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France, Welcome to the Negative Yields Club

Wall Street Journal MoneyBeat - 5 hours 33 min ago
French President François Hollande (R) and European Central Bank President Mario Draghi (L).
European Pressphoto Agency

Investors are paying to park their money in France.

France’s government may be in turmoil, its economy showing precious few signs of growth, and there may be worries about how long it takes to repay its debt. But that doesn’t mean the party is off. Yields on short-term debt, you see, have turned negative.

On Monday, French two-year government bond yields shed nearly three basis points to trade at -0.001%, meaning investors now have to pay French treasury for the privilege of owning this paper.

Just to take stock of the landscape in which they are doing this, it’s worth remembering that only last Monday France’s President François Hollande dissolved his government after a public quarrel within his cabinet over how to cure the ills of the euro zone’s second-largest economy. The government shake-up—the second in less than five months—underscores the difficulties Mr. Hollande has had in rallying the left wing of the French political establishment to a new, pro-business platform.

The need for reform is apparent. At the start of August, the Bank of France said the French economy would grow at 0.2% in the third quarter from the second quarter, the same quarterly expansion as the previous quarter. Statistics agency Insee in June forecast only 0.7% expansion for the whole of the year, below the 1% the government is relying on to meet its deficit-reduction targets. Growth at 0.2% in the second and third quarters would leave a large gap to fill in the fourth quarter to reach even Insee’s forecast.

This prompted Moody’s Investors Service to say that France was likely to miss its deficit reduction targets for this year and next.

Yet despite all this, France has joined a list of Germany, Holland, Austria, Finland and Belgium as countries within the euro zone that offer negative yields on their short-dated paper.

The ongoing clashes in Ukraine have certainly resulted in a degree of flight to safety, but it’s the expectation that the European Central Bank will further ease policy measures that continues to fuel buyers for core euro-zone debt.

No pressure, Mr. Draghi.

Categories: Transactions

Heart Drug Study Gives Novartis a Shot in the Arm

Wall Street Journal MoneyBeat - 6 hours 3 min ago

Just how big a deal is Novartis ’ new heart failure drug?

Shares in the Swiss pharmaceutical giant climbed to a record high Monday, gaining 4% on the back of impressive data it presented at an industry conference on one of its experimental new drugs: LCZ696.

In a large study of patients with chronic heart failure, LCZ696 cut both the risk of cardiovascular death and the risk of being hospitalized from heart failure by around a fifth, compared to the current standard treatment.

Crucially, LCZ696 showed benefits in patients from different geographic populations. It also showed a manageable – albeit slightly higher – incidence of side effects such as angioedema, a type of rapid swelling which often affects the limbs or face.

Those results should be enough to get U.S. cardiologists to switch their prescribing habits from current cheap generic drugs to LCZ696 if it’s approved for sale, according to a survey conducted by Deutsche Bank .

LCZ696 thus promises to be a big breakthrough in a big field. Novartis estimates some 26 million people live with heart failure in the U.S. and Europe. Novartis aims to file the drug with U.S. regulators this year, meaning it could be on the market as soon as 2015.

Reuters

Even before the data were released, investor hopes for LCZ696 had been high, with analysts penciling in annual sales of around $2 billion by 2020. Novartis said back in March the study had been stopped early because it had met its goals. Since then the company’s share price has risen almost 18%.

Some analysts have now used the newly-released trial data to raise their peak sales forecasts: Morgan Stanley said Monday it now forecasts $5 billion of annual sales by 2020, up from $3 billion previously.

Those are huge figures for an industry dominated by drug launches which are often tailored to small patient sub-groups. Industry experts are heralding LCZ696 as an uncharacteristic “return of the mass market blockbuster.”

Still, there are a number of question-marks around the drug. It’s impossible to predict exactly how enthusiastically doctors will prescribe the treatment particularly when one big imponderable is price. Here, Novartis says it’s too early to speculate.

Analysts at Sanford Bernstein think LCZ696 could be launched at a price of around $7 a day in the U.S., a big premium to cheap generic heart drugs that can cost as little as $4 for a 30-day supply.

Another is how widely LCZ696 could be used for patients with a more difficult to treat sub-group of heart failure. Novartis is currently trialing the drug in this sub-group, with results expected in 2019.

