A federal judge approved the proposed merger of AT&T and Time Warner, a big defeat for the Department of Justice, which had tried to block the deal on antitrust grounds. Both companies argued that combining their assets was necessary in a media environment that has been disrupted by Amazon, Netflix and others. The decision opened the door to more dealmaking in the industry. Soon after the ruling Comcast launched a $65bn takeover bid for some of 21st Century Fox’s assets, topping a rival offer from Disney. See article.
The Federal Reserve lifted its benchmark interest rate by a quarter of a percentage point, to a range of between 1.75% and 2%, the second rise this year. The last time the rate was 2% was mid-2008, before the worst of the financial crisis. The Fed hinted at two more rises this year, and dropped its prediction that monetary policy would remain stimulative for some time. See article.
In France the High Council for Financial Stability for the first time raised the “countercyclical” capital buffer, obliging banks to fund themselves with additional equity amounting to 0.25% of risk-weighted assets. The aim is to force banks to store up capital when the economy is strong. The HCFC is worried about mounting household and corporate private-sector debt, which hit 130% of French GDP in late 2017.
Seeking a better relationship
Christine Lagarde, the managing director of the IMF, said that protecting Argentina’s poor and most vulnerable was central to the plan thrashed out between the fund and the Argentine government following the sharp fall in the peso. The IMF is extending a $50bn line of credit to Argentina in return for quicker reductions of the budget deficit and hard targets to tame inflation. The deal also includes measures to increase welfare spending if the economy worsens. See article.
Voters in a referendum in Switzerland overwhelmingly rejected a proposal to remove the ability of commercial banks to create money (through lending). The Swiss National Bank described the result as a relief; the Vollgeld plan envisaged the public holding current accounts directly with the central bank.
A national-security threat?
The Trump administration reached an agreement with ZTE, a Chinese maker of telecoms equipment, that overturns a ban on ZTE acquiring American components. In return ZTE must pay a $1bn fine for violating sanctions against Iran and North Korea, replace its senior management and allow America to monitor its activities. That was not enough for Congress, which moved to scotch the deal. ZTE’s share price swooned on its first day of trading following a two-month suspension.
Adyen, a Dutch payments platform that counts Netflix and Uber among its customers, made its stockmarket debut in Amsterdam. Its share price doubled above the offer price, giving it a market value of €14bn ($16.5bn). It was one of the biggest European technology IPOs in recent years.
Tesla is to reduce its global workforce by 9%, or around 3,500 employees, part of an effort to streamline management and generate sustainable profits. The job cuts won’t affect production workers, who are racing to reach the all-important target of making 5,000 Model 3 cars a week by the end of June.
Toyota paid $1bn for a stake in Grab, a ride-hailing startup based in Singapore. It is the latest big investment by a conventional carmaker in technologies and firms that are disrupting the industry. Grab operates in eight South-East Asian countries. In March it bought Uber’s business in the region; under the deal, Uber took a 27.5% stake in Grab.
German authorities handed Volkswagen a €1bn ($1.2bn) fine for cheating emissions tests, one of the biggest-ever penalties levied against a company in Germany.
Just a month after it passed the measure unanimously, Seattle’s governing council rescinded a tax on the city’s biggest companies amounting to $275 per full-time employee. The tax was intended to raise money to ease Seattle’s homelessness problem, but met fierce resistance from Amazon, Starbucks and others with headquarters there. Amazon described the levy as “hostile”. Such “head taxes” are being considered in other cities, including San Francisco, where the growth of tech firms is blamed for pushing locals out of the housing market.
A spanner in the works
In a decision with ramifications for the country’s gig economy, Britain’s Supreme Court ruled that an independent contractor for Pimlico Plumbers could be classified as an employee, entitling him to paid holiday, sick pay and other benefits. The court found that, although the plumber’s contract bore features of being self-employed, his work was controlled and restricted by the firm, akin to a normal job. See article.