How risky bank debt makes customers safer 25 May 2023 Protecting depositors is at the top of regulators’ list of priorities after recent bank failures. Big banks already derive extra protection by issuing loss-absorbing bonds. Getting mid-sized US players to do so too could be the key to promising clients their cash is risk-free.
Capital Calls: Russian cash, Chinese car feud 25 May 2023 Concise views on global finance: European plans to divert Russian money to Ukraine are ill-thought-out; a feud between China’s BYD and Great Wall Motor is spooking investors.
Telco tycoons’ UK bets look stuck underwater 25 May 2023 Patrick Drahi, Xavier Niel, John Malone and Abu Dhabi’s e& have lost $2.4 bln on about $13 bln worth of investments in BT and Vodafone, Breakingviews estimates. It’s hard to see either firm recovering soon, leaving their big-money backers potentially stuck in the quicksand.
Tesco’s diversity reboot has further to go 25 May 2023 The chair of the $24 bln UK grocer quit amid allegations of inappropriate comments. But Tesco also lags on diversity in its senior ranks. With its lowest paid staff mostly women and investors likely to be watching closely, it needs to be leading, not following.
Macron’s neglect is France’s main fiscal problem 25 May 2023 National debt is above 110% of GDP and will keep rising if the government’s rosy forecasts don’t pan out. Austerity isn’t the answer now, but the president doesn’t seem interested in crafting a long-term plan to cut indebtedness. That will hit the economy and future generations.
Debt ceiling crash will have few victims 25 May 2023 President Joe Biden is trying to hammer out a deal with Republican lawmakers to ensure the United States can keep its lights on. In this Viewsroom podcast, Breakingviews columnists explain how even if the world’s largest economy defaults on its debts the damage will be limited.
China thesis lurches from one lazy extreme to next 25 May 2023 Investors that piled into Chinese tech stocks and high-yield bonds are fleeing on worries about President Xi Jinping’s agenda, as the yuan slumps and commodities retreat. The People’s Republic is a tricky trade, but now is a better time to rebalance portfolios than abandon them.
Biden’s oil reserve plan is slippery slope 24 May 2023 America sold 180 mln barrels of oil from its strategic reserve last year when prices were high. It can top coffers now for less, but that window might not last long. Plus budget battles – and Biden’s fossil fuel agenda – making a needed fuel fill up look less likely.
Intuit investors bet on Uncle Sam’s inept tech 24 May 2023 The US may allow consumers to file taxes online, bypassing private software. Surveys suggest a free option could threaten up to $2.9 bln in revenue from Intuit’s TurboTax arm. The $120 bln company and its shareholders are relying on the state failing to get its act together.
It’s Netflix’s world, rivals just stream in it 24 May 2023 Disney, Warner Bros Discovery and Paramount are shifting strategies to stem losses on their TV and film services. Spending to amass subscribers is no longer the priority. Programming remains expensive, however. As the industry reshapes, its $160 bln pioneer retains star quality.
Citi slinks rather than marches out of Mexico 24 May 2023 The US bank will IPO rather than sell the Mexican retail business CEO Jane Fraser once ran. It’s the wiser path after a year of haggling and dramatic market moves. Given Citi’s dismal valuation and past underinvestment, what Fraser does closer to home matters more anyway.
Capital Calls: Embracer fail dents credibility 24 May 2023 Concise views on global finance: Shares in the $3 bln maker of shoot-’em-up video games fell nearly 45% after a mystery partnership agreement fell through at the eleventh hour.
Mediobanca chief’s 20-year race has one more lap 24 May 2023 For two decades, Alberto Nagel has fought market and boardroom crises while diversifying the Italian bank and booking fat returns. His new business plan lacks fireworks. But fear of destabilisation will prompt restless core investors to back the veteran banker for one more term.
‘Greedflation’ loosens its grip on food retailers 24 May 2023 Suppliers like Unilever and Kraft Heinz are easing inflation-busting price rises that hit grocers hard. That will benefit profit margins at the likes of Kroger and Carrefour. Their next challenge will be convincing cash-strapped consumers to pay, and buy, more in supermarkets.
Foxconn’s global dealmaking suffers Sharp shock 24 May 2023 The iPhone supplier rescued the Japanese electronics group in 2016 with a promise to turn it around. Sharp’s surprise $1.6 bln writedown casts doubt on the Taiwanese group’s grip on its investment. It also raises questions about Foxconn’s push into assembling electric vehicles.