Still, if successful, widening the drug’s range to these patients could potentially double its annual sales to as much as $10 billion annually, notes Deutsche Bank.

That’s some impressive potential upside for a company, even one with annual revenue of around $60 billion and a market capitalization of $243 billion.

Categories: Transactions

Europe’s Manufacturing Malaise Was Not in Policymakers’ Playbook

Wall Street Journal MoneyBeat - 7 hours 8 min ago
Are the wheels falling off European manufacturing?
Bloomberg News

For much of this year, the European Central Bank’s policymakers have taken heart in generally positive economic surveys which have suggested that a sustained recovery was just around the corner.

The surveys let them shrug off some of the disappointing official statistics. After all, actual data are backward looking whereas polls take the current economic temperature and about future prospects, insofar as expectations matter. Eventually, the thinking went, the gap between surveys and data would close.

As indeed it is. But not in the way policymakers were hoping. Rather than official data rising to confirm the poll results, the reverse is happening. Surveys are softening to match government statistics.

Take the latest purchasing managers’ indexes.

European PMI manufacturing surveys were almost universally disappointing for August. Most economies reported softening manufacturing conditions. And the weakest were the euro-zone economies, with France and Italy reporting outright contraction while the single currency region overall only just managed to register expansion.

Part of the malaise seems to be derived from the fact that the euro zone’s hardest-hit economies still have insufficient domestic demand to generate self-sustaining growth, while core countries have started stumbling under local and global onslaughts.

Though Russian sanctions are likely to have done substantial damage–PMIs for eastern European economies, Sweden and Germany all dropped back sharply–that’s not the whole story. The more subdued tone seems to be global–Chinese PMIs have been softening and even Europe’s powerhouse economy, the U.K., came out with a substantially weaker than expected reading. The tenor is mirrored by subdued oil prices in spite of a plethora of crises in major producing countries, not least Russia, Iraq and Venezuela.

These latest European PMIs–along with other business surveys–build the case for the ECB to do more. To provide more monetary stimulus. Investors have already started pricing in an asset purchase program, driving short-dated German and French bond yields into negative territory and those on 10-year bonds to the sort of levels associated with deflationary Japan.

Will it be enough? Unlikely, if the economic weakness is global and, at the same time, European governments continue to resist stimulatory fiscal measures.

Categories: Transactions

U.S. Fee to Drop Citizenship Is Raised Fivefold

Wall Street Journal MoneyBeat - 9 hours 45 min ago
iStock

The fee for individuals to renounce U.S. citizenship is jumping to $2,350 as of Sept. 12—more than five times the current charge of $450.

The U.S. State Department, in its explanation for the increase, said that documenting a renunciation is “extremely costly” and requires a minimum of two intensive interviews with the applicant as well as other procedures.

The fees charged for a number of other services, such as “fiance(e) visas” and employment-based visa applications,  increased far less than those for renunciation and in some cases declined.

The large increase in the renunciation fee comes at a time when record numbers of Americans living abroad are cutting ties with the U.S. Last year, 2,999 U.S. citizens and green-card holders renounced their allegiance to the U.S., a record number, and renunciations in 2014 are on track to exceed that. The State Department estimates that 7.6 million Americans live abroad.

In its explanation of the fee increase, the State Department referred to the growth in renunciations, noting that since 2010 the demand has “increased dramatically, consuming far more consular time and resources.” It also referred to a 2010 statement saying that the $450 fee was substantially less than what it cost to provide the service, adding that  “there is no public benefit or other reason for setting this fee below cost.”

According to a State Department spokesman, the wait time for an expatriation interview has increased to as much as six months in some areas, while it is as short as two to four weeks in others.  He added that three-quarters of all renunciations are processed by consular offices in Canada, the U.K. and Switzerland.

Advocates for U.S. expatriates reacted angrily to news of the increase. “I’m so disappointed and insulted by the continuing punitive actions of the U.S. in trying to prevent persons and companies from leaving,” said Carol Tapanila, who was born in New York state but has lived in Canada  for more than 40 years. She renounced her citizenship in 2012.

“The cost of U.S. tax lawyers, accountants and immigration lawyers made a good dent in our retirement savings. With these new fees, we would have had to take out a loan,” she added.

