers, and lump sums are worth more to lower-paid employees. But workers have to trust bosses to give similar help next year.
Ukraine needs grants more than long-term loans 22 Jun 2022 EU leaders are debating ways to help Kyiv finance its $5 bln monthly budget deficit from the Russian invasion. So far, it has met all its financial obligations. But Ukraine’s allies shouldn’t add to its debt burden. Better that they borrow in order to help Kyiv out with grants.
Capital Calls: SoftBank Arm-twisting 22 Jun 2022 Concise views on global finance: The UK government may be eyeing desperate measures to keep SoftBank-owned chip group Arm's IPO in London.
China stocks decouple from West – and reality 22 Jun 2022 The CSI300 is up some 14% over the past couple of months against a 10% swoon in the S&P 500. There’s growing optimism Beijing crackdowns are ebbing, lockdowns are easing and stimulus will be flowing. It may look like a cheap hedge against the Fed, but hope is not a fundamental.
Kellogg’s three-way breakup plan lacks crunch 21 Jun 2022 The $24 bln Frosties maker is spinning off its North American cereals and plant-based foods, leaving behind a faster-growing global business. Dividing businesses by their prospects may boost performance. But any valuation uplift seems unlikely to justify the cost of the carve-up.
Veteran Nelson Peltz makes rookie mistake 21 Jun 2022 The activist investor is facing a shareholder revolt at his London-listed fund. He joins other high-profile peers like Dan Loeb to get embroiled in messy spats. Whatever the appeal of raising long-term capital in public markets, sometimes it’s easier to stick to your knitting.
CEO’s exit puts $30 bln cancer specialist in play 21 Jun 2022 Founder Clay Siegall quit U.S. oncology biotech Seagen after a domestic-abuse charge. Merck has already spied an opening into a hot area of cancer treatment. Rivals Roche, Pfizer and Novartis may also want to get involved. But Seagen’s size will create regulatory problems.
Capital Calls: Spirit dogfight costs more each day 21 Jun 2022 Concise views on global finance: Hostile suitor JetBlue bumped up its offer for the budget airline. The bidding war with rival Frontier Airlines is getting more expensive, even as the cost of corporate debt – and thus the burden for the winning suitor – keeps rising.
Euromoney offers warm glow in buyout freeze 21 Jun 2022 The London-listed financial data and events firm is evaluating a $2 bln takeover offer from a private equity consortium. Despite a chunky premium, the buyer can make a decent return with a modest margin boost and limited debt. These qualities may yet attract other bidders.