Wall Street’s glum rainmakers deserve more love 26 Oct 2023 Income from dealmaking is moribund; trading revenue is lumpy. No wonder investors in firms like Morgan Stanley and Goldman Sachs promote the relative appeal of less temperamental businesses like wealth management and credit cards. Before long, though, what’s down may be up again.
Real big energy: Exxon and Chevron swim upstream 26 Oct 2023 The two US oil titans unveiled acquisitions worth more than $100 bln combined within weeks of each other. In this Viewsroom podcast, Breakingviews columnists discuss what’s powering the renewed consolidation push, as well as the threats posed to the industry by a greener market.
Capital Calls: Ford, Amazon 26 Oct 2023 Concise views on global finance: The loss per car at the $45 bln automaker’s electric-vehicle unit has jumped 51% in a year. So-so earnings at the $1.2 trln e-commerce giant’s cloud division beat the even lower bar set by rival Alphabet.
Europe’s oil majors are stuck as M&A party-poopers 26 Oct 2023 Exxon Mobil and Chevron’s respective decisions to double down on oil have put European peers Shell, BP and Total on the spot. Yet their lower valuations complicate share deals. The most obvious big targets for lower-carbon M&A are invitingly cheap, but look hard to get at.
StanChart hopes crash into harsh market realities 26 Oct 2023 Shares in the lender run by Bill Winters tanked by up to 17% after surprise hits to its China bank and real estate holdings. These may be one-offs. But the reaction is a reminder that StanChart’s current mediocre goals, after years of subpar results, offer little room for error.
ECB’s rosy outlook is a recipe for economic pain 26 Oct 2023 Frankfurt policymakers think the euro zone will grow by 0.7% in 2023 and want to keep rates high to fight inflation. Yet most data point to stagnation or recession. A gloomier perspective would enable the European Central Bank to ease policy and help the bloc’s economy.
China deal offers Stellantis ingenious EV shortcut 26 Oct 2023 The $58 bln Jeep-owner is paying $1.6 bln for 20% of electric-car maker Leapmotor and the right to sell its autos abroad. Hitching up with the Chinese group’s affordable and advanced tech will help CEO Carlos Tavares accelerate his green goals, despite festering geopolitics.
Morgan Stanley CEO shift pleases all, thrills none 26 Oct 2023 Ted Pick is an easy choice: steeped in markets, long-serving and unlikely to upset James Gorman’s strategic direction. Promotions for two CEO also-rans may keep the handover civil. It’s an utterly underwhelming transition which – given Wall Street’s record – is a good thing.
Meta tenuously clings to financial reality 26 Oct 2023 Facebook’s owner grew quarterly revenue 23% and vowed to keep expenses in check. AI investments and a planned hiring spree may yet run into an economic slump, however, and reverse an ad rebound. Only then will boss Mark Zuckerberg’s power of self-restraint become clear.
Hess deal would be higher-octane with cash added 25 Oct 2023 The takeover target’s rich valuation grants it a chunky stake in an enlarged Chevron. But the $53 bln merger now offers no premium and only shares in an underperforming acquiror. Chevron CEO Mike Wirth may have to bid against himself by throwing in a sweetener with hard currency.
Music fund’s flat deal calls for major key change 25 Oct 2023 Shareholders are pushing Hipgnosis, run by industry veteran Merck Mercuriadis, to overhaul its board and cancel a $440 mln asset sale involving Blackstone. Poor governance and a discount value add weight to their case. A new management team could do better by selling the company.
If Amazon, why not Walmart? 25 Oct 2023 Lina Khan’s FTC argues the e-commerce giant’s dominance leaves sellers and customers little choice, even though shopping habits vary. The agency also targets common pricing strategies. By this logic, it’s hard to see what’s so different from the Walton family’s mega-retailer.
Worldline crash is pivotal moment for payments 25 Oct 2023 The $7 bln French group’s shares fell 60% after it said sales would be hit by a call to ditch riskier merchants. Investors expect payment providers to be on top of flaky transactions. The fact that a leading player has had to rethink will scare them, and alert regulators.
Europe’s investment-bank push is far from a shove 25 Oct 2023 Deutsche Bank has bought a $500 mln UK boutique, BNP is bulking up in markets and Santander has hired 50 Credit Suisse bankers. Yet no one is trying to go back to 2010, when the region had 48% of the debt-trading business. That’s good for US rivals, and the Europeans’ investors.
Russian war economy is overheating on a powder keg 25 Oct 2023 Soaring military spending is Moscow’s main growth engine, leading to tight labour markets and 6% inflation. The government is strengthening its grip on a country gradually closing to the world and financially beholden to China. If peace returns, a collapse is a real risk.
