FT : Greece assures on €450m payment to IMF

Greece assures on €450m payment to IMF

Greece has assured the International Monetary Fund that it will not miss a €450m payment to the fund due on Thursday, easing fears that Athens was set to become the first developed country in the IMF’s history to default on its debts to the institution.
The Greek finance minister, Yanis Varoufakis, on Sunday met for more than two hours with Christine Lagarde, the IMF’s managing director, after flying in for what was billed as an “informal meeting” by the fund. He is due to meet with senior US officials on Monday.

In a statement issued after their meeting, Ms Lagarde said Mr Varoufakis had confirmed that Athens would make the next payment due April 9 as part of the plan agreed by a previous government to repay the fund for Greece’s first bailout in 2010.
Greece this year is due to repay the IMF more than €9bn as part of a repayment plan that fund officials insist cannot be rescheduled unless Athens agrees to a fresh IMF program, something the new government does not want to do.
Ms Lagarde also said Mr Varoufakis had agreed that discussions in Brussels on Greece’s proposed new reform program, as well as efforts by IMF and European officials to conduct “due diligence” in Athens, would “resume promptly on Monday”.
The unscheduled weekend flight to Washington by the Greek finance minister had prompted speculation of a more dramatic turn of events, or that Athens was turning to the IMF and the US in a bid to persuade its European creditors to adopt an easier tone in negotiations with Greece.
Those negotiations have grown increasingly acrimonious in recent weeks with European officials openly questioning the makeup of the new government in Athens which has been in power for less than four months.
Further fuelling tensions, officials, including Mr Varoufakis, have said the government would rather pay public sector workers’ salaries than the IMF in the event of a cash crunch.
But after the Easter Sunday meeting Ms Lagarde seemed determined to play any chances that Greece would take what would amount to a nuclear option by missing a payment to the fund.
Though doing so would not immediately be officially deemed a default by the IMF, especially if a payment was made within 30 days, it would have significant implications for other creditors and could trigger events that might lead to the country’s exit from the eurozone.
In her statement Ms Lagarde said she and Mr Varoufakis had agreed that “effective cooperation is in everyone’s interest” and “noted that continuing uncertainty is not in Greece’s interest”.

FT : LetterOne Telecom has USD 16bn for acquisitions in US, Europe

LetterOne Telecom has USD 16bn for acquisitions in US, Europe

LetterOne Telecom, the London-based investment platform, has USD 16bn to invest in telecoms and internet technology businesses in the US and Europe, the Financial Times reported.

Part of the LetterOne Group (the investment vehicle founded by MIkhail Fridman) LetterOne Telecom will use technology to transform existing business practice, the unit's Chief Executive Alexey Reznikovich was cited as saying. With a debt-free balance sheet, LetterOne Telecom would leverage up to USD 25bn, Reznikovich said.

LetterOne Telecom targets companies operating in a range of business areas including traditional telecommunications, Reznikovich noted. App makers and companies offering streaming services are also of potential interest, he added.
Financial Times

WSJ : European Biotech’s American Dream


European Biotech’s American Dream
Companies on the Continent are finding richer rewards by listing their shares in the U.S.

If you can’t beat them, join them. European biotech companies increasingly look across the Atlantic where investors’ enthusiasm for nascent health-care companies seemingly knows no bounds.

With the Nasdaq Biotechnology Index up nearly threefold in the past three years, European companies have benefited from listing on U.S. exchanges rather than at home. Some, like Denmark’s Forward Pharma and the Netherlands’ Prosensa, recently acquired by BioMarin , skipped their domestic markets to list in the U.S. Others, like France’s DBV Technologies and Cellectis, have issued American depositary receipts.

ENLARGE
The fact is that, bubble or otherwise, these companies get attention and liquidity from a specialist investor base not readily available in Europe. No European biotech companies sold shares in the U.S. from 2010 to 2012, according to Dealogic, but fundraising has picked up markedly since.

Cellectis, active in the red-hot area of oncology known as CAR-T, already was getting noticed by U.S. investors. But the stock really flew after it confirmed in January it was pursuing a U.S. listing. Shares in DBV Technologies, which develops allergy treatments, similarly soared as it moved closer to a Nasdaq listing.

Bankers say another reason to favor U.S. markets is the ease of raising further equity; pre-emption rights in Europe limit this. Last week, several U.S.-listed biotechs announced plans to sell more stock.

After a busy 2014, Europe’s biotech emigration may slow. But the lure of a better life in America is well established now. When asked whether many European biotech companies were considering a listing stateside, one banker said: “A lot to all of them.” Best to make the most of long-distance love before the ardor fades.

>>> EU Mid-Market Update

EU Mid-Market Update: US participants get to react to disappointing payroll data from last Friday


***Notes/Observations***
- Price action subdued as most markets closed in both Asia and Europe
- Friday's miss in Mar US jobs data having analysts rethink 1st potential Fed rate hike

**Economic data***
- (IN) India Mar Services PMI: 53.0 v 53.9 prior; Composite PMI: 53.2 v 53.5 prior
- (JP) Japan Feb Preliminary Leading Index CI: 105.3 v 105.1e; Coincident Index: 110.7 v 110.7e
- (ES) Spain Mar Net Unemployment M/M: -60.2K v -13.5K prior

Fixed Income
- (PH) Philippines sold total PHP14.46B vs. PHP20.0B indicated in 3-month, 6-month Bills and 12-month Bills
- (IN) India sold total INR140B in 3-month and 12-month Bills

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
**Equities**
Indices [Stoxx50 closed, FTSE 100 closed, DAX closed, CAC-40 closed, IBEX-35 closed, FTSE MIB closed, SMI closed, Athens Stock Exchange closed, S&P 500 Futures -0.7% at 2,044]

- Market Focal Points/Key Themes: With the major European bourses closed for holiday, S&P 500 Futures have declined by over 0.6%, as traders assess recent US payrolls data. US corporate earnings are also in focus this week, as Alcoa is due to report its results on Wed April, 8th (after the close). Commodities are sharply higher, as traders have pushed back Fed rate hike bets following the US jobs report (Copper +2.3%, NYMEX Crude Futures +2.8%, Gold Futures +1.7%); Upcoming comments from Fed official Dudley (dove, FOMC voter)

**Speakers**
- Spain PM Rajoy reiterated that the country's 2015 GDP growth was seen above 2.4% vs 2.0% official target and could create 500K jobs in 2015
- France Finance Ministry to maintain its 2015 GDP growth outlook of 1.0% when it presents broad outline to public finance council this week
- Greece Fin Min Varoufakis expected initial deal related to Greece at the April 24th Eurogroup meeting
- Turkey Central Bank commented on March inflation data: Reiterates core inflation is slowing on basic goods, ex-food inflation trend fall continued
- Turkey Econ Min Zeybekci: 3% GDP growth is unacceptable
- Israel Central Bank (BOI) Mar Minutes: Decision to hold rates steady at 0.10% was unanimous
- JPMorgan revised its Fed call; now saw a rate hike in Sept vs June prior view

**Currencies***
- The USD consolidated its recent losses after Friday's release of non-farm payroll laid an egg and missed expectations. Various analysts were pushing back their call for the 1st Fed rate hike
- EUR/USD still contained within its post FOMC trading range from the past two week. EUR-buy stops above 1.1050 area were unable to be taken out (elected) despite the miss in US jobs data.
- The weaker USD has helped commodities. Spot gold was higher at $1,222/oz while front month WTI oil contract was above $50/barrel

**Political/In the Papers:
- IMF's Lagarde confirmed that Greece would make the planned repayment to IMF on Apr 9th

**Looking Ahead***
All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- 07:30 (CL) Chile Central Bank Meeting Minutes
- 07:30 (CL) Chile Economic Activity Index (Monthly GDP) M/M: -0.1%e v 0.8% (revised from 0.4%); Y/Y: 1.8%e v 3.0% prior
- 07:30 (BR) Brazil Central Bank Weekly Economists Survey
- 08:30 (US) Fed's Dudley (dove, FOMC voter) on economic outlook in NJ
- 09:00 (BR) Brazil Mar Services PMI: No est v 52.3 prior; Composite PMI: No est v 51.3 prior
- 09:00 (MX) Mexico Feb Leading Indicators M/M: No est v -0.07 prior
- 09:45 (US) Mar Final Markit Services PMI: 58.5e v 58.6 prelim; Composite PMI: No est v 58.5 prelim
- 10:00 (US) Mar Labor Market Conditions Index Change: No est v 4.0 prior
- 10:00 (US) Mar ISM Non-Manufacturers Composite: 56.8e v 56.9 prior
- 10:00 (CA) Canada Mar Ivey Purchasing Managers Index (Seasonally Adj): 51.0e v 49.7 prior; PMI (unadj): 51.0e v 50.8 prior
- 10:30 (CA) Bank of Canada Q1 Senior Loan Officer Survey: -1.0e v -2.7 prior; Business Outlook Future Sales: 0.00e v 8 prior
- 11:30 (US) Treasury to sell $48B in 3-Month and 6-Month Bills
- 16:00 (US) Crop Condition Report
- 21:00 (PH) Philippines Mar CPI M/M: 0.0%e v 0.1% prior; Y/Y: 2.6%e v 2.5% prior; CPI Core Y/Y: 2.7%e v 2.5% prior
- 21:30 (AU) Australia Feb Retail Sales M/M: 0.4%e v 0.4% prior
- 23:00 (TH) Bank of Thailand to sell 3-month, 6-month and 12-month
- 23:35 (JP) Japan to sell 6-Month Bill
- (AU) RBA Rate decision (Early Tues)
- (IN) RBI rate decision (early Tues)

>>> Asian Update

Asian Mid-session Update: Cloud of weak US non-farm payrolls hangs over markets


***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 -0.2%, S&P/ASX closed, Kospi +0.2%, Shanghai Composite closed, Hang Seng closed, Jun S&P500 -0.7% at 2,045

***Commodities/Fixed Income***
- Jun gold +1.4% at $1,217/oz, May crude oil +1.4% at $49.85/brl, May copper +0.5% at $2.75/lb
- (KR) South Korea Fin Ministry sells 3-year bonds at 1.71%
- BTC/USD: BNK Mellon to experiment with bitcoin, as a potential way for transactions - press

***Market Focal Points/FX***
- Much of Asia remained close, and thin holiday conditions has made it difficult to gauge the regional response to the US employment data disappointment on Friday. However, as US heads into its Q1 earnings season, much of the focus in the coming week will be on whether March report was a cold-weather derived aberration, or the onset of a less impressive labor trend as more companies struggle with dollar strength. S&P500 futures are pointing to a lower open, while the US treasuries have maintained their firm tone from Friday's bounce, with the yield on the 10-year remaining around 1.83%. USD/JPY opened slightly lower below 118.90 but briefly retested 119. EUR/USD opened up by 30pips above 1.10 but reverted below 109.80 later in the session. Metals, energy, and commodities all traded higher as investors pushed out expectations of the first Fed rate hike deeper into late 2015.

- In Europe, the Greece situation remains unsettled even though IMF head Lagarde held a meeting with Greece Finance Minister Varoufakis, maintaining that Athens will make a debt repayment to the IMF on Apr 9th as scheduled. In turn, Varoufakis said discussions with Lagarde were fruitful, reiterating the Greek govt is planning "deep" reform measures.

***Equities***
US equities / ADRs:
- RIO: Mongolia govt approves new phase of the Oyu Tolgoi mine project; To result in $4.2B investment - financial press; 6-month moratorium on merger talks with Glencore to expire on Tuesday; Potential merger hinges on price of copper relative to price of iron ore - financial press
- TSLA: West Virginia Gov signed bill to ban Tesla's direct sale in West Virginia - techblog

Notable movers by sector:
- Consumer Discretionary: Asahi Co 3333.JP -9.0% (FY14/15 results); Jin Co Ltd 3046.JP +6.5% (FY14/15 guidance)
- Technology: Samsung Electronics 005930.KR +3.3% (press speculation on Q1 results); Toshiba Corporation 6502.JP -5.9% (to investigate possible accounting problems); Sharp Corp 6753.JP +6.5% (press speculation on spin-off; considering restructure options)

>>> What to look at today - Week End 4th & 5th of April

The first quarter of 2015 came to an end this week, with Europe and Asia equities up big, while the S&P500 underperformed and the DJIA posted a losing quarter for the first time in two years. There were some green shoots in European and Chinese data. China's March PMI data showed manufacturing returned to expansion after two months of contraction, while Euro Zone manufacturing registered its 21st straight month of growth. But Friday's US payrolls data disappointed, posting the worst gain in over a year, and sending treasury yields and the dollar lower. The Iran talks were extended past the Tuesday deadline, allowing negotiators to arrive at a preliminary agreement that hopes to curtail Tehran's nuclear ambitions. For the week, the DJIA rose 0.3%, the S&P500 gained 0.3% and the Nasdaq slipped 0.1%.

Macro :
- Greece Has Cash to Make IMF Payment Next Week, Minister Says
- Italy Won’t Increase VAT in 2016, Renzi Tells Il Messaggero


Keep an eye on :
- A2A IM : A2A May Be Aggregator With CDP Entering Capital, Corriere Says
- AFR LN : Afren to Name Alan Linn as New CEO: Sunday Times
- AIR FP : New govt of Sri Lanka said to have launched a criminal investigation of $2.3B purchase of 10 aircraft by the former govt
- AIR FP : India May Agree to Jointly Build Helicopters With Airbus: JD
- ATST LN : Alliance Trust former chairman weighs in against activist Elliott Advisors - Sunday Telegraph
- BAYN GY : Bayer’s CEO Injects a Dose of U.S. Risk-Taking - WSJ
- CAP FP : Capgemini CEO Sees Growth at 5% to 7% in Three Years: Investir
- EDF FP : Areva, Edf Will Soon Make Proposals to Government, Royal Says
- ENI IM : Eni Not Planning Acquisitions, CEO Descalzi Tells Corriere
- GATE SW : Gategroup Compromises With Hedge Funds on Board Candidates
- GSZ FP : Belgian Nuclear Plant Profit Estimate Drops for 2014, Echo Says
- GLEN LN : Still interested in Rio, Glencore barred of biding till next week according to FT artcile
- HEI GY : Holcim was interested in HeidelbergCement before Lafarge clipboard - RTR
- LG FP : Lafarge-Holcim Urged to Pick Chief Able to Unify Factions: FT
- CFR VX : Net-a-Porter Executives, Investors Seek to Sell Stakes: Reuters
- TATE LN : Ajinomoto Considering Bid for Tate & Lyle’s Splenda: Telegraph

WSJ : Producer Prices Could Signal Turnaround in Europe

Producer Prices Could Signal Turnaround in Europe
The eurozone producer-price index normally flies beneath investors’ radar. It may be time to pay attention

With inflation, or its absence, in the market’s sights, every number counts.

As economic indicators go, eurozone producer-price data tends to get elbowed aside by its bigger sibling, the harmonized index of consumer prices. This is understandable. Producer prices can be volatile and don’t drive monetary policy. But with the European Central Bank buying government bonds, the euro having slumped and signs of eurozone growth starting to bubble up, producer prices due Tuesday are worth watching.

The last reading for January showed a steep decline: The index fell 0.9% from the previous month and 3.4% from a year ago. Annual eurozone producer-price inflation has been negative since August 2013; in January, prices fell from the year-ago month everywhere except in Luxembourg.

ENLARGE
As with consumer prices, a lot of this is due to energy costs. Excluding those, producer prices were down 0.7% in January from a year earlier. But it is still a signal that companies lack pricing power. That raises the risk of entrenching more subdued expectations, potentially denting expansion and investment plans. This, in turn, threatens the sustainability of the nascent eurozone recovery. While there are many tailwinds at the moment, growth still isn’t broad-based.

Producer prices, though, might start to show some hopeful signs. Annual consumer inflation moved off its lows in February and March, even if the latest flash reading showed it still slightly negative. And survey data have suggested manufacturers are joining in the eurozone recovery.

Markit’s manufacturing purchasing managers index rose to a 10-month high of 52.2 in March, with incoming business picking up. Companies said they were hiring at the fastest pace in more than 3½ years. Significantly, the survey showed a big rise in input prices, the first in seven months, and broadly stable selling prices. There is evidence the weaker euro is having an effect on import prices. They rose 0.8% in February from a month earlier in both Germany and France.

Meanwhile, the credit straitjacket is loosening for companies. Most important, borrowers seem willing to take on debt. Manufacturers might get their mojo back.

A recovery in eurozone producer prices would be another reason to believe growth is becoming more robust. It also would be another sign last year’s deflation scare was just that—a scare.

FT : Barrick chairman aims to put shine back in gold miner

Barrick chairman aims to put shine back in gold miner

When John Thornton came to Barrick Gold, he found what he calls a “contaminated” culture that meant the world’s biggest and most valuable gold miner had well and truly lost its shine.
For the former Goldman Sachs banker, the evidence was in deals such as Equinox, the copper miner that Barrick bought for C$7.3bn in 2011 and has now written off mostly.

It was also in projects such as Pascua-Lama, an Andean gold deposit whose estimated cost more than doubled before Barrick halted the development unfinished.
“Most outstanding companies, after some period of time, tend to drift off and lose their way,” says Mr Thornton now. In almost a year since he took over as executive chairman from Peter Munk, Barrick’s elderly founder, he has seen his job as reversing that drift.
Barrick’s chief executive departed last year while new cohorts have been ushered into the executive suite and into the boardroom. Head office numbers in Toronto have almost halved and lines of command cut between Canada and Barrick’s far-flung mines.
Barrick will be more rigorous about spending, Mr Thornton says, and executives will have to hold large amounts of stock until retirement to make sure they think like shareholders.
Speaking in London, in his first interview as executive chairman, Mr Thornton acknowledges that these are just assertions of improvement. Barrick, he says, is now “meaningfully different [but] we still have a long way to go”.
Barrick’s share price — it has lost its position as the most valuable gold miner by market capitalisation — suggests investors are biding their time.
The miner is lumbered with debt that is almost as large as its $13bn stock market value. The gold price is also volatile, having come down more than one-third since 2011.
The debt is a big concern amid such volatility, says Mr Thornton. “If I owned a gold company personally it would have no debt. The fact that we have a lot of debt . . . is not a good place to be.”
Barrick has vowed to cut $3bn from more than $10bn of net debt this year. Mr Thornton says Barrick is confident about disposals and more clearly understands the value of its assets.
Chariman of Barrick Gold, John Thornton©Luke MacGregor
John Thornton
He cites a turnround at Acacia Mining, Barrick’s UK-listed African subsidiary, which Barrick was keen to sell before a new chief executive triggered big improvements with an operating overhaul.
Mr Thornton’s conclusion is: if Barrick misunderstood this asset, what else has it got wrong? “The deeper you look [at the assets] the better they look — there is value that was not being optimised previously,” he now says.
Mr Thornton was anointed by Mr Munk as his successor, following a stellar career at Goldman, where he rose to become president, and then a role in Chinese academia that has made him an acknowledged expert on relations with Beijing. A long-term goal remains to develop a strategic relationship between Barrick and China.
Yet the American has been part of recent uncertainty and investor discontent at Barrick, brought in to the company at significant expense and blamed publicly by Newmont Mining, Barrick’s US rival, for the failure of a potential merger deal last year.
Gold price
In his limited public statements, Mr Thornton sent mixed messages on whether Barrick would diversify, initially suggesting that this was an aim, but then this year saying Barrick would remain focused on gold.
Mr Thornton says diversification remains possible — in the longer-term. “This is not carved in stone for all time,” he says.
Jorge Beristain, an analyst at Deutsche Bank in the US, says senior executives’ pay at Barrick remains a source of investor concern. Mr Thornton was paid $13m, mainly in stock, by Barrick for 2014.
“Shareholders want to feel that management shares their pain but instead they see that they are still being well rewarded, whether in stock or cash. There is a feeling that Thornton and the others are in an ivory tower and not yet rolling up their sleeves,” Mr Beristain says.
Mr Thornton argues that Barrick’s new pay structure, including shares that cannot be sold until their holder leaves the company, is “the most owner-centric system in the world”.
But he admits there will be “counter-intuitive” years “where we are turning ourselves around but it hasn’t shown up in the share price”.
Gold mining
As for Newmont, the deal failed because of differences over how to spin off non-core assets, Mr Thornton says. “Sitting here today, Newmont is nowhere on our radar screen . . . we have plenty to focus on to get where we want to be.” Newmont declined to comment.
Mr Thornton says his role is about setting the framework for Barrick to operate. “I am not, and nor do I want to be, involved in the day-to-day running of the business,” he says. “Think of me as both architect and spiritual keeper of the flame, in the same way as Peter Munk was.”

FT : Investors expect European banks to outperform, key survey finds

Investors expect European banks to outperform, key survey finds

BRUSSELS, BELGIUM - OCTOBER 24: European Union flags are pictured outside the European Commission building on October 24, 2014 in Brussels, Belgium. Alongside criticism from outgoing European Commission president Jose Manuel Barroso on the UK's stance on EU immigration and a plan to quit the European Court of Human Rights, the UK has now been told to pay an extra £1.7bn GBP (2.1bn EUR) towards the EU's budget because its economy has performed better than expected. (Photo by Carl Court/Getty Images)©Getty
European banks will beat other financial sector investments this year but valuations will not catch up to international peers until regulatory uncertainty fades and loan growth picks up, a survey of investors by Morgan Stanley has found.
The bank polled about 200 investors at a recent closed-door London conference that attracted about 120 chief executives and finance heads from global banks, as well as policy makers and about 800 investors. Most investors answered only some of the questions.

“Europe as a whole is by far the preferred equity region for the next 12 months, favoured by 56 per cent of pollsters, followed by the US at a distant 20 per cent,” said Huw van Steenis, Morgan Stanley’s head of European bank research.
“Forty per cent of the investors polled think European banks are going to outperform in the next 12 months, while a close 30 per cent favour diversified financials. Insurers have lost ground and only 13 per cent of voters thought they would outperform this year.”
European banks have traded at a discount to US peers since mid-2009, as investors bought into American banks’ post-crisis restructuring and remained sceptical about their transatlantic cousins’ progress. Now, the MSCI US banks index is priced at about 110 per cent of its constituents’ book value. The MSCI European banks index is priced at about 90 per cent.
About a third of investors said European banks would not “re-rate”, or trade at higher materially valuations, until concerns about future regulatory requirements and capital demands eased.
Almost half of the investors fear the European Central Bank will set a common equity tier one ratio of at least 12 per cent for the 130 eurozone banks it supervises, well above the 4.5 per cent demanded by international rules and the 8 per cent set in the ECB’s recent stress tests.
More than half expect European banks to raise at least €20bn of equity this year over and above equity raises that have already been announced.
The next biggest hurdle to re-rating was loan growth, with a quarter saying it was a necessary precondition for improved banks’ valuations. Bank lending contracted sharply during the eurozone crisis, as demand fell in recession-hit countries and banks grappled with new regulations compelling them to have more capital relative to their loans.
Numerous efforts by policy makers, including trillions of euros of ultra-cheap long-term funding from the ECB, have so far failed to turn the tide. “Loan growth is key to unlocking value,” Mr van Steenis said.
He said he found the most surprising finding to be the fact that almost 60 per cent of respondents believed the cost of equity for banks should be 7-9 per cent, the lowest level at which investors have priced since 2007.
“Investors are reassessing the sector’s risk, prompted by QE [quantitative easing] and a perception that the uncertainty in banks’ share count is now perceived to be as low as it’s been since the crisis,” Mr van Steenis said.

FT : Glencore’s Glasenberg bides his time on Rio Tinto

Glencore’s Glasenberg bides his time on Rio Tinto

Ivan Glasenberg is not a chief executive short of opinions. But for the past six months, he has been uncharacteristically silent on one topic.
In October, Glencore, the company he leads, revealed that an informal merger approach to its larger rival, Rio Tinto, had been rebuffed some months earlier.
Under the provisions of UK takeover law, the revelation started an important clock ticking: Glencore was barred from further discussing the Anglo-Australian mining group for a full six months — a period that expires next week.
Will Glencore return with another approach to Rio? A combination of the second and largest miners by market value would create a $130bn resources group with an unprecedentedly broad exposure to a range of raw materials.
It would also be a decisive way to try to fight the gloom in commodity markets, where prices continue to soften amid concerns about slowing growth in China. But six months on, there are few reasons to think Rio shareholders would be interested in merging with a smaller rival. “Glencore still needs Rio more than the other way around,” said Ben Davis, analyst at Liberum.
It was immediately clear in the aftermath of October’s revelations that, for Glencore to pull off a deal, many stars would have to align. So far that has not happened. While the price of iron ore, the source of about 80 per cent of Rio’s earnings last year, has slumped to its lowest level in decade, the company has managed to increase its dividend, launch a share buyback and cut its debt.

This has helped support Rio’s share price and means that Glencore is no closer to solving the main obstacle to any deal: the fact that Rio remains a bigger company.
“The likelihood of a deal being announced in the near term remains unlikely,” said Jeff Largey of Macquarie Bank in London.
When Mr Glasenberg called Rio chairman Jan du Plessis to pitch the merger idea, the Glencore/Rio share ratio was around 9:1, that is, the price of a Rio share was equal to about nine of Glencore’s. That widened to 12:1 in January as the price of copper, Glencore’s most important commodity, slumped. It is now just under 10:1.
“We still wouldn’t even expect the possibility of a bid till the share ratio gets to below 8:1. Even then I don’t see where there is a sweet spot that gives enough premium for Rio shareholders and is not too dilutive to Glencore shareholders,” said Mr Davis.
Institutional investors are largely content with the job Sam Walsh, Rio’s chief executive, has done in pruning costs and cutting spending, even if some have reservations about his strategy of pumping more iron ore into the market, in an effort to keep market share and drive higher-cost producers out of business.
“Mr Walsh has shown that he can and will cut costs,” said Michael Hulme of Carmignac Gestion, a fund manager.

The relatively weak performance, which analysts attribute to Glencore’s debt levels, is not the only reason a fresh approach looks unlikely. Glencore’s triple B credit rating could be in jeopardy if it attempts a major deal this year.
Furthermore, Rio remains resolutely opposed to a combination of the two businesses. Mr Walsh told an audience at Chatham House in February that even if Glencore could come up with an offer that was attractive for Rio shareholders, a merger would never happen because it would not clear regulatory hurdles.
“The interesting thing is that, the media are sort of infatuated with this, and I guess it’s because it sells newspapers or gets people watching TV or what have you. But as I move around investors, investors say: ‘I don’t get it. Why are you giving this any ear? Because it actually isn’t going to happen’,” he said.
But for Mr Glasenberg, the attractions of a deal remain. Not only would it create the world’s biggest resources company but Glencore would get access to Rio’s balance sheet and its Australian iron ore assets, widely acknowledged to be the best in the industry.
Yet the steelmaking ingredient, which plunged 50 per cent in 2014, has extended its losses this year on concerns about a supply glut and currently iron ore languishes below $50 a tonne.
It means Mr Glasenberg’s best option is to remain patient.
“Glencore is content to let the iron ore price continue to fall and put further pressure on iron ore miners,” says Mr Largey. “Rio’s balance sheet remains solid but further weakness in iron ore prices will weigh on its valuation and affect the way investors feel about the company.”