Daily Agenda: Australia Latest U.S. Ally To Consider AIIB

Kraft and Heinz to merge; Bank of China acknowledges more bad loans; orange juice futures on rally.


In another blow for U.S. foreign policy, Australian Prime Minister Tony Abbott stated today that Australia would consider joining China’s Asian Infrastructure Investment Bank, provided that there are assurances that China would limit its political power within the organization. Media outlets in Australia have reported that the cabinet has approved an initial memorandum of understanding for joining the bank. For the U.S., which under the administration of President Barack Obama has sought to shift to a more heavily Asia-centric trade and diplomatic tilt, the stakes are high. After securing trade and defense agreements with India, the attempt to stymie Beijing’s financial influence by lobbying trading partners to abstain from the new bank initiative is a clear message that Washington intends to continue to increase its influence in Asia. For now, though, China’s economic clout appears to be winning out over the U.S. political agenda.

Kraft announces merger with Heinz. Suburban Chicago-headquartered Kraft Foods Group is to merge with H.J. Heinz to create North America’s third-largest food and beverage company, with combined revenues of about $28 billion. Brazil-based private equity firm 3G Capital was part of a consortium that took Heinz private in a $23 billion transaction in 2013; the deal announced today marks Heinz’s return to public trading.

Bank of China doubles bad loan hedge. Fourth-quarter profits reported by Bank of China rose by nearly 5 percent year-on-year, with net income totaling 38.5 billion yuan ($6.2 billion) for the period, the bank’s slowest fourth-quarter net profit growth in six years. Critically, the bank saw an increase in its ratio of nonperforming loans, with the total earmarked for bad debt rising to over 100 billion yuan, or 1.2 percent of total outstanding debt.

German business confidence spikes. Data released today by the IFO Institute showed a significantly improved mood among German business leaders. The expectations subindex reached 107.9 versus 106.8 in February, while the current assessment measure rose to 112 from 111.3 the previous month.

Plane crash investigation continues. The search for evidence at the site of yesterday’s crash of Germanwings Flight 9525 continues. French authorities have recovered one of the Airbus A320’s black boxes as recovery teams navigate mountain terrain. German insurance giant Allianz announced yesterday that it was the primary underwriter for the aircraft.

Orange crop in peril. Orange juice futures contracts have staged the largest three-day rally in 16 years with contracts for May delivery up over 20 percent from Friday’s session to Tuesday. Unseasonably cold weather and so-called greening, or premature fruit, on trees in Florida this winter have raised concerns regarding production levels there.

U.S. economic indicators on deck. Durable goods orders for February and the critical Energy Information Administration oil inventory levels will be announced today. The pace of orders is expected to slow dramatically from January’s sharp rebound, which was driven largely by the transportation sector.