Nestlé's Slow Growth Plays Into Dan Loeb's Hands

The activist investor is agitating for higher margins at the world’s largest food company. Disappointing growth lends weight to his arguments.

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Noble's Shriveled Asian Roots Won't Catch Much Rain

Noble’s share price fell nearly 50% after it warned of another big loss and said it planned to sell of most of its global oil-and-gas assets. What’s left may have trouble surviving on its own.

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Toshiba Bankruptcy a Nice Idea, But Hard to Execute

The nuclear option of bankruptcy could give Toshiba a fresh start. It’s a nice idea, but the embattled Japanese giant is more likely to choose to muddle through.

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Deutsche Bank No Longer Reeling, but Recovery Out of Sight

Deutsche Bank is finding firmer ground, but first-half revenues disappointed and there was little to suggest investors have anything other than a long wait for better returns.

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Texas Republicans revive their “bathroom bill”

“FLUSH the bill!” chanted protesters gathered outside Texas’s state capitol building, in Austin, on July 21st. They had gathered, bearing placards decorated with pictures of toilets, seat up, to urge lawmakers to ditch legislation that would prevent transgender people from using the lavatory of their choice.

Undeterred, the Senate voted in favour of two bills on July 25th that would reserve certain toilets, showers and changing rooms, in schools and public places, for the use of “persons of the same sex as stated on a person's birth certificate." But whether the bill will ever become law is another matter.

This is the second time this year that conservatives in Texas have tried to regulate the toilet habits of transgender people. In March, a similar bill succeeded in the state Senate but fell in the House of Representatives, thanks to opposition from pro-business Republicans. They were concerned such a law would deter investors from outside the state, as happened in North Carolina last year after its Congress...Continue reading

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U.S. Shale Threatens Chemical Element of Aramco's IPO

An expected surge in U.S. petrochemicals output challenges one of the main pillars of the energy giant’s plans to list.

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Loan Investors Give Companies a Break at Their Own Expense

It has proved startlingly easy for companies to cut the rates on their leveraged loans. Loan investors have little choice but to go along.

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GM and PSA Geared Up for Auto Industry Tougher Times

The car makers’ unwavering focus on costs and margins will offer protection in the coming downturn.

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The euro’s obituaries were premature

FIVE years ago, Mario Draghi, head of the European Central Bank, pledged to do “whatever it takes” to save the euro. At the time, many people were predicting that the euro zone would break up. But Mr Draghi pulled off the trick; no countries have left the single currency. Borrowing costs have come down and even Greece has been able to tap the markets.

Keeping the euro together may have been the aim of the game, but was it worth it? As M&G, the fund management group, points out, the record has been mixed. Economic growth has rebounded to a respectable 1.5% year-on-year. This is not stellar but it is hard for the euro zone to grow rapidly when its population is ageing; the IMF suggests a greater proportion of older workers may weigh on productivity growth.  

Of course, the euro zone could get more of the current...Continue reading

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AMD's New Chips Are Stacking Up

Strong results from the heavily shorted chip maker should calm some nerves.

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Citigroup Sets High Bar for Itself

Citigroup shares have been on a tear. Did executives get too giddy on their future prospects?

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Can Donald Trump pardon himself?

MIXED messages are a hallmark of the Donald Trump presidency. So it is no surprise that in the wake of a Washington Post story on July 20th depicting Mr Trump as curious about the extent of his pardon power, contradictory spins emerged from different corners of the White House. Jay Sekulow, Mr Trump’s lawyer, flatly denied the report that, under investigation for suspicious ties to Russia, the president is looking into ways to shield his aides and himself. “We have not and I continue to not have conversations with the president of the United States about pardons”, Mr Sekulow said on July 23rd. But a day earlier, the president tweeted his belief that “all agree the US president has the complete power to pardon”.

Mr Trump, no authority on the constitution, may have come to that conclusion all on his own. If he or his team had looked into the range of expert views on the subject, a more nuanced take would have emerged. Article II, section 2 of America’s constitution says presidents “shall have power to grant...Continue reading

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The Coming Squeeze for Shale Oil Drillers

Oil field services firms such as Halliburton and Schlumberger see more improvement in the U.S. shale patch, but their rising margins may come at the expense of oil and gas producers’ profits.

