Econ_June_09

The Economist

June 9th 2018

The world this week

China offered to buy $70bn-

worth ofAmerican goods,

including oil and gas, through

its state-owned companies if

America ditches its plan to

impose tariffs on Chinese

products. It was the latest

move to avert a

tradewar

between the two countries,

submitted after talks between

Chinese and American negoti-

ators led nowhere. Meanwhile,

trade hostilities broke out

between America and its

allies, after the Trump adminis-

tration pressed aheadwith

tariffs on steel and aluminium.

The EuropeanUnion drewup

a list ofAmerican products

targeted for retaliation. Mexico

got a head start, levying penal-

ties on imports fromAmerica,

such as porkand bourbon.

Savvy Satya

Microsoft

agreed to buy

GitHub

, an online platform for

developers towrite and share

code, for $7.5bn. The deal

underscoresMicrosoft’s em-

brace of open-source software

under Satya Nadella, some-

thing that was unthinkable

under previous chief exec-

utives. Its pivot towards cloud-

based computing and services

has rejuvenated its share price,

allowingMicrosoft to use only

stock to pay for GitHub.

The British government sold

925mof its shares in

Royal

Bankof Scotland

, the biggest

chunk it has offloaded since

bailing out

RBS

in 2008, reduc-

ing the public’s stake to 62%.

The shareswere sold at amuch

lower price than the govern-

ment paid for them, repre-

senting a £2.1bn ($2.8bn) loss to

taxpayers from this sale alone.

More tranches of shares are

expected to be sold over the

next fewyears.

Commonwealth Bankof

Australia

was fined A$700m

($535m) byAustralia’s finan-

cial-crimes agency for break-

ing rules onmoney laundering

and financing terrorism. It was

a record corporate penalty in

the country. The bank

admitted to lapses in checking

53,500 transactions at its

“intelligent” cashmachines,

wheremoney can be deposit-

ed anonymously.

DavidDrumm, the former

boss of

Anglo Irish Bank

, was

found guilty of dishonestly

inflating the size of the bank’s

deposits before its collapse and

subsequent bail-out during the

financial crisis. It was a rare

instance of a senior executive

being held to account legally

for events leading to the crisis.

Mr Drumm’s trial lasted for 81

days. The jury took just ten

hours to convict him.

SouthAfrica’s economy

shrankby 2.2% at an annual

rate in the first quarter, the

worst contraction in almost a

decade. Agriculture, mining

andmanufacturing all record-

ed big drops in output, un-

derscoring the broad-based

nature of the decline. Cyril

Ramaphosa, the president, has

vowed to increase investment.

Walmart

reached a deal by

which a private-equity firm

will take an 80% stake in its

Brazilian operations. The

supermarket chain expects to

booka loss as a result of the

transaction. Walmart entered

Brazil in1995, eventually be-

coming the country’s third-

largest retailer, but it has

chalked up seven consecutive

years of losses there.

Continuing the pain on Brit-

ain’s high streets,

House of

Fraser

said it was closing 31of

its 59 department stores, caus-

ing thousands of job losses. Its

flagship store on London’s

Oxford Street is on the list to

shut shop, one of themost

visible casualties of the online

disruption to retail.

Ramping up

ElonMusk said that

Tesla

would probably reach its target

ofmaking 5,000Model 3 cars a

weekby the end of June. Tes-

la’s production glitches have

worried investors. Thisweek

MrMusk survived a vote at the

annual shareholders’ meeting

to relieve himof the chair-

man’s role, which he holds

alongside the job of

CEO

SoftBank’s Vision Fund

unveiled a $2.3bn investment

in the division that is devel-

oping

autonomous cars

General Motors. The carmaker

hopes to roll out its first self-

driving vehicles next year.

With his health deteriorating,

David Koch

stepped down

fromhis role at Koch Indus-

tries, one ofAmerica’s biggest

privately held conglomerates,

where his brother, Charles, is

chief executive. David Koch is

also ending all his political

activities. The Koch brothers

aremost famous for creating a

networkof donors for conser-

vative causes.

Howard Schultz

announced

his retirement as chairman of

Starbucks, ending hismanage-

ment ties to a company that he

bought in1987, turning it into

theworld’smost extensive

chain of coffee shops. Mr

Schultz, who gave up the

CEO

’s job in 2016, has been

mentioned as a potential Dem-

ocratic presidential candidate.

Environmentally friendly

Monsanto

is nomore. Bayer

scrapped the name, which for

decades invoked ire among

green activists because of its

development of genetically

modified crops, when it com-

pleted its takeover of the com-

pany thisweek.

Business

South Afr

ca’s GDP

*Annualised

Source: Thomson Reuters

% change on previous quarter*

2015

17 18

–

For other economic data and

news see Indicators section