Glencore Xstrata hit by $7.7bn writedown of its mining assets following the complex merger that created the diversified commodities trader and miner

Last updated: August 20, 2013 8:42 am

Glencore Xstrata hit by $7.7bn writedown

By James Wilson

Glencore Xstrata knocked $7.7bn off the value of its mining assets following the complex merger that created the diversified commodities trader and miner this year. The hits to the value of Xstrata’s mines show the gloom surrounding the mining industry as prices for many key commodities have fallen amid oversupply and slowing growth in demand.

Glencore took over Xstrata in May following a year-long acquisition process. Ivan Glasenberg, chief executive, reiterated on Tuesday that Glencore believed it would be able to get more synergies and cost savings from the deal than the $500m originally promised. Read more of this post

‘Perverse Effects’: How green subsidies often increase carbon emissions

August 19, 2013, 7:22 p.m. ET

‘Perverse Effects’

How green subsidies often increase carbon emissions.

Anticarbon central planning was bound to distort markets, but it turns out that the planners often increase emissions as they try to engineer President Obama’s “new energy economy.” So concludes the National Academies, whose major report on energy subsidies deserves more attention than it has received since its June release.

By some miracle, Congress in 2008 created a National Research Council special committee to comb the tax code to figure out how specific provisions increase or decrease greenhouse gases. As chairman William Nordhaus of Yale and his colleagues note, there is very little empirical literature on these programs. What they did learn is that “several existing provisions have perverse effects, while others yield little reduction in greenhouse gas emissions per dollar of revenue loss.” Read more of this post

E&P Investors Fear the Oil Party Hangover; Oil-Company Stocks Disconnect from Crude Price

August 19, 2013, 1:34 p.m. ET

E&P Investors Fear the Oil Party Hangover

Oil-Company Stocks Disconnect from Crude Price

LIAM DENNING

There comes a point in a boisterous night out when you order that drink that ensures the following day will be a write-off. Investors toasting the oil-and-gas sector this summer seem to have reached that moment of realization. Near-month crude-oil futures on the New York Mercantile Exchange have rallied almost 17% since the start of June. Goldman SachsGS -1.26% added fuel to the fire Monday by raising its Brent forecasts for this year. For much of the summer—indeed, most of the year—stocks of exploration-and-production companies have done even better than oil prices. Read more of this post

Phone Taps Considered in Malaysia’s War on Graft: Southeast Asia

Phone Taps Considered in Malaysia’s War on Graft: Southeast Asia

Malaysia may allow phone tapping and Internet monitoring as it steps up the war on corporate and government graft, which costs the country as much as $9 billion a year, a minister said.

It also plans legislation to make company directors liable for corruption involving staff and will appoint chief integrity officers in government ministries, Paul Low, the minister in the Prime Minister’s Department in charge of fighting graft, said in an interview. He said talks on electronic monitoring are in early stages and didn’t provide specifics on how sweeping powers might be or how they might be used. Read more of this post

Ship Travels Arctic From China to Europe; Northern Passage Shaves Two Weeks of Travel Time Off Journey

Updated August 19, 2013, 8:12 p.m. ET

Ship Travels Arctic From China to Europe

Northern Passage Shaves Two Weeks of Travel Time Off Journey

COSTAS PARIS

China’s Yong Sheng is an unremarkable ship that is about to make history. It is the first container-transporting vessel to sail to Europe from China through the arctic rather than taking the usual southerly route through the Suez Canal, shaving two weeks off the regular travel time in the process. The 19,000-ton Yong Sheng, operated by China’s state-controlled Cosco Group, left the port of Dalian Aug. 8 and is scheduled to reach Rotterdam, in the Netherlands, via the Bering Strait Sept. 11. The travel time of about 35 days compares with the average of 48 days it would normally take to journey through the Suez Canal and Mediterranean Sea. Read more of this post

Public Funds Take Control of Assets, Dodging Wall Street

AUGUST 18, 2013, 2:11 PM

Public Funds Take Control of Assets, Dodging Wall Street

By NATHANIEL POPPER

Investors responsible for more than $2 trillion recently gathered at a resort in the Canadian Rockies, far from the news media and, more important, far from Wall Street.

Those in attendance, including leaders of Abu Dhabi’s sovereign wealth fund and France’s pension system, were there to consider ways to put their money to work together without paying fees to private equity firms and hedge funds. Over that weekend, three of the attendees completed the details of a $300 million investment in a clean-energy company. Read more of this post

Obama Focuses on Risk of New Bubble Undermining Broad Recovery

Obama Focuses on Risk of New Bubble Undermining Broad Recovery

By David J. Lynch – Aug 19, 2013

President Barack Obama, who took office amid the collapse of the last financial bubble, wants to make sure his economic recovery doesn’t generate the next one.

