FRIDAY 29 JULY 2016 WORLDBUSINESSNEWSPAPER EUROPE

ElitesandMrsMay Deutsche angst Facebook friends ThenewPM’sfightforfairer The struggle facing Germany’s Why investors keep signing up capitalism —PHILIP STEPHENS, PAGE 9 biggest bank —BIG READ, PAGE 7 COMPANIES, PAGE 15

Ellison scoops Briefing $3.5bn from i France media torn over terror reporting The decision by French news organisations to with- Oracle deal holdinformationonperpetratorsofterroristattacks hassparkedadebateinFranceovertheroleofmedia infuellinghomegrownjihadism. — PAGE 4 Larry Ellison, chairman of Oracle, has added $3.5bn to one of the tech indus- i EU bank stress test results awaited try’sbiggest fortunes, with the purchase ItisnotjustEurope’sbankerswhoarenervously byhiscompanyof NetSuite,whereheis awaitingthepublicationtonightofthe“stresstests” alsothebiggestsingleinvestor. onthebiggestlenders—theresultscouldmakelife Mr Ellison’s foresight 18 years ago in uncomfortableforeurozonepolicymakers. — PAGE 3 helping to found NetSuite has left him well placed now Oracle is adding to its i Merkel rejects migrant policy rethink ownfirepowerincloudcomputing. Angela Merkel, Germany’s chancellor, said she One of the world’srichest men thanks would not budge on her refugee policy, despite to his $48bn Oracle stake, he is esti- terrorist attacks in Würzburg and Ansbach that matedtohavespent$100minasuccess- have sparked calls for a U-turn. — PAGE 4 ful high-tech bid to win back for the US the sailing world’s top prize, the Amer- i Credit Suisse returns to profit ica’s Cup, in 2013 — barely a fifth of the Swiss lender has brushed off amount he made yesterday morning as investors’ negative NetSuite’ssharesjumpedonthenews. expectations, reporting a Report page 11 return to profit in the second Lex page 10 Larry Ellison watches an America’s Cup training race off Bermuda in 2015 — Mike Segar/Reuters quarter despite the tumult of Brexit, low interest rates and volatile markets. — PAGE 12 i Adidas profits at the double GermansportsweargroupAdidasraiseditsprofit forecastforthefourthtimethisyearafterdoubling profitsinthesecondquarterto€291m,from€146m IMF accused of bowing to Brussels inthesameperiodayearearlier. — PAGE 11 i Turkey purge ensnares stock analysts After targeting tens of thousands of soldiers, bureaucrats and educators, Turkish President pressure in eurozone debt crisis Recep Tayyip Erdogan’s purge after a failed coup has now focused on stock analysts. — PAGE 2 i Russia urges US not to vote for Clinton 3 Internal review finds commission influenced staff 3 Lagarde rejects ‘premise’ of report Maria Katasonova, a 21-year-old prospective candidate for Russia’s Duma, began her campaign ARTHURBEESLEY —LONDON Christine Lagarde, the IMF’s manag- staffthatitrepeatedlybentitsownrules ‘Political crisis lending, acted as the agent of the by urging the US to vote for Donald Trump. — PAGE 2 ing director since 2011, backed some of tohelpouttheeurozone. eurogroup, which in turn represented TheIMFrepeatedlysuccumbedtopolit- the recommendations for improving “It highlights the concerns of many, factors member states and decided whether to ical pressure from European govern- internal procedures but dismissed calls both inside and outside the fund, that seemed to provideassistance. ments during the eurozone debt crisis, from the inspectors to fortify the fund’s the fund’s treatment of developing and “Interviews and some internal docu- Datawatch according to a damning internal report defencesagainstpoliticalinterference. emergingmarketeconomiesisquitedif- play a mentssuggestthatpoliticalfeasibilityin on bailout strategy that will fuel debate “IsupporttheprinciplethattheIMF’s ferent from its treatment of advanced bigger role creditor countries was an important US private fixed investments The Federal over whether it should continue to fund technical analysis should remain inde- economies,” said Eswar Prasad, eco- consideration for [European Commis- Annual change Reserve is more Greece. pendent,” she said. “However, I do not nomics professor at Cornell University. . . . [for] sion] staff and that IMF staff occasion-  optimistic about the US labour The Independent Evaluation Office accept the premise of the recommenda- “Politicalfactorsseemedtoplayabigger advanced ally felt pressured to accept a less-than-  highlighted a litany of flaws in the IMF’s tion, which the IEO failed to establish in role than pure technical considerations idealoutcome.” market but “uneven” response, prompting calls for its report, and thus do not see the need [for]advancedeconomies.” economies’ TheinspectorssaidtheIMFexecutive  warned ‘business fixed investment greaterclarityoveritsrescuestrategy. todevelopnewprocedures.” The inspectors said the troika boardwasinthedarkonsensitivepolicy  has been soft’. Theassessmentalsoraisesfreshques- The fund’s involvement in eurozone arrangement — in which the IMF questions for Greece and for Ireland, Annual growth tions over the failure to restructure programmes had been a “qualified worked alongside the European Com- which also received a bailout in 2010.  slowed from more Greek debt at the time of its first bailout success” in the face of unprecedented mission and European Central Bank — Some members had learnt more via the than 12 per cent in in 2010. The report, released yesterday, systemicchallenge,MsLagardesaid. potentiallysubjectedthetechnicaljudg- press throughout the crisis than from  2012 to 2 per cent said key decisions had already been Nonetheless, the report is likely to ment of IMF staff “to political pressure” informalboardmeetings.       in the first quarter reached in Europe by the time the fund fuel suspicions of some emerging mar- from an early stage. “The European Analysis page 3 Source: Thomson Reuters Datastream this year. becameinvolvedintherescueeffort. ket IMF shareholders and some of its Commission, in the area of emergency Editorial Comment page 8 Chairman Mao relative builds stake in Sotheby’sas China’sfocus on art grows

CHRISTIANSHEPHERD —BEIJING sale of Modigliani’s“Reclining Nude” to Commission. It had “provided sugges- Liu Yiqian, a private collector, in tions”forboardnominationsattheauc- A Chinese life assurer headed by a rela- November for $170.4m. It was the tion house, it said, noting that “such tive of Mao Zedong has become the second-highest price for a work sold at nomination could include persons asso- largest single shareholder in Sotheby’s, auctiontodate. ciatedwith[TaikangLife]”. taking a 13.5 per cent stake in the China’s insurers have a similar appe- Tad Smith, Sotheby’s president, said Trump’s Russia faux pas auctionhouse. helps Clinton woo insiders tite for overseas acquisitions. Anbang the group “warmly welcomed” Taikang Life, one of China’s largest Insurance became a global name in Taikang’ssupportofits“strategicinitia- Analysis i PAGE 2 insurance groups with net assets of 2014withthe$2bnpurchaseoftheWal- tives”. Rmb33bn ($5bn), revealed yesterday dorf Astoria hotel in New York. In Mr Chen’s fame comes not just from that it had paid $230m for 8m shares in Marchits$14bnbidforStarwoodHotels Taikang and his wife’sancestry,but also

Austria €3.60 Luxembourg €3.60 the New York-based auction house. The & Resorts stalled following speculation from his prominence as an art dealer Bahrain Din1.7 Macedonia Den220 Belgium €3.60 Malta €3.50 shareswerepurchasedontheopenmar- aboutregulatorychallenges. andaesthete. Bulgaria Lev7.50 Morocco Dh43 ketduringJuneandJuly. Between January and June Chinese In 1999 he founded the first govern- Croatia Kn27.50 Netherlands €3.60 Cyprus €3.50 Norway NKr35 Chen Dongsheng, who founded and companies agreed to $121.1bn in cross- ment-run auction house to specialise in Czech Rep Kc100 Oman OR1.50 Denmark DKr32 Pakistan Rupee 280 runs the life assurer, is a grandson-in- border deals, according to data from Chineseartandantiques. Egypt E£20 Poland Zl 18 Finland €4.10 Portugal €3.50 law of Mao and the largest shareholder ThomsonReuters,morethantherecord Sales of Chinese ceramics and paint- France €3.60 Qatar QR15 of China Guardian Auctions, a leading forafullyearsetin2015. ings have buoyed Sotheby’s revenues in Germany €3.60 Romania Ron17 Gibraltar £2.70 Russia €5.00 artauctionhouse. Taikang said a “positive view” of Asia. Last week the auction house Greece €3.50 Serbia NewD420 Hungary Ft1090 Slovak Rep €3.60 Several world-famous works have Sotheby’s business was the primary reported 22 per cent year-on-year India Rup195 Slovenia €3.50 beensoldtoChineseartbuyersrecently, reason for the purchase in a filing growth to $461.5m for the region during Italy €3.50 Spain €3.50 Kazakhstan US$5.50 Sweden SKr37 the most high-profile of which was the with the US Securities and Exchange thefirstsixmonthsoftheyear. Kenya Kshs300 Switzerland SFr5.90 Latvia €6.99 Tunisia Din7.50 Lebanon LBP7500 Turkey TL10 Lithuania €4.30 UAE Dh15.00 Subscribe In print and online World Markets www.ft.com/subscribetoday STOCK MARKETS CURRENCIES INTEREST RATES email: [email protected] Tel: +44 20 7775 6000 Jul 28 prev %chg Jul 28 prev Jul 28 prev price yield chg Fax: +44 20 7873 3428 S&P 500 2163.71 2166.58 -0.13 $ per € 1.108 1.099 € per $ 0.902 0.910 US Gov 10 yr 101.03 1.51 0.01 Nasdaq Composite 5142.44 5139.81 0.05 $ per £ 1.312 1.312 £ per $ 0.762 0.763 UK Gov 10 yr 106.39 0.84 -0.03 © THE FINANCIAL TIMES LTD 2016 Dow Jones Ind 18402.09 18472.17 -0.38 £ per € 0.845 0.838 € per £ 1.184 1.193 Ger Gov 10 yr 106.28 -0.15 0.00 No: 39,228 ★ FTSEurofirst 300 1338.28 1351.75 -1.00 ¥ per $ 104.835 105.650 ¥ per € 116.194 116.104 Jpn Gov 10 yr 104.05 -0.29 0.00 Euro Stoxx 50 2973.73 2999.48 -0.86 ¥ per £ 137.581 138.556 £ index 79.588 79.595 US Gov 30 yr 105.79 2.23 0.02 Printed in London, Liverpool, Glasgow, Dublin, FTSE 100 6721.06 6750.43 -0.44 € index 88.557 88.343 $ index 101.546 101.244 Ger Gov 2 yr 103.17 -0.66 0.00 Frankfurt, Brussels, Milan, Madrid, New York, FTSE All-Share 3651.13 3663.95 -0.35 SFr per € 1.088 1.092 SFr per £ 1.288 1.303 price prev chg Chicago, San Francisco, Washington DC, Orlando, Tokyo, Hong Kong, Singapore, Seoul, Dubai CAC 40 4420.58 4446.96 -0.59 COMMODITIES Fed Funds Eff 0.38 0.37 0.01 Xetra Dax 10274.93 10319.55 -0.43 Jul 28 prev %chg US 3m Bills 0.31 0.31 0.00 3 0 Nikkei 16476.84 16664.82 -1.13 Oil WTI $ 41.10 41.92 -1.96 Euro Libor 3m -0.30 -0.30 0.00 Hang Seng 22174.34 22218.99 -0.20 Oil Brent $ 43.21 43.91 -1.59 UK 3m 0.51 0.51 0.00 FTSE All World $ 272.32 272.61 -0.11 Gold $ 1341.75 1329.00 0.96 Prices are latest for edition Data provided by Morningstar

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JULY 29 2016 Section:FrontBack Time: 28/7/2016 - 19:10 User: puttnama Page Name: 1FRONT USA, Part,Page,Edition: EUR, 1, 1 2 ★ FINANCIALTIMES Friday 29 July 2016

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GLOBALINSIGHT Presidential race WASHINGTON Clintonwoosforeignpolicyexperts Edward Luce Nomineeattemptstodrive the email comments prompting new do not know the answer,” said William his“wildlyinconsistent”swingsbetween scrutiny of Mr Trump’s Russia connec- Galston,attheBrookingsInstitution. “isolationism and military adventur- wedgebetweenTrumpand tions, the Democrats hoped to drive the He added: “Unless the American peo- ism”andpledgingtoworkagainsthim. eliteafteremailoutrage pointhomelastnightwhenJohnAllen,a plearesodesperatethattheyarewilling Republican responses to Mr Trump Obama transcends retired four-star general and former to take a leap in the dark, then I suspect have ranged from Robert Kagan, the GEOFFDYER —WASHINGTON commander of US forces in Afghani- a patient and sustained effort to raise neoconservative intellectual who wrote stan, was to be one of the warm-up acts questions about Donald Trump’s judg- that “this is how fascism comes to Philadelphia occasion Tryingtocalmanuproarthatispresent- forMrsClinton’sconventionspeech. mentwillbearfruit.” America,notwithjackbootsandsalutes ing a political gift to his opponent, Don- On Wednesday, another retired mili- Mr Trump’semail remarks were only but with a television huckster”,to Brent to fight for his legacy ald Trump said yesterday he was only taryfigureandformerRepublican,Rear thelatestoccasionwhentheRepublican Retired US Navy Scowcroft, the former national security joking when he appeared to encourage Admiral John Hutson, told the conven- candidate has espoused a worldview at Rear Admiral adviser who endorsed Mrs Clinton’s RussiatohackHillaryClinton’semails. tion: “Donald, you are not fit to polish odds with party orthodoxy or with the John Hutson “unique experiences and perspectives” The Republican candidate told Fox John McCain’s boots” — a reference to US-led liberal order promoted by much speaks during butdidnotmentionMrTrump. t was arguably the most fateful speech of Barack News that he was being “sarcastic” Mr Trump’squestioning of the war hero of the Washington elite. Last week, he the Democratic The latest establishment backing Obama’slife.Onpreviousoccasionshemayhavebeen when he suggested on Wednesday that statusoftheRepublicansenator. questioned whether the US would help National came yesterday from Michael Vickers, a seeking office, leading a nation’smourning, accepting Russia should seek and hand over Mrs The symbolic embrace of Mrs Clinton Nato allies attacked by Russia; a posi- Convention in former senior Pentagon official, who a Nobel Peace Prize, or pushing for a historic bill. Clinton’semails from her private server by large parts of the foreign policy tion Senate majority leader Mitch Philadelphia on contrastedMrsClinton’s“temperament, Never before, however, has everything he stood for thathavebeendeleted. establishment sets up one of the most McConnellcalleda“rookiemistake”. Wednesday. national security experience and strate- Iteetered on the brink. It is arguable no such potential fate With critics suggesting Mr Trump’s intriguing dynamics of this year’s presi- He has called to tear up trade deals Below, President gicjudgment”withMrTrump’s“limited has hung over any outgoing president. Donald Trump comments bordered on the “treason- dential contest, where so many of the that were once bedrock Republican Barack Obama grasp”ofnationalsecurity. would repeal Mr Obama’s healthcare reform, scrap his ous”,Mrs Clinton was planning to bene- normalpoliticalruleshavedisappeared. commitments and has sounded open to and Hillary The Republican candidate has won nuclear deal with Iran, undo the progress that came from fitfromthesimmeringrevoltamongthe In previous cycles it might have been accommodating the interests of powers Clinton wave to over some party stalwarts including electing the country’s first non-white president, abolish foreign policy establishment about the fatal for a candidate to be snubbed by most Washington experts consider to be the crowd Dick Cheney,the former vice-president, hisWallStreetregulation,andappointSupremeCourtjus- Republican candidate for president — those who have helped run US foreign geopoliticalrivals—RussiaandChina. John Locher/AP and Donald Rumsfeld, the former ticeswhowouldoverturnequalgayrights—tonamejusta partofabroaderpushattheDemocratic policy in his or her party. However, in a By contrast, Mrs Clinton proposes a defence secretary.One result of the elite few. About the only thing Mr Trump would be unable to convention to drive a wedge between campaigndominatedbypopulardisdain vision of leadership that is mainstream backlash against the Republican candi- undoisthedeathofOsamabinLaden. theRepublicanpartyand“Trumpism”. forWashingtonanditsways,theClinton in Washington but which Mr Trump, date is that it is highly uncertain who Mr Obama did not just rise to the occasion. He tran- Over the past three months, the campaignisgamblingthateliteendorse- andmanysupportersofBernieSanders, wouldstaffthenationalsecurityjobsina scended it. Earlier speakers, including Michael Bloomb- former secretary of state has been accu- mentswillendupbeinganetbenefit. Mrs Clinton’s primary campaign rival, Trump administration. Most of the erg,theformermayorofNewYork,evisceratedMrTrump mulating endorsements from Republi- “One of the fundamental questions in believetoberecklesslyhawkish. advisers he announced in March are with relish. Mr Bloomberg pointed out that “the richest cans who have held national security thiselectioniswhetherthesignalsbeing The insider revolt against Mr Trump unknowntoformerRepublicanofficials. thing about Donald Trump is his hypocrisy”.He said that roles in previous administrations and sentbytheforeignpolicyestablishment erupted in March when more than 100 The danger for the Clinton side is that Hillary Clinton understood that governing a nation was who are dismayed at the positions and will persuade some educated, suburban Republican former officials and foreign it ties itself too closely to a foreign policy “notrealitytelevision.Itisreality”.Theroastingwasallthe judgment of their own candidate. With Republicans to vote for Hillary.I simply policy experts signed a letter criticising elitethatisderidedoutsideWashington. moredevastatingcomingfromapoliticalindependentand self-made man whose net worth is a multiple of Mr Trump’s. Mr Bloomberg ended by urging Americans to vote for the “sane, competent” candidate — perhaps the firsttimeamajorpublicfigurehasquestionedMrTrump’s sanity. Joe Biden, vice-president, poured scorn on Mr Trump’s claim to understand the travails of blue-collar Americans. “This guy does not have a clue about the mid- dleclass,”saidMrBiden. Mr Trump earned his fair share of derision — particularly on a day Even by his own when he traduced US oratorical national security con- cerns, and skirted the repertoire, his edgesofUSlaw,bycalling address was on Russia to hack into his opponent’s email one of a kind account. For the most part,however,MrObamachosetotalkupAmerica’sgreat- ness rather than talk down the man who claimed he could winitback.AsanappealtoAmericanoptimismitstrucka blinding contrast to the hellscape Mr Trump sketched at his convention last week. But Mr Obama went much fur- ther than that. His larger purpose was to remind Ameri- cans,particularlyyoungerones,ofthevalueofdemocracy. He did not do it via a standard apple-pie homage to Amer- ica’s verities but as a clarion call to how easily democracy could be degraded. “Democracy works,” said Mr Obama, “but we’ve got to want it.”Some people might dislike Mrs Clinton,ordisagreewithheronbigissues.Buttheyshould understand that elections are about choices, he argued. Sometimesthechoicescanbefateful. “WhatweheardinClevelandlastweekwasadeeplypes- Nationalist’s stunt simistic vision of a country where we turn away from each otherandturnawayfromtherestoftheworld,”MrObama said. There has never been an endorsement like it. Mrs Russia’sletter to America urges voters to reject ‘dangerous’ Democrat Clinton may be the most qualified person ever to run for the White House — “more than me, more than Bill”,as Mr Obama claimed. But no White House nominee has ever KATHRINHILLE —MOSCOW Theyoungpolitician’sstuntstandslit- which the US election is reso- sonova, left, handed a copy of her letter been held up as the only thing standing between America tle chance of influencing the US elec- natinginRussia. to guards outside the US embassy in and a demagogic strongman. Others have sought to MariaKatasonovayesterdaykickedoff tion.Yetitcouldaddtogrowingpanicat Pro-Kremlin bloggers have Moscow. “I want to show that Russia unnerve voters by talking about what a Trump adminis- her campaign for a seat in Russia’s theideathatMoscowistryingtoinvolve been busy laying the blame for supports Trump!” she said. “Hillary tration would mean. Mr Obama appealed to the better Duma. But instead of addressing her itselfintheracefortheWhiteHouse. war, terrorism and regime means a dictatorship of strength, but angelsofAmerica’snature. own constituency, the 21-year-old The release by WikiLeaks of embar- change around the world on Trump — that is somebody who is ready Even by his own oratorical repertoire, Mr Obama’s nationalist published an open letter to rassing emails and call recordings from Mrs Clinton in her former role for compromise, ready to talk, ready to address was one of a kind. Twelve years after he shot to theAmericanpeople. the Democratic National Committee on as secretary of state. State supportamultipolarworld.” prominence with an electrifying address that sought to “You are about to choose the new US the eve of this week’s party convention media have barely reported Ms Katasonova is running for transcend America’s “red state, blue state” divide, a grey- president and I hope that your choice has raised suspicion among some US on the hacking attack against office on a ticket of the nationalist ingMrObamafoundhimselfmakingthesamecaseallover will be correct,” she wrote, adding that politicians and security analysts that the DNC — for which many in Rodinaparty. again. On this occasion the stakes were dramatically “voting for Hillary Clinton is wrong and getting Mr Trump elected is the latest the US blame Russia — but they “What she does in general and what higher — and America’s divide considerably worse. This dangerous.” project on the clandestine warfare have played up the resulting shedidtoday,ofcourse,reflectstoacer- time he spoke with the urgent poignancy of experience. Speaking to the Financial Times, Ms agenda of Vladimir Putin, Russian pres- infighting of evidence of the US’s dys- tain extent the policy agenda of the “Our power doesn’t come from some self-declared saviour Katasonovasaidtherewasonlyonecan- ident. functionaldemocracyandMrsClinton’s Kremlin in its anti-liberal, anti-western promising that he alone can restore order,” said Mr didate who could end a foreign policy Russian political analysts dismissed personalfailings. drift,”said Maria Lipman, an independ- Obama.“Democracyisn’tabout‘yeshewill’.It’sabout‘yes thathadwhippedupanewcoldwarand the idea of Ms Katasonova being part of Clad in a T-shirt emblazoned with a ent political analyst. “But the idea that wecan’.” energised global terrorism: Donald such a campaign as ridiculous. Still, her photooftheDemocraticcandidateand this action is somehow backed by the Trump. move illustrates the strange manner in thewords“CrookedHillary”,MsKata- Kremlinisfar-fetched.” [email protected]

Coup aftermath MAKE A SMART INVESTMENT Subscribe to the FT today at ft.com/subscription Turkey stock analysts swept up in Erdogan’spurge

MEHULSRIVASTAVA —ISTANBUL copies of their client research in what since recovered much of those losses. soughtfortheirtiestoGulen-alliedpub- one Turkish official said was an attempt The crackdown on stock analysts has lications,ratherthantheirworkasjour- Aftertargetingtensofthousandsofsol- to determine whether they had dam- been overshadowed by a broader nalists.) diers, bureaucrats and educators, the agedthecountry’smarketcredibility. cleansing of Turkey’s institutions that Intotal,thepurgehasalreadyclaimed

015 sweeping purge unleashed by Turkish “My job is to tell people what I think has prompted expressions of concern the careers or professional licences of NOVEMBER 7 2 NOVEMBER president Recep Tayyip Erdogan fol- about the current situation, and in this fromtheUSandtheEU. some 30,000 Turks in education, about lowingafailedcouphassettledonaless current situation I can’t speak my mind So far,some 114 businesses, including 14,000 in the government and nearly obvioustarget:stockanalysts. anymore,”saidananalystatoneofTur- newspapers, radio and TV channels — 9,000 in the interior ministry and the FINANCIAL TIMES Spain; Fabripress, C/ Zeus 12, Polígono Industrial Meco- Mert Ulker, the head of research at Ak key’sbiggest banks, who requested ano- ostensibly tied to Fethullah Gulen, the military.Some 16,000 people have been 1 Southwark Bridge, R2, 28880 Meco, Madrid. Legal Deposit Number London SE1 9HL (Deposito Legal) M-32596-1995; Publishing Director, Investment, the brokerage arm of Tur- nymity. self-exiledclericMrErdoganblamesfor detained since the coup, with 8,113 cur-

Lionel Barber; Publishing Company, TheROLLING Financial IN THE DEEP Times Subscriptions & Customer service: Limited, registered office as above. Local Representative key’ssecond-biggest bank, was stripped “This has an absolute chilling effect, the failed coup — have been seized by rentlyunderarrest.

Tel: +44 207 775 6000, [email protected], office; C/ Infanta Maria361_Cover.PRESS.indd Teresa 1 4, bajo 2, 28016, Madrid.21/10/2015 10:51 of his licence by the country’s capital and is the opposite of what Turkey the state. Two ambassadors were Turkey’s universities have fast www.ft.com/subscribetoday ISSN 1135-8262.. Advertising: UAE; Al Nisr Publishing LLC, P.O.Box 6519. Dubai. Editor marketsboardoveraresearchreporthe needsrightnow.” detained, and arrest warrants were become a cautionary tale: the deans of Tel: +44 20 7873 3794 [email protected], in Chief: Roula Khalaf. Origin of publication, twofour54, issued to investors in the aftermath of Eight other market analysts con- issued for 47 journalists. (A Turkish everyuniversityinTurkeyhavealready [email protected] Media Zone, Abu Dhabi. Letters to the editor: France; Publishing Director, Dominic Good, 40 Rue La theJuly15attemptedputsch. tacted by the FT said they were either official said the journalists were being resigned their posts after being Fax: +44 20 7873 5938, Boetie, 75008 Paris, Tel. +33 (0)1 5376 8256; Fax: +33 (01) Mr Ulker’s report featured the stand- under orders from management to “invited” to do so by the government, [email protected] 5376 8253; Commission Paritaire N° 0909 C 85347; ISSN Executive appointments: 1148-2753. ard predictions for the lira, the stock remain silent or were doing so out of clearingthepathforErdoganloyaliststo Tel: +44 20 7873 4909 Turkey; Dunya Super Veb Ofset A.S. 100. Yil Mahallesi www.exec-appointments.com 34204, Bagcilar- Istanbul, Tel. +90 212 440 24 24. exchange and other economic indica- caution for their own professional replace them, said the just-retired dean tors. It also offered his analysis of the future. ofonemajoruniversity. Published by: The Financial Times Limited, 1 Southwark ©Copyright The Financial Times 2016. Bridge, London SE1 9HL, United Kingdom. Tel: +44 20 Reproduction of the contents of this newspaper in any botched coup’s potential political The focus on stock analysts may “It’s starting to feel like the Soviet 7873 3000; Fax: +44 20 7407 5700. Editor: Lionel Barber. manner is not permitted without the publisher’s prior impact and theories behind the perpe- reflect the acute sensitivity in Ankara Union under Stalin, or China under Belgium; BEA Printing sprl, 16 Rue de Bosquet, Nivelles consent. ‘Financial Times’ and ‘FT’ are registered trade 1400. marks of The Financial Times Limited. trators. about the vulnerability of an economy Mao,”said the dean, who asked for ano- Germany; Dogan Media Group, Hurriyet AS Branch In punishing Mr Ulker, who could not that is heavily reliant on foreign invest- nymity to avoid arrest for criticising the Germany, An der Brucke 20-22, 64546 Morfelden - The Financial Times and its journalism are subject to a Walldorf. Responsible Editor, Lionel Barber. Responsible self-regulation regime under the FT Editorial Code of be reached for comment, the capital ment. Mr Erdogan and his senior government. for advertising content, Dominic Good. Practice: www.ft.com/editorialcode Italy; Poligrafica Europa, S.r.l, Villasanta (MB), Via Enrico markets board said the analyst had not appointees repeatedly attacked Stand- “Their goal is clear — use this oppor- Mattei 2, Ecocity - Building No.8. Milan. Reprints are available of any FT article with your fulfilled his responsibilities and also ard & Poor’s for downgrading Turkey’s tunity to clear the ranks of anyone who Owner, The Financial Times Limited; Rappresentante e company logo or contact details inserted if required Direttore Responsabile in Italia: I.M.D.Srl-Marco Provasi - (minimum order 100 copies). cited laws that made it a crime to insult debtafterthecoupattempt. isn’t a fan of Mr Erdogan, and this has a Via G. Puecher, 2 20037 Paderno Dugnano (MI), Italy. One-off copyright licences for reproduction of FT articles theinstitutionofthepresidency. Turkey’s equity market suffered its long-term impact on universities and Milano n. 296 del 08/05/08 - Poste Italiane SpA-Sped. in are also available. Abb.Post.DL. 353/2003 (conv. L. 27/02/2004-n.46) art. 1 For both services phone +44 20 7873 4816, or email Other Turkish brokerage houses say sharpest fall in recent history when Recep Tayyip Erdogan: criticised otherinstitutionsthatare,bydefinition, .comma 1, DCB Milano. [email protected] they have also been asked to hand over it reopened after the coup but has Standard & Poor’s over downgrade onlycredibleiftheyareindependent.”

JULY 29 2016 Section:World Time: 28/7/2016 - 18:55 User: owendavid Page Name: WORLD1 USA, Part,Page,Edition: EUR, 2, 1 Friday 29 July 2016 ★ FINANCIALTIMES 3

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Energy infrastructure IMF report questions its role in Greece France’sEDF split as £18bn Fund criticises lack of internal debate on alternatives to a loan package without debt restructuring project for UK

ARTHURBEESLEY —LONDON 2010, when the fund was drawn into fiscal adjustment. At least in part, this gramme and go along with European suretoprovideexceptionalaccesswhen Europe’s chaotic campaign to shore up contributed to a big contraction in eco- policy. On all of this the inspectors are prospects for success are quite poor”. nuclear plant An unsparing assessment of the Inter- the single currency. A succession of nomic output and undermined public clear: “Decision-making could have The decision to lend to Greece under- nationalMonetaryFund’sinterventions huge bailouts for Greece and other supportinGreecefortherescueeffort. been strengthened by taking one or mined the rule’s purpose, which was to approved in the eurozone debt emergency weaker states followed. It paints a pic- From the European perspective, the both of the following steps during the limitdiscretionandflexibility. prompts questions over its approach to ture of poor pre-crisis surveillance, fol- question of debt restructuring was early months of 2010: a formal, open Lessons from past crises were not Greece, the origin of the saga and still its lowed by problems in the design and alreadyoffthetablebythetimetheIMF and early discussion of all options avail- always taken into account, the inspec- KIRANSTACEY —LONDON epicentre. executionofrescueprogrammes. joined the fray in March 2010. This had able to the IMF; and a more rigorous torsadded.OnewasthattheIMFunder- ROBERTWILLIAMS —PARIS At issue is an IMF decision expected Improvisation was the order of the its roots in fear of contagion. But IMF attempt to quantify likely contagion estimated the likely negative response EDF has given the go-ahead for the thisautumnonwhethertotakepartina day and rules were stretched, not least officials were almost evenly split on the outcomesunderdifferentoptions.” of private creditors to a high-risk pro- UK’s first nuclear power plant in 20 third bailout of Greece, which has been in the IMF,where there was doubt from question. In summary, there was no open dis- gramme. While the IMF also knew from years, approving the £18bn Hinkley under international tutelage for six theoutsetabouttheGreekrescue. Ultimately it was Ms Lagarde’sprede- cussion—includingwiththeIMFexecu- the Asian crisis that a long list of struc- Point scheme in the west of England at years. Germany has threatened to stop Taking issue with the lack of open cessor, Dominique Strauss-Kahn, who tive board — on alternatives to a loan tural conditions without prioritisation aboardmeetingyesterday. lendingtoAthensifthefundpullsout. discussion in the fund on an alternative decided to take a chance on the pro- packagewithoutdebtrestructuring. would be counterproductive, this was The IMF has warned repeatedly that strategy for the country,inspectors said The inspectors bemoan a lack of not applied to the joint EU-IMF pro- Directors approved the long-delayed it cannot participate in any further bail- staff occasionally felt pressured by transparency in the way IMF lending grammes. The IMF’s performance was project during a meeting in Paris. But out without meaningful debt relief. European colleagues to accept a less- rules were changed, saying the original uneven, with only patchy availability of opposition from within the company Amid ructions in Turkey after a failed than-ideal outcome in light of political proposalwasembeddedinastaffreport staff with relevant experience. “Pro- was underlined by the resignation in military coup two weeks ago, the US has concerns. That assessment is disputed with no advance warning to executive gramme design and implementation protest of a board member as the meet- steppeduppressureonEuropeancredi- by Christine Lagarde, IMF managing directors. “Few recognised the implica- was close to exemplary in Ireland but ingstarted. tors of Greece to settle its finances so it director. tions of the language until one of them severely wanting in Greece. Financial The board was also split for the first can serve as a regional anchor. But this Still, the fund’s decision to provide raised the issue during the meeting. sector work was first-rate in Spain but timeinthecompany’shistory. remains deeply contentious in the euro- loans to Greece required a change to its Otherwisethedecisionwouldhavebeen inadequateinPortugal.” Pending final sign-off by the British zone, where Germany leads resistance internal lending criteria. The reason for approved without the board’s full The global political agenda may have government, which has already agreed tofar-reachingdebtforgiveness. this was that Greek debt could not be knowledge.” movedonfromGreecebuttheproblems tounderwritetheprojectwithaguaran- ThereportbyinternalIMFinspectors “deemed sustainable with a high proba- The irony here is that the very rule brewing since the earliest days of the teedpricefortheelectricityitproduces, makesclearthatthisquestiongoesright bility”.Sustainability concerns were left Christine Lagarde: disputes claim that was changed was originally cast to debaclestillfester. constructioncouldbeginwithinweeks. back to the beginning of the crisis in unaddressed, magnifying the need for that staff felt politically pressured make the IMF “less vulnerable to pres- Editorial Comment page 8 The power plant is designed to give the UK zero-carbon power for the next 60 years, to kick-start a string of new reactors across the UK and to provide continuing work for France’s nuclear Eurozone. Balance sheets powerindustry. EDF has said Hinkley Point in Somer- set will be completed by 2025, by which time it will be able to meet 7 per cent of Bank stress test the UK’s electricity needs with a capac- ityof3.8gigawatts. But critics say the project could also result crucial to risk the financial future of EDF, the highly indebted French utility, whose chieffinancialofficerThomasPiquemal quit in March, warning that its future lending revival was being put in danger by Hinkley Point. Theschemehasbeensubjecttomulti- said Richard Barwell, economist at BNP ple delays and budget revisions since Poor outcome could hit loans Paribas. firstbeingproposedinthemid-2000sas but signals are that markets Recent bank lending surveys indicate part of what Tony Blair’s then Labour credit markets have been thawing government promised would be a have little to worry about across the eurozone, including in mem- “nuclearrenaissance”fortheUK. ber states with weaker economies such New reactors are also being planned asSpainandItaly. in north Wales and in Cumbria, while CLAIREJONES —FRANKFURT Banks in Italy,notably Monte dei Pas- EDF wants to help develop two sites It is not just Europe’s bankers who are chi di Siena, the country’s oldest and after Hinkley Point — at Sizewell in Suf- nervously awaiting the publication third-largest lender by assets, are folkandBradwellinEssex. tonight of the “stress tests” on the conti- viewed as most at risk from the stress EDF had hoped to take the final nent’sbiggestlenders. tests. Some German banks are also seen investment decision earlier this year, The result could also make uncom- as vulnerable. Faced at a press confer- but it was postponed amid growing fortable weekend reading for eurozone encelastweekwithseveralquestionson opposition from board members and policymakers. the health of the eurozone’s lenders, executives. That opposition persisted Thefearisthatapoorsetofresultsfor Mario Draghi, ECB president, acknowl- until the end, despite the company’s the eurozone’s 37 biggest banks could edged that the sharp falls in bank stocks decisiontopushaheadwiththescheme. damp the recent lending revival in a in the aftermath of the UK’s decision to As the meeting got under way,Gérard region already at risk from slowing leave the EU posed a danger to central Magnin quit as a state representative on growthandthefalloutfromBrexit. EDF’s board, calling the company’s The European Central Bank, which nuclearstrategy“highlyrisky”. worked with the European Banking ‘It is essential the banks In the end, the vote was carried by 10 Authority on the exercise, has also sub- are in a fit state to finance to seven. It was closer than expected, jected the balance sheets of another 56 with all six union representatives and smaller eurozone lenders to stress tests, the growth of productive one shareholder representative voting althoughthesewillnotbepublished. new enterprises’ against the measure. It was also the first The most important figures from the time the board has ever made a non- tests, to be published after US markets bank efforts to steer the region towards unanimousdecision. close, will be those that show how well economicrecovery. Ministers in the UK must now give banks’ capital buffers could stand up in “Bank equity prices are of some sig- theirfinalsign-offtothescheme,having the event of worsening economic condi- nificance for policymakers, because if already agreed to pay £92.50 — double tionsandtougherregulation. they drop in the way they did [and] if the current wholesale price — for each Whilethereisnopassorfailmark,the this is to stay, the cost of capital would megawatthourofelectricityitproduces risk is that markets will put pressure on increase and therefore the net return on for35years. lenders that perform poorly to raise lending would decrease,” he said. This While Theresa May has not said any- capital in an environment where, with risked “more conservative lending thing about the scheme since becoming share prices low and wide concern over behaviour”bybanks. prime minister two weeks ago, her new banks’ growth prospects, this is difficult However, Mr Draghi pointed out that Illuminating: “Credit conditions have been easing trigger a tough response from the chancellor, Philip Hammond, said ear- todo. banks in the region were in a much the European until very recently, which is indicative region’sregulators. lierthismonth:“Wemustmakesurethe The eurozone economy is much more stronger position now than a few years Central Bank in that banks in the aggregate will not be “The stress tests should not lead to a projectgoesahead.” reliant on banks than the US, where agoandhadraisedtheircorecapitallev- Frankfurt impacted,otherwisewewouldprobably big drop in lending across the eurozone companies have access to other sources els from an average of 9 per cent in 2012 worked with the have seen some [pre-emptive] change anytimesoon,”saidMrBarwell. ofcapitalinadditiontobankloans,such to about 13 per cent. The problems of European inlendingbehaviour.” “But there is a medium-term threat asmuchdeeperdebtmarkets. theeurozone’sbankingsectorwereones Banking But the tests could focus attention on from the unintended consequences of And the ECB needs healthy banks, if ofprofitability,notofsolvency,hesaid. Authority on existing concerns about lenders’ health any emergency policy response to they are to pass on the central bank’s The signals from the ECB and EBA so the tests — Alamy and, if the results are poor, prompt a known problems that the stress tests cheap funding to customers so growth far are that the tests will uncover little policy response by banks and govern- willhighlight. canstrengthen. thatwillspookthemarkets.Economists ments that leads to tougher rules on “A bailout of a bank today could “It is essential that the banks are not broadly share this view. “We don’t lenders. undermine the bail-in regime, prompt- just solvent but in a fit state to finance expect any meaningful impact on credit The big concern is that a big public ing regulators to demand higher capital the growth of the productive new enter- conditions from the test or the policy bailout of Italian banks would under- requirements across the board tomor- prises . . . rather than just warehousing response,”said Dirk Schumacher, econ- mine Europe’s attempts to create a row.Andthatcouldweighonlending.” A computer generated image of the legacy loans to . . . mature companies,” omistatGoldmanSachs. regime to bail in private investors and Lenders fall short page 12 proposed Hinkley Point reactor