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Venezuelans sell sex in Colombia to survive

ON SATURDAY night in Parque Poblado in Medellín, young people gather to drink, smoke and chat. Barbara and her cousin Sophia have more serious business: they hope to make enough money from selling sex to live decently after fleeing Venezuela, where survival is a struggle.

Barbara, who is 27, prefers her former occupation as the owner of a nail and hair business in Caracas, Venezuela’s capital. But polish and shampoo are as hard to find as food and medicine, and so she has come to Medellín. In an hour a sex worker can make the equivalent of a month’s minimum wage in Venezuela. Colombian pesos “are worth something”, unlike Venezuela’s debauched currency, the bolívar, Barbara says. “At least here one can eat breakfast and lunch.”

Some 4,500 Venezuelan prostitutes are thought to be working in Colombia; the trade is legal in both countries. But until recently they were often rounded up by police and deported back to Venezuela by the busload. That...Continue reading

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Challenging the cult of Che Guevara

Hard to erase

CHE GUEVARA was born in Rosario, then Argentina’s second-largest city, in 1928 but did not stay long. Less than a year later his family moved away. Yet his birthplace has not forgotten the left’s warrior-saint. A red banner marks the posh apartment block where he was born. A four-metre-high (13-foot) bronze statue stands in Che Guevara Square. The city council finances CELChe, a centre devoted to the study of his life, and celebrates “Che week” around his birthday in June. CELChe will stage a concert to commemorate the 50th anniversary of his death on October 9th.

Not everyone in Rosario thinks the bereted revolutionary, who was captured by soldiers in Bolivia and killed on the orders of the country’s pro-American dictator, deserves such reverence. Fundación Bases, a liberal think-tank based in the city, has launched a petition to persuade the city council to remove the monuments. The martyr was himself a killer, says Franco Martín...Continue reading

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The outlines of NAFTA 2 emerge

FOR months President Donald Trump has veered between threatening to terminate the North American Free-Trade Agreement (NAFTA) and merely proposing to bring it “up to date”. On July 17th, in a letter to Congress, the United States trade representative, Robert Lighthizer, made the administration’s intentions clearer. They are closer to revision than destruction, which is a relief for Mexico and Canada, the United States’ NAFTA partners. But alongside conventional-sounding negotiating objectives are flashes of Trumpian aggression and hints that the United States will demand painful changes to the deal.

The stakes are high. A quarter of American trade in goods and services is with Mexico and Canada. The three economies tend to grow or shrink together and have integrated supply chains. Fears that the United States would abandon NAFTA have caused volatility in the markets for the Mexican peso and Canadian dollar, and talk of possible recessions.

Mr Lighthizer’s letter,...Continue reading

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Latin America’s disappointing economic growth

SCAN the Latin American newspapers and it is hard to find much sign of a convincing economic recovery. True, Brazil’s industrial production is perking up after a two-year slump. Mexico’s energy reform is starting to pay off, at last, with a big new oil discovery by an international consortium. And Peruvian restaurateurs celebrated “National Char-roasted Chicken” day on July 16th, hoping to dispatch a million birds, up from last year’s 720,000.

Otherwise, animal spirits are in short supply. After five years of deceleration and one of recession, Latin America should register modest economic growth of 1-1.5% this year, according to forecasters. The picture varies from country to country. The return to aggregate growth is largely thanks to Brazil and Argentina, which are coming out of recessions. Venezuela’s economy is collapsing. Mexico, Chile, Colombia and Peru are expanding at a sluggish rate of 2-3%. Only in Central America, the Dominican Republic and Bolivia is growth a respectable...Continue reading

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Violence and diplomatic upheaval over the al-Aqsa mosque

ON July 14th a gun battle took place outside the al-Aqsa mosque in Jerusalem. Three Israeli-Arab citizens opened fire on police. Two Israeli police officers were killed, along with the three attackers. The shootout has led to a diplomatic crisis between Israel, the Palestinians and Jordan.

