TheChek News Flow

Production of ___ copper, which is the base product used to make other copper products, in the Luvata plant in Johor, Malaysia, on Monday, May 13, 2013. Photographer: Munshi Ahmed/Bloomberg©Bloomberg

At Glencore’s interim results on Wednesday, the miner cum commodities trader will try to put a bruising year behind it, presenting a slimmed-down, more modest company than the one that misread the market mood one year ago.

At its half-year results last August, Glencore’s management was defiant in the face of the worst commodities crash in a generation, with Steven Kalmin, chief financial officer, boasting the company could “walk and chew gum”, in spite of investor concerns that its dividend and large debt load were incompatible.

As commodities prices spiralled lower, the brutality of the market’s verdict was matched only by its swiftness, with Glencore’s share price falling more than 50 per cent over the following month.

Glencore’s combative chief executive Ivan Glasenberg was forced into a rare climbdown, outlining plans last September to slash the dividend, raise cash from shareholders and sell assets in order to reduce the company’s borrowings.

One year on, Mr Glasenberg and Mr Kalmin will be looking to demonstrate that they are following through quickly on their plans to deleverage the company, having moved, eventually, more aggressively than peers.

By scrapping $2.4bn of dividend payments, completing a $2.5bn share offering and selling more than $3bn in assets, Glencore is on its way to hitting a net debt target of $17bn to $18bn by the end of this year, down from almost $30bn in the middle of 2015.

“No other company in the peer group has reduced indebtedness as quickly or by as great a magnitude, and the scope for further debt reduction remains high,” said Alon Olsha, analyst at Macquarie. “We believe that management’s credibility has been restored.”

Glencore’s shares have recovered to 188.6p, up 175 per cent from last year’s low, but remain below their 2011 flotation price of 530p.

The company’s earnings for the first half of 2016 are still expected to be lower than those for the same period last year, however, because of the pain felt by its mining unit through the ongoing commodities slump.

The consensus analysts’ forecast for Glencore’s adjusted earnings before interest, tax, depreciation and amortisation — its preferred measure — is $3.9bn for the six months to June 30, down 16 per cent from $4.6bn in the same period one year ago.

The prices of most of Glencore’s key mined commodities averaged less in the first half of the year than during the same period in 2015, although many have since rebounded. Copper, which generates about a quarter of the company’s underlying earnings, is flat.

Investors will also be looking at the performance of Glencore’s trading unit, which makes money from moving millions tonnes of commodities around the world.

Some shareholders are concerned that trading conditions, especially in agricultural markets, have not been strong in the first six months of 2016.

Still, certain analysts are starting to ask if Glencore might return to buying assets after this period of scaling back and balance sheet reinforcement.

“Does the company remain committed to debt reduction or move back to a more growth-focused approach,” said Liam Fitzpatrick, analyst at Credit Suisse.

Glencore has said it is targeting a higher credit rating — it is currently one notch above junk status — and will only resume dividend payments once it has further improved its ratio of net debt to earnings.

Unconventional tools used after financial crisis may become increasingly common

For much of the post-financial-crisis era, U.S. Federal Reserve officials have held to a belief that they could get back to their old way of doing things. Growth would resume at a modest pace, annual inflation would climb to 2% and interest rates would gradually rise from near zero to a normal level near 4% or higher.

As they prepare to gather at their annual retreat in Jackson Hole, Wyo., officials are grimly coming to a view that it isn’t going to happen that way.

Growth in economic output appears stuck at a slow pace, with inflation vulnerable to undershooting the central bank’s target. The Fed, in turn, is starting to see that rates aren’t going to return to normal and the way it conducts monetary policy and deals with recessions is going to have to change.

“New realities pose significant challenges for the conduct of monetary policy,” San Francisco Fed President John Williams said in a research note released last week on the shifting monetary policy landscape.

In this world, unconventional tools used after the financial crisis—including purchases of long-term Treasurys to push down long-term interest rates and assurances of low short-term rates into the future—could be rolled out when another downturn hits. A portfolio of securities, now $4.2 trillion, could grow. Unpopular interest payments to banks for their deposits at the central bank could persist.

The new normal, in short, could look a lot like what the Fed has been doing for the past several years.

This isn’t to say the Fed won’t raise short-term rates again sometime this year. Many officials expect it will. The Fed boosted its benchmark federal-funds rate—a rate on overnight loans between banks—by a quarter percentage point from near zero in December. But it does mean it isn’t likely to raise them much beyond its next few moves in the months and years ahead.

“We probably don’t have a lot of monetary policy tightenings to actually do over time,” William Dudley, president of the Federal Reserve Bank of New York, told Fox Business Network.

Because growth is slow and could remain so, and inflation correspondingly low, the Fed has revised down its estimates of how high the fed-funds rate will go in the long run. Most officials see it reaching 3% or less. Four years ago the consensus was 4% or more.