Helping boost the exodus of U.S. citizens, say experts, is a five-year old campaign by U.S. authorities to track down tax evasion by Americans hiding money abroad.  While the campaign has collected more than $6 billion in taxes, interest and penalties from 43,000 U.S. taxpayers, it has also swept up many middle-income Americans living abroad who pay taxes in their host country and say they weren’t trying to dodge U.S. taxes.

Scrutiny of these Americans by U.S. authorities is intensifying under the Foreign Account Tax Compliance Act, known as Fatca, which Congress passed in 2010. The law’s main provisions took effect in July and require foreign financial firms to report income and account balances above certain thresholds to the Internal Revenue Service.

The heightened enforcement is prompting many to renounce their citizenship. While a renunciation doesn’t free them of taxes due for past years, these people don’t want to risk large tax bills for themselves and their children in the future.

 

 

 

 

Categories: Transactions

Veteran Investor Sells HSBC Stake on ‘Fine Inflation’ Fears

Wall Street Journal MoneyBeat - 9 hours 58 min ago
Bigger fines mean unquantifiable risks, says Mr. Woodford. 
Bloomberg News

One of the highest-profile money managers in the U.K. has ditched his holding of around 10 million shares in HSBC because “fine inflation”—growing penalties levied by regulators—is becoming too great a risk.

Neil Woodford, a 26-year veteran of Invesco Perpetual who quit in April to set up Woodford Investment Management, started to build a position in HSBC in May last year. Most recently, HSBC shares represented 2.68% of his CF Woodford Equity Income Fund, the first to be launched by his new venture in mid-June.

But he wrote in a blog post late last week:

“In recent weeks, however, I have started to become more concerned about one particular risk: that of ‘fine inflation’ in the banking industry. Clearly, banks have attracted many fines in the post-financial crisis world as regulators and policy-makers have cracked down on past and ongoing wrongdoings in the industry. The size of the fines, however, appears to be increasing.”

He cited HSBC’s $1.9 billion fine for failing to prevent Mexican drugs cartels laundering money through its bank accounts, and Bank of America ’s $16.7 billion fine to end investigations into toxic mortgage sales, and wrote: “I am concerned, however, that these fines are increasingly being sized on a bank’s ability to pay, rather than on the extent of the transgression.” Of particular concern are fines related to the “historic manipulation of Libor and foreign exchange markets could expose HSBC to significant financial penalties.”

HSBC is very able to pay a substantial fine, he says, and that represents an unquantifiable risk.

Conduct costs from fines and lawsuits at 10 of the world’s largest banks, including HSBC, totaled around £157.43 billion ($264.86 billion) between 2009 and 2013, according to the London School of Economics’ Conduct Costs project.

“I’m not suggesting that HSBC is a bad investment but in the light of this growing risk, I now view the shares as broadly fair value,” Mr. Woodford wrote.

He is known for contrarian views and in 2008, he sold out of bank stocks before the worst of the financial crisis.

Mr. Woodford thinks U.K. lenders still have plenty of work to do to repair balance sheets, he’s worried about the quality of loan books, capital adequacy and leverage ratios. That’s wasn’t so much his concern for HSBC, though, which he thinks is well managed and “has navigated through the headwinds that have blighted the banking industry in recent years robustly.”

In an interview with the Wall Street Journal last month, Mr. Woodford said that he thought equity investors are currently too optimistic and that valuations have charged ahead of fundamentals. The U.K. in particular, he said, is shaped by troubling growth prospects and an excessively lofty currency.

Nonetheless, Mr. Woodford’s new venture appears to be flourishing.

The Equity Income Fund attracted £1.6 billion of investment during a two-week initial offer period in June and by mid-August had grown to around £2.5 billion.

That’s thanks in part to a loyal following Mr. Woodford had built up at Invesco. Wealth management companies St. James's Place PLC and Hargreaves Landsdown PLC both withdrew money from Invesco Perpetual and invested in WIM when Mr. Woodford left. Most recently, U.K. asset manager Skandia, a unit of insurer Old Mutual PLC, also said it was preparing to transfer a £640 million mandate from Invesco to WIM.

