Sunday, 4 July 2010

The Dow dived below 9700, oil plunged to around 72 and the euro surged back to 1.25 last week, surprising pundits and straights alike. Attitudinally, nothing has changed for US while for EU everything has changed and BRICs are enjoying the sunshine like never before. Japan seems to have gone spiritual, devoid of desire by design. Ideological divides are sharpening by the day. Domestic opposition to Angela Merkel has become strident, UK is busy preparing for fall out of the BP fiasco and perhaps Sarkozy is waiting to guess the direction from which he will be attacked. Politically, one never knows what will happen when and why. Only two things are clear – the consumer is trying to save more and cash hoard with trade and industry is growing.

US wages are declining as the 7 mn unemployed are offering to work more for less. Savings are rising slowly but steadily and yet flows to the St are slowing. Sales of automobiles in China are likely to exceed US sales pre-Lehman. GM is selling more cars in China than at home. China and Taiwan have cut tariffs on imports from each other. Hedge funds have started closing shop in Europe. The Swiss are trying hard to contain the rising franc as it has started hurting exports. As governments across europe cut spending and curb speculation, the EU economic climate is beginning to stabilise.

South Africa expects the World Cup to add 0.4% to its GDP, Hong Kong’s retail sales are growing at nearly 20%, and Russia continues to amass petro dollars/euros, maintaining output at nearly 10 mn bpd. Australia has adjusted super profits tax on mining after fears of decline in investments rose. In Pakistan, the army, the supreme court and the presidency, along with other state bodies owe an estimated $2 bn to the national power company.

God will not abandon the people affected by the oil leak, said a priest last week, even if BP and Obama do. Still nobody knows how much oil is leaking. Fed is examining whether BP’s collapse could cause a major crisis on the St; UK and US say they want a strong and stable BP. Russians say nuke the well (they have done that successfully in the past) to plug it. Seafood prices are rising and tourists are abandoning beaches. However, despite the leak continuing and the supposedly magnificent recovery of developed economies, oil plunged again last week to around 72.

Apple’s iPhone4 has antenna problems; some customers have sued, alleging Apple was aware of defects before launch. Microsoft, after having shelved tablet PC, has withdrawn its Kin smartphones also. Google seems to be making up with China, of course on China’s terms; it has stopped redirecting Chinese users to its Hong Kong site. China Mobile has started looking for overseas takeover opportunities. Yahoo has launched a $3 bn stock repurchase plan that would run for 3 years.

Amazon has started expanding its Internet-based retail operations selling food and wine in Germany also. Dell wants to move upmarket and compete with IBM, HP, etc. It has bough a software firm.

Spanish bank Santander’s US unit is going all out for expanding auto loans in US; it has bought $3.2 bn of auto loans from Citi. Barclays is moving to consolidate units in Spain, Portugal and Italy and has entered India, Pakistan, Russia and Indonesia. AIG has decided to sell its two Japanese units for about $5 bn; its deal with Pru for Asian unit is almost dead now.

Teijin and Toray may witness some explosive growth if automakers developing electric cars achieve reasonable success as most of them are looking at carbon composites as the key to reducing weight while maintaining strength. Teijin has signed a 15 year deal with Airbus to supply carbon composites. Toshiba is developing lithium batteries with Mitsubishi.

Air China is to buy 20 Boeings for $1.4 billion, Celgene Corp (pharma) is buying Abraxis for $2.9 bn, and Malaysian sovereign fund Khazanah is competing with Fortis of India for controlling equity in Parkway hospitals operator of Singapore. Sanofi has completed acquisitions worth $17 bn since 2008 and is reportedly negotiating a $20 bn deal in US. It generated $10 bn of cash last year. Sumitomo is to acquire 30% of iron ore mining unit of Usiminas of Brazil for $1.93 bn. Gas storage facilities of a Exxon-Shell JV in Germany are up for sale.

A US report says clandestine sales of data amounted to $1 tn last year, surpassing revenue of the drug trade. The Chinese are figuring out ways of helping single soldiers find love. A cat has been successfully fitted with prosthetic limbs in UK and can now walk on all its four. The US Supreme Court has rejected a company’s plea for patenting the structure of a hedge deal. Larry King has decided to hang his boots after a glorious 25 years as the world’s most popular talk show host.

A lock of Napoleon’s hair has fetched US$13,000. Luanda (Angola) has become the world’s costliest city for expatriates and Ndjamena (Chad) has ranked third. A Swiss company has developed a fabric that can soak oil up to seven times its own weight. US scientists have developed engineered lung tissue that may be used for transplants and elsewhere researchers say genes can tell who is likely to live 100 years or more.

Warren Buffet is transferring his wealth to the Bill & Melinda Gates Foundation at a steady pace, giving away $1.6 bn this year. A fourth of inmates of all jails in Russia are businessmen and professionals, half of whom are to be released shortly. Russia did not qualify for the World Cup and yet a poll last week said 8% of Russians expect their country to win the World Cup.

Gold and euro are the in the eye of the same storm and automobiles and cash are equally starved of safe parking space. Follow Tony Hayward. Forget worries and watch the World Cup.

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