Glencore deserves credit for lessons learned 10 Dec 2015 The Swiss miner and commodities trader will cut debt even faster than it vowed in September. Planning for copper prices below current levels is wise. Chief Executive Ivan Glasenberg can’t control China’s demand for metals, but at least his balance sheet now reflects reality.
Bank capital zealots hang up their hairshirts 10 Dec 2015 The Basel Committee that sets global bank rules has backed down in its attempt to stop lenders from using rating agencies to measure asset riskiness. A change to measuring real estate loans could yet hurt. But it adds to a sense that tough Basel IV rules could be a paper tiger.
Inditex is priced for perfection 10 Dec 2015 Shares in the Zara fashion retailer are up some 35 percent this year, against a 7 percent fall for rival H&M. Inditex’s nimble business model and strong double-digit earnings growth explains why. But currency fluctuations could slow its stellar trajectory.
Savoy and Plaza sale means trophies for all 9 Dec 2015 Accor is buying the owner of the luxury London and New York hotels for $2.9 bln from its Saudi and Qatari investors. Adding higher-end lodging may help the French group make its online booking system more competitive. The price, however, looks too high to create much value.
Trump’s Muslim tirade fails basic capitalist test 9 Dec 2015 The GOP candidate’s call to ban Muslim visitors ignores the openness on which the system that made him rich relies. U.S. deficits, banks and property have all benefitted from Arab money. Closing doors to people could do the same to capital, which a president can ill afford.
O2 deal may get hung up on UK telco concessions 9 Dec 2015 Brussels’ trustbusters are assessing the market impact of Hutchison’s 10 bln stg bid for Telefonica’s UK arm. It would be odd to push the bidder to surrender spectrum: rivals have more. A demand for it to create a new operator looks sounder but would hurt the deal logic.
How to beat the FTSE 18-fold: keep spending 9 Dec 2015 Shares of UK construction-hire group Ashtead have outpaced the FTSE average at an extraordinary rate. It has won admiration because it spends every penny it has on new kit. Negative cashflow results, but earnings grow. Ashtead’s task is to know when to stop investing.
Anglo American is facing a crisis of confidence 8 Dec 2015 Collapsing commodity prices led the coal, copper and diamonds miner to suspend its dividend on Dec. 8. It’s also slashing jobs and investment. Big London-listed miners including Anglo American have lost 47 percent of their market value this year. Yet things could still get worse.
Pimco has chosen the wrong celebrity advisers 8 Dec 2015 The $1.5 trln asset manager’s new advisory board includes former UK premier Gordon Brown and ex-Fed Chair Ben Bernanke. Their past errors are worth learning from. But people who spotted trouble coming, such as Raghuram Rajan, India’s central bank chief, would serve Pimco better.
Rio Tinto capex cuts won’t stop race to the bottom 8 Dec 2015 The Anglo-Australian miner is cutting spending by $1.5 billion to save cash amid the rout in commodities. But it’s not the same as slashing production – which is what’s needed to bring metals prices back up. The current strategy should make shareholders nervous.
New type of dealmaker gives Keurig $14 bln respite 7 Dec 2015 The single-serve coffee group is selling to the family-backed JAB. The 78 pct premium is surely a welcome exit for investors in the struggling company. The novelty, though, is JAB’s caffeine-themed consolidation play, reminiscent of Brazilian 3G’s effort with Heinz and Kraft.
Far-right poll success jeopardises French reforms 7 Dec 2015 Marine Le Pen’s National Front won more votes than mainstream rivals in the first round of regional elections. Anti-euro and anti-immigration, the party espouses protectionism and state intervention. Its rise may force the ruling Socialists to rethink economic reform plans.
Container shipping deal stacks up in multiple ways 7 Dec 2015 French giant CMA CGM is buying Singapore’s ailing Neptune Orient Lines for $2.4 billion plus debt. Offering majority owner Temasek and public shareholders close to book value – a 49 percent premium – looks generous. But the unlisted buyer can chart a course to value creation.
Electrolux’s GE failure leaves only faint stains 7 Dec 2015 The Swedish group will be deprived of extra growth after a U.S. acquisition was scotched by trustbusters, who felt that owning GE’s appliance unit would give Electrolux overmighty pricing power. The $1 bln fall in Electrolux’s value suggests investors never held such hopes.
Dixon: Turkey’s economy threatened on many fronts 7 Dec 2015 A row with Russia, a resurgence of violence within its borders and the prospect of the Fed raising rates have coincided with President Erdogan’s increasing politicisation of the economy and bad governance. This could prove a toxic cocktail given the private sector’s high debt.
OPEC indecision could engulf big oil majors 4 Dec 2015 Instead of cutting output, the oil cartel has cleared the way for its members to keep flooding the market with more crude. For investors in oil companies this means a year of deeper spending cuts. Lower earnings are almost guaranteed to follow.
Europe’s least bad option: ditch Schengen 4 Dec 2015 The 26-country free border zone is struggling to cope with refugees and security risks. Abolishing Schengen would be expensive and wouldn’t solve migration problems. Yet it might dampen the populism in continental Europe and the UK that threatens Europe’s economic integration.
Anglo American dividend cut just the beginning 4 Dec 2015 Confidence in the mining giant is at rock bottom. Cost savings are paling beside the slide in commodities prices. Anglo American can save the equivalent of one-eighth of its market cap by scrapping the dividend. Shuttering production, and firesales, may now be necessary evils.
Caixabank finds neat way to conserve capital 4 Dec 2015 The Spanish lender owns minority stakes in overseas banks that consume capital and add volatility to earnings. It is selling two of them to its parent for 2.7 bln euros, mostly in its own shares. It’s an elegant workaround. But Caixabank’s tough home market is the bigger problem.
Mario Draghi is central banking’s tragic hero 3 Dec 2015 Despite new easing measures, the ECB chief’s fight to revive inflation looks doomed. Forces beyond his control, such as oil prices, are too strong. Markets are moving against him. Draghi is admirably determined, but will probably be remembered for trying rather than succeeding.