Bad debts Padoan faces greatest challenge in effort to shore up Italy’sailing banking system

JAMESPOLITI —ROME Investors have targeted them as the If a “market solution” does not work, mediate with Brussels. “Padoan is a EU policy. “I don’t think it’s as co-ordi- door was shut to a Spanish or Irish-style weakest link in the European financial Rome will have to consider the more quiet leader. He listens to everyone, but natedasgoodcop,badcop.Ithinkit’sin bad bank solution, he led efforts to set Over dinner with reporters at a Rome system, prompting sharp falls in their politicallyperilouspathofrescuingMPS when he talks, he talks — it’s for real,” their natures,” said Francesco Galietti, up a guarantee scheme to stoke private hotel in November, Pier Carlo Padoan, sharesandraisingconcernglobally. with public money. High-stakes talks said Filippo Taddei, the top economic ananalystatPolicySonarinRome. investmentinNPLsandsetupaprivate- Italy’sfinanceminister,wasaskedwhat Mr Padoan has not relished the spot- havetakenplacewithBrusselsoverhow advisertotherulingDemocraticparty. But other observers are less sure that sectorfundtorecapitalisesomebanks. he would do if he had a magic wand to light on Italy as a source of trouble for to structure a rescue without violating This temperament balances some of Mr Padoan’s skills match the moment. Mr Padoan pressed ahead with helpthesluggisheconomy. the global economy. At the meeting of tough EU rules on state aid. With few MrRenzi’smoreoutspokencriticismsof “[MPS] should have been tackled reforms to improve governance and The answer was telling: he would wipe G20 finance ministers and central bank exceptions, these rules will require a hit immediately after the first comprehen- backed measurestoacceleratethereso- away the huge stock of non-performing governors in China last weekend he to the bank’s private investors, includ- sive stress tests . . . in October 2014,” lutionofdisputesoverbaddebts. loans that had accumulated on banks’ triedtosoothemarkets. ingjuniorbondholders. said Andrea Montanino, a director at Should Italy plunge back into finan- balancesheetsintherecession. “There is no risk in terms of systemic Italian officials are desperate to avoid theAtlanticCouncilinWashington.“He cial distress, his reputation could be in Nine months later, the unassuming stability,”he said. “There are a few criti- that scenario because it could further should have grabbed it by the horns . . . tatters. 66-year-old labour market economist cal cases which are contained and [will dent support for the government. Mr sowedidn’tgettothispoint.” Butifhesucceeds,hisstaturecouldbe faces arguably his greatest challenge be]resolvedthroughamarketprocess.” Padoan, a former International Mone- A sign of mounting impatience with enhanced.MrPadoanisconsistentlythe amid turmoil in Italy’s banking system Under Mr Padoan’sdirection, officials taryFundandOECDofficial,waspicked Mr Padoan came last week when Franc- most popular cabinet minister, accord- driven by that very problem. Saddled are this week looking to engineer a pri- by Matteo Renzi, prime minister, in esco Boccia, a senior Democratic law- ingtoasurveybyIPR. with €360bn of gross NPLs — including vate-sector cash injection into Monte 2014 to be finance minister. To some maker, said he was “not up to the task” “His suits are awful and he can be about €200bn of bad debts — the banks dei Paschi di Siena, Italy’s third-largest observers, his low-key style and famili- ofhandlingthebankingwoes. very grumpy,” said Mr Galietti. “But have been slow to boost lending to the bankbyassetsandthemostlikelytofall arity with international institutions Italian officials have said Mr Padoan this is someone who cares; he’s a safe economy even as it recovered from a short of capital in Europe-wide stress make him ideal to manage Italy’s tricky Pier Carlo Padoan: ‘There is no risk did what he could given rigid regulatory pairofhands.” lengthyrecession. testswhenresultsarepublishedtoday. economic and financial portfolio and in terms of systemic stability’ constraints. Once it was clear that the Comment page 9

JULY 29 2016 Section:World Time: 28/7/2016 - 18:55 User: conlonj Page Name: WORLD2 USA, Part,Page,Edition: USA, 3, 1 4 ★ FINANCIALTIMES Friday 29 July 2016

INTERNATIONAL

Post-Brexit deals Germany Merkel rejects UK trade secretary faces queries over post calls to rethink policy on Fox’s officials surprised he Instead, David Davis’s new Depart- minister, who said her focus was on thegovernmentwouldseekafree-trade they cannot legally be concluded until mentforExitingtheEUhasbeentasked tyingupadealwiththeEU. agreement with the EU rather than a Brexitiscomplete. will not be leading talks on with establishing “the future relation- Mrs May, who is on a tour of Europe, closer“customsunion”. Although Britain cannot negotiate refugees after future ties with the EU ship between the EU and the UK”, visiting Slovakia and Poland yesterday, Some of Dr Fox’s colleagues thought free trade deals until it leaves the EU, includingtraderelations. wantsDrFoxtotraveltheworldseeking the trade department, which is hiring Dr Fox believes that preparatory work terror attacks GEORGEPARKER —LONDON Earlier in the week, US trade repre- tradeopportunitiesforBritain. negotiators from the private sector to can be done to make sure they are ANNE-SYLVAINE CHASSANY —PARIS sentativeMichaelFromansoundedcau- But the trade secretary’s job only build up the country’s minimal exper- ready to be agreed at the earliest oppor- Liam Fox, Britain’s international trade tious about the possibility of an early makes sense if Britain pulls out of the tise, would lead talks on an EU free- tunity. GUYCHAZAN —BERLIN secretary,returned from a three-day US tradedealwiththeUK. tradeagreement. Dr Fox’s visit to New York, Chicago Germany’s chancellor Angela Merkel visit yesterday facing questions about In the run-up to the UK referendum But the prime minister’s office insists and Los Angeles is part of a flurry of said she would not budge on her refu- his new role and his ability to quickly on June 23, Barack Obama, US presi- Liam Fox: ‘We have that the trade department’s remit only post-Brexit diplomatic activity by Mrs gee policy, despite the Islamist terror strikepost-Brexittradedeals. dent, warned London would be “at the nothing to fear covers trade deals across the globe, not May’snewgovernment.Theprimemin- from forging our attacks in Würzburg and Ansbach that Dr Fox told his US audience that Brit- backofthequeue”. thedetailofanynewarrangementswith ister visited Berlin and Paris last week own free-trade have sparked urgent calls for a govern- ain wanted to break out of the EU’scus- “As a practical matter, it is not possi- theEU. and this week added Rome, Bratislava environment’ mentU-turnonimmigration. toms union to develop a global trade ble to meaningfully advance separate DrFoxwasoptimisticthisweekabout and Warsaw to her list, seeking help policy,only to be told that the UK prime trade and investment negotiations with theprospectsofBritainflourishingafter from central European countries as she Yesterday, Ms Merkel repeated her minister has yet to decide whether that the UK until some of the basic issues EU’s customs union, under which Brus- Brexit, telling an audience in Chicago: preparesBrexitnegotiations. phrase from a year ago — “We can do shouldbethecase. around the future EU-UK relationship sels negotiates global trade deals and “We have nothing to fear from forging Mrs May said in Rome that she was this”—andinsistedthatGermanycould Now Theresa May’soffice has made it have been worked out,” Mr Froman sets a common external tariff and trade our own free-trade environment and seekinga“bespoke”Britishrelationship cope with the 1m migrants who crossed clear that Dr Fox will not be leading said. rulesforallmembers. breakingoutonourown.” with the EU, including the curtailing of into the country last year, while fully talks on Britain’s future trade relations Dr Fox’s claim he had opened “very TheUKprimeminister’sofficesaidno Dr Fox told The Sunday Times that free movement of people but retaining integratingthemintoGermansociety. with the EU, in spite of a belief among fruitful” trade talks with Canada was decision had been made on whether to Britainwas“scoping”aboutadozenfree maximum possible access to the single She dismissed a reporter’s suggestion some officials in his department that he quickly followed by a clarification from stay in the customs union, in spite of Dr trade deals outside the EU, although Mr market. that the phrase now seemed “thought- wouldbe. Chrystia Freeland, Canada’s trade Fox telling The Wall Street Journal that Froman’s comments confirmed that Philip Stephens page 9 less” in view of the jihadi attacks this month. “I never said it would be easy,” she said. “But I’m just as much as con- vinced now as I was then that we will cope . . . and we will live up to this his- Davis v Barnier. Divorce talks torictask.” Shealsoputforwardanine-pointplan tobeefupsecurity,includinglowerhur- dlesfordeportingfailedasylumseekers, Brexit bout reunites sparring partners an early-warning system to flag up refu- gees who were becoming radicalised and joint exercises between the army and police to prepare for domestic ter- rorattacks. Ms Merkel was speaking after a week of violence that has plunged Germany intoamoodofuncertaintyandfear.Her comments were made at an annual summer press conference that is nor- mally held in August but was brought forwardtoaddresstheterrorincidents. The violence has raised concerns that Germany may have compromised its securitylastsummerbyopeningitsbor- derstohundredsandthousandsofrefu- gees,manyofthemfromSyria,Iraqand Afghanistan. Some are asking whether the authorities, who do not have the same experience battling terrorism as counterparts in France, the UK and Bel- gium,haveagriponsecurity. Horst Seehofer, the prime minister of Bavaria and a staunch opponent of Ms Merkel’s refugee policy, said this weekthathehadbeenvindicatedbythe attacks. “All our prophecies have been provedright,”hesaid. The anger in Bavaria, where both ter- ror attacks took place, threatens to cre- ate fresh tensions between Mr See- hofer’s Christian Social Union and its sister party, Ms Merkel’s CDU, just weeks after the two had reached a truce Tactical battle: David Davis, left, and Michel Barnier will both fear being overruled by their respective leaders — Jack Taylor/Getty; Laurent Dubrule/Reuters ontherefugeeissue. TheviolencebeganonJuly18whenan axe-wielding Afghan teenager injured Today,Brexit poses a similarly daunt- the Channel, Continent is isolated.” a “rulemaking spring”. In one meeting was,forinstance,tailoredtoBritishcon- five people on a train in Würzburg. Four GaullistformerFrenchforeign ing challenge for Mr Barnier and Mr Mr Davis, raised on a public housing he so annoyed Sir Mervyn King that the cerns,muchtothechagrinofFrance. days later a German-Iranian with right- ministerandUKEurosceptic Davis, albeit one that will probably be estate by a single mother and with a then governor of the Bank of England Mr Barnier was always at pains to wing extremist views killed nine people foughtoutinfarlesssalubriousBrussels career as a reservist in the elite Special thumpedthetable. show his anglophile side. He kept up in a mass shooting at a shopping centre accusedbycriticsofvanity officebuildings. Air Service, has always been up for a Yetforallthepotentialforspectacular Englishlessonsthroughouthistenureat in Munich. On Sunday, a Syrian refugee Foralltheirpoliticaldifferencesinthe fight; his matchup with suave, winter fightsbetweenMrBarnierandMrDavis, the commission, giving his valedictory killedhisgirlfriendinthesoutherntown ALEXBARKER —BRUSSELS 1990s, the Gaullist former French for- sports-loving Mr Barnier will be an the two negotiators also have, over the interview to the Financial Times almost of Reutlingen and, later the same day, a GEORGEPARKER —LONDON eign minister and Thatcherite Brexit intriguingone. years, shown some pragmatism and entirelyinEnglish. 27-year-old from Aleppo wounded 15 Eurosceptic share some traits that have Mr Barnier pointedly welcomed the compromise. Criticaltothesuccessofbothmenwill people when he blew himself up outside Brexit talks are set to reunite two spar- taken them on oddly similar political “change in climate” after Tony Blair’s Mr Westendorp, the chair of the be whether their political bosses will a wine bar in Ansbach, in Germany’s ring partners from a bygone European journeys. reflectiongroup,onceremarkedthatMr givethemthespacetonegotiate. firstsuicidebombing. battle. Both are proud political fighters with Davis behaved quite differently behind While a formidable dealmaker in the Security officials have warned for Michel Barnier’s appointment as the chequered careers, including abrupt ‘I worked with both of closed doors. Inside the talks he “acted European Parliament, Mr Barnier has months that militant group Isis, which European Commission’s chief negotia- stintsinthepoliticalwilderness.Bothare these men. They’re both like Douglas Hurd”, the pro-EU foreign sometimes struggled to make headway claimed responsibility for both the torprimeshimforacontestwithBritish accused by critics of vanity and lacking secretary, while outside, “like Michael among EU finance ministers — and dur- Würzburg and Ansbach attacks, may counterpart David Davis, a similarly attentiontodetail,yethaveprovenabili- very able, affable and are Portillo”, the Eurosceptic then defence ing Brexit talks will fear forever being have smuggled its operatives into Ger- headstrong politician he first clashed ties to cut political deals. And both enter people of integrity’ secretary. overruledbyEUleaders. manyunderthecoverofbeingrefugees. withmorethan20yearsago. the Brexit talks, the negotiation of a life- Gay Mitchell, who represented Ire- Just like Mr Barnier, Mr Davis has yet They have also repeatedly said that BoththenservedasEuropeministers, time,questioningwhethertheywillhave victory in the 1997 general election that landonthereflectiongroup,recallslittle to fully carve out his political responsi- young asylum seekers from Arab coun- representing France and Britain respec- theauthoritytheyneedtodothejob. ousted the inflexible Mr Davis from his tension between Mr Barnier and Mr bilities in Brexit talks and will fear tries were being targeted for recruit- tively on a “reflection group” estab- In the 1990s, Mr Davis revelled in his chair at a conference to draft what Davis, in spite of their divergent views. being constantly trumped by Theresa mentbylocaljihadinetworks. lished to overcome entrenched differ- reputation as “Monsieur Non” on that becametheAmsterdamtreaty. “I worked with both of these men. May’s negotiations with other EU lead- Ms Merkel described the terror inci- ences and pave the way for a new EU reflection group, where his efforts to Snappily dressed, hyperactive and They’re both very able, affable and are ers. dentsas“shocking,distressing,andalso treaty. stem the flow of powers to Brussels neverslowtocallforboldstateinterven- people of integrity. I would say they are Should that happen, the Brexit duo depressing”. The chancellor said Ger- Moving between castles in Luxem- establishedhimasafavouriteoftheCon- tion, Mr Barnier built a reputation dur- two people who could work very well mightshareafatesimilartotheWesten- many was being put to the test, but it bourg and an ancient nunnery on the servativeright.AtthetimeElmarBrok,a ing his time as EU commissioner for together.” dorp “reflection group”: rather than shouldsticktoitsprinciples. Sicilian coast, the group struggled with federalist German MEP who served on financial regulation from 2009-2014 as For all the bluster, Mr Barnier too offer a solution, its report laid out There has been a sharp fall in the what Carlos Westendorp, a veteran the group, smarted over Mr Davis’s ascourgeoftheCityofLondon. proved able to strike deals with the UK, optionsandleftotherstodecide. number of migrants entering Germany Spanish diplomat, called “an almost doggedoppositiontofurtherEUcentral- In the wake of the financial crisis, Mr especiallytowardstheendofhistenure. Additional reporting by Arthur Beesley in since the height of Europe’s refugee cri- impossibleexercise”. isation,describinghispositionas:“Fogin Barnierdescribedhismissionasleading A proposal to revamp bank structures LondonandJimBrunsdeninBrussels sislastyear.

Homegrown threat Decision to withhold jihadis’ details ignites soul-searching in France on media’srole

ANNE-SYLVAINE CHASSANY —PARIS zine La Croix decided it would only bad,”LaurentJoffrin,editorofLibération, has proved highly adept at using social InstituteofInternationalRelations,said internal police investigation concluding revealtheirfirstnamesandtheinitialof wroteinaneditorialyesterday. media and video production both to of the media row. “It shows the French that measures had “not been inappro- The decision by several French news their last names. Europe 1, a radio sta- The debate underlines France’s soul- lure fighters to Syria and encourage societyiswrestlingwithwhattodoafter priate” that evening has not quashed organisations to withhold information tion owned by Lagardère, will refrain searching after 18 months of Islamist themtostrikeathome. coming to the realisation that we might controversy. on perpetrators of terror attacks has fromusingnamesandphotographs. terror. The country is still reeling from “It is a sign of the mental confusion need to modify our behaviour and way “We can continue to do our work, sparked a wider debate in France over “Since the emergence of Isis-linked the shock of the truck massacre that Franceisinatthemoment,”Dominique oflifetocombatterrorism.” informpeople,tellwhotheyarewithout the media’srole in fuelling homegrown terrorism, Le Monde has several times killed 84 people in Nice on Bastille Day Moïsi, special adviser to the French Jihadismexpertsaredivided,too.The having to name them or give their jihadism as the nation struggles to halt modifieditspractices,”JérômeFenoglio, and the murder of an 85-year old priest glorification process takes place in identity,” Nicolas Escoulan, head of awaveofdeadlyassaults. its editor, wrote in an editorial. “We in a Catholic church in Normandy ear- Islamist websites anyway, noted David Europe1,argued. BFM TV,France’s largest news channel, have decided to no longer publish lierthisweek. Thomson,anRFIreporterandauthorof But Mr Joffrin of Libération said that and Le Monde, France’s second-largest images from Isis propaganda. After the News groups have been blamed for Les Français Jihadistes. Withholding “hiding the reality of terror attack and daily newspaper, said on Wednesday Nice attack, we won’t publish photo- allowing jihadis to spread their propa- information would only fuel conspiracy minimising their horrible effects” they would no longer publish photo- graphs of killers to avoid possible post- gandaanddisruptpolicework.BFMTV, theoriesand“havenoimpactonthefre- wouldhaveunintendedconsequences. graphs of Islamist terrorists. State- mortem glorification. Other debates on a prime source of breaking news, has quencyofattacksinFrance”,hesaid. Reporters risked “underestimating owned TV France 24 and RFI, a radio ourstandardsareongoing.” come under particular scrutiny for The questions come as public scepti- danger, overlooking victims, hiding the service, have mirrored their moves and But Le Figaro, the centre-right news- speaking to the Kouachi brothers and cism is growing over the French govern- barbaric ordeal that they inflict to our added that they would be “extremely paper owned by defence group Das- Amedy Coulibaly in the midst of their ment’s ability to tackle homegrown ter- democracy,” Mr Joffrin wrote. “Better, parsimonious”innamingterrorists. sault, and Libération, the leftwing daily assaults on Charlie Hebdo cartoonists, rorism. Bernard Cazeneuve, interior for citizens, to look the threat in the It is customary for Paris prosecutor backed by telecom tycoon Patrick policeofficersandcustomersofaJewish minister, has been accused by Libéra- eyes, know who they are dealing with, François Molins to provide the full Drahi,disagreed. supermarketinJanuary2015. tion and opposition politicians of pro- see that the murderers who commit name of terrorist suspects, as well as “Ceasingtopublishphotographsofter- The media’s conduct is particularly A newspaper headline reads ‘Je Suis viding misleading details of the security those awful crimes were also harmless details of their lives. But Catholic maga- rorists?Theintentionisgood,theresultis relevant in the fight against Isis, which Nice’ in the wake of the truck attack measures that were in place in Nice. An lookingyoungsters.”

JULY 29 2016 Section:World Time: 28/7/2016 - 19:01 User: holdsworthi Page Name: WORLD3 USA, Part,Page,Edition: USA, 4, 1 6 ★ FINANCIALTIMES Friday 29 July 2016

ARTS Finny,funny—andsubtlysophisticated

flailing every which way, as a tornado FILM whisks up cars or cattle. LeRoy, it turnedout,wasnon-existent.He/itwas Nigel the pen name and androgynous alter ego of one Laura Albert. LeRoy was Andrews played in public appearances by Albert’s blonde-wigged sister-in-law, Savannah Knoop. The masquerade wasexposedbyaNewYorkTimesstory hen you create an ani- in2006. mated superhit called Until then cultism was contagious. Finding Nemo, sequeli- This film critic remembers a Cannes sation law requires a Film Festival evening, in 2004, when new fish to get lost, and LeRoy and Albert, posing as the Wfound, with each new roll of the fran- author’s manager “Speedie”, attended chise. All the more amazing that Pixar’s the Directors’ Fortnight unveiling of undersea saga has resisted spin-offs for Italian hipster-director Asia Argento’s 13 years. No finny life-form has lost its film of The Heart Is Deceitful . . . The way until the title female of Finding movie was awful, the pre-movie fan Dory. The forgetful blue tang fish who mania awesome. (Argento herself, who stole a few scenes in the first film is now features in Feuerzeig’s documentary, tasked with finding her own way home was rumoured to have had a romance afteryearsinthewaterywilderness. with Leroy. If so, how come she didn’t Lissom and funny-lilting of voice discoverhisgender?) thanks to Ellen DeGeneres, Dory runs Weird. But that’s what’s wonderful the gauntlet of giddy menace and the here:marvel-inducingbutalsomaking- gamut of grand spectacle (multi- you-wonder. Albert herself repudiates coloured shoals of tropical fish, choreo- the word “hoax” with its quasi-criminal graphed armies of stingrays) and high- note of fraudulence and points to percentage Disney/Pixar humour. the word you’d see above a library There are few dud jokes, if any, in a shelf containing her books: fiction. script directed with vaudevillian verve Where does fiction begin and end? And by Andrew Stanton, the human pilot vocal shtick. But no actor does waggish Damon plays the identity-troubled spy Bourne used to be existential in the Life of brine: ‘Finding why should it do either? The imagina- fish behind Nemo and Wall-E who woe better than Albert Brooks, re-voic- last seen in 2007’s The Bourne Ultima- old and echt philosophical sense: Dory’. Below left: Trine tion is deceitful above all things. Or we also wrote Toy Stories one to three and ing Nemo’s clownfish dad Marlin. His tum but still swimming around, we dis- concerned with individuality, authen- Dyrholm in ‘The could more properly, affirmingly, say Monsters,Inc. retreatbeforeademonicmonsterofthe cover, in the opaque ocean of world ticity and the generating of moral iden- Commune’ “creative”and“inventive”. For children there is knockabout reef encapsulates in two sentences of espionage.FindingJason? tity ex nihilo. He is now existential in With The Commune Denmark’s comedy — at its best with octopus comedy panic — at least for metaphysi- My theory: the Bourne saga and its the cheapjack modern sense: con- Thomas Vinterberg sharpens another Hank, a camouflage-intensive blob cal sceptics like me happily alert to eternal-reappearanceriffsareabigjoke cerned with survival. Into the next sec- satire-drama about man as social ani- whose squishy extensions have a Shiva- agnostic mischief — the origin of world at the expense of William Shakespeare. ond or season or sequel, whichever mal. The household here is like the worthyexpressiveness—andnon-cloy- religion: “If you spare us we will wor- “Theundiscoveredcountryfromwhose comesfirst. family gathering in Festen. People come ing cuteness. Grown-ups get to play ship you, we will create a monu- Bournenotravellerreturns . . . ”(Ham- The JT LeRoy Story, like Orson together for the best of reasons, celebrity-spotting. Is that Idris Elba ment. What kind of monument do let): who can recite that now with a Welles’s F for Fake, is a hoaxumentary Finding Dory then come apart for the worst in the voicing the cockney sea lion protect- you want?” (It’s Frazer’s The Golden straight face? Directed by saga veteran that challenges the concept “hoax”. Andrew Stanton worstofways. ing his rock? (“Arf! Arf!” really Bough in a nutball nutshell.) Paul Greengrass in his brand-recogni- Like Welles’s screen essay on art AAAAE The break-up here is more predicta- does sound like “Off! Off!”) Finding Dory is good on bright tion style — handheld and headlong — forgery,Jeff Feuerzeig’sstudy in impos- ble than in the 1998 film. The stuffy And is that the famous star simplicity, sparing of trite the story bounds along at high speed ture asks: “Where do you draw the line, Jason Bourne married architect (Ulrich Thomsen) of the Alien series inton- sentimentalityandinthemar- likeatraveladdicttryingtoaccumulate or write or paint it, between deception Paul Greengrass fills his inherited manor house with ing “This is Sigourney ket throughout for sparks of air miles. Now Langley, Virginia andart?” AAAEE friends to save money and then falls for Weaver” when we’re subtlersophistication. (spooks’ HQ); now Las Vegas; now Lon- JT LeRoy was a literary hurricane a young live-in blonde. The potential ushered into the tan- “Bourne’s been off the grid don;nowGreece . . . who blew through late-1990s America The JT LeRoy Story larger resonances about communal liv- noyed reverence of for some time,” remarks some- Never mind the plot. There isn’t any; with Sarah and The Heart Is Deceitful Jeff Feuerzeig ing — the heaven of togetherness versus the giant marine park one in Jason Bourne. No, really? beyond Tommy Lee Jones as a rogue AboveAllThings,twopunk-lyricalmem- AAAAE thehellofproximity—arepushedaside where Dory’s memory What else is new? Bourne’s CIA chief out to kill anyone who irks oir-novels about a white-trash boy- by triangular love clichés. Plot develop- leadsher? whole thing, surely, is being off him. Just feel the pell-mell editing — at hood. They dealt with LeRoy’s life as a The Commune ment gets B for banality, though A for Before that, large parts the grid. In the week’s second itsmostbravurainacarchasealongthe truck-stop prostitute’s son and one- Thomas Vinterberg acting goes to Trine Dyrholm for tran- of the ocean seem set franchise sequel featuring a pro- Vegas Strip — and the weary grace that time rent boy. They and their nominal AAAEE scending triteness, or trying, as the aside for Jewish-style tagonist with memory issues, Matt Matt Damon, 45, brings to his role. author whisked up critical opinion, dumpedanddevastatedwife. Tiffany’sinsearchofsparkle

Energy: THEATRE Pixie Lott in ‘Breakfast at Breakfast at Tiffany’s Tiffany’s’ Theatre Royal, Haymarket, London Sean Ebsworth Barnes aaeee

Ian Shuttleworth

It was only a few years ago that the last attempt to adapt Truman Capote’s 1958 novellaforthestage(andpretendinvain thattherealdrawwasn’ttherecollection of Audrey Hepburn in the sanitised 1961 movie version) opened in this very theatre. Richard Greenberg’s present adaptation (which ran on Broadway in 2013) is more coherent than Samuel Adamson’s2009versionintermsbothof narrative and overall tone, although it isn’t always easy to spot this beneath Nikolai Foster’sstaging. It’strue that the performance I saw was the final West End preview, but the show has been Capote’s original image of her, with so that he begins as another seeming touring for nearly five months now, so I longish blonde hair (he wanted Monroe suitorofHollybutdevelopsintoherGay hardly think that running-in provides forthefilm).SingerPixieLott,whotakes BestFriend;however,MattBarberplays muchofanexcuse. theroleforitstwo-monthmid-tourWest him with all the camp of Capote but Foster’slong suit as a director is musi- End run, seems to think energy is all littleofthemordancy. cals, and he has rather approached this that’sneededtopulloffadecentcharac- Lott’s performance may be more piece as if it were one. In fact, it contains terisation. She delivers every line in a extreme than her fellows’, but Foster’s four numbers, including “People Will vampish sing-song that reduces her approach is consistent: everything here SayWe’reInLove”andtworenditionsof character to the two dimensions of a is a caricature. Alas, this is what neither “Moon River”, one of which serves as a 1960s American TV sitcom and makes Capote nor Greenberg wrote. Spectacle prologuejustsowefeelwe’regettingour her supposed universal attractiveness aloneisnotenough. money’sworthofnostalgia. incomprehensible. The wacky flibbertigibbet Holly This adaptation makes the homosex- BookingtoSeptember17 Golightly is here cast to conform to uality of the nameless narrator explicit, breakfastattiffanys.co.uk

to African culture. It contrasts the pro- DirectedbyDominicCookeanddeliv- THEATRE nouncements of public figures with ered on a bare stage by three actors — numerous examples, drawn substan- Fisayo Akinade, Sharon D. Clarke and Pigs and Dogs tially from an anthropological study, Alex Hassell — the piece has an almost Royal Court (Jerwood Downstairs), London Boy-Wives and Female-Husbands by ritualistic quality. As ever with Church- aaaee Stephen O. Murray and Will Roscoe, of ill,theroleoflanguageinshapingbehav- people living with more fluid notions of iourisacutelyobserved. Sarah Hemming sexual and gender identity. “Sagoda The three performers circle the stage, never marry and wear skirts,” we are identifying speakers — 17th-century Shorter than most intervals, Caryl told. “Ashtime dress like women and do missionaries, preachers, anthropolo- Churchill’s taut 15-minute drama has women’swork.” gists—buildingupachorusofvoicesand nipped on to the Royal Court stage for a deftly tracing the colonial role in report- briefrunintheearlyevenings—asortof ing and influencing sexual practices. hors d’oeuvre to the main dish of Throughtheaccumulationofvoices,the Unreachable at 7.30pm. Churchill uses play suggests that institutionalised thetimeittakesmostofustoorderagin homophobia is less an assertion of inde- andtonictodeliverasharp,far-reaching pendence than an internalisation of assessment of homophobia across importedprejudices. Africannations. Akinade, Clarke and Hassell bring wit PromptedbytheAnti-Homosexuality andwarmthtotheirtaskofshiftingrole, Act passed in Uganda in 2014, the play voice and accent, but also give the nas- takes its title from a repellent observa- tier sentiments the venomous delivery tion from Zimbabwe’s President that suits them. There are all sorts of Mugabe: “If dogs and pigs don’t do it, ways you can spend 15 minutes; watch- why must human beings?” But just as ingthisbrisk,revealinglittlepieceisone the title inverts the relevant part of that ofthebest. statement, so the play turns inside out theassertionthathomosexualityisalien Wit and warmth: Sharon D. Clarke ToJuly30,royalcourttheatre.com

JULY 29 2016 Section:Features Time: 28/7/2016 - 17:52 User: marais Page Name: ARTS INT, Part,Page,Edition: USA, 6, 1 Friday 29 July 2016 ★ FINANCIALTIMES 7