A low rate in normal times puts the Fed in a bind when another recession hits. During the past four downturns dating back to the early 1980s, the Fed cut short-term rates by 5 percentage points or more in an effort to stimulate growth by boosting borrowing, spending and investing.

It now looks like it won’t have that room to maneuver next time. Officials will need to turn to other tools to support growth in a downturn. That includes bond purchases and assurances of low rates in the future.

The Fed’s last round of bond purchases—also known as quantitative easing, or QE—increased its securities holdings from $2.6 trillion to $4.2 trillion. A Standard & Poor’s analysis found that third round supported the creation of 1.9 million jobs and helped reduce the unemployment rate by 1.3 percentage points. “By that measure, QE3 worked,” S&P concluded.

Officials are wary of more radical measures. Mr. Williams said the Fed might need to consider raising its inflation target from 2% to 3%, an idea that hasn’t yet caught on with many others at the central bank.

Meantime, negative interest rates are seen by many Fed officials as a last resort that haven’t worked very well in places like Japan.

A research paper by Fed senior economist David Reifschneider argues that bond purchases and low-rate promises ought to be enough for the Fed to manage even a “fairly severe recession” that drives the unemployment rate up to 10%. Doing so would require the Fed to expand its securities portfolio by $2 trillion, and possibly as much as $4 trillion, the analysis shows.

Still Mr. Reifschneider warns “one cannot rule out the possibility that there could be circumstances in the future in which the ability of the [Fed] to provide the desired degree of accommodation using these tools would be strained.”

The Fed’s challenge goes beyond managing another recession.

The topic of the Jackson Hole meeting is “Designing Resilient Monetary Policy Frameworks for the Future.” Fed officials heard special briefings from staff at their July 26-27 policy meeting on related topics. In addition to the challenge of addressing recessions, it involves the shifting plumbing of how monetary policy is conducted in a low-rate world.

To manage its large securities portfolio and the abundance of reserves it has placed in the banking system, the Fed has rolled out new tools, including interest payments to banks on their deposits at the Fed. Lawmakers have complained to Fed officials that the payments look like an unfair subsidy to big banks.

In this brave new world of central banking, it is another feature of the current landscape that just might not go away.

Major oil companies cannot afford their dividends

Companies pay dividends to reward their shareholders, and to signal confidence. Management is pushing out its chest: we will be here for years to come, and we have the money to prove it. That confidence has to be backed by growing cash flows. But in the commodities sector, now is not the time for such bravado. Big mining companies have already made the tough decisions on dividends. Major oil companies — ExxonMobil, Chevron, Royal Dutch Shell and BP — should follow suit.

In theory, better earnings — and therefore dividend growth — do not necessarily require rising revenues. Get costs down, and perhaps do an acquisition or two, and over time profits should expand enough to give your shareholders something for hanging around. But the reality of commodity industries is that the advantages of lower costs get competed away over time. Consider that the price of a basket of the major commodities has fallen over 1 per cent annually in real terms since 1934, according to research from Robeco, an asset manager.

Certainly oil prices have struggled in recent years. Adjusted for inflation, Brent crude prices at $22 per barrel are not much above their average since 1983. As cash flow has withered the oil companies have done what they can to cut costs and capital spending. However, some of the biggest companies — such as BP and Shell — still need to sell off parts of their businesses, and perhaps borrow a bit more, to pay dividends.

So the big producers cannot maintain their dividends if oil prices do not go up. In order to pay a dividend, the largest oil producers need oil at $63 just to cover dividends and investment with cash flow, according to consultants Wood Mackenzie. Even if that break-even price comes down in years to come, the threat to dividends is clear. Brent is currently struggling to stay above $50.

Confidence is fine. False confidence is dangerous. Four of the oil majors so far refuse to cut their dividends. They will need to do so.

Dow-0.13% S&P -0.01% NAsdaq+0.10% Russell +0.57% Brazil +1.37% EuroStoxx -2.52% FTSE -0.83% CAC -2.21% Dax -1.58% Ibex -3.05% MIB -4.05% SMI -2.02% Nikkei -2.21% Hang Seng +0.75% CSI +2.15% Shanghai +1.88%

Major equity indices retreated slightly from record highs in light summer trading, while the 10-year Treasury yield crept up toward 1.6% this week. Crude futures continued to march higher with Brent breaking above $50/bbl for the first time since early July and WTI topping $48/bbl, even as the Baker Hughes rig count rose for the eighth straight week. The greenback hit seven-week lows against the Yen and Euro before mounting a small recovery on Friday. For the week, the DJIA lost 0.1%, the S&P500 slipped less than 0.1%, and the Nasdaq edge up 0.1%.

