FT Opening Quote – Rolls-Royce restructures

Warren East is trying to prevent Rolls-Royce going west with his restructuring plan, Pfizer is under fire for its tax inversion deal with Allergan. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here.  Read more

Further reading

Elsewhere on Tuesday,

- One big influence on interest rates is about to reverse.

- Is there a method to ISIS’s madness?

- The lingering effects of the financial crisis.

- Why millennials still live with their parents.

 Read more

FirstFT – France seeks to monitor bank accounts, the year of debt defaults and China’s copycat cows

France’s finance ministry is seeking new authority to combat terror financing Read more

How oil can get back to triple digits by 2017

With Goldman raising the spectre of a $20 crude price, here’s an alternative scenario from Ecstrat strategist Emad Mostaque…


After years of being too high, oil forecasts now appear too low. As supply rolls over we could see prices back at $100, with decade-high geopolitical risks shocking it higher. Read more

What mobile money giveth, it also taketh away

Mpesa, the digital money system rolled out in Kenya by Vodafone-owned Safaricom, is frequently cited by mobile money advocators as an excellent example of what can be achieved when you give emerging markets access to mobile money services.

But, as we’ve previously written, some unique and hard-to-replicate drivers were responsible for Mpesa’s success in Kenya — not all of them good.

Notably, in its early days, Mpesa drew major benefits from its extremely monopolistic market positioning, at one point even threatening the seigniorage power of the central bank and that of the regulated banking system. Read more

Plus ça change at Plus500

Today’s update from Plus500, the Israel-based Contracts for Difference broker whose takeover by Playtech collapsed on unspecified regulatory hurdles, appears to contain one bit of very good news.

The Group is not subject to restrictions imposed by any of its regulators.

But what does it mean? Read more

Pfizer, having its drug-laced cake and eating it

The formal announcement is out on Pfizer’s planned takeover of Allergan. It’s an all paper deal which values the Dublin-based target at $160bn.

The guff starts right up there in paragraph one, referencing…

a leader in a new industry model – Growth Pharma

 Read more

Markets Live: Monday, 23rd November, 2015

Live markets commentary from FT.com 

No, very kind offer, but we think we’ll keep our gold for now. Yours, India

Compare, contrast and then draw your own conclusions about India’s newly born Gold Deposit scheme, its plan to lure gold out of temples, vaults and jewellery boxes with the promise of (hopefully but not apparently yet) lovely enough interest rates.

First… from Reuters last last week on its rather stuttering start:

A gold deposit scheme launched amid fanfare by Indian Prime Minister Narendra Modi two weeks ago has so far attracted only 400 grammes, an industry official said on Thursday, out of a national hoard estimated at 20,000 tonnes…

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FT Opening Quote – Playtech pulls out of £460m Plus500 deal

Playtech has called off its deal to buy Plus500, fearing FCA disapproval, while Pfizer is expected to announce it is buying Allergan today, despite the Obama administration’s disapproval of tax inversion deals. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

That was nuts. What about next year?

The year that was, in bullet points, from Michael Hartnett and team at BofAML:

1. 2015 ends with the market cap of Amazon & Google exceeding that of every single Chinese company in the MSCI China index…

2. …the US stock market a mere 107 trading days away from becoming the 2nd longest bull market of all-time, with equity leadership driven by “growth” (longest duration of outperformance ever) & “quality” (at all-time relative high)…

3. …and $6trn of negatively-yielding government bonds, $17trn of bonds yielding <1%, and the Fed expected to raise the Fed funds rates for the 1st time since 2006.

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Further reading

Elsewhere on Monday,

- The Fed pushes back as Congress eyes its billions.

- The challenge of trade adjustment in Greece.

- Are banks Europe’s problem?

- In defence of higher pensionsRead more

FirstFT – Brussels on lockdown, Argentina’s new president and the benefits of feeling useless

Belgium’s prime minister says that the risk of a Paris-style attack remains ‘serious and imminent’ Read more

Maybe the euro area’s bad banks didn’t matter?

One common explanation why Europe had a worse crisis and weaker recovery than America: its companies depend far more on banks for financing than the capital markets.

Those banks have been in perpetually worse shape than US lenders, mostly because of bad decisions from officials in national governments and the European Central Bank.

The critics point hammer home their point with charts like this:

 Read more

Buiter on transferring robot incomes to the people

So the robots are coming for our jobs.

But what’s a government to do to fend off such an economic threat to its populace? Read more

Alphachat: Robots, artificial intelligence and a sluggish shopping season

Alphachat is available on Acast, iTunes, and Stitcher.

 Read more

Just you wait till the second half, says Slater & Gordon

Quindell was an assortment of legal businesses collected into a basket of troubles. In the year before almost all of the UK-listed group was sold to Slater & Gordon, an Australian rival, it made promises to stop burning cash by a series of deadlines, all broken.

The A$1.2bn deal closed in May. Slater & Gordon said at its annual meeting on Friday the UK business wasn’t doing so well and the group as a whole will burn through A$30m to A$40m in the first half of its financial year. It still expects to make it up in the second half, however.

Have we seen this script before?

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When unsecured is cheaper than secured borrowing

A strange thing is happening in money markets: the cost of borrowing unsecured wholesale funds is now below the cost of borrowing secured funds.

