Oil services company Cameron International (NYSE:CAM) is trading up 19 percent today on the news of its acquisition by Schlumberger (NYSE:SLB), the world’s largest oilfield-services provider.
The deal is valued at $14.8 billion and has been unanimously approved by the boards of both companies. The merger will combine two complementary technology portfolios into a “pore-to-pipeline” products and services offering to the global oil and gas industry.
Paal Kibsgaard, Chairman and Chief Executive Officer of Schlumberger said in a statement:
“This agreement with Cameron opens new and broader opportunities for Schlumberger.
“We believe that the next industry technical breakthrough will be achieved through integration of Schlumberger’s reservoir and well technologies with Cameron’s leadership in surface, drilling, processing and flow control technologies.
“We look forward to working closely with Schlumberger to achieve a seamless post-closing integration and long term value for all of our stakeholders.”
Schlumberger is currently trading down 2.39% on the news, at 70.77 per share. (1449GMT)
Commodities have had a rough couple of months, and the rout shows no sign of abating. Crude Oil is currently at $39 a barrel, with Brent Crude at $43; compare these prices to those of a year ago, when oil was over $100 a barrel, and it’s clear there has been significant volatility in the sector. But the question on everyone’s lips is: how low can it go?
Oversupply and weakening demand has caused the dramatic drop in oil price over the last year. Whilst demand was high, oil companies began to produce more; the US in particular has been pumping more and more oil, as has Saudi Arabia. Furthermore, the nuclear deal with Iran means sanctions have lifted and millions of barrels of Iranian oil will enter the market for the first time in twenty years, exacerbating the problem further.
This problem is coupled with an unprecedented drop in demand. Many expected China’s hunger for oil to soak up the excess oil produced; however, with the ‘Great Fall of China’ casting aspersions upon the health of the world’s second biggest economy, demand from the region has dried up significantly.
High production and low demand has led to fierce competition in the industry and the U.S. rigcount has dropped to a 12-year low. Coupled with deep lay-offs and cutbacks in the sector, domestic production should drop significantly in the near future, perhaps evening up supply and demand.
Image: MoneyWeekSo what lies ahead for oil?
According to the August OPEC report, global oil demand is expected to pick up in 2015 by 1.38/mb.d. Demand is showin signs of recovering in some countries, but until production shows signs of significant decline, crude oil prices will remain low.
According to Gulf News, recovery may take a while; especially with the impact of Chinese markets causing prices to drop to a six year low on Monday.
Ole Sloth Hansen, Head of Commodity Strategy, Saxo Bank, told Gulf News:
“Fears about weaker global growth, especially in China, have hit the market at a time where supplies of key commodities from oil and copper to iron ore and corn have been rising. Mining and oil companies have all been expecting a continued strong rise in demand from emerging economies.”
The effect of this crisis on countries whose economies rely on oil production is huge, and some blame OPEC, the intergovernmental oil organization, for not intervening to stabilize the markets. The organisation met in 2014 but decided not to implement measures to control production; the price of oil has since fallen nearly 50 percent.
Russia is one such country facing difficulties; wealth from oil gives Putin’s government strength, and as shown by their recent economic downturn, the country heavily relies on oil exports to keep it afloat. Similarly, oil money funds the extravagant lives of countless Saudi princes and the urbanisation of their countries. Slower demand and weak oil prices also risk impacting upon smaller producing nations such as Venezuela and Nigeria, where oil exports account for 35 percent of GDP.
The history of oil is littered with booms and busts and so in the bigger picture, this rout is nothing new. Furthermore, oil is not alone – the drop has been commodity wide, with diamond giant De Beers recently announcing a 9 percent cut in retail prices as demand for diamond slows. Much of the global economy has been affected by political and economical problems of late – including the situations in both Greece and China – and the fall in commodities is just one reaction. History shows that the price of oil will, without a doubt, recover – but by all accounts, it’s unlikely to be before the middle of next year.
According to Spread Betting firm IG Markets, The Dow Jones is set to open up over 400 points.
The Dow sold off heavily in the final hour of trading yesterday but futures held at the previous days low, a key technical factor for investors who are looking for the market to build a base before a rally.
Even though Chinese stocks finished in the red, they were down (a mere) 1% after days of selling of around 8%.
These two factors along with cheap valuations maybe the primer for a relief rally in global equities.
“The failure of Chinese authorities to provide any indication of support for the markets over the weekend saw panic selling ensue on Monday, Tuesday we witnessed the dead cat bounce die in the US, however we are now starting to see a degree of rationality return with investors looking to buy value as the market looks to establish a bottom” said Mr Davies of Charles Hanover Investments.
The number of mortgage approvals in Britain rose in July to their highest level in 17 months according to the British Bankers’ Association, spelling good news for the housing sector.
Richard Woolhouse, chief economist at the BBA, said:
“Savvy homeowners are snapping up competitive deals before an expected increase in interest rates.”
British banks approved 46,033 mortgages for house purchases, the highest number since February 2014. That was up from 44,802 in June and up 11 percent from a year ago.
The number of mortgages approved for remortgaging jumped 29 percent and was its highest in four years.
Turmoil in China has invited questions into whether the Bank of England may push back a rate hike. However, this positive news from the housing sector may well put the hike on track.
Shares in online gambling giant Betfair (LON:BET) soared nearly 18 percent this morning, after a merger was announced between Betfair and Paddy Power.
The £5 billion deal is the latest in a series of gambling mergers, and will create one of the world’s biggest online betting and gaming companies.