The top holdings in the equity fund, as of July 31, were AstraZeneca PLC, representing 7.52% of the portfolio, GlaxoSmithKline PLC, at 6.91%, Imperial Tobacco PLC at 6.15% and British American Tobacco PLC at 6.05%.

HSBC declined to comment.

Categories: Transactions

Energy Journal: Sunnier Days For Coal and Solar

Wall Street Journal MoneyBeat - 9 hours 59 min ago

Here’s your morning jolt of news, insight and analysis on the global energy business. Send us tips, suggestions and complaints: andrew.peaple@wsj.com

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By Andrew Peaple

COAL TURNS A CORNER

Things are looking up for coal.

A reclaimer places coal into stockpiles at the coal export terminal in Newcastle, north of Sydney. 
Reuters

Coal mining companies have struggled for the last couple of years, thanks to soaring supply. But according to a WSJ article by Rhiannon Hoyle and Biman Mukherji, there’s a new mood of optimism in the sector.

Shares in companies for whom coal is the main part of their portfolio—like Glencore, Whitehaven Coal and Adaro Energy—have all rallied strongly this year after their prospects started to brighten.

The reason appears to be a favorable turn in supply and demand dynamics for the black stuff. In Australia, the source of much of the world’s coal, unprofitable pits have closed with the loss of 10,000 jobs. Meanwhile, demand in key importing nations like China and India is set to increase.

This hasn’t actually led to a major pick-up in coal prices yet—either for thermal coal, which is used in electricity generation, or for metallurgical coal, which is used in the process of refining iron ore. But prices for the two types of coal appear at last to have bottomed out after a dismal couple of years.

Interestingly, the response of coal producers to falling prices stands in contrast to what is going on in the world of iron ore. Whereas coal suppliers seem to be acting rationally to falling prices by reducing supply growth, falling iron ore prices seem only to have encouraged major producers like BHP Billiton and Rio Tinto to produce ever more of the metal.

AND THE SUN SHINES ON SOLAR

From one of the most polluting energy sources to one of the cleanest; market trends could also be helping the solar industry, according to a Heard on the Street column by Liam Denning.

Denning suggests demand growth for solar modules could finally outstrip supply. Again, as with coal, this has helped to stabilize prices and improve company profit margins after years of decline.

With the cost of fossil fuels still high for many markets outside the U.S., the competitiveness of industries such as solar could improve further, as they benefit from technological advance. As Denning notes, this is “hardly a new paradigm, but it is reason enough to invest.”

MARKETS

Oil prices are lower Monday even though tensions in a number of key oil-producing areas are on the rise. The latest report can be read here.

Categories: Transactions

Bearish Euro Bets Are Gathering Pace

Wall Street Journal MoneyBeat - 10 hours 18 min ago
That sinking feeling. 
Agence France-Presse/Getty Images

Investors are ramping up their bearish bets on the euro ahead of a closely watched meeting of the European Central Bank Thursday.

Positioning data released by the U.S. Commodity Futures Trading Commission for the week up to August 26 show that shorts on the euro are at their highest level since soon after Mario Draghi‘s ‘whatever it takes’ speech two years ago.

Speculators’ aggregate net shorts on the euro covered by these figures are now at $24.8 billion, the highest level since July 2012. That’s a tiny slice of a vast market, but these data are closely watched as a barometer of market sentiment towards a wide range of currencies and assets.

Investors have been positioning for a drop in the currency since the ECB cut rates in June but their call for a cheaper currency has been backed up by expectations that the central bank will take further action to stimulate the euro zone economy, and soon.

“It is too early to call an end to the deterioration of euro sentiment,” said Scotiabank strategist Camilla Sutton.

On Friday, Goldman Sachs analysts said they expect the euro to reach parity with the dollar by 2017.

One big potential banana skin: what if the ECB doesn’t live up to expectations?

“Clearly, the market is in danger of disappointment if the ECB meeting on Thursday fails to deliver more than dovish rhetoric and promises of action,” says Societe Generale macro strategist Kit Juckes.

