Saudiarabia Borrows$10Bn Asoilslump
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WEDNESDAY 20 APRIL 2016 WORLDBUSINESSNEWSPAPER UK £2.70 Channel Islands £3.00; Republic of Ireland €3.00 Martin Wolf China uncorked Pay grades Brexit is a perilous one-way bet HowChileischallengingFranceinthe Students need more data on college for Britain —COMMENT, PAGE 11 Chinese wine market —BIG READ, PAGE 9 performance —SARAH O’CONNOR, PAGE 12 No more tears Millennial mums going Saudi Arabia Briefing ga-ga for organics spark J&J rethink i EDF board warned over Hinkley Point Managers at the French utility have written to its board warning that the directors could be held responsible if the company pushes on with its borrows $10bn £18bn nuclear project.— PAGE 15; ANALYSIS, PAGE 17 i Hammond rules out Libya combat role The foreign secretary has told MPs that there are no plans for troops to be involved in fighting Isis in as oil slump Libya, though the UK was willing to send thousands to help train “unity” government forces.— PAGE 4 i Extremist allegations threaten Khan bid Former human rights lawyer and drains reserves Labour candidate for London mayor Sadiq Khan leads the polls but questions, pushed by Tory rival Zac Goldsmith, on links to extremists may 3 First debt-raising since 1991 be hurting his campaign.— PAGE 4 3 Move paves way for historic bond i Labour shortage to drive US wages A leading business group has predicted that the US SIMEONKERR —DUBAI “This is paving the way for the king- faces significant labour shortages in a wide range of ELAINEMOORE — LONDON domtotransformfromacreditornation sectors as unemployment falls towards 4 per cent Saudi Arabia is raising $10bn from a into a debtor nation. It’s a significant and the working-age population stagnates.— PAGE 5 consortium of global banks as the king- momentofchangeindebtmarkets.” dom embarks on its first international Saudi Arabia may now raise its first i Goldman profit plunge caps grim season borrowing in 25 years to counter dwin- global bond in the wake of the loan deal, The US bank’s profits have more than halved after dlingoilrevenuesandreserves. bankers said. Institutions that loaned across-the-board falls in revenues, bringing down Thelandmarkfive-yearloan,asignof the most would be set to benefit from a the curtain on a sobering earnings season for the big Riyadh’s newfound dependence on mandatetohelpRiyadhraisethebond. US banks.— PAGE 15; LEX, PAGE 14; ANALYSIS, PAGE 16 foreign capital, opens the way for the The lead lenders, each pledging about country to launch its first international $1.3bn, include Bank of Tokyo-Mitsubi- i Saudis host Obama and look to successor bond issue. It comes as the low price of shi, HSBC and JPMorgan, bankers said. The US president arrives in Riyadh today, where he crude encourages other Gulf govern- Banks were required to lend at least will be greeted by hosts looking past the US election ments, such as Abu Dhabi, Qatar and $500mtoparticipate. in the hope his successor will restore ties that have Oman,totapbondmarkets. Mr Algaseer declined to comment on frayed during his time in office.— PAGE 7 The oil-rich kingdom, which last the pricing but other bankers close to weekend blocked a deal among oil pro- the deal said it had priced at around i Tesco Bank targets mortgage market ducers to freeze output and bolster 120basispointsoverUSdollarLibor. The Edinburgh-based lender has unveiled a push to prices, has burnt through about $120bn The loan is Saudi Arabia’s first inter- take on the high-street banks by offering property inreservessincelate2014.Itsfiscaldefi- national borrowing since 1991, when it loans through independent brokers, a sign that cit is set to widen to 19 per cent of gross raised about $1bn in the aftermath of mortgage market competition is rising.— PAGE 20 domesticproductthisyear. theIraqiinvasionofKuwait. Strong interest in the loan, especially Bankers are now confident that Saudi fromAsia,camedespiteratingagencies’ state-relatedcompanieswillalsoseekto A Johnson & Johnson US magazine advertisement from the 1950s — Image courtesy of the Advertising Archive downgrades on Saudi creditworthiness raise funds, using the sovereign loan, Datawatch since the oil price collapsed. The gov- andlaterbond,asabenchmark. ernment raised the amount it wanted to Prince Mohammed bin Salman, who DAVID CROW — NEW YORK changingtastesofyoungercon- to rethink their strategies as Employment rates in The last quarter — CHICAGO borrow from $6bn-$8bn to $10bn after oversees economic reform, is set to LINDSAY WHIPP sumers. US sales of J&J’s baby they struggle to cope with the the OECD of 2015 saw the thedealwasoversubscribed. publish his “vision for Saudi Arabia”, a care products, including its “no shiftingtastesofmillennials. 