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27/10/2016

Weekly News Bites: Few bricks shy of a load

Our top picks from this week's Morning Chat

Few bricks shy of a load: Brent crude fell below the psychologically significant $50-level for the first time in weeks yesterday as a much touted production freeze agreement appears to be fraying. Iraq is the latest country asking for a special exception from production quotas, claiming exceptional budgetary pressures due to its war against Islamic State militants. Iran, Nigeria, Libya, Venezuela and Indonesia also believe they should be excused for various reasons. This would leave Saudi Arabia and Russia – neither famous for altruism – to bear the load. (27/10)

The handwriting was on the London Wall: Thirty years ago today – on 27 October, 1986 – the City of London was forever transformed by the “Big Bang”, which essentially converted London finance from a “fixed-commissions cartel” to the global, competitive, and (mostly) transparent place we know today. Some hark back nostalgically to when City bankers were synonymous with long lunches in the vicinity of a drinks trolley. Perhaps they were more fun than today’s straight-laced, quinoa-and-arugula types often witnessed squeezing stress balls. (27/10)

tEarning around: Disappointing corporate results from heavyweights such as 3M and Apple dampened the S&P 500 yesterday. Still, of the 150 companies from the S&P 500 that have reported thus far, 75% have beaten analyst expectations, well above the long-term average of 64%. More importantly, there is increasing confidence that third-quarter earnings will have grown this quarter, breaking a year-long spell of contraction. Even a week ago, few expected that to happen. (26/10)

It’s really been building up: The UK government has backed a highly contentious third runway at Heathrow. Many hoops still need to be jumped through, and at best, construction will not commence until 2020. Nonetheless, a clarion call has been made by a government which believes large infrastructure projects can catalyse the economy; it is currently projected to grow at a meandering 1.6% over the next four years. Already approved are the £18 billion Hinkley Point nuclear power plant, and the colossal £42 billion HS2 high-speed railway project. More, reportedly, is to come in the Autumn Statement. (26/10)

Waloony tunes: Belgium cannot sign a key EU trade deal with Canada because of objections from its Wallonia region. Wallonia, a die-hard socialist area of 3.6 million people, objects to the deal because it believes the agreement cedes too much power to multi-national corporations. The EU's 27 other governments – representing about 500 million people – have already approved the document. The Canadian trade agreement would have been the EU's most ambitious free trade deal to date; at least a few British politicians saw it as a prototype for a post-Brexit relationship. (25/10)

Better luck this Time: AT&T, the telecommunications giant, has bought Time Warner, a crown jewel of the entertainment industry which own brands such as HBO and CNN, for $85 billion. If approved, this merger will create a colossus capable of both producing content and distributing it, the new holy grail of the technology, media and telecoms sector. However, as in every mega merger, it pays to balance hubris with humility. Time Warner's own calamitous combination with AOL – one of the biggest failures of all time – can be allegorical. That deal was also predicated on the idea of uniting content with a new delivery mechanism: the internet. (24/10)

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