Categories: Transactions

Fund Manager Neil Woodford Sells HSBC Stake on Risk of Fines

New York Times DealBook - 10 hours 40 min ago
In a blog post, Mr. Woodford, formerly of Invesco, said he was concerned about the "unquantifiable" fines HSBC could face in continuing investigations by regulators.
Categories: Transactions

Li Ka-shing Repeats Vague Stance On HK Democracy

Wall Street Journal MoneyBeat - 10 hours 49 min ago

What’s Li Ka-shing’s response to a Chinese government ruling on Sunday which curtailed reforms for Hong Kong’s chief executive elections, setting the stage for weeks of protests?

Hong Kong’s—and Asia’s—richest man is out of town.

Mr. Li is currently away from Hong Kong, his companies Cheung Kong Holdings Ltd. and Hutchison Whampoa Ltd. said in a joint statement Monday.

Li Ka-shing, chairman of Hong Kong-based Cheung Kong and Hutchison Whampoa, at a news conference on Feb. 28.
Associated Press

Instead, the octogenarian billionaire’s press team repeated previous elliptical remarks which Mr. Li first made to a community group on August 19, including these comments: “Should we fail to nail the perfect synthesis between ideals and practicalities, we must still move forward together as ‘a bundle of antinomies’.”

The word “antinomy” was particularly puzzling. The statement in Chinese might translate more to a “bundle of contradictions.” Merriam-Webster defines antinomy as “a contradiction between two apparently equally valid principles.”

“Every effort for democracy will not be a vain struggle, as progress will arc towards broadening participation, and with each and every conscientious vote, Hong Kong Citizens will be participants in building it so,” Mr. Li went on.

A spokeswoman for Cheung Kong Holdings did not respond to requests for comment as to the meaning of these remarks and whether Mr. Li supports Beijing’s ruling or not. One could however understand the mention of “each and every conscientious vote” as a tacit approval of the ruling, which would give all Hong Kong citizens the opportunity to vote in chief executive elections for the first time, even if the candidates are limited by Beijing.

Whatever Mr. Li does think, Beijing believes it is working on behalf of him and his fellow Hong Kong tycoons, according to Chinese legal scholar Wang Zhenmin, who said last week that the interests of Hong Kong’s business community must be taken into account in electoral reforms.

Business elites “control the destiny of Hong Kong,” Mr. Wang said.

Mr. Li meanwhile did say at a university commencement in June that that he was losing sleep over wealth inequality, among other concerns.

“I fear that widening inequality in wealth and opportunities, if left unaddressed could fast become ‘the new normal’,” Mr. Li said.

Categories: Transactions

Error Rate Audit

Wall Street Journal MoneyBeat - 12 hours 19 min ago

Grains of salt should spill when investors read a company’s unaudited results. Singapore’s top auditing body, the Accounting and Corporate Regulatory Authority, has attempted to answer how much salt. A study it commissioned found that for 257 listed companies last year, auditors proposed 3,222 sets of adjustments to their books worth 33.9 billion Singapore dollars (US$27.15 billion), or 12% of the market cap of the companies involved.

There were quite a few bad apples in the barrel, with 33 companies collectively contributing almost three-quarters of the adjustments. The key differentiator seems to be working with Chinese currency. Chinese yuan accounts represented 60% of the proposed adjustments, worth S$20 billion. A study commissioned by a regulator with two Big Four auditors on its board espousing the value of auditing might also be taken with a grain of salt – especially by company CFOs. Management accepted only two-thirds of the adjustments recommended by auditors.

Categories: Transactions

Heineken to Sell Packaging Operations in Mexico to Crown Holdings

New York Times DealBook - 12 hours 46 min ago
The deal values the can-making unit Empaque at about $1.23 billion and would make Crown the second-largest beverage can producer in North America.
Categories: Transactions

India Outpacing China’s Oil Demand

Wall Street Journal MoneyBeat - 13 hours 59 min ago
India’s diesel demand has risen sharply in the last few months because of power shortages and delayed monsoon rains. Here, an assistant refuels a boat with diesel in Pondicherry, India, on Saturday, July 19, 2014.
Bloomberg News

India’s oil demand has grown faster than China’s so far this year, highlighting slowing energy demand in the world’s most populous country and fueling expectations that India may pick up the slack over the medium-to-long term. The pace of India’s demand also reflects optimism about India’s economic growth under Prime Minister Narendra Modi. 