15-64 year olds (%) proportion of Johnson & Johnson is 66.5 “Thedealisverysuccessful,withvery template for shifting to a post-oil era, in relaunching its baby care busi- more tears” shampoo, fell Mr Caruso said J&J had people in jobs in the OECD area competitive pricing,” said Elyas Algas- RiyadhonApril25. ness because millennial moth- 14 per cent year-on-year in the “robust plans to relaunch 66.0 eer,deputy regional general manager at It is expected to give details about the first quarter to $95m, their baby”thisyear. return to the peak ers are ditching its talcum 65.5 level hit in the Bank of Tokyo-Mitsubishi. “There was privatisation of state oil company Saudi powders and shampoos in lowestlevelinadecade. The company’sinfant brands 65.0 first quarter of immensemarketappetite.” Aramco, the creation of a sovereign favour of more expensive “It looks like millennial have been a mainstay since the 2008. However, Ewen Cameron Watt, chief invest- wealth fund and other reforms to boost organicalternatives. moms are buying new organic launch of Johnson’s baby pow- 64.5 employment rates ment strategist at BlackRock, the jobs and investment. JPMorgan has products,” said Dominic der in 1893. But more recently 64.0 are not back to world’slargestassetmanager,said:“The been working with the state oil com- Tumbling sales of its baby care Caruso,chieffinancialofficer. the company has struggled to pre-crisis levels in loan is a way for Saudi Arabia to test the pany since late last year on a plan for an products have forced the Brands from McDonald’s, combat the perception that 2006 10 15 many countries, waters and set up an international initial public offering, people aware of change, making J&J the latest Heinz and Campbell’s Soup to some of its products contain Source: OECD including the US borrowingprofile. themattersaid. power brand to fall prey to the Avon andGaphavebeenforced dangerouschemicals. Gove holds up Albanian model for post-Brexit future outside EU market GEORGE PARKER — LONDON Critics seized on Mr Gove’s “Albanian saying the UK should not accept the ALEX BARKER —BRUSSELS model”, pointing out that the Balkan principal conditions for entry. It would Britain will move outside the EU’s country has limited access to the single not pay into the EU budget, accept free singlemarketandinsteadjoin“Bosnia, market, no financial services “pass- movement of workers or the jurisdic- Serbia,AlbaniaandUkraine”inaEuro- ports” and its exports to the EU are sub- tionoftheEuropeanCourtofJustice. Mistrust of Spain keeps EU pean free trade zone if voters choose jecttocustomschecks. The “free-trade area” described by support solid in Gibraltar Brexit in June’s referendum, according Brexit campaigners were challenged Mr Gove takes several forms. Iceland, toavisionoutlinedbyMichaelGove. byGeorgeOsborneonMondaytosetout Liechtenstein, Norway and Switzerland Gibraltar, ceded to Britain in the 1713 exactly what “Out” would look like. are part of the European Free Trade Treaty of Utrecht but seen by Spain as The pro-Brexit justice secretary for the Mr Gove set out to respond, saying: Association,whosemembershavevary- a colonial relic that sooner or later will first time confirmed yesterday that the “There is a free-trade zone stretching ing levels of single market access. Nor- be returned, wants the UK to stay in Leave camp did not want Britain to from Iceland to Turkey that all Euro- waypaysintotheEUbudgetandaccepts the EU. A poll puts support at 88 per remainpartoftheEU’stariff-freeblocin peannationshaveaccessto . free movement. Switzerland does not cent amid fears that should Britain which British-based banks can trade “After we vote to leave we will remain have full access to the single market but leave, ‘Spain might be tempted to be under a “passport” scheme. He insisted in the zone. The suggestion that Bosnia, doesacceptfreemovement. mischievous at best and downright the UK’sfinancial services sector would Serbia, Albania and Ukraine would Albania has an agreement covering vindictive at worst’, especially with “thrive”inthisnewenvironment. remain part of this free-trade area — trade in goods and potentially financial regard to its border crossing, used by He said Britain would forge its own andBritainwouldbeontheoutsidewith services. But it would only have full 30,000 workers and visitors every day. deal with the EU but said that a conti- just Belarus — is as credible as Jean- single-market access if it applies the Analysis i PAGE 2 nent-wide free trade area embracing a ClaudeJunckerjoiningUkip.” existingandfutureEUrulebook. Martin Wolf i PAGE 11 wide range of bilateral deals would “be MrGove’saidessaidBritainwouldnot Britain in Europe pages 2 & 3 thecoreofournewarrangement”. seektoremainpartofthesinglemarket, Martin Wolf page 11 Subscribe In print and online World Markets www.ft.com/subscribenow Tel: 0800 298 4708 STOCK MARKETS CURRENCIES