Currencies

Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

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Property

Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

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Currencies

Euro suffers worst month against the pound since financial crisis

Political risks are still all the rage in the currency markets. The euro has suffered its worst slump against the pound since 2009 in November, as investors hone in on a series of looming battles between eurosceptic populists and establishment parties at the ballot box. The single currency has shed 4.5 per cent against sterling […]

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Banks

RBS falls 2% after failing BoE stress test

Royal Bank of Scotland shares have slipped 2 per cent in early trading this morning, after the state-controlled lender emerged as the biggest loser in the Bank of England’s latest round of annual stress tests. The lender has now given regulators a plan to bulk up its capital levels by cutting costs and selling assets, […]

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Currencies

China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

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Categorized | Equities

Week in Review, February 27


Posted on February 26, 2016

Week in Review

A round up of some of the week’s most significant corporate events and news stories.

Oil price slide continues

    A pump jack operates in an oil field near Corpus Christi, Texas, U.S., on Thursday, Jan. 7, 2016. Crude oil slid Thursday to the lowest level since December 2003 as turbulence in China, the worlds biggest energy consumer, prompted concerns about the strength of demand. Photographer: Eddie Seal/Bloomberg©Bloomberg

    Oil market investors suffered a difficult start to the week when Ali al-Naimi, the Saudi oil minister, ruled out a deal by major producers to cut output, writes Kiran Stacey.

    A week earlier, the Saudis had joined Russia, Qatar and Venezuela in announcing a provisional output freeze — but only if other large producers agreed.

    Mr Naimi called this “the beginning of a process”, but poured cold water on the idea of going further, saying there was still too much mistrust between the world’s biggest producers.

    His comments sent the price of a barrel of Brent crude down $1.33 to $33.35, and the slide continued into the middle of the week. Prices recovered later, however, as data suggested low prices were helping stimulate demand for petrol.

    Meanwhile, the effects of the price slump continue to be seen in the annual accounts of oil companies worldwide.

    On Thursday, Spain’s Repsol became the second European oil major to announce it would cut its dividend after unveiling a €1.2bn net loss for 2015. The company proposed a 2015 payout of €0.30 a share, down from €0.50 a year earlier, following a similar move by Eni, the Italian oil major, last year.

    Oil chart 1

    Losses were even heavier at Chesapeake, the second-largest gas producer in the US, and one-time darling of the country’s shale industry. The company said on Wednesday that it had swung from a $1.3bn profit in 2014 to a $14.9bn net loss last year. It is now looking to cut its capital spending for this year by 69 per cent.

    In the UK, Premier Oil, one of the country’s largest independent oil and gas explorers, said it was considering starting talks with its lenders about renegotiating its banking terms. Like many in the UK North Sea, Premier’s debt pile has built steadily over the past few years.

    Things are also difficult for the companies that supply oil explorers, two of which — Petrofac and Wood Group — said this week they had seen a drop in earnings for 2015.

    Miners approach rock bottom

    Mobile World Congress in Barcelona, Spain, on Saturday, Feb. 20, 2016©Bloomberg

    For the mining industry, this week was one to forget, write FT reporters.

    Vale, the world’s largest iron ore producer, on Thursday reported a $12.1bn loss for 2015 — the biggest loss for any listed Brazilian company since records began in 1986, according to data from consultancy Economatica.

    A near-50 per cent depreciation in the Brazilian real against the dollar over the year pushed up the value of its largely dollar-denominated debt, while Vale was also forced to make impairments of $9.37bn to account for falling iron ore prices.

    BHP Billiton reported equally dismal results on Tuesday, cutting its interim dividend for the first time in 15 years as it swung to a $5.67bn net loss in the last six months of 2015.

    Both miners have also taken writedowns on Samarco, their joint venture in Brazil that triggered the country’s worst-ever environmental disaster when one of its dams burst in November last year.

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    On Wednesday, Brazilian police charged Samarco’s chief executive and six others with homicide following the dam’s collapse, which killed at least 17 people and left more than 700 homeless.

    Samarco said it considered the charges “misguided”, while Vale and BHP said they were awaiting the results of an external independent investigation to evaluate the causes of the incident.

    The charges came a day after Vale announced Samarco was the subject of another civil lawsuit in Espírito Santo, requiring its joint venture to pay R$2bn. Brazil’s government is already suing the company for R$20bn over the disaster.

    Mobile’s mass appeal

    More than 100,000 people attended Mobile World Congress in Barcelona to see the latest in virtual reality, artificial intelligence and connected devices from a vast array of telecoms and technology groups, writes Dan Thomas.