In absolute terms China is Asia’s largest oil consumer, having burned 10.76 million barrels a day of oil and accounting for 12.1% of global oil consumption in 2013, according to BP PLC. The second-largest oil consumer in Asia is Japan, though its oil consumption has been declining as its economy has matured. 

India ranks third at 3.7 million barrels a day and accounted for about 4.2% of global oil consumption in 2013. 

India’s oil demand has shown steady growth through July at an average of 3%, or 101,000 barrels a day. China’s oil demand has declined at an average of 0.6%, or 62,000 barrel a day, in the same period, Barclays PLC analyst Miswin Mahesh said. 

Indian oil demand growth has “organic, domestic, economic activity-linked factors still driving it,” he said. Mr. Mahesh expects the south Asian country’s oil demand to accelerate to 210,000 barrels a day next year, spurred by healthy construction activity, government-financed industrial projects and strong growth in car purchases. 

China’s oil-demand growth, on the other hand, remains uncertain, with a large portion of its imports this year going into strategic stockpiling instead of consumption. Its oil demand fell into negative territory in July and its oil imports declined for the first time this year.

“This surprise drop in crude imports further supported our view that [China's] full-year oil demand could be weaker than current market expectations,” Thomas C. Hilboldt, head of Asia Pacific oil research at HSBC Holdings PLC said last week. 

The disparity of the demand drivers in India and China is also telling. 

The bulk of oil demand in both countries is for diesel, the most widely consumed liquid fuel in Asia. China’s diesel consumption has shown a sharp decline because of its industrial slowdown, while India’s diesel demand rose sharply in the last few months because of power shortages and delayed monsoon rains. 

Despite this, the extent to which Indian energy demand can compensate for China’s decline remains doubtful. 

Markets are looking for the next emerging-market economy to take over as China moves into its post-industrial phase. Yet India has a fundamentally different economic structure and growth model, Janet Kong, head of market analysis at BP Singapore’s trading division pointed out last week. 

“It’s very much a service-oriented economy…not relying on a lot of infrastructure investments or manufacturing,” she said. 

The manufacturing sector in India has underperformed for many years, contributing to about 15% of gross domestic product and 12% of employment, compared with 25% or more of GDP in countries like China, Malaysia, Thailand and Vietnam, according to the Asian Development Bank’s 2014 report. Meanwhile, China is transitioning from an industrial economy dependent on exports to focus more on domestic consumption.

 

Categories: Transactions

Morning MoneyBeat Europe: Bulls Lack Cues as New Week Starts

Wall Street Journal MoneyBeat - 15 hours 4 min ago

Good Morning Europe

There are plenty of good reasons for investors to leave stock markets alone as a new week gets under way, and, sure, enough, that is what the forecasters expect with modest falls about the most they’re tipping before the bell Monday.

The U.S. will be out for the labor day break, and, despite a strong August for Wall Street, continued conflict in Ukraine will probably keep the lid firmly on European equity.

The European Central Bank’s looming monetary policy meeting, on Thursday, might also keep investors away until the see what Mario Draghi and Co. have in store.  Most forecasters seem to consider ‘full blown’ quantitative easing to be some way off, despite inflation’s weakness, although whether another ‘steady as she goes’ act from the ECB chief -consummate performer though he might be- will be enough for the bulls remains to be seen.

The day’s economic data, in the shape of final manufacturing Purchasing Managers Indexes from around Europe, aren’t expected to offer much solace.

Market Snapshot: U.S. stocks (Friday close) DJIA up 0.1%, Nasdaq up 0.5%, S&P up 0.3%. Nikkei now up 0.3%. September FTSE and S&P futures both flat. Brent crude up one cent at $103.20. Gold up 30 cents at $1287.70. EUR/USD now at $1.3126. USD/JPY at ¥104.19. Ten-year T-note yields 2.34%, Bund 0.89% and Gilt 2.34%.

Watch For:  Manufacturing PMI data from around Europe.

What you may have missed from MoneyBeat:

Europe’s Week Ahead: ECB Lies in Wait: The European Central Bank gets back to work after the summer next week with inflation in the euro zone now down to 0.3%. That may not prove enough for them to bring in new policy measures: But it and investors will watch the latest economic data form Germany closely too.

