Business

ROME — Shares of Telecom Italia (TIM) soared on Monday after receiving a "friendly" buyout offer from US private equity fund KKR valuing the operator at around 10.8 billion euros.

Shares in Italy's largest telecom rose as high as 0.45 euros on the Milan bourse, up almost 29 per cent from Friday's closing price.

The public tender offer by New York-based Kohlberg Kravis Roberts regards the entire share capital of the company. TIM said the offer would be for an initial 0.505 euros a share. 

Italy's economy ministry saluted the interest by KKR as "positive news for the country" in a statement Sunday and said a working group would be formed to study the matter.

The ministry said it was necessary to ensure that such a project would be compatible with the rollout of ultra-wideband in the country.

Any sale would need the approval from government stakeholders, as TIM's network is considered a national strategic asset. 

TIM, which called an emergency meeting of the board to discuss the offer on Sunday, said the proposal was subject to around four weeks of due diligence and would require the backing of holders of least 51 per cent of both ordinary and savings shares.

KKR already has a 37.5 per cent stake in FiberCop, a joint venture with TIM and Italian Internet provider Fastweb to provide fibre optic broadband across Italy.

The takeover proposal comes amid news reports that shareholders — the largest of which is France's Vivendi — are putting pressure on TIM's top management following disappointing company results.

A spokesman for Vivendi had earlier denied it was in discussions with any funds.

Shares of Vivendi rose 2.71 per cent on the Milan bourse in morning trade. 

LONDON — US equities rose on Monday as Federal Reserve (Fed) Chairman Jerome Powell was renominated for another term, but other stock markets wobbled as investors fretted over inflation and possible new pandemic lockdowns in Europe.

Stock prices on Wall Street opened higher after US President Joe Biden nominated Powell for a second four-year term. 

By mid-afternoon, stock prices in Paris gained 0.1 per cent and prices in London were up 0.3 per cent, while Frankfurt were showing a loss of 0.1 per cent. 

"There's been so much anxiety about inflation and interest rates that investors are clearly apprehensive about over-committing," said OANDA analyst Craig Erlam.

"And that anxiety has been exacerbated by the prospect of lockdowns in Europe, following Austria's announcement on Friday," he said.

On Friday, Austria surprised the markets by returning to a partial lockdown, not just for the unvaccinated as had been previously planned.

In Germany, outgoing Chancellor Angela Merkel warned that the country's current COVID curbs — including barring the unvaccinated from certain public spaces — "are not enough".

"European stocks slipped as Angela Merkel fanned concerns over the fourth wave of COVID in Europe," said ThinkMarkets analyst Fawad Razaqzada.

"The fear among market participant [is] that fresh lockdowns could be introduced in other parts of Europe, making the road to recovery from the pandemic even bumpier and raising concerns over the efficacy of the vaccines," Razaqzada said.

"So, there is now a real possibility we may see at least a short-term correction, as investors wake up to the risks facing the eurozone economy, after the major stock indices hit repeated all-time highs in recent weeks."

Earlier, Asian stock markets finished mixed as investors mulled Europe's new containment measures alongside growing speculation of interest rate hikes to tame spiking inflation.

Oil was flat, regaining some of its earlier losses after major consumers including the United States considered releasing some of their reserves to keep a lid on prices, which have been a key reason for elevated inflation this year.

Crude had tumbled on Friday on fears of adverse demand fallout from the fast-moving COVID crisis.

MIZATA, El Salvador — President Nayib Bukele said El Salvador plans to build the world's first "Bitcoin City", powered by a volcano and financed by cryptocurrency bonds. 

Bitcoin City "is gonna include everything: Residential areas, commercial areas, services, museums, entertainment... airport, port, rail", Bukele said at the Latin American Bitcoin and Blockchain Conference on Saturday. 

El Salvador, which has used the US dollar for two decades, was the first country in the world to legalise bitcoin as legal tender. 

Bukele said the Conchagua volcano "will power the whole city and will also power the mining".

Bitcoin mining is the process by which new bitcoin is created using computers that solve complex mathematical problems — a process which demands huge amounts of energy. 

In El Salvador, some of that energy comes from a geothermal plant fed by the Tecapa volcano. 

Bukele said the city would initially be powered by the Tecapa plant before his government builds a new geothermal plant powered by Conchagua.

"Zero Co2 emissions. This is a fully ecological city," Bukele told the crowd.

To fund the project, El Salvador will issue $1 billion "Bitcoin bonds" in 2022, according to Samson Mow, chief strategy officer of Blockstream, a blockchain tech provider. 

On stage with Bukele, Mow said half of "volcano bonds" would be invested in Bitcoin, and the other half in infrastructure. 

"El Salvador will be the financial centre of the world," Mow said.

Bukele said that Bitcoin City will only charge value added tax.

"We will have zero income tax. Zero per cent fore ver. Zero capital gains tax... zero property tax, zero payroll tax," he said. 

No timeline was given for Bitcoin City's construction.

ISTANBUL — The Turkish lira sank to a record low against the dollar on Thursday after the central bank slashed interest rates for the third consecutive month following pressure to do so from Turkey’s President Recep Tayyip Erdogan.

The bank cut its policy rate from 16 to 15 per cent despite rising inflation and a fast-depreciating currency.

The lira sank to an all-time low of 11.30 against the dollar, but later pared down losses.

"Just a pretty ludicrous move," BlueBay Asset Management Economist Timothy Ash said in an email to clients, of the central bank's announcement. 

"Really dangerous for lira and for Turkey," he commented. 

