DealBook Today's Top Headlines - June 28, 2016: Market Panic Subsides as Britain Faces Economic Fears | Volkswagen to Settle Diesel Claims in U.S. | Lyft is Said to Hire Qatalyst
Tuesday, June 28, 2016
TODAY'S TOP HEADLINES
By AMIE TSANG
MARKET PANIC SUBSIDES AS BRITAIN FACES ECONOMIC FEARSMarkets regained some equilibrium in Asia on Tuesday with the pound clawing back some of its losses and the Nikkei 225 rising in Japan, Jonathan Soble reports in DealBook.
The Japanese authorities sought to prevent the strengthening of the yen,
which could be bad for profits and deflation. The finance minister,
Taro Aso, said that the authorities were ready to respond if necessary.
A measure of calm had appeared already on Monday, Nathaniel Popper reports in DealBook.
Stocks slid, but Standard & Poor's 500-stock index was stable for
most of the day after dropping around 2 percent in the first minutes of
trading. It closed 1.8 percent lower, while markets in Japan and China
The VIX measure of volatility fell on Monday after a spike on Friday.
Europe was less sanguine with investors still dumping stocks and seeking
safety in bonds and gold. The pound fell to its lowest level against
the dollar since the 1980s and Standard & Poor's rating agency announced that it was stripping Britain of its AAA rating.
There is still enormous uncertainty about how Britain's exit will play out, but if you consider the absolute worst-case scenarios, it could just be the first domino, Andrew Ross Sorkin writes in DealBook. And the next ones to fall would matter more.
Italy's government is already considering pumping money into its banking systems as bank stocks were pummelled after the vote. Italy's banks would suffer if Britain's vote to leave the European Union created a material economic slowdown.
If Italy's economy faltered later on and the European Union offered
help only with tough conditions, we could witness the secession of
Italy, Mr. Sorkin writes.
There is a decent chance that another country could try to follow Britain on its way out before then.
Geert Wilders, the populist leader of the anti-immigrant Party for
Freedom in the Netherlands, has already called for a Dutch referendum.
James Pethokoukis, a commentator at the American Enterprise Institute,
recently found a memorandum written in 2011 during the euro crisis by
Willem Buiter, the global chief economist at Citigroup, that imagined
the destruction of the European Union. It compared it to the movie "War of the Roses" - disruptive, destructive and without any winners.
"Exit, partial or full, would likely be precipitated by disorderly
sovereign defaults in the fiscally weak and uncompetitive member states,
whose currencies would weaken dramatically and whose banks would fail,"
Mr. Buiter wrote at the time. "If Spain and Italy were to exit,
there would be a collapse of systemically important financial
institutions throughout the European Union and North America and years
of global depression."
Hopefully, these are just worst-case scenarios. Unfortunately, as Neil Irwin explains in The Upshot, Britain's exit actually accentuates global forces that have been building for years that governments have been unable to limit.
These self-reinforcing dimensions make it a particularly perilous time
for the global economy. The dollar is likely to strengthen with the
value of the pound collapsing. The result of the referendum could drag
down growth even further.
And political environments around the world are getting more toxic, driving greater polarization and a greater range of possible outcomes. These and other changes do not stand in isolation, and no one yet knows where the cycle ends.
VOLKSWAGEN TO SETTLE DIESEL CLAIMS IN U.S.Volkswagen has agreed to pay up to $14.7 billion
to settle claims stemming from its diesel emissions cheating scandal in
what could be one of the largest consumer class-action settlements ever
in the United States,
Hiroko Tabuchi and Jack Ewing report in The New York Times.
The proposed settlement involving the federal government and lawyers for the owners of about 475,000 Volkswagen vehicles,
includes a maximum of $10.03 billion to buy back affected cars at their
pre-scandal values, and additional cash compensation for the owners,
according to two people briefed on the settlement's terms.
Each owner will be offered cash compensation of $5,100 to $10,000. The buyback price and the compensation would depend on the car's value before the scandal erupted.
The settlement still only covers a fraction of the 11 million diesel cars worldwide, most of them in Europe. But it was seen as a remarkable deal for the Volkswagen owners.
Volkswagen will also compensate previous owners who may have sold their
diesel vehicles after the cheating became known last year - but at only
half the rate of the compensation being offered to current car owners.
Volkswagen would also pay $2.7 billion into an Environmental Protection
Agency fund. Volkswagen has also agreed to spend $2 billion on new
The automaker's problems are still far from over. It faces a
criminal inquiry by the Justice Department and investigation by
attorneys general in 42 states, the District of Columbia and Puerto
Rico. Financial regulators in New York are also investigating whether
Volkswagen overcharged consumers when it leased or financed sales of
cars designed to cheat air-quality tests. The Financial Services
Department is also seeking information on the insurance coverage
required by Volkswagen.
On top of all this, it is also under investigation in other countries, including Germany and South Korea.