Macro :

- Uber Said to Tell Backers It Won't Pay Above $2 Billion for Lyft

- Goldman Says Don’t Bet on Dollar Selloff as Dovish Fed Priced In

- BOJ Gov Kuroda: there is room to take rates further negative; sees sufficient chance of more easing in Sept

- Dow Jones Bearish Bias Amplified as FX Risk Ratio Breaks Uptrend

- Fed’s Fischer Says U.S. Growth to Pick Up as Investment Recovers

Keep an eye on :

- AIR FP : Airbus Offers Overtime to Boost A350 Output: Telegraph

- BABA US : Alibaba Seeks to Expand Alipay With U.K. Retailers: Telegraph

- CSGN VX : Credit Suisse Will Consider Swiss Deals After Unit IPO: Blick

- ENI IM : Eni Chief Descalzi Says Contract Talks With Iran Remain Ongoing

- FB US : Zuckerberg Sells ~$95m in Facebook Shares for Philanthropy, Facebook CFO David Wehner Sells ~13% of Reported Holdings

- LYFT IPO : Lyft Said to Fail to Find a Buyer, Despite Talks: NY Times

- MGGT LN : Meggitt Chairman Said to Have Met With Elliott Twice: Telegraph

- SAN FP : Sanofi Updates NDA on Diabetes Product; Pdufa Date Now in Nov.

- SNH GY : Steinhoff thirsty for more deals in bid to double valuation in five years

- VIV FP : Vivendi Declines to Comment on Mediaset Lawsuit Filed in Milan - see press release http://bit.ly/2b8CRda

- VOD LN : Vodafone's fixed lines in the Netherlands attract interest from T-Mobile and Fiber - report

- VOW3 GY : UBS Says Supplier Dispute May Cost VW Up to EU100m a Week: Welt

- VOW3 GY : VW to Reduce Wolfsburg Golf Production on Lower Demand: Bild

- WPP LN : WPP’s Sorrell Warns of Prolonged, Costly Brexit: Sunday Express

Google has long held the spotlight in developing driverless technology; however, with the emergence of Otto and Elon Musk’s announcement of a Tesla Semi, “driverless trucks” are coming to the forefront of the autonomous vehicle conversation.

One major reason the trucking industry is so interested in driverless technology is a chronic shortage of truck drivers, which is threatening to get worse as the Baby Boom generation hits retirement age.

But despite the increased spotlight on autonomous trucks, the reality is that trucking technology still has a long way to go before we see trucks on the road without drivers.

In the meantime, many new technology advances are already helping with the driver shortage by expanding the impact of today’s drivers — while also making trucks and highways safer.

These advanced technology systems, collectively referred to as “Advanced Driver Assistance Systems” (ADAS), begin with simple convenience tools, like power steering, cruise control and automated gear changing. These tools are so common in passenger cars that most of us take them for granted, but they are crucial stepping stones toward higher degrees of vehicle autonomy.

Tools like traction control and anti-lock braking systems (ABS) go beyond mere convenience, and are especially helpful for truck drivers. They act as skill compensators, making it easier and safer for drivers to address challenging road conditions.

The same goes for advances in electronic stability control (ESC) — the computerized technology improves a vehicle’s stability by actively assessing road conditions to adjust vehicle handling in order to reduce potential skidding and roll overs. Radar and digital-camera technologies further elevate ADAS by compensating for drivers’ blind spots and detecting lane departures.

Ultimately, the goal is to convert most accidents into near-misses — or better.

Even more impressive is what happens when these tools work together. The combined technology is capable of detecting objects in the truck’s path, alerting the driver, then automatically braking the vehicle — if necessary — in advance of a potential collision. Adaptive cruise control also uses laser- and radar-based systems to help trucks maintain a safe distance from the vehicle ahead.

In the trucking business, beyond the obvious importance of assisting the driver in safer vehicle operation, risk mitigation is also a powerful motivator. Because trucks and the cargo they carry are significantly bigger than passenger vehicles, truck accidents can carry major price tags. By reducing the kinetic energy of an accident, such systems can mitigate both personal injury and property damage. Ultimately, the goal is to convert most accidents into near-misses — or better.

In addition to an end goal of autonomy, risk avoidance is a powerful incentive for trucking companies to adopt such technologies. Combining these tools enables vehicle platooning — the ability to line up trucks in a row and automatically brake and accelerate them as one. Demonstrations of this technology in Nevada, and most recently in Europe, shows how close the industry is getting to fully autonomous trucks.

This technology is continually being perfected through initiatives like Mcity, a public-private R&D partnership at the University of Michigan that is working to develop a commercially viable ecosystem of connected and automated driverless vehicles in urban and suburban environments.

Frankly, there’s never been a more exciting time to be part of the trucking industry. Innovations in vehicle-to-vehicle, vehicle-to-infrastructure and vehicle-to-anything communication will push the envelope beyond even these advances. By improving the flow of traffic, such systems can enable today’s highway infrastructure to be used more efficiently.