FTBIGREAD. DEUTSCHEBANK

Its aim of being the only European universal bank backfired, and concerns over legal challenges and capital positions have intensified. Just a year into his job, John Cryan must make some big calls. By James Shotter, Laura Noonan and Martin Arnold

t was the defining bet of Anshu Jain’s reign at Deutsche Bank. In 2014,asmostEuropeanbankswere retrenching in the face of slacken- ing markets and tightening regula- Ition, the German lender’s then co-chief executivetooktheoppositecourse. Problems of scale Two weeks after Barclays — Deut- sche’s European arch-rival — capitu- lated to market pressure and slashed its debt trading business, Deutsche launched a plan to raise €8bn in capital. The move was, in part, designed to give Germany’s biggest bank the firepower towinmarketshareasitsrivalsfaltered, and to position it as the last remaining European challenger to the US titans on WallStreet.Deutsche,MrJainsaidatthe time, would be the “only truly universal bankbasedinEurope”. That bet failed: markets remained slack and regulation kept tightening. Two years on, Mr Jain and Jürgen Fitschen, with whom he shared the top job, have stepped down. Deutsche’s investment bank has lost its top three ranking. The group’s capital position is under scrutiny.And Mr Jain’ssuccessor, the former UBS banker John Cryan, has embarked on a painful curtailing of Deutsche’sglobalambitions. Mr Cryan faces a formidable task. Deutsche’s markets business, which accounts for a third of its revenues, is struggling to cope with a world of lower trading volumes, tougher capital requirements and increasing US domi- nance. Its retail bank in Germany, where margins were always thin, is suf- ‘There are so many moving parts. Markets have been very tough Search for direction: Deutsche Bank’s this year. Brexit has Frankfurt headquarters made things worse’ Michael Probst/AP Photo

fering under Europe’s rock-bottom Deutsche Bank Return on equity Deutsche Bank -year Bund yield US-UK probe into $10bn of potentially interestrates.Totalcostsarestubbornly Share price () Year ending Dec   () Quarterly net income (bn) Yield suspicious trades involving Deutsche’s highandthebankisgrapplingwithlegal  Russianbusiness.   challenges that could cost it billions of - -     Mr Cryan has said he wants to resolve euros. Last year, Deutsche — a pillar of Deutsche’sbig cases as soon as possible, Banco Santander  Germany’s postwar economic strength, and the bank disclosed on Wednesday and a cog in global capital markets —  Credit Suisse -  that it was in settlement talks with the made a €6.8bn loss amid a host of fines Commerzbank  USDepartmentofJusticeoverthemort- -  and writedowns. Analysts predict an UBS gage probe. What concerns investors,   €860mlossthisyear. - however, is that they have no idea what “The problem for John Cryan is that Crédit Agricole  thesettlementswillcostand,inparticu- there are so many moving parts,” says BNP Paribas -  lar, whether it will be more than the  Chris Wheeler, an analyst at Atlantic  €5.5bn Deutsche already has in litiga- Société Générale - Equities. “Markets have been very tionreserves. tough this year. Brexit has made things Barclays  - -  Ashortageofcapital worse. It’sconstantly one step forwards, Deutsche Bank two steps back. He was probably hoping Jun   Jul           July   The conclusion that many analysts for one-and-a-quarter steps forwards, FT graphic Sources: Thomson Reuters Datastream; Deutsche Bank; Capital IQ draw from this combination of weak onestepback.” earnings,highrestructuringcosts,tight- InvestorsaresoconcernedaboutGer- “BecauseretailbankinginGermanyis industry.Brexit has added to the uncer- UBS and Credit Suisse, the latter of Deutsche in numbers eningregulationandloominglegalrisks many’s biggest bank that earlier this sotough,Deutschedoesn’thaveastrong tainty, putting a dampener on Deut- which is cutting almost $60bn of risk- isthatDeutscheneedsmorecapital.The month its share price fell to €11.22 — a home market to fall back on like sche’s trading and advisory businesses, weighted assets from its investment bank’smanagementhasrepeatedlysaid level not seen since the 1980s, and 24 Santander does in Spain, or BNP in while the downward pressure on Euro- bank and coming under pressure from it has no plans to issue new shares. But per cent lower than at the depths of the France, or UBS in Switzerland,” says a pean interest rates has intensified the investorstodomore. €6.8bn itscoretieroneratio—akeymeasureof Loss made by Deutsche Bank financial crisis. Deutsche is not alone, seniorGermanbanker. strainonthebank’sretailoperation. With even tighter rules to come, financial strength — stood at 10.8 per last year bearish sentiment has afflicted its The cornerstone of Deutsche’s plan is With the share price slumping, ques- many observers think Deutsche will centattheendofJune. rivals,too.AftertheUK’sshockdecision its decision to offload its Postbank retail tions over whether its strategy needs have to cut assets in its global markets The ratio will get a boost later this to leave the EU, bank shares across the business, which analysts estimate is on adjustment are becoming more intense. business more sharply. “This is where €860m yearfromthesaleofastakeinaChinese continent fell sharply.But Deutsche has the bank’s books for around €5bn. The One concern is whether Deutsche will Deutsche Bank’sstructural problem is,” Expected loss in 2016 bank.Butitislowincomparisonwithits become the bogeyman among global group will also reduce assets in its be able to sell Postbank as planned. No says Daniele Brupbacher, an analyst at peers and analysts reckon Deutsche is banks. investmentbankandcutcostsbylaying buyer is in sight and the market for UBS. “It has this business with huge lev- about €7bn short of its target of 12.5 per At yesterday’s close, investors were off 9,000 of its roughly 100,000 staff, Europeanlistingsiscomatose. erage exposure, which is not earning €11.22 centby2018. implying that the biggest bank in closing operations in 10 countries from Marcus Schenck, Deutsche’s chief enoughmoney.” The share price low reached in July — A person close to the senior manage- Europe’s most stable economy is worth Argentina to New Zealand and shutting financial officer, said on Wednesday Others disagree. “The problem for 24 per cent lower than at the depths of ment says there is no sense in raising €17.7bn, just a quarter of the book value bank branches in Germany. If the plan that the bank was not under pressure to Deutsche is that it has got to the stage the financial crisis capital before the bank resolves its of its assets. Its travails have turned it works, Deutsche hopes to see a signifi- offload the unit in 2017 but, without a where if it continues to cut assets, it is larger US litigation cases. Otherwise it into a political football with Matteo cant boost in its capital position and sale,akeypartoftheplantobolstercap- goingtoloseasignificantamountofrev- will end up paying much of it out in set- Renzi, Italy’s prime minister — who is profitabilityby2018. italwouldhavetoberethought. enues,” says one of the bank’s top 20 €17.7bn tlement costs. “In the short term, I can keen to deflect attention from his coun- It has been hard going. The bank investors. Investors’ assessment of the bank’s see that they don’t want to raise capital try’sbankingproblems—takingaswipe made a €700m pre-tax loss in the final Cuttingoutrisk Kian Abouhossein, an analyst at worth, according to its share price before they have settled in the US,” says at Deutsche’s gargantuan derivatives three months of last year, even exclud- Theotherareaoffocusistheinvestment JPMorgan, is also sceptical about the the top 20 investor. “But it is clear that booklastmonth. ing restructuring costs. Profits in the bank. Regulation has had a huge effect chance of a dramatic shift in approach. in the medium term, Deutsche needs Whenthedetailsofthelatestroundof first quarter of 2016 were less than half onthebusiness,withtoughcapitalrules “Deutsche Bank is an investment bank, 7,000 morecapital.” European banking stress tests are pub- the level of a year earlier while in the already prompting the bank to with- sofromthatperspectivetochangestrat- Separate lawsuits and regulatory actions Theproblemforthebankisthatithas lished later today, Deutsche’s results, secondquartertheyallbutvanished. draw from activities such as high-risk egy is not possible; to do what we would that Deutsche Bank is facing too few options to improve its capital along with those of Italy’s institutions, Deutsche’s senior managers have weighted securitised trading and flow likeCreditSuissetodo[isnotpossible],” position. Given its weak profitability, will be closely scrutinised. Analysts fear alwayswarnedthatthecostsoftheover- credit. hesays. some people close to the company that Deutsche will fare poorly, partly haulwouldbefeltalongtimebeforethe Deutsche’s plan for the investment Deutsche also faces the consequences €5.5bn acknowledge that the least painful way because, for the first time, the tests will fruits appeared, and that 2016 would be bank by 2018 includes reducing client of a history of weak controls. It is facing Size of its litigation reserves to improve its position, retaining prof- takeconductrisks—Deutsche’sAchilles the year in which restructuring charges numbers by half and cutting risk- 7,000 separate lawsuits and regulatory its,isunlikelytoclosethegap. heel—intoaccount. peaked. It has also been hit by sluggish weighted assets by a net €28bn. These actions. At the front of investors’ minds 10.8% Cutting assets further would improve If the result matches the worst-case markets, which have pushed down actions are, however, far less sweeping are a US inquiry into the mis-selling of Core tier one capital ratio at the end of ratios but at the expense of longer-term expectations, the bankcould be pressed returns across the investment banking thanthoseofitsEuropeanrivals,suchas mortgage-backed securities, and a joint June — low compared with its peers earnings. Selling businesses, such as its to raise capital. Even if its numbers are asset management arm, have similar better than feared, as long as improved disadvantages. With its shares well returns are elusive there will be ques- New leaders last year. But Deutsche seems to have remain in Mr Cryan’s corner. “Cryan is below book value, and bank stocks tions over whether Mr Cryan’s strategy European bank chiefs the fewest options, lacking Credit the right man,” says one top 10 investor. hardly in vogue with investors, it is also is right — and if not, what else the bank Suisse’s large wealth management “First you have to set up the bank notagoodtimetogotothemarketto shoulddo. face tougher scrutiny operation, the solidly profitable retail solidly. Then you can work on visions.” raiseequity. With such limited options, there is Lookingforapivot and credit card business of Barclays or Tidjane Thiam was also cheered by Most analysts agree that John Cryan the emerging markets penetration of investors when he took over at Credit even chatter among bankers that the When UBS was looking for ways to has the toughest job of the European StanChart. Suisse. But since then his strategy has statemighthavetostandbehindarights improveitsfortunesin2012,theSwiss bank chief executives who were News of Mr Cryan’s appointment was been underwhelming and his credibility issue, something German officials dis- bank chose to make big cuts to its appointed within a few months of each applauded by investors, who sent took a knock with his admission that he missasspeculationbyhedgefundskeen investment banking arm, a move other last year at Deutsche, Barclays, shares up 8 per cent on the day after it “didn’t know” about a distressed debt todrivedownDeutsche’sshareprice. that has helped it boost profits Credit Suisse and Standard was announced. The German press was position that caused a $1bn loss. It is not only speculators raising con- andcapital.ButUBShadthelux- Chartered. also positive, welcoming the fact that, Some Barclays investors have Business blow Lower trading volumes cerns.ThejittersareasignofDeutsche’s ury of pivoting towards wealth Underlining just what an uphill task unlike his predecessor Anshu Jain, he criticised Jes Staley for slashing the have hit Deutsche’s markets operation, significance as the biggest bank in the management, another strong Mr Cryan, left, faces, Deutsche shares speaks good German and hailing him as dividend and for selling the bank’s which accounts for a third of revenues most important economy in Europe, franchise. Deutsche is have dropped about 60 per an “ice-cold restructurer” for his role in African operation instead of cutting and a reminder of how high the stakes dominated by its cent since he started last stabilising Swiss bank UBS. deeper into the investment bank. Deflecting attention Italian PM Matteo are, not just for Mr Cryan. The Interna- investment bank and July, more than any of the A year on, the press has become The top performer in share price Renzi took a swipe at Deutsche’s large tional Monetary Fund said last month has no other busi- other three banks over more sceptical, with some observers terms has been StanChart’s Bill Winters derivatives book earlier this month that, among globally significant banks, nesses with the scale the same period. Each questioning whether Mr Cryan has a but this largely reflects the bank’s Deutsche “appears to be the most or profitability had a bumpy ride and “vision” for the bank once it has been relative immunity to Brexit Banks out of favour With its shares important net contributor to systemic around which to reported a net loss cleaned up. Big investors, however, disruption. trading at a third of book value, it is risks”. No one wants the fund to be regroup. not seen as a good time to raise equity provedright.

JULY 29 2016 Section:Features Time: 28/7/2016 - 19:17 User: marais Page Name: BIG PAGE, Part,Page,Edition: EUR, 7, 1 8 ★ FINANCIALTIMES Friday 29 July 2016

Email: [email protected] or Fax: +44 (0) 20 7979 7790 Include daytime telephone number and full address Letters Corrections: [email protected]

Food shared with others is nourishment for the soul

Sir, No doubt on account of his age — the body. It is also nourishment for the have repercussions on our health and useful) may start falling out; 27 — Rob Rhinehart must be forgiven soul. Through the preparing and the our state of mind. mastication, which begins the digestive for his radical and “self-taught” sharing of meals, it harbours a binding Mr Rhinehart’s choice (no “foodie” process, will not be necessary; the opinion on food, which he would like social element that is part of what is he!) for his Lunch with the FT was protective bacteria in our gut may us to swallow as efficiently as his known as civilisation. From time exactly like the school lunches of my disappear: humans have never based liquid meal in a bottle (“Eggs and immemorial, man has partaken of childhood: he piles it on his plate with their diet on algae. And what of milk — when were those invented?”, meals with his community, friends and little discernment and seems to find depression brought on by a lack of FRIDAY 29 JULY 2016 Lunch with the FT, Life & Arts, July family, and indeed it is no doubt a satisfaction in double servings, social intercourse and satisfaction of 23). social regression for food to be not only swallowed down with Coca-Cola. the palate? I was horrified to read that, for him, prepared industrially but consumed A typical meal for a young man of 27 — But what I fear most is that our the intake of food is basically an whenever and wherever it is needed. but in what possible manner is this societies will certainly be the worse for out-of-date, time-consuming necessity No wonder our western privileged and educated young adult guzzling Soylent whenever the brain of life that has been resolved by populations are suffering from a new giving us lessons on how to feed (or a smartphone app) sends a message Soylent, the ghastly liquid food he has scourge, obesity, with all that this ourselves like civilised creatures? to say that food is required. Concerns over political invented. What I read made me think illness implies. Mr Rhinehart claims he has whiter What a depressing thought for the of a Huxleyan or Orwellian world Our over-nourished societies need to teeth, thicker hair and better skin future of our old-fashioned and still where people no longer interact and eat less but better food, quality as through his diet. But he’s only 27 and so civilised world. influence at the IMF communicate around a balanced opposed to quantity. Food should not he should be in a healthy physical Arline Gaujal Kempler meal, shared and enjoyed in the be considered as a cheap and low-cost state. Has he considered the Directeur Général Délégué, The fund must continue to reduce the undue dominance of Europe company of others. commodity. Everything we eat should consequences of a liquid-only food Foncière Inea, Food is far more than a carburant for be chosen with care, as what we eat will such as Soylent? Our teeth (no longer Paris, France With the sad exception of Greece, the havetakenplaceoutsidenormalpolicy eurozone financial crisis has fallen channels with no proper evidence down the list of problems that Euro- abouthowtheywerereached. Legal structure for Central banks continue religious people, trades unionists, pean leaders have to confront, with Political influence often operates Marxists, Fabians, activist state liberals migration and Brexit rising to the top. instead in intellectual and institutional governance reform is down Greenspan’s road and others who have understood that The International Monetary Fund, capture, in an organisation dominated already in place Sir, Recent concerns about pensions social progress depends on unity which played a leading role in trying to byonewayofthinking.Whetherornot given low returns on bonds and among these. Such unity in turn must resolve the crisis, has had to turn its direct political interference by share- Sir, Guy Jubb (Letters, July 27) gilts/Treasuries (“Brexit piles pressure depend on discipline, loyalty and attentiontomorefamiliarissuesofbal- holder countries exists, the fund must criticises the legal duty of directors to on overstretched pensions”,July 18) mutual respect. Given the realities of ance of payments problems in emerg- strivetominimiseitspotential. promote the success of their company, are ironic in light of the report on class power it could not be otherwise. ingmarketcommodityproducers. As the crisis spread across the euro- but makes no suggestion for what to Treasuries by Alan Greenspan in 2001 Both factions in the current dispute YetthereportyesterdaybytheIMF’s zone, for example, there was a clear put in its place. The answer was given when he was Fed chairman. seem to have forgotten this. All call for watchdog,theIndependentEvaluation conflict of interest in Dominique in the letter on the same page from Mr Greenspan asserted that the US discipline and respect, while few Office, on the IMF’s role in the crisis Strauss-Kahn being head of the IMF. Simon Howley. The Companies Act national debt (then at about $3.4tn) practise it. Meanwhile, party loyalists deserves attention. The study does not The former finance minister’s ambi- already obliges a board to have regard was being paid down at a remarkable look in vain for a voice that is not find conclusive evidence of political tion to stand for the French presidency to the long-term consequences of any rate with a dwindling supply of blinkered by factionalism, “insiderism” interference in the fund’s processes. It was well known, arousing suspicions decision, which Mr Jubb rightly Treasuries available. He argued before or ambition. does, however, provide ammunition that political considerations, particu- describes as of critical importance. In Congress that it was a “great thing” as it As a member who will have to decide for the view that Europe’s outsized larly with regard to writing off debt to addition, it requires directors to would add to the national savings, keep between the current candidates, I influence over the governance of the European creditors, were affecting the consider the interests of employees, long-term interest rates down and would have preferred a grown-up IMF must continue to decline if the fund’s judgment. The IMF made a customers, the impact on the encourage more investment. However, committed to solidarity, even if he or institutionistoretaincredibility. marked change of direction on that community and the maintenance of he noted that circulating Treasuries she disagreed with my ideology. Several of the conclusions of the issue after Mr Strauss-Kahn was high standards of business conduct allowed the Fed to stimulate the Amit A Pandya report have been accepted already by replaced by Ms Lagarde, who deferred among other things — all factors economy by buying them up, then by London N3, UK IMFmanagement,headedbyChristine much more to the views of IMF staff regularly mentioned by critics as “cut off trade” with the remainder of injecting liquidity into the market. Lagarde, and its executive board, economists. currently missing. the EU. The common external tariff is To deal with the problem, Mr It seems Corbyn missed which represents its shareholder coun- Thefundhasundoubtedlylearntles- An appropriate legal structure is 10 per cent on cars, much less on other Greenspan had in 2000 expanded a tries. Taking their lead from European sons from the eurozone crisis, includ- already in place. One factor that may manufactures, which can easily be programme begun in 1999 via the one or two things officials, the IMF failed to grasp that ingtheeffectoffiscalcontractionsinan still be lacking is the willingness of absorbed thanks to the more Federal Open Market Committee’s Sir, Janan Ganesh’s broad attack balance of payments problems could economy operating below potential. investors to flex their muscles and so competitive exchange rate. It is much initiative allowing the NY Fed to accept (Comment, July 26) on Jeremy occur within a currency union. It also But it is disturbing that European gov- ensure the directors pursue the higher on food and textiles, and is mortgage-backed securities as Corbyn’s failure to learn from the 20th ignored the lesson it had supposedly ernments maintain outsize voting outcomes they wish for. Since 2010, clearly not the optimal tariff for the collateral on loans extended to century’s “extended rebuttal” of his drawn from earlier crises: that a power, even after recent reforms. The FTSE350 directors have each year UK. securities dealers. If that were not “economic and foreign policy” is more prompt and orderly writedown of pri- EU has also yet to demonstrate that it stood for re-election by shareholders. Dermot Glynn enough to set the fuse of an explosion convincing than Peter Cave’s narrow vate and public debt is often necessary has abandoned the traditional How many have been voted off the London SE3, UK (“irrational exuberance”), the FOMC points of defence (Letters, July 27). Mr torestoreconfidence. stitch-up by which it in effect appoints board? had staff begin a process of using as Corbyn missed the failure of leftwing It participated, too, in a “troika” of theheadoftheIMF. Martin Webster The English simply won’t collateral certain debt obligations of US socialism in the USSR, China and India lenders, the others being the EU and Even though most of the rescues in Partner, states and foreign governments. All that left 2bn people in needless poverty the European Central Bank, which which it participated were qualified Pinsent Masons, settle for having no say this, according to Mr Greenspan’s and murdered 50m. He did not, as far meant that its hands were frequently successes — Ireland, Portugal, Cyprus London EC2, UK Sir, There is at least one major problem testimony to Congress, so that its as I’m aware, support the uprisings in tied. — there is no doubt the eurozone crisis with the so-called “Norwegian model” operations would not affect any private the Soviet empire or the free market As Ms Lagarde says in her response and particularly Greece showed up No possibility that leaving for Brexit as proposed by Jim Gallagher sector securities. The result was a vast reforms in Asia. Far from being a to the IEO report, its authors did not institutional weaknesses within the in “Sturgeon and May must balance expansion of debt, the marketing of radical, he comes across as a find clear evidence that IMF staff or IMF. These may be corrected piece- will cut off trade with EU party and country” (July 27). England real estate debt and the tremendous reactionary who would like the world management were unduly influenced meal but there remains a serious ques- Sir, Jim Gallagher, in “Sturgeon and is not Norway. While a level of crash of the stock market that affected to go back to where it was in 1982 and bypoliticalpressure.Butsuchpressure tion about whether an institution that May must balance party and country” “associate” membership of the EU has millions of peoples’ private sector has nothing much to say about the 21st is rarely written in the record, particu- retains a lopsided influence from one (July 27), makes two assertions that been workable for the Norwegians and, securities. century. He is an elderly rebel who has larly when, as the report disturbingly part of the world can ever be seen as should not go unchallenged. for all intents and purposes, the Swiss, It is amazing that Mr Greenspan has never run anything in his life. The only makes clear, key decisions seem to dispassionateandeven-handed. He writes that the leave vote “was as it would never be acceptable to the escaped responsibility for the mess he question for Labour is whether to ditch much protest as proposal, and it was a English. Not since Richard I pursued promoted, and that the world’s central him now or leave it until an election cry of distress, not a commitment to glory in Palestine has “England” been banks continue down this road. has shown his clear failure to his the detail of constitutional change, that willing to take a back seat in decision- Dr Niccolo Caldararo supporters. delivered the narrow majority” and making. There is simply no way that a Dept of Anthropology, Marek Wakar that the government “is not required situation in which England was San Francisco State University, US London W4, UK by the Brexit vote to . . . cut off trade required to implement rules governing with the UK’s biggest market”. trade and immigration, while having Labour loyalists seek an Whig Supremacy II? Britain’s relations with To the contrary, the leave vote was no say in those rules, would be the articulation of a deep attachment sustainable. unblinkered candidate Sir, Henry Mance’s speculations (July to democracy and national For a country that aspires to be a Sir, Janan Ganesh (“Disillusioned 27) about a new centre party taking Ireland need special care independence, made despite the huge major world power there is no halfway Corbyn backers deserve no sympathy”, shape in the UK may prove prophetic. weight of state propaganda thrown at house. The UK must either remain a July 26) makes the mistake of The Whig party re-formed in 2014 May recognises that Brexit cannot put a hard-won peace at risk the campaign. A longer, cooler debate committed member of the EU or resign accepting both Labour factions’ under a liberal and intelligent leader, might well have delivered a larger itself to no longer being part of the narrative that ideology is the issue. But and membership is spiking in the wake For the best part of 40 years, Ireland’s Forbusinessonbothsides,thedown- majority for leaving. “common market” regardless of the Labour’s present travails stem more of Brexit. Perhaps another Whig relations with the UK have been culti- sidewouldbemorepronouncedshould And there is not the slightest costs. from amnesia about the party’s nature Supremacy is just around the corner. vated within the EU to transforma- London leave the single market in possibility that leaving the EU customs Alex McAuley and about its sources of success. Peter Wagstaff tional effect. Old enmities have faded return for controls on the freedom of union, as we are surely bound to, will Prangins, Switzerland It has always been a wide coalition of Bristol, UK alongwiththeborderthatoncedivided movement of EU nationals. That sce- northandsouth.Undertheumbrellaof nario could require the reimposition of the EU both states have worked to con- the border in Ireland, although the UK solidate peace in Northern Ireland in and Irish prime ministers have both Some of my best friends were social beating Labour in the share of the Roy Jenkins, Shirley Williams and ways that alone they never achieved. pledgedtoavoidthis. The SDP casts democrats. They joined Britain’s popular vote, though its 25 per cent David Owen — had substantial public Trade between the two countries has Since the Good Friday agreement, fledgling SDP in the early 1980s, fired support translated under the UK’s profiles. Jenkins was a major figure, a flourished.And,forthemostpart,they the old dividing line imposed at Irish a shadow over up with dreams of “breaking the voting system to a handful of seats. By social-reforming home secretary and have sat on the same side in Europe, partition in 1922 has all but disap- mould” of British politics. 1987, almost all the Labour MP former chancellor. Patently prime championing a liberal economic peared. The free movement of people Labour MPs Then, as now, there appeared to be a defectors to the new party had lost ministerial material, his return to agenda and guarding transatlantic and goods across it, has since become a gap at the centre of British politics their seats. What remained split and London to found the party after a stint relations. London and Dublin, the pro- powerful symbol of how the communi- in despair between a hardline Conservative scattered. as president of the European tagonistsofacenturieslongfeud,areas ties of Ireland are now at ease. Reparti- government and an increasingly Seen this way, the SDP is a bleak Commission gave its creation the aura tightastheyhaveeverbeen. tion risks reawakening the ghosts of leftwing Labour opposition engaged in warning for Labour MPs. The splitters of electability. The current crop of Britain’s decision to leave the EU Irish nationalism at a time that in Ire- pursuing policies that made its own were wiped out and saw Margaret disaffected Labour MPs boasts no one comesasajolt,complicatingthetaskof land, as elsewhere in Europe, the cen- members feel good but rendered it Thatcher’s Tories win two more of equivalent stature. consolidating the achievements of the tre ground in politics is shrinking and unelectable to many voters. Then, as elections with huge majorities. But There are also signs that the centre 1998 Good Friday agreement, which populists are already on the march. Yet now, there was talk of a realignment viewing it through this prism is a of political gravity is shifting leftward brought an end to the troubles in the 310-mile border will be the UK’s around a progressive centre and of mistake. as voters turn their backs on the NorthernIreland,andofsustainingIre- sole land frontier with the EU. To pre- Labour MPs splitting to form a new Of course, its leaders would like to unfettered fill-your-boots capitalism land’srecoveryfromthe2008financial ventEUnationals,andsmugglers,from party. Paddy Ashdown, a former have formed a new winning party but of the past decades. Mr Corbyn may crash. enteringtheUKthroughthebackdoor, Liberal Democrat leader, has they always knew the odds were be a step too far but the party need Although barely raised during the immigration and customs controls launched a new centrist grouping against them. The SDP’s real goal and not revert to Blairism to be viable. referendum campaign, the stability of mighthavetobereimposed. called More United UK with the real success was in keeping a very If today’s potential splitters are right Northern Ireland and Anglo-Irish rela- In this, the UK must weigh the prior- familiar dream of building a moderate leftwing Labour party out of power that a Corbynite party is unelectable, tions could both be greatly affected by ity of preserving the union against the Notebook progressive alliance. But for Labour until it understood that the price of they, too, have little to lose. It should the outcome of UK negotiations to exit prerogatives of Brexit. Ireland, mean- MPs in despair at the ineffectual and refusing to compete for the political also be said that even in defeat, life the EU. Theresa May, UK prime minis- while, is confronted by choices it did by Robert Shrimsley hard-left leadership of Jeremy Corbyn centre was Conservative hegemony. was not too awful for the SDP’s leading ter, was wise therefore to signal this not want to make and outcomes over the SDP casts a long shadow over such Having failed to reform Labour lights. Their political death was week how important it is to maintain whichitmayhavelittlesay. talk, because by conventional from within, they forced it to reform softened by an ermined afterlife in the the positive momentum by visiting Maintaining the common travel measures it was a failure. from without, creating the conditions Elysian Fields of the House of Lords. Belfast and hosting Ireland’s prime area, which allows passport-free travel For a while it was all terribly for Tony Blair to drive it into the Others, like my friends, fled to other minister,EndaKenny. between the two countries, and ensur- exciting. They held jolly rolling party centre and back into power. parties, fuelling their modernisation. Both sides have much to lose. With- ing the border remains as invisible as conferences on trains. Opinion polls Today under Mr Corbyn, Labour is It turned out that they had not so out the support of its outsized neigh- possible, will be priorities. So, too, will gave the party staggering leads and shaping up as a hard-left party led by much broken the mould as secured it. bour, Dublin may now find itself more relations within the EU. Handled care- members truly believed they were a man explicitly rejected in a vote of But if the disaffected Labour MPs isolated in Brussels on EU issues such fully these constraints could act as a about to reshape British politics. With no-confidence by 80 per cent of his are tempted to split they must do so astaxharmonisation,whichitopposes. brake on the ambitions of the more what now looks like hubris, they own MPs. He now faces a leadership knowing that they will not be the Although Ireland’s economy is less radical Brexiters who favour a clean talked about the new politics and election, but with early indications beneficiaries. For, as in the 1980s, the dependent on the UK than it once was, departurefromtheEU. plotted rebuilding the House of suggesting members will re-elect him true goal is not to replace Labour but it is still heavily so. Trade between the Brussels once bent over to ensure Commons as a circular chamber. talk of a split has resurfaced. to force it to save itself. two countries is worth more than €1bn bureaucracy did not get in the way of Within six years the gap at the The parallels are not exact. Last The SDP split was a success; but it a week and is more important to the the Good Friday agreement. The centre had closed and the SDP was time, the split was led by four political was a successful suicide mission. UK than business with all of Africa. utmost care will be required from all squeezed from existence. In 1983, it heavyweights, all former cabinet Any slackening in UK growth has sides to ensure that nothing jeopard- came within two percentage points of ministers, at least three of whom — [email protected] knock-oneffectsforIreland. isesthatrareachievement.

JULY 29 2016 Section:Features Time: 28/7/2016 - 18:57 User: marais Page Name: LEADER USA, Part,Page,Edition: EUR, 8, 1 Friday 29 July 2016 ★ FINANCIALTIMES 9 Comment

