Naughty banks … More angst for some of the world’s biggest banks with the gnomes of Switzerland’s competition regulator looking at yet more reports of market-fixing in precious metals. The Swiss competition commission said overnight it had opened a probe against two Swiss banks, UBS and Julius Baer, and five foreign banks — Deutsche Bank, HSBC, Barclays, Morgan Stanley and Mitsui — on suspicions they might have colluded on how bid-ask spreads in previous metals were priced. The metals involved in the probe are gold, silver, platinum and palladium. A number of banks have already been pinged for fiddling the now abandoned London gold fix. And banks have paid billions of dollars in fines for that and for fiddling foreign exchange and interest rate pricing as well.
The story has legs because Julius Baer and Mitsui bank have said they were co-operating with the authorities — the others are playing dead at the moment. And it gets worse (or better, from a journalist’s point of view), with reports that American regulators and the European Commission are also reportedly investigating similar trading issues in the metals markets. VW, banks, they are all the same when you think about it — untrustworthy. — Glenn Dyer
How to start a small oil company? Following Shell’s example might be one way. Shell is busy moving towards wrapping up its US$90 billion takeover of BG Group (if only those pesky Australian regulators would give the thumbs up). But overnight it added to its woes by abandoning its oil drilling campaign in the Arctic, which resulted in upwards of US$7 billion being spent on drilling one hole (which found traces of hydrocarbons in an area claimed to contain 4.3 billion barrels of the gloopy stuff). Shell says drilling in the area is off “for the foreseeable future”, partly due to the high costs of exploring in the region as well as “the challenging and unpredictable federal regulatory environment in offshore Alaska”.
But the main reason was the slowly dawning belief that oil priced around US$50 a barrel is here for longer — while the drilling could only be justified by a price above US$100 a barrel. Shell’s shock decision to abandon of Arctic drilling came just six weeks after the US government gave the company final clearance for its campaign. The decision is likely to cost the oil giant around US$4-US$7 billion in charges and write-offs against the third-quarter result. Seeing Shell earned US$3.4 billion in the second quarter, it is likely the Arctic related write-offs will produce a bottom-line loss for the quarter when the results are announced on October 29. — Glenn Dyer
Glencore’s date with Bermuda’s Triangle? Yesterday we brought you the tale of the travails of Glencore, the big commodities trader and miner (big in Australian coal, copper, lead, zinc and silver and nickel in Queensland, NSW and WA). Overnight those travails turned into a full-blown crisis as Glencore shares collapsed on the London Stock Exchange, plunging to be down 29% at the close at a new all-time low. That was after the 21% slide last week, meaning the shares have halved in value in just six trading sessions. The company is now worth just US$15 million, against US$60 billion four years ago, the shares are down 77% this year, and the slide is signaling something is very wrong.
Its debts (around US$30 billion) are a concern. Its exposure to copper and thermal coal are concerns, too, but some reason it is the one stock singled out by worried investors and vultures (like hedge funds) to attack as they fret about global economic growth and China. The latest sell-off was sparked by the Investec investment bank casting doubt on the company’s profitability and financial strength. Its report was entitled Bermuda Triangle — an overblown idea perhaps, but the market gloom says it all. — Glenn Dyer
US warming, world cooling? It’s one of those weeks for all things global and economic. The US jobs report for September is out Friday night (our time) and by then a handful of senior Fed officials will have spoken (including chair Janet Yellen and vice-chair Stanley Fischer). That will be after the start-of-month final surveys of global manufacturing, especially for China (where there will be two reports), inflation and unemployment in the eurozone. Friday brought a surprise upgrade in June quarter GDP for the US to 3.9%, from 3.7% (annual) in the second estimate a year ago, as consumers spent more, business investment was higher than expected, net exports did well and construction and housing spending was stronger. The Fed meets on October 27 and 28, the first estimate of US third-quarter GDP is out the next day and could make any Fed decision look prescient, or wrong. — Glenn Dyer