After it, the Israeli government ordered a 48-hour closure of the Haram al-Sharif compound, known to Israelis as the Temple Mount. Israeli police put up metal-detectors near the entrances. The Israeli government says these measures are necessary to keep people safe. However, to the Palestinians, who contest Israel’s control of East Jerusalem, the extra security is a symbol of oppression. They have refused to enter the mosques through the detectors. In clashes with Israeli forces in Jerusalem, four Palestinian demonstrators have been killed. On July 21st a Palestinian entered a home on a West Bank settlement and stabbed to death three Israelis during their sabbath meal. On his...Continue reading

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Akzo Nobel's Poor Results Increase Chances of a Deal

The paint giant’s shares look like a one-way bet. Weak growth makes a fresh takeover bid from U.S. peer PPG ever more probable.

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Who Owns HNA? We Still Don't Know

China’s acquisitive HNA Group has disclosed more than ever about its owners. That won’t stop the questions.

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SoftBank Tries to Grab the Ride-Hailing Market

The Japanese tech giant is spreading its bets on the market. Its returns may depend on big changes in consumer behavior.

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Traffic Costs Jam Up Google

Google’s sharp jump in paid clicks came at a high cost. Traffic acquisition spending outpaced revenue growth for the first time in five years.

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How Blockbuster Drugs Fight Off Cheaper Competition

A lower-priced version of blockbuster Remicade hasn’t sold well, will an even cheaper drug upend the obscure pricing of the drug industry?

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Chaldean Catholics and Iraqi Kurds face deportation

AT MIDNIGHT on July 24th a two-week stay of deportation for more than 1,400 Iraqis—around 300 Christians and dozens of Kurds among them—will expire. Mark Goldsmith, a district judge in Michigan, had prolonged the stay twice to allow time to consider a class-action suit representing 114 of them who argue they face persecution and torture, or worse, on their return. Civil-rights advocates are doing what they can to prevent the deportations. Family and friends have protested against them almost daily. 

One of the Iraqis in danger of imminent deportation is Usama Jamil Hamama, known as Sam, a 54-year old Iraqi Christian who came to America lawfully as a refugee in 1974 when he was four. Mr Hamama, who lives in West Bloomfield, Michigan, where he is a partner at a local supermarket, is married and has four children, all American citizens, between the ages of 11 and 17. He is a regular churchgoer and a pillar of his community. On June 11th, just as he was getting ready to go to church with his family, Mr Hamama was arrested by...Continue reading

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Car Industry's Diesel Woes Just Won't Die

This was supposed to be the year Volkswagen drew a line under its diesel-emissions scandal. Instead the scandal seems to be spreading to the other German car giants.

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Bringing In Wealth Beats Trading It for Julius Baer

Managing money for the rich looks like a better business than trading and investment banking: That is the upshot of half-year results for Swiss bank Julius Baer and the theme of last week’s U.S. bank results.

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Good News: China Is Making Less Useless Stuff

After years of overinvestment, which helped to sink global prices for steel, aluminum and other products, some of the worst-offending sectors in China are looking a bit better.

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How Markets Could Come Out of the Shadows

The European Central Bank has reached the same spot the Federal Reserve reached four years ago. For financial markets on both sides of the Atlantic, it is an event that comes with consequences.

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Cloud Wars at the Right Price

The cloud computing business is growing, and revenue is building even without the draw of price cuts.

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Donald Trump’s spokesman quits

DONALD TRUMP seems to enjoy publicly humiliating people, especially those in his power. There was the Venezuelan beauty queen, Alicia Machado, he nicknamed “Miss Piggy” and made to work out in front of a pack of male journalists. There is Chris Christie, the governor of New Jersey, one of the first senior Republicans to endorse Mr Trump, who the president repaid by cracking fat jokes at his expense and passing over him for cabinet appointment. But no Trump hireling has been more ridiculed, by the president and at times, it has seemed, half of America, than the chief White House spokesman, Sean Spicer, who, despairing of his treatment, abruptly resigned on July 21st.

However many millions of dollars Mr Spicer is about to make off the back of his six-month spell as Mr Trump's official mouthpiece, it may not be enough. After just six months in Mr Trump’s service, Mr Spicer’s reputation is in pieces. Formerly a respected press chief at the Republican National Committee, he was dispatched by the president, on his debut...Continue reading

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Blackstone and CVC Ready to Bet on Risky Side of Payments

Private equity groups Blackstone and CVC are looking to join the payments party with a preliminary near-$4 billion offer for U.K.-listed Paysafe, the company revealed Friday. It looks like a gamble Paysafe shareholders should welcome.

