Year: 2009

Recession catches up with E.on

10 Mar 2009

Utilities may be defensive, but they are not immune from the crisis. The German utility has cut profit forecasts, and its recent acquisitions in Spain, Italy and Russia aren t living up to expectations. There may be more bad news to come.

HSBC falls off its pedestal

10 Mar 2009

The bank s shares fell perilously close to the price of its $18bn rights issue on Monday. The 24% fall probably has a lot to do with the quirks of the Hong Kong market. Still, once it has repaired its balance sheet, HSBC needs to repair the confidence of disillusioned investors.

Gilts torn between market forces and reality

10 Mar 2009

The UK central bank is using newly created money to buy up UK government debt. The bondbuying pushes yields down now, but the moneyprinting increases the risk of inflation later. Bond buyers still live in hope that inflation will never come. Currency markets are less persuaded.

Turkey should rethink its brinksmanship

10 Mar 2009

Delays on an IMF deal have driven Turkish equities and the lira down to fresh lows. The Turkish government s haggling may look suicidal. But the bet that Turkey is too strategically important to be allowed to fail may pay off for now. The longterm effects could be disastrous.

Bernanke offers hope that there’s a real plan

10 Mar 2009

The US central bank chief still blames Asia s excess savings for America s woes. But otherwise, his diagnosis of the roots of the economic crisis too big to fail banks, ad hoc financial infrastructure, procyclical regulation, fractured oversight makes sense.

Malaysian sampan navigates choppy seas safely

10 Mar 2009

Malaysia s stimulus plan at 9% of GDP is proportionately bigger than the US plan, but it s better focused and the country s budget deficits are smaller. With a balanced economy, ample reserves and domestically funded deficits, Malaysia should weather the storm better than most.

Merck liberates overseas cash in Schering deal

10 Mar 2009

The US drug group needs to tap its giant cash pile to buy rival ScheringPlough. But the money is trapped overseas, and simply repatriating it would trigger a tax bill. Merck has found a way around that, using a relic of an old Schering acquisition. It's a clever twist.

Deripaska’s travails illustrate new Kremlin line

10 Mar 2009

The Rusal owner has won a limited reprieve from foreign creditors, but his holding company can t keep up with its $24bn of debt. While the Kremlin says it won t bail out oligarchs, it can use the crunch to restructure the industrial landscape. Deripaska may be the first example.

World’s pain is dollar’s gain

10 Mar 2009

The dollar is now at 3year highs, but seems set to rally further. Currency traders choose their worries, and right now a weak US economy is a lesser concern than Japan s failing exports, the eurozone s growth and banking problems, and the UK s imploding financial sector.

Belgium picks up tab for new BNP/Fortis deal

9 Mar 2009

BNP Paribas and the Belgian government have come up with a third deal on the sale of Fortis assets to the French bank. BNP gets what it wants, while disgruntled Fortis shareholders have a slightly sweetened offer. Belgian taxpayers are making this all possible.

Rio’s Chinalco deal suits buyers’ market

9 Mar 2009

The miner s board should have raised equity when it had the chance. Rio s pact with Chinese miner Chinalco was a poor alternative. But markets have weakened for both commodities and capital. The deal doesn t look so bad. At least Rio s shareholders get a quasiput option.

Glass-Steagall rerun is not the answer

9 Mar 2009

The idea of forcibly separating casino capitalism from utility banking has superficial attractions. But such a divorce wouldn t have stopped the crisis. A better solution is stronger regulation for both the casino and the utility, says Hugo Dixon.

Paulson helps rescue Dow deal – and his profit

9 Mar 2009

The hedge fund bigwig is set to take preferred stock in Dow Chemical to help it fund the $15bn purchase of Rohm & Haas it was trying to wriggle out of. So is the Haas family. It s a way to help do the deal without sinking Dow. It also rescues a big Paulson bet at least for now.

Bargain laptop could help Apple weather downturn

9 Mar 2009

The Mac maker is rumoured to be devising a touchscreen portable to hawk for less than its standard offerings. If so, that could help it weather the industry slowdown. But Apple would need to be extrainventive to avoid cannibalising its highermargin fare.

State control could save Lloyds’ bosses

9 Mar 2009

The crisis has justly cost many executives their jobs. Lloyds bosses would probably be for the chop too, after the UK bank s HBOS deal handed majority control to the state. But the new lead shareholder has another view. The lesson? Doing the government favours may help careers.

