Random musings: Portugal; and BP

Portuguese woes!


Following on from last Wednesday's resignation by the Prime Minister of Portugal (due to rejection of his proposed austerity measures), I see that there is a tangible inevitability that Portugal will run out of money in the next few weeks to become the next domino in the line of failing sovereign states that need bailing out by the EU.

Overnight, 10 year Portuguese bonds have deteriorated to yield more than 8% as confidence leaks out of the country's finances (the face value goes down as the yield goes up as sellers try to offload them).

Markets seem to have got used to this sequence now though and seem to be less concerned than they are with other global events. I guess that with Ireland and Greece taking hand-outs there is now a survival formula....as long as the money tree keeps growing!

Other than that, speculators and ambulance chasers will again be looking at Spain or Italy as the next in line. 

There may be some short term knock to the recovery of banking and sales growth of life assurance companies which have sales in the Eurozone. I recall that many fell when Greece teetered on the brink of its own bailout.

There is probably also a sobering lesson to be learnt for the UK as well which had (until our own austerity measures were implemented) often been cited as the next most likely candidate after the "PIIGS": Portugal; Ireland; Italy; Greece; and Spain.

As an erstwhile former colleague of mine often remarks: 

"eventually somebody has to pay the piper!".

BP @ 467.15p, - 9.95 (- 2.09%)

Elsewhere, BP continues to experience the fall-out of its Russian debacle with:

- rivals looking to take their place in the tie-up with Rosneft;

- major shareholders, such as Standard Life, voicing opposition to any share swap without the benefits of Arctic exploration

- Chevron also voicing concerns and threatening to pull out of its own venture with Rosneft in the Black Sea.

All in all, it seems like BP has yet another CEO, Bob Dudley, intent on blundering his way around. Brought in with a clear view to rebuilding the company's reputation in America (he is American), he  appears to have gone after one of those career defining deals and walked into another legal minefield.

In this case it is a particular concern that he has "previous" in Russia and with the same TNK-BP partners! 

Some are also suggesting that the Chairman of BP, Carl-Henric Svanberg, has also taken his eye off the ball in not sufficiently reviewing or questioning the possible legal implications of the company's existing contracts with TNK-BP.

Prior to the results and surprise Rosneft announcement on the 1 Feb, the shares had been consolidating their post Gulf of Mexico recovery at 484p (after peaking at 509p on the 18th Jan). 

And, initially well received and with endorsement from the UK and Russian Governments the deal looked to be opening a new avenue for the company until the injunction from BP's existing Russian partners.

Markets don't like uncertainty and the relatively new  Chairman and CEO appear to have led the company out of one situation into another. All this on top of the powder keg in the Middle East!

How long before another change at the top of BP?