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Banks, Bombardier—and a bailout for Greece?

Feb. 19: Greece asks for an extension, plus, a banking crackdown, a Bombardier bailout, and billions for Uber


 

MORNING-PLAYBOOK-STORY
Are the world’s big banks in the dog house?

It’s not a new question—date the current shade from around 2007, if you like—but, this morning, as the HSBC scandal continues to balloon, the U.K.’s financial watchdog announced it will be investigating competition among major investment and corporate banks. That’s right: all of them.

Also this morning, Greece is asking for an extension of its bailout deal, a reversal of its previous position of refusing a bailout, but Germany isn’t biting. At home, analysts are wondering whether government help for Bombardier is warranted—and whether it would even help. Oil has dropped below $50 already this morning, and the price slump yesterday hit the TSX, bringing the index down by more than 70 points, despite more indications from the U.S.’ Federal Treasury that a rate hike will be slow coming, which usually gives markets a boost.

Today, the European Central Bank will follow the Fed’s lead—for the first time—in releasing minutes from their latest meeting, where they announced a massive bond-buying program to kick-start the eurozone economy. The release is part of a new push for transparency at the ECB. There will also be employment-insurance numbers released by Statistics Canada, and the Bank of Canada’s deputy governor will make a speech on inflation and monetary police at Mont Tremblant. Earnings reports today include Wal-Mart, Nestlé and Virgin Australia.

Did Greece just blink? Plans for an emergency meeting tomorrow are under way, after Greece submitted a request for a six-month extension of its current bailout. The head of the group of eurozone finance ministers had said a meeting was only on the table if Greece changed its hard line on not extending the bailout. Previously, the Greek government was insisting that it wouldn’t consider an extension of the 172-billion-euro (about $245 billion Canadian) bailout, which comes with austerity requirements. The European Central Bank has also offered the Greek central bank another 3.3 billion euros, as money rapidly leaves the country and the government faces running out of cash as soon as next week. Greek bonds and equity let out an early sigh of relief in response.

Update: Germany isn’t biting. At just before 7:30 a.m. Toronto time, the German government rejected the proposal. 

British banks go (further) under the microscope. This morning, the U.K.’s Financial Conduct Authority (FCA) said it would investigate corporate and investment banks for anti-competition practices, saying the move is spurred by questions over whether clients have a full picture of prices. The move may be part of a broader crackdown on banks ahead of the country’s general election in the spring, and an increase in powers for the regulator due for April. Asset managers may also get their own probe, as the FCA said there were still concerns over whether enough is being done to stop insider trading. The banking world is apparently feeling a little shaky this morning: One of the side effects of the HSBC tax-evasion scandal has been frequent asides from banking sources that the British bank was not an outlier in offering clients “special” serves. Following the Swiss prosecutor’s raid on HSBC’s Geneva offices, FT reports that rival banks are rapidly trying to clean out their own closets.

A bailout offer for Bombardier. Yesterday, Quebec’s economic minister pledged the province would help out the ailing manufacturer if need be, despite not receiving a request, saying, “We have money available to finance Bombardier customers.” It wouldn’t be the first; GM and Chrysler have received government bailouts in the past. Last week, the company announced a slate of changes, from shaking up the leadership, to cutting the dividend, and raising debt and equity. But would a bailout make the changes worth it? Maclean’s Jason Kirby is skeptical; after all, the company has pulled out the same tricks years before, and remains one of the TSX’s worst-performing stocks.

champions?

I see your millions, and I raise you billions. Another day, another massive round of fundraising for a tech disrupter, in this case, Uber. The ride service has expanded an ongoing round of funding by $1 billion due to demand—that makes the round worth $2.8 billion—and comes just weeks after the previous round, which raised $1.2 billion. All these billions making you dizzy yet? Here’s one more: Uber also just raised $1.6 billion from the clients of Goldman Sachs, this time, in convertible debt. The takeaway: The company is putting IPOs out of style, as the money just keeps rolling, and rolling, and rolling in (regardless of scandals and protests from Delhi to South Korea to Spain).

Need to Know:
TSX: 15,212.75 (+71.86), Wednesday
Loonie: 80.53 (+0.28 cents), Wednesday
Oil (WTI): $49.90, Thursday (6:46 a.m.)


 

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