Every Friday the Current rounds up the biggest business stories of the week. This week; Kraft and Heinz merge, a Chinese state owned firm buys Pirelli, the euro’s weakness is the eurozone’s strength, Ukraine and Russia agree to a gas deal, US employment slows and, Canada’s trade deficit shrinks.
Kraft and Heinz Merge
A Brazilian investment firm, 3G Capital, teamed up with Warren Buffett’s Berkshire Hathaway to arrange the merger of Kraft Foods with Heinz for $50 billion. 3G and Berkshire Hathaway had bought Heinz back in 2013 and the merger between the two food industry giants means that the organisation is now the world’s 5th largest food company. It is speculated that Jorge Paulo Lemann, Brazil’s richest man, could stand to gain $5 billion for his role in the deal. Despite this windfall the Brazilian tycoon was beaten to the punch by millions of Canadians who have been merging Kraft Dinner and Heinz ketchup for decades.
Pirelli bought by China National Chemical Corporation
China National Chemical Corporation, a state owned firm, bought a 26.2% chunk of Italian tire company Pirelli. All told the agreement is worth about $7.7 billion and gives the Chinese stakeholder the option of taking full control, however, the agreement stipulates that Pirelli’s headquarters will remain in Milan. The takeover is one of the largest by a Chinese state-owned company.
The Euro’s Weakness is the eurozone’s strength
According to the research firm Markit’s purchasing managers’ index (PMI) the euro’s weakness has been European exporters’ strength. The euro has fallen 12% since January due to the European Central Bank’s quantitative easing (QE) program. Meanwhile the PMI rose to a 10 month high in March. The findings, and other recent indicators, suggest that the eurozone’s recovery is beginning to gain momentum. Meanwhile in Britain, the country’s inflation rate dropped to 0% in February.
Naftogaz and Gazprom agree gas deal
Despite fighting a vicious war with Russian backed rebels in its eastern region Ukraine has agreed a new cheaper gas deal with Gazprom. Naftogaz, Ukraines national gas company, will now pay just under $250 per thousand cubic down from around $330. Ukraine is reliant on natural gas for heating and energy and Russia has not been afraid to utilise Gazprom as an extension of its foreign policy. Both Russia and Ukraine have seen the values of their currencies tumble, inflation skyrocket and economic uncertainty grow due to the ongoing conflict and, in the case of Russia, debilitating Western sanctions.
US Employment growth slows
In February the US unemployment rate fell to 5.5% – its lowest level in 6 years. In March, however, the country experienced a slowdown in the number of new jobs that were added. Harsh weather, low oil prices and a sky-high dollar have impacted consumer spending, the oil industry and manufacturing. Only 126 000 jobs were added – the lowest level since 2013 – down from 12 straight months of increases of over 200 000.
Canada’s Trade Deficit shrinks
Canada’s trade deficit for February came in at $984 million, down from $1.5 billion in January and well below the $2 billion trade deficit projected by some experts. Oil prices increased about 17.5% from January to February and were largely responsible for reducing the trade deficit. The news could be good for the Canadian dollar as a major trade deficit can devalue currency. Despite the seemingly good news some are warning that the numbers are deceiving. Energy notwithstanding, Canada’s export numbers are actually worse in February than January amounting to a four month high $7.2 billion trade deficit.
Stay informed. Stay Current.