UBS has grounds to resist fresh breakup calls 16 Apr 2015 Activist Knight Vinke says the Swiss group’s investment bank gets unfair funding subsidies from wealth management. But the cost of spinning it off could offset a valuation bump for the remainder. With returns up and dividends resurgent, UBS’s current strategy looks a surer bet.
Fat fiscal surplus will eventually weaken Germany 16 Apr 2015 Berlin is squandering the biggest windfall in a generation. Its annual budget surplus will be north of 20 bln euros both in 2015 and 2016, think tanks predict. Angela Merkel favours debt reduction over plugging the chronic investment gap. This can only harm long-term growth.
Europe’s credit boom locks in mediocre returns 15 Apr 2015 Investors are throwing money at European companies. Carrefour and Danone paid little over 1 pct a year to borrow for a decade; Novartis got 20-year funds at similar levels. A Breakingviews calculator shows how bond buyers’ generosity could backfire.
EU’s competition sprawl as worrying as Google’s 15 Apr 2015 Europe has accused the web giant of favoring its own shopping search results and broadened the case to include its Android mobile operating system. Investigations and appeals may take a decade. Brussels’ ambitious lack of focus is similar to what threatens ever-expanding Google.
Edward Hadas: Don’t moan about secular stagnation 15 Apr 2015 The idea that economic growth has shifted stubbornly downwards has gained currency. But flawed measurements and demographic shifts undermine the diagnosis. In any case it’s better to address specific problems than to predict doom.
Hairy deals mean European animal spirits returning 15 Apr 2015 Shell-BG and Nokia-Alcatel are complicated, long-mooted deals finally coming to fruition. Exor’s move is just plain ballsy. American firms powered last year’s $3.5 trln global M&A bonanza. With Old World boards and bosses becoming more daring, Europe looks set to catch up.
Nokia engineers surprisingly clean Alcatel terms 15 Apr 2015 The Finnish group is set to buy its French rival for 15.6 bln euros. There are a few concessions to keep France happy but this is clearly a takeover not an unwieldy “merger”. Paying in stock keeps Nokia’s balance sheet healthy and synergies look decent - if rather distant.
Tactical euro zone bond issuance is welcome 15 Apr 2015 Some euro zone governments are issuing a lot more long-dated debt to lock in low rates. The opportunistic supply switch may explain why ECB bond-buying isn’t pushing some peripheral countries’ yields even lower. If so, the extra bit of interest expense is a price worth paying.
Agnellis pay up to claim mini-Buffett status 14 Apr 2015 Exor, the Italian family’s holding company, is offering a premium to buy PartnerRe out of a merger with fellow reinsurer Axis. The price is full and the bid lacks its rival’s synergies. But debt is cheap, and Berkshire Hathaway-style cash flow could fund further acquisitions.
Europe’s lending boom shows power and limits of QE 14 Apr 2015 The ECB’s bank survey shows how loose monetary policy is boosting demand for credit in Europe, helping small companies. That is good for growth. Yet the results are uneven, and investment is not driving demand. The central bank’s policies work, but governments need to do more.
Fixing tax flaws can kick-start German investment 14 Apr 2015 A report commissioned by Berlin suggests equity capital should get debt-like tax privileges. That would be a radical reform. But Germany’s private investment slump is so deep that it requires bold steps.
Nokia will struggle to cut through Alcatel tangle 14 Apr 2015 An all-stock takeover by the Finnish company would create a roughly 40 bln euro telecoms equipment giant. Nokia investors are understandably sceptical. A deal would mean another big restructuring and stretch the buyer’s industrial expertise. The French connection adds complexity.
German bonds are becoming like gold dust 14 Apr 2015 They’re scarce, and you increasingly have to pay to own them. The benchmark 10-year Bund may soon go negative. But like gold, it might be a good deal. The market supply is shrinking, thanks to strong German government finances and ECB buying. This paper could prove precious.
Europe’s car spring can turbo-charge auto stocks 14 Apr 2015 The speed with which new car sales have accelerated this year has surprised even optimists. Pent-up demand, a stabilising economy and low interest rates are all helping. Shares in VW, Fiat, Renault and others have already rallied. But sentiment was so glum there’s further to go.
Biggest UK election issue rests on euro instincts 13 Apr 2015 Little of substance separates Britain’s two big political parties. Oddly, the leftists speak of low taxes and fiscal caution. In-power Conservatives talk of commitment to the state-run health service and schools. For investors, the most important difference is over Europe.
ECB nudges Monte Paschi towards fire sale 13 Apr 2015 The European Central Bank wants MPS to find a merger partner, the Italian lender says. That’s a more serious issue for MPS than an awkward breach of counterparty limits. There aren’t many likely acquirers - and the regulatory pressure makes it even harder to secure a good price.
Volkswagen weakened by chairman’s grumbling 13 Apr 2015 Ferdinand Piech has distanced himself from his successor-in-waiting, CEO Martin Winterkorn. This weakens Europe’s largest carmaker in the midst of a big cost-cutting effort. It also exposes flaws in VW’s governance and divisions in the controlling Porsche family.
Shell-BG bargain evaporates on closer look 13 Apr 2015 The target’s shares are trading at a tantalising 10 pct discount to Shell’s bid. That suggests a big arbitrage opportunity. In fact the gap is explicable: this is a year-long deal that must jump many hurdles, and Shell’s owners will get more dividends in the meantime.
Hugo Dixon: Squaring the UK’s non-dom tax circle 13 Apr 2015 Current rules give some rich people an unwarranted tax break. But Labour’s plan to reform the system for those living in Britain with “non-domiciled” tax status could deprive the country of valuable talent. New levies on non-doms’ UK residences would bring a fair compromise.
U.S. throws monetary policy stone from glass house 10 Apr 2015 A new report from the Treasury criticizes excessive economic reliance on central banks in Japan and the euro zone and calls for more fiscal action. That’s rich, considering the Federal Reserve’s balance sheet has ballooned nearly fourfold since 2008 and Congress is paralyzed.