Italian banks in dangerously tight spot

9 Mar 2009

Rome has come up with E12bn of bailout loans, but the heavily indebted government can t do much more. That s hard for all the banks, as the sinking economy spawns losses. It s especially tough on Unicredit and Intesa. They'll have to look elsewhere for help in eastern Europe.

A good chairman is hard to find

9 Mar 2009

UBS, BP and RBS are the latest to struggle. Firms are playing musical chairs, dragging grandees out of retirement or hiring ones who feel a begrudging sense of duty. The crisis has discredited many candidates and scared away others. Expectations for the role have grown too high.

Satyam fallout limited, but India can do more

9 Mar 2009

A sale process has begun for the stricken IT outsourcer, only three months after a $1bn accounting fraud was revealed. Bidders are queuing up. The Indian government has dealt with the scandal well, but one thing is still missing a successful prosecution.

Merck banks on huge savings to outweigh deal risks

9 Mar 2009

The US company has never believed in big pharma M&A. So why is it bidding $44bn for rival ScheringPlough which might lose the right to sell an important drug because of the deal? Well, the two should fit nicely. But the big motivation is $25bnworth of potential cost cuts.

US Congress shouldn’t foment economic nationalism

9 Mar 2009

A committee plans to criticise Treasury officials for allowing US banks to invest money abroad after receiving government infusions. Such grandstanding could further impede the effective functioning of international capital markets at the worst possible time.

Allocation of scarce capital is key to world growth

9 Mar 2009

The World Bank s estimate of negative global growth in 2009 looks right. Even if stimulus programmes and natural recoveries turn rich country economies round by midyear, emerging markets may well suffer capital shortages that cause their economies to deteriorate further.

Lloyds’ £260bn recession-proofing punishes shareholders

7 Mar 2009

The UK bank has finally signed up for the government s asset insurance scheme at comparable terms to RBS. The new capital should get Lloyds through the recession. But existing holders lose out badly the state could end up with a 77% shareholding. They will blame management.

AIG bailouts need a dose of Obama’s openness

6 Mar 2009

Senators want to know which counterparties were made whole thanks to $180bn of government funding. A full explanation could put conspiracy theories to rest. Besides, AIG is effectively owned by taxpayers it's a perfect test of the administration's commitment to transparency.

Geithner badly needs reinforcements

6 Mar 2009

With the US Treasury secretary's choice for his deputy apparently withdrawing from the nomination process, Geithner looks even more like Atlas supporting the entire financial world on his shoulders. Only he's not that strong, and every day the world crumbles some more.

UK equity well is all but dry, Europe take note

6 Mar 2009

Two midsized UK companies managed to get desperately needed rights issues away. But they had to use byzantine structures to get the cash, after HSBC had sucked £13bn out of the market. European companies could soon be in a scramble for a limited supply of private money.

US bank chiefs protest too much about Tarp

6 Mar 2009

US Bancorp s Richard Davis and Wells Fargo s John Stumpf don t like it and say their dividend cuts will help pay it back. But shareholders care mainly about capital strength right now. The bank bosses' aversion to Tarp risks sounding ideological or, worse, driven by bonuses.

Roche tries higher offer to put Genentech away

6 Mar 2009

After going hostile, the Swiss group has reversed tack and is making soothing sounds. By raising its bid to $93 a share, Roche has a chance to seal its deal before Genentech unveils drug data in April and possibly raises the purchase price.

US jobs data could herald approaching bottom

6 Mar 2009

The 651,000 decline in US employment is nasty, but the rate of job loss has stopped accelerating. Stimulus moves should provide a shortterm boost soon, so a bottom to the economic downturn may be approaching. Sorting out the budget deficit and inflation will come later.

Authorities flail as markets and economy swoon

6 Mar 2009

Remember the Great Moderation earlier this decade? Wise bankers and disciplined governments kept inflation down and growth steady. Now we have the Desperate Experiment. Fiscal deficits are soaring, central banks are going for broke. As yet, the radical therapy isn t working.

New Citadel fund’s cheaper fees still look cheeky

6 Mar 2009

The hedge fund outfit is charging 2% of assets and 20% of gains on a new fund. That s much less than the firm used to pull in on its flagship funds until they lost 55% last year. But investors are scarce. They should have the clout to make even 2and20 a thing of the past.