Capital Calls: Mobileye IPO, Loafer buyout 26 Oct 2022 Concise views on global finance: Intel’s autonomous driving subsidiary benefited from lower expectations, while Tod’s founder Diego Della Valle may have a Plan B after resistance from minority investors forced him to abandon plans to take the luxury shoemaker private.
Energy crisis gives beermakers a lasting hangover 26 Oct 2022 Heineken’s shares fell 10% after reporting weaker-than-expected sales. Inflation is eroding punters’ disposable income, making it harder for brewers to raise prices like in previous crises. Soaring costs for fuel and wheat, which bite next year, pose a further threat to margins.
Europe’s industrial mess has protectionist endgame 26 Oct 2022 Manufacturers like Germany’s $42 bln BASF face a toxic brew of high energy prices at home and rising risks in China. That implies a freeze on new investment, and a loss of market share to foreign players. To stop that, European states may ultimately intervene with tariffs.
European banks’ perfect moment will prove fleeting 26 Oct 2022 Rates are rising, traders are busy, and customers are paying their debts. That helpful backdrop helped Barclays, Deutsche and Santander average a punchy 11% return on tangible equity so far in 2022. But with recession looming, and bad-debt buffers looking low, it may not last.
Australia has bulwark against China slowdown 26 Oct 2022 Demand from Down Under’s top trading partner is cooling. But Treasurer Jim Chalmers' first budget assumes the price of exports like iron ore will fall while also keeping a tight lid on spending. The fiscal discipline will be a shock absorber if China’s growth disappoints.
China’s chairman of everything wins again 26 Oct 2022 President Xi Jinping dramatically consolidated his political power at the recently concluded Communist Party Congress. In this episode of the Exchange, Dan Rosen of the Rhodium Group and Pete Sweeney delve into the role Xi-style socialism will play in China’s economic future.
Xi’s indifference to economic optics saves time 26 Oct 2022 China’s leader is swapping internationally experienced financial reformers like Liu He with parochial loyalists. The latter will struggle to soothe investors, especially foreigners. Yet the pro-market gloss Liu and peers applied to Xi’s policy was misleading in the end.
Spotify will have to keep an eye on TikTok’s clock 25 Oct 2022 The $19 bln Swedish company grew subscribers by 20% to 456 mln in the latest quarter. Its operating loss also widened from investments in podcasts and staff. At least it has some time on its side as the short-video firm’s Chinese parent ByteDance explores music expansion.
Alphabet properly preps its books for a downturn 25 Oct 2022 The company’s quarterly revenue growth slowed to 6%, the worst performance since the pandemic. But compared to rivals, the $1.3 trln giant taps a variety of sources for ad dollars and has been comparably conservative with hires. A looming downturn will be a little less painful.
Microsoft’s melancholy largely out of its hands 25 Oct 2022 The $1.9 trln software giant has been hit by three woes: Consumers are overstuffed with pandemic PC purchases, a strong dollar is reducing overseas revenue, and web services growth is slowing as businesses retrench. Shareholders just have to sit tight.
UK unveils overdue sieve for ESG alphabet soup 25 Oct 2022 Britain’s Financial Conduct Authority has sketched out rules classifying environmental, social and governance funds. The approach differs from Europe’s framework, adding to fund managers’ burden. Yet it may also be tougher and more consumer friendly, making greenwashing harder.
Adidas-Kanye split leaves investors in the money 25 Oct 2022 The $18 bln sportswear group cut ties with the musician, now called Ye, after he made offensive comments. Its sluggish response risks a boycott. But given Yeezy sneakers’ high profit margins in recent years, shareholders may already have won more than they stand to lose.
GE is hurting but Larry Culp’s legacy has hope yet 25 Oct 2022 The $80 bln industrial conglomerate’s renewable business dragged on earnings. Free cash flow is falling, and the company cut earnings guidance. But a $370 bln U.S. spending package should help. And CEO Culp is about to head up the aerospace division, GE’s only bright spot.
HSBC ditches its cost-cut tsar before job is done 25 Oct 2022 Boss Noel Quinn is replacing CFO Ewen Stevenson with investment bank co-head Georges Elhedery. It’s odd timing, since the $100 bln lender has not finished slashing expenses, which is Stevenson’s speciality. Elhedery will have to wield the axe quickly to avoid spooking investors.
ECB $2 trln bank-loan unwind is fraught with peril 25 Oct 2022 The European Central Bank may tweak a funding scheme to stop lenders minting money at its expense. Fiddling with the terms is legally dubious. Other options could undercut its fight against inflation. But the status quo, indirectly costing taxpayers billions, is unsustainable.