Obama this month spoke four times in five days of the need to avoid what he called “artificial bubbles,” even in an economy that’s growing at just a 1.7 percent rate and where employment and factory usage remain below pre-recession highs. Read more of this post

Keeping Corporate Managements Honest; The key is to switch the allegiance of the auditor to independent directors on company boards

August 19, 2013, 7:15 p.m. ET

Keeping Corporate Managements Honest

The key is to switch the allegiance of the auditor to independent directors on company boards.

ROBERT C. POZEN

In a rare burst of bipartisanship, the House of Representatives last month voted 321 to 62 to stop a government board from forcing public companies to change auditors every six or seven years. This requirement was floated by the Public Company Accounting Oversight Board, which suggested that term limits would bolster the independence of auditors.

An overwhelming number of congressmen rejected this requirement as too costly, and they passed an amendment to the 2002 Sarbanes-Oxley corporate-accounting law that would prohibit the board from adopting such mandatory rotation. Read more of this post

German Stocks Shift Toward Home; Market may be moving toward German stocks with strong domestic exposure

August 18, 2013, 5:03 p.m. ET

German Stocks Shift Toward Home

Market may be moving toward German stocks with strong domestic exposure

ANDREW PEAPLE

Germany may remain the powerhouse of the European economy, but you wouldn’t necessarily know it from looking at the share prices of its leading companies. Sure, the DAX 30, Germany’s benchmark stock index, is up 9.6% this year. But its rise lags other major indexes like the U.K.’s FTSE 100, France’s CAC 40 and the S&P 500 in the U.S. That is despite Germany’s relatively consistent economic performance. It grew by 0.7% quarter on quarter in the three months to June, faster than the European Union’s other major economies. The truth is that German companies aren’t all that German in one key respect. Like many leading European companies, Germany’s top firms, ranging from sportswear giant Adidas ADS.XE +0.40% to auto makers like Daimler, DAI.XE -0.36% are becoming ever more international. The country’s top 50 companies generate only around 29% of their sales domestically, according to analysts at Absolute Strategy Research. Companies in the FTSE 100 earn a similarly low level of revenue in the U.K. Top North American companies, by contrast, make 64% of their sales in their domestic market. Read more of this post

Activist Investors: A Roar or a Bark?

Aug 19, 2013

Activist Investors: A Roar or a Bark?

By Francesco Guerrera

Can a lion be confused with a dog? In Luohe, China, the answer is a resolute “no.” Visitors at the local zoo weren’t impressed last week when they found a Tibetan mastiff in the cage earmarked for the king of the jungle.

When it comes to activist investors, though, the situation is less clear-cut. On Wall Street, this breed of hedge-fund manager engenders extreme reactions. Some lionize them as intrepid champions of shareholders’ rights in the face of corporate ineptitude. Others accuse them of terrier-like aggression, snapping at executives’ heels with short-term demands that end up harming companies. Read more of this post

French vineyard sales leave bitter taste amid laundering fears by Russian and Chinese investors

August 18, 2013 9:17 pm

French vineyard sales leave bitter taste amid laundering fears

By Anne-Sylvaine Chassany in Paris

French anti-money laundering authorities have raised the alarm over recent acquisitions of vineyards by Russian and Chinese investors.

The use of multiple holding companies based in tax havens to buy French wine estates has pushed Tracfin – whose mandate is to uncover money laundering and terrorism funding schemes – to issue a warning in its 2012 report published this month. Read more of this post

End of the Options Backdating Era

AUGUST 19, 2013, 1:03 PM

End of the Options Backdating Era

By PETER J. HENNING

Before the clamor about the lack of prosecutions from the financial crisis and the current crackdown on insider trading, the practice of backdating stock options came to light seven years ago and prompted a flurry of prosecutions. The practice is now long forgotten, but it looks as if the last of those cases has finally concluded, and as the Grateful Dead put it so well, “What a long, strange trip it’s been.” Read more of this post

Dubai Sees Need for Tallest Office Tower Amid 45% Vacancy

Dubai Sees Need for Tallest Office Tower Amid 45% Vacancy

In Dubai, where almost half of the offices sit empty, the head of a state-owned business zone says there’s room to build the world’s tallest office tower.

