Republican hopefuls’ deficit goals are all talk 24 Aug 2023 Conservatives vying for the Republican nomination vowed to slash the deficit in a debate. After years of spending under conservative leadership, it’s a throwback. Yet tax cuts and other costly projects are still key talking points. Worsened US finances make the agenda impossible.
Arm’s changing business model is wildcard for IPO 24 Aug 2023 As well as jumping on the AI bandwagon, SoftBank’s soon-to-float chip designer has altered the way it charges big customers to boost growth and smooth out revenue. If it works, a valuation north of $60 bln looks slightly less implausible. But investors lack evidence so far.
Prigozhin exit leaves Putin’s weakness alive 24 Aug 2023 The apparent death of the former convict-turned-chief mercenary comes two months after his mutiny against the Kremlin. Prigozhin’s actions had raised doubts about the stability of the Putin regime and its capacity to get out of the Ukrainian morass. His exit leaves those intact.
China’s sliding currency is vote of no confidence 24 Aug 2023 The People’s Republic is scrambling to stop the yuan’s weakening against the US dollar. In this Viewsroom podcast, Breakingviews columnists discuss capital flight pressures and tepid investor interest in the world’s second largest economy, and what that means for the wider world.
Capital Calls: Shein/Forever 21 24 Aug 2023 Concise views on global finance: The Chinese retailer is partnering with Sparc, the operator behind Forever 21. That helps validate Shein before a public listing without the messiness of a merger. Forever 21 gets a new omnichannel and potentially a way to an IPO.
Germany’s plight is good news for bond investors 24 Aug 2023 Yields on Berlin’s 10-year obligations have spiked this month, mirroring US ones. That looks overdone: Europe’s largest economy is slowing, inflation is falling and the central bank is unlikely to hike rates much more. Such Teutonic frailty should firm up debt valuations.
Global insurers surf China’s storm while they can 24 Aug 2023 AIA’s value of new business in Hong Kong more than doubled in the first half. The $100 bln giant and peers are benefitting again from selling policies to returns-hungry mainland visitors. Insurers may become victims of their success if Beijing’s angst over capital flight deepens.
Aussie gas strike risk has market fighting old war 24 Aug 2023 Possible industrial action on key rigs added 41% to the fossil fuel’s European price. Yet with storage nearly full, it trades at a fraction of last year’s peak. Real fear of a new supply crunch would lift it far more. No wonder Woodside and Chevron are taking talks to the wire.
AI frenzy’s feedback loop stuffs Nvidia 23 Aug 2023 The $1.2 trln semiconductor designer’s second-quarter revenue doubled. Tech giants’ valuations are soaring on AI hype, so naturally companies are pouring money into it, including by buying Nvidia's chips. As long as investors quack for more, Jensen Huang's firm gets fed.
Capital Calls: Diversity initiatives 23 Aug 2023 Concise views on global finance: The group that got the Supreme Court to overturn affirmative action at universities is suing financial firms to end programs for diverse applicants. It will make companies rethink recent diversity initiatives.
Private funds’ regulatory dream meets logical end 23 Aug 2023 Securities watchdogs are proposing safeguards for private equity and hedge fund investors. The now-$25 trln industry owes its growth partly to lighter regulation than at the banks it is displacing. Tighter rules will irk some, but growing up should bring new responsibilities.
Beware the hedge fund deal that’s not about money 23 Aug 2023 Bill Ackman, Marc Lasry and Boaz Weinstein want to buy Sculptor, which manages $34 bln. Instead, Daniel Och’s former shop accepted a lower bid from real estate investor Rithm. Sculptor’s doubts about the moguls’ funding sounds fishy, as does the idea they couldn’t work it out.
Bond rout will amplify Powell’s Jackson Hole words 23 Aug 2023 Yields on 10-year US debt are near a 16-year-high. That’s lifting borrowing costs even though the Federal Reserve is likely done with raising rates. More expensive loans may cause a recession. When he speaks on Friday, the Fed chair needs to calm markets without caving into them.
Italy faces bumpy round trip on the Silk Road 23 Aug 2023 Prime Minister Giorgia Meloni may quit Chinese President Xi Jinping’s infrastructure club. Like other European fans, Italy gained little economic benefit from signing up to the Belt and Road Initiative. Yet leaving may provoke retaliation, perhaps against its luxury industry.
Leaving the office for dead may haunt investors 23 Aug 2023 Landlords’ valuations are half pre-pandemic levels due to the boom in hybrid work. Yet looser labour markets are giving bosses more power and companies like Google want staff to spend more time in their buildings. Fund managers betting on a trend reversal may be on to a winner.