Capital Calls: Buyout loans 23 May 2023 Concise views on global finance: The termination of broadcaster Tegna’s sale to Standard General lets banks off the hook for funding some $8 bln in buyout debt, but clearing the pile of hung loans is just one part of the leveraged finance problem for big lenders.
Activist Yelp review is worth hearing out 23 May 2023 TCS Capital wants the local listings site to explore a sale, pitching a tie-up with Barry Diller’s home-services rival Angi. A targeted $70-per-share price – double Yelp’s current valuation – seems absurdly high. But potential cost savings make the combo an intriguing blueprint.
Debt ceiling debacle is ultimate winner’s curse 23 May 2023 The US government is sailing perilously close to a moment when it cannot both service its debts and pay its dues. Political dysfunction could trip into market mayhem. Yet in monetary terms the US remains the only game in town. The debt showdown is the flip side of that privilege.
Europe’s scramble to tame artificial intelligence 23 May 2023 Brussels is a step closer to unveiling regulation for the controversial technology. Dragoș Tudorache, a legislator in the European Parliament, helped write the law. In this Exchange podcast, he argues that the rules focus on the biggest risks while leaving room for innovation.
Supply chain scrutiny may upend EU solar ambitions 23 May 2023 Renewable groups must forgo photovoltaic components from China’s Xinjiang to comply with forced labour curbs. Yet the region produces 35% of the pure silicon needed in panels, and US firms are scooping up the non-Chinese supply. Enforcing a ban may scupper EU green targets.
Transatlantic tech-tax truce is on a knife edge 23 May 2023 EU-US spats over levies on the likes of Amazon have taken a breather while a global pact advances. But sabres are rattling, led by French Finance Minister Bruno Le Maire. Washington may well be patient with the pace of promised rollbacks, but any new levies would break the truce.
SoftBank pulls rabbits out of Fortress’s hat 23 May 2023 Boss Masoyoshi Son appears to be selling the money-losing Japanese conglomerate’s US alternative asset manager for at least double the valuation initially touted. There should be enough tricks left over for new majority owner Mubadala. But Fortress staff get the best of the deal.
EU will go easy on Indian resale of Russian fuel 23 May 2023 Fuelled by imports from Moscow, oil products sales to Europe from refiners including Reliance and Nayara have nearly doubled to $15 bln. The trend shows anti-Russian sanctions are not watertight. Yet, risks of an energy inflation revival make a European Union ban a tough call.
Capital Calls: JPMorgan’s rich pickings 22 May 2023 Concise views on global finance: The giant lender’s investment day laid out benefits from buying parts of defunct bank First Republic. Boss Jamie Dimon gets more than just the fuzzy glow from stabilizing the industry. Snagging more wealthy clients should please his investors too.
Meta becomes cross-border tech mascot 22 May 2023 The EU smacked the $630 bln social media giant with a record $1.3 bln fine over data transfers to the US. Meta will fight it, but a fix requires a cross-border agreement and differing philosophies on data access make that hard. Without it, Meta’s fine is a bigger tech problem.
China’s Micron hit sets up repeat strikes 22 May 2023 The $72 bln US memory-chip maker says Chinese restrictions will probably reduce revenue less than 10%. Perhaps, but similar measures taken against database firms like Oracle and IBM a decade ago had a bigger long-term effect, helping domestic manufacturers to catch up.
Mizuho will find M&A history rhymes at Greenhill 22 May 2023 The Japanese giant is expanding rapidly in merger advice by acquiring the boutique for $550 mln. Striking during a dry spell means a lower cost and less chance of bankers leaving. Dealmakers blind to the risks of their own deals, however, has caused decades of disappointment.
A&O Shearman could live down to expectations 22 May 2023 UK law firm Allen & Overy is merging with New York's Shearman & Sterling. Creating the world's third largest legal practice with $3.4 bln in revenue could please big clients after a transatlantic service. But judging by past sector M&A, it could also create dis-synergies.
Revolut-SoftBank fight exposes VC share artifice 22 May 2023 The fintech group may only win a UK banking licence if it gets rid of preference stock held by the Japanese investor. Similar structures are common in startup land, and help justify puffed-up valuations like Revolut’s $33 bln price tag. The fracas shows they also have a downside.
Greek vote can bear gifts for debt investors 22 May 2023 A big win by Kyriakos Mitsotakis in Sunday’s polls makes him odds-on to stay as Greece’s premier. That will help the $200 bln economy continue its rebound after crises in the 2010s. Forthcoming investment-grade status is another reason for Greek sovereign debt to keep rallying.