Bookie tie-up dependent on regulator condition

A proposed merger between two of the biggest bookmaking companies in the UK will be cleared by authorities on the condition they sell off hundreds of betting shops.

According to a press release last Friday by the sector watchdog, The Competition and Markets Authority (CMA), the deal could severely hamper smaller competitors and slimming down on the number of storefronts will be needed.

Ladbrokes plc, former owners of the Hilton hotels, and Gala Coral Group Ltd, owned by a consortium of private equity firms, will have until mid-June to offer counter arguments to the details within the report including the condition that up to 400 shops will need to be closed.

Gala Coral, headquartered in Nottingham and Gibralter, has eighteen hundred betting shops across the UK and has its bingo operations in 137 clubs across the nation.

Ladbrokes are a slightly bigger firm with over 2000 stores and is listed on the London Stock Exchange. The deal was initially agreed on this time last year.

The biggest UK betting company currently is William Hill, which operates worldwide and employs over 16,000 staff. If the merger goes through the new Ladbrokes-Coral company will eclipse the market leader.

A spokesman for CMA, Martin Cave said, “Although online betting has become relatively popular, we feel that physical shop fronts are still very popular to a significant number of customers. And it is these people who stand to lose out if a high street monopoly is formed and this is why we feel conditions for this proposed merger are necessary.”

Cave added that a final report would be published by the end of next month.
In response to the preliminary findings from the CMA, Ladbrokes said, “We respect the initial findings of the report and are determined to reach an agreement with the CMA regarding the number and location of shops we need to terminate.”

The merger is said to be priced in the region of 2.4 billion pounds, and Ladbrokes shares climbed 6.7 percent with the recent news. Experts say the newly formed company will not be overly affected by the proposed shop closures.

Jonathon Price, Director of Mergers & Acquisitions at Nikko Holdings commented in an email to clients yesterday, “Ladbrokes-Coral looks like it will be the dominant force In the UK betting sector regardless of the CMA’s enforced shop disposals. With the amount of overlap the two firms have in the field we are going to see substantial cost savings.”

Greenback slows up after knee jerk hike reaction

European currency markets watched the dollar hold up its recent gains on Friday, after the rumours of U.S. interest rate increases by September pushed the greenback to new levels.

The dollar nearly drew level with the euro in 2015 and the recent gossip coming out of the Fed, combined with sturdy data reports, has had a positive effect on the currency markets and resurrected rally hopes particularly among hedge funds.

Currency managers are proceeding with caution however, especially in an election year, with suspicion still strong that the slide in the greenback observed since the first quarter have been affected greatly by politics.

Most experts have been disheartened recently by the dollars failure to gain, and data from this week shows the currency markets now betting it will go in the opposite direction.

“A long greenback position is popular with investors, even today,” said Jonathon Price, Director of Mergers & Acquisitions at Nikko Holdings, “The reason is not because the monetary policy gap is not there, it is, but too many investors have been burnt in the past.”

Nikko Holdings have preferred to back the dollar against Asian currencies rather than its basket peers. “We are confident the dollar increase will no longer be against the usual suspects who have used their central banks to weaken through easing methods and negative interest rates. We see what happened with the yen in the first quarter,” Price added

The figures for the dollar were stable at $1.1221 following a recent high on the euro zone trading floors of $1.1207 and up 0.2 percent on the .DXY, its measuring stick against its major competitors.

Japanese bank trader sentiment points towards a steadier pace for a greenback rise against the yen mainly due to the ability of the nation’s exporters to sell the currency.

The news will please Japanese economic authorities who have been panicking lately over the yen’s strength and the knock on affect to the economic recovery of the country.

These subjects are more than likely to be a major talking point at the Group of 7 summit due to take place in Japan at the end of the week. The meeting for the worlds most advanced economies could be prickly on the dollar/yen situation and there may well be divided opinion over a spectrum of peripheral issues also.

There is expected to be some opposition to Japanese monetary easing, especially from the U.S.

State Oil Company Ready for Privatisation

The Middle East’s biggest oil producer, Saudi Aramco, is planning international expansion via partnerships as it prepares for its IPO, encouraged by a government eager to modify its economic options.

The crude giant is seeking joint foreign ventures in the U.S. and all across Asia, CEO Amin Nasser commented to journalists at a press meeting at the company's HQ this week.
"There is a definite opportunity for international development looking at the current oil market," he said, adding that he thought global demand would increase by approximately 1.3 million barrels per day.

The changes to the company are part of a much bigger strategy for a profound re-examination of Saudi Arabia’s economy in response to an estimated dip in crude.

The kingdom is planning to sell up to 6% of Aramco via IPO and has requested that the company play a more dominant role in the industrial sector with a view to diversifying the oil-centric national economy.