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GE's New Boss Should Embrace Negativity

Quarterly earnings show that General Electric’s new chief will have a tough time meeting lofty expectations for 2018

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Turkey’s growing repression leads to a showdown with Germany

AFTER months of diplomatic tiptoeing, Germany’s patience has run out. On July 18th a Turkish court ordered that one Swede, one German and five Turkish activists who had been detained during a training workshop with Amnesty International, a human-rights group, should be officially arrested. Two days later Germany’s foreign minister, Sigmar Gabriel, cut loose.

He warned his country’s nationals against travelling to Turkey, proposed rolling back European Union economic assistance and suggested his government might stop providing export credit guarantees to companies doing business in Turkey. “We cannot advise anyone to invest in a country where there is no longer legal certainty and even companies are being accused of supporting terrorists,” he said.

The Turkish government’s repression of opponents and civil-society groups has grown steadily worse since an attempted coup last summer. Over 50,000 people have been jailed on charges of association with the...Continue reading

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Emmanuel Macron is revitalising the European Union—and dividing it

LIFE comes at you fast in the European Union. Barely a year ago, with the wounds from the refugee crisis still gaping, Donald Tusk, the president of the European Council, could be heard warning that a British vote to quit the EU threatened to bring about the collapse of western civilisation. In half the countries on the continent, snarling populists eager for European disintegration were terrifying the pro-EU establishment.

Yet over the past few months, gloom has turned to sunshine. In June Mr Tusk declared that he had never felt so optimistic about the EU. Much of the credit goes to Emmanuel Macron. France’s newly minted president has lifted pro-Europeans’ spirits not only by winning election wrapped in the EU flag but by doing so in revolutionary fashion, emerging from nowhere to humble France’s old parties (as well as Marine Le Pen, the nationalist who stalked Eurocrats’ nightmares for months). Rarely do members of the European establishment get to feel like...Continue reading

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The cost overruns on Russia’s World Cup stadiums are staggering

FROM a boat cruising past the south bank of the Neva in St Petersburg, passing the baroque facades of the Winter Palace and the gilded dome of St Isaac’s cathedral, it can seem as if the 19th century never ended in Russia. But turn to the river’s north side and you will see something much more futuristic: Krestovsky stadium, a Japanese-designed football arena nicknamed “the spaceship”. In June and July the newly opened stadium hosted several matches of the Confederations Cup, a second-tier tournament, meant to serve as a dress rehearsal for Russia’s hosting of the FIFA World Cup next year (and, unavoidably, won by Germany’s B team). Russians are hoping the competition itself works out better than the preparations. Krestovsky stadium was completed eight years behind schedule and 540% over budget.

The scandals that have plagued the project since construction started in 2007 have made it a symbol of the corruption in Vladimir Putin’s Russia. A former vice-governor of...Continue reading

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France’s top general quits, in a test for Emmanuel Macron

FOR a president usually eager to get the drama of politics right, Emmanuel Macron’s provocation of an open confrontation with his armed forces this month was a notable stumble. On July 14th he celebrated Bastille Day, riding in an open-top military jeep on the Champs-Elysées alongside Pierre de Villiers, the chief of the armed forces, before reviewing a parade with his guest of honour, Donald Trump. Five days later the furious general quit, saying he could no longer “guarantee” the means to protect France and sustain its ambition.

The affair has become Mr Macron’s first serious leadership test. He is likely to extricate himself, says François Heisbourg, a French security analyst, but the spat was “avoidable, at least in terms of theatre”.

The root of the dispute was money. General de Villiers, in office since 2014, was reappointed for another year on June 30th. He expected the military budget of €33bn ($38bn) to be maintained, and was reassured by...Continue reading

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Italy is facing a surge of migration across the Mediterranean

THE encampment has no name, no water, no electricity and no right to be where it is: an abandoned bus park in a desolate stretch of scrub, east of the Tiburtina railway station in Rome. Most of the Africans dotted across the asphalt in tents or sprawled on mattresses in the enervating heat of a Roman summer have no permission to be there either. Many come straight off the boat, says Andrea Costa, head of Baobab Experience, the NGO running the camp: “For them, this is just the latest stage in a journey that may already have taken two years.”