    This year, virtual reality devices were among the most prominent at the event given the arrival of headsets and cameras capable of taking immersive video from a number of Asian manufacturers.

    Samsung and LG even had competing virtual reality rollercoaster rides to show off their headsets, while Mark Zuckerberg took to the stage on the opening night to support Samsung’s Gear VR range that has a partnership with Facebook’s Oculus.

    Mr Zuckerberg later that week returned to the stage to talk more about his excitement about virtual reality, as well as mount a stout defence of the ban on Facebook’s Free Basics internet service in India.

    Other technology groups focused on connected devices and applications firmly aimed at the fast growing market for the internet of things. These ranged from radical solutions for how to link urban services such as public transport in smart cities to simple gadgets that let help people fish or walk their pets.

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    Smartphones are always one of the main draws at Mobile World Congress, although this year many manufacturers such as Samsung concentrated on improving ranges rather than unveiling any revolutionary changes to form or function.

    Mobile network groups also use the event to show their latest plans to introduce improved infrastructure capable to faster speeds and better services. There were many examples being talked about in particular of 5G — the next generation of mobile network — although all admitted that any real practical demonstration of a commercially available technology was still some years away.

    Global recall for Mars

    Packets of Mars Duo chocolate confectionary bars, manufactured by Mars Inc., sit displayed for sale in a newsagent's store in London, U.K., on Thursday, Oct. 17, 2013. The cost of chocolate is set to rise, propelled by raw sugar trading at a nine-month high and this year's 60 percent increase in cocoa butter combined with the arrival of Christmas demand. Photographer: Chris Ratcliffe/Bloomberg©Bloomberg

    Mars experienced the sour over the sweet this week when it made a sweeping, voluntary, recall of some of its most popular chocolate-bar brands after a customer found a piece of red plastic in a Snickers bar, writes Lindsay Whipp.

    The decision to recall Mars, Snickers, Milky Way, Celebrations and Mini Mix brands, which had been made at a Netherlands factory over a short period spanning the end of last year and the beginning of 2016, was made complicated owing to the global reach of distribution.

    The factory’s chocolate bars were sent to 57 countries, mainly in Europe, but as some were sold in duty-free shops, the potential for some of these treats to have made their way across the globe was high.

    Corporate person in the news

    Honeywell chief executive does not give up easily

    Honeywell Chairman and CEO Dave Cote

    Dave Cote hopes to create a behemoth in the aero and building sectors

    But the fourth-generation, Mars family-owned, company said that it believed that the occurrence of the plastic piece in a chocolate bar was an “isolated” one.

    Analysts said that Mars would probably suffer a short-term impact from loss of sales but because it had acted swiftly, any reputational damage would probably be temporary.

    However, the cost of the recall could run into the “tens of millions of dollars”, estimated one analyst.

    David Young, partner at British law firm Eversheds, said that the recall would be “among the largest undertaken given the number of products and countries affected”.

    “What needs to be remembered is that this is about risk management. It is not a story about pieces of plastic being in every one of these products.”

    Winners and losers of UK’s banking sector

    A man enters a Lloyds Bank branch in central London, Britain February 25, 2016. Lloyds Banking Group rewarded investors with a surprise 2 billion pound payout on Thursday, underlying its intent to be the biggest dividend payer among Britain's banks and its recovery after a state bailout. REUTERS/Paul Hackett©Reuters

    Bank dividend watchers had a busy week as the annual results of some of the UK’s biggest lenders shed more light on the gap between the sector’s winners and losers, writes Martin Arnold.

    Lloyds Banking Group emerged as the clear winner after its shares ended the week up 17 per cent, boosted by the £2bn dividend it announced that prompted investors to shrug off an 11 per cent drop in pre-tax profits.

    Another bank that won plaudits for its payout to shareholders was HSBC, which stuck to its policy of upping its dividend even though pre-tax profits of $18.9bn missed expectations. Its shares rose 4 per cent over the week.

    In contrast, Royal Bank Scotland had a rougher ride. The state-controlled lender postponed the date when it expects to be able restart dividend payments from the first quarter of 2017, blaming delays in spinning off its Williams & Glyn business.

    RBS shares ended the week down 8 per cent after it reported a net loss of £2bn, its eighth consecutive deficit that took its total losses since the financial crisis to more than £50bn.

    Standard Chartered also had a week to forget. Bill Winters, chief executive, said it “rips at our soul every time we look at these numbers” as he reported a $2.4bn net loss — its first since 1989 — and scrapped the final dividend. However, its shares finished the week up 4 per cent.