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City Republic: Sainsbury's, phone wars and the oil price

City Republic is the latest great new addition to BR. Every Monday and Wednesday, Stephen Foster takes a personal view on what the financial markets are doing and what it means for marketing and media.

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Qataris head for the exit at Sainsbury's
The 600p-a-share bid by the Qatari Investment Authority for Sainsbury's never stacked up but it came within a whisker of succeeding.

This morning (Monday) bid vehicle Delta Two announced that it was packing its tents, citing pension fund problems and the problems of raising £500m of new equity in difficult financial markets.

What about all that Qatari gas we kept hearing about? Surely there was enough to raise a loan?

There's obviously been a big fight going on. Over the weekend, we kept reading that the bid would proceed in time to meet Thursday's Takeover Panel deadline.

I've no idea who was putting this story about but it doesn't sound like it was the QIA.

Predictably, Sainsbury's shares were heading south as fast as they could go in early trading, down 18% to close to their pre-bid price of 450p.

Which will be extremely painful for the QIA with 25% and property dealer Robert Tchenguiz with 10%, plus all those speculators who chased the price up to touch the bid price of 600p.

The Sainsbury's board under chairman Sir Philip Hampton doesn't look too clever either.

A more robust "put up or shut up" defence could have killed this one at birth.

Will a new round of phone wars boost the markets?
There's a nervous week ahead with more nasties set to emerge among the banks (of which more later) and, potentially much more serious, a political meltdown in Pakistan.

However, it's not (quite) all doom and gloom.

Apple's iPhone launches in the UK today (Monday) and service provider O2 reckons it will sell 200,000 of them this year.

At £899 a go (£269 for the phone, the rest for the contract), that's good business and another coup for O2 (which must win all the marketer of the year awards going for its inspired exploitation of the old Millennium Dome).

More important though is Google's unveiling of the so-called G-Phone, actually a nifty bit of software which gives phone users access to Google services, for free.

All they need to do is to agree to receive Google's ads.

If it saves you 900 quid, or whatever, this will clearly have a big impact. Not least on the current phone companies who make billions from expensive handset and contract packages.

Across the board, technology companies are still making big money. The tech-heavy Nasdaq index in the US has avoided most of the problems of the Dow Jones and the Standard & Poor's 500 because it doesn't include any banks (or companies that use a lot of oil).

So there's one bit of the global economy that's still motoring.

The bankers have it both ways
When banks are succeeding they cause trouble because they charge us more for less, when they're in trouble they cause even more trouble because, all of a sudden, there's no money.

Recently, the focus has been on the US as Merrill Lynch's Stan O'Neal and, today, Chuck Prince of CitiGroup have fallen on their swords after revealing horrendous sub-prime losses.

These will get worse, of course, as the new guys (former US Treasury Secretary Robert Rubin is the stand-in at CitiGroup) move in and do a "kitchen sink" job on what passes for the banks' accounts. Citibank said today that it would have to write off a further $8bn-$11bn.

Small change really.

This week attention will also be on the UK as investors refuse to believe that the likes of Barclays and Royal Bank of Scotland, the two biggest and most ambitious globally of the British banks, have managed to avoid this mayhem.

Barclays fell 6% Friday and RBS 5%, despite carefully couched statements to the effect that everything was fine.

It's all a "bear raid", ie nasty hedge funds trying to drive down the price of their shares their paid-for friends advised.

Well let's hope they're right.

In the meantime, the oil price is rattling ahead (although the weakness of the dollar should mean that the stuff gets cheaper as you pay for it in dollars) and General Musharraf's suspension of what little democracy there was in Pakistan will make the Middle East even more febrile.

So the markets, terrified at the prospect of the double-whammy of oil-induced rising inflation and slowing growth, will have another tough week.

Hong Kong, which only a week ago reached a new peak, lost 5% on Monday and European markets all opened in the red.

There are still people out there who think equities are undervalued but it takes a brave soul to buy in these circumstances.

As ever, company earnings may help.

News Corporation and Time Warner, the world's two biggest pure media companies, are due to report this week. Their figures should be strong.

But will anyone pay attention?

Stephen Foster is a former news editor of Campaign, former editor of Marketing Week and Evening Standard ad columnist. He is a partner in Editorial Partnership and writes the blog www.editco.net and Politics of the Media for Brand Republic.

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