The problem, according to repo dealers, is that new leverage ratio rules are set to make it far too costly for repo market participants to transact.

Meanwhile in the world of swap spreads, as Bloomberg’s Tracy Alloway has been noting, rates have plummeted to historic negative lows which defy market logic. Read more

Markets Live: Friday, 20th November, 2015

Live markets commentary from FT.com 

JCap on Wirecard: a search for the Asian business

Wirecard is the German-listed payment processor valued by the market at almost €6bn. It’s a market darling, a fast growing tech stock with a share price which has quadrupled in the last five years, raising €0.5bn from shareholders along the way.

Much of the growth has come from Asia, where the group has bought up a string of local payments business. However J Capital Research, a US and Hong Kong registered independent research group, went looking for Wirecard in the region and reports finding thinly staffed offices, and in two places no office at all.

The report, which is undermined in part by some faulty assumptions about Wirecard’s accounting, contrasts starkly with opinions from the 23 bank analysts covering the stock, of whom 17 are buyers and just one is a seller. The company has rubbished JCap’s work, saying it “fundamentally misunderstands the Wirecard business model”, while also disclosing it does not have a physical presence in some of the countries where it claims leading market positions in payment services. Read more

Here’s that Imperial Tobacco RAW in full

Frankly, we’re sick of this. You are too, most likely. None of us wants to spend another day being strafed by rumour, counter rumour and unguided speculation about tobacco M&A. We’ve slogged through too many balance-of-probabilities analyses. We’ve had more than our fill of noncommittal steers during conversations with unattributable people familiar with things. It’s been going on for three solid months, and that’s enough. Consider this an intervention.

The Imperial Tobacco bid theory will follow after the RAW disclaimer. Read the disclaimer.

 Read more

Your pending local currency-commodity downfall

Which came first the commodity fall or the local currency collapse? And, more importantly, how far through the commodity supply/ demand adjustment are we?

The suggestion here from SocGen’s Kit Juckes and friends is that the causality runs from commods to currencies and that there is still a lot of pain to come:

My colleague Michael Haigh has done a lot of work on the overall state of supply and demand in commodity markets, and he makes one very striking observation: For all the fall in the prices of many industrial and agricultural commodity prices in USD terms, the prices in the currency of the biggest producers have not necessarily fallen much. Sugar prices have fallen by over 8% this year in USD terms, but the Brazilian real has fallen by 29%. Copper prices have collapsed, down over 20%, but the Chilean peso is down 15% and trying hard to keep up. Gold is down 9%, but the South African rand has fallen by twice as much and in rand terms, the gold price is near its highs. The fall in iron ore prices (over 30%) is twice the fall by the Australian dollar, but you get the picture (Charts 1 and 2).

 Read more

Further reading

Elsewhere on Friday,

- Syrian refugees, jelly beans and murderers.

- Crowdfunding or crowdphishing?

- China has a $1.2 trillion Ponzi finance problem.

- Squaring the cycle: capital flows, financial cycles, and macro-prudential policy in the euro area. Read more

FirstFT – Paris ringleader killed, leaving luxury London and why men overeat in front of women

The suspect, Abdelhamid Abaaoud, died during the seven-hour siege in Saint-Denis Read more

How information technology is shrinking the pie

An essential read from Martin Wolf this Thursday on the manner in which corporate surpluses are contributing to the savings glut problem and causing all sorts of distributive chaos in the process.

So, whereas it used to be the sovereigns over-hoarding international claims and under-consuming/under-investing in their own infrastructure for the benefit of getting a leg up in the global hierarchal order, it’s now corporates over-hoarding retained earnings for the sake of protecting their dominant positions instead (retaining earning piles being different to explicit cash piles, which can be generated with debt not just profit). Read more

An HBOS curiosity…

Pages and pages and pages of re-investigations into repeated past investigations on Thursday into the violent death of HBOS — the merged Halifax/Bank of Scotland — way back in October 2008.

The PRA/FCA report on the failure of the bank is here.

The report by Andrew Green QC on the failure of the FSA to feel more than one collar in the wake of the affair (Peter Cummings) is here.

TL/DR: former HBOS chief executives Sir James Crosby and Andy Hornby will belatedly get it in the neck; former FSA CEO Sir Hector Sants, meanwhile, is simply made to look a fool.

But consider this single page from an annex to the Green report… (click to enlarge) Read more

Markets Live: Thursday, 19th November, 2015

Live markets commentary from FT.com 

Ever wondered what a strike by 17,000 Indian central bank employees looks like?

The scene, as we went to pixel, outside the Reserve Bank of India in Mumbai — from where Rajan stares across the city — on the day 17,000 of its staff decided to up sticks in protest about interference from India’s government in its workings and, one suspects more pressingly, pensions:

Observe the… absolutely nothing unusual happening. Read more

Choose your own adventure, China contagion edition

An update from Alberto Gallo’s chart-chest:

 Read more

FT Opening Quote – Fresh look at HBOS £20bn failure

Former HBOS executives could find themselves the subject of fresh investigations, following the release of a long-awaited report later today on the bank’s 2008 collapse. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here.  Read more