China puts $137 bln Band-Aid on local debt wounds 25 Oct 2023 Beijing will funnel the borrowed cash to regional governments to spend on water and other infrastructure projects. It’s part of a “basket of measures” aimed at alleviating their worsening $13 trln debt crisis. Absent proper restructuring, it’ll only buy local authorities time.
Kering’s woes are tip of melting luxury iceberg 25 Oct 2023 Sales at Gucci’s $54 bln owner plunged 9% last quarter. Inflation suppressed less affluent shoppers’ appetite for its products and geopolitical risks are clouding its most coveted market - China. While a complex turnaround ups Kering’s challenge, bling rivals are also vulnerable.
Alphabet’s present looks brighter than its future 24 Oct 2023 Revenue at the Google parent rose more than 10% for the first time since mid-2022 because of a recovery in online advertising, its bread-and-butter. But a stumble in its fast-growing cloud computing unit suggests it will be tough for Alphabet to catch up with weightier rivals.
GM earnings give its restive workers an inch 24 Oct 2023 The automaker’s strong third-quarter earnings have raised the stakes in a strike costing it $200 million a week. The union continues to push aggressively. But with Detroit’s gas guzzlers doing relatively well, a tough-but-survivable compromise seems possible.
How to spur investments in greener power grids 24 Oct 2023 Electricity networks need to be upgraded and adapted to a carbon-free world. That means doubling investments to $750 bln a year. With returns uncertain, attracting cash is not easy, Secure Meters CEO Suket Singhal argues in this Exchange podcast. New pricing models would help.
UniCredit’s surge is a pipe dream for Barclays 24 Oct 2023 The Italian bank’s shares have risen to 60% of forecast tangible book value while the UK lender languishes at 40%. Cost control helped, which Barclays could mimic. But so did UniCredit’s business lines and geography, which is not something the British group can do much about.
Letter from the editor: Introducing The Big View 24 Oct 2023 Breakingviews today launches a daily in-depth column which helps our readers make sense of the world. Each weekday, The Big View will go beyond the headlines with an original and deeply reported take on big issues in finance, deals, economics, investment and geopolitics.
Time is ripe for another push on carbon pricing 24 Oct 2023 Green subsidies can help fight climate change but are fiscally unsustainable. Regulations can be politically unfeasible, while doing nothing is ecologically untenable. Carbon taxes raise cash, some of which can be used to ease the public backlash.
Foxconn’s China woes expose supply chain dilemma 24 Oct 2023 A tax probe is hitting the Apple supplier ahead of a key Taiwanese election in which founder Terry Gou is running for president. It may complicate the manufacturer’s plan to move production outside China. Other multinationals will learn from Foxconn the true cost of reshoring.
Kotak’s new boss will have his work cut out 24 Oct 2023 Former Barclays and Citi executive Ashok Vaswani is taking the helm at the $41 bln Indian bank. He’s short on domestic experience, key lieutenants were in the running for the job, and his predecessor is the lender’s top investor and a board member. Vaswani has a hard path ahead.
Hong Kong property stares into the abyss 24 Oct 2023 Secondary sales prices in the world’s least affordable housing market fell 19% since a 2021 peak, the biggest slump since the global financial crisis. High interest rates are a pain and slashing stamp duties may not help. The city’s image problem will keep hurting sentiment.
Capital Calls: Roche’s $7 bln partial cure 23 Oct 2023 Concise views on global finance: The Swiss pharma giant’s deal for rights to develop a bowel disease treatment in the US and Japan can help diversify its portfolio. But new boss Thomas Schinecker will need more such purchases to fill out his depleted pipeline.
Chevron’s $53 billion deal is risky Exxon copycat 23 Oct 2023 The all-stock offer for Hess is more speculative than rival Exxon’s massive plunge in Texas shale. It also makes Chevron look more like its US rival: Exxon already owns a piece of prolific Guyana fields with Hess. The long-term bet could work, but for CEO Mike Wirth, it’s dicey.
US deficit problem screams for revenue solution 23 Oct 2023 Rising interest costs threaten to widen a $1.7 trln budget gap already stretched beyond 7% of GDP. Lawmakers are haggling about spending, but the math only works with higher taxes. It means closing an inheritance loophole, charging the rich more and resetting the corporate rate.
China’s Middle East agenda gets harder to manage 23 Oct 2023 The country’s private refineries have been snapping up over 90% of Iran’s cheap crude exports. Tighter US sanctions in the face of the Islamic Republic’s support for Hamas could turn these customers away. That would cut across Chinese efforts to grow influence in the region.