ON THE AGENDAA third estimate of gross domestic product for the first quarter and a revised estimate of first-quarter corporate profits will be published at 8:30 a.m. The latest Standard & Poor's/Case-Shiller Home Price Index data will be published at 9 a.m.Jerome H. Powell, a member of the Federal Reserve board of governors, will speak at the Chicago Council on Global Affairs at 5:30 p.m. on central banks and the global economic outlook.
LYFT IS SAID TO HIRE QATALYSTThe ride-hailing start-up Lyft is working with Qatalyst Partners, the investment bank founded by Frank Quattrone, The Wall Street Journal reports, citing people familiar with the matter.
Mr. Quattrone, known for helping tech companies find a buyer, has contacted automakers about acquiring a stake in Lyft, the people told The Journal. It is unclear whether Lyft is aiming to sell itself or raise new funding.
Lyft and Uber have been burning through capital to expand their
services, pouring millions of dollars into subsidizing low-price rides
and giving cash bonuses to new drivers. Lyft has so far raised about $2
billion in funding - a sixth of the funds raised by Uber.
It may have invited Qatalyst on board to signal that it is open to a
sale. Qatalyst recently advised LinkedIn on its $26 billion sale to
One potential buyer may be General Motors, which paid $500 million for a 10 percent stake in Lyft this year.
World's Largest Uncut Diamond Heads to Auction, a Break With TraditionThe Sotheby's
auction for the 1,109-carat white diamond represents a new approach that
aims to take advantage of wealthy individuals' desire for trophy
Sale of Yum China Stake Said to Be DelayedPotential
bidders held off submitting their bids and missed a deadline after Yum
Brands sought to impose new terms on the investments, Bloomberg reports,
citing people with knowledge of the matter.
Premiums for Mergers and Acquisitions Hit Highest Multiple Since 2007In a climate
where organic growth is increasingly difficult, there is pressure on
companies to acquire others to raise revenue and profit, said Peter
Tague, co-head of global mergers and acquisitions at Citigroup.
Apax Said to Secure Additional Capital Apax Partners,
one of Europe's largest private equity firms, has secured $7.9 billion
for its latest pool of capital, Bloomberg reports, citing people
familiar with the matter.
Asian Hedge Funds Seek a Safe Bet Hedge funds in
Asia are taking what is viewed as a safe bet on Britain's vote to leave
the European Union: stacking up trades against shares of the British
Soros Wagered Deutsche Bank Would Drop in 'Brexit' Turmoil Soros Fund
Management took a short position in Deutsche Bank of about seven million
shares as turmoil from Britain's decision to leave the European Union
sent bank stocks lower.
China Resources Arm Aims for Muscular Hong Kong I.P.O.China Resources
Pharmaceutical Group, the pharmaceutical arm of one of China's biggest
conglomerates, is looking to raise more than $1 billion and could
potentially list shares as soon as September, The Wall Street Journal
reports, citing a person familiar with the matter.
Y Combinator Wants to Build Cities YC Research, Y
Combinator's nonprofit arm, plans to solicit proposals for research into
new construction methods, power sources, driverless cars, even notions
of zoning and property rights.
Emigrant Savings Bank Discriminated Against Minorities, Brooklyn Jury SaysA federal jury
found that the bank had targeted minority homeowners with low credit
scores, marketing subprime mortgages to them from 2005 to 2009.
RJR Nabisco Ruling Bolsters Justice Dept.'s Pursuit of FIFAA RICO case
against FIFA, the international soccer organization, can move forward
without concern that the charges might not be a permissible use of
federal law, Peter J. Henning writes in White Collar Watch.
AstraZeneca Pushes to Protect Anti-Cholesterol Drug From Generic CompetitionThe drug maker
is trying to get Crestor, its popular anti-cholesterol pill, approved to
treat children who have a rare disease characterized by high
Bad Behavior Is Exposed as the Shale-Oil Market ShrinksA legal case
against Chris Faulkner, who describes himself as a Frack Master, is a
sure sign that the so-called bezzle, an inventory of undiscovered
shenanigans that builds up during boom time, in the shale-oil industry
is shrinking, Kevin Allison writes in Breakingviews.
Uber and Lyft Settle Litigation Involving Top Executives Rival
ride-hailing services Uber and Lyft have settled high stakes litigation
involving two of their top executives, court filings show, before a
trial that could have aired sensitive details about both companies.
Google Said to Be Hit By New Complaint From Brussels The competition
commissioner of the European Union is planning to issue two separate
"statements of objections" against the company for reportedly abusing
its market power in online advertising and shopping, The Financial Times
reports, citing people familiar with the case.
U.S. Extends Temporary Lifting of Sanctions on ZTEThe extension
is good news for ZTE, a maker of telecommunications equipment, which is
trying to rebuild its reputation after being accused of violating trade