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Daily Agenda: Deutsche Bank Concerns Cast Shadow over European Markets
Saudis signal willingness to discuss oil options; RBS settles MBS suit; Anheuser-Busch InBev/SABMiller deal approved by shareholders.
Increasing concerns over the stability of Germany’s biggest bank, Deutsche Bank, hang over the European financial sector today after the German Ministry of Finance officially denied plans to bail out the troubled lender. Despite the denial of state aid, the bank’s shares rebounded modestly by more than 3 percent in early trading at one point, suggesting that at least some investors are becoming more confident that U.S. regulators will back down from demand for more than $14 billion to settle charges related to mortgage-backed securities sold prior to the credit crisis. Deutsche Bank CEO John Cryan has launched a public-relations campaign to reassure investors, with an interview in Germany’s largest-circulation newspaper this morning in which he insisted that no bailout would be required. The prospect of a failure of the bank is sobering to the euro zone. With Volkswagen already deeply troubled due to ongoing investigations around the world into its emissions scandal, a threat to the financial sector in Europe’s largest economy could weigh on demand across the region.
Saudi Arabia Signals willingness to work on deal. In Algiers, at an unofficial meeting of leaders of the Organization of the Petroleum Exporting Countries and Russia, media comments suggest that the group is working towards a deal ahead of the official November OPEC meeting. Saudi Energy minister Khalid Al-Falih signaled a willingness to apply oil-production caps that would still allow economically fragile OPEC members such as Iran, Algeria and Libya to pump at current levels and generate desperately needed revenues. Brent-grade futures contracts for front-month delivery regained only a small portion of Tuesday’s pullback in early trading today.
Merger of brewing giants clears hurdle. Almost one year after Anheuser-Busch InBev announced its intention to acquire SABMiller, SABMiller shareholders officially approved the transaction, which is valued at more than $100 billion. In a statement released today, SABMiller said that more than 95 percent of its shareholders had voted for the merger. Anheuser-Busch shareholders are expected to approve the merger later today. The deal, which will create a company that controls roughly one third of global beer sales, is expected to close by October 10.
RBS settles U.S. suit. In a statement issued yesterday, the U.S. National Credit Union Administration announced an agreement to settle with Royal Bank of Scotland Group over the sale of mortgage-backed securities in the leadup to the credit crisis. The settlement roughly amounts to $1.1 billion. As part of the agreement, RBS does not admit fault and officials at the bank stated that the cost of the settlement will be covered by provisions already set aside. The bank still faces challenges over MBS practices from the U.S. Federal Housing Finance Agency and the Justice Department.
Steinhoff raises funds for further expansion. Steinhoff International Holdings announced today that South African billionaire Christoffel Wiese will be investing $1.8 billion into a secondary equity round as the company seeks to fund overseas expansion. Over the past year, the company has acquired large retailers in the U.K. and U.S., bringing the total number of stores operated by the furniture seller to 6,500. Wiese, South Africa’s wealthiest man as well as Steinhoff’s chairman and largest shareholder, has spent most of his career developing retail chains.
Wal-Mart to invest in Indian online retailer. Bloomberg today reported that Wal-Mart Stores is close to announcing an investment in Indian e-commerce firm Flipkart Online Services as part of a joint effort to prevent Amazon.com from achieving online retail dominance in India. According to the report based on unnamed sources, the total size of the investment may be as much as $1 billion. Flipkart is currently the largest online retail outlet in India but has faced stiffening competition from Amazon.