Business this week
Aug 24th 2013 |From the print edition
India was plunged into financial turmoil. Markets swooned in response to the government’s imposition of capital controls on domestic investors to stop cash flowing out of the country in order to halt the decline of the rupee. Investors fret that India’s large current-account deficit makes it particularly exposed to capital flight out of emerging markets prompted by the Federal Reserve’s plan to taper quantitative easing. As share prices in Indian banks fell and Indian bond yields rose, the central bank promised to intervene to boost liquidity.
However, the rupee fell to a new low against the dollar after the minutes from the Fed’s latest meeting confirmed it was on track to ease bond-buying this year. Currencies in other emerging markets also came under pressure. In a surprise move Turkey’s central bank raised interest rates to support the lira. The Brazilian real sank to its lowest level against the dollar in four years.
Falcone has his wings clipped
The Securities and Exchange Commission fined Philip Falcone and Harbinger, the hedge fund he runs, $18m for his misuse of clients’ cash to pay a tax bill. More importantly, Mr Falcone had to admit to wrongdoing, the first such admission under the SEC’s policy of reducing the number of deals it cuts with defendants in which they neither admit nor deny guilt.
Two electronic-trading mishaps further undermined confidence in automated markets. A sudden spike in the Shanghai stockmarket was caused by a computer glitch at Everbright Securities. Chinese regulators banned the broker from proprietary trading for three months as a result. And a software error at Goldman Sachs saw it place enough mistaken orders for stock options on American exchanges to drive prices lower. The blunder could potentially cost the bank hundreds of millions of dollars.
BHP Billiton’s net profit for the year to June fell by 30%, to $10.9 billion. The mining company is to invest heavily in potash, an ingredient used in fertiliser and for which there is a burgeoning demand worldwide. This should offset some of its decline in prices for iron ore and copper, as the Chinese-led commodities boom cools.
Glencore Xstrata reported its first earnings since merging as a new company in May, and announced a $7.7 billion write-down of its mining assets.
Vestas, a Danish maker of wind turbines, replaced its chief executive, after its quarterly earnings revealed steeper losses. Once a leader in the industry, Vestas’s windpower business has been buffeted by competition from China; it also gets less from European subsidies for green energy. Anders Runevad, who used to work at Ericsson, a Swedish telecoms firm, is the new boss.
Carlsberg and Heineken saw profits slip in their latest set of earnings, partly because the cooler-than-usual European spring watered down the demand for beer. Carlsberg said the closure of outdoor beer kiosks in Russia in an effort to curb public drunkenness had also hurt it. Both companies pointed to Asia as a bright spot.
The Bank of Israel issued new rules to banks on mortgages, including a requirement that monthly repayments be no more than half of a borrower’s household income. Lending has surged over the years, though the economy is slowing and unemployment rising.
Meg Whitman’s turnaround plan for Hewlett-Packard hit a bump in the road, when she said she now no longer expects to see a return to revenue growth next year after almost all its divisions recorded a drop in quarterly sales. HP’s big push into computer servers has so far failed to offset the decline of its PC business.
A judge refused Carl Icahn’s request to speed up his lawsuit to stop the proposed buy-out of Dell, the latest setback to the activist investor’s alternative takeover proposal for the computer-maker. A postponed shareholders’ vote is now due to take place on September 12th. Dell, meanwhile, reported a 72% drop in quarterly net profit, after heavily discounting sales of its PCs and servers.
Al Jazeera began broadcasting on its new news channel in the United States, building on the network of Al Gore’s Current TV, which it bought in January. With bureaus in 12 American cities, the Qatari company promises to provide an alternative on cable to CNN, Fox and MSNBC.
That lost Kodak moment
A judge approved Eastman Kodak’s plan to restructure and leave bankruptcy protection, which it filed for in January last year. The company has shed its photography business (and $4.1 billion in debt) to focus on commercial printing technologies. It designed the world’s first working digital camera in 1975, only to discard the project and stick to film.