Prospect of default or Grexit grows after weekend talks collapseAs Greece edged closer to default after weekend talks with its creditors collapsed almost as soon as they began, leading shares hit a new three month low.The FTSE 100 fell 74 points or 1.1% to 6710.52 - its lowest level since 10 March - as investors fretted that both sides were becoming more intransigent in their positions, even as time for Greece to reach a deal comes closer to running out. London fared slightly better than some of its European peers, with German and French markets both down around 1.6%. In Greece, the Athens market dropped 4.68%, ahead of what is seen as a key Eurogroup meeting on Thursday. On Wall Street, the Dow Jones Industrial Average was down around 100 points or 0.6% by the time London closed.The London market has lost a lot of ground today, but it is doing better than its continental counterparts. The eurozone equity markets are feeling the most pain over the Greek situation, and without an agreement a bounce back is not likely. The five-year debt saga for Greece has left traders feeling that something drastic needs to happen, and a default seems as if it is just around the corner. Athens needs to shape up or ship out, and every day that goes by with no resolution makes a default all the more possible. Traders are fixated on Greece at the moment and that won’t change until a deal has been reached, and even then traders will be mentally preparing themselves for the next round of Greek negations as the indebted country has several more sizeable payments to make over the summer.[In an] interview with Channel 4 chief executive David Abraham in the Sunday Telegraph [it is clear that] C4 thinks its privatisation is very much on the agenda (with a possible sale price of up to £1bn) as the government looks to dispose of assets. If C4 is privatised, then introducing retransmission fees for the main commercial channels (including Channel 4) would see a maximisation of value...which would also benefit ITV - a double-digit increase on our 2017 forecasts and we are around 20% ahead of consensus.On our estimates, this suggests around 5% upside to BAT from current Bloomberg 2016 consensus of 226p, with Reynolds’ contribution as an associate at constant exchange rates rising from £449m in 2014 to over £810m in 2016 on our estimates. The deal raises Reynolds’ contribution from around 11% in 2014 on a reported basis to around 19% in 2016, using current Reynolds consensus forecasts. We expect consensus figures to adjust in the next few weeks. We also think Altria’s investor day (23 June) will reinforce positive sentiment around the US tobacco market.We also expect that in the second half, BAT will buy out the minority investors in its Brazilian subsidiary, Souza Cruz. This deal will be about 0.5-1% earnings per share accretive in the 12 months after closing, depending on Souza’s results and the Brazilian real. The timing of this deal closing is uncertain, but it is likely to benefit 2016, in our view.Not surprisingly, to our minds, the Competition & Markets Authority (CMA) has decided to take the proposed acquisition of Dairy Crest Dairies by Muller-Wiseman to a phase II review. However, when trying to make sense of the process we believe that CMA has bottled it, so unnecessarily prolonging a process that is, by common thinking, necessary for the challenge and over-supplied British liquid milk industry to progress; a view implied in the CMA’s own narrative to our minds.... the CMA is potentially in a pickle here because if this merger does not go through then there will be further economic consequences because the viability of liquid production is under serious threat. The discounting of a highly expensive product to produce, care for and move is a frustration for everyone involved in milk production. Rationalisation and concentration needs to take place because the retail trade is picking off the processor leading to depleted margins. Such margins are a chronic issue with respect to future investment and innovation in the trade. The farming lobby will justifiably go nuts with the CMA if common sense does not prevail. That though, when it comes to common sense, there is now encyclopaedic evidence that the CMA lives on another planet. Continue reading...
 |
| READ THE ORIGINAL POST AT www.theguardian.com |