BoE enquiry into Libor
Parliament has come under pressure to launch an inquiry into claims the Bank of England (BoE) and members of the government put pressure on Barclays (BARC) to submit a lower Libor reading during the 2008 financial crisis. The claims were made in a BBC Panaroma special, which released details of an exchange between Barclays senior manager Mark Dearlove and submitter Peter Johnson, who later pleaded guilty to manipulating the libor rate. The BoE has always denied encouraging banks to submit false libor readings. MP Chris Philp, who sits on the treasury select committee, has called for an investigation into the allegations.
Turkey decides
Presidential powers could reform
On Sunday Turkish voters will head to the polls to vote on constitutional reform, which if passed would solidify president Recep Tayyip Erdogan’s power. More than a dozen opposition politicians have been jailed in the run-up to the vote and around 150 news outlets closed. The reform would substantially increase the powers of the president, who would become head of the executive as well as head of state, while retaining ties to a political party. Parliament would lose its right to scrutinise ministers. However, Mr Erdogan argues the reforms would streamline the decision-making process.
Vodafone/Jio market battle
Regulator called upon
Vodafone (VOD) has complained to the Indian telecoms regulator about a promotional offer from challenger Reliance Jio. Jio had been ordered by the Telecom Regulatory Authority of India to stop its three-month free data offer, which rivals argued was unfair competition. However, Vodafone argues that Jio has not complied with the spirit of the order, instead ramping up its promotion to lure customers a week ahead of the offer’s close date. In March Vodafone announced plans to merge its Indian business with listed rival Idea Cellular (NSE:IDEA) to build scale and compete with new entrant Jio, which ploughed £25bn into its introductory offer.
BHP break-up
Investor calls for reform
Activist investor Elliott Advisers has this time been on the case of BHP Billiton (BLT). It called for the mining group to spin off its US oil business to unlock value and improve capital returns to shareholders. The hedge fund manager – which has a 4.1 per cent shareholding in BHP – also proposed it scrap its dual structure and locate its headquarters in Australia in order to take advantage of tax breaks. However, BHP Billiton responded that the costs and risks associated with Elliott’s proposals would outweigh any benefits. This story may have further to run.
Sky/Fox EU approval
Ofcom decision awaits
Sky (SKY) has been given unconditional approval by the European Commission for its takeover of Twenty-First Century Fox. Regulators found that for markets including Germany, Italy and Ireland the takeover would lead to a limited increase in Sky’s ability to acquire TV content. It also ruled that the deal would be unlikely to diminish the broadcaster’s will to acquire shows from other companies. The approval was widely anticipated. However, the investigation being carried out by Ofcom on media plurality and broadcasting standards will be a bigger hurdle to jump.
French jitters
Euro/dollar hedge surges
The cost of hedging against swings in the value of the euro against the US dollar reached its highest level since the UK referendum this week. One-month euro-dollar implied volatility hit 12.63 per cent. French voters will take part in the first round of the presidential elections on 23 April, with the run-off between the top two candidates due to take place on 7 May. Far right candidate Marine Le Pen and liberal politician Emmanuel Macron are expected by polls to face-off in the second round.
Motor's sterling benefit
Car exports rising
British car manufacturers are benefiting from higher experts thanks to a weak pound, according to figures from the Office for National Statistics. Average monthly export revenues during the past six months stood at £3.4bn, up 16 per cent on the same time the previous year. This means that foreign exports now account for a greater proportion of overall sales than domestic, which held steady at an average £3bn during the period. This comes as consumer price inflation was 2.3 per cent during the 12 months to March.
If you’re looking for potential fault lines in the US economy, something analogous to the delinquencies on sub-prime housing loans that triggered the global financial crisis, then you might want to take a look at the student body. Student loans constitute the only form of borrowing that has grown since the peak of consumer debt in 2008.
Americans owe over $1.4 trillion in student loan debt, spread out among 44m borrowers – or $31,818 (£25,480.91) on average – a rate that eclipses both auto loans and credit cards. The student loan delinquency rate remains stubbornly high at 11.2 per cent; not surprising given that the average monthly student loan payment (for borrowers aged 20 to 30 years) is $351. More than 4.2m borrowers were in default as of the end of 2016, up from 3.6m in 2015.
