Petrobras risks becoming Latin America’s Gazprom 6 Feb 2014 Brazil’s petro-giant increasingly resembles Russia’s gas monopoly as state meddling and rampant spending destroy value and crowd out more productive investment. Petrobras shares have fallen so low it’s like 2007’s “gift from God” never arrived. It’s not too late to change course.
Credit Suisse stuck in a hit-and-miss phase 6 Feb 2014 The Swiss bank has cut leverage and may beat long-term balance-sheet targets. Its legal bills look bearable too. But the operational restructuring is still a work in progress. Until that’s fixed, the wobbly performance of the fourth quarter could be repeated.
Standalone Vodafone starts to look healthier 6 Feb 2014 Quarterly results suggest revenue declines are finally moderating. Competition, regulation, technological change and the slump have all hurt the mobile giant. It now hopes to ride a boom in mobile data. Yet Vodafone’s role in future M&A remains the top question for investors.
For third Greek bailout, EU could try generosity 6 Feb 2014 Brussels and the IMF are mulling how far they could go to ease the Greek debt burden, without agreeing to a straightforward haircut. They should act fast - and be bold. If they fail, calls for more radical measures will grow louder, ahead of crucial European elections.
Revving-up Daimler still not running at full speed 6 Feb 2014 Shiny new models helped the carmaker show record sales and profit in 2013. But Daimler still faces big challenges. While margins are increasing, they’re still below rivals’, and headaches in China are only abating slowly. The shares are already counting on much more good news.
AstraZeneca challenged but no longer cheap 6 Feb 2014 The UK pharma group says patent expiries will hit earnings harder than analysts expected. Management sees growth returning in 2017, but rivals like Sanofi offer a less risky earnings trajectory. After a good run in recent months, AstraZeneca’s shares are taking a lot on trust.
Markets escape tyranny of risk-on/risk-off 5 Feb 2014 Global asset gyrations may smack of panic but the reality is more complex. Stocks have fallen, but some supposedly risky sovereign bonds have gained. It’s less blanket risk aversion than a welcome display of investor discrimination.
Hugo Dixon: QE is the way for the ECB to go 5 Feb 2014 With euro zone inflation falling to 0.7 percent and trouble in emerging markets, the risks of deflation are up. The ECB says inflation expectations remain anchored at near 2 percent. But if the anchor slips, deflation fears could be self-fulfilling. QE is the most effective tool.
Central bank alchemy turns credit into equity 5 Feb 2014 Bond markets are turning into equity. Esoteric products like PIKs, AT1 CoCos and corporate hybrids give yield when rates are low. The downside is that such products may perform erratically in a crisis, and investors may not realise they are taking equity-like risk.
Don’t blame the economy for melting markets 4 Feb 2014 Small-country troubles, shaky Chinese demand and a few U.S. disappointments would not normally be enough to push investors into fear mode. The current volatility proves what a difference a tapering Fed makes to the health of financial markets.
John Malone’s drive for F1 shows value of sport 4 Feb 2014 The cable tycoon offered to buy a stake in Formula One last year. His recent focus has been on distribution, not programming. But the taste for motor racing highlights live sport’s must-have status in content. If he wants it, he can expect an auction and a $10 bln-plus valuation.
TPG’s bitter coffee should wake up private equity 4 Feb 2014 David Bonderman’s shop and Israel’s Strauss family are feuding over their java joint venture. Buyout firms prefer control for good reason, though it isn’t always possible. While the payoffs from different ownership structures can be big, the risks are often commensurate.
UBS’ next task: avoid U.S. overreach 4 Feb 2014 The Swiss group’s revamp into a wealth manager with a smaller investment bank tacked on has paid off. UBS’ capital position is solid and over 20 bln Swiss francs of tax assets give it options. But management should heed the risks of breakneck expansion - especially in the U.S.
BP starts to shine next to Shell 4 Feb 2014 It’s all relative: BP’s profit fell almost a third in the fourth quarter, but it was no worse than expected. Russia and mounting Gulf of Mexico spill costs make its earnings hard to predict. But, unlike Shell, it has set more concrete targets to back up its promises.
Smith & Nephew jumps on a wounded rival 3 Feb 2014 Treating injured athletes is a faster-growing business than selling artificial joints to a greying world. So the UK medtech giant is paying $1.5 bln including cash for U.S.-listed ArthroCare. A share price premium of just 6 pct reflects the target’s own self-inflicted wounds.
KKR needs lucky goals to win in German soccer 3 Feb 2014 The buyout group is investing 61 mln euros in Berlin-based team Hertha BSC. The club is struggling financially and mediocre on the pitch. A thriving Bundesliga tournament and a booming Berlin suggests potential. But turning Hertha round looks a long shot for private equity.
Emerging markets’ big danger is financial markets 3 Feb 2014 Investors are right to shun the worst emerging markets. But some poor countries are doing well. They don’t deserve to be shut out of global capital markets by panicky investors. Of course, folly creates opportunities. Smart investors will be able to find some emerging bargains.
Retail bankers outdo casino peers on misconduct 3 Feb 2014 Even before the latest provisions for selling bogus mortgage insurance, UK retail bank fines outstripped those caused by their trader colleagues as a proportion of earnings. That makes it harder to judge the true profitability of the supposedly safer consumer business.
Lloyds still looks best of a bad bunch of UK banks 3 Feb 2014 The past weighs on the UK lender, with charges for mis-selling up another 1.8 bln stg. Dividends will be smaller than hoped and the next stage of privatisation could be rocky. But given Lloyds’ durable strategy and market position, its premium valuation looks intact.
Ryanair’s loss highlights need to change 3 Feb 2014 Revenue at the low-cost airline has stalled, plunging the group to a heavy third-quarter loss. The shares, however, are up smartly. Investors are relieved that guidance is unchanged. But they are putting a lot of faith in the company’s new strategy to be nice to its customers.