Bad romance

July 29 - Aug 2, 2013

AMERICAS

Markets: Canadian based Potash Corp. of Saskatchewan Inc.’s stock fell 23% following the news that Russia’s OAO Uralkali "broke up a European marketing group that controls about 43 per cent of global exports", a move which signals prices will weaken. This, along with  falling metals prices dragged the TSX lower at the beginning of the week.  However, 

the global requirement for fertilizer is sound and likely to grow increasingly urgent as the population rises, giving producers a relevance that will not fade away. That should translate into steady returns over the longer term

Data shows that the TSX lost across all industry sectors in July. However, the beginning of August looked good; strong economic numbers in the US brought markets up towards the weak end. The TSX lost over the week, but S&P closed 1% higher. Previously, strong US job numbers would have moved markets significantly higher, but in this instance they prolonged uncertainty over federal reserve and monetary policy timings.  

 Companies: Publicis and Omnicon, French and American advertising firms respectively, announced a 35$ bn merger. This will make WPP the second largest marketing firm in existence. It is meaningful in terms of new types of programmatic advertising and the movement towards technology and data.  The deal has yet to go through regulators. 

Otherwise: Yellen and Summers, the two top contenders to take over from Bernanke, are both Keynesians. Unsurprising, given Yellen taught Summer economics at Harvard. Indeed, they are two very different people who have followed strangely parallel careers. The common thought is that Yellen, who has worked with Bernanke is more attuned to modern economic thinking, while Summers may bring creative thinking to the position. 

Also, are emerging market slow downs priced in? 

All the concerns about the health of emerging markets has the folks at Capital Economics scratching their heads: Economic growth has been slowing for years, suggesting that the slowdown, which has sapped share prices, might almost be over rather than just beginning.

 EMEA

In an attempt to meet new regulations, Barclays bank raised 5.8bn GBP in a rights offering. Shareholders will be able to buy one new share for every 4 they already own. The bank will also shrink assets by as much as 80 billion pounds to 1.5 trillion pounds and sell 2 billion pounds of loss-absorbing securities to meet calls by the regulator to cut leverage.

Berlsuconi's trial verdict regarding Tax Evasion upheld in Italy. Given his age, the man will likely be given a shorter term sentence, to be served under house arrest. In a statement, Berlusconi said the verdict is "based on nothing" and "deprives me of my freedom and political rights". There will be further consideration as to whether he will be able to hold office. 

After a data dump on the Bank of England's website, it was found that the Bank sold gold looted by the Nazis from Czechoslovakia, with complete awareness of where the gold came from. The bank did this without the consent of government, choosing instead to bow to pressure from the Bank of International Settlements. More from the Financial Times. 

One more (and taken from the economist as i've run out of time...): The EU and China averted a trade war by settling an antidumping spat over solar panels. The European Commission put a floor on the price of Chinese panels that was much lower than expected. In return, the Chinese withdrew their threat to retaliate against wine and polysilicon imports from Europe.

*Bad Romance, by Lady Gaga, chosen to emphasise the Publicis/Omnicon merger. The companies had to fall for each other, and now the regulators must approve. Lots of wooing to be done. Bad romance is also related to the BoE / Nazi gold story, which is very much a relationship story about the BoE cheating on the UK Gov with the BIS. Scandalous.