The US student debt bubble is a study in financial dysfunction Weak Italian banks are a dle-class life, which is an obvious prob- University of Phoenix, which went pub- The Roosevelt Institute notes that found the average student debt burden OPINION lemforaneconomy70percentofwhich licin1994,atonepointhadamarketing seven of the eight largest universities in for a married couple with two four-year symptom of isaccountedforbyconsumerspending. budgetlargerthanApple’s. the state of Michigan, for example, have degrees ($53,000) actually led to a life- Rana In many ways, the student debt crisis Colleges, too, often invest in luxury got involved in risky interest rate swap timewealthlossofnearly$208,000. deeper problems Foroohar chimeswithMrSanders’otherbugbear: facilities to attract richer (full-fee pay- deals in recent years, resulting in mil- Thanks to Mr Sanders, free tuition at the subprime crisis of 2008. Many of ing) students, or, in the case of the for- lions of dollars in unnecessary fees, fur- in-state public colleges and universities the same factors are in play: a cost profit sector, take big profits (margins therraisingcostsforstudents. for all Americans whose families make bubble (the price of college has typically run above 30 per cent). Stu- The very idea that a large number of up to $125,000 a year is now a proposal ne of the most memorable increased by over 1100 per cent in the dents are regularly over-promised American universities are now involved inMrsClinton’scampaign. OPINION moments of this week’s pastthreedecades);vulnerableborrow- financial aid in complex deals that then ininterestrateswapdealsthatputthem Meanwhile, the market is already dis- Democratic National Con- ers paying above-market rates (student far out of their financial depth raises rupting the existing model. Online edu- William vention came during loan prices, fixed by the government, questions about how their balance cation has challenged the notion of Rhodes Bernie Sanders’ speech, have not fallen despite near zero real A majority of graduates sheets are being managed. But the physical colleges. Fintech firms, not Owhen young delegates wept as the interest rates); corruption (scandals financialisation of education and the bound by federal student loan rules, former presidential candidate endorsed involving Pell Grants, subsidies for low- now move back home with debt bubble it has brewed raises a offer crowdfunded loans at lower than Hillary Clinton. No wonder they were income students, have been rife); con- their parents, often for deeper question: who, exactly, is higher averagerates. egative interest rates are crying. Mr Sanders brought America’s flicts of interest between educators and educationfor?Whoisithelping? Just as the most successful and taking the world of finance $1.2tn student debt bubble into the regulators (which are predictably several years While a degree does ensure a job pay- enlightened companies now think of into uncharted waters. The spotlight,arguingforfreecollegetuition understaffed and underfunded); and a ing more than $15 an hour for most workers as assets rather than costs on a impact will be damaging so that young people entering a lacklus- victim-blaming mentality when it all change year on year, just like the sub- graduates, it is no longer a ticket to balance sheet, so the next American for most economies, espe- treUSlabourmarketwouldnotbeham- goeswrong. primemortgagesthatblewupin2008. social mobility for the poorest Ameri- president should understand that Ncially the 19 member countries of the strungbydebtstheycouldneverrepay. While too many students sign up for The “financialisation” of education cans, in part because so many end up in future growth will depend on creating a eurozone. It is an issue of concern, and not just useless degrees in things like sports has grown in tandem with the rise of second- or third-tier colleges, and a system of higher education that does The monetary union is facing a for millennials. The majority of college marketing, it is also true that they are the financial sector over the past 40 largechunkofthosewhotryforadegree not leave students, and the country, mounting crisis that combines indeci- graduates in the US now move back aggressively pushed into it by both non- years.Inmanycases,universitiesthem- end up dropping out, many because of drowningindebt. sive leadership, uncertainty following home with their parents, often for sev- profit and for-profit institutions that selves are being duped by Wall Street financialissues. Britain’s vote to leave the EU and eral years. The class of 2016, the most spend an increasing amount of their into bad debt deals, just as public Among those who do graduate, debt The writer is author of ‘Makers and Takers: struggling banks whose problems are indebted in history, cannot afford revenue on marketing to students. municipalities such as Detroit were in loads can equal downward mobility. A The Rise of Finance and the Fall of Ameri- compounded by the failure to establish homes,cars,orothertrappingsofamid- Apollo,parentcompanyofthefor-profit therun-upto2008. 2013 study by the think-tank Demos canBusiness’ acomprehensivebankingunion. This crisis is about to come into stark focus. The European Central Bank will release the results of stress tests for major banks today and this is bound to underscore the problem of low capital levelsatmanybanks,especiallyinItaly. At the centre of concerns is Europe’s May is right oldest bank, Monte dei Paschi di Siena. Placingitonastablefootinglooksasifit willbemoredifficultpoliticallythanhas been expected. A new ruling by the European Court of Justice has upheld the principle of making creditors bear about reforming theburdenforinvestmentinbankswith high levels of non-performing loans and capitaldifficulties. The Italian government has esti- mated that as much as $45bn is needed capitalism to secure Italy’s banks and, given intense domestic political pressures, Matteo Renzi, the prime minister, is pushing hard for an old-style govern- ment bailout. I believe that the German working classes. “When it comes to chancellor Angela Merkel and French GLOBAL POLITICS opportunity we won’t entrench the president François Hollande under- advantagesofthefortunatefew.” stand the risks to the EU of a full-scale Philip The comments are worth looking at Stephens alongside the single speech delivered by Mrs May in the truncated Conservative The failure to design and party leadership race. This too was about domestic politics rather than the implement a banking momentous decision to wrench Britain union will soon come rom time to time politicians out of the EU. In it she floated a range of mean what they say. This ideas to improve the way the economy to haunt the eurozone seems to be the case with works, including the appointment of Theresa May, Britain’s new worker and consumer representatives words. When George Osborne, the never shared the metropolitan liberal- before it first replaces the agricultural, political crisis in Italy, particularly with prime minister. For David to company boards, binding share- former chancellor of the exchequer, ism of her recent predecessors. To her environmental and regulatory frame- a constitutional vote set for October, FCameron the simple fact of his occupy- holder votes on executive pay and coined the phrase “We’re all in this mind, rights come with responsibilities, worksatpresentprovidedbyBrussels. and in the wake of the Brexit vote and ing 10 Downing Street was mostly strongercontrolsonforeigntakeovers. together” to describe his approach to for business leaders as much as for any- The structure Mrs May has created to the migrant crisis. They would like to enough. Gifted the job by the failure of Theknee-jerkresponsetotheselatter austerity, the sentiment was instantly one else. These responsibilities reach carry out the task — split between the see a compromise, but the European Mr Cameron’s Brexit gamble, Mrs May suggestions has been that governments belied by the Treasury’s actions. Fiscal beyondobservingtheletterofthelaw. Foreign Office and new trade and Brexit Court’sdecisionmakesthisfarharder. gives every appearance of having plans should not interfere in the operation of retrenchment was loaded overwhelm- Itwouldbesurprisingiftheaggressive ministries — looks inherently unstable. Making matters worse is the failure of forherpremiership. markets. The critics have their heads in ingly on to spending cuts rather than tax avoidance operations of digital And this is before the prime minister eurozone leaders to design and imple- Itisunfashionabletopaymuchatten- the sand. Things have moved on since higher taxes, so ensuring the pain was behemoths such as Apple, Amazon and confronts the arguments erupting ment a meaningful set of banking union tion to political speeches. Much more the 1970s. Sir Philip Green’shandling of felt disproportionately by the less well Googledidnotfeaturehighonherlistin within her party over whether the June arrangements. This failure will soon interesting to spot the supposed gaffes the sale of the now defunct BHS — off. Mrs May, one suspects, will not this regard. These corporations — and 23votewasfora“hard”or“soft”Brexit. come to haunt the eurozone. There are and conflicts. But Mrs May’sbrief state- rightly and roundly condemned this repeatthemistake. they extend beyond the world of tech- What should be obvious, though, is three aspects to banking union: ment outside Number 10 on her first week by a committee of MPs as the Even putting the upheaval of Brexit nology — content themselves with that Mrs May is on to something. The progress on regulation is being made by day in office bears a second glance. By unacceptablefaceofcapitalism—wasat aside, Whitehall officials say that her claiming that their complex cross-bor- referendum vote was as much an the ECB and the European Banking mycountitrunstojust650words.What the far distant end of the scale. But a move into Downing Street feels much der tax structures do not technically expression of disenchantment with the Authority; bank resolution rules have isstrikingisthattheissuethatpropelled glance at the way increases in board- more like a change of government than breakthelaw.Theyfailtorecognisethat elites and the workings of the liberal been determined, although they are not her to power, and the one that could yet room pay have outstripped by a mile one simply of prime minister. She has successful market economies depend market economy as a repudiation of to be fully implemented until 2018; seeherlaidlow,claimedjust75ofthem. improvements in corporate perform- returned a certain formality in place of on recognition of standards, norms and the works of Brussels. The same can be however, the third aspect, involving the For most of the rest of it, Mrs May ance during the past decade or so is the chumminess of Mr Cameron’s Not- mutual responsibilities that extend said of the rise of populist movements introduction of deposit insurance, has promisedatonceakinderbrandofcapi- proof enough of a much deeper prob- ting Hill set. More importantly, she has beyondthestatutebook. acrossEurope. yettobedecided. talism and a government ready to inter- lem.Thereistoomuchrent-seekingand It is fair to say that the odds are “Labour Isn’t Working”, declared the The weaknesses of a number of venetoironoutinequalitiesandtakeon toolittlewealthcreation. stacked against the prime minister. It is famous Tory election poster before European banks, not just Italian ones, vested interests. She highlighted the Another glib response says all incom- Whitehall officials say this quite possible that the process of Brexit Margaret Thatcher swept to power in are exacerbated by the global financial shorter lifespans and poor educational ing prime ministers promise to govern willswampallelse.Thebasicmechanics 1979.Thesamemightnowbesaidabout environment today. The current weak- attainment of the least well off, gender for the country as a whole. Mrs May feels more like a change of of withdrawing Britain from the EU will thepresentanything-goesmodelofcap- ness, and possible further weakening, and ethnic discrimination, and employ- could hardly have stood on the steps of government than one consume vast amounts of political and italism.Fixingitmeansmakingitfairer. of the euro compared with the US ment and income insecurity among Downing Street and promised two-na- administrative energy. Britain cannot dollar, reflects the relentless search by what politicians like to call the hard- tion Toryism. There are words and simply of prime minister even start to negotiate new trade deals [email protected] investors for short-term yield across theworld. A weaker euro will at best produce a marginal increase in economic growth, but which will not be sufficient to miti- gate problems with the banks, high lev- No, this is not the 1930s all over again els of youth unemployment in many countries and the widespread sense of economic stagnation. The US and Japa- nese economies are growing well below immigration before the populists do it German-style GDP growth and unem- unemployment exceeding 20 per cent Law and Justice party in Poland has potential. Except for India, there are no OPINION foryou. ploymentat5percent,whereasthenext (50 per cent among the young). Italy, beaten the same drum: its main slogan bright spots across emerging markets. However, the parallel drawn with the countryinlineforapopulistinsurgency with a similarly poor record of eco- is a straight translation from Barack And Brexit Britain, with a weaker Jacek politics of the 1930s is overblown. Fas- maybetheUS,whichhasperformedfar nomic achievement has also, so far, Obama’s sunny “Yes we can” (“Damy pound, will be competing even more Rostowski cism in Germany and Austria and revo- bettersincethecrisisthanEurope. resistedthetemptationofBeppeGrillo’s Radę”). Hardly the stuff Mein Kampf is forcefully against eurozone economies lutionary leftism in Spain thrived as a Attheotherendofthescale,thecoun- Five Star Movement, opting instead for madeof. inthedepressedglobalexportarena. result of truly extreme economic depri- tries that have suffered most are not themoderateleft-of-centregovernment Ontheotherhand,votersincountries Eurozoneleadersmustnotonlymove vation. Gross domestic product in Ger- necessarily electing populists. Three ofMatteoRenzi.Greeceis,ofcourse,the that have suffered most from the crisis quickly to complete the banking union he wave of populism in the many fell by 30 per cent after the Great days after the Brexit vote in the UK, exception that proves the rule. The 25 know that bad things can indeed hap- andfindapoliticalcompromiseinorder western world which has Crash in 1929, and unemployment Spanish voters increased support for percentdeclineinGDPithassufferedis pen. As a result, they have — so far — to secure Italian banks; they must also given us Brexit, and may reached 6m. In Spain the Civil War was Mariano Rajoy’s centre-right Popular trulyonthescaleofthe1930s,somaybe behaved more responsibly. Even the finallyturntheirbacksonausterityeco- carry Donald Trump and preceded by widespread hunger in the we should not be surprised that it Greeks re-elected Syriza after it prag- nomics.Theycannotcontinuetorelyon Marine Le Pen to power in south and artillery shelling of striking electedtheneo-MarxistSyriza. matically chose austerity and reform the ECB to produce growth through Tthe US and France respectively, has minersinthenorth. Many of the countries So what is happening, if the present insteadofGrexit. monetary policy. They need to allow been compared to the social forces Today,by contrast, the economic per- populism is not correlated with unbear- Unfortunately this conservative France, Spain, Portugal and Italy to which drove the politics of the 1930s. formance of Poland and Britain, the two that have suffered able misery, as it was in 1930s Europe? explanation is not much more hopeful breach rigid EU fiscal deficit targets. Increasing job insecurity or unemploy- countries that have already succumbed most economically are Thealternativetothesocial-democratic than the social-democratic one in its Further,theymustrecognisethatunless ment in Europe and the failure of to the present populist wave, is well explanationisaconservativeone:popu- implications for the future. We may not debt relief is provided to Greece there median wages to rise for many years in abovetheaverageinEurope.Polandhas not electing populists lists are doing well in countries that are berelivingthedark1930s.Butthewish- will soon be another cliffhanging crisis the US are cited as the “root causes” of been the EU star performer, with GDP doing well, because voters there do not fulthinkingandirresponsibilityofthose theretoo. thephenomenon. growth of 28 per cent between 2007 and party, in spite of a series of corruption believe that anything really bad can in comparatively well-performing The eurozone faces some major Thisisa“social-democratic”explana- 2015.Contrarytothe“socialdemocratic scandals linked to it. In an even greater truly happen. Why not “give the popu- countries bears a uncanny resemblance policy decisions. Further efforts to tion of the current western political cri- narrative”, inequality in Poland has surprise, they gave the leadership of the lists a chance” to fulfil their promises? to the way the nations of Europe, in the fudge crucial issues will not only fuel sis. The suggested remedies that flow fallen. The real income of the middle 60 left to the moderate, social-democratic Afterall,maybetheycandeliver. sunny early August of 1914 went off populist anti-EU sentiment, but it could from it are also predictably social-dem- per cent of households has increased by Socialist party in preference to the far- Indeed, the leaders of the Brexit cam- singing to war,convinced that “it will all have grave global economic conse- ocratic: reducing job insecurity and ine- more than 30 per cent and unemploy- leftUnidosPodemosmovement. paign have been decidedly Pollyanna- beoverbyChristmas”. quencesaswell. quality, increasing social benefits, espe- ment is at an all-time low of 6.3 per cent Yet, contrary to Britain, Spain has ish in their confidence that Britain will cially for those in work, and raising ontheharmonisedEUdefinition. seen its GDP fall by a cumulative 8 per thrive, trading with the world once it The writer is former deputy prime minister The writer is author of ‘Banker to the taxes. If you have no choice, reduce The UK has also done quite well, with cent since 2007 and is hampered by throws off the shackles of Brussels. The andfinanceministerofPoland World’

JULY 29 2016 Section:Features Time: 28/7/2016 - 18:01 User: marais Page Name: COMMENT USA, Part,Page,Edition: EUR, 9, 1 10 ★ FINANCIALTIMES Friday 29 July 2016

Hong Kong/China shares: China’s Stock Connect scheme allows mainland investors to buy Hong Kong-listed shares, and foreigners to invest unreliable connection in Shanghai listings. Those on the mainland are keen to get hold of shares in Hong Kong-listed Chinese banks

Northbound – Hong Kong to mainland (market value, $m) Northbound 3,263 1,091 981 931 785 Twitter: @FTLex Email: [email protected] Aggregate flow (Rmb bn) 200 Kweichow Moutaii Shanghai China Inner Jiangsu Int’l Yangtze Mongolia Hengrui 150 Airport Power Yili Medicine 100 Lloyds Banking: say a at 13 per cent, the net interest margin Adidas: stars and stripes looks resilient and the bank has 50 little prayer for him managed an impressive double digit return on tangible equity. For those 0 Chelsea’s players cannot wait to tear off Aretha Franklin is known for her achievements at least, Mr Horta-Osório Total of top five Stock Connect holdings 7,051 2014 2015 2016 their Adidas shirts. But the English emotional insights into vexed human deserves a little credit. Premier League club’s preference for relationships. Lloyds Banking Group Southbound – mainland to Hong Kong (market value, $m) Southbound Nike gear (and the annual £60m for Total of top five Stock Connect holdings 7,869 chief executive António Horta-Osório Aggregate flow (Rmb bn) 200 wearing it) gave Adidas some must know how the Queen of Soul negotiating clout; yesterday the feels. Yesterday, the bank reported a Royal Dutch Shell: 150 company revealed that it would extract doubling of first-half pre-tax profits coupon cutting a “mid-to-high-double-digit million and raised the dividend by more than a 100 euro amount” in early termination tenth — yet the shares fell 4 per cent. When the oil price is rising, energy 50 fees. The German sporting goods What does a bank chief executive have company executives are happy to take Bank China company can use the money to kick of Merchants to do to get some respect? the credit for all the clever investment China Bank ICBC CCB HSBC 0 back at Nike by expanding further in With no investment banking decisions they have made. When it North America (worth 39 per cent 913518 1,563 2,262 2,613 2014 2015 2016 operations and no overseas business of falls, they turn their palms up and of global sports retail sales, according note, Lloyds is by far the biggest of a blame the commodity markets. This FT graphic Source: HKEX to Citigroup). group of banks that are plays on the week European oil majors BP, Royal A marketing push in the US is health of the UK economy. Until the EU Dutch Shell and Total reported second- One investor’s dog stock is another’s contrast, foreigners held a mere $20bn even appear on the list, despite being already paying off, helping group referendum, that was largely a good quarter earnings to a jaded market. All darling. In few markets is this more in mainland stocks — about one half of one of China’s largest private revenue in the second quarter increase thing. Over the past five years, despite emphasised cost cutting. One day, this the case than in China, over whose the permissible amount — with little enterprises with a market value of 13 per cent year on year. Operating broadly flat revenues, the bank discipline might well deliver a fantastic economic prospects opinion is change over the past 12 months. $225bn — and having no dual listing margins are up, too. The partnership managed to steadily raise underlying return for shareholders. If it does not, fiercely divided. On the basis that Mainland buyers’ market positioning on a mainland exchange. with Kanye West, a non-athlete, could pre-tax profits by cutting expenses. dividends will have to come down. China’s own citizens are closest to the is quite different to that of emerging One possible explanation is that help strengthen the trend. True, a Loan impairments helpfully fell to Shell yesterday became the latest to action, their positioning might market fund managers. Last month, Chinese banks’ Hong Kong shares steadier run of results is necessary to historically low levels, too. True, large point the finger at weak energy prices suggest that global investors should data from Copley Fund Research trade at lower multiples than their convince the market that the German and regular provisions for past to explain surprisingly poor earnings. be more positive about its financial showed that the most active EM mainland listed stock, with discounts company can beat Nike on its own turf. mis-selling sullied the picture at the Second-quarter profits missed analysts’ sector — and on Hong Kong shares. managers were avoiding Chinese of between 7 per cent and 29 per If so, it would hardly be the first time reported level but that did not prevent modest expectations by half. In the Data on Stock Connect, a scheme banks, holding less than a quarter of cent. China-based investors might be that Chelsea have ditched a winner. a return to the dividend list. Last year, division that actually produces the oil that allows mainland investors to buy the benchmark position. One of their choosing to buy companies they Lloyds paid out just over £1bn (2.75p a and gas, (upstream) losses of $1.3bn Hong Kong shares and foreigners to most-loved names is Hong Kong-listed already know at cheap valuations Rolls-Royce: no more CARs share) and that will rise sharply this were twice as large as expected, leading buy Shanghai-listed stocks, show that Chinese technology company, Tencent. (although the arbitrage is not closing year. Royal Bank of Scotland does not to as much as a 4 per cent drop in the money has been flowing south. At the Southbound Stock Connect investors the gap; Goldman Sachs points out The fan blades in Rolls-Royce’s jet pay dividends and Barclays recently shares. The added depreciation charges end of June, China-based investors are expressing the opposite view. Of that discounts have widened since engines turn 50 times a second. cut its payout. The shares did well too; from its new acquisition, BG Group, held nearly $30bn of Hong Kong- their top six holdings, five are Chinese Stock Connect launched). Another is Turning a profit takes longer: engine in five years before Brexit, they beat compound the effect from lower listed shares, taking up four-fifths of banks, including China Construction that the Chinese have a less sales generate a loss, recouped years those of other UK banks handsomely. energy prices. the aggregate quota. That proportion Bank and ICBC, while HSBC is their apocalyptic view of their debt later by a stream of service revenues. Since Brexit, though, they have fallen But Shell’s costs remain too high. has grown steadily through 2016. By favourite holding. Tencent does not problems than outsiders do. Minor tremors in the latter cause what by a quarter and now stand at about While its upstream production costs chief executive Warren East terms the same level as when Mr Horta- are over $10 a barrel, notes Société “accounting fog”.It is a principal Osório arrived in 2011. Générale, those of French rival Total reason Rolls flummoxes accountants as The first half of 2016 did not contain are well below that figure. The higher threatened. Dividends at Shell — the circumstances around the deal. 2017 earnings; its own shares trade much as it wows engineers. a big PPI provision. Instead came a break-even drags on earnings. More main reason many investors hold the NetSuite financial planning software is at 14 times. It has said the deal would Yesterday’s half-year profits were warning that business might slow and a important for dividend purposes, it shares — still do not look safe. geared towards small and medium- add to earnings. down sharply but beat expectations. cut in the amount of core tier one reduces cash flow. sized companies that rent it over the Oracle has form in buying companies That older engine sales are tailing off, capital it expects to generate this year, All of the majors struggle to cover internet, while Oracle offers massive controlled by Mr Ellison, too. In 2011, it hitting margins, has been known for a from 200 basis points to 160 bps — their capital expenditures using the projects for Fortune 500 companies acquired Pillar Systems (although not while. The beat pushed the stock up equivalent to roughly 4.5p per share. A cash they generate from operations Oracle: installed “on premise”.They have co- without controversy; Mr Ellison agreed 7 per cent at first. It later doubled this, weaker economy may result in loan (before any asset sales), never mind all in the family operated before, for instance by to give up his gains after legal pressure reflecting a sense of the fog lifting. impairments rising and provisions paying for dividends. As a result, BP, making Oracle’s human resources from investors). But Pillar was private; Clearer management structures help, against PPI — £16bn to date — may not Statoil and Total all hinted this month Oracle may have been late to the cloud software available to NetSuite’s clients. Oracle’s acquisition of NetSuite is as should accounting rules that might be over yet. Lloyds’ ability to maintain that their estimates for capital computing party but its founder Larry Oracle has been touting its own pitched below its high of $115 in 2014, eliminate devices — like “contractual a progressive dividend policy, a big part spending would slip further. But Shell Ellison was not. In the late 1990s he rapidly growing cloud business for and the premium to its undisturbed after market rights” or CARs — of its appeal to small investors in looks especially weak. Even if one adds backed a software start-up, NetSuite. years. In the fiscal year ending in June, price is about 36 per cent — adequate intended to smooth sales-profits particular, is suddenly in doubt. back a $6.4bn increase in working Yesterday, Oracle gatecrashed the joint its $2.8bn of sales accounted for a tenth but not egregious. Given Mr Ellison’s mismatches. The long-term sales In response, Mr Horta-Osório is capital, it did not have enough cash by agreeing to buy NetSuite for $109 a of Oracle’s total software revenue. stake, it is difficult to see the company outlook is good. Margins must improve tugging ever harder on the only lever flow to cover its capex in the first half share, all in cash. NetSuite should add more than $1bn in attracting competing bids from the but a clearer view should help, too. available to him: costs. The bank has of the year. That is a tidy return for Mr Ellison; 2017. Mr Ellison believes Oracle can be likes of SAP or Salesforce. raised its £1bn savings target by 40 per Granted, one should not read too NetSuite, which proclaims itself the the first software company to hit $10bn Mr Ellison has built a family of cent until the end of 2017; branches much into a single quarter or a half. original cloud player, floated in 2007 in annual cloud revenue. That growth software companies. And as the Lex on the web and jobs will go. But he does have a But with oil prices dropping, the cash at $26 a share. But the tie-up came as comes at a price. To add NetSuite, godfather, it is perhaps inevitable that For notes on today’s breaking stories go to www.ft.com/lex cushion; core tier one capital is strong flows that finance payouts are again no surprise, and neither should the Oracle is paying 150 times the target’s he is benefiting the most.

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JULY 29 2016 Section:FrontBack Time: 28/7/2016 - 18:55 User: marais Page Name: 1BACK, Part,Page,Edition: EUR, 10, 1 Friday 29 July 2016 ★ 11

Rolls-Royce Fujifilm Lloyds Sterling/dollar Brent oil Nikkei 225 10-year UK Dollar/yen A woman’s place Management’s gilt top ranks still a battleground 13.52% 9.9% 5.83% 0.6% 1.7% 1.1% 2bp 0.5% INSIDE MEDIA, PAGE 12 831p ¥3650 52.5p $1.3142 $42.74 16,476 0.71% ¥104.91 Ellison sees sunny side of the cloud Short 3 Oracle chairman to make $3.5bn from NetSuite 3 Billionaire had criticised IT evolution View Robin RICHARDWATERS— SANFRANCISCO computing,dismissingitformanyyears nies such as Oracle, SAP and Microsoft from a NetSuite shareholder vote to PANKWANYUKAND as a fad, in what was seen as an attempt trytotransformintocloudcompanies. Oracle is approvethedeal. Wigglesworth JAMESFONTANELLA-KHAN— NEWYORK to defend Oracle’s traditional software Oracle has since gone on to appropri- locked in Oracle was the target of a shareholder Oracle chairman Larry Ellison, once a business. He later said he had only ate the cloud name for its own business lawsuit after buying another company vocal critic of the new era of cloud com- objectedtotheword“cloud”. as it tries to convince Wall Street that it a race with controlled by Mr Ellison, Pillar Data Bond markets are flattening faster than a poorly made puting,issettomakeapersonalprofitof Mr Ellison claimed credit for invent- can make up for a decline in its core Salesforce Systems, in 2011. The Oracle chairman soufflé.Thatisworryingeconomistsandfrustratinginves- $3.5bn from his company’s takeover of ing cloud computing in 1998, when he databaseandapplicationsoftwareprod- later agreed to forgo the $575m he tors, but there are about 180bn reasons why it is likely to cloudcompanyNetSuite. came up with the idea for NetSuite, ucts with its small but fast-growing to become would have received if Pillar had met continue. The software group’sall-cash acquisi- which was set up to run the software cloud services. It is now locked in a race the first to earningstargetsaspartofOracle. The Federal Reserve might still be inclined to raise tion for $9.3bn, which was announced that controls other businesses’ back-of- with Salesforce to become the first to NetSuite’sfocusonsmallerbusinesses interest rates, but Deutsche Bank estimates that the Euro- yesterday, marks Mr Ellison’s biggest fice functions over the internet. It was reach$10bnincloudsoftwarerevenues. reach $10bn represents a departure for Oracle, pean Central Bank and the Bank of Japan are buying deal since he bought PeopleSoft 11 years founded six months before Marc Ben- To deal with the potential conflicts of in cloud which targets its own products mainly approximately $180bn of securities a month. This is ago. The billionaire Oracle co-founder ioff, a former Oracle salesman, estab- interest, Oracle said a special commit- atlargebusinessesandgovernments. swamping the bond market, beating down yields and will increase his fortune as he is also the lished Salesforce.com, widely credited tee of its independent directors had led software Oracle’s $109 a share offer represents forcinginvestorsdesperateforreturnstobuylonger-dated largestshareholderinNetSuite. withpioneeringcloud-basedsoftware. the evaluation and negotiation of the revenues a near 30 per cent premium to Net- debt. Despite his early involvement and The NetSuite deal follows a spate of takeover, and had approved the deal Suite’s closing price on Tuesday, before This, in turn, is flattening global “yield curves”; the near 40 per cent stake in NetSuite, Mr acquisitions of other cloud software unanimously on behalf of the board. It rumoursofabidstartedtocirculate. slope of returns offered by various bond maturities, which Ellison has publicly criticised cloud companies this year as software compa- also said that Mr Ellison would abstain Lex page 10 in most major markets are at or close to the lowest since 2008. Where once there were bond market moun- tains and hills, there are now gentle slopes and desolate steppes. In the US, the difference between the two and 10-year bond yields stood at just 78 basis points yesterday.The UK Step change and German 2-10 year spreads are 58bps and 53bps, respectively,andinJapanameasly6bp. Adidas profits jump Thisisworrying,asflatteningyieldcurvesaretradition- allyanaccurateharbingerofeconomicrecessions.Butthis to bolster forecasts usually trusty market indicator of economic distress has probably been muffled by the sheer scale of central bank bondbuying. Adidasraiseditsprofitforecastforthe Nonetheless, it is clearly bad news for banks, whose fourthtimethisyearafterdoubling business model depends on steeper yield curves. And for profitsinthesecondquarter,writes pensionfundsandinsurers,evaporatinglonger-termbond James Shotter in Frankfurt. yieldsiscausinganguish. TheGermansportsweargroupsaid Most investors and strategists predict that the yield thatinthethreemonthstotheendof curve flattening trade will endure. An inflation scare, an June,netprofitfromcontinuing unexpectedly hawkish Federal Reserve or a durable operationsjumped99percentto economicupswinginChinaandJapanmightdisruptit,but €291m,from€146minthesameperiod allofthoselookunlikelyfortheforeseeablefuture. ayearearlier. Indeed, the consensus is so overwhelming that it is Adidassaidtheimprovementwas temptingtobelievetheopposite.Thishasbeenagreatyear downtoincreasingsales—up21percent for contrarian trades, after all. But as Pimco’sJoachim Fels to€4.4bn—andtheearlyterminationof says:“Sometimestheconsensusisright.” asponsorshipdealwithEnglish As long as global central banks keep their collective foot PremiershipfootballclubChelsea. tothepedal,curvesarelikelytoflattenfurther. Thegroupdidnotsayhowithad performedindifferentregions,but AndreasRiemann,ananalystat Global yield curves deflating Commerzbank,saidhebelievedthe -year less -year government bond Europeanfootballchampionships,held spread (basis points) inFranceinJune,hadprobablybeena US  keydriver,aswellastheUSandChina. UK Inlightofthestrongfigures,Adidas Germany Japan  saiditexpectednetincomefrom Global banks are continuingoperationstoincrease swamping bond  35-39percentthisyeartobetween markets causing a €975mand€1bn.Ithadpreviously flattening of yield predicteda25percentrise.  curves that often SharesinAdidasrose2.6percentin      foreshadows Frankfurtto€144.25. Source: Bloomberg recessions Lex page 10 [email protected] Ford warns $1bn Brexit hit will force price rises and possible plant closures

PETERCAMPBELL —LONDON of the year for carmakers, with weak- in completed vehicles for sale in the UK. nesses in the US and Chinese markets Asked if the group would shut its UK Fordisconsideringclosingplantsinthe adding to headwinds from Brexit and operations, Mr Shanks said: “Every- UK and across Europe in response to currency swings. The warning, com- thing is going to be on the table across Britain’svote to leave the EU, as it fore- binedwithFordmissingexpectationsin Europe.” cast a $1bn hit to its business over the the second quarter because of weaker The group is targeting a margin nexttwoyears. salesinChinaandtheUS,sentitsshares between6percentand8percent. Diageo toasts return to The US motor company, which is the down more than 9 per cent to $12.52 in In the second quarter, Ford reported biggest car brand in the UK, will also late-morningtradinginNewYork. margins of 5.8 per cent in Europe, up growth in North America raise the price of cars sold in Britain Mr Shanks said a combination of from 2.3 per cent a year earlier,lifted by Diageo, the drinks group behind before the end of the year. Bob Shanks, sterling’s devaluation and an expected record European profits on the back of Johnnie Walker scotch and Guinness chief financial officer, said a rise was hittotheUKcarmarketwouldcostFord strong sales. But weakness in other key stout, was yesterday celebrating a neededtoclawbackmoneylostthrough $200m this year and another $400m markets resulted in net profit falling long-sought return to growth in North foreignexchangemovements. to $500m each year over the next two 9percentto$2bninthesecondquarter, America — the market in which it Sterling has fallen 11 per cent against years. belowexpectations. makes almost half of its operating thedollarsincethevote,leavingcompa- Ford’stwo remaining UK plants make Ford warned of “elevated economic profits. niessellingintotheUKfacinglowerrev- engines that are exported to other uncertainty restraining business invest- Analysis iPAGE 13 enuesinthemonthsahead. EU countries for final assembly. Ford ment, with downside risk to global Ford warned of a difficult second half then re-imports many of these engines growth”.

Companies / Sectors / People

Companies ConocoPhillips...... 12 Lloyds Banking Group...... 10 Sotheby’s...... 1 Yahoo...... 12,15 Chen,Dongsheng...... 1 21st Century Fox...... 12 Credit Suisse...... 7,12 London Metal Exchange...... 22 Sports Direct...... 21 Yokohama Rubber Company, ...... 12 Dunleavy, Ivan...... 15 Adidas...... 1,10,11 Danone...... 14 Marcegaglia...... 14 Sprint...... 15 Sectors East, Warren...... 14 Alibaba...... 15 Deutsche...... 7 Microsoft...... 11,15 Statoil...... 10,12 Aerospace & Defence...... 14 Gasser, Bob...... 12 Alliance Tire Group ...... 12 Diageo...... 13 Monte dei Paschi di Siena...... 3 Supercell...... 15 Automobiles...... 11,21 Guo,Guangchan...... 12 Amazon...... 12 Dialog Semiconductor...... 21 NetSuite...... 10,11 Taikang Life...... 1 Banks...... 3,12 Heintz, Stephen...... 13 Anglo American...... 21 Didi Chuxing...... 14 Nike...... 10 Tata Steel...... 14 Basic Resources...... 21 Henry, Simon...... 12 Facebook...... 12,15,21 Tech Pro Technology Dvlpment..20 Apax...... 12 Oracle...... 11 Energy...... 13,20,21 Ingram, Tamara...... 12 Ford...... 21 Tencent...... 10 Apple...... 12,15 Perella Weinberg...... 15 Financial Services...... 10 Li, Charles...... 22 Fresnillo...... 21 ThyssenKrupp...... 14 ArcelorMittal...... 14 Pernod Ricard...... 13 Financials...... 12 Mallya, Vijay...... 13 Gland Pharma...... 12 Time Warner...... 12 Arm...... 15 Pinewood Studios...... 15 Food & Beverage...... 13,14 Mayer, Marissa...... 12 Goldin...... 20 Total...... 10,12 BG Group...... 12 Postbank...... 7 Insurance...... 1 Menezes, Ivan...... 13 Google...... 12,15 Transocean...... 20 BP...... 10,12 Randgold...... 21 Media...... 12,15 Murdoch, Rupert...... 12 GungHo Online Entment...... 15 Twitter...... 15 BT Group...... 21 Rolls-Royce...... 10,14 Oil & Gas...... 10,12,20,21 Nayar, Sanjay...... 12 HSBC...... 10 UBS...... 7 Pharmaceuticals...... 12 Baltic Exchange...... 22 Hanergy Thin Film...... 20 Royal Dutch Shell...... 10,12,21 UGC...... 15 Penmetsa, Ravi...... 12 Retail...... 1,15 Baosteel Group...... 14 Hong Kong Exchange...... 20,22 SSAB...... 14 Uber...... 14 Smith, Tad...... 1 Barclays...... 7 Huawei...... 15 Salesforce...... 10,11 Verizon...... 12 Retail & Consumer...... 14,15 Smith, David...... 14 Blackstone...... 12 ICBC...... 10 Samsung Electronics...... 15 Viacom...... 12 Technology...... 11,12,14,15,21 Son, Masayoshi...... 15 CBS...... 12 ITG...... 12 Shanghai Fosun Pharma...... 12 WPP...... 12 Telecoms...... 15 Thiam, Tidjane...... 12 Centamin...... 21 International Personal Finance...... 21 Shell...... 12 Walt Disney...... 12 Travel & Leisure...... 11,15 Troise, Francis...... 12 Chesapeake...... 20 J Walter Thompson...... 12 Singapore Exchange...... 22 WhatsApp...... 15 People Wehner, David...... 15 China Construction Bank...... 10 KKR...... 12 Smith & Nephew...... 21 Whole Foods...... 21 Boon Chye, Loh...... 22 Zuckerberg, Mark...... 15 Comcast...... 12 LG Electronics...... 15 SoftBank...... 15 Wuhan Iron & Steel Group...... 14 Cabanis, Cécile...... 14 van Beurden, Ben...... 12 © The Financial Times Limited 2016 Week 30

JULY 29 2016 Section:2Front Time: 28/7/2016 - 19:07 User: marais Page Name: 2FRONT USA, Part,Page,Edition: EUR, 11, 1 12 ★ FINANCIALTIMES Friday 29 July 2016