The agreement is not yet final, but in a statement the companies said that the deal had “compelling strategic logic”, and would and enhance their their market position. The combined business would have annual revenues of some £1.1bn.
Paddy Power shareholders will own 52% of the combined business, with Betfair investors owning the remaining 48%.
Betfair Chief Executive Breon Corcoran told Reuters:
“We fundamentally believe this industry is all about scale.
“By putting together two distinct but phenomenally strong brands, we’ll have a market leading position in the UK, Ireland, Australia and in the United States.”
China’s stock market fell again on Wednesday, with the Shanghai Composite dropping 1.27% to 2,927.29.
Chinese indexes have fallen about 16% in the last three days alone, sending shock waves throughout markets globally. The People’s Bank of China slashed rates again yesterday, making it the fifth cut since November last year.
The further fall in Chinese shares affected European markets again, many of which were trading down around 1 percent this morning. The FTSE is currently down 1.36 percent at 5998.84.
The number of complaints from customers who claim they were mis-sold packaged bank accounts has risen, according to the industry’s watchdog.
Packaged bank accounts are often labelled gold or platinum accounts, with monthly fees of between £5 and £25. They offer a range of additional services, including insurance, cheaper loans and other benefits.
The Ombudsman is now seeing about 1,000 complaints about packaged accounts every week; in comparison, there were only 21,348 such complaints in the whole of 2014, and just 5,667 in 2013.
The complaints are either because people were signed up to the accounts without asking, the bank never cancelled them after a request to do so, or the benefits – such as insurance – were inapplicable to them.
Royal Bank of Scotland, Barclays and Lloyds have set aside £732 million between them to compensate customers for possible mis-sold packaged accounts, fuelling concerns that it may escalate into a scandal the size of mis-sold PPI.
China’s central bank have announced that it will cut interest rates and relaxed reserve requirements in a further attempt to bring the economy under control.
The People’s Bank of China will lower the benchmark bank lending rate by 25 basis points, to 4.6 percent, effective tomorrow.
The move has boosted European share prices further, with the FTSE 100 in London jumping 3.3 percent after the move. Germany’s DAV is also up nearly 5 percent on the news, with the NYSe up 2.6 percent.
This is the latest in a series of moves by the Chinese authorities who have made continual efforts to prop up the markets over the past few weeks. Yesterday, after the Chinese markets caused volatility around the world the government took no further action, prompting speculation that it would stop further intervention and adopt a more laissez-faire approach.
However, this appears not to be the case. The People’s Bank of China has also announced that it will ower the reserve requirement ration by 50 basis points to 18 percent.
Shares in China plunged 7 percent overnight, on top of their 8 percent drop on Monday.
On the constantly evolving fintech scene, a new player is emerging; say hello to Hello Soda, who have created a new platform that uses social media data to assessing the creditworthiness of loan applications.
Whilst most people are aware that recruiters may scan potential applicants’ social media profiles for clues about their suitability, analysing minute data from those sites to assess their creditworthiness is something quite different. Founded in 2013, the new platform PROFILE aims to inject an element of human behaviour into a typical computer-led lending application process, and give a more accurate depiction of customers’ situations. The company is the brainchild of James Blake, previously head of Global Sales at the UK’s second largest credit reference agency Call Credit and tech entrepreneur, Paul Shepherd.
PROFILE founder, James Blake
This process benefits both lenders and consumers, who get quicker decisions that are more accurately aligned to ‘the fabric of their life’. The data can also be used by recruitment and gaming companies to help compile personality profiles. Blake says:
“That human element, especially in lending, disappeared with the financial crash in 2008 when the world changed, leaving many people unable to access credit.
“With the exponential growth in online data, it makes sense to take a ‘snapshot’ of a person’s real life and cross reference that with traditional metrics to further verify an individual’s application in a way that benefits the customer and lending provider”.
The information Blake refers to comprises of thousands of pieces of online data, including the use of only capital letters when filling out forms ad the amount of time a person spends reading terms and conditions. These are then collated to deliver a ‘Soda Score’ that forecasts trustworthiness, affordability and consumer intent.
“We think technology should be leveraged to the mutual benefit of vendor and consumer,” says Paul Shepherd, Hello Soda’s co-founder and marketing director, “and we believe PROFILE does that.”
The Manchester-based company recently took part in Pitch@Palace 3.0, the third event organised by HRH The Duke of York, which aims to identify the most promising technology startups from within the creative industries. Furthermore, the company has attracted backing from several European investors and has recruited leading data-scientists and engineers from the likes of Skype and General Electric.
For further information on HelloSoda and their services, visit their website here.
The Big Four supermarkets had another slow quarter, as growth in the British grocery market continues to stagnate according to figures from Kantar Worldpanel.
Fraser McKevitt, head of retail and consumer insight at Kantar, comments: “Industry growth of around or below 1% has now persisted since summer 2014 and has become the new normal. Despite the accelerating British economy like-for like grocery prices are still falling, with a representative basket of everyday items now 1.7% cheaper than in 2014.”
However, budget retailers have had another good period, continuing to push down the market share of the Big Four.
Asda has retaken its position as Britain’s second largest supermarket, and growth at Aldi has accelerated to 18.0 percent. Lidl’s sales have also risen, up 12.8 percent, taking its market share to a new high of 4.1 percent. Aldi and Lidl now have a combined market share of 9.7 percent, up from 8.4 percent a year ago.
Tesco’s (LON:TSCO) market share fell from 28.8 percent to 28.3 percent year on year, and Sainsbury’s (LON:SBRY) share of the market fell 0.1 percent to 16.3 percent.