Ahmed Bin Sulayem, chairman of the Dubai Multi Commodities Centre, said the Persian Gulf business hub can still attract tenants and investors with such a project because many of its buildings are unsuitable for large businesses. Bin Sulayem helped lead the development of the DMCC’s 68-story Almas Tower, Dubai’s tallest building when it was completed in 2007. The tower’s full and has a waiting list for tenants, he said. Read more of this post

Central Banks Risk Clash of Titans; In the U.K., Government Bonds Could Be a Bad Bet for Investors

August 19, 2013, 1:34 p.m. ET

Central Banks Risk Clash of Titans

In the U.K., Government Bonds Could Be a Bad Bet for Investors

RICHARD BARLEY

Are central banks losing control of global bond markets?

For much of the time since 2008, bonds have danced to the tune played by the Federal Reserve, European Central Bank and Bank of England. With rates at historic lows and central banks buying bonds directly and indirectly, investors played along and have been richly rewarded as global yields plummeted. But now markets aren’t so compliant. The Bank of England looks most vulnerable in risking a head-on clash with investors. Read more of this post

Repo Market Decline Raises Alarm as Regulation Strains Debt

Repo Market Decline Raises Alarm as Regulation Strains Debt

Regulations aimed at reducing the risk of another financial crisis are starting to upend a key part of the bond market that expedites trading in everything from U.S. Treasuries to junk bonds.

The repurchase, or repo, market where banks and investors borrow and lend Treasuries and other fixed-income securities shrunk to $4.6 trillion daily outstanding last month, down 35 percent from a peak of $7.02 trillion in the first quarter of 2008, based on Federal Reserve data compiled from its 21 primary dealers. Read more of this post

Nestle’s Sales Slowdown Seen Leading to Slimmer Brand Portfolio

Nestle’s Sales Slowdown Seen Leading to Slimmer Brand Portfolio

Nestle SA, (NESN) the world’s biggest food company, needs to reignite sales that have disappointed investors for four straight quarters. One solution: Get smaller.

The maker of Nescafe coffee and DiGiorno pizza said Aug. 8 that it’s “actively looking” at its 8,000 brands and is seeking to identify the laggards after posting its weakest quarterly revenue growth in four years. Nestle has said it will struggle this year to meet its long-term forecast for annual sales growth of 5 percent to 6 percent, hurt by a deceleration in emerging markets, European weakness and sluggish performances from its diet products, frozen entrees and water. Read more of this post

China Trading Error Reduces Investor Confidence in Stocks

China Trading Error Reduces Investor Confidence in Stocks

The biggest swing in China’s benchmark equity index since 2009 threatens to further erode confidence in the nation’s stock market after it lost more money for investors than any in the world during the past four years.

China’s shares were roiled Aug. 16 by a trading error at Everbright Securities Co. (601788) that spurred a 53 percent surge in volumes and a swing of more than 6 percent in the Shanghai Composite Index. The gauge jumped from a loss of as much as 1 percent to a gain of 5.6 percent in two minutes during the morning session, then ended the day with a 0.6 percent drop. Erroneous buy orders from Everbright’s proprietary trading group sparked the early rally, the securities regulator said. Read more of this post

Indonesia Rupiah, Stocks Plummet on Current-Account Gap

Indonesia Rupiah, Stocks Plummet on Current-Account Gap

Indonesia’s rupiah fell to 10,500 per dollar for the first time since 2009, stocks dropped by the most in 22 months and government bonds plunged after the current-account deficit widened to a record last quarter.

The Jakarta Composite Index of shares has fallen 8 percent in two days, and is now the world’s worst performer this quarter. The yield on 10-year notes surged to the highest since March 2011 after Bank Indonesia said late Aug. 16 the current-account shortfall was $9.8 billion, the largest in data compiled by Bloomberg going back to 1989. Inflation quickened to a four-year high and economic growth slowed to the least since 2010, figures showed last week. Read more of this post

India Markets Plunge Pressures Singh as Economy Teeters

India Markets Plunge Pressures Singh as Economy Teeters

India’s biggest stock market slide in almost two years, surging bond yields and an unprecedented plunge in the rupee are pressuring officials for fresh steps to stem capital outflows and revive a struggling economy.

The S&P BSE Sensex (SENSEX) Index sank 4 percent on Aug. 16 as the rupee touched an all-time low of 62.005 per dollar and the yield on the government bond due May 2023 rose 39 basis points to 8.88 percent, the highest on a 10-year note since 2011. Read more of this post

Investors Ditch Ratings for Returns in Bond Boom: Nordic Credit

Investors Ditch Ratings for Returns in Bond Boom: Nordic Credit

Norway is about to share its European dominance in unrated bonds with the rest of the Nordic region.

Issuance of bonds ignored by Moody’s Investors Service, Standard & Poor’s and Fitch Ratings has surged in Sweden and Finland. Many of the companies selling, such as Skanska AB and Finnair Oyj (FIA1S), are finding the lack of a credit rating is no impediment to attracting more local buyers. Read more of this post