Toyota’s new, new EV plan suggests smarter driving 25 Oct 2022 The $218 bln Japanese automaker is mulling its third electric-vehicle reboot in 13 months as rival Tesla leaves it in the dust. Frequent rejigs can mean bigwigs are flailing for ideas. But Toyota’s latest overhaul implies boss Akio Toyoda is addressing missteps with more speed.
Hong Kong’s real-estate correction has no winners 25 Oct 2022 Property prices are falling due to rising interest rates, a brain drain and a weak local economy. That sounds like good news for the world’s most unaffordable housing market. But first-time buyers and homeowners face rising mortgage costs, adding pressure for developers, too.
Rishi Sunak offers only temporary fix for UK woes 24 Oct 2022 Britain’s borrowing costs fell as the ex-chancellor won the race to become prime minister. Sunak is the least-bad option for restoring Britain’s battered finances and credibility. It’s less obvious he can unite a chaotic party or sort out a longer-term cost-of-living crisis.
Big Tech risks a reversion to Web Finance 1.0 24 Oct 2022 Meta, Alphabet and Twitter were noobs to the ad game during the last recession. Back in 2009, digital claimed just a 16% share. Now, the online giants are far more heavily exposed to deep marketing budget cuts. With costs also out of whack, it could start to feel more like 2000.
Italy’s new boss is missing a trick on tax evasion 24 Oct 2022 Public debt at 147% of GDP and a slowing economy limit Prime Minister Giorgia Meloni’s scope to curb an energy crisis and keep spending promises. Tackling endemic tax evasion would give her more fiscal ammunition. Yet promoting the use of cash and tax amnesties will not help.
Aussie budget could do with a spot of dam-busting 24 Oct 2022 Rising inflation and expectations of lower growth put Treasurer Jim Chalmers in a tight spot as he prepares his first comprehensive fiscal policy. Cancelling up to $4.7 bln worth of the previous government’s plans for unnecessary water infrastructure would relieve some pressure.
Xi Jinping’s third term gets markets thumbs-down 24 Oct 2022 Investors ignored rosier-than-expected GDP data to wipe almost 10% off the value of internet giants like Alibaba and Tencent amid a broader selloff. It suggests the private sector was blindsided by the president’s politburo overhaul and is an early test for his new economic team.
Xi’s contract with China needs more signatures 23 Oct 2022 The president has effectively secured a third term. His prize: a country traumatised by pandemic lockdowns and crashing real estate. There are some relatively easy things Xi Jinping can do to compensate his citizens; the next five years will test whether he can grasp them.
Blackstone black box is buyout shops’ hot product 21 Oct 2022 The asset manager marked its private equity assets down 0.3% this quarter – far less than public-market declines. For clients who piled $44.8 bln into its funds, that disconnect has appeal. For the industry, it's a balancing act until the real valuation test of M&A returns.
Truss’s exit highlights America’s free pass 21 Oct 2022 U.S. fiscal policies, based on tax cuts for the rich and widening budget deficits, have been fairly similar to those of Britain’s ousted prime minister. Only the dollar’s status as the world’s reserve currency keeps the laws of economics from applying in the United States, too.
Delusions of grandeur are root of Britain’s chaos 21 Oct 2022 “Trussonomics” followed hot on the heels of Brexit. Both are symptoms of a country that hasn’t fully come to terms with the loss of its empire, says Hugo Dixon. If the UK now realises it can’t defy the laws of economics and geopolitics, it may emerge wiser albeit weaker.
If Credit Suisse loves its bankers, set them free 21 Oct 2022 The Swiss bank may bring outside investors into its dealmaking unit, to insulate it from parental turmoil. The business could be worth up to $6 bln, valued in line with boutique advisory shops. Yet the best way to hit such a price tag is for Credit Suisse to cut it loose.
Capital Calls: Adidas 21 Oct 2022 Concise views on global finance: The 19 bln euro sportswear maker slashed its 2022 revenue outlook, dragging shares down 10%.
Aussies put net-zero nationalisation on the map 21 Oct 2022 The leader of Victoria says the state will take a controlling stake in new green power projects if he’s re-elected. That might crowd out capital. But done right, public ownership can spread financial risks and align policy with investors – just what the private sector wants.
Goldman Sachs alumni rebuild Goldman of yore 20 Oct 2022 Byron Trott’s BDT boutique is uniting with Michael Dell’s $20 bln investment firm, also led by a veteran of the Wall Street bank. Backing clients under a veil of privacy and less regulation evokes pre-IPO Goldman. Preserving the culture should be easier in a small shop.