E First Kill All The Lawyers

Because market forces have pushed up US dollar interest rates to around 3%, most other countries have seen the same increase in their official interbank rate, about 0.25% this spring. But there are a few outriders.

At the same time another high-interest country, Argentina, which under President Mauricio Macri attempted to reform way from the Peronist shambles left by his predecessor, who never behaved herself, asked the International Monetary Fund to give it help in cutting its rates from the current level of 27.25%.

Messy Ukraine, undermined by political attacks from Russia and home-grown corruption, has rates at 17%.

Yesterday, the central bank of the Sick Man of Europe capitulated to reason by raising its interest rates by 1.25% tp 17.75%, something of a record for yields. The country is Turkey and the move was strongly opposed by President Recep Tayyip Erdogan, partly on religious grounds, because high interest rates are un-Islamic, and partly because he shoots from the hip like another President we all know about.

Only other countries so far have had to hike their interest rates by that much and in each case politics bears part of the blame. Mexico's rates were raised 1.75% so far to 7.5% because of the poll gains for its left-wing presidential candidate, Andres Mauel Lopez Obrador, now the front-runner. He will probably turn out to be less of a Robespierre than the markets expect, but of course this is uncertain.

Other countries which have had to raise interest rates are Romania, where yields are 7.5%, and Pakistan, where they are 6.5%.

Since we invest in stocks from Mexico and Argentina, we have to watch these moves in interest rates closely. And there is always a risk of markets misjudging the risks, and confusing one country for another.

More today in the usual Friday pileup, not of reporting companies but of other moves in the markets. We have news from Assam and Bangalore in India, Germany, Finland, Russia, Canada, Hong Kong, Guangzhou, Shenzhen, and lots of other cities in China, South Africa, Britain, Nevada, Lxembourg, Japan, Thailand, Spain, and Sweden. We start with some stories about legal issues, which justify my quote from William Shakespeare heading this blog.

Legal Issues

*EON SE of Germany opted to delay the closure of its sale of 46.65% of Uniper to Finnish Fortum for euros 3.8 bn, about $4.5 bn because of obstructions by the management of Uniper which is illegal under German corproate law. Backed by Elliott Management, EONGY has delayed the takeover which could monetize its UNO1 holdings until the next general meeting of shareholders, which gives it time to file a complaint with German authorities against the board of the latter firm and name a special auditor to examine Fortum's actions. Elliott via a Luxembourg company called Cornwall owns about 8% of Uniper.

The merger has cleared all the other necessary approvals, including one from Russia, but is being held back inside Germany.

This delay will affect other moves by EONGY to transfer subs to fellow-German ute RWE in pursuit of simplicity and synergy which are lacking in its complex organigram, to say nothing of cash. Uniper appears to have placed negative ads in Finnish newspapers, which is a no-no under German rules on takeovers.

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Vivian Lewis 2 years ago Author's comment

since I wrote the article myself I give it 5 stars and hope to win a free Echo Show, whatever that may be

Vivian Lewis 2 years ago Author's comment

since I wrote the blog I naturally want to say it was good and win a free echo show, whatever that may be.