London’s island airport may yet fly 2 Sep 2014 Opponents of the plan to build a brand new airport in the Thames estuary have won support from a government-appointed arbiter. The four-runway project is hard to square financially. But Boris Island has a champion who may yet win the power needed to push the proposal through.
Agenda for Tesco CEO: price cuts, board and UK 29 Aug 2014 There’s a jumbo profit alert, a hacked-back dividend and lower capex. The new chief exec is also bringing forward his start date. Dave Lewis needs to reduce prices, rebuild the board, and launch a strategic review of the international business.
Tesco should cut its dividend 27 Aug 2014 Shareholders ultimately lose out when too-high payouts prevent companies from responding well to problems. Right now, Tesco needs all the financial flexibility it can muster. With a new CEO coming, the UK grocer has a window of opportunity it would be wise to climb through.
Time nudges Pfizer and Astra a bit further apart 27 Aug 2014 The U.S. pharma group is now allowed to renew its overtures to its UK peer. AstraZeneca has performed OK since May. That will support Astra’s recent view that any bid should be worth at least $123 bln. But Pfizer now has other options for tax-driven M&A.
Currency still weak point of independent Scotland 26 Aug 2014 Alex Salmond used a second TV debate on Scottish independence to sketch out Plan Bs to a sterling currency union. The alternatives sound iffy. The leader of the secession campaign could probably negotiate a currency deal, but voters will still think twice about finding out.
Latest blunder hits StanChart where it most hurts 20 Aug 2014 New York regulators have fined the emerging markets bank another $300 mln for compliance lapses. StanChart’s biggest problem is still its misfiring strategy. But such avoidable missteps reinforce a disturbing impression that senior managers are too detached from daily operations.
Glencore’s capital promises are those of a trader 20 Aug 2014 The $80 bln trader-miner is returning $1 bln of cash and has set out a framework for capital management, with wiggle room. That makes sense – miners need flexibility on M&A and capex. Glencore’s owner-manager ethos gives credibility to its broad commitment to shareholder returns.
Bank of England split adds muddle to confusion 20 Aug 2014 Two of the nine members of the UK central bank’s rate-setting committee voted to increase rates. There is good evidence of job market tightening. But inflation is still falling. Markets don’t know which way to turn. Neither, it seems, does the BoE.
Carillion’s new Balfour offer still falls short 19 Aug 2014 The plan to merge the UK construction groups always looked fraught. The potential for cost savings is high, but Carillion has left questions about execution risk unanswered. Its proposal is also less generous than its 36 pct premium claim implies. Balfour can remain stony-faced.
BHP spin-off won’t appeal to commodity players 19 Aug 2014 The mining giant plans to hive off some assets into a new company. The prices of nickel and aluminium, two of its key products, are rising. Investors could use the new firm to follow the trends. But they probably won’t. There are purer plays and better-diversified producers.
London-UK house-price divergence is manna for BoE 18 Aug 2014 Property asking prices in England and Wales are falling, led by the capital. London may now revert to underperforming, while nationwide house-price inflation settles to a safe level. The Bank of England could keep rates low and encourage price rises where they’re needed.
BHP cheer shows premium on focus 15 Aug 2014 The miner’s shares rose on news its demerger idea is nearer fruition. A split won’t transform the business, and it’s hard to see the separated $12 bln-plus unit being bid for. But simplicity is in vogue. So creating stocks for distinct investor bases can create shareholder value.
UK rates may not rise till 2016 – or later 14 Aug 2014 This year or early next for a UK rate rise? That has been the market’s question. The data demands much more caution. The Bank of England expects inflation to be on target until 2017, and its growth forecasts look optimistic as Europe struggles. Expect flat rates for a long time.
BoE on slack: we’re even more confused than before 13 Aug 2014 The central bank has conceded the economy still contains slack, despite plummeting unemployment. It is easy enough to tweak wage growth assumptions that already looked way too bullish. Keeping investors interested in following BoE guidance will be rather harder.
World can fete royal credit upgrade tricentennial 13 Aug 2014 The Hanoverians were foreign and unpopular when they came to Britain in 1714. They had to depersonalize government, which made government bonds national obligations - and a decent credit risk. The lesson for now: for bond investors, solid institutions beat charisma hands down.
Barclays’ new chair does not need to be banker 13 Aug 2014 The ideal candidate would be a former banking CEO with a clean reputation, a grasp of complexity, a thick skin, and the ability to support boss Antony Jenkins while staying objective about his performance. But Barclays can’t have it all. The executive bank experience can be sacrificed.
Wages, not slack, will set U.S. and UK rate hikes 12 Aug 2014 The Fed and BoE say they’ll use the gap between actual and potential output to decide when to raise rates. Yet measuring this is a mug’s game. Investors struggling to estimate slack are better off watching wage growth. Right now, that means rates should stay where they are.
Pru just shades AIA in battle of Asian insurers 12 Aug 2014 Interim numbers show the UK-domiciled Prudential and its Hong Kong-based peer are both still growing new business at breakneck speed in Asia. AIA generates more cash right now. But the Pru’s geographic mix in the region makes its shares the slightly better long-term bet.
Walgreen encounters uncommon inversion boundary 6 Aug 2014 The drugstore chain will keep flying the U.S. flag even after buying the rest of Swiss-based Alliance Boots for $15 bln. A backlash against corporate emigration may have affected Walgreen’s decision, but harder numbers probably mattered more. Expect more tax arbitrage deals.
Dollar set to take pound’s strong currency title 6 Aug 2014 Sterling became the FX market strongman during the past year as investors started to believe the UK would be the first big economy to raise rates. They may be right. Even so, shifting market expectations of when U.S. rates will be hiked now look set to boost the dollar.