What’s Important in the Financial World (7/16/2012)

Much of the financial future of Europe is still caught in a web of the political movements of Germany’s Angela Merkel. Today, the possibility that her own party will not support a Spanish bank bailout emerged. And Merkel has not entirely decided on her position of where liability for bank rescues should sit. Her early comments suggested that Spain’s bank problems are Spain’s. That would put more pressure on the troubled nation’s sovereign debt. One reason Merkel may have taken this stance is that her Christian Democratic Party has not offered full support of the bailout. German politicians also may await an IMF study on Spain’s economy, as well as a decision by Germany’s highest court about whether it is constitutional for the nation to give such aid at all.

Strait of Hormuz Bypassed

The Strait of Hormuz just became much less important to the transport of oil to countries that import crude. There has been much concern that if the strait was blocked by Iran’s navy in response to sanctions because of its weapon’s program, then the price of crude would soar. The price increase, in turn, would hurt the already fragile economies of some of the world’s largest nations. But Saudi Arabia and the United Arab Emirates have opened pipelines that will allow oil supplies to bypass the strait. The Financial Times reports:

The new links will more than double the total pipeline capacity bypassing the strait to 6.5m barrels a day, or about 40 per cent of the 17m b/d that transits  Hormuz.

Human Genome Sciences Purchased

Several reports indicate that GlaxoSmithKline (NYSE: GSK) will buy Human Genome Sciences (NASDAQ: HGSI) for $2.8 billion. The two companies have battled over the price for several months. GSK believes it needs the latest biotech products and research to offset the slow growth a number of big pharma companies have experienced as many of their blockbuster drugs come off patent. To close the transaction, GSK increased its offer to $14 a share from $13. Reuters reports:

“It looks like a great conclusion for Glaxo. At around $14 a share, it is marginally higher than they first pitched but lower than I expected them to have to pay,” said Navid Malik, an industry analyst at Cenkos Securities.

Douglas A. McIntyre