The Wall Street Journal, aside from the Sarah Palin maelstrom, devotes its lead coverage to the plummeting fortunes of oil, even as the dollar and the battered stock market rebound. Future contracts for crude fell $5.75 to $109.71 yesterday—that’s a 5 percent drop from Friday’s trading and nearly a $40 decline from its all-time peak back in July. Oil’s woe mirrors the general fall from grace experienced by all commodities recently—a sure sign of investor concern over a slowing global economy—and, with the fun now gone out of speculation, some analysts see a price floor for crude at around $80 a barrel, says BusinessWeek. Is this deja vu all over again? The WSJ points out that much like in the late 1970s, the Saudis are warning against keeping oil prices too high—they fear the combined effect of a production glut and weakening global demand—even as states like Iran and Venezuela are “expected to lead a campaign for OPEC to cut back on production” to maintain the $100-a-barrel level. If oil is plummeting, then surely the cost manufacturers charge for petroleum-based products—stuff like lotions, toothpaste, plastics—should also fall right? Think again, says the New York Times. “Many companies that cited higher energy costs for increasing prices are resisting a rollback, saying they still need to recover money lost in the run-up,” it writes.
Meanwhile, Coca-Cola wants to buy the leading Chinese maker of juices and nectars for some $2.4 billion, “the second-largest acquisition in the Atlanta company’s history,” notes the WSJ. Following on from Coke’s Olympics push, the acquisition of Huiyuan would further secure the company’s “hold on a booming market in the biggest foreign takeover in China,” writes Reuters. “It’s a high-growth market because of the growing personal income in China and increased health awareness,” an analyst tells the BBC. In the other direction, Chinese banks are having a tough time figuring out where to invest their foreign currency holdings now that they’ve cut back on their investments in U.S. mortgage giants Fannie Mae and Freddie Mac. As the Journal notes Chinese banks have a lot of cash they need to invest, with Bank of China sitting on $240 billion of overseas assets and the other three big lenders holding a combined total of $219 billion. With Fannie and Freddie currently out of favor despite being seen as low-risk, the Chinese billions need to find a new home.
The Financial Times devotes front-page coverage to Hollywood’s princely new backer: Abu Dhabi. The Abu Dhabi Media Company, an arm of the oil-rich government, told the FT on Tuesday it will stump up to $1 billion to finance the production of as many as 40 films with Hollywood over a five-year-period. The NYT though pours some cold water on the deal, pointing out the same outfit a year ago signed a $1 billion movie-and-video-game-financing deal with Warner Bros. and only have one film in the can: Shorts, what the newspaper calls “a family-friendly adventure film” starring William H. Macy. That doesn’t seem to have torpedoed Abu Dhabi’s Hollywood dreams. A new Abu Dhabi government-backed incubator named Imagenation Abu Dhabi will manage the existing Warner Bros. deal and name new studio partners at the Toronto Film Festival later this month, the NYT reports.
It’s been a busy week for Abu Dhabi royalty, scoring in recent days the acquisition of English pro soccer club Manchester City. On Wednesday, it set the soccer world buzzing with a report by Arabian Business that Manchester City is considering an unprecedented $240 million bid for cross-town star Ronaldo. When you bring in $500 million a day in oil revenues, you can afford such high-priced flirtations with sports stars and celebrities, the Daily Telegraph grumbles.
Lest you think there are no checks and balances on oil-rich sultanates and shrewd Asian government-backed funds buying stakes in tottering banks and even more distressed sports franchises, alas, some preliminary rules have been brokered on how sovereign wealth funds are to proceed with future investments, the WSJ reports. The International Monetary Fund succeeded in hammering out a “preliminary agreement” with some of the world’s largest sovereign wealth funds “in which they agreed to follow principles for commercial investment.” The newspaper adds that the actual list of principles was not made public, as the funds need to bring the rules back home for state approval.
Finally, Indian car giant Tata’s plans to build a supercheap small car for the masses have stalled, says the Financial Times. Violent protests by farmers over land they claim was taken from them and given to the company by the state of West Bengal have curtailed all production of the Nano, which was meant to launch next month, reports the NYT. Now the company is threatening to move production to other less rebellious locales, and that could throw off the launch by at least a year.