COMPANIES

INSIDEBUSINESS Oil & gas MEDIA Shell profits tumble as crude retreats Matthew Garrahan Anglo-Dutch group adds “The second quarter was incredibly sitional year” for Shell but insisted the Henry, chief financial officer, warned it challenging across the board,” said Iain group was making progress towards a could edge closer to the group’s self- to sector gloom with 72% Armstrong, an analyst at Brewin Dol- more streamlined business that could declaredupperlimitof30percent. slide in quarterly earnings phin. “If oil prices don’t start improving deliver fresh growth in an era of lower However,he said plans to raise $30bn Clinton’s feat highlights in the third quarter the bears will start oilprices. from asset sales were progressing well, gettingreallyaggressiveagain.” He said the group was on track to cut with 17 potential transactions worth ANDREWWARD —ENERGYEDITOR Shell’s results were especially disap- costs by 20 per cent by the end of this $6bn-$8bnunderway. the challenges faced Royal Dutch Shell appealed for inves- pointingforinvestorsbecauseitwasthe year, compared with the combined Jon Rigby, an analyst at UBS, attrib- tors’ patience after announcing a 72 per first full quarter after completion of its operating costs of Shell and BG in 2014. $1.05bn uted the “disappointing” results to by women at work cent drop in second-quarter earnings as £35bn takeover of BG Group. The addi- This year’splanned capital expenditure Shell’s second- “much worse” than expected cash flow continuedweaknessinoilandgasprices tion of BG assets helped lift production of $29bn, meanwhile, would be 38 per quarter earnings, of $2.29bn, down from $6.1bn a year batteredtheAnglo-Dutchgroup. 28 per cent to 3.5m barrels of oil equiva- centlessthanthepairjointlyinvestedas which were down ago. Shell remained committed to The results were far worse than mar- lent per day.But this was more than off- standalonecompaniesin2014. from $3.76bn in defending its dividend, Mr van Beurden illary Clinton smashed one of the remaining kets expected and added to the gloom setbytheweakmarketconditions. The decision yesterday to put on hold the same period said, with the payout held steady at 47 glass ceilings in politics this week, when she last year hanging over the industry after weak On a current cost of supplies basis — a multibillion-dollar liquefied national centsinthesecondquarter. became the first woman to secure her party’s numbers from BP and Statoil this week the measure most closely watched by gasexportfacilityinLakeCharles,Loui- Total reported a 30 per cent year-on- nominationforUSpresident. and a new dip in oil prices below $43 a analysts — second-quarter earnings siana, was the latest example of the $43 year fall in adjusted net income to It has taken 227 years for a woman to get barrel,thelowestforthreemonths. were $1.05bn, down from $3.76bn in the squeezeonspending. The price of a barrel $2.2bn, beating analysts’ forecast for Hthis far in a US election and the ascent of women on the ConocoPhillips and Total also same period last year.Analysts’ consen- A combination of low prices and the of oil dipped below $1.89bn. ConocoPhillips reported an corporate ladder has been almost as slow. There are still announced steep drops in earnings yes- susforecasthadbeenfor$2.2bn. BG acquisition have caused Shell’s debt this during the adjusted net loss of $985m compared very few female chief executives, and women remain week, reaching its terday, although the latter’s was less Ben van Beurden, chief executive, to equity ratio to more than double in lowest point for withaprofitof$81mayearago. under-represented in senior business roles. Workplace precipitousthananalystshadfeared. admitteditwasprovingadifficult“tran- the past year to 28.1 per cent and Simon three months See Lex sexismstillexists. Recent events suggest the challenges facing women are particularlyacuteinmediaandtechnologycompanies. When Gretchen Carlson, a former Fox News Channel Banks Banks presenter, alleged that she had been sexually harassed by Roger Ailes, who ran the network, other women came for- ward alleging similar treatment by other executives. One EU lenders woman told the New York Times this week that she had been afraid to complain. “There is a culture where, not thatyouacceptit,youjustdealwithit,”shesaid. still fall short Rupert Murdoch’s 21st Century Fox, which owns Fox News, parted company with Mr Ailes last week after an on capital, say internal investigation. Mr Murdoch and his sons, James and Lachlan, now have two tasks:replacingMrAilesand academics reforming what appears to Appointing more have been a boorish, macho women to senior cultureatFoxNews. posts is unlikely LAURANOONAN —LONDON Hiring more women to senior positions would help ThelistedbanksintheEU’slateststress to eradicate and is something that all tests would have to raise close to media and technology com- sexism at work €900bn in total to convince investors panies should do. The US’s they have enough capital to withstand biggest media groups — Walt Disney, Comcast, 21st Cen- another crisis, a feat that would allow tury Fox, Time Warner, CBS and Viacom — are all led them to finally overcome their weak by men. It is the same story in tech: Amazon, Apple, valuations, three academics have GoogleandFacebookallhavemalechiefexecutives. argued. Yahoo, in the process of being acquired by Verizon, is an “The market has a very different view exception. But Marissa Mayer, its chief executive, spoke on how risky bank portfolios are as this week of how her efforts to revive the internet group opposed to what the Basel supervisors had been plagued by sexist stereotyping. “I’ve tried to be (who make the capital rules) say,” says gender-blindandbelievetechisagender-neutralzonebut ZEW’sSaschaSteffen,oneofthereport’s think there has been gender-charged reporting,”she said, authors, emphasising that he does not referringtomediacoverageofhertenureatthegroup. expect the tests’ actual outcome to be Appointing more women to senior positions is unlikely anythinglikeasdramatic. to eradicate workplace sexism. But it would be a start. The European Banking Authoritywill Media and technology companies create products and tonight publish the results of stress test content for both sexes. Why should women not be on 51 banks. Instead of a traditional appointedtorunthemtoo? “pass/fail” mark, the tests will show Long ago, the advertising industry woke up to the how banks’ key capital ratios would fact that women were responsible for most household respond to various shocks. Regulators spending decisions, so they tailored marketing messages can later decide if they want banks to tothem. raisecashortakeotheractions. Yet women continue to be The academics — NYU Stern’s Viral under-represented at adver- Glass ceilings Acharya, University of Lausanne’s tising agencies — particu- continue to be Diane Pierret and University of Man- Credit Suisse investors shrug off return to black larlyinseniorcreativeroles. nheim and ZEW’s Sascha Steffen — A group called The 3% smashed but argue the 2014 eurozone stress tests, Conference has been the pace of which showed a capital need of just attempting to change that. It change is slow €25bn across 130 banks, were a failure RALPHATKINS —ZURICH ter than a more recent set of forecasts. Shares in Credit internationalwealthmanagementunits takes its name from an because they did not adequately reflect LAURANOONAN —LONDON Some also homed in on Credit Suisse’s Suisse dropped — at SFr5bn and SFr5.4bn respectively alarming statistic from a therealrisksinthebanks. A second consecutive set of expecta- cautious outlook and questioned the as much as 6% —bothaheadofanalysts’expectations. decade ago, when just 3 per cent of creative directors at They point out the 34 listed banks in tion-beating earnings was not enough sources of the bank’s growth as well as yesterday Not everyone approved of how the advertising companies were women. It has had some suc- thelatesttestshavelostanaverageof33 to rescue Credit Suisse from a share itsabilitytoimproveitscapital. despite results growth had been achieved. Chirantan cess:by2014,thatproportionhadrisento11.5percent. per cent of their book value since those price spiral that has marked down the Andrew Coombs, an analyst at Citi, that outshone Barua, banks analyst at Bernstein, said Glass ceilings continue to be smashed but the pace of tests were carried out, suggesting inves- value of its stock by almost 60 per cent said he thought yesterday’s share price expectations the asset growth had been fuelled by change is slow. J Walter Thompson, the 152-year-old ad tors had little confidence the banks had inthepastyear. drop was unfounded. “We thought the Chris Ratcliffe/Bloomberg loan growth of 7 per cent. “Throwing agency now owned by WPP, recently appointed Tamara properly restored their balance sheets. results themselves were solid . . . We leverage . . . to get AUMs [assets under Ingram as chief executive — the first woman to have ever Before the 2014 tests, Mr Acharya and Shares in the bank fell as much as 6 per struggletounderstandthemove.” management] . . . is an unsustainable heldtheposition. Mr Steffen wrote the eurozone banks cent yesterday, even though it made a MrThiamtoldanalystsheknewthere and risky strategy for a region where JWT’sworkforce is 47 per cent female and the company alone could need more than €770bn — return to profit during a quarter when was much left to do but said the bank wealthcreationhasstalled,”hewrote. has female regional chief executives in places such as 32timesthecapitalshortfallidentified. Brexit,volatilemarketsandlowinterest had earned some credit: “We recognise Mr Thiam defended the strategy.“It’s Sri Lanka, Mexico and Canada. But Ms Ingram told the FT The academics estimate banks would ratesallweighedonbanks. it’s only two quarters in and it’s only a controlled lending with careful risk recentlyshewouldnotbesatisfieduntilhalfofallthecom- have to raise €882bn to reach a 5.5 per The bank had hoped that the per- start but it’s a good start against a very analysis but it’s lending to people we pany’s senior leadership positions were held by women. cent common equity tier one ratio after formance would be welcomed, coming unsupportivemarketbackdrop.” knowextremelywellandwithwhomwe This is the right goal to set. Would a male chief executive taking into account their crisis losses, as after a smaller than expected loss in TheUKreferendumonexitingtheEU have a longstanding relationship,” he setsuchatarget?Possibly.Butawomanisactuallydoingit. reflected in their lower market values. February. Before that, Tidjane Thiam, had added to market challenges, Mr said. Ms Ingram succeeded Gustavo Martinez as chief execu- The 5.5 per cent ratio was the EBA’spass who took over as chief executive a year Thiam said. Credit Suisse still saw Lon- The common equity tier one ratio — a tive. He resigned this year after Erin Johnson, JWT’s head marklasttimeround. ago, presided over a succession of set- donasanimportantfinancialcentrebut key capital measure — beat expecta- of communications, filed a lawsuit accusing him of an Together the 51 banks in the tests backs as he fine-tuned a plan designed its operations in Dublin and Luxem- tions to grow 40 basis points to 11.8 per “unending stream of racist and sexist comments as well as have €1.18tn of common equity tier one to pivot Credit Suisse towards wealth bourg gave “optionality” if UK-based centbutthebankdidnotupdateitsfull- unwantedtouchingandotherunlawfulconduct”. capital, including the €260bn they have management and Asia and away from bankslostaccesstoEUmarkets. yearguidance. MrMartinezhasdeniedalltheallegations.Still,thecase raisedsince2011. itsriskiertradingactivities. While banks on both sides of the Pre-taxincome,whileaheadofexpec- hasechoesofMrAiles’sdeparturefromFoxNews.JWThas France comes out of the analysis But investors’ early disillusionment Atlantic have recovered from a tough tations, was down from a profit of moved on from the episode by appointing someone who worst, with the three French banks in has proved hard to shake. Analysts first quarter, Swiss banks are particu- SFr1.7bn in the same period a year ear- wants to transform the outlook for women at the agency. the 2016 tests needing the highest capi- pointed out that while second-quarter larly benefiting from their increased lier,aconsequenceofmarketconditions As they set out to replace Mr Ailes, will Mr Murdoch and tal requirement, of almost €250bn, fol- profits of SFr199m ($203m) were far focus on wealth managing. One of the and the withdrawal from some business hissonsdothesame? lowed by the UK’s four listed banks, betterthantheSFr232mlossconsensus, highlights of Credit Suisse’s results was lines as the bank cut back to improve its whoserequirementwouldbe€185bn. theactualresultwasonly7percentbet- net new assets at its Asia-Pacific and capitalposition. [email protected]

Pharmaceuticals Financials Fosun seals $1.1bn deal for India drugmaker ITG lays out growth path after trading scandal

AMYKAZMIN —NEWDELHI The deal comes only months after foreign direct investment into the coun- NICOLEBULLOCK —NEWYORK in his career — has spent six months like implementing portfolio trading DONWEINLAND —HONGKONG KKR’s$1.2bnsaleofits90percentstake tryin2015. studyingthecompanyandmeetingwith strategiesandmanagingtradingcosts. ITG has unveiled a plan to return the in India’s Alliance Tire Group to Japan’s “Private equity investors are making clientstocraftthestrategy. Citingsome“confusion”onthepartof Shanghai Fosun Pharma has agreed to “dark pool” trading pioneer to growth Yokohama Rubber Company, that saw returns out of India after many years, “Forthemostpart,clientsarepastthe its customers about the business, Mr pay $1.1bn for an 86 per cent stake in after a scandal that toppled the KKR nearly double its original $500m and that is a huge positive as it will help SEC settlement,” Mr Troise told the Troise has opted to exit what he called Indian drugmaker Gland Pharma, in agency broker’s top management and investment. attractmoremoney,”MrNayarsaid. FinancialTimes.“Wearegoingtoregain periphery businesses: a research arm, the largest Indian corporate takeover itsstockprice. byaChinesecompany. Sanjay Nayar, head of KKR’s India Gland produces anticoagulants, used andreinforceourbrandidentity.Weare Canadian arbitrage trading and securi- business, said the sales to two large in dialysis or heart bypass surgery to Last August, ITG agreed to pay a $20m strengtheningandinvestingtoberecog- tieslending. The deal is the biggest acquisition by east Asian groups confirmed India’s prevent blood-clotting, anaesthetics, record fine to the US Securities and nisedasbestinclass.” The company hopes to grow by Hong Kong-listed Fosun since the mys- potential as a competitive manufac- and other injectable medicines, mainly Exchange Commission to settle charges The problems at ITG were one in a investing in the core areas, identifying terious disappearance for several days turer, a view New Delhi is eager to forexporttotheUS. that it operated a secret proprietary string of improprieties that came to ways to cross-sell its products and fine- last year of Guo Guangchan, the group’s promote. Mr Raju will remain chairman, and desk that traded against ITG clients and light at off-exchange trading venues tune its business and taking advantage chairman, in connection with an anti- “These are private companies run by his son, Ravi Penmetsa, will remain misusedtheirconfidentialinformation. amidheightenedscrutinyafterthe2010 of what it sees as favourable industry corruptioninvestigationinChina. Indian entrepreneurs that are creating managing director. Together they and The chief executive at the time, Bob Flash Crash and Michael Lewis’s book trends in the EU’s Mifid II rules, which Yesterday’s deal — which values realvalue,”hesaid. members of the founding group will Gasser, resigned, after the allegations. Flash Boys, which claimed equity mar- call for the unbundling of the sale of Glandat$1.35bn—alsoprovidesalucra- KKR’s profitable exits from the com- retainabout10percentofthecompany. The stock price slumped to a low of ketswere“rigged”. research and trading, as well as the shift tive exit for private equity firm KKR, panies — coupled with successful exits ThesaletoFosun,whichrequiresgov- $12.71 last September from close to $30 ITG will focus on trading for its cli- toelectronictrading. which three years ago paid $200m for a by Blackstone and Apax — will buoy ernment approval, is the largest foreign inthemiddleof2015. ents,mainlyinstitutionalinvestors,pro- Nearly all of ITG’s clients are back 38 per cent stake in the Hyderabad- sentimentonIndiaamongotherprivate acquisitionofanIndianpharmaceutical The new chief executive, Francis viding algorithms and high-touch since the SEC settlement, but many are based drugmaker and is selling its full equity and venture capital participants, company since New Delhi relaxed its Troise — who joined from JPMorgan but (voice) broking and offering tools and not trading as much as they were before holding. which were the largest single source of controlsonforeignpurchases. hadworkedatITGforeightyearsearlier analytics that help customers do things thescandaleruptedlastyear.

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COMPANIES

Johnnie walking on air

Diageo cheers Diageo Share price and index (rebased)  return to US FTSE  Beverages  growth as long  

Diageo  hangover lifts    

Chief delivers ‘turnaround’ year Global net sales of key brands (annual change) - - -     andpledgestokeepupmomentum Tanqueray

SCHEHERAZADEDANESHKHU cent in Colombia. Certainly there is Captain Morgan CONSUMERINDUSTRIESEDITOR recovery for Johnnie Walker, for which Baileys  Therewerecocktails,dancemusicanda emerging markets account for 70 per  partymoodinLondon’sSohoyesterday. cent of revenues. Sales of the whisky This was no club, but the central Lon- rose 1 per cent in 2016, driven by Guinness don offices ofDiageo, the world’slargest demand for its premium-priced Blue,  distiller. Gold and Green labels — after falling for Smirno The maker of Johnnie Walker scotch twoconsecutiveyears. and Guinness stout was celebrating its One big change is a positive swing in Johnnie Walker annual results, reporting a long-sought exchange rates after several years of Sources: company; Thomson Reuters Datastream return to growth in North America — weakingemergingmarketcurrencies. Johnnie Walker whisky sales have risen 1 per cent in 2016 after falling for two years — Nicky Loh/Bloomberg whereitmakesalmosthalfofitsoperat- The steep fall in the pound after the ingprofits. UKvotetoleavetheEUhasgivenDiageo Ivan Menezes, chief executive, has a Brexit boost. Its shares have risen 19.5 delivered the “turnaround” year prom- per cent since the referendum, as ster- ised to investors, who had been made ling’s fall benefits UK-based companies tetchy by three years of slowing organic withhighdollarearnings. salesgrowth. Thecompanysaysitexpectstheweak Organic operating profits of £2.9bn poundtobenefitnetsalesby£1.1bnand rose3.5percentintheyeartotheendof operatingprofitsby£370min2017. June — a sharp improvement on the 0.7 In North America, Diageo has faced per cent recorded in 2015 — after a an uphill battle in appealing to millen- strong second half in North America nial consumers, whose tastes have andhigherdemandinEurope. become frustratingly eclectic instead of Profit margins were 0.3 percentage brand-loyal. They have been well- points higher at 28.7 per cent, thanks in servedbyaproliferationofcraftginand parttoa£200mcost-cuttingplan. vodka labels that have helped erode “Diageo is stronger,” says Mr Men- Diageo’smarketshare. ezes, adding he is confident of higher And although whisky sales have been growthnextyear.“We’refeelinggood.” booming in North America, Diageo’s Diageo’s lengthy hangover is dissipat- portfolio is under-represented in the ing—buthasitfullylifted? most popular categories of Irish whis- Since taking the helm almost exactly key,bourbonandsinglemaltscotch. three years ago, Mr Menezes has faced Sales of the group’s premium-priced twobigproblems:aslowdowninemerg- Reserve brands rose 7 per cent — twice therateofitsbiggestspirits,butReserve onlymakesup15percentofnetsales. ‘Wecan’t remember Mr Menezes’ strategy has been to try when we last saw this — to react more quickly to consumer trends by making more frequent and organic sales grew in smaller shipments of the latest fla- every category’ voured vodka or spirit. Senior manage- ment in North America was also ing markets and dispiriting demand in changed and sales staff given greater North America, which reached its nadir incentives. These initiatives appear to last year when both sales and operating be working: Smirnoff and Captain Mor- profitsfell. ganswungbackintogrowthin2016. Diageo’s most important emerging JamesEdwardesJones,analystatRBC market is India, the second-biggest Capital Markets, says: “We can’t region by sales after the US. Sales and remember when we last saw this — profitability on its £1.8bn investment in organic sales grew in every category. UnitedSpiritsIndiahavebeenheldback Scotch was flat, but not down at least, by a tense relationship with Vijay suggesting that Diageo’s new marketing Mallya,themercurialentrepreneur. approachmightbestartingtopayoff.” But after a three-year battle, Diageo Despite the improvement, sales in gained control of USL and in February North America, which rose 3 per cent in reached a $75m settlement with Mr 2016, are still not growing as fast as the Mallya, who stepped down from the market average, suggesting Diageo con- chairmanshipofUSL. tinuestolosemarketshare. Theheadachewas“wellworthit”says Trevor Stirling, analyst at Bernstein Mr Menezes, citing the potential for says: “The state of the global economy growthinIndia’smarket. thathasputpressureonscotchsaleshas Jeremy Cunnington, alcoholic drinks been outside Mr Menezes’ control. But analyst at Euromonitor, says: “Having investorscouldholdhimresponsiblefor finally integrated United Spirits into its having a US portfolio that has not kept operations and stabilised its volume up with consumer tastes. Diageo has share in India, now is the time to see if it some stars, such as Bulleit [bourbon] — can [emulate] the success of its rival, butnotenoughofthem.” PernodRicard.” Mr Menezes disagrees. “We’ve got a Emerging markets’ sales growth of 3 broadportfoliowhichiswell-positioned per cent in 2016 was weaker than ana- to perform in that market,” he says. “I lysts’expectations.Itwasdraggeddown do think we’ll do better than 3 per cent by two of Diageo’s biggest markets — nextyear.” Nigeria, where sales fell 15 per cent, and Diageo’s challenge now is to keep up Brazil,whichposteda9percentdrop. themomentuminthefirsthalfof2017. Mr Menezes points to growth else- “This is a supertanker,”says Mr Men- where — a 10 per cent rise in sales in ezes. “It’s all about steady improve- Mexico and revenue growth of 28 per ment.”

Energy Rockefeller switches to green

ANDREWWARD —LONDON But Stephen Heintz, president of the Rockefeller Brothers Fund, said this The family foundation built on the week the switch to renewable energy riches of John D Rockefeller’sStandard wasinkeepingwiththefamilyspirit. Oil has backed a $177.5m wind and He said: “John D Rockefeller was a solar power programme in Africa, great visionary who saw in petroleum a marking its biggest move into green product that was going to change the energy since announcing plans to stop world. If he were alive today he would investinginfossilfuels. seethatthefutureisgoingtobeingreen TheRockefellerBrothersFundispartof power.” a consortium of investors supporting a About 3.3 per cent of the $816m fund scheme led by Mainstream Renewable is still invested in fossil fuel assets but PowerofIrelandtobuild1.3gigawattsof this is down from 7 per cent two years carbon-free generating capacity in agoandMrHeintzsaidthesewouldcon- Africaby2018. tinuetobesold. The agreement is the clearest sign yet The fund has committed $10m to the of the fund making good on its 2014 Africanrenewablesscheme. promise to withdraw from fossil fuel The money will help finance Lekela investments and reallocate resources to Power, a joint-venture between Main- green energy because of concern about stream and Actis, a private equity fund climatechange. spun out of the UK government in 2004 That decision drew criticism at the toinvestinthedevelopingworld. time from some in the oil sector who Lekela is planning wind and solar saw it as a betrayal of an industry that projects in South Africa, Egypt, Ghana formed the basis of Rockefeller wealth. andSenegal.

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COMPANIES

Technology Aerospace & defence Rolls-Royce Beijing gives legal status to car-hailing apps climbs as Rules boost Uber and Didi message of support for ride-sharing and translated into millions of rides a day. ProfHuang.“Inpractice,alocalgovern- accounting the benefits that it offers riders, drivers Didi has claimed to be handling 14m ment could use this language to set — and set precedent for andcities”. rides a day across its platforms, includ- prices for online cars higher than other industries in China Chinawas“acountrythathasconsist- inglicensedtaxisandcarpoolingaswell municipaltaxis.” chill nears ently shown itself to be forward-think- asprivatecarhailing. Didi had lobbied for changes to draft ing when it comes to business innova- In an investor presentation in June rules last year that imposed strict limits CHARLESCLOVERANDMAFANGJING BEIJING tion”,theUSgroupadded. 2015thegroupforecastthattheChinese and licensing on vehicles and drivers, PEGGYHOLLINGER —INDUSTRYEDITOR Car-hailing has been met with pro- ride-hailing market would be worth and explicitly said prices could not be Rolls-Royce has signalled that new The Chinese government has formally tests and bans in many countries, but $50bnannuallyby2020. lowerthanforalicensedtaxi. accounting rules will hit earnings even legalised online car-hailing services, Beijinghassoughttoco-optthetechnol- “The biggest good news for the indus- Also scrapped was a proposal to force as its shares rose nearly 14 per cent on including San Francisco-based Uber ogytopromoteeconomicgrowth. try is that it is legal,” said Huang Shao- driverstoobtainanindividualcommer- the back of better than expected and Beijing‘s Didi Chuxing, giving a The car-hailing rules set a precedent qing, a professor of applied economics cial vehicle license, requiring cars to be underlying interim profit, down 80 per boosttoanindustrythathasoperatedin for other industries in China — such as atShanghaiJiaotonguniversity. scrapped after eight years — deterring centonlastyear. agreyarea. finance and healthcare — where regula- However,headdedthatloosewording manypart-timedrivers. Both groups welcomed the provi- tors are considering how much disrup- in the regulations allowed local govern- Under the new rules platforms will be The UK group, which has had five profit sional rules, unveiled by the transport tion can be tolerated from fast-moving ments to interpret rules as they liked. able to apply for ride hailing licenses on warnings in two years, returned under- ministry yesterday,which Didi referred internetcompanies. Car-hailing platforms were allowed to behalfofdrivers. lying pre-tax profits of £104m, against toas“theworld’sfirstnationwideonline Car-hailing has quickly grown from a set their own market-determined Didi said it hoped local authorities marketexpectationsofasmallloss. ride-bookingregulations”. nichesectortoalargeindustryinChina, prices, but the rules contained the Smart moves: Didi claims to handle would “encourage innovation while Sterling’s collapse after the vote last Uber said the regulations sent “a clear where the ubiquity of smartphones has phrase “with certain exceptions”, said 14m rides a day on all its platforms exercisingdiscretionarypower”. month to leave the EU left the company nursing a £2.15bn loss on an unadjusted basis, as a result of an accounting requirement to value currency hedges attheendofthereportingperiod. Basic resources. Shifting fundamentals Investors were relieved by the better than expected first half and the group’s reassurance that it was not changing guidanceforthefullyear. Price dip raises questions over steel recovery However, the focus is shifting to accounting changes that could have a substantialimpactonprofitsinfuture. The shares closed up 101.5p, or 13.9 European producers are facing percent,to833.5p. some of the toughest conditions Rolls-Royce said it would no longer take revenues from lucrative mainte- since the financial crisis nance contracts before its engines were taken into the shop, but would instead billasworkwasdone. MICHAELPOOLER —INDUSTRYREPORTER Previously it had brought forward Attheheightofeverysummer,Europe’s profits from long-term aftersales serv- manufacturers slow down, their work- ice contracts, to make up for the fact ers go on holiday and some of their fac- that many aero-engines were initially tories even close. But, this year more sold at a loss. About 50 per cent of its than any other, the continent’s steel- civil aerospace sales are generated by makers are hoping the annual seasonal aftersalesservicecontracts. lull is the only reason for a dip in the The accounting rules come into force metal’sprice. in 2018 and will specify how and when a This 4 per cent fall since June has cut shortarallyinrecentmonthsandraised questions about the strength of a recov- Group will have to wait ery in the sector, which is still grappling ‘five-plus years from with the collapse in the commodity’s valuelastyear. delivery of the lossmaking A combination of global oversupply, engine to booking profits’ low raw material prices and a flood of cheap Chinese exports have created company can recognise revenue from some of the toughest market conditions contracts. Rolls-Royce had previously for steelmakers since the financial cri- said it was too early to tell how the rules sis.LowpricesweighedheavilyonEuro- wouldaffectitsbusinessmodel. pean producers, such as ArcelorMittal, David Smith, finance director, said ThyssenKrupp and Tata Steel Europe, the changes would hit earnings, which put its lossmaking UK arm up for although the scale had yet to be quanti- saleearlierthisyear. fied, but would improve transparency Recently, though, there have been and align the group’s cash performance signs of improvement: since touching a more closely to profit. Rolls-Royce’s lowof€313atonneinFebruary,average China, which makes almost half the world’s 1.6bn annual tonnes of steel, is accused of dumping excess material at lowball prices — Reuters/China Daily accounting has long been criticised by EU monthly prices for hot rolled coil theinvestmentcommunity. shot to €444/t by June, according to the NickCunninghamofAgencyPartners consultancy Meps. This month, how- almost half the world’s 1.6bn annual But China’sdomestic and export steel continued to cede market share in their led Jefferies to halve its estimates for said the “stricter interpretation” of the ever, this benchmark sheet steel prod- tonnes of steel and is accused of dump- prices are now at more stable and home region to players from countries steel demand growth in the second half rules could “mean waiting five-plus uctslippedinpriceto€426/t. ing excess material at lowball prices as “acceptable”levels,saysSethRosenfeld, such as Japan, South Korea, Iran and ofthisyearand2017. years from delivery of the lossmaking Nevertheless, market fundamentals itsdomesticconsumptioncools. an analyst at Jefferies. As these imports Russia. Total imports by EU countries A degree of self-help could yet be on enginetobookingafter-marketprofits”. have “shifted dramatically” in favour of Chinese shipments into the EU lose their price advantage, the impact increased nearly a quarter in the first the way from a possible wave of merger Sandy Morris at Jefferies said the steelmakers, according to Mike Shil- jumped by more than 50 per cent last on European producers should be less three months of 2016, according to and acquisitions in Europe. Thyssen- changes could have a “significant laker, an analyst at Credit Suisse. He year and remain “elevated”, according harmfulthanseeninlate2015. Eurofer, while apparent steel consump- Krupp and Tata are in talks over a joint impact”onearnings. says the run-up in prices is partly down toEurofer,atradeassociation. Even so, companies in the EU have tiongrewjust3.1percent. venture that would create the conti- Mr Smith said some of the impact to buyers of steel refilling their ware- One hope for protection against these nent’s second-largest steelmaker, Arce- would be mitigated as the company housesafterrunningsuppliesdown. flowsistheEU’snewlyfoundcombative lorMittal and Marcegaglia are compet- moved to engines not linked to service “We were in a major destocking European steel price EU imports of Chinese steel attitudetowardsunfairlytradedsteel. ing with other bidders for control of the contracts. The transition has contrib- period for a good year-and-a-half, trig- Hot-rolled coil average ( per tonne) Finished goods only (’ tonnes) Steelmakers have long criticised Italy’s large Ilva plant. Fewer but bigger uted to a sharp fall in profitability as gered by the collapse of oil and iron ore Brussels for its slower and less robust players in Europe could lead to supply mature engines are replaced by an ini- [prices] in the middle of 2014,” he   regulatory approach compared with the restraintandlessaggressivepricing. tiallylossmakingnewgeneration. explains.“Inventorywasdepleted.” US. But EU authorities have expanded “IntheUS,proactivesupplydiscipline Rolls-Royce has suffered from the Investors will be looking for further  an investigation into Chinese hot-rolled in times of weaker demand has sup- downturnindefencebudgets,acollapse signs of encouragement when Arcelor-  coil shipments to a further five coun- ported much higher prices. The EU has inoilandgasexploration,andanearlier Mittal, the world’s biggest steelmaker,  tries, covering about 80 per cent of all never seen that in the past, so it’s com- than expected retirement of widebody reportshalf-yearresultstoday.  Europeanimportsoftheproduct. pelling,”saysMrRosenfeld. aircraftthatitsenginespower. There is already some cause for opti-  “Anti-dumping is kicking in quite In addition, Beijing has pledged to Underlying pre-tax profits fell from mism. Last week, SSAB of Sweden  strongly,”says Alessandro Abate of Ber- shut down unneeded plants. Whether £439m to £104m in the six months to exceeded analyst expectations when it  enberg. “If there’s further implementa- these factors combined will be enough June. Rolls-Royce had warned in May posted second-quarter earnings of tion of anti-dumping [measures], this to prevent another precipitous drop in that it would barely break even in the SEK1,585m ($183.3m) before interest,   canboostprices.” European prices is likely to become first half, leaving many investors tax,depreciationandamortisation.        However,anybenefitmaybeoffsetby more evident in late September, say expectingamarginalpre-taxlossbefore However, much will depend on the the potential economic fallout from the analysts, once the wheels of the econ- arecoveryinthesecondhalf. behaviour of China, which makes Sources: MEPS; Thomson Reuters Datastream UK’s vote to leave the EU: it has already omypickupspeedagain. Warren East, chief executive, said the company was maintaining its guidance forthefullyear,withheadwindsofsome £650m still expected to damp profits. Contracts & Tenders Food & beverage Rolls-Royce was well on the way to real- ising savings from restructuring pro- grammesfollowingrapidgrowth. Danone buoyed by dairy gains Thecompanywasexpectingtolockin close to £50m in cost savings this year from a restructuring launched in 2015, ADAMTHOMSON —PARIS about growth at any cost but about and was on track to keep its promise of profitablegrowth.” £150mto£200mbytheendof2017. Danone, the world’s biggest yoghurt Danone shares rose 2.7 per cent in Out of 2,000 senior management jobs maker by sales, has reported that afternoon trading to €67.46 compared 400 had been cut, and the focus was on improvement at its core dairy business witha0.14percentriseforFrance’sCAC makingtherestmoreeffective. helpeditpostfirst-halfprofitsthatbeat 40index. analysts’forecasts. See Lex Ms Cabanis said, however, that the The Paris-based maker of Actimel and environment “is still very volatile”, in Evian water said yesterday that particular in emerging markets such as adjusted operating profit was €1.48bn Argentina,Brazil,ChinaandRussia. in the six months to the end of June. Danone reiterated its full-year guid- That was 7 per cent higher than a year ance for sales growth of between 3 per Legal Notices earlier—andcomfortablyabovemarket cent and 5 per cent. It said it would also expectationsof€1.4bn. concentrateonincreasingfreecashflow The group said like-for-like sales rose —thoughitdidnotgivespecifictargets. 4.1 per cent in the second quarter com- The figures come after Danone this pared with a year earlier to €5.75bn, month announced its biggest deal in a thanks to a 1 per cent rise in volumes decade. The French group has agreed anda3.1percentincreaseinvalue. the $12.5bn purchase of WhiteWave Analysts had forecast sales growth of Foods, a US maker of premium natural 3.7 per cent. In reported terms, which drinksandhealth-focusedfoods. includes the effect of currency fluctua- The acquisition is set to double tions,salesduringtheperiodweredown Danone’s sales in the US. The market 3percent. will now account for a fifth of Danone’s Cécile Cabanis, chief financial officer, worldwide sales, a significant shift after said: “We are rebalancing our model of a series of difficulties and misadven- growth to make sure that it’s not just turesinemergingmarkets.

JULY 29 2016 Section:Companies Time: 28/7/2016 - 18:15 User: marais Page Name: CONEWS3, Part,Page,Edition: USA, 14, 1 Friday 29 July 2016 ★ FINANCIALTIMES 15

COMPANIES

Technology. Transformation Technology Son points to Facebook is Wall Street’snew best friend SoftBank cash flow strength Social network tries to temper euphoria at results while KANAINAGAKI —TOKYO Masayoshi Son, chief executive of pointing to new opportunities SoftBank,soughttoallayconcernsover his £24.3bn takeover of UK chip RICHARDWATERS —SANFRANCISCO designer Arm, pointing to the group’s strong cash flows and improvement at Finding new superlatives to describe UScarrierSprint. Facebook’s financial performance is becomingharderwitheachquarter. InthefirstearningsreleasesinceMrSon Fouryearsago,atthetimeofitsinitial disclosed the biggest acquisition of a public offering, the social network gen- Europeantechnologygroup10daysago, erated less revenue than Yahoo, and its the Japanese telecoms and internet growth rate had slowed to about 30 per group reported a 19 per cent year-on- cent as the rise of smartphones threat- yearriseinquarterlynetprofit. enedtocapitsadvertisingbusiness. Mr Son said yesterday: “Both our The extent of the transformation was ‘We see a domestic telecoms and Sprint busi- clear with second-quarter earnings world that nesses are doing well, and we have new released late on Wednesday.Facebook’s cash at hand. The conditions to acquire quarterly revenue has risen more than is video Armarenowinplace.” fivefold since the time of its IPO, to first, with Ahead of the Arm deal, SoftBank had $6.4bn: it dwarfed the $1.4bn in net rev- sold $20bn worth of its most valuable enue that Yahoo and Twitter produced video the assets, including shares in Chinese between them in the same period, mak- heart of ecommerce group Alibaba, Finnish ing those companies look increasingly game developer Supercell and Japan’s likealso-ransinonlineadvertising. all of our GungHoOnlineEntertainment. Facebook’s 59 per cent growth rate in apps and Boosted by the Alibaba proceeds, the latest period was 11 percentage SoftBank reported a net profit of pointsaboveWallStreet’sestimates. services’ ¥254.2bn ($2.42bn) compared with “The outperformance alone was ¥213.4bn a year earlier for the April to almost as much as Twitter’s entire ad Junequarter. revenue in the quarter,”said Brian Wie- Revenue rose 3 per cent to ¥2.13tn ser,ananalystatPivotalResearch. duetocontinuinggrowthofitsdomestic David Wehner, Facebook’s chief telecoms business, which generates free financial officer, seemed intent on Thumbs up: Facebook’s 59% growth makers. The number of searches car- already reached by WhatsApp. And mentedreality(orAR),wasmorethana cashflowofnearly$5bnayear. attempting to damp some of the Wall rate this quarter outperformed Wall ried out on Facebook each day, for Facebook said its users had 1bn “inter- flashinthepan. OnMonday,Sprint,thefourth-largest Streeteuphoria.Evenasitsstocksurged Street’s estimates, with the number instance, has reached 2bn, raising the actions” a month with businesses over The biggest lesson from the game, he US wireless group that SoftBank 6 per cent in after-market trading, of daily searches carried out on the prospect of a new source of revenue in Messenger — the kind of activity that said,isthatmobilehandsetsarelikelyto acquired for $22bn in 2013, reported extending a rally that has added about site hitting 2bn — Chris Ratcliffe/Bloomberg search advertising. This would give it a could become the foundation for an bring the first mainstream applications steady customer additions in the latest $70bn to its market value this year, Mr way to appeal more to the small busi- advertising business, though Mr Weh- ofAR,ratherthanface-mountedglasses quarter even as its net loss expanded to Wehner warned that Facebook’sgrowth nessesthatmakeupthebulkofGoogle’s ner said it was “incredibly early” to — a prediction that leaves a question $302mfrom$20mayearearlier. ratewouldslowas2016progressed. advertising,MrWiesersaid. think about how to make money from hanging over ambitious investments by Arm reported on Wednesday a 19 per A more significant, secular slowdown Facebook mobile ad revenues Mark Zuckerberg, chief executive, suchinteractions. Microsoft, whose HoloLens is the first cent increase in revenue to £544.1m in would set in at about this time next year As of total ad sales said Facebook was not yet ready to Even as Facebook waits for new headset to come to market, and Google, the six months to the end of June, while as Facebook reached the peak “ad load” moveintothisnewmarket.However,he sources of advertising such as this to one of the biggest financial backers of pre-tax profits rose 9 per cent. Shares in itsservicecanbear,hesaid.  added that it was already seeing some kickin,MrZuckerbergispreparingfora ARstart-upMagicLeap. SoftBank have fallen 11 per cent since Restraining stock market enthusiasm powerful uses of search on its service, waveofvideothatislikelytochangethe Mr Zuckerberg had already bet on the Arm deal was announced on con- makes sense given the difficulty of pre-  such as looking for media content, natureofmanyofitsservices. AR.Earlierthisyear,Facebookacquired cerns about the acquisition price and its dicting how big the new markets Face- pointingtowhatcouldbecomebigcom- “Ten years ago, most of what we Masquerade, an app for recording video debtpile. book is serving will become, said Mr mercialopportunities. shared and consumed online was text,” that overlays cartoon features on to the The deal will increase SoftBank’s net Wieser: “They need to temper expecta-  The surging traffic on the company’s the Facebook co-founder said. “Now it’s realfacesofpeoplebeingfilmed. debt to earnings ratio before interest, tions.Theydon’tknowhowhighisup.” messaging services, Messenger and photos.Soon,mostofitwillbevideo.We Together, video and AR could point depreciation and amortisation to a level Butfornow,asadvertisersinsearchof  WhatsApp, also highlights advertising see a world that is video first, with the way to new and more expressive of 4.4 times compared with 3.8 times as mobileaudiencesflocktoFacebook,itis potential. At 60bn a day, the number of video . . . theheartofallofourappsand ways for people to communicate and ofendofMarch,accordingtoMrSon. easy to believe the sky is the limit. And messages being sent over these services services.” socialise, Mr Zuckerberg said. With a The SoftBank chief said the group’s even as they spelt out the latest jump in  is three times the peak global volume Alert to how the winds of fashion can monthly audience of 1.7bn, it has a base netdebtwas¥7.1tnasoftheendofJune, revenues, Facebook executives on      reachedbySMS,MrZuckerbergsaid. turn in online behaviour, he also sug- of users to test out services. And, as its while the value of its investments Wednesdayhighlightedareasthatcould Messengerpassed1bnmonthlyactive gested that Pokémon Go, the mobile latest earnings show, it has the power to including its remaining stake in Alibaba yield the company’s next big money- Source: Bloomberg users in the latest quarter, a milestone gamethatreliesonasimpleformofaug- turnnewonlinehitsintoseriousmoney. totalled¥9.1tn.