So far this year, the number of migrants arriving in Italy by sea is up by 17% over the same period in 2016, to 93,335. Unlike the Syrians who poured across the Aegean in 2015, most of them are fleeing not from war or persecution, but for economic reasons. They do not qualify for humanitarian protection, and in most cases do not want to remain in Italy, but to move on to countries with better grey-market jobs.

Under the European...Continue reading

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The Euro May Be Rising, But Money Is Still Easy

European Central Bank President Mario Draghi said Thursday that the euro’s gains had “received some attention” on the ECB Governing Council, but the currency isn’t the only factor that counts for financial conditions.

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Don't Trust Capital One's Math

Capital One sees default rates declining after a worrying jump, but investors should stay skeptical.

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To escape repression, critics are leaving the Gulf

FOR two years Ghanem al Masarir al-Dosari, a Saudi satirist, has fronted an online comic look at the news in a show called “Fadfada” (Natter), which pokes fun at his kingdom’s royal highnesses. He portrays the young crown prince and de facto ruler, Muhammad bin Salman, in nappies, and calls him “al-dub al-dasher”, loosely translated as “fat crumpet”. His YouTube channel attracts millions of followers, most of them Saudi. “Back home, I’d have lost my head,” he says. But Mr Dosari broadcasts from the safety of a north London suburb, he hopes out of reach of the royal sword.

Ever since the leading pan-Arab newspaper, Asharq al-Awsat, launched in Britain in 1978, London has served as an Arab media hub. Fleeing the censors at home, journalists found freedom in exile. Fresh crackdowns, censorship and war are again rejuvenating their ranks.

As part of its campaign against Qatar, Saudi Arabia has demanded the closure...Continue reading

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Would-be successors to the ailing Nigerian president are circling

Osinbajo the loyal

POLITICS is the survival of the fittest, and Nigeria is no exception. “The Hyenas and the Jackals will soon be sent out of the kingdom,” the first lady, Aisha Buhari, wrote on Facebook on July 10th, in response to a senator who had described her husband as “the absent Lion King”. Muhammadu Buhari has been in London being treated for a mysterious illness since May 7th, after spending a seven-week stint there earlier this year. His only recent communication has been a few written statements mourning deceased politicians.

Despite many rumours, Mr Buhari is probably not dead himself. The vice-president (and acting president), Yemi Osinbajo, rushed to London for a few hours last week. On his return he said his boss was recovering fast and would be back “very shortly”. But the beasts are circling, in the expectation that it will be one of them who gets to contest the next presidential election, due in February 2019.

Mr...Continue reading

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China goes to Africa

IN CRISP white uniforms and standing to attention beneath a fluttering red flag with five golden stars, the sailors on board the People’s Liberation Army ships setting sail for Djibouti on July 11th represent a significant step for China. When they arrive they will open the Middle Kingdom’s first military base abroad since the Korean war.

It is a canny first foray. China has prepared the ground with low-key deployments of blue-helmeted troops to UN operations in places such as South Sudan. And it has placed the base in a country that is likely to cause the least offence.

America already has a large airfield and naval station in Djibouti. From there it conducts counter-terrorism operations, and watches the Gulf of Aden and the Red Sea, both much used by smugglers trafficking drugs, weapons and people. And China’s main regional rival, India, cannot argue that the installation represents a significant projection of power into an ocean it regards as its own. The base will...Continue reading

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Geely's Rally Is Running Out of Road

One of China’s most prominent auto makers has been the gift that kept on giving for investors, but not for long.

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BHP Sees a Hungry Planet, Elliott Sees Another Shale Disaster

BHP has written off billions in U.S. shale investments, but it is poised to plow a substantial amount of funds into potassium fertilizer, or potash. Activist shareholder Elliott is kicking up a fuss.

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Gas Everywhere but No Way to Ship It

Natural gas pipeline delays in the Marcellus and Utica shale producing regions have caused a sharp discount for gas sold in the region.