The Good News In Europe’s Inflation Story: A substantial part of the fall in inflation comes from dropping energy prices. Falling energy prices in effect act as a windfall to households, which leaves them with more money to spend on discretionary goods. What’s more, the fact that the euro zone is a large importer of energy, the net effect should be positive for the region.

Forex Funds Post Profits In July, Bucking This Year’s Trend: Investment funds betting on currency moves are finally registering some profits.

Energy Journal: Oil Key to Scotland’s Fate: There are just three weeks to go before Scotland votes on whether to become independent from the rest of the U.K. And so the debate over its oil industry there is heating up.

Overnight action: 

Ukraine Loses Ground to Separatists: Government forces lost more ground to Russian-backed separatists in heavy fighting in eastern Ukraine a day after European leaders threatened to impose more sanctions on Moscow.

U.S. Strikes Help Break Siege in Iraq: Airstrikes helped break a two-month siege by Sunni militants on a Shiite town on Sunday, in apparent coordination with ground attacks by Shiite militias, local civilian fighters and Kurdish troops.

Beijing Abandons Pragmatism: Deng Xiaoping understood Hong Kong’s distrust of Communism and let the city keep its British-style courts and administration. Today’s Chinese leadership shows far less inclination for such pragmatism.

Feel free to forward this email to colleagues and friends and include this link so they can sign up to receive it for free too. You are receiving Morning MoneyBeat Europe. You can also sign up for U.S. and Asian editions here.

Categories: Transactions

Barclays to Sell Retail and Corporate Bank Units to CaixaBank of Spain

New York Times DealBook - Sun, 08/31/2014 - 21:18
The sale represents the latest development in the British bank’s plan to streamline itself by selling non-core businesses.
Categories: Transactions

Start-Ups Accrue Funding in Case of Leaner Times

New York Times DealBook - Sun, 08/31/2014 - 20:13
Some entrepreneurs say worries about a possible downturn are partly why they are stocking up on financing, essentially taking out insurance on the risk of harder days ahead.
Categories: Transactions

Morning MoneyBeat Asia: The Gains of August

Wall Street Journal MoneyBeat - Sun, 08/31/2014 - 18:27
Agence France-Presse/Getty Images

Market Snap: At the New York close on Friday, for the month: S&P 500 up 3.8% at 2003.37. DJIA up 3.2% at 17098.45. Nasdaq Comp up 4.8% at 4580.27. Treasury yields declined; 10-year at 2.347%. Nymex crude oil down 2.25% at $95.96. Gold up 0.35% at $1,285.80/ounce.

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How We Got Here: It was a strong month for U.S. stocks. Considering what a quagmire August can be and where the indexes were a month or so ago, that’s saying something.

Markets started dropping in late July, and slid into early August. Given that August has been the worst month for the Dow and S&P 500 since 1987, it was reasonable to think that this might be long-awaited 10% correction. Only, it wasn’t. The market turned on a dime on Aug. 7, and kept rising into Friday; the Dow was up 12 of the past 16 sessions. The S&P closed the month at 2003, a fresh record.

Where do we go from here? Well, the Ukraine/Russia crisis is eating into economies both in Russia and Europe; Islamic State is a serious problem for western powers; and there’s mounting evidence that Abenomics is not doing its promised job. But then again, the Fed is still running with rock-bottom interest rates, and Mario Draghi is jawboning European bonds to multi-century lows.

Coming Up: Auto makers, including Japan’s Toyota Motor, Honda Motor and Nissan Motor, will report their sales results for August this week. The companies suffered from a rise in Japan’s consumption tax in April, which caused at least a short-term slide in sales. They are also bringing in hybrid technologies and introducing models designed to cater to Chinese tastes. Analysts and investors will be watching for signs that those actions are bearing fruit.

From The Wall Street Journal

Yuan’s Fall Hurts Chinese Profits: Chinese companies are reporting profit hits from the weaker yuan, after borrowing billions of dollars from the U.S., Hong Kong and elsewhere abroad.


Beijing Abandons Pragmatism:
China’s World: Deng Xiaoping understood Hong Kong’s distrust of Communism and let the city keep its British-style courts and administration. Today’s Chinese leadership shows far less inclination for such pragmatism.