Media Pinewood Studios sets the stage for £323m sale

JUDITHEVANS —LONDON Pinewood’s60,000sqft007stagewas Pinewood, is an offshoot of US invest- builtin1976fortheJamesBondfilmThe ment bank Perella Weinberg but split The owner of Pinewood Studios, home Spy Who Loved Me, and has since been fromitsparentcompanyinJuly2015. to the James Bond and Star Wars films, used for scenes in films from Tomb The€900mfundseekingtobuyPine- is set to be sold to a real estate private Raider to Charlie and the Chocolate Fac- wood has a mandate to buy property equityfundfor£323m. tory. assets and “corporate operating busi- Pinewood Group, which is listed on But the group has been seeking fur- nesses that have a real estate compo- London’s junior market, said it would therinvestmentforexpansion—includ- nent”. Another fund run by the same recommend that shareholders accept ing a £200m boost to capacity at its managers previously owned a portfolio an offer from PW Real Estate Fund III, main UK operations — and in February of cinemas leased to the French opera- run by the French real estate investor hired investment bank Rothschild to torUGC. LeonBressler. explore options including a takeover. The 560p-a-share offer equates to 31 A person familiar with the fund’s Rothschild spoke to more than 180 times earnings, and is a 50 per cent pre- strategy said it did not intend to sepa- potential buyers, according to a person mium to the 375p-a-share achieved in a rate Pinewood’s real estate from its closetothedeal. £30m placing in April, but comes below operating business, but would invest to Ivan Dunleavy, Pinewood’s chief the 570p-to-580p range in which the speed up the group’sexisting expansion executive,said:“Pinewoodhasgrownin shareshavetradedinrecentweeks. plans, with the current management recent years into a global operation Sahill Shan, analyst at N+1 Singer, remaininginplace. which sits at the forefront of the UK’s said the price was “below our fair value Buckinghamshire-based Pinewood, creative industries. We believe that we estimate of 600p-625p and in our view established in 1936, has provided the have found the right partner for the does not fully reflect the potential setting for some of the best-known UK business and one that shares our long- upside”. films and a series of Hollywood block- termvisionforthefutureofthegroup.” The Aermont fund must complete its busters.Italsooperatesstudiosincoun- London-based Aermont Capital, financing for the deal in the next four triesincludingCanadaandMalaysia. which runs the fund seeking to buy weeksinorderforittoproceed.

Technology Samsung pins hopes on chips to lift margins

SONGJUNG-A —SEOUL rose 18 per cent to Won8.14tn ($7.17bn) 24 per cent in the second quarter, with intheApril-Juneperiod,matchingguid- Apple second at 12 per cent followed by Samsung Electronics has presented an ance. Net profit rose to Won5.85tn from China’sHuaweiwith9percent. upbeat outlook for the second half of Won5.75tn a year earlier while sales Samsung will roll out its new Galaxy the year, projecting that stronger increased5percenttoWon50.94tn. Note phablet with a larger screen next demand for components including The mobile division was the biggest week, about a month ahead of the chips and display panels will outweigh contributor to earnings with operating iPhone launch. The associated market- an anticipated slowing in smartphone profit for the unit surging 57 per cent to ing costs and stiffer competition would earnings. probably slow second-half earnings at The world’s largest smartphone maker itsmobilebusiness,thecompanysaid. expects mobile phone sales to remain Samsung’s But Samsung expects pressure on Galaxy S7 handset briskinthethirdquarterbutsaidhigher is flying off shelves smartphone margins to be offset by a marketing costs were likely to put but the group says pick-up in earnings at its component pressure on margins, with rival Apple mobile marketing businesses as the prices of microchips expected to launch its new iPhone in costs are set to rise and display panels show signs of a September. recovery. “Looking ahead to the second half of Won4.32tn — the highest since the “The company has great technology 2016,thecompanyexpectsitssolidper- secondquarterof2014. and cost competitiveness over rivals in formance to continue compared to the Samsung’s premium smartphones such components, which will enable it first half, mainly driven by an earnings have benefited from the absence of to enjoy high margins for the time increase in the component business,” strong competition this year as sales of being,” said Kim Young-woo, analyst at Samsungsaid. Apple’siPhoneshavesagged. SKSecurities. The South Korean company yester- Samsung said it shipped about 90m Shares in Samsung fell 1.3 per cent on day reported its best quarterly operat- handsets in the second quarter and profit-taking yesterday, having risen 20 ing profit in more than two years as its expects similar shipments in the third per cent so far this year. The broader flagship Galaxy S7 devices continued to quarter. Research firm Canalys esti- market in Seoul, South Korea, closed fly off store shelves. Operating profit matedSamsung’sglobalmarketshareat down0.2percent.

JULY 29 2016 Section:Companies Time: 28/7/2016 - 17:51 User: marais Page Name: CONEWS4, Part,Page,Edition: EUR, 15, 1 16 FINANCIALTIMES Friday 29 July 2016

MARKETDATA

WORLD MARKETS AT A GLANCE FT.COM/MARKETSDATA

Change during previous day’s trading (%) S&P 500 Nasdaq Composite Dow Jones Ind FTSE 100 FTSE Eurofirst 300 Nikkei Hang Seng FTSE All World $ $ per € $ per £ ¥ per $ £ per € Oil Brent $ Sep Gold $ -0.13% -0.38% -0.44% -1.00% -1.13% -0.20% -0.11% -0.771% No change 0.05% 0.819% 0.835% 0.43% 0.96% Stock Market movements over last 30 days, with the FTSE All-World in the same currency as a comparison AMERICAS EUROPE ASIA Jun 29 - Jul 28 Index All World Jun 29 - Jul 28 Index All World Jun 29 - Jul 28 Index All World Jun 29 - Jul 28 Index All World Jun 29 - Jul 28 Index All World Jun 29 - Jul 28 Index All World S&P 500 New York S&P/TSX COMP Toronto FTSE 100 London Xetra Dax Frankfurt Nikkei 225 Tokyo Kospi Seoul 2,163.71 6,750.43 10,274.93 14,531.15 16,476.84 2,021.10 9,612.27 15,323.14 2,036.09 13,842.69 6,140.39 1,956.36 Day -0.13% Month 2.38% Year NaN% Day -0.11% Month 4.94% Year 3.19% Day -0.44% Month 9.68% Year 2.74% Day -0.43% Month 1.17% Year NaN% Day -1.13% Month 7.63% Year -19.03% Day -0.20% Month 4.89% Year -0.87%

Nasdaq Composite New York IPC Mexico City FTSE Eurofirst 300 Europe Ibex 35 Madrid Hang Seng Hong Kong FTSE Straits Times Singapore 22,174.34 5,142.44 1,338.28 2,941.49 46,533.70 8,479.20 45,466.37 1,290.86 8,105.30 4,691.87 20,172.46 2,729.85 Day 0.05% Month 11.92% Year 2.03% Day -0.59% Month 4.10% Year 5.26% Day -1.00% Month 7.06% Year -13.25% Day -2.10% Month 10.90% Year -23.92% Day -0.20% Month 9.63% Year -8.94% Day -0.78% Month 6.92% Year -11.92%

Dow Jones Industrial New York Bovespa São Paulo CAC 40 Paris FTSE MIB Milan Shanghai Composite Shanghai BSE Sensex Mumbai 4,420.58 18,402.09 56,189.35 16,522.64 28,208.62 15,946.93 2,994.32 51,526.93 4,195.32 17,409.72 2,931.59 26,524.55 Day -0.38% Month 7.37% Year 5.52% Day -1.17% Month 12.32% Year 13.24% Day -0.59% Month 10.94% Year -10.29% Day -2.02% Month 5.90% Year -29.17% Day 0.08% Month 3.41% Year -19.63% Day 0.66% Month 6.84% Year 2.35%

Country Index Latest Previous Country Index Latest Previous Country Index Latest Previous Country Index Latest Previous Country Index Latest Previous Country Index Latest Previous Argentina Merval 15527.95 15698.69 Cyprus CSE M&P Gen 65.89 66.29 Italy FTSE Italia All-Share 18187.04 18530.47 Philippines Manila Comp 8024.98 8100.48 Taiwan Weighted Pr 9076.64 9063.39 Cross-Border DJ Global Titans ($) 243.76 244.38 Australia All Ordinaries 5636.70 5615.00 Czech Republic PX 887.26 893.42 FTSE Italia Mid Cap 30296.84 30561.27 Poland Wig 46721.53 46803.82 Thailand Bangkok SET 1524.58 1515.40 Euro Stoxx 50 (Eur) 2973.73 2999.48 S&P/ASX 200 5556.60 5539.70 Denmark OMXC Copenahgen 20 990.99 996.35 FTSE MIB 16522.64 16863.01 Portugal PSI 20 4681.41 4708.62 Turkey BIST 100 75075.70 73689.43 Euronext 100 ID 869.48 877.75 S&P/ASX 200 Res 2965.20 2932.30 Egypt EGX 30 7539.99 7517.78 Japan 2nd Section 4211.15 4231.22 PSI General 2469.94 2480.78 UAE Abu Dhabi General Index 4596.83 4591.73 FTSE 4Good Global ($) 5395.18 5407.91 Austria ATX 2228.16 2242.97 Estonia OMX Tallinn 1003.68 1014.04 Nikkei 225 16476.84 16664.82 Romania BET Index 6695.57 6727.32 UK FT 30 2932.20 2952.20 FTSE All World 272.32 272.61 Belgium BEL 20 3418.19 3453.66 Finland OMX Helsinki General 7979.72 8001.14 S&P Topix 150 1069.49 1082.25 Russia Micex Index 1946.53 1938.65 FTSE 100 6721.06 6750.43 FTSE E300 1338.28 1351.75 BEL Mid 5924.01 5953.35 France CAC 40 4420.58 4446.96 Topix 1307.00 1321.67 RTX 919.76 921.67 FTSE 4Good UK 5978.13 6008.57 FTSE Eurotop 100 2637.31 2668.09 Brazil Bovespa 56189.35 56852.84 SBF 120 3502.82 3521.77 Jordan Amman SE 2110.35 2099.03 Saudi-Arabia TADAWUL All Share Index 6431.58 6470.82 FTSE All Share 3651.13 3663.95 FTSE Global 100 ($) 1342.28 1345.49 Canada S&P/TSX 60 845.82 846.40 Germany M-DAX 21088.49 21217.66 Kenya NSE 20 3475.38 3494.03 Singapore FTSE Straits Times 2918.62 2941.49 FTSE techMARK 100 4292.87 4319.63 FTSE Gold Min ($) 1953.07 1895.39 S&P/TSX Comp 14531.15 14546.54 TecDAX 1703.27 1716.21 Kuwait KSX Market Index 5461.90 5484.20 Slovakia SAX 310.23 310.23 USA DJ Composite 6454.59 6470.77 FTSE Latibex Top (Eur) 3023.50 3064.70 S&P/TSX Met & Min 677.47 653.60 XETRA Dax 10274.93 10319.55 Latvia OMX Riga 639.59 639.51 Slovenia SBI TOP 715.27 708.55 DJ Industrial 18402.09 18472.17 FTSE Multinationals ($) 1542.04 1538.49 Chile IGPA Gen 20444.63 20483.77 Greece Athens Gen 562.84 569.16 Lithuania OMX Vilnius 547.92 547.00 South Africa FTSE/JSE All Share 53282.16 53764.26 DJ Transport 7843.76 7861.45 FTSE World ($) 482.43 483.00 China FTSE A200 8162.73 8162.38 FTSE/ASE 20 1501.49 1532.34 Luxembourg LuxX 1550.84 1541.85 FTSE/JSE Res 20 32211.65 31975.91 DJ Utilities 705.55 704.80 FTSEurofirst 100 (Eur) 3760.78 3803.21 FTSE B35 9414.99 9306.04 Hong Kong Hang Seng 22174.34 22218.99 Malaysia FTSE Bursa KLCI 1658.50 1663.56 FTSE/JSE Top 40 46390.00 46874.05 Nasdaq 100 4708.87 4702.88 FTSEurofirst 80 (Eur) 4051.97 4093.07 Shanghai A 3134.53 3132.06 HS China Enterprise 9082.85 9115.29 Mexico IPC 46533.70 46812.07 South Korea Kospi 2021.10 2025.05 Nasdaq Cmp 5142.44 5139.81 MSCI ACWI Fr ($) 412.78 412.54 Shanghai B 346.42 346.37 HSCC Red Chip 3786.40 3791.59 Morocco MASI 9928.35 9822.12 Kospi 200 251.86 252.73 NYSE Comp 10712.79 10739.77 MSCI All World ($) 1706.35 1705.99 Shanghai Comp 2994.32 2991.97 Hungary Bux 27628.47 27781.05 Netherlands AEX 447.82 452.98 Spain IBEX 35 8479.20 8661.40 S&P 500 2163.71 2166.58 MSCI Europe (Eur) 1385.26 1379.02 Shenzhen A 2040.77 2044.03 India BSE Sensex 28208.62 28024.33 AEX All Share 686.33 693.11 Sri Lanka CSE All Share 6392.15 6382.42 Wilshire 5000 21224.32 21238.05 MSCI Pacific ($) 2309.00 2308.52 Shenzhen B 1143.27 1126.96 S&P CNX 500 6627.95 6634.30 New Zealand NZX 50 7306.35 7301.90 Sweden OMX Stockholm 30 1345.44 1359.14 Venezuela IBC 12322.26 12230.07 S&P Euro (Eur) 1356.29 1368.81 Colombia COLCAP 1321.65 1315.69 Indonesia Jakarta Comp 5299.21 5274.36 Nigeria SE All Share 27945.02 27629.90 OMX Stockholm AS 480.68 485.01 Vietnam VNI 657.14 656.11 S&P Europe 350 (Eur) 1375.57 1388.46 Croatia CROBEX 1752.37 1749.83 Ireland ISEQ Overall 5804.47 5817.98 Norway Oslo All Share 663.11 665.18 Switzerland SMI Index 8095.07 8221.33 S&P Global 1200 ($) 1891.81 1897.58 Israel Tel Aviv 100 12.75 12.77 Pakistan KSE 100 39468.98 39468.98 Stoxx 50 (Eur) 2861.30 2887.24 (c) Closed. (u) Unavaliable. † Correction. ♥ Subject to official recalculation. For more index coverage please see www.ft.com/worldindices. A fuller version of this table is available on the ft.com research data archive. STOCK MARKET: BIGGEST MOVERS UK MARKET WINNERS AND LOSERS AMERICA LONDON EURO MARKETS TOKYO Jul 28 %Chg %Chg Jul 28 %Chg %Chg Jul 28 %Chg %Chg Jul 28 %Chg %Chg ACTIVE STOCKS stock close Day's ACTIVE STOCKS stock close Day's ACTIVE STOCKS stock close Day's ACTIVE STOCKS stock close Day's FTSE 100 price(p) week ytd FTSE 250 price(p) week ytd FTSE SmallCap price(p) week ytd Industry Sectors price(p) week ytd traded m's price change traded m's price change traded m's price change traded m's price change Winners Winners Winners Winners Facebook 56.4 125.32 1.98 Sabmiller 588.4 4324.00 -79.17 Santander 522.6 3.71 -0.15 Toyota Motor 496.7 5859.00 -7.00 Rolls-royce Holdings 831.00 10.0 42.3 Hochschild Mining 273.00 23.8 468.1 Brammer 105.00 45.1 -42.5 Fixed Line Telecommunication 4722.34 7.0 -11.1 Apple 18.3 103.86 0.91 Astrazeneca 347.8 5027.00 50.98 Royal Dutch Shella 494.4 23.58 -0.92 Japan Tobacco . 477.1 4056.00 -54.00 Sky 904.00 8.5 -15.4 Acacia Mining 587.50 12.7 226.3 Game Digital 75.50 21.8 -37.6 Pharmaceuticals & Biotech. 14674.60 4.9 14.1 Amazon.com 16.3 747.40 10.73 Royal Dutch Shell 263.2 2051.50 -60.50 Nestle N 397.3 71.69 0.00 Mitsubishi Ufj Fin,. 345.5 484.60 -12.70 Bt 414.35 7.1 -12.2 Virgin Money Holdings (uk) 262.60 11.4 -29.8 Premier Farnell 195.00 17.7 97.2 Industrial Metals 1642.77 4.6 127.6 Hospira 11.8 89.95 -0.01 Lloyds Banking 238.7 52.50 -2.92 Novartis N 371.4 75.27 0.00 Kao 312.6 5645.00 -73.00 Anglo American 842.60 6.6 180.4 Countrywide 263.20 11.2 -29.7 Fdm (holdings) 600.00 15.9 14.3 Aerospace & Defense 4711.91 4.5 14.0 Ford Motor 10.9 12.52 -1.32 Arm Holdings 210.4 1670.00 -2.50 Daimler Ag Na O.n. 363.4 61.92 0.00 Fanuc 285.7 17690.00 30.00 Fresnillo 1902.00 6.5 173.3 Metro Bank 2080.00 9.7 - Tyman 294.00 14.3 -1.2 Forestry & Paper 16286.29 4.2 13.7 Microsoft 9.7 55.96 -0.23 Royal Dutch Shell 209.0 1984.50 -66.04 Adidas Ag Na O.n. 327.0 140.55 0.00 Softbank . 274.0 5366.00 -56.00 3i 613.00 5.5 28.5 Rightmove 4070.00 9.5 -0.5 Helical Bar 291.50 12.6 -38.9 Software & Computer Services 1966.69 3.8 19.0 Alphabet 6.0 741.76 -0.01 Bp 200.7 426.65 -4.29 Roche Gs 321.5 229.12 0.00 Mitsubishi Electric 272.1 1184.50 -100.50 Crh 2281.00 4.8 16.7 Vedanta Resources 566.50 8.7 105.5 Nanoco 71.50 12.1 25.8 Mining 11702.80 3.6 59.8 Alphabet 5.8 761.77 -0.20 Diageo 177.3 2192.00 65.69 Intesa Sanpaolo 311.5 1.96 0.00 Nissan Motor Co., 233.8 1024.00 -22.50 Astrazeneca 5027.00 4.8 2.7 Morgan Advanced Materials 275.00 8.4 11.1 Sdl 438.75 10.4 5.2 Construction & Materials 5568.41 3.5 7.7 Allergan . 4.9 258.00 -2.24 Glaxosmithkline 157.6 1699.50 5.01 Total 311.1 42.49 -0.20 Fujifilm Holdings 233.7 3650.00 -401.00 St. James's Place 920.00 4.6 -8.6 Ip 159.30 8.2 -22.3 On The Beach 241.00 9.5 0.4 Media 7615.99 2.5 3.0 Gilead Sciences 4.6 81.20 -0.59 Rolls-royce Holdings 154.0 831.00 86.40 Cs N 284.0 10.62 0.00 Alps Electric Co., 232.1 2262.00 219.00 Mondi 1512.00 4.6 14.2 Sports Direct Int 281.10 7.2 -51.3 Severfield 52.75 9.3 -18.8 Mobile Telecommunications 5166.18 2.3 1.4 Diageo 2192.00 4.6 18.7 Polymetal Int 1112.00 7.1 90.4 Capital & Regional 58.75 8.8 -9.6 Real Estate Investment Trusts 2942.54 2.1 -9.5 BIGGEST MOVERS Close Day's Day's BIGGEST MOVERS Close Day's Day's BIGGEST MOVERS Close Day's Day's BIGGEST MOVERS Close Day's Day's Morrison (wm) Supermarkets 184.30 4.2 25.2 Just Eat 529.00 7.1 2.9 St. Ives 112.00 8.7 -49.7 Equity Investment Instruments 7988.95 2.0 7.0 price change chng% price change chng% price change chng% price change chng% Ups Ups Ups Ups Losers Losers Losers Losers Varian Medical Systems 94.02 5.52 6.24 Countrywide 263.20 33.61 13.59 Deutsche Wohnen Ag 28.23 1.12 4.15 Alps Electric Co., 2262.00 219.00 10.72 Lloyds Banking 52.50 -6.0 -27.7 Int Personal Finance 253.70 -25.6 -12.2 Enquest 23.75 -14.4 25.0 Oil Equipment & Services 13351.17 -5.5 2.9 Xl Ltd 34.74 1.78 5.40 Rolls-royce Holdings 831.00 86.40 11.80 Danone 67.93 2.23 3.39 Advantest 1333.00 115.00 9.44 Royal Dutch Shell 1984.50 -5.0 29.6 Tullow Oil 194.80 -8.0 21.1 Hunting 409.50 -12.5 35.0 Oil & Gas Producers 7321.37 -4.4 29.5 O'reilly Automotive 291.96 14.45 5.21 Sports Direct Int 281.10 23.56 9.15 Suez 14.47 0.46 3.25 Ntn 336.00 27.00 8.74 Smith & Nephew 1227.00 -4.7 2.2 Vectura 147.70 -7.8 -17.6 Premier Oil 63.25 -10.8 32.4 Electricity 9093.75 -3.9 3.7 Advance Auto Parts 172.33 7.60 4.61 Thomas Cook 65.25 3.98 6.63 Ryanair Holdings 11.97 0.35 3.01 Sumco 783.00 30.00 3.98 Bp 426.65 -4.7 21.4 Weir 1452.00 -7.2 45.2 Soco Int 148.00 -9.3 1.6 Health Care Equip.& Services 7621.19 -3.8 5.3 Zimmer Biomet Holdings 128.07 5.39 4.39 Polymetal Int 1112.00 66.04 6.31 Cap Gemini 85.11 2.46 2.98 Toho Z Co., 357.00 9.00 2.59 Capita 935.00 -4.3 -22.1 Man 114.60 -7.2 -34.7 Lsl Property Services 232.00 -6.5 -18.6 Banks 3166.23 -1.7 -16.8 Easyjet 1017.00 -4.1 -41.2 Petrofac 755.00 -6.2 -4.9 Flybe 37.25 -6.4 -58.6 Food Producers 8004.63 -0.5 -9.5 Downs Downs Downs Downs Royal Dutch Shell 2051.50 -3.9 32.5 Victrex 1479.00 -5.8 -16.7 Lamprell 70.75 -5.7 -28.9 General Industrials 4961.83 -0.4 12.8 Ford Motor 12.52 -1.32 -9.54 Int Personal Finance 253.70 -83.30 -24.72 Grifols Sa 14.99 -14.40 -48.99 Fujifilm Holdings 3650.00 -401.00 -9.90 Paddy Power Betfair 8495.00 -3.3 -7.6 Amec Foster Wheeler 450.80 -5.7 7.2 Uk Mail 302.00 -5.0 20.8 Industrial Engineering 9165.68 -0.3 28.1 Whole Foods Market 30.52 -3.13 -9.29 hcape 668.00 -41.37 -5.75 Cnp Assurances 13.56 -0.90 -6.26 Mitsumi Electric Co., 513.00 -53.00 -9.36 Sabmiller 4324.00 -2.9 5.7 Cairn Energy 180.30 -4.7 15.6 Town Centre Securities 288.25 -4.4 -14.0 Tobacco 55866.04 -0.3 21.2 Borgwarner 32.44 -1.77 -5.17 Lloyds Banking 52.50 -2.92 -5.24 Bayerische Motoren Werke Ag 64.40 -4.15 -6.05 Mitsubishi Electric 1184.50 -100.50 -7.82 Sse 1541.00 -2.9 2.4 Dignity 2659.00 -4.4 1.8 Lookers 103.50 -4.4 -44.1 Chemicals 11950.92 -0.3 11.0 Extra Space Storage 85.90 -4.00 -4.45 Smith & Nephew 1227.00 -64.87 -4.99 Carrefour 22.40 -1.30 -5.49 Minebea Co., 826.00 -67.00 -7.50 Associated British Foods 2686.00 -2.9 -19.5 Drax 342.10 -4.0 40.4 Trinity Mirror 74.00 -3.9 -55.7 Food & Drug Retailers 2535.89 -0.2 1.6 Mosaic (the) 27.73 -1.15 -3.98 Weir 1452.00 -72.29 -4.74 Grifols 19.50 -1.06 -5.13 West Japan Railway 6298.00 -389.00 -5.82 Barclays 146.50 -2.6 -32.4 Jardine Lloyd Thompson 986.00 -3.8 4.1 Findel 168.50 -3.7 -15.8 Technology Hardware & Equip. 1997.69 -0.2 56.6 Based on the constituents of the S&P500 and the Nasdaq 100 index Based on the constituents of the FTSE 350 index Based on the constituents of the FTSEurofirst 300 Eurozone index Based on the constituents of the Nikkei 225 index Based on last week's performance. †Price at suspension. CURRENCIES DOLLAR EURO POUND DOLLAR EURO POUND DOLLAR EURO POUND DOLLAR EURO POUND Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's Jul 28 Currency Mid Change Mid Change Mid Change Jul 28 Currency Mid Change Mid Change Mid Change Jul 28 Currency Mid Change Mid Change Mid Change Jul 28 Currency Mid Change Mid Change Mid Change Argentina Argentine Peso 15.0313 0.0612 16.6599 0.2087 19.7263 0.0938 Indonesia Indonesian Rupiah 13101.0000 -39.0000 14520.5320 80.3282 17193.1496 -39.4352 Poland Polish Zloty 3.9356 -0.0464 4.3620 -0.0140 5.1648 -0.0573 ..Three Month 0.7622 -0.0005 0.8444 0.0066 - - Australia Australian Dollar 1.3311 -0.0079 1.4753 0.0038 1.7469 -0.0092 Israel Israeli Shekel 3.8273 -0.0137 4.2419 0.0210 5.0227 -0.0145 Romania Romanian Leu 4.0289 -0.0315 4.4654 0.0033 5.2873 -0.0377 ..One Year 0.7627 -0.0005 0.8437 0.0066 - - Bahrain Bahrainin Dinar 0.3772 -0.0001 0.4180 0.0034 0.4950 0.0002 Japan Japanese Yen 104.8350 -0.8150 116.1941 0.0901 137.5805 -0.9750 Russia Russian Ruble 66.6788 0.4274 73.9036 1.0967 87.5061 0.6203 United States United States Dollar - - 1.1084 0.0094 1.3124 0.0009 Bolivia Bolivian Boliviano 6.9350 0.0050 7.6864 0.0707 9.1012 0.0128 ..One Month 104.8349 -0.8153 116.1941 0.0901 137.5805 -0.9752 Saudi Arabia Saudi Riyal 3.7504 - 4.1567 0.0353 4.9218 0.0034 ..One Month - - 1.1082 -0.2031 1.3124 0.0009 Brazil Brazilian Real 3.2765 -0.0111 3.6315 0.0187 4.2999 -0.0116 ..Three Month 104.8346 -0.8158 116.1941 0.0901 137.5802 -0.9756 Singapore Singapore Dollar 1.3531 -0.0041 1.4997 0.0082 1.7757 -0.0042 ..Three Month - - 1.1079 -0.2031 1.3126 0.0009 Canada Canadian Dollar 1.3189 -0.0028 1.4618 0.0093 1.7309 -0.0026 ..One Year 104.8334 -0.8182 116.1941 0.0900 137.5805 -0.9764 South Africa South African Rand 14.2434 -0.0379 15.7867 0.0923 18.6924 -0.0369 ..One Year - - 1.1067 -0.2031 1.3131 0.0009 Chile Chilean Peso 664.9100 -0.1900 736.9547 6.0434 872.5968 0.3459 Kenya Kenyan Shilling 101.3600 0.0100 112.3426 0.9641 133.0201 0.1038 South Korea South Korean Won 1124.4500 -9.7500 1246.2872 -0.1414 1475.6756 -11.7804 Venezuela Venezuelan Bolivar Fuerte 9.9900 0.0100 11.0724 0.1049 13.1104 0.0221 China Chinese Yuan 6.6576 -0.0120 7.3790 0.0494 8.7371 -0.0098 Kuwait Kuwaiti Dinar 0.3025 0.0002 0.3352 0.0030 0.3969 0.0005 Sweden Swedish Krona 8.6442 -0.0346 9.5808 0.0433 11.3442 -0.0376 Vietnam Vietnamese Dong 22305.0000 - 24721.8177 209.7308 29272.1195 20.0367 Colombia Colombian Peso 3089.3750 6.0350 3424.1169 35.6820 4054.3527 10.6810 Malaysia Malaysian Ringgit 4.0495 -0.0285 4.4883 0.0068 5.3144 -0.0338 Switzerland Swiss Franc 0.9817 -0.0116 1.0881 -0.0036 1.2883 -0.0144 European Union Euro 0.9022 -0.0077 - - 1.1841 -0.0093 Costa Rica Costa Rican Colon 546.3100 0.3100 605.5041 5.4777 716.9517 0.8955 Mexico Mexican Peson 18.8982 0.0274 20.9458 0.2078 24.8010 0.0528 Taiwan New Taiwan Dollar 31.9510 -0.1080 35.4130 0.1818 41.9310 -0.1130 ..One Month 0.9021 -0.0077 - - 1.1840 -0.0093 Czech Republic Czech Koruna 24.4012 -0.1983 27.0451 0.0116 32.0229 -0.2382 New Zealand New Zealand Dollar 1.4153 -0.0041 1.5687 0.0088 1.8574 -0.0041 Thailand Thai Baht 34.8755 -0.1045 38.6543 0.2131 45.7690 -0.1058 ..Three Month 0.9018 -0.0077 - - 1.1839 -0.0093 Denmark Danish Krone 6.7110 -0.0585 7.4382 -0.0012 8.8072 -0.0707 Nigeria Nigerian Naira 316.7500 1.7500 351.0707 4.9016 415.6879 2.5785 Tunisia Tunisian Dinar 2.2241 -0.0141 2.4650 0.0054 2.9187 -0.0165 ..One Year 0.9006 -0.0077 - - 1.1832 -0.0093 Egypt Egyptian Pound 8.8846 0.0275 9.8472 0.1137 11.6597 0.0440 Norway Norwegian Krone 8.5537 -0.0439 9.4805 0.0322 11.2255 -0.0499 Turkey Turkish Lira 3.0156 -0.0177 3.3423 0.0089 3.9575 -0.0205 Hong Kong Hong Kong Dollar 7.7563 -0.0012 8.5967 0.0716 10.1789 0.0054 Pakistan Pakistani Rupee 104.8250 - 116.1831 0.9857 137.5674 0.0938 United Arab Emirates UAE Dirham 3.6731 - 4.0711 0.0345 4.8204 0.0033 Hungary Hungarian Forint 281.4364 -3.7950 311.9308 -1.5241 369.3440 -4.7251 Peru Peruvian Nuevo Sol 3.3540 -0.0055 3.7174 0.0255 4.4016 -0.0042 United Kingdom Pound Sterling 0.7620 -0.0005 0.8446 0.0066 - - India Indian Rupee 67.0775 -0.0775 74.3455 0.5456 88.0294 -0.0416 Philippines Philippine Peso 47.0750 -0.1200 52.1757 0.3108 61.7790 -0.1152 ..One Month 0.7621 -0.0005 0.8445 0.0066 - - Rates are derived from WM Reuters Spot Rates and MorningStar (latest rates at time of production). Some values are rounded. Currency redenominated by 1000. The exchange rates printed in this table are also available at www.FT.com/marketsdata UK SERIES FTSE ACTUARIES SHARE INDICES www.ft.com/equities FT 30 INDEX FTSE SECTORS: LEADERS & LAGGARDS FTSE 100 SUMMARY Produced in conjunction with the Institute and Faculty of Actuaries Jul 28 Jul 27 Jul 26 Jul 25 Jul 22 Yr Ago High Low Year to date percentage changes Closing Day's Closing Day's £ Strlg Day's Euro £ Strlg £ Strlg Year Div P/E X/D Total FT 30 2932.20 2952.20 2925.50 2935.90 2924.10 0.00 2961.50 2508.90 Industrial Metals & 115.10 Chemicals 11.16 FTSE SmallCap Index 0.83 FTSE 100 Price Change FTSE 100 Price Change Jul 28 chge% Index Jul 27 Jul 26 ago yield% Cover ratio adj Return FT 30 Div Yield 1.57 1.57 1.57 1.57 1.58 0.00 3.93 2.74 Mining 54.57 Electronic & Elec Eq 10.98 Media 0.41 3I Group PLC 613.00 -8.00 Legal & General Group PLC 200.60 -3.20 FTSE 100 (100) 6721.06 -0.44 6207.00 6750.43 6724.03 6631.00 3.72 0.71 38.04 143.82 5391.17 P/E Ratio net 28.44 28.45 28.41 28.37 28.33 0.00 19.44 14.26 Tech Hardware & Eq 53.75 Forestry & Paper 10.20 Household Goods & Ho -2.01 Admiral Group PLC 2134 -10.00 Lloyds Banking Group PLC 52.50 -3.25 FTSE 250 (250) 17252.33 -0.08 15932.79 17265.91 17069.10 17512.81 2.67 1.97 19.03 276.14 12207.83 FT 30 since compilation: 4198.4 high: 19/07/1999; low49.4 26/06/1940Base Date: 1/7/35 Basic Materials 45.67 Pharmace & Biotech 10.16 FTSE 250 Index -2.56 Anglo American PLC 842.60 43.40 London Stock Exchange Group PLC 2748 -1.00 FTSE 250 ex Inv Co (209) 18529.99 -0.22 17112.73 18570.04 18326.55 19060.77 2.71 2.10 17.56 299.71 13370.37 FT 30 hourly changes Oil & Gas Producers 36.16 Health Care 10.04 Telecommunications -4.78 Antofagasta PLC 503.00 9.70 Marks And Spencer Group PLC 321.00 -0.50 FTSE 350 (350) 3708.47 -0.38 3424.83 3722.50 3703.39 3676.10 3.55 0.86 32.69 76.04 5988.36 8 9 10 11 12 13 14 15 16 High Low Oil & Gas 35.08 Health Care Eq & Srv 8.57 Leisure Goods -5.30 Arm Holdings PLC 1670 -5.00 Mediclinic International PLC 1063 -5.00 FTSE 350 ex Investment Trusts (309) 3681.84 -0.40 3400.24 3696.76 3677.43 3654.65 3.57 0.86 32.58 76.00 3061.65 2952.2 2957.5 2953.5 2947.7 2951.4 2949.5 2950.6 2945.5 2940.2 2966.7 2932.2 Technology 34.55 Electricity 7.96 Consumer Services -6.83 Ashtead Group PLC 1190 -19.00 Merlin Entertainments PLC 467.00 -7.00 FTSE 350 Higher Yield (125) 3480.95 -0.48 3214.71 3497.63 3482.08 3406.36 4.93 0.40 50.18 98.07 5816.98 FT30 constituents and recent additions/deletions can be found at www.ft.com/ft30 Industrial Eng 27.71 FTSE 100 Index 7.82 Financial Services -7.15 Associated British Foods PLC 2686 -32.00 Mondi PLC 1512 -9.00 FTSE 350 Lower Yield (225) 3572.00 -0.26 3298.80 3581.44 3560.25 3591.59 1.98 2.16 23.43 42.21 3828.40 Tobacco 22.52 Aerospace & Defense 6.86 Automobiles & Parts -7.72 Astrazeneca PLC 5027 337.00 Morrison (Wm) Supermarkets PLC 184.30 -2.70 FTSE SmallCap (280) 4767.57 0.43 4402.92 4747.33 4698.37 4697.75 2.91 1.37 25.15 77.90 6649.93 Personal Goods 18.43 Industrials 5.93 Travel & Leisure -8.88 Aviva PLC 384.90 -7.10 National Grid PLC 1101 - FTSE SmallCap ex Inv Co (145) 4209.39 0.44 3887.43 4190.96 4126.95 4238.82 3.07 1.82 17.89 72.15 6167.43 FX: EFFECTIVE INDICES Gas Water & Multi 14.47 FTSE All{HY-}Share Index 5.79 Food Producers -9.05 Babcock International Group PLC 968.50 -4.50 Next PLC 4968 -37.00 FTSE All-Share (630) 3651.13 -0.35 3371.88 3663.95 3644.50 3618.45 3.52 0.88 32.36 74.36 5963.14 Industrial Transport 14.39 Nonlife Insurance 5.71 Financials -10.87 Bae Systems PLC 538.00 -1.50 Old Mutual PLC 205.80 -2.40 FTSE All-Share ex Inv Co (454) 3608.99 -0.39 3332.96 3623.07 3603.47 3583.27 3.56 0.87 32.10 74.26 3050.48 Jul 27 Jul 26 Mnth Ago Jul 28 Jul 27 Mnth Ago Utilities 13.13 Oil Equipment & Serv 5.52 Real Est Invest & Tr -10.98 Barclays PLC 146.50 -3.25 Paddy Power Betfair PLC 8495 -5.00 FTSE All-Share ex Multinationals (566) 1102.17 -0.50 843.63 1107.75 1094.76 1249.20 3.18 1.44 21.80 21.53 1915.27 Australia 91.44 91.72 89.99 Sweden 77.88 78.12 78.96 Software & Comp Serv 12.88 Equity Invest Instr 4.91 Banks -15.88 Barratt Developments PLC 429.40 -3.50 Pearson PLC 970.00 -2.00 FTSE Fledgling (104) 7944.49 0.13 7336.86 7934.15 7883.10 7978.89 2.70 1.53 24.10 116.65 14537.70 Canada 88.51 88.50 90.28 Switzerland 158.82 158.92 160.65 NON FINANCIALS Index 11.81 Construct & Material 3.80 Life Insurance -16.76 Berkeley Group Holdings (The) PLC 2686 7.00 Persimmon PLC 1683 2.00 FTSE Fledgling ex Inv Co (53) 10328.60 0.18 9538.62 10310.02 10215.52 10920.44 3.09 2.00 16.16 147.83 18366.86 Denmark 107.59 107.45 106.99 UK 79.59 79.59 81.84 Beverages 11.68 Mobile Telecomms 3.51 Fixed Line Telecomms -17.33 Bhp Billiton PLC 961.00 -3.30 Provident Financial PLC 2672 -28.00 FTSE All-Small (384) 3305.00 0.41 3052.22 3291.47 3258.19 3259.83 2.90 1.37 25.09 53.73 5918.49 Japan 146.52 147.92 150.37 USA 101.55 101.24 99.09 Consumer Goods 11.47 Food & Drug Retailer 2.12 General Retailers -17.90 BP PLC 426.65 -7.40 Prudential PLC 1307.5 -31.50 FTSE All-Small ex Inv Co Index (198) 3137.22 0.43 2897.27 3123.83 3076.94 3165.08 3.07 1.83 17.81 53.45 5823.21 New Zealand 115.75 115.28 115.52 Euro 88.56 88.34 87.50 Support Services 1.82 Real Est Invest & Se -22.33 British American Tobacco PLC 4782.5 36.00 Randgold Resources LD 8850 195.00 FTSE AIM All-Share Index (824) 754.19 0.39 696.51 751.23 746.27 749.16 1.70 0.64 92.49 6.10 818.63 Norway 85.95 86.04 86.03 British Land Company PLC 662.50 - Reckitt Benckiser Group PLC 7438 -6.00 FTSE Sector Indices Source: Bank of England. New Sterling ERI base Jan 2005 = 100. Other indices base average 1990 = 100. Bt Group PLC 414.35 12.25 RELX PLC 1456 50.00 Oil & Gas (16) 7679.13 -2.42 7091.79 7869.71 7892.34 6819.96 5.79 -0.67 -25.92 228.12 6667.38 Index rebased 1/2/95. for further information about ERIs see www.bankofengland.co.uk Bunzl PLC 2358 6.00 Rio Tinto PLC 2460.5 4.00 Oil & Gas Producers (9) 7357.58 -2.39 6794.84 7537.68 7564.74 6449.78 5.82 -0.69 -24.96 218.77 6607.15 Burberry Group PLC 1320 -24.00 Rolls-Royce Holdings PLC 831.00 99.00