As a result, beyond improved productivity for drivers, we’ll also see a reduction in the number and severity of accidents, greatly improved fuel economy and significant environmental benefit. While there is still time before on-highway driverless trucks are the norm, there are still several technologies available today that augment drivers’ skills to make the road smoother and safer.

Technology in the mobility space has made travel safer, faster and more convenient. The results have been incredible: The Insurance Information Institute found a 33 percent decrease in automobile deaths in the past three years. The same survey found that nine models registered zero fatalities per vehicle per million. Mobility has also become more accessible with ride-hailing apps like Uber and Lyft delivering more than one million rides a day in more than 60 countries.

Despite the upside, there are consequences to innovation. On May 7th of this year, a Tesla owner died while using the Autopilot feature. His vehicle crashed into a truck after his Tesla failed to differentiate the white color of the truck against the backdrop of the sky. This event may change the narrative and public appeal for autonomous driving. It puts into perspective how close the future actually is and whether or not society will fully embrace it.

Autonomous driving promises to decrease the automobile death toll. Last year there were 35,000 automotive-related deaths, accounting for .01 percent of the U.S. population. While it may not seem like a high number, those deaths are the result of people, not an algorithm that holds a passenger’s life within its source code. This brings us to question the liability programmers and the code they write be given the power to determine life and death for consumers who buy their cars. And ultimately, who is liable in the case of an accident or even death?

The next critical step is the proliferation of autonomous driving and the task of safely embedding its utility within the framework of our society. With these issues in mind, private companies and governmental agencies are taking appropriate steps to address them. Google has been testing and building a fleet of self-driving cars that have completed 1.5 million miles of road tests.

In 2014, the U.S. Department of Transportation approved vehicle-to-vehicle technology that enabled vehicles to “talk” to one another and can help prevent human errors that often lead to collision. And this March, General Motors acquired a startup called Cruise Automation for $1 billion to launch a highway-oriented, cruise control system for their Cadillac C6 line. Technological and governmental infrastructure for autonomous vehicles is well on its way to maturity.

But there are a number of factors that will decide whether the mass adoption of autonomous driving will actually happen. Consumer acceptance is one factor. Not everyone may want a self- driving vehicle. Americans actually love cars; Experian Automotive reports that each household owns 2.28 cars on average. If the idea of autonomous vehicles were to become widely adopted, the end user will eventually need to view travel and car ownership as separate concepts, a concept highlighted in Elon Musk’s master plan.

Deloitte believes there are four future stages of mobility: incremental change, car sharing, driverless revolution and accessible autonomy. The road that our current model is headed down is a driverless revolution, where consumers may still own their car but the vehicle will have the capabilities to operate itself. While all four stages may exist simultaneously, they may not necessarily distribute evenly among every segment of the population. The driverless-revolution stage may indicate incremental change from what we have now, much like GM’s new self-driving Cadillac technology.

Accessible autonomy will impact auto insurance significantly. For starters, fewer accidents will result in fewer claims and less in losses for insurance carriers. David Zuby, EVP and Chief Research Officer at the Insurance Institute for Highway Safety stated, “Vehicles equipped with front crash prevention technology have a 7-15% lower claim frequency under property damage liability coverage.” This is a win-win situation; not only will technology prevent accidents, insurance companies will pay out fewer claims.

Insurance companies will also need to develop new, innovative products before autonomous vehicles become widespread. Crash-prevention technology will play a huge role in lowering premiums during the driverless-revolution stage. Insurance companies will need to find new products they can sell. In the car-sharing stage, insurance companies sold gap insurance and ride sharing policies to companies like Uber and Lyft. Drivers needed coverage when they picked up and dropped off guests.

The premiums from the new policies cost more, as well. Geico’s personal policies for a male living in Chicago would cost $1,140, while its ride-sharing policy for the same individual would cost $3,743. Autonomous car policies could follow the same pricing increase strategy.

The Tesla incident may deter the public from fully embracing autonomous vehicles. Self-driving cars may never reach accessible autonomy and might only be an add-on feature. It is very likely that the driver will still be liable for the actions of their vehicles. This means that drivers will still need auto insurance. Driving technology may never replace drivers, but it could help us become less injury prone.

Mediaset files for damages over Vivendi failure to complete Mediaset Premium deal in timely manner

Mediaset has announced that it has filed for damages over Vivendi's failure to execute a binding agreement to acquire its pay TV subsidiary Mediaset Premium. Mediaset filed the claim for damages of EUR 50m a month with the Milan Tribunal starting from 25 July 2016.

Mediaset noted that the filing did not take into account more serious damages that would be caused if Vivendi does not honour the completion of the contract, which Mediaset estimates at EUR 1.5bn.

The present claim is for damages relating to Vivendi's failure to execute the contract on time.