“Because it’s France” no basis for EU budget rules 1 Jun 2016 Jean-Claude Juncker used that to explain why France wins more fiscal leeway. This might be worrying coming from the head of the European Commission, which enforces budget discipline, if it weren't already plain. Blindly applying rules is foolish, as is regular failure to do so.
ECB corporate bond buying is risky experiment 1 Jun 2016 The central bank's pledge to buy company bonds has caused a surge in issuance. As a result, market spreads - the premium investors demand over sovereign debt - are not falling. The unwanted side effects of the programme show why corporate credit markets are best left alone.
Hermes shows scarcity is still a classic 1 Jun 2016 A Birkin handbag fetched $300,000 at auction in Hong Kong, a new world record - even though sales in the wider luxury sector are hitting the skids. The lesson for rivals is that rarity still elicits demand. That's cold comfort for luxury brands that have grown too big
OPEC’s second coming can only start at the top 31 May 2016 Oil prices could get a boost if bickering members of the cartel can put aside their differences and select a new secretary general. Nigerian Mohammed Barkindo looks like the candidate most capable of getting OPEC functioning, and restoring its image among non-members like Russia.
Goldman’s DONG windfall leaves gains for Danes 31 May 2016 The Wall Street bank will have doubled its money in two and a half years when Danish state-owned utility DONG lists. The country’s socialists quit the ruling coalition in protest at Goldman’s $1.2 bln investment. But its cash sped a pivot to green energy at just the right time.
Spanish politicians leave demographic bomb ticking 31 May 2016 While economic activity has picked up, the Spanish population is ageing faster than the EU average. Consensus and long-term planning are needed to tackle the burden this will place on the welfare system and growth prospects. The current polarisation in politics stands in the way.
VW travels in two directions, both bad 31 May 2016 The stricken carmaker is making fewer vehicles than a year ago. Yet it hired more people in the first quarter. Investment and distribution costs grew too. Chief Matthias Mueller may be busy with a still-unresolved emissions scandal, but there’s little sign of needed cost-cutting.
Bayer’s Monsanto bid yields poor financial harvest 27 May 2016 The German chemicals group’s rejected $62 bln offer for the seed maker already appeared to violate one of its key principles: stick to projects whose returns beat the cost of capital. Upping the price to win over Monsanto would take heroic sales-growth assumptions to stack up.
Qatar’s debt bonanza stores up problems for future 27 May 2016 Too much of a good thing could be bad for the Gulf state. It has just raised a whopping $9 billion in the bond market thanks to investors’ hunger for yield. Loading up on debt will help Qatar cope with lower energy prices, but just dodges its biggest problem: lavish spending.
AstraZeneca glitch cements M&A discount 27 May 2016 A blockbuster drug the UK group bought in a $2.7 bln deal has been delayed. The production glitch could mean just a few months holdup, but highlights why Astra trades at a lower valuation than peers. Buying and selling businesses is a risky way to manage a looming patent cliff.
German discounters open new front in trolley wars 27 May 2016 Lidl is investing 6.5 billion euros to soup up its stores, half of that outside Germany; peer Aldi is upgrading too. That will advance their attack on the middle market. If they can do it without raising prices, big rivals like UK grocers Tesco and Sainsbury will be in trouble.
UK regulator gives RBS fresh reason to shrink 26 May 2016 The Bank of England has introduced a new capital requirement for lenders deemed systemically risky in a domestic context. Big banks basically have enough equity to meet it already. But Royal Bank of Scotland’s weighting to the UK means it has most to gain from getting smaller.
Oil sustainably above $50 requires OPEC action 26 May 2016 Prices sneaked above a psychologically important marker. But given temporary geopolitical and climate drivers explain why, oil bulls can’t declare victory yet. Only a major reduction in global oversupply - the preserve of OPEC - can send oil markets much higher.
Sterling options market gets the hump over Brexit 26 May 2016 Traders are braced for big sterling swings around the EU referendum and then expect volatility to subside. But true calm may prove elusive whatever happens. Even if Britain votes to stay, there will be enough economic and political uncertainty around to ensure trading is lively.
European IPO market regains its senses 26 May 2016 Danish renewable energy utility DONG priced its initial public offering at up to $16 bln, suggesting a forward EBITDA multiple in line with stricken carbon-heavy peers. If it sounds dull, that’s the point. European IPOs are still a buyer’s market, but maybe now a rational one.
Banco Popular flags trials of holding bank equity 26 May 2016 The Spanish bank’s 2.5 bln euro rights issue better protects it against real estate losses, but is still a surprise for shareholders. Pain is also not being shared with equity-like CoCo holders. Dealing with the uncertainty would be easier if returns were more compelling.
Debenhams plucks new CEO from arms of its nemesis 26 May 2016 Amazon is the worst thing that could happen to stodgy old department stores. Yet that’s where Britain’s Debenhams found new boss Sergio Bucher. That makes it one of a handful of UK high-street names headed up by a digital ace. The hire sounds odd, but could be inspired.
Bank returns paradox cannot hold 25 May 2016 Why do banks seek double-digit returns when interest rates are so low? The Bank of England is among those wondering. Return expectations may be too high, or banks may still be too risky. Investors don’t appear to care. If they did, banks might face calls to break up.
Cox: The other European referendum to fret over 25 May 2016 While the world obsesses over Brexit, another perilous plebiscite looms in October. Italy’s leader has dangerously staked the future of his leadership over a constitutional reform vote. Its failure would present huge risks to Europe’s economy and global capital markets.
Italian broadband has a new Romulus and Remus 25 May 2016 Utility Enel looks likely to win the bidding for fibre-optic group Metroweb, beating Telecom Italia. What follows may have shades of the twins who fought over the building of Rome. If so, Enel should be daunted, TI worried and Italian broadband users overjoyed.