UK wage puzzle demonstrates breakdown of old laws 11 Nov 2015 The textbook tradeoff between lower unemployment and higher inflation isn’t happening. Britain’s jobless rate is at its lowest since 2008 yet wage growth is actually slowing. Workers aren’t suffering now, but they must hope unemployment and inflation don’t start rising together.
UniCredit opts for fingers-crossed capital plan 11 Nov 2015 The Italian bank’s strategy to boost returns and capital involves a credible dose of cost-cutting. But to boost its core Tier 1 ratio to a still-unexceptional 11.5 pct, it will need topline growth that may not materialise. It may not be enough to close UniCredit’s discount.
AB InBev too coy over SAB mega-deal’s benefits 11 Nov 2015 The Budweiser brewer reckons its tie-up with SABMiller will generate cost savings worth around $10 bln. Investors have added roughly $50 bln to the combined companies’ value since the deal was mooted. The gap suggests the market likes the deal more than AB InBev dares to say.
Molson gets tasty chaser in giant beer deal 11 Nov 2015 The Coors owner is paying SABMiller $12 bln for its 58 pct stake in their U.S. venture. By helping ease antitrust pressure on the UK-listed brewer’s $105 bln sale to AB InBev, Molson avoids a premium. Some $200 mln of annual cost savings, plus a sizeable tax perk, are pure gold.
New Vivendi looks muddled 11 Nov 2015 The French media group has turned itself into a pure music and pay-TV group. But both units face a tough market and need “heavy investments”, the company said in its third-quarter update. It’s also hard to see the payback from buying stakes in Telecom Italia and gaming groups.
Cutting Portugal’s lifeline would be act of mercy 11 Nov 2015 The state’s access to European Central Bank bond-buying hangs on the opinion of Canadian rating firm DBRS. A downgrade could make it ineligible, punishing Portuguese bonds. A messy compromise could hurt ECB independence. Tough love might actually help.
E.ON sets dismal scene for dirty power spinoff 11 Nov 2015 The German utility has taken a $9 billion charge on the value of power plants and oil and gas exploration business in the third quarter. The charge does not affect actual cashflow but highlights the grim prospects of the units E.ON will spin off by 2016 under the Uniper brand.
AB InBev’s deal skills turn into an embarrassment 10 Nov 2015 The 11 pct increase in the brewer’s shares since it agreed in principle to buy rival SABMiller for $105 bln has made its cash offer less attractive. Announcing big cost savings, AB InBev’s forte, would make the problem worse. AB has good reason to subtly play down its prospects.
Regional banks grab hold of repo grenade 10 Nov 2015 Wells Fargo, Nordea and Sumitomo Mitsui are bulking up in a form of short-term collateralised lending, as big investment banks pull back. Yet buoyant “repo” financing may carry hidden risks. The market played a central role in the financial crisis - and much of it remains opaque.
Hefty ECB rate cut might do more harm than good 10 Nov 2015 Some European Central Bank policymakers want to push the floor for policy rates deeper into negative territory. This may depress the euro and bond yields for a while. But Nordic evidence of the price banks pay when rates are so low suggests an outsized cut may be self-defeating.
ABN Amro IPO merits discount for ugly structure 10 Nov 2015 The Dutch state is hawking up to 23 pct of its erstwhile problem child, valuing the bank at up to 18.8 bln euros. The price range seems attractive relative to listed peers. But a markdown is warranted given an anti-takeover provision that could rescind investors’ voting rights.
IEA history lesson makes $100 oil more likely 10 Nov 2015 The Paris-based International Energy Agency says the world’s reliance on low-cost Middle East oil could return to 1970s levels. By cutting capex, oil majors are bolstering that dependence. Supply squeezes could feed through to higher crude sooner rather than later.
Vodafone could break new ground with India IPO 10 Nov 2015 The mobile giant has taken a step towards listing its India unit, which could be worth $14 bln. With a 25 pct free-float, it could be the country’s largest ever offering. An outgoing wrangle over tax and new competition could prove thorny, but this is the kind of listing India’s bankers dream about.
Catalonia’s risky secession threat may backfire 10 Nov 2015 The Spanish region’s government has started a process of “disconnecting”, despite a doubtful mandate and a constitution that forbids a referendum. The plan is unlikely to win much international support, but may provoke Madrid into cutting off financing. Investors will steer well clear.
Dud IPO adds fuel to Rocket’s downward trajectory 10 Nov 2015 Cash-burning e-commerce investor Rocket Internet pulled the listing of startup HelloFresh. A $2.8 bln valuation for a loss-making delivery firm of ready-to-cook meals rightly did not sway investors. Rocket shares have more than halved this year, but may have further to fall.
Cameron will struggle to find EU game-changers 9 Nov 2015 The UK prime minister is engaged in a largely one-sided renegotiation of European rules. The domestic politics are tough, as the likely gains will sway few voters in the upcoming membership referendum. The economics are simpler. Britain is already fairly well placed in the EU.
Lonmin buys time but platinum is bigger problem 9 Nov 2015 A $407 mln rights issue at an eye-popping 94 pct discount will allow the South African miner to postpone a day of reckoning with its creditors. Lonmin has bought itself a reprieve, but this won’t fix the platinum price, or help it avoid another strike at its Marikana mines.
Too-big-to-fail rules make banking less global 9 Nov 2015 New guidelines will force lenders to hold big buffers of capital in their overseas arms. American and European banks can phase in their bail-in needs, and big Chinese groups no longer get off scot-free. Even so, the regulatory regime looks set to be another balkanising force.
Portugal dangles between stasis and crisis 9 Nov 2015 A group of left-wing parties could replace Portugal’s minority government after a key vote on Nov. 10. This communist-backed coalition could repeal reforms and make the country ineligible for ECB bond-buying. Or it may prove weak, in which case a damaging stalemate could follow.
Dixon: Brexit debate should start with trade 9 Nov 2015 The chances of the UK voting to quit the European Union are high. The damage to business if it does leave would be high too. Trade ties, and the difficulty of replacing them from outside the EU, should be front and centre of the debate.