RBS deal
Goodwin spared?
A High Court trial, which would have seen former RBS boss Fred Goodwin provide testimony about the state of the bank's finances in the run-up to its £12bn rights issue during the early months of the financial crisis, was adjourned at the last minute this week after the bank upped the value of its out-of-court settlement offer. The case was brought by thousands of investors who ended up out of pocket when the bank was bailed out by the government. The majority of those investors signalled their willingness to accept the new offer of compensation, which was increased from 43.2p a share to around 82p a share just before proceedings were due to start on Monday. A month's adjournment has been agreed as lawyers sought time to contact all the complainants.
Grain of truth?
Glencore deal eyed
Commodities trading giant Glencore this week admitted it has made an informal approach to global grain trading giant Bunge with a view to a possible takeover. The Switzerland-based company's agriculture arm, which is 49 per cent owned by Canadian pension funds, is believed to be considering a number of options in the sector, including Bunge, whose shares leapt more than 15 per cent in New York on Tuesday. Bunge was founded in 1818 and is one of four companies that dominate the grain industry, with annual revenues of more than $40bn. Bunge is believed to be open to corporate action in an industry where a grain surplus has dampened profit margins recently.
China downgrade
Rating cut
Credit ratings agency Moody's has delivered the first downgrade to China's credit rating in three decades, raising concerns over the borrowing levels in the country and its ability to maintain previously stellar economic growth rates. In a statement Moody's said it believes "that China's financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows". It also pointed to ongoing stimulus efforts, aimed at sustaining strong growth, which "will contribute to rising debt across the economy as a whole".
Germans "euphoric"
Business booming?
Business confidence in Germany is running at levels not seen since the country's reunification. The closely watched Ifo business climate index hit 114.6 last month - its highest reading since the index was initiated in 1991, beating expectations in the process. The president of the Ifo, Clemens Fuest, said German businesses were "euphoric" following strong first-quarter growth figures and the latest purchasing managers' index (PMI) readings for Germany's economy, which this week climbed to a six-year high.
Deficit grows
Higher than forecast
Lower than expected consumer spending, resulting in weaker VAT receipts for the government, contributed to a widening of the UK's budget deficit to £10.4bn in April. This was significantly higher than the £8.9bn that economists had forecast, and also £1.2bn higher than the same month a year ago, which gives credence to forecasts by the Office for Budget Responsibility that the budget deficit will rise to £58bn during the 2017-18 financial year. In the financial year just ended the budget deficit fell £72.1bn to £48.7bn, helped by a number of one-off factors.
Tesco trial?
Class action coming
The ripples from Tesco's mis-statement of profits in 2014 continue to spread. This week City law firm Rosenblatt Solicitors said it was seeking retail investors who had suffered potential losses from share price movements as potential claimants in a class action against the grocer. Although the Financial Conduct Authority has already announced a compensation scheme for investors who saw the value of their holdings fall between 29 August 2014 and 19 September 2014, a group of institutional investors has already filed for further damages claiming that Tesco was mis-stating financial information over a longer period and Rosenblatt is seeking retail investors to participate alongside them.
Opec extension
A meeting of the Opec group of oil-producing countries on Thursday is expected to result in an extension to the curb on production that has steadied the oil price in recent months. Ahead of the Vienna gathering, ministers from Algeria and Ecuador indicated they were willing to back proposals from Saudi Arabia to prolong production cuts to the first quarter of 2018, and possibly longer, although the chances of an increase in the size of production cuts is thought to be less likely. Non-Opec member Russia is believed to be supportive of the extension, which producing nations hope will finally make headway in reducing global inventories.
Investor confidence in Brazil took a hit this week, after president Michel Temer was allegedly caught on tape endorsing bribe payments. Brazilian newspaper O Globo reported the chairman and chief executive of Brazil’s largest meat packer JBS had presented a secret recording of Mr Temer approving bribes to former speaker of the lower house Eduardo Cunha, as part of plea bargain negotiations.
Mr Temer has denied any wrongdoing. The Brazilian Bovespa index dropped more than 10 per cent on the reports (see chart), forcing market regulators to trigger a circuit breaker. Mr Temer is charged with reforming Brazil’s generous pension system and leading the country out of its worst recession in decades.