Alibaba Plans IPO Launch Week: What will likely be the world’s largest initial public offering in years appears to be just over a week away. Chinese e-commerce company Alibaba plans to launch its U.S. initial public offering, which could raise more than $20 billion, early in the week of Sept. 8.

Hong Kong Exchange Considers Rule Change After Losing Alibaba IPO: Hong Kong’s stock exchange is exploring a rule change after its refusal to budge on the issue of equal voting rights for shareholders cost it the initial public offering of Alibaba Group Holding Ltd.


NTT Makes New Overseas Push:
More than a decade after a disastrous foray abroad, Japan’s biggest telecom group, NTT, is trying to grow overseas again.

Bad Loans Soar at China Banks: China’s biggest state-owned banks reported a surge in soured and castoff loans in the first half of the year.

Tax Rise Puts Abenomics at Risk: Prime Minister Shinzo Abe’s decision to raise taxes is taking a toll, hurting household spending and putting his “Abenomics” revival plan at risk.


India Expects Economy to Strengthen:
India’s finance minister expects the country’s economic growth will accelerate as inflation moderates and government measures aimed at making it easier for companies to do business take effect.

From MoneyBeat

Be Aware of Companies Bearing Gifts: Money talks, but investors don’t always get to decide what it says. Sometimes investors can’t even hear it. When public companies give cash to candidates for office, lobbies or political action committees, the money comes out of shareholders’ pockets. But companies aren’t required to disclose to investors how much they give or where it goes.

U.S. Dollar Will Achieve Parity With Euro by 2017, Says Goldman: The euro is on its way to parity with the dollar by the end of 2017, say analysts at Goldman Sachs Group Inc.

Hal Finney and Bitcoin’s Earliest Days: When Satoshi Nakamoto released bitcoin in January 2009, it was noticed by only a few people, and of those people, even fewer grasped its significance. One of them was Hal Finney, who died on Thursday from complications related to ALS.

Carl Icahn’s Spellbinding eBay Returns: A chart recently filed with the Securities and Exchange Commission by Icahn Enterprises showed a 76% return on the stock of eBay during the period in which an Icahn designee served on the online auction company’s board.

Categories: Transactions

2014 Amendments Affecting Delaware Alternative Entities and the Contractual Statute of Limitations

Editor's Note: The following post comes to us from Scott E. Waxman, founding partner in the Delaware office of K&L Gates LLP, and is based on a K&L Gates alert authored by Mr. Waxman, Eric N. Feldman, Nicholas I. Froio, Andrew Skouvakis, and Zachary L. Sager. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

On August 1, 2014, amendments to Delaware’s alternative business entity statutes, [1] as well as the statute of limitations applicable to Delaware contracts, [2] became effective. These amendments (the “2014 Amendments”) represent a continuing effort by Delaware to create a flexible statutory framework for alternative business organizations and transactions involving business entities generally. This post briefly summarizes the more significant 2014 Amendments.

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Categories: Governance

Top Bitcoin Proponent to Plead Guilty to Federal Charge

New York Times DealBook - Sat, 08/30/2014 - 15:40
Charles Shrem, a leading backer of Bitcoin, is to plead to one federal count of aiding and abetting an unlicensed money transmitting business.
Categories: Transactions

The SEC Whistleblower Program Year in Review

Editor's Note: The following post comes to us from Jordan A. Thomas, partner at Labaton Sucharow LLP and former assistant director at the Securities and Exchange Commission, and is based on a Labaton Sucharow publication by Mr. Thomas and Vanessa De Simone.

Four years ago this month, with the country still reeling from financial crisis, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act–the most sweeping financial reform effort since the Great Depression. The goal of Dodd-Frank was as ambitious as its scope; as President Barack Obama remarked, the legislation would “restore markets in which we reward hard work and responsibility and innovation, not recklessness and greed.”

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Categories: Governance

Alibaba to Begin Investor Roadshow on Week of Sept. 8

New York Times DealBook - Sat, 08/30/2014 - 00:17
Under the latest timetable, Alibaba will hope to price its stock sale toward the later half of the week of Sept. 15, this person added.
Categories: Transactions

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