Thailand’s new CEO PM will find it hard to please 23 Aug 2023 Populists and the military voted in Srettha Thavisin, a tycoon. Markets are cheering the end of an impasse. But the $500 bln economy has scant room for handouts and crony capitalism that grew under the prior mogul-turned-leader Thaksin who is back from exile. Relief may be brief.
Volkswagen’s China shortcut will tempt rivals 23 Aug 2023 The $69 bln carmaker is investing in Xpeng and doubling down on cooperation with state-backed SAIC. As Toyota, Ford, BMW and their peers navigate increasingly tough competition in the Chinese market, VW’s plan to reboot its electric vehicles presents a timely but tricky roadmap.
Microsoft rethink puts big tech M&A back on table 22 Aug 2023 The $2.4 trln tech giant will sell streaming rights to Ubisoft in a bid to get UK approval for its $69 bln Activision deal. The big concession is likely to work. It shows a path for tech giants to buy rivals, while sidelining regulators' fears that M&A will kill nascent markets.
DeSantis chose wrong Disney battle, right war 22 Aug 2023 Homing in on the $157 billion entertainment company was politically foolish. But the Florida governor is right that Disney's sweetheart deal doesn't make sense. Other similar arrangements are finite and fairer, and still end up bad for states' finances.
Arm’s IPO risks shine brighter than its potential 22 Aug 2023 SoftBank’s chip group is leaning on the artificial-intelligence boom to justify a hoped-for float valuation north of $60 bln. There’s no evidence to support that in the numbers, which show lumpy, shrinking sales. China risks and lack of investor control also call for a discount.
Telecom Italia debt legacy outlasts its initiator 22 Aug 2023 Two decades after the Italian telco’s landmark leveraged takeover its architect, Roberto Colaninno, has passed away. His bold acquisition ended up saddling the ex-monopolist with a huge debt pile. A KKR-led deal, blessed by Rome, may finally end the sorry saga.
Capital Calls: Coinbase’s Circle deal 22 Aug 2023 Concise views on global finance: Crypto exchange Coinbase is investing in struggling $26 bln stablecoin issuer Circle. Tokens tracking the US dollar haven’t delivered on hopes of transforming finance; the deal promises little current payoff, but at least keeps the dream alive.
BHP’s dividend cut is canary in ore mine 22 Aug 2023 Boss Mike Henry is talking up the $140 bln miner’s ability to withstand everything from lower commodities prices to China risks. He has a point. But shareholder payouts have fallen to 64% of earnings from last year’s 77%. It suggests some steeling for short-term global shocks.
High food prices put populism on India’s table 22 Aug 2023 The cost of onions and tomatoes are soaring ahead of state elections, ramping up pressure for government relief measures. Modi’s fiscal prudence has helped tame inflation and supports his appeal to global investors. The latest crisis could push everyone out of their comfort zone.
US Steel should hold out for a better deal 21 Aug 2023 The world’s first $1 bln company has rejected a $7 bln takeover bid from rival Cleveland-Cliffs. The suitor is touting union support that could short-circuit a broader sale process. A merger makes strategic sense, so much so that the target’s shareholders deserve more.
TikTok challenger backpedals into public arena 21 Aug 2023 After nixing a $5 bln reverse merger last year, Triller plans to sell shares in a direct listing. Music videos and live-streamed brawls hosted by stars such as Snoop Dogg have attracted brands. A pivot to social media tools and questionable growth, however, make it a lightweight.
SoftBank Arm deal is expensive gift to Vision Fund 21 Aug 2023 Masayoshi Son’s group bought 25% of the chip designer from its Saudi-backed investment vehicle. It puffs up the fund’s poor returns, but betrays a lack of confidence in an upcoming float. A pricey $64 bln valuation means Son’s fellow SoftBank shareholders will probably lose out.
World Bank’s green overhaul is slowly taking shape 21 Aug 2023 The multilateral lender needs $200 bln more annually to make the world’s $3 trln green transition goal less of a pipe dream. Its shareholders have pledged just $50 bln over 10 years. President Ajay Banga’s new plan is a start, but he will need more ideas to reach the target.
China woes put global miners’ optimism to the test 21 Aug 2023 BHP boss Mike Henry and Fortescue peer Fiona Hick have remained bullish on the People’s Republic even as the country’s economy, and their own shareholders, waver. Absent Beijing unveiling a big stimulus package, the CEOs are likely to have to revise their enthusiasm.
Yuan slide half pulls Beijing out of its inertia 21 Aug 2023 It is scrambling to stop the currency’s slide against the US dollar but warning signs of diminishing returns on Chinese assets keep coming and will maintain capital flight pressure. The bill will be hefty the longer President Xi Jinping lets the economy search for a bottom.