Nasser declared "We will stay on point with Aramco,", as he expounded on the crude giants massive production capabilities of 10.2 million barrels per day average last year and that it will take “only a fortnight longer” to finish a recent development project at the Shaybah field.
The area’s output will increase to 1 million barrels per day once infrastructure work is complete, the development aimed at improving the kingdoms oil quality and dealing with decreased output at several other fields as they tap out, Nasser added.

The company also says a large shipbuilding complex that it is constructing at Ras al-Khair will be 100% operational in the next 5 years.

The primary area of the specialized port, part of Riyadh's strategy to seed industrial diversification, will be open in just 2 more years, and it’s long term purpose is to construct platforms and oil tankers.
It’s expected the project will create 85,000 new jobs, according to the company’s own press releases, and allow the kingdom to cut down on its imports by $11bn, while boosting the nations GDP by a cool $16bn.

Jonathon Price, Director of Mergers & Acquisitions at Nikko Holdings said “The timing is perfect for the recent announcements, and that’s no coincidence. With the company preparing for a forthcoming IPO, they are pretty much obliged to let potential investors know of development plans. Having said that, the new industrial port at Ras al-Khair is something that you would most certainly brag about anyway. It’s going to be an impressive complex.”

Cautious mood in Asian markets; bonds pick up

As the economic outlook remains bleak in China, market specialists in the region observed a global stock gain with a pinch of salt and instead turned their interest to bonds.

European markets may follow suit with the exchanges there expected to open relatively flat.
A knock on effect of fluctuations in the Chinese economy is the negative blowback on certain nations in the region dependent on the world’s second biggest economy such as Hong Kong, Taiwan and Korea, who all saw their shares decline.

A recovery in China’s growth was a possibility after first-quarter data was released in March and the country’s economy was thought to be heading in a positive direction. However, doubts have been growing since April regarding the durability of a turnaround after contradictory data and soaring debt in a number of sectors.

A news article by an un-named ‘economic oracle’ in a communist publication last week that hinted to China’s L-shaped economic trend didn’t alleviate investors’ fears over future recovery potential either.

The lone positive market was the Nikkei, which gained 4 per cent as the yen continued to move away from the highs seen last year against the greenback.

“The overall mood in Asia remains cautious I would say” Jonathon Price, Director of Mergers & Acquisitions at Nikko Holdings commented. “The lack of recovery in the Chinese markets is a down point but I think market sentiment is leaning towards a reversal in overly bearish positions” he added.
Meanwhile, bonds held firm which may be a sign that investors remained pessimistic regarding the future of less solid assets in the short term as the current environment of slow economic development continues.

In currencies, the yen remained defensive after a period of decline following authority’s comments threatening to intervene should it continue the present trend.

The greenback received good comments by the Fed President William Dudley last week, which rekindled hopes of an interest rate hike after a disappointing U.S. payrolls report. He said that there was a reasonable possibility there would be two hikes this year.

The dollar outperformed its 6 basket rivals as it gained to a weekly high of 94.156.
In the energy sector, oil prices added following wildfires in Canada and a terrorist attack on an oil platform in Nigeria. Brent and U.S. crude figures were both out approximately 0.4 per cent coming in at $45.29 and $44.30 per barrel respectively.

Japan's Abe Backs Cameron in Brexit Affair

Japan’s PM Shinzo Abe added to the Brexit banter, saying that Japanese organizations contribute resources to England because they consider it to be a door to the European Union.

Abe told a question and answer session in London, following conversations with UK PM David Cameron that Japan wants Brits to vote to stay in the 28-country coalition in the June 23 referendum.

"Japan attaches significance to our partnership with the U.K. as a door to the EU," he said. "A vote to leave would make the U.K. less appealing as a destination for Japanese venture."

Abe made his remarks as new figures underscored the effect the choice, is having on companies in the UK. Markit Economics said the economy is “slowing right down" after its manufacturing plant, development and administrations indexes all fell more than experts anticipated a month ago.

Abe is the most recent world leader to back Cameron's battle to keep Britain in the EU, with U.S. President Barack Obama and New Zealand Leader John Key among those voicing their support. In support of his argument to legislators on Wednesday, Cameron contended that no nation friendly to the U.K. is in favour of a Brexit.

Nikko Holdings Director of Mergers & Acquisitions, Jonathon Price said “It’s important for world leaders to share their comments on the issue of Britain and the EU. Their viewpoint is valuable not only as outsiders looking in but also as partners in the global economy”.

Japan's Priority

Obama's intercession was singled out by the "Remain" groups as a sign of the troubles England may confront on the off chance that it leaves the EU. The U.S. president said, during a three-day visit to the U.K. a month ago, that the U.K. would go to the "back of the line" with regards to arranging a U.S. trade agreement.