The announcement of the bank's decision was delayed five minutes, with bank officials reportedly telling Turkish media that it was due to a "technical failure", dismissing social media rumours that the decision had been leaked.

Erdogan's interest rate fight 

Erdogan, an outspoken opponent of high interest rates in order to promote investment and economic growth, on Wednesday pressed for rate cut. 

"As long as I am in this position, I will continue to fight against [high] interest rates, I will continue to fight against inflation," he said.

"We will remove this interest rate trouble from the shoulders of the people. We will never let our people be oppressed by interest [rates]," he said.

In an address to his ruling AKP Party members in the parliament, Erdogan also justified his decision with a verse from the Koran which strictly forbids interest. 

"I cannot stand by those who defend interest," he said. 

Erdogan, who has in the past fired a number of central bank governors, is notorious for his unorthodox belief that high interest rates cause inflation instead of helping tamp it down. 

Conventional economic theory states the exact opposite is true.

Erdogan once called interest rates the "mother and father of all evil".

'Erdogan running the show'

Fawad Razaqzada, market analyst with ThinkMarkets, said the market clearly did not take the central bank seriously anymore because it has lost any credibility it had.

"Erdogan is running the show," he said. 

"If he wants to lower interest rates, he will get lower rates, regardless of how high inflation might be or how the economy is doing."

The lira has lost 32.8 per cent of its value against the dollar since the start of the year and the annual inflation rate has reached nearly 20 per cent — quadruple the government target.

The central bank has lowered its policy rate by 400 basis points to 15 per cent since August.

This means Turkey has a negative real interest rate — a policy that devalues lira assets and gives additional incentive for people to buy foreign currencies and gold.

"Stop Erdogan!" opposition leader Kemal Kilicdaroglu tweeted shortly after the central bank announcement, using a hashtag (#HemenSecim or elections right away in English). 

Kilicdaroglu on Wednesday called Erdogan the real "central bank governor" and accused him of dragging the country into catastrophe. 

Jason Tuvey, senior emerging markets economist at London-based Capital Economics, said that with this decision, policymakers had defied investors who had "clearly" been pushing for the central bank to stand up against Erdogan's call for lower interest rates. 

"The decision is a reminder that monetary policy in Turkey is being dictated at the presidential palace and also that the CBRT [central bank] is now more tolerant of a weaker lira than it has been in the past," he noted. 

GENEVA — The United Nations warned on Thursday that a surge in container freight rates could mean higher prices for consumers next year unless pandemic-fuelled problems are untangled.

The UN's trade and development agency (UNCTAD) said global import price levels could increase by 11 per cent and consumer price levels by 1.5 per cent between now and 2023.

"Global consumer prices will rise significantly in the year ahead until shipping supply chain disruptions are unblocked and port constraints and terminal inefficiencies are tackled," UNCTAD said in its Review of Maritime Transport 2021 report.

Global supply chains faced unprecedented demand from the second half of 2020 onwards as consumers spent on goods rather than services during coronavirus lockdowns.

But the upswing in demand hit several practical constraints, including container ship carrying capacity, container shortages, labour shortages, congestion at ports and Covid-19 restrictions.

The mismatch led to record container freight rates "on practically all container trade routes", according to the report.

"The current surge in freight rates will have a profound impact on trade and undermine socioeconomic recovery, especially in developing countries, until maritime shipping operations return to normal," said Rebeca Grynspan, UNCTAD's secretary general.

"Returning to normal would entail investing in new solutions, including infrastructure, freight technology and digitalisation and trade facilitation measures," she said.

UNCTAD said the pandemic had magnified pre-existing industry challenges, particularly labour shortages and infrastructure gaps.

It also exposed vulnerabilities, such as when China's Yantian Port shut in May due to a coronavirus outbreak, causing significant delays, or when the giant container ship Ever Given blocked the Suez Canal in March, snarling global trade.

Maritime trade rebound 

Still, the pandemic's impact on maritime trade volumes last year was less severe than initially expected, UNCTAD said.

Maritime trade contracted by 3.8 per cent to 10.65 billion tons in 2020, and is projected to increase by 4.3 per cent in 2021.

UNCTAD said the medium-term outlook remained positive but was subject to "mounting risks and uncertainties".

The agency predicted that annual growth will slow to 2.4 per cent between 2022 and 2026, compared to 2.9 per cent over the past two decades.

"A lasting recovery... largely hinges on being able to mitigate the headwinds and on a worldwide vaccine roll-out," said Grynspan.

"The impacts of the Covid-19 crisis will hit small island developing states (SIDS) and least developed countries (LDCs) the hardest."

The rise in consumer prices is expected to be 7.5 per cent in SIDS and 2.2 per cent in LDCs.

Contending with lockdowns, border closures and a lack of international flights, hundreds of thousands of seafarers have been stranded at sea, unable to be repatriated or replaced, UNCTAD said.

The UN agency urged governments and industry to work together to end the crew change crisis in the sector, which employs more than 1.9 million people worldwide.

UNCTAD also said the vaccination rate of seafarers was around 41 per cent and called for them to be jabbed as a priority.

"This is not acceptable if we want to see the supply chains moving again," said Shamika Sirimanne, UNCTAD's director of technology and logistics.

Shape of the future 

While bottlenecks have hindered the economic recovery, the pandemic could trigger far-reaching transformations in maritime transport, UNCTAD predicted.

The crisis has activated digitalisation and automation, which should, in turn, deliver efficiency and cost savings.

Meanwhile, e-commerce - accelerated by the pandemic -- has changed consumer shopping habits and spending patterns, according to the report.

"This could generate new business opportunities for shipping and ports," said UNCTAD.