Oil Equipment Services & Distribution (7)13811.26 -3.51 12754.91 14313.28 14011.26 17882.85 4.63 0.26 83.89 394.46 10444.49 FTSE GLOBAL EQUITY INDEX SERIES Capita PLC 935.00 -40.00 Royal Bank Of Scotland Group PLC 188.00 -4.10 Basic Materials (27) 4115.62 0.50 3800.84 4095.10 4052.12 3932.10 3.34 0.22 133.78 53.46 4107.28 Carnival PLC 3623 29.00 Royal Dutch Shell PLC 2051.5 -53.50 Chemicals (7) 12744.81 -0.46 11770.03 12804.22 12741.97 11953.45 2.33 2.08 20.68 239.20 11186.50 Jul 28 No of US $ Day Mth YTD Total YTD Gr Div Jul 28 No of US $ Day Mth YTD Total YTD Gr Div Centrica PLC 241.50 -0.50 Royal Dutch Shell PLC 1984.5 -59.00 Forestry & Paper (1) 17771.34 -0.59 16412.10 17877.12 17994.66 18135.70 2.63 2.97 12.80 347.94 18873.32 Regions & countries stocks indices % % % retn % Yield Sectors stocks indices % % % retn % Yield Coca-Cola Hbc AG 1572 -3.00 Royal Mail PLC 505.00 -6.00 Industrial Metals & Mining (2) 1646.87 1.29 1520.91 1625.87 1598.06 1091.48 0.35 2.79 103.14 0.00 1437.20 FTSE Global All Cap 7717 467.47 0.1 8.8 3.7 650.12 5.4 2.5 Oil & Gas 151 340.27 -0.8 -0.8 11.6 531.08 13.9 3.6 Compass Group PLC 1434 -32.00 Rsa Insurance Group PLC 495.30 -2.70 Mining (17) 11277.08 0.68 10414.56 11200.43 11064.66 10839.57 3.53 -0.05 -564.68 134.88 5890.14 FTSE Global All Cap 7079 462.39 0.3 7.3 -0.3 624.68 0.2 2.5 Oil & Gas Producers 110 318.47 -0.7 -0.7 11.6 506.18 14.0 3.8 Crh PLC 2281 -6.00 Sabmiller PLC 4324 -56.00 FTSE Global Large Cap 1425 410.80 0.1 8.5 3.0 585.09 4.9 2.7 Oil Equipment & Services 31 313.25 -1.1 -1.1 12.9 444.94 15.0 3.2 Industrials (117) 4717.57 0.38 4356.75 4699.86 4653.59 4505.41 2.42 1.07 38.49 69.54 4763.02 Dcc PLC 6740 -5.00 Sage Group PLC 714.00 12.00 Construction & Materials (15) 5685.40 -0.20 5250.56 5696.68 5596.14 5180.94 2.23 0.04 1076.39 86.07 5906.93 FTSE Global Mid Cap 1642 631.73 -0.1 9.5 4.9 836.56 6.4 2.1 Basic Materials 256 394.46 0.9 0.9 12.3 588.81 14.3 2.8 Diageo PLC 2192 54.00 Sainsbury (J) PLC 223.60 -2.30 Aerospace & Defense (9) 4874.76 4.04 4501.92 4685.25 4640.31 4524.90 2.42 -0.44 -94.17 71.61 5122.18 FTSE Global Small Cap 4650 664.14 0.1 9.6 5.9 852.78 7.2 2.0 Chemicals 125 591.14 0.6 0.6 -0.1 887.04 2.0 2.8 Direct Line Insurance Group PLC 347.90 -1.20 Schroders PLC 2531 -109.00 General Industrials (6) 4041.69 -1.20 3732.57 4090.60 4090.47 3613.19 2.93 1.19 28.64 48.86 4457.95 FTSE All-World 3067 272.61 0.1 8.7 3.4 400.19 5.1 2.6 Forestry & Paper 16 207.59 -0.6 -0.6 5.9 342.19 8.7 3.7 Dixons Carphone PLC 346.10 -6.30 Severn Trent PLC 2478 - Electronic & Electrical Equipment (10) 6137.50 -0.13 5668.07 6145.31 6021.88 5333.40 2.03 1.80 27.35 74.29 5508.64 FTSE World 2542 483.00 0.1 8.7 3.3 951.74 5.0 2.6 Industrial Metals & Mining 62 324.23 0.9 0.9 26.0 483.00 27.5 2.2 Easyjet PLC 1017 5.00 Shire PLC 4818 -88.00 Industrial Engineering (13) 9791.74 -1.40 9042.83 9930.87 9783.93 8746.26 2.71 1.30 28.40 165.62 11700.97 FTSE Global All Cap ex UNITED KINGDOM In 7391 483.41 0.0 8.5 4.3 662.68 6.0 2.4 Mining 53 493.03 2.1 2.1 52.4 733.14 54.6 2.9 Experian PLC 1476 4.00 Sky PLC 904.00 16.50 Industrial Transportation (8) 4588.93 -0.36 4237.94 4605.32 4571.86 4361.74 3.76 1.02 26.08 123.38 3972.02 FTSE Global All Cap ex USA 5769 420.64 0.3 8.9 0.8 623.81 3.0 3.1 Industrials 535 319.67 0.1 0.1 6.8 450.94 8.5 2.3 Fresnillo PLC 1902 55.00 Smith & Nephew PLC 1227 -73.00 Support Services (56) 6872.73 -0.22 6347.07 6887.67 6830.51 6848.68 2.28 1.78 24.59 96.41 6999.38 FTSE Global All Cap ex JAPAN 6453 478.67 0.1 9.2 4.3 671.83 6.1 2.5 Construction & Materials 111 462.39 0.7 0.7 10.3 683.70 12.2 2.0 Gkn PLC 288.00 -7.90 Smiths Group PLC 1265 -1.00 FTSE Global All Cap ex Eurozone 7072 485.62 0.0 8.5 4.7 662.61 6.2 2.4 Aerospace & Defense 26 533.37 0.6 0.6 5.3 745.25 6.8 2.3 Consumer Goods (39) 20394.22 0.34 18834.38 20325.97 20389.77 17531.49 2.67 1.84 20.37 281.43 14602.55 Glaxosmithkline PLC 1699.5 3.00 Sse PLC 1541 -85.00 FTSE Developed 2095 438.11 0.0 8.5 2.7 613.89 4.4 2.5 General Industrials 55 231.51 -0.2 -0.2 6.7 351.32 8.5 2.5 Automobiles & Parts (1) 6768.13 -2.67 6250.48 6953.79 7073.64 7557.75 3.02 1.29 25.59 136.30 6354.53 Glencore PLC 185.70 -4.00 St. James's Place PLC 920.00 2.50 FTSE Developed All Cap 5684 460.91 0.0 8.7 3.0 638.54 4.7 2.5 Electronic & Electrical Equipment 69 324.99 0.9 0.9 2.7 421.17 3.8 1.9 Beverages (6) 17281.15 0.84 15959.40 17137.38 17281.49 14211.12 2.25 1.58 28.14 113.34 11856.26 Hammerson PLC 551.00 -1.50 Standard Chartered PLC 605.60 -24.50 FTSE Developed Large Cap 899 404.06 0.1 8.4 2.3 574.23 4.1 2.6 Industrial Engineering 104 593.86 0.6 0.6 10.8 826.33 12.8 2.4 Food Producers (8) 8117.91 -0.03 7497.01 8120.38 8081.68 8284.82 2.04 1.84 26.64 94.31 6874.44 Hargreaves Lansdown PLC 1272 -24.00 Standard Life PLC 292.20 -5.30 FTSE Developed Europe Large Cap 223 314.28 0.4 10.6 -4.8 510.00 -1.9 3.7 Industrial Transportation 95 536.25 -0.5 -0.5 8.3 755.22 10.0 2.5 Household Goods & Home Construction (15)13693.58 -0.12 12646.23 13709.62 13497.66 13194.53 2.26 2.67 16.54 153.86 9419.26 Hikma Pharmaceuticals PLC 2620 59.00 Taylor Wimpey PLC 154.20 -0.40 FTSE Developed Europe Mid Cap 308 489.23 0.7 12.9 -4.6 717.17 -2.3 2.8 Support Services 75 287.46 -0.7 -0.7 4.2 388.81 5.5 1.9 Leisure Goods (1) 5137.43 0.00 4744.50 5137.43 5137.43 5400.95 3.32 1.50 20.11 129.52 4453.30 HSBC Holdings PLC 490.90 -6.80 Tesco PLC 156.20 -0.80 FTSE Dev Europe Small Cap 705 685.60 1.1 12.5 -6.3 974.93 -4.5 2.6 Consumer Goods 423 431.64 -0.4 -0.4 3.6 623.58 5.3 2.4 Personal Goods (6) 26523.16 -0.19 24494.54 26573.37 26667.55 23072.16 2.60 3.41 11.27 383.12 17389.35 Imperial Brands PLC 3952 6.00 Travis Perkins PLC 1554 -11.00 FTSE North America Large Cap 291 461.64 0.0 8.0 5.8 615.64 7.1 2.2 Automobiles & Parts 103 350.53 1.3 1.3 -8.2 488.42 -6.3 2.9 Tobacco (2) 55866.13 0.58 51593.23 55546.08 56098.96 44362.44 3.34 1.18 25.29 1163.34 34866.02 Informa PLC 729.50 -21.50 Tui AG 962.50 25.50 FTSE North America Mid Cap 394 698.52 -0.6 9.2 9.1 870.78 10.1 1.7 Beverages 48 594.03 -1.6 -1.6 3.9 867.64 5.2 2.5 Health Care (19) 10713.09 1.39 9893.70 10566.64 10470.18 9471.70 3.11 0.41 77.80 211.12 7996.60 Intercontinental Hotels Group PLC 3003 -14.00 Unilever PLC 3526.5 1.50 FTSE North America Small Cap 1478 704.89 -0.1 10.1 9.9 855.04 10.9 1.7 Food Producers 104 606.05 -0.8 -0.8 8.5 902.69 10.4 2.1 Health Care Equipment & Services (8) 7696.27 -3.50 7107.62 7975.51 7980.58 6830.15 1.43 2.01 34.86 64.89 6584.39 International Consolidated Airlines Group S.A. 409.30 -7.10 United Utilities Group PLC 1019 -1.00 FTSE North America 685 309.84 -0.1 8.2 6.3 423.22 7.6 2.1 Household Goods & Home Construction 47 421.18 -0.4 -0.4 4.9 605.09 6.6 2.3 Pharmaceuticals & Biotechnology (11)14563.18 1.87 13449.32 14295.47 14151.08 12874.18 3.27 0.35 88.03 303.96 9671.50 Intertek Group PLC 3680 26.00 Vodafone Group PLC 229.75 -3.10 FTSE Developed ex North America 1410 220.67 0.3 9.1 -2.7 351.41 -0.4 3.2 Leisure Goods 31 153.85 -0.3 -0.3 16.7 199.02 17.2 1.3 Intu Properties PLC 296.90 2.40 Whitbread PLC 3850 36.00 Consumer Services (93) 4629.99 0.01 4275.86 4629.68 4582.69 5005.12 2.63 1.84 20.63 77.09 4248.81 FTSE Japan Large Cap 176 313.53 0.3 4.4 -4.3 396.92 -3.2 2.3 Personal Goods 79 618.20 0.0 0.0 3.4 848.56 4.8 2.0 Food & Drug Retailers (7) 2646.08 -0.77 2443.70 2666.52 2627.53 3262.63 1.57 2.48 25.78 29.93 3058.89 Itv PLC 195.20 -2.10 Wolseley PLC 4163 -3.00 FTSE Japan Mid Cap 307 487.85 0.3 2.7 -0.8 595.38 0.3 1.9 Tobacco 11 1340.14 -1.3 -1.3 10.1 2672.02 12.4 3.5 General Retailers (31) 2461.26 0.15 2273.01 2457.61 2424.44 3141.51 3.05 2.15 15.22 41.81 2741.91 Johnson Matthey PLC 3242 -1.00 Worldpay Group PLC 291.50 -0.60 FTSE Global wi JAPAN Small Cap 781 538.01 0.2 3.8 2.2 678.88 3.4 2.1 Health Care 177 466.53 0.2 0.2 1.8 658.73 3.2 1.9 Media (21) 7690.33 0.54 7102.14 7649.26 7536.95 7518.56 2.78 1.39 25.91 135.65 4624.21 Kingfisher PLC 334.00 2.80 WPP PLC 1695 3.00 FTSE Japan 483 131.44 0.3 4.0 -3.6 186.89 -2.5 2.3 Health Care Equipment & Services 63 721.97 -0.7 -0.7 11.1 832.87 11.8 1.0 Travel & Leisure (34) 8102.28 -0.33 7482.58 8128.96 8103.15 8366.23 2.58 1.99 19.42 138.05 7511.08 Land Securities Group PLC 1089 -6.00 FTSE Asia Pacific Large Cap ex Japan 549 577.38 0.1 9.2 6.7 881.34 8.9 3.2 Pharmaceuticals & Biotechnology 114 343.72 0.5 0.5 -1.2 505.60 0.4 2.2 Telecommunications (6) 3848.21 0.19 3553.88 3840.95 3829.11 4170.17 4.35 -0.25 -93.50 85.24 4123.09 FTSE Asia Pacific Mid Cap ex Japan 420 793.14 0.2 8.6 6.2 1163.64 8.0 2.8 Consumer Services 392 397.97 -0.3 -0.3 2.1 522.78 3.3 1.8 Fixed Line Telecommunications (4) 4805.31 2.86 4437.78 4671.71 4640.05 5452.24 3.29 1.87 16.23 11.68 4178.02 FTSE Asia Pacific Small Cap ex Japan 1443 517.43 0.0 6.6 3.6 747.28 5.2 2.6 Food & Drug Retailers 54 301.39 -0.5 -0.5 0.5 412.42 1.8 1.9 UK STOCK MARKET TRADING DATA Mobile Telecommunications (2) 5158.36 -1.28 4763.82 5225.44 5219.96 5438.80 4.96 -1.05 -19.14 172.86 4991.66 FTSE Asia Pacific Ex Japan 969 457.99 0.1 9.1 6.7 742.77 8.8 3.1 General Retailers 123 551.88 -0.3 -0.3 3.6 706.22 4.5 1.6 Utilities (7) 9416.99 -0.99 8696.74 9511.21 9543.40 8238.96 4.31 1.72 13.47 303.54 10384.07 FTSE Emerging All Cap 2033 632.57 0.4 9.5 10.7 921.26 13.1 3.0 Media 84 299.61 0.3 0.3 3.6 395.02 4.9 2.0 Jul 28 Jul 27 Jul 26 Jul 25 Jul 22 Yr Ago Electricity (2) 9073.10 -4.81 8379.15 9531.34 9542.90 8734.22 5.46 1.47 12.48 484.22 12748.21 FTSE Emerging Large Cap 526 595.73 0.4 9.7 10.6 873.78 13.1 3.0 Travel & Leisure 131 377.86 -0.7 -0.7 -1.0 501.31 0.2 1.9 SEAQ Bargains 5067.00 4260.00 4794.00 4332.00 4332.00 4332.00 Gas Water & Multiutilities (5) 8980.21 -0.04 8293.36 8983.71 9018.99 7670.38 4.04 1.80 13.73 245.09 9897.62 FTSE Emerging Mid Cap 446 814.39 0.4 10.4 14.7 1177.63 16.9 2.7 Telecommunication 91 170.44 0.2 0.2 8.2 307.92 11.1 3.9 Order Book Turnover (m) 120.62 69.73 150.94 70.92 70.92 70.92 Financials (288) 4079.62 -1.35 3767.59 4135.36 4091.26 4907.84 4.11 1.52 16.03 106.47 3657.29 FTSE Emerging Small Cap 1061 659.94 0.5 7.7 7.2 922.60 9.0 2.8 Fixed Line Telecommuniations 42 146.99 0.6 0.6 10.9 291.44 14.3 4.3 Order Book Bargains 1026244.00 822987.00 763123.00 771023.00 771023.00 771023.00 Banks (11) 3126.33 -2.56 2887.21 3208.59 3167.70 4424.54 5.27 1.00 18.95 102.10 2225.27 FTSE Emerging Europe 112 295.52 0.2 4.0 10.6 448.18 14.3 4.2 Mobile Telecommunications 49 172.20 -0.3 -0.3 4.5 280.62 6.7 3.4 Order Book Shares Traded (m) 1999.00 1461.00 1305.00 1296.00 1296.00 1296.00 Nonlife Insurance (10) 3011.44 -0.46 2781.11 3025.35 3024.68 2673.44 2.74 2.29 15.98 53.63 5158.15 FTSE Latin America All Cap 236 772.99 -0.2 13.3 29.1 1158.95 31.1 3.0 Utilities 164 265.22 -0.8 -0.8 11.8 497.63 14.5 3.6 Total Equity Turnover (£m) 4453.93 3633.60 3246.84 3288.34 3288.34 3288.34 Life Insurance/Assurance (10) 6646.56 -1.77 6138.20 6766.11 6651.58 8034.93 4.44 1.53 14.76 201.97 6276.59 FTSE Middle East and Africa All Cap 219 707.43 1.1 17.1 14.4 1072.61 16.3 2.8 Electricity 111 288.67 -0.9 -0.9 11.5 535.44 14.1 3.6 Total Mkt Bargains 1116118.00 910701.00 838169.00 832171.00 832171.00 832171.00 Index- Real Estate Investment & Services (20) 2463.21 0.59 2274.81 2448.86 2405.18 3250.29 2.68 3.62 10.30 38.38 6423.86 FTSE Global wi UNITED KINGDOM All Cap In 326 312.87 0.5 13.0 -4.9 505.50 -2.8 3.6 Gas Water & Multiutilities 53 282.73 -0.6 -0.6 12.3 544.76 15.2 3.7 Total Shares Traded (m) 5150.00 5429.00 3447.00 4523.00 4523.00 4523.00 Real Estate Investment Trusts (28) 2676.20 0.13 2471.52 2672.65 2658.92 3066.64 3.52 4.36 6.53 59.18 3231.89 FTSE Global wi USA All Cap 1948 532.45 -0.1 8.6 6.2 690.41 7.5 2.0 Financials 690 191.51 0.2 0.2 -4.6 304.16 -2.5 3.3 † Excluding intra-market and overseas turnover. *UK only total at 6pm. ‡ UK plus intra-market turnover. (u) Unavaliable. General Financial (33) 7525.73 -1.47 6950.13 7638.01 7536.93 8068.84 3.46 1.88 15.40 178.66 8368.49 FTSE Europe All Cap 1423 364.27 0.5 10.9 -4.5 572.12 -1.8 3.4 Banks 246 161.63 0.3 0.3 -9.4 274.71 -7.0 3.9 (c) Market closed. Equity Investment Instruments (176) 8211.17 0.60 7583.14 8161.83 8139.05 7768.53 2.56 0.97 40.32 125.05 4390.89 FTSE Eurozone All Cap 645 339.59 0.8 11.4 -5.3 540.21 -2.6 3.4 Nonlife Insurance 68 209.53 0.2 0.2 -2.3 297.69 -0.3 2.6 Non Financials (342) 4463.82 -0.06 4122.41 4466.37 4449.68 4152.56 3.35 0.65 45.90 83.53 6382.56 FTSE RAFI All World 3000 3041 5590.26 0.1 9.3 3.0 7186.04 5.1 3.2 Life Insurance 51 177.25 0.3 0.3 -10.6 275.17 -8.5 3.4 Technology (18) 1969.06 0.50 1818.46 1959.19 1951.46 1352.43 1.11 1.64 54.60 14.65 2488.77 FTSE RAFI US 1000 999 9465.59 -0.4 8.4 7.0 12134.62 8.5 2.4 Financial Services 152 218.92 0.3 0.3 -1.6 295.55 -0.2 2.2 All data provided by Morningstar unless otherwise noted. All elements listed are indicative and believed Software & Computer Services (12) 2167.10 1.58 2001.35 2133.35 2119.00 1671.36 1.73 1.60 36.12 26.40 2883.50 FTSE EDHEC-Risk Efficient All-World 3067 331.63 -0.2 8.6 5.1 452.21 6.6 2.2 Technology 188 185.32 0.9 0.9 6.3 223.57 7.6 1.8 accurate at the time of publication. No offer is made by Morningstar or the FT. The FT does not warrant nor Technology Hardware & Equipment (6) 2444.20 -0.22 2257.26 2449.49 2444.37 1539.00 0.70 1.71 83.71 10.68 2825.88 FTSE EDHEC-Risk Efficient Developed Europe 531 270.83 0.5 11.9 -3.0 403.95 -0.9 2.7 Software & Computer Services 92 328.17 0.1 0.1 5.8 379.12 6.5 1.1 guarantee that the information is reliable or complete. The FT does not accept responsibility and will not be Technology Hardware & Equipment 96 135.24 1.9 1.9 7.0 168.73 8.8 2.6 liable for any loss arising from the reliance on or use of the listed information. Hourly movements 8.00 9.00 10.00 11.00 12.00 13.00 14.00 15.00 16.00 High/day Low/day Alternative Energy 10 99.12 0.4 0.4 -4.1 132.84 -3.0 1.4 For all queries e-mail [email protected] FTSE 100 6736.19 6746.82 6743.16 6731.72 6736.63 6735.42 6740.28 6742.02 6734.00 6761.98 6720.16 Real Estate Investment & Services 102 292.82 0.0 0.0 3.5 476.12 5.5 2.6 FTSE 250 17245.46 17354.44 17339.36 17299.47 17371.39 17343.58 17351.53 17325.51 17290.24 17390.22 17237.97 The FTSE Global Equity Series, launched in 2003, contains the FTSE Global Small Cap Indices and broader FTSE Global All Cap Indices (large/mid/small cap) as well as the enhanced FTSE All-World index Series (large/ Data provided by Morningstar | www.morningstar.co.uk FTSE SmallCap 4745.23 4762.91 4762.20 4765.45 4765.15 4766.25 4768.68 4769.95 4763.76 4770.65 4744.43 mid cap) - please see www.ftse.com/geis. The trade names Fundamental Index® and RAFI® are registered trademarks and the patented and patent-pending proprietary intellectual property of Research Affiliates, LLC FTSE All-Share 3656.96 3665.73 3663.61 3657.33 3661.89 3660.46 3662.92 3662.85 3657.98 3671.80 3650.49 (US Patent Nos. 7,620,577; 7,747,502; 7,778,905; 7,792,719; Patent Pending Publ. Nos. US-2006-0149645-A1, US-2007-0055598-A1, US-2008-0288416-A1, US-2010- 0063942-A1, WO 2005/076812, WO 2007/078399 A2, Time of FTSE 100 Day's high:07:30:45 Day's Low07:05:45 FTSE 100 2010/11 High: 6750.43(27/07/2016) Low: 5536.97(11/02/2016) WO 2008/118372, EPN 1733352, and HK1099110). ”EDHEC™” is a trade mark of EDHEC Business School As of January 2nd 2006, FTSE is basing its sector indices on the Industrial Classification Benchmark - please see Time of FTSE All-Share Day's high:07:46:00 Day's Low07:07:00 FTSE 100 2010/11 High: 3663.95(27/07/2016) Low: 3046.53(11/02/2016) www.ftse.com/icb. For constituent changes and other information about FTSE, please see www.ftse.com. © FTSE International Limited. 2013. All Rights reserved. ”FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. Further information is available on http://www.ftse.com © FTSE International Limited. 2013. All Rights reserved. ”FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. † Sector P/E ratios greater than 80 are not shown. For changes to FTSE Fledgling Index constituents please refer to www.ftse.com/indexchanges. ‡ Values are negative. UK RIGHTS OFFERS UK COMPANY RESULTS UK RECENT EQUITY ISSUES Amount Latest Company Turnover Pre-tax EPS(p) Div(p) Pay day Total Issue Issue Stock Close Mkt Issue paid renun. closing Anglo American Int 9936 11558 364L 1920L 0.63L 2.34L - 32.917 - - 85.9 date price(p) Sector code Stock price(p) +/- High Low Cap (£m) price up date High Low Stock Price p +or- AstraZeneca Int 11718 12364 693 1336 0.51 0.99 90 90.419 Sep 12 283 285 07/27 11.00 WideCells Group PLC 11.38 - 13.00 11.00 0.0 95p Nil 23-08-16 678.00 662.28 Melrose Industries PLC 676.50 5.50 BAE Systems Int 8278 8001 528 508 12.9 12.3 8.6 8.4 Nov 30 21.032 20.7 07/26 151.00 SEC SpA 152.00 -1.50 155.00 152.00 1857.7 British American Tobacco Int 6669 6398 3426 3497 143.8 142.4 51.3 49.4 Sep 28 155.332 150 07/08 161.00 AIM DAR Dorcaster PLC 163.50 0.00 168.00 163.00 1635.0 BT Group 1st 5775 4360 717 632 5.9 6.1 - -- - - 06/21 50.00 AIM COM Comptoir Group PLC 58.50 0.80 70.90 50.00 5616.0 Centrica Int 13380 15451 1625 1208 22.2 21.1 3.6 3.57 Nov 24 11.984 11.97 Diageo Pre 10485 10813 2858 2933 89.5 95 36.6 34.9 Oct 6 59.2 56.4 Informa Int 647.7 618.8 98.9 118.9 13.8 15 6.8 6.55 Sep 9 20.276 19.45 Intu Properties Int 285.5 281.9 64.8 265.6 3.9 20.4 4.6 4.6 Nov 22 13.651 13.7 Lloyds Banking Group Int 18430 11805 2454 1193 2.3 1 0.85 0.75 Sep 28 2.342 1.5 Merlin Entertainments Int 573 544 50 36 3.6 2.5 2.2 2.1 Sep 19 6.576 6.3 RELX Int 3257 2964 733 601 26.9 21 10.25 7.4 Aug 26 32.429 26.4 Rolls-Royce Holdings Int 6462 6370 2150L 310 96.72L 19.51 - -- - - Royal Dutch Shell Int 106969 138108 319 11411 0.22 1.34 47 48.622 Sep 19 189.5 191.7

Figures in £m. Earnings shown basic. Figures in light text are for corresponding period year earlier. §Placing price. *Intoduction. ‡When issued. Annual report/prospectus available at www.ft.com/ir For more information on dividend payments visit www.ft.com/marketsdata For a full explanation of all the other symbols please refer to London Share Service notes.

