G20 bank reforms betray lack of regulatory trust 15 Oct 2014 The Financial Stability Board is mulling a common bail-in mechanism for cross-border banks. A draft plan suggests that national regulators don’t trust each other enough to maintain the industry’s flexible funding structures. It might make banking safer - but costlier.
Luxury needs a new price tag 15 Oct 2014 Shares of luxury companies such as LVMH and Richemont have underperformed the wider market in the last two years, due to Asian slowdown and China’s corruption crackdown. Now add weak global growth and geopolitical uncertainty. Yet valuations remain oddly high.
BG’s new CEO will walk pay-performance highwire 15 Oct 2014 The UK gas company has poached Statoil’s well-regarded boss. Helge Lund transformed the Norwegian rival and his skills will serve BG well. But his pay, potentially worth 10 mln stg or more a year, is rich. BG will need to lay out his performance targets very clearly.
Tesco rights issue would be a tough sell 14 Oct 2014 De-gearing would help the UK grocer fight the price war raging in its home market. A share sale is tempting, but disposals make strategic as well as financial sense. Management has much to prove before asking shareholders to pay up to receive even lower returns.
Three cheers for the end of the Double Irish 14 Oct 2014 Dublin is to annul one of the tech sector’s favourite tax ruses. The Double Irish was a distortion that allowed companies to discount entirely the costs of intellectual property. Even if Apple, Facebook et al gripe now, the simplification should ultimately benefit all companies.
Excitement over Iliad’s homecoming looks premature 14 Oct 2014 French telecom shares jumped after billionaire Xavier Niel dropped his bid to acquire T-Mobile US. The hope is that his Iliad group switches focus to a deal with bitter domestic rival Bouygues. Consolidation would aid the wider market – but Iliad is under no pressure to trade.
European "lowflation" stays on its dire path 14 Oct 2014 Even the UK is succumbing, although its 1.2 percent rate remains high by European standards. Trends in France, Spain and Italy are all weak. With prices almost flat, wage rises will be poor and government finances will stay strained. A BoE rise may not come until 2016.
Commodity producer/trader boundary starts to blur 14 Oct 2014 Glencore’s interest in a deal with Rio Tinto was about more than corporate ambition. Commodity traders are keen to buy hard assets to secure supply, while producers view logistics and marketing as a way of boosting returns. Expect more convergence, and shrinking trading margins.
Iliad bid for T-Mobile US was a deal too far 13 Oct 2014 Even in a frothy market for TMT deals, the French group’s surprise bid was a long shot. It relied on leverage and promises of big savings in an unfamiliar country. That didn’t impress majority owner Deutsche Telekom. And with T-Mo gaining traction, DT can afford to stay put.
Fiat Chrysler spins onto NYSE with hefty price-tag 13 Oct 2014 Boss Sergio Marchionne wants to sell 60 pct more cars by 2018, costing perhaps $10 bln a year. That’s a big ambition for a debt-laden firm with poor margins. Yet the Italo-American carmaker, now trading in New York, sports a similar multiple to more profitable rivals Ford and GM.
Nobel economist wraps good sense in too much math 13 Oct 2014 Jean Tirole changed the study of regulation and oligopolies. Some of his best observations, such as those on the trade-offs between limiting prices and restricting profits, were obvious after he made them. But Tirole’s complex game theory models confuse more than illuminate.
Markets finally side with economy on bad news 13 Oct 2014 For the past five years, an addiction to easy money explained most stock market moves. That era may be ending. Investors seem to be paying more attention to the surprisingly harsh economic environment. With policymakers running out of options, the gloom could worsen.
Luxottica needs a soap-opera discount 13 Oct 2014 The maker of Ray-Ban glasses has lost its CEO, the second in as many months. The impression of tensions with the family of 61 pct owner Leonardo Del Vecchio will deter candidates. And the premium rating will be hard to regain until the governance befits a publicly traded company.
Gas Natural’s Chile deal smacks of empire-building 13 Oct 2014 The Spanish utility will pay $7.6 bln including debt for CGE, Chile’s largest electricity distributor. This increases Gas Natural’s footprint in Latin America, countering weak growth at home. But it is paying more than 10 times 2013 EBITDA with few obvious synergies.
Hugo Dixon: Italy has no good Plan B 13 Oct 2014 Matteo Renzi’s Plan A is to push through domestic reforms, hope the ECB manages to get inflation ticking up, and keep his fingers crossed that the economy stops shrinking. But if this fails, a mega wealth tax, debt restructuring and/or exit from the euro beckons.
EU securitisation tweaks miss the point 10 Oct 2014 The European Commission has outlined rules for high-quality securitisation. That should revive the market for the sort of debt the ECB wants to buy. But focusing on the least risky kind of deals will still make it hard for banks to free up capital – and get lending.
Europe’s chipmakers crash into macro slowdown 10 Oct 2014 Shares in Germany’s Infineon and Italy’s STMicro plunged after a U.S. rival missed forecasts. Infineon stock has now fallen 20 pct in a month. Its focus on industrial and automotive clients hurts. The pricey $3 bln purchase of International Rectifier just got harder to justify.
Ebola shows dangers, and power, of globalisation 10 Oct 2014 The spread of the deadly disease is a symptom of an interconnected yet hugely unequal global economy. At least there is enough solidarity, and enough at stake for the rich world, for belated help to reach the poor countries at the centre of the outbreak.
How to square the circle on bankers’ allowances 9 Oct 2014 European policymakers are capping bonuses in a misguided attempt to reduce excess risk-taking. Worried about staff defections, banks are using allowances to offset lower variable compensation. The way forward is to maintain some flexibility for the payouts.
Reborn as the bond market? No way. Look at yields 9 Oct 2014 An adviser to U.S. President Bill Clinton once said he’d like to be reincarnated as the bond market because it can intimidate anybody. Those days are gone. Central banks now push investors around. That’s why yields are falling globally, and are at record lows in Europe.