U.S. downgrade would force bond buyers to rethink 21 Jul 2011 S&P could cut America's AAA rating even if Congress does a deal on the debt ceiling. The 18 other toprated sovereigns are either caught up in the EU mess or tiny. Without the $8 trln riskfree benchmark, even ultracautious bond investors would have to get used to credit risk.
Regulators chip away at U.S. financial reform 21 Jul 2011 Tim Geithner says the president should veto Republicans' efforts to defang DoddFrank. His boss may get that chance if reelected next year. But rulewriters are already making the reforms weaker than their creators intended. That in turn could cool the desire to roll them back.
Outbound China funds stretch private equity idea 21 Jul 2011 Investors like Jacob Rothschild's RIT are hoping to raise local currency to buy stakes in Western companies. The funds are like corporate matchmakers, offering Chinese firms a lowrisk route abroad. But with private equity fees, it's still nice work for those with the contacts.
Will the real price of oil please stand up? 21 Jul 2011 Oil is a quintessential global commodity. But the price of the black stuff has got harder to grasp thanks to the gap between the two main benchmarks. Brent and WTI may diverge more, to the delight of U.S refiners. Then questioning about the true price of oil could get louder.
Gulf Arab states take up food subsidy outsourcing 21 Jul 2011 Ordering international giants like Kraft, Unilever, Carrefour and even Saudi's Almarai to cap prices minimises the risk of political unrest and helps the kings club avoid even larger subsidy bills. But this increasingly common tactic is a poor answer to rising commodity prices.
Tax hikes far from inevitably a U.S. job killer 21 Jul 2011 Republicans have warned before that tax hikes cause job losses. Reagan and Clinton faced similar claims over their deficit reduction plans. Tax increases aren't ideal but the strong job creation that followed in both cases refutes the simplistic notion that they always cost jobs.
EU banks’ stress test hangovers aren’t equally bad 20 Jul 2011 The European Banking Authority's health check of the sector left a number of banks looking undercapitalised. Over half of them, however, can point to actions they are taking that will improve matters. But not all the banks' capitalraising schemes look equally solid.
Year-old Dodd-Frank punches, if below its weight 20 Jul 2011 With a final 848 pages of law and over 3,300 pages of rules (and counting), the U.S. financial reforms passed a year ago are cumbersome. But they can't be written off as a useless doorstop. Despite flaws and financial industry bleating, sound new measures are taking shape.
Star returns alone can’t pay California pensions 20 Jul 2011 The state's two big public employee funds generated returns of over 20 pct in the latest annual accounts. But Calpers and its fellow teachers' plan, with $400 bln of assets, remain underfunded. Even if they achieve investment targets, they can't hope to keep promises to retirees.
BAA faces rock bottom Stansted airport selloff 20 Jul 2011 The UK airports group, no stranger to bad timing, would only be able to sell Stansted at a big discount to its 1.32 bln pound regulated value. The secondstring London airport is too reliant on Ryanair and on cashstrapped holidaymakers. No wonder BAA is playing for time.
Is the ECB as hard as it looks? 20 Jul 2011 Working out what the central bank thinks can be like Kremlinology in the old Soviet Union. But there are signs that its line on not taking defaulted Greek debt as collateral isn't quite as hard as one might think. If so, there could be a compromise that unlocks the crisis.
Coke suggests U.S. consumers won’t buy price hikes 20 Jul 2011 The beverage giant's volume was flat in North America following modest price increases. That bodes poorly for passing commodity inflation on to customers. Coke can compensate with bubbly emerging market sales. But U.S.centric consumer firms will struggle to maintain margins.
Yuan may no longer be undervalued 20 Jul 2011 Rising prices have helped correct the undervaluation of the Chinese currency. Consumers get less bang for their buck, and there's now less pressure from current account inflows. If inflation doesn't ease, the yuan could even start to look overvalued.
News Corp’s UK static could yet hit U.S. airwaves 20 Jul 2011 Hacking and bribery charges already threaten Rupert Murdoch's stake in UK payTV firm BSkyB. But his ownership of Fox stations in America could also be in jeopardy if accusations prove true. It's rare, but U.S. broadcasters have on occasion lost licenses over bad character.
Citadel resorts to activism to rescue bum trