Econintersect: Here are some of the headlines we found to help you start your day. For more headlines see our afternoon feature for GEI members, What We Read Today, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.
Big Oil Opts for Payouts Over Debt Rating (The Wall Street Journal) The world's biggest energy companies have a tough decision to make amid languishing oil prices: Do they keep their coveted investment-grade credit ratings or maintain century-old practices of paying shareholders annual dividends worth billions in cash? Four of the biggest Western oil companies - Exxon Mobil Corp., Royal Dutch Shell PLC, Chevron Corp. and BP PLC - are poised to pay more than $35 billion in dividends to investors this year, an amount equal to about 40% of their combined cash flows, says Oppenheimer & Co. To do so, they face increased pressure to borrow, a strategy that has alarmed ratings firms.
Collapsing crude prices are hurting emerging-market debt (Nikkei Asian Review) Investors in emerging-market debt might have hoped for a different start to the New Year. As oil prices have fallen to new lows, markets have demanded ever-larger premiums for buying emerging-market debt. Risk premiums for such debt are now at their highest since 2011. Most risky asset classes have come under pressure during the first few weeks of the year, but there is a particularly close correlation between the interest rate premium commanded by emerging-market bonds and the oil price. That's because around 26% of the $1.4 trillion in emerging-market debt is directly oil-dependent.
Market volatility to continue as emerging markets pay off debt (City A.M.) The strength of the dollar is leading many emerging market economies to start paying off their dollar debts - deleveraging - in response to the strengthening of the dollar. A strong dollar means it harder to repay borrowed dollars if sales revenue or income is in a different currency. It leads to so-called currency mismatches.
Imperial Tobacco is dropping tobacco (City A.M.) No, they are not abandoning tobacco profucts, but changing their name to "Imperial Brands". The London Stock Exchange company will have a new symbol Monday morning: IMB (was IMT). On the New York Stockj Exchange the ADR symbol will be IMBBY. The company shares are up just shy of 20% over the most recent 12 months on the London exchange.
Saudi currency devaluation would carry major political risk (Reuters) A devaluation of Saudi Arabia's currency could cause such political instability that Riyadh has little choice but to stick to its promise to use vast foreign exchange reserves to defend the riyal's 30-year-old peg to the U.S. dollar. Currency traders have been betting against the Saudi peg. But in Saudi Arabia's largely dollar-denominated economy breaking the peg would immediately raise the price of goods, hitting living standards. Combined with other pending painful economic reforms, this could lead to unrest in a country where the unwritten social contract swaps citizens' obedience and allegiance to the king for good government services and a share in oil wealth.
What Syria's Refugees Need (Bloomberg Editorial) The refugees and the countries where they are staying need jobs, infrastructure and education. The European Union may be struggling to absorb 1 million refugees (0.2% of the bloc's population), but Lebanon now has nearly as many Syrian children in its schools as Lebanese children, with many more young Syrians left out. In Jordan, 1.4 million refugees are putting severe strain on already scarce water supplies, power generation and hospitals, as well as schools. Partly in response, government expenditures have risen 38 percent, while the economy has slowed sharply as trade routes to Europe and much of the region have been cut off by war and Islamic State. To cope, the government says it needs $8 billion between now and 2018 to manage.
Quake fells Taiwan apartment building, at least five dead (Reuters) A powerful earthquake, magnitude 6.4 at about 4 am, toppled a 17-story apartment building in Tainan, southern Taiwan, on Saturday, killing at least five people, including a 10-day-old girl, and triggering frantic efforts to rescue about 35 people feared trapped inside. Many other buildings have reported damage in the sity of 2 million.
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