Business

Business this week

Financial markets endured another tumultuous few days, starting with a run on Bear Stearns, a venerable Wall Street bank, amid rumours of its imminent collapse. The Federal Reserve led a rescue by assuring $30 billion of the bank's assets and engineering its takeover by JPMorgan Chase. At the same time it said it would accept investment banks' collateral. The action was praised for halting Bear Stearns's complete meltdown. The deal values the investment bank at just $2 a share: in January 2007 its shares traded for over $170. See article

The Fed also made an emergency cut of one-quarter of a percentage point to its discount rate (which it charges commercial banks), to 3.25%, and extended the rate to securities firms. At its regular meeting, the Federal Open Market Committee reduced the federal funds rate by a further three-quarters of a percentage point, to 2.25%.

Small mercies

Lehman Brothers sought to reassure jittery investors after it saw 20% wiped off its market value on March 17th. Its share price stormed back after it reported a quarterly net profit of $489m, 57% less than in the same period a year ago but better than had been expected. Goldman Sachs also posted a much-reduced quarterly profit, of $1.51 billion, stemming from losses in mortgages and securities.

n a week when the markets were highly agitated, Visa managed to raise $17.9 billion from its initial public offering, the world's second-biggest (behind Industrial & Commercial Bank of China in 2006). The flotation will provide some much-needed cash to Visa's shareholders, the banks that issue credit cards.

Siemens issued a surprise profit warning because of delays to projects and contract cancellations, which will drag down its quarterly earnings by euro900m ($1.4 billion). The German engineering giant stressed that its problems had nothing to do with the present market turmoil. The news was a blow to Peter Löscher, Siemens's boss, who has begun a big clean-up at the company following a bribery scandal.

The dragon catches a cold

China's prime minister, Wen Jiabao, said his government would take “forceful” steps to dampen inflation, which is running well above official targets. Soon after Mr Wen spoke, China's reserve ratio was increased for the second time this year, with lenders ordered to place 15.5% of deposits with the central bank. See article

A federal appeals-court threw out the conviction handed down last year to Joseph Nacchio and ordered a retrial. Mr Nacchio was sentenced to a six-year prison term (though he remains free on bond) for insider-trading while chief executive of Qwest Communications. The appeals court said the conviction was unsound because testimony had been barred from an expert witness deemed crucial to Mr Nacchio's defence.

Responding to recent speculation, BNP Paribas, France's biggest bank, said it would not make a takeover bid for Société Générale, which in January unveiled a euro4.9 billion ($7.2 billion) loss that stemmed from a rogue-trading scandal.

CME Group made formal its agreement to buy the New York Mercantile Exchange for $9.4 billion. CME, created when the Chicago Mercantile Exchange and the Chicago Board of Trade combined last year, began negotiations with Nymex in January.

International Paper said it would buy Weyerhaeuser's packaging and recycling business in a deal valued at $6 billion. Because the offer is for assets and not stock, IP should reap a tax benefit worth around $1.4 billion, reducing the net purchase price accordingly. On either measure, it is one of the biggest deals in the timber-products industry in recent years.

Piping hot

Evraz, a Russian steelmaker part-owned by Roman Abramovich, agreed to buy the Canadian pipemaking business of Sweden's SSAB for $4 billion. Evraz then sold some of the division's assets to TMK, its compatriot. Demand is strong for steel piping in the North American oil and gas industry, but regulators will study the deal to see if there are any implications for energy security.

Air France-KLM cemented its offer to buy Alitalia, valuing the equity of Italy's loss-making state airline at just euro139m ($217m). The Italian government has been trying to offload the carrier for more than a year (several potential buyers pulled out of an auction last summer). It recommended Air France's offer, as did Alitalia's management. The airline's powerful unions, however, remain hostile, as are opposition politicians, one of whom invoked the battle of Caporetto—Italy's biggest defeat in the first world war. See article