JULY 29 2016 Section:Stats Time: 28/7/2016 - 18:26 User: whiteg Page Name: MARKET DATA 1, Part,Page,Edition: EUR, 16, 1 20 ★ FINANCIALTIMES Friday 29 July 2016

MARKETS&INVESTING

Capital markets Capital markets Yield refugees seek a safe US energy junk bonds under pressure way into Chinese debt

Investors fleeing the yield- its published financial investors are demanding to own junk energy bonds — the difference in yield spread to other industries. Standard & Prices drop alongside % parched debt markets of figures, says Mr Qi. energydebt. on a corporate bond and a similarly 24 Poor’sexpects5.3percentofthecompa- the developed world are Nevertheless, the idea of crude’s retreat and the rise Bond investors view the recent maturing US Treasury — have histori- Returns in nies it rates in junk territory to default declineinhigh-yieldasahealthycorrec- cally been negative, according to Marty high-yield energy by March 2017, roughly triple the level being forced to explore snapping up pieces of in sector delinquencies debt this year, some unfamiliar frontiers, corporate Chinese debt is tion after the sector has returned 24 per Fridson,chiefinvestmentofficerofLeh- including a 52% oftwoyearsbefore. including China’s huge not proving to be an easy cent this year, including a 52 per cent mann Livian Fridson Advisors. The gain since February Portfolio managers said they also had domestic bond market. sell overseas. For one ERICPLATT —NEWYORK gainfromitsFebruarytrough. higher the price of oil, the lower the a better view of which companies would Anacceleratingdropinoilpricesthreat- “It shows the market is focused on spread an energy company must pay to survive $40 or $50 a barrel oil now than But how much exoticism thing, the depreciation of % is acceptable as a trade-off the renminbi against the ens a five-month rally in high-yield broad fundamentals,” said Henry Pea- sellitsdebt. 5.3 they did in the first quarter, when bond energy bonds, reigniting the relation- body, a portfolio manager with Eaton “The real question is at what point Proportion of pricesswungviolently. for higher yields? Chinese US dollar since mid-April issuers in the government bonds, backed has taken the shine off ship between the two asset classes as Vance. “The market is not terribly wor- will you see the risk premium actually segment that S&P “When you think back to February, if by strong ratings from renminbi-denominated crude approaches bear market terri- ried about this pullback and there is a go up in energy and on the high-yield expects to default you watched CNBC for eight hours at international rating investments. tory. massivereachforyield.” index as a whole?,” Mr Fridson said. by March 2017 your trading desk you would see red agencies, are considered For another, there is Prices for high-yield energy bonds Chesapeake bonds maturing in 2021 “Whatwillittaketodothat?$40[abar- headlines all day on oil hitting new safe enough by some. The concern over the lack of have fallen for eight consecutive days — havefallenfrom71centsonthedollarin rel]maybeareasonablenumber.” lows,”said Daniel Kelsh, a fixed-income 10-year bond is yielding transparency among following a decline in the price of US oil mid-July to 68.5 cents yesterday, while Junk debt weakness has spread strategist with UBS Wealth Manage- 2.82 per cent, eclipsing the Chinese corporations and towards $41 a barrel, its lowest level oil-rig operator Transocean has seen its beyondtheenergyspace,withthebroad ment. welter of negative-yielding the failing finances of sinceApril. debt due in 2021 sliding to 84.7 cents market weakening for the past three “Andbecauseofthat,therehasbeena issues around the many local governments, Risingstocksofgasoline,alongsidean from 89 cents on the dollar over the days. little bit of a breakdown in how people developed world. which are prevalent owners increase in the number of rigs drilling sameperiod,accordingtoMarketAxess. Delinquencies in the energy sector think about risk. It doesn’t appear to be But how about buying a of debt-issuing companies. for oil has increased pressure on crude Correlations between oil prices and have climbed rapidly since the year capturing the imaginations now the piece of the $2tn in debt “What you are likely prices and lifted the risk premium the risk premium or spread on junk began, but have yet to meaningfully samewayasitdid.” issued by one of the going to see is selective world’s most indebted defaults over the coming corporate sectors as years,” says Peter Kinsella, default rates surge and head of emerging market domestic credit rating research at Commerzbank Analysis. Commodities agencies continue to claim in London. “Effectively this that everything is just fine? problem is so large that Jeffrey Qi, portfolio you are likely to see a manager at E-Fund, one of zombiefication of the Crude data being tapped to divine oil prices China’s largest asset state-owned enterprise managers with $150bn sector in China, with huge under management, says amounts of debt and non- there are attractive returns performing debt.” to be had for yield When it comes to the Traders are tracking five Brent crude refugees from Europe and idea of buying bonds indicators to analyse the  per barrel  elsewhere as long as they issued by local government   play by Chinese rules. financing vehicles (LGFVs) market’s next direction “There have been — companies that raise  several credit events in debt to invest in local DAVIDSHEPPARDANDNEILHUME  China this year, but our government projects — Mr  fund has not been hit by Kinsella gives clear Since crude prices hit a year-high above any of them,” says Mr Qi. warnings. $52 a barrel in June they have slipped  The company’s RMB Bond “Local governments almost 20 per cent, leaving them on the  Fund had returned an have an issue because cusp of a new bear market and heaping       annualised 7.1 per cent most of their revenue more pressure on oil companies and since inception in 2012 and streams were derived from major producing countries that had US weekly gasoline stocks an annualised 3.5 per cent property sales and that is hopedtheworstoftheroutwasover. Million barrels so far this year, he said. going to be an issue,” he Here are five things traders are track- About 80 per cent of the adds. ingtoseeiftheslidecontinues—orifthe  The yields offered by sell-offisjustablipinarecovery.  local government bonds Supplyanddemand are somewhat higher than those on central Twoyearssinceoilbeganitsprecipitous  government bonds but decline from above $100 a barrel, opinions diverge on troughing below $30 in January, the  whether or not local market appears to be edging closer Average over period governments and their towardsbalance.  subsidiary LGFVs enjoy an High-cost supplies are declining,       demand has been boosted, and concern implicit guarantee from US oil rig count Beijing. about the impact of investment cuts on $2tn Anthony Chan, Asian future supplies have all helped the mar-  Debt issued by China’s sovereign strategist at ketrecover. corporate sector; 99.5% AllianceBernstein in Hong But the process of moving back to a  has been rated triple A Kong, expects Chinese balanced market was never going to be by national agencies bonds to be included in smooth. This summer has disappointed  international bond indices the more bullish analysts as the two- fund is invested in at an unspecified date, year-old glut of crude has become a glut  corporate bonds. after which overseas funds inproducts—thegasoline,dieselandjet He puts the performance may flow in. fuelthatconsumersuse.  down to a healthy “Mostly government Stocks of both crude and products       scepticism towards China’s bonds are attracting that have built up over the past two Sources: EIA; Bloomberg; Thomson Panglossian domestic investors,” Mr Chan says. years will need to be worked off before Reuters Datastream credit rating agencies, “For corporate bonds, they therecanbeamoresustainedrecovery. tration recently lowered its gasoline duction will bottom at 8.1m barrels per which have awarded an need to have a more Gasoline Pricing Rigcounts investment grade rating to meaningful rating because pressures: demandgrowthforecastfortheremain- day in September before edging up to 99.5 per cent of all rated now the domestic rating The recent decline in oil prices has sev- refiners may der of the year to 130,000 barrels per When Saudi Arabia took its fateful deci- 8.3m b/d in November and December. publicly issued debt agencies all give triple A.” eral drivers but one stands out: gasoline decide to buy day,or 1.5 per cent, from 220,000 previ- sion in December 2014 not to bolster Oilmajorsforecastasimilartrend. outstanding. Mr Chan also says those demand has underwhelmed and stocks less crude if ously. prices by reducing production it did so ofthefuelaretoohigh. with a clear aim in mind — to rebalance Hedgefundpositioning “We have our own corporate bonds that enjoy gasoline Floatingstorage internal rating system for an implicit government In the US — the world’s most impor- demand the market by driving out higher-cost After amassing a near-record bet on the the companies that we guarantee are fairly tant gasoline market, accounting for remains low The persistence of the oil glut has seen supplies. That put US shale producers, recovery in oil prices between January invest in,” Mr Qi adds. attractive at a time when almost one in every nine barrels of oil Andrey Rudakov/Bloomberg some traders storing crude oil and amongothers,firmlyinthecrosshairs. and May, funds have either started “There is a big difference default risks are rising. globally—ahugesurplusisoverhanging refined fuels such as gasoline and diesel From that date, oil market partici- taking profits or placed more bets the between our ratings and Deciding which companies the market as the summer driving sea- aboardtankersatsea. pants have closely followed the weekly otherway. those of the domestic — beyond a phalanx of 106 son draws to a close. Stocks are 12 per They can partially finance the storage US rig count survey complied by Baker In early May, hedge funds held the ratings companies.” centrally owned state centhigherthanayearago. by selling the oil forward through the Hughes to assess the pace of the rebal- equivalent of almost 420m barrels of E-Fund’s internal ratings enterprises — can claim This is putting pressure on prices and futures market where it currently ancingprocess. Brent through futures and options con- are much less sparing of such a guarantee is, refining margins. If it continues, refin- fetches a higher price thanks to a struc- Sincehittingaseven-yearlowof316in tracts. Net longs — the difference corporate egos than those however, a nuanced ers, who had been running hard for ture known as contango that is preva- May, the number of rigs drilling for oil betweenbetsonhigherandlowerprices of its rating agency business. muchofthepast18monthsaslowprices lentwhenthemarketisoversupplied. has crept higher, rising to 371. Last — have since fallen to less than 300m counterparts, with many Mr Qi is confident of the buoyed demand, may decide to buy less Traders and analysts say this has week’s gain of 14 was the biggest barrelsequivalent. “junk” ratings awarded China bond market’s crude. That, many fear, is delaying the largely been driven by necessity, with increasesinceDecember.Sincecrudeoil In the US benchmark West Texas according to a 22-notch performance. “We should rebalancingofthemarket. onshore storage already very full or rose above $50 a barrel in June, drillers Intermediate there has been a similar scale. The fund’s skill lies in perform a lot better than This new downstream threat has also locked up by rival traders in long-term haveput55rigstowork. pattern, with net longs declining by using on-the-ground bond funds concentrated sharpened attention on demand, which deals. Indeed, outside of a few isolated If maintained, the increase in drilling 100mbarrelssincelateApril. research to assess a on Europe this year.’’ may now not be growing as quickly as geographic pockets, floating storage has activity should stop the decline in US oil “Inputs on the speculative side are company’s viability beyond James Kynge manypeopleassumed. declined in the past month as global production.TheUSEnergyInformation certainly more bearish than bullish,” The US Energy Information Adminis- suppliesstarttorecede. Administration now thinks crude pro- sayanalystsatJBCEnergyinVienna.

Commodities Equities Auto trade steers platinum metals to year high Tech Pro plunges 90% on short-seller attack

HENRYSANDERSON increasingly supportive backdrop for platinum and palladium has fallen in JENNIFERHUGHES —HONGKONG California-based Glaucus Research a margin call. The company did not investing in precious metals, with US the first half of the year, with exports released a report during Hong Kong respondtorequestsforcommentonthe Platinum has eclipsed gold’s perform- Shares in Tech Pro Technology Devel- equities at record levels and a growing from South Africa lagging, according to morning trade claiming Tech Pro had latemove. ance this year and palladium is close to opment crashed almost 90 per cent in universeofbondswithnegativeyields. minerAngloAmerican. overstated profits and inflated acquisi- The scale of the fall was probably doing so, after demand from the car Hong Kong yesterday following an “An environment where risk appetite Recoveryofplatinumfromend-oflife tion costs. Its shares should be worth made worse by its late-day timing, leav- industry and investor appetite sent the attack by a short seller, in one of the isup,equitiesareat . . . highsandgoldis automotive catalysts also continued to zero,theshortsellersaid. ing the company or the exchange with two precious metals on a blistering biggest one-day successes for such holding well above $1,300 is conducive beweak,theminersaidyesterday. Tech Pro’s board “vigorously denied” littletimeinwhichtoreact. rallythismonth. investors who stand to profit from forPGMs[platinumgroupmetals]todo For palladium the market will proba- the allegations in a statement to the Hong Kong rules call for a company sharepricefalls. Palladiumissetforitsbestmonthlyper- well,”said Joni Teves, an analyst at UBS bly be in a “substantial physical deficit” Hong Kong Exchange during the mar- facingallegationstorapidlyissueaclari- formanceinmorethaneightyears,leav- said. in 2016 for the fifth consecutive year, The fall in the stock price wiped ket’s lunchtime break, and described fication — normally a rebuttal — or sus- ing it just shy of the 26 per cent rise in Palladium,usedinpetrolvehicles,has according to consultancy Metals Focus. US$1.7bn off the value of the company, Glaucus’s report as “incomplete, bias- pendtradinguntilitcandoso. goldthisyear. also benefited from strong car demand It estimates a deficit of 1.3 million which makes LED lighting and owns edlyselectedandpresentedandmateri- Tech Pro was a known short target Platinum and palladium, which are in China this year. Total vehicle sales in ouncesthisyear. French second-division football club allymisleading”. before Glaucus Research’s report was used in auto catalysts, are trading at China rose 15 per cent in June from a Analysts at Commerzbank said the SochauxMontbéliard. While trading volumes yesterday released. theirhighestlevelsinmorethanayear. year earlier, and UBS forecasts a 6.7 per price increase this month “could have The stock closed at HK$0.31 after were6,000timesthecompany’snormal The group last month suspended its This month palladium is up 16 per cent volume growth for passenger cars been mainly speculative”,given that the openingthetradingdayatHK$2.32. levels,TechPro’sshareswerejust10per shares for a day before “categorically centto$697.92atroyounce,whileplati- thisyear. amount investors have in exchange Tech Pro’splunge also revived memo- cent lower until the final hour of trade, denying” suggestions by GeoInvesting, num has risen 11 per cent to $1,138 a “Higher global auto production traded funds backed by platinum and ries of Hanergy Thin Film and Goldin, when they suddenly plunged for no another US-based group, that its busi- troyounce. growththisyearversus2015shouldbea palladium has dropped this year. whose own headline-grabbing share apparentreason. ness was deteriorating and it did not After falling out of favour with inves- fundamental positive for both platinum “Inflows to platinum and palladium price slumps in Hong Kong last year Traders suggested a shareholder havesufficientfinancing. tors for years despite production defi- andpalladium,”MsTevessaid. ETFs remain either sparse or non-exist- underlined the volatility risk present might have suddenly dumped stock or Tech Pro did not, however, suspend cits, the rebound has been led by an At the same time, global supply of ent,”theysaid. amongthecity’sthinlytradedstocks. been forced to do so, potentially to meet themyesterday.

JULY 29 2016 Section:Markets Time: 28/7/2016 - 18:26 User: marais Page Name: MARKETS1, Part,Page,Edition: EUR, 20, 1 Friday 29 July 2016 ★ FINANCIALTIMES 21

MARKETS&INVESTING

Global overview TRADINGPOST Markets update

Jamie S&P  index Oil price volatility adds to jitters Change on day  Chisholm   One of the more bullish-looking ahead of BoJ decision on stimulus  commodity price charts is that of   lumber. After touching a four-year low Jun   Jul around $215 per 1,000 board feet in October, the Chicago Mercantile Dollar’s retreat offers no make some minor new highs, WTI US equities A sharp fall for Ford Motor Exchange Lumber future has climbed crude prices have slid from over $50 a — following a worrying update from more than 50 per cent. cheer for Brent and WTI barrel at the start of June to just $42 the carmaker — put the S&P 500 Those of a technical bent will note as equities drift lower, abarreltoday. under pressure, although Facebook that the breakout came after the chart “Moreover the move from above inched higher after strong results formed an inverse “head and while 10-year gilt yield $48 a barrel to today’s level took less shoulders” pattern, with the 50-day touches record low than three weeks. Crude oil price vola- FTSE  index moving average breaking above an tility is clearly moving higher, and his- Change on day  tory says that it is a set-up for a move upward sloping 200-day moving DAVESHELLOCK  average — both trends considered by lower for stocks since crude prices are  some to be a price-positive set-up. Global equity indices drifted lower as declining.” The rally comes as surging Canadian participants digested a welter of corpo- The S&P 500 equity index was down  rate earnings reports and watched with 0.2 per cent at 2,162 by midday in New exports to the US raise the prospect of  trepidation as oil prices sank to levels York—0.6percentbelowarecordintra- Washington slapping a tariff on its Jun   Jul northern neighbour’s wood. But it is notseenformorethanthreemonths. dayhighreachedlastweek. increasing demand that is behind the Uncertaintyaheadofapolicydecision On top of broad declines for energy UK equities Lloyds Banking Group fell bounce in prices. And that’s mainly a from the Bank of Japan, due today, con- stocks, Ford was down 9.5 per cent after 5.8 per cent and Royal Dutch Shell result of recovering US construction. tributed to the cautious mood, particu- it warned that the second half of the shed 2.9 per cent, helping to drag the With global interest rate suppression larly given expectations that Tokyo will yearwouldbedifficultforcarmakers. FTSE 100 further away from a one- ensuring long-term mortgage rates unveil a significant fiscal stimulus pack- Across the Atlantic the Euro Stoxx year high struck on Wednesday stay close to historic lows, demand for agenextweek. 600 index fell 1 per cent to a one-week housing is increasing. “What makes this week’sBoJ meeting low, dented by disappointing trading Eurofirst  index so significant is not the fact that updates from the likes of Dialog Semi- Last month the number of new Change on day  single-family homes sold in the US market expectations are at their strong- conductorandRoyalDutchShell.  climbed to the highest level in more est since prime minister [Shinzo] Abe In Tokyo the firmer tone of the yen  than eight years. came to power, but that there is a ensured that stocks had a negative ses- Justin Tallis/AFP/Getty Images Residential real estate prices are show of greater co-operation between sion, with the Nikkei 225 ending 1.1 per  rising and builders are expanding fiscal and monetary policy,” said One month on, what Brexit means: FT.com/markets centlower. Divyang Shah, global strategist at In , the  production to ride the market. Typical The FT’s senior investment columnist John Authers judges government bond markets Jun   Jul homes use about 16,000 board feet of IFRMarkets. sentiment a month after the UK voted to leave the EU 10-year UK gilt yield touched a record lumber, according to Bloomberg. “There remains uncertainty as to lowbeneath0.70percent,whilesterling European equities The Eurofirst 300 Speculators’ net long futures what the BoJ will announce, as well as was down 0.6 per cent against the dollar retreated from a one-month high as positions are at their highest since the size of the net fiscal stimulus, but at that more than a few investors were ateshed1.2percentto$41.43—thelow- at $1.3145, as expectations mounted participants digested a welter of big- March 2013, so many in the market least we are seeing the beginning of fis- alreadypositionedthatway. estforbothbenchmarkssinceApril20. that the Bank of England would take name corporate earnings reports and have already bought into this rally. cal policy shouldering some of the bur- “The Fed is still waiting and watching The day’s move left Brent nearly aggressive action at its policy meeting awaited news from the Bank of Japan Still, a 14-day relative strength index denfrommonetarypolicy.” the data. The forward curve is still only 19 per cent down from its 2016 high next week to counter the risks from of 64 suggests lumber is not yet in Meanwhile the dollar continued to half-priced for a hike by year-end and reached in June — a decline largely Brexit. Nikkei  index egregiously overbought territory. retreataftertheFederalReserve’spolicy fully priced for a hike by late in the sec- based on concerns about a glut of “We expect a sizeable package at the statement on Wednesday — to the sur- ondhalfof2017.” oil, which were heightened by data on BoE’sAugust 4 meeting: a 25 basis point (’ ) Change on day   priseofmanyinthemarkets. The dollar index, a measure of the Wednesday showing an unexpected rate cut, £50bn of quantitative easing [email protected]  “Our initial read of the statement was currency against a basket of peers, was increaseinUScrudesupplieslastweek. split between gilts and private-sector — and remains — dollar positive, so the down0.5percentat96.61butoffanear- Nicholas Colas, chief market strate- assets, and rebooting the Funding for  CME lumber futures  per  board feet broad sell-off leaves us a little per- liertwo-weeklowof95.91. gist at Convergex, noted the steady Lending Scheme,” said Robert Wood, plexed,” said Shaun Osborne, chief FX Dollar/yen was 0.6 per cent lower at increase in the correlation between US UK economist at Bank of America Mer-   Jun   Jul  strategistatScotiabank. ¥104.79 while the euro was up 0.3 per equities and oil prices since the start of rillLynch. ElsaLignos,seniorcurrencystrategist centat$1.1088. theyear. The yield on the 10-year German  Japanese equities Strength for the at RBC Capital Markets, said: “The Fed- But the soft US currency offered no “Investors need to keep an eye firmly Bund fell 1bp to minus 0.09 per cent yen against the dollar weighed on the  eralOpenMarketCommitteestatement cheer for as international Brent on oil prices at the moment,” he said. while that on the 10-year US Treasury    oil Nikkei as the market braced for the Source: Thomson Reuters Datastream was more upbeat than in June, although crudefellafurther1.3percentto$42.92 “While US stock prices have been able wasflatat1.52percent. Bank of Japan’s policy decision the subsequent price action suggests a barrel and US West Texas Intermedi- to buck the correlation trend enough to Goldwasdown$5at$1,333anounce.

Whole Foods increasingcompetitionasconsumer Share price ( ) preferencehasshiftedtowardsnatural Trading Directory  andorganicfood,pressuringhigh-end  specialtygrocerslikeWholeFoods.  Thecompanylauncheditsmore affordableWholeFoods365store  Jul  Jul earlierthisyearandsaiditisseeing Wall Street Source: Thomson Reuters Datastream largerbasketsizes. Day's “Whilethenewformatisinteresting, Whole Foods hard Indices Close change performanceofthecore450stores S & P 500 2163.71 -2.87 remainsthekeyforthestock,”Mr to swallow amid DJ Industrials 18402.09 -70.08 Wiltamuthsaid.Investorswanttoseeif margin squeeze Nasdaq Comp 5142.44 2.63 the365storecannibalisesonitsexisting Russell 2000 1204.70 -8.35 storeformat. VIX 13.24 0.41 Thesell-offinWholeFoodsarrivedas US 10 yr Treas Bd 1.51 0.01 USstocksfluctuatedbetweenlossesand US 2 yr Treas Bd 0.71 0.00 gains.Bymidday,theS&P500had Mamta Badkar and declined0.2percentto2,163.21,andthe Adam Samson DowJonesIndustrialAveragewasdown 0.4percentto18,398.07.TheNasdaq down2.4percentfromayearagointhe Compositewasflatat5,141.05. InvestorssouredonWhole Foodsafter currentquartertoJuly24. Elsewhere,Facebook rose2.6percent theupscalegrocerreportedadropin “Whilecompsaresequentially to$126.52afterthesocialnetwork grossmarginandsaidakeysalesmetric improvingoneasieryear-ago,thereis revealedstronger-than-expected continuedtofallinthecurrentquarter. noevidenceofimprovementin quarterlyresults.Revenuesclimbedby SharesinWholeFoodsfellmorethan underlyingsales,”MarkWiltamuth,a 59percentonayear-on-yearbasisto 9percentto$30.47andwereamongthe Jefferiesanalyst,said.“Despiteawaveof $6.4bninthesecondquarter,surpassing biggestdeclinersontheS&P500,after initiativesandmajorgrossmargin WallStreetestimatesbymorethan thecompanysaidthatitsgrossmargin sacrifice,thereisstillnosignofaturn.” $400m.Thestrongresultscameas declined89basispointsto34.7percent Thefallincomparablesalescame advertisingsalesrose63percent.The initsfiscalthirdquarterandthatlike- alongsideresultsthatwereinlinewith groupexpandeditsmonthlyuserbase for-likesalesfell2.6percentoverthe forecasts.Profitsslidto$120m,or37 to1.71bnfrom1.49bninthesamethree- sameperiod—itsfourthconsecutive centsasharepershare,against$154m, monthperiodin2015. quarterlydecline,widerthananalysts’ or43centsashare,intheyear-ago AnalystsapplaudedFacebook’stilt expectationsfora2.3percentdrop. period.Salesrose2percentto$3.7bn. towardmobileadvertising.Mobilesales DespiteWholeFoods’effortstolower Analystswereexpectingearningsof37 accountedfor84percentofFacebook’s pricesandboostcompetitiveness,the centsashare,onsalesof$3.7bn. advertisingrevenue,upfrom76per companysaidcomparablesaleswere Thegrocerysectorhasfaced centinthesecondquarterof2015.

withanalystsseeingpotentialbenefits reportedrisingrevenues.Numis,which fromacurrencydepreciationonthe upgradedthestocktobuyonatarget backofaweakerpound.Ithadgained priceof£12.50,pointedto“robust about13percentsinceJune23before results”. theresultsoftheEUreferendum. “WeretainourviewthatpayTVis ButShoreCapitalanalysts,who resilientinmorechallengingeconomic downgradedthestocktohold,pointed conditionsandthatSkyhasstrong toIPF’sfallingprofitsinMexico. momentumfornewproduct “Thisisextremelydisappointingas developmenttodriverevenuegrowth,” London Mexico(alongsidedigital)hadbeen Numisanalystswrote viewed . . . asapotentialcounterweight BT Groupalsorose,adding3.1per Doorstep lender IPF totheproblemsofincreasedregulation centto414.4p.Thestockreachedits andcompetitionineasternEurope,” highestlevelsinceBrexitafteritsresults falls as profits hingeing theywrote. surpassedfirst-quarterestimates. on Mexico disappoint Inthewidermarket,theFTSE100 Smith & Nephew,themakerof Trading Directory slipped0.4percent,or29.37points,to medicaldevices,lost5.6percentto 6,721.06,furtherretreatingfromthe £12.27.Resultsshowedweaknessin one-yearhighreachedonWednesday. ChinaandtheGulfStates,whichfurther Anglo AmericanwasoneoftheFTSE weighingonrevenuethatedgedup3per Thomas Hale 100’sbestperformers,risingby5.4per centinthefirstsixmonthsbutmissed centto842.6pafteritsresultsbeat analystexpectations.Thefallwas forecastsandshowedafallinnetdebt. anotherexampleofpost-Brexitgains International Personal Financelost Jefferiesraiseditspricetargetto750p beingundoneSmith&Nephewhad nearlyaquarterofitsmarketvalueafter from500p.Othercommoditystocks increasedmorethan12percentsince itspost-Brexitboostwasderailedby alsogained.GoldminerCentaminwas thedayoftheEUreferendum. disappointingresults. oneoftheFTSE250’slargestrisers, Sports Directwasoneofthelargest Thedoorsteplender,whichhas adding4.9percentto161p.Meanwhile, risersontheFTSE250.Itadded9.2per operationsineasternEuropeand Randgoldwasup2.3percentto£88.50 centto281.1p—itsbiggestone-daygain Trading Directory Mexico,dropped24.7percentto253.7p. andFresnillowasup3percentto£19.02. inmorethanfouryears.Theretailer Runs Daily Itsresultsshowedfallingunderlying Skyrosesharplyinearlytrading announcedplanstospendupto£89.8m ...... profitbeforetax. beforelosingsomemomentumtoclose onasharebuybackinastatementtothe Classified Business Advertising Thestockhadriseninthepastmonth up1.9percentat904p.Thebroadcaster LondonStockExchangeyesterday. UK: +44 20 7873 4000 | Email: [email protected]

JULY 29 2016 Section:Markets Time: 28/7/2016 - 18:55 User: marais Page Name: MARKETS2, Part,Page,Edition: EUR, 21, 1 22 ★ Friday 29 July 2016

INSIGHT Analysis. Exchanges Simon Mundy Singapore-Hong Kong bourse battle heats up

Asian rivals eye derivatives Platform power play and other asset classes as they Share prices Hong Kong Exchanges and Clearing Platform India’s next central seek cross-border dominance Rebased Revenue by sector (2015, $m) and infrastructure 64.5 ��� = $1m London Metal Exchange bank governor faces 219.3 JENNIFERHUGHES Clearing 645.0 Cash equities 438.6 Hong Kong Exchanges and Clearing tough balancing act On the anniversary of his appointment ��� as head of the Singapore Exchange this Singapore Exchange month,LohBoonChyemighthavehigh- lighted the fact that the group’s own ��� ive days before the UK voted to leave the EU, shares were outperforming the bench- Indian media were abuzz with talk of “Rexit”: mark,orthepotentialinitsmergertalks ��� Equity Raghuram Rajan’s sudden announcement that with London’s Baltic Exchange. But a and financial derivatives 283.8 he would give up leadership of the Reserve Bank technical malfunction halted trading ofIndiainSeptember. and produced the worst outage in the ��� Singapore Exchange FThat followed months of speculation over his future, bourse’shistory. Issuer services 59.4 fuelled by open tensions with the government over Mr The glitch was more embarrassing Revenue by sector (2015, $m) Rajan’s gradual pace of monetary easing, which was seen than commercially damaging. SGX not Depository ��� = $1m services 86.5 Market data by critics as sacrificing India’s growth prospects on the longer derives the largest part of its rev- 26.6 altarofinflationarycaution. enues from cash equity trading Derivatives 215.0 Securities 152.2 The speculation was often coupled with warnings of the —although, as with the Hong Kong �� dark message investors would take from the departure of Exchange, its primary function is still the celebrated former IMF chief economist. Yet trading in whatitisbestknownfor. Indian assets has shown little sign of trauma over his deci- What both groups are focusing on, �� FT graphic Source: sionnottostaybeyondhisinitialthree-yearterm. however, is a battle to become Asia’s The sanguine market response reflects broad confi- go-to centre for cross-border dealing in Other revenue 0.1 Member services dence in the Indian government to appoint a competent as many asset classes and market seg- ���� �� �� �� �� �� and connectivity 35.0 successor, even if most of the putative candidates are mentsastheycan. FT Graphic Billy Ehrenberg-Shannon Sources: Thomson Reuters Datastream; S&P Capital IQ; JPMorgan viewedasmoredovishthanMrRajan. InEuropeandtheUS,exchangeshave Moreover, the new governor’s powers will be more mergedinthepastdecadeintoever-big- ‘It’s very and India’s Nifty index. Its crown jewel executive, says the goal is to become the as the main gateway for all China- restricted than those of any recent predecessor. Under a gerentities.Butanalystssayattemptsto difficult to is the FTSE China A50 contract, the gateway for international investors relatedproducts.” new framework, monetary policy will be set by a six-per- follow suit in Asia are likely to be sty- world’s only offshore futures contract looking at China, and a risk manage- Soggy equity trading is not helping son committee. This ends the governor’sone-man control mied by national pride — as was SGX’s revive cash basedonmainlandstocks. mentcentreformainlandinvestors. either exchange. This week Singapore — though his casting vote would still give him the final say, mooted$6.2bnmergerwiththeAustral- trading AddingBalticExchange—discussions LastweekHKExsuffereditsownmal- reported that revenue from equity and in the event of an even split between RBI officials and gov- ianSecuritiesExchangefiveyearsago. volumes continue — would give SGX freight function when a four-hour outage dur- bonds trading was down 2 per cent in ernmentappointees,whowillnumberthreeapiece. SGX and HKEx thus have two main derivatives, a natural fit for a city that ing Asian trading hours on the LME’s the past year on flat volume, while Thecommitteemustworktokeepinflationwithinatar- routes for growth: derivatives and other when hosts one of the busiest container ports. electronic platform left dealers scram- income from derivatives had jumped get range set by the government, with the governor asset classes. “It’s the art of the possible investors It would also mark its first foray into blingtoconductbusinessbyphone. 10 per cent on a 14 per cent increase in required to write explanatory for both exchanges right now,” says aren’t putting owningindices. Traders agree that the exchanges’ tradingactivity. letters to the government if it Harsh Wardhan Modi, head of Asean Mr Loh, presenting full-year results direction makes sense, particularly Global trading volumes were a quar- fails. This commitment to Under a new banks and exchanges equities research new money on Wednesday, said: “If you look at the because competing products have so far terlowerinthefirsthalfofthisyearthan inflation targeting will be a framework, atJPMorgan. into stocks’ position of Singapore as a financial cen- beenavoided. in 2015. This trading collapse has legacy of Mr Rajan, who “It’s very difficult to revive cash trad- tre internationally . . . being a multi-as- “Listing a new product is one thing,” affected KHEx more. But Hong Kong pushed for institutional safe- monetary policy ing volumes when investors aren’t set exchange is very real and important. says Stephane Loiseau, head of Société has one clear advantage over Singapore guardsagainstinflation. will be set by a putting new money into stocks. There is There are various things we are doing Générale’s cash equities business in — its role as a capital-raising centre, Yet successive governors a method to inorganic growth, and both thatwillbearfruit.” Asia. “Having enough liquidity to make where it ranked number one globally have been faced with persist- committee exchanges are looking at options that HKXx bought the London Metal it attractive and efficient for investors is last year, raising almost $34bn through ent government demands for makestrategicsense.” Exchange for $2.2bn in 2012, opened quiteanother. initialpublicofferings. monetary easing, a practice unlikely to end under the new Singapore has had success with iron the only direct link to trade mainland “So instead of trying to compete During the past decade SGX has governor. While Mr Rajan had an unusually high resist- ore derivatives and index futures, not stocks in 2014, and is developing a suite directly with Singapore, it looks like raised about a 10th of the IPO capital of ancetopressure,anewmemoirfromhispredecessorDuv- least for Tokyo’s Nikkei 225 contract ofcurrencyderivatives.CharlesLi,chief Hong Kong is trying to promote itself itsrival,accordingtoDealogicdata. vuri Subbarao makes clear the potential for the executive toswingmonetarypolicythroughinformalintervention. In May 2012, Mr Subbarao surprised the market with a 50 basis point base rate cut — “on the assurance” of the Currencies finance minister, in a private conversation, that fiscal pol- icy would be tighter than indicated in the budget, he writes. That promise went unfulfilled, and the rate cut Dollar dips following helpedtofueldouble-digitinflation. InflationhasreturnedtomoderatelevelssinceMrRajan arrived in 2013 and started tightening policy, ending sev- Fed’sdovish appraisal eral years of negative real interest rates. Consumer prices rose by a relatively modest 5.8 per cent in the year to June — and private-sector analysts broadly support the govern- MICHAELHUNTER before officials released ment’s view that inflation has further to fall, pointing to a theirJulystatement. Dollar bulls retreated yes- 25basispointratecutbytheendofthisyear. Investors’ expectations terday, with a broad meas- But that near-term outlook is coloured by anticipation have oscillated wildly this ure of the US currency fall- of a stronger monsoon this year, bringing relief on food year, with a strong US jobs ing, after the Federal pricesaftertwoyearsofweakrains.Duringthenewgover- report for June and limited Reserve was judged to have nor’s term, weak harvests could push up inflation — as falloutfromBrexithelpingto extinguished the chance of a couldariseinworldoilprices. fan expectations that policy- rateriseinSeptember. The new governor — as chief bank regulator — also faces makers could move as soon abigchallengeinthestate-ownedlendersthataccountfor The assessment of the US asSeptember. 70 per cent of banking assets, and which are labouring economy from the Fed’s The dollar had a bigger fall underhugeportfoliosofdistressedcorporateloans. rate-setters released after against the yen than the Mr Rajan took an aggressive stance on this, overseeing their July meeting acknowl- euro, sliding as much as 0.9 anassetqualityreviewlastyearthatforcedlarge-scalebad edged that the jobs market percentto¥104.49. loan provisioning and sent state banks’ non-performing had rebounded in June, but The short-term fate of the assetratiossoaringto9.6percentattheendofMarch. did little to encourage bets currency pair now lies with Senior Mumbai financiers say this process is far from that they would move at Bank of Japan officials who complete and investors will be watching closely to see theirnextgathering. meettodaytosetpolicy. whether the new governor shares Mr Rajan’s belief that “TheFed,inshort,isdoing Expectations about the only by cleaning up their balance sheets can the banks get absolutely nothing to scale of any further easing backintoapositiontofueleconomicgrowth. encourage anyone to hold from authorities in Tokyo Dissenting voices argue that the RBI’s actions on the any bullish dollar thoughts, has waxed and waned this state banks have sent them into shock, casting a shadow leaving currency markets to week, taking the Japanese over India’s economic prospects. Such criticism has taken be driven by what happens currencywiththem. on a more personal tone during the term of Mr Rajan, elsewhere,” Kit Juckes, a Having introduced a nega- reaching fever pitch in May when one senior ruling-party strategist at Société Géné- tiveinterestratepolicyatthe legislatoraccusedhimofbeing“mentallynotfullyIndian”. rale,said. start of the year, the BoJ is Intensified public focus on monetary policy has come Afterrobustralliesin2014 expected to ease policy with heightened scrutiny of those who set it. The new gov- and 2015, the dollar has again. The full details of a ernorshouldbepreparedforaroughride. weakened 2 per cent this separate government fiscal year as anxiety over weaker stimulus package are fore- [email protected] economic growth outside cast to be announced soon, the US, and low inflation eventhoughtherearedoubts domestically, have forced abouttheextentofthemeas- the Fed to scale back projec- ureslikelytobeadopted. tions of how quickly it will Economists at Goldman tighten monetary policy this Sachs said: “Our main con- More comment and data on ft.com year. clusion is that Japan will In its July assessment of need to work hard to deliver the economy,the Fed’sOpen a package that is large Y Fast FT Our global economies, headed Market Committee said enough to matter.The size of team gives you market- by Brazil, Russia, India “gradual adjustments in the fiscal boost is more moving news and views, and China. the stance of monetary pol- important than the mone- 24 hours a day, five days ft.com/beyondbrics icy” would be enough to tary measures under discus- a week. ft.com/fastft Y Podcast The Hard ensure “moderate” eco- sion.” Y Alphaville Our Currency podcast takes a nomic expansion. That judg- Despite aggressive mone- irreverent financial blog. look at what is driving ment was sufficient to send tary policy from the BoJ, the Join Paul Murphy and the global currency the dollar index — which yen has strengthened more Bryce Elder for the daily market. ft.com/podcasts tracks the world’s reserve than 10 per cent against the Markets Live session at currency against of its peers dollar so far this year, partly Y Lex Video Analysis 11am. ft.com/alphaville — down 0.5 per cent to 96.5 because of concerns that and opinion from the inLondon. negative interest rates would Y beyondbrics News and team on the hot issues Interest-rate futures mar- be counterproductive. That comment from more affecting companies and kets put the probability of a has knocked Japanese equi- than 40 emerging markets. ft.com/lexvideo rate rise in September at 26 ties this year, leaving the per cent, little changed from Nikkeidown13percent.

JULY 29 2016 Section:Markets Time: 28/7/2016 - 17:49 User: marais Page Name: MARKETS3, Part,Page,Edition: EUR, 22, 1