Abe echoed his sentiments, stating that Japan's priority would be establishing a trade agreement with the EU.

“More than 1,300 Japanese organizations have visibility in the U.K., employing more than 140,000 individuals,” Cameron told journalists.

England benefits more from Japanese venture than any other nation apart from the U.S.

Towards the end of 2014, Japan had interests in the U.K. estimated at 38 billion pounds ($55 billion).

Whilst "this is a matter to be decided on by the English people," Abe said, "Japan's own interests are also at stake."

Oil Prices Decline Following OPEC Production Figures

After it was revealed that oil stockpiles are rising in the U.S. oil prices fell sharply in the U.S. as well as in the other parts of the world. This is a cause for concern as OPEC has shown continued increase in production.

Jonathan Price of Nikko Holdings says, "Oil is both over bought and over supplied."
According to the data released by Genscape Inc., the key U.S delivery hub, supply levels have increased by 871,000 in comparison to last week. Economists are of the opinion that inventory levels will fall in concurrence with the decreasing price of oil in the U.S.

Mr Price added, "According to a report released by Reuters, the daily output for the month of April had increased by 170,000 barrels a day. OPECs total production could have been much higher but it was prevented due to the outage in Kuwait, UAE, Nigeria and Venezuela."
The U.S crude benchmark went down by 2.5% and ended at $44.78 per barrel on the New York Mercantile Exchange. The global Brent also registered a downfall of 3.3% and ended at $45.83 at the ICE Futures Europe Exchange.

Analysts have already begun to caution businesses regarding the surplus of refined fuel products. It is quite likely that gasoline will also register a decrease in demand. This is cause for concern as refineries have already begun to increase gasoline output in the hope of an increased demand.
"The refineries are pushing production without taking demand in perspective. This could lead to an oversupply of products," says Price.

Currently, production is being driven by financial pressure. The revenue of service companies has reached unsustainable levels and these companies are reacting by increasing demand.

More recently, Energy Aspects, a London-based research consultancy, said that many key players are experiencing losses. Giants like Schlumberger Ltd. and Halliburton Co. have registered operational losses. Halliburton also announced that on Monday the company will formalize its takeover of Hughes Inc. at a cost of $35 million.

Both gasoline and diesel have registered a drop. While gasoline went down by 2.6% and ended at $1.5628 per gallon, diesel went down by 2.2% and ended at $1.3555 per gallon.

Hedge Fund Traders are Out of Their Depth

They may not admit it, but numerous merchants at investment banks harbour a fantasy – that some time or another they will give up banking and go to work at a hedge fund outfit.
In the previous year, many have found themselves in a situation where they are forced to chase that aspiration, as redundancies have hit City exchanging floors. Yet, despite the fact that traders are not acclaimed for thinking little of their own capacities, the individuals who make the move to hedge funds frequently find that it is not as simple as they thought.

For a few, that is on the grounds that their bank experience is not the perfect preparation for the new employment – huge numbers of those recently let go at Deutsche Bank, Credit Suisse, Barclays and Morgan Stanley had settled into their fixed income desks, which probably hadn’t prepared them for most hedge funds.
The workers to leave Nomura, in mid-April (it was revealed that the bank was arranging 500 employment cuts in Europe, the Middle East and Africa) may be better prepared. Yet, even brokers with a solid foundation can find it difficult to adjust to hedge fund work.
One thing traders miss is the sheer volume of flow. The flow at a major bank is a consistent chance to profit. What's more, they leave a stream of business as well as data – what partners are doing and what customers are exchanging. Moving to a hedge fund cuts off that consistent opportunity.
Jonathon Price, Director of Mergers & Acquisitions at Nikko Holdings, who oversees $4.9 billion over a scope of assets, comprehends the complexity.

Price says, "You have to get used to the diminished stream of customer data. Ten years back, you could simply take your pick from all the data that was accessible."
He includes the proviso, "It’s not so much a major variable now, as most exchanges are done electronically."

In addition there were trade-offs, one being a more prominent flexibility than most bank merchants need to exchange more resource classes. Sir Michael Hintze, who established CQS, with $12 billion of assets under the administration of one of Europe's biggest multifaceted hedge fund managers, in 1999, is also a veteran of bank exchanging floors, at Salomon Bros, Credit Suisse, First Boston and Goldman Sachs.

Hintze said, "Numerous dealers underestimate the value of the seat and the stream of data at a bank. At a hedge fund, you have obligations regarding your exposures, capital, accounting report, margin and financing."

Star traders new to the hedge fund game might be perplexed to find that not all clients are inspired by their record.