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Reform of China’s ailing state-owned firms is emboldening them

ACCORDING to company lore, Yunnan Baiyao, a musty-smelling medical powder, played a vital role during the Long March. As China’s Communist troops fled from attacks in the 1930s, trekking thousands of miles to a new base, they spread its yellow granules on their wounds to stanch bleeding. To this day, instructions on the Yunnan Baiyao bottle recommend application after being shot or stabbed. Many Chinese households keep some in stock to deal with more run-of-the-mill cuts. But the government has recently put its maker into service to treat a different kind of ailment: the financial weakness of state-owned enterprises (SOEs).

Yunnan Baiyao has emerged as a poster-child of China’s new round of SOE reform. The company, previously owned by the south-western province of Yunnan, sold a 50% stake to a private investor earlier this year. The same firm had tried to buy a slice of Yunnan Baiyao in 2009 but was blocked. Its success this time has been held up in the official press as proof that a...Continue reading

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Could bond funds break the market?

GOOD generals know that the next war will be fought with different weapons and tactics from the last. Similarly, financial regulators are right to worry that the next crisis may not resemble the credit crunch of 2007-08.

The last crisis arose from the interaction between the market for mortgage-backed securities and the banking system. As investors became unsure of the banks’ exposure to bad debts, they cut back on their lending to the sector, causing a liquidity squeeze. Since then, central banks have insisted that commercial banks improve their capital ratios to ensure they are less vulnerable.

Might the next crisis originate not in the banking system, but in the bond market? That is the subject of a new paper* from the Bank of England. The worry centres on the “liquidity mismatch” between mutual funds, which offer instant redemption to their clients, and the corporate-bond market, where many securities may be hard to trade in a crisis. The danger is that forced...Continue reading

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KKR, a private-equity giant, lays out its succession plan

IN MOST four-decade-old firms run by greying co-founders, investors would have long since demanded clarity on succession. But private equity works differently: the industry has been dominated by its pioneers ever since its origins in the 1970s. So an announcement on July 17th about its future leadership by KKR, one of the world’s largest private-equity firms, puts it a step ahead of its rivals. Its aim of ensuring that the firm has the right structure in place “for decades to come” is not obviously shared across the industry.

KKR has been run since 1976 by two of its founders, Henry Kravis and George Roberts (both in their early 70s). They are staying on as co-chairmen and co-chief executives but with less of a day-to-day role. Lining up behind them are a pair of 40-somethings, Joe Bae and Scott Nuttall, who will join the board and take the titles of co-president and co-chief operating officer.

Such explicit, public succession planning is unusual. Stephen...Continue reading

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Regulating credit unions in Africa

Striking a co-operative note

THE most recent time Moses Kibet Biegon needed a quick loan was when his roof blew away. He got one from the Imarisha Savings and Credit Co-operative, in Kericho in western Kenya. Imarisha channels the savings of its 57,000 members into loans for school fees, business projects or, in Mr Biegon’s case, roof repairs. It runs a fund to help with medical bills. And it pays dividends to its members from its investments, which include a shopping plaza that it opened last year.

Savings and credit co-operatives (SACCOs) like Imarisha are the African version of credit unions: member-owned co-ops, usually organised around a community or workplace. Some are rural self-help groups with a few dozen members and a safe. Others have branch networks and mobile apps. The largest SACCOs rival banks; Mwalimu National, which serves Kenyan teachers, has even bought one.

The co-operative model brings “a more humane face” to finance,...Continue reading

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The power of populists

WITH the defeat of Marine Le Pen in her bid for the French presidency, establishment politicians in rich countries breathed a sigh of relief. The fortunes of extremist candidates have faltered since the populist surge that put Donald Trump into the White House. But it is hard to be confident that this was populism’s high-water mark without a better understanding of what caused the swell in the first place. The most convincing explanations suggest that populist upswings are not in the past.

It is tempting to dismiss the rise of radicalism as an inevitable after-effect of the global financial crisis. Studies show that the vote shares of extreme parties, particularly on the right, tend to increase in the years after a crisis. The Depression spawned some of the 20th century’s most dangerous and radical populist movements. But the facts do not fit that story precisely. In Europe, for example, populist parties have steadily won more voters since the 1980s. What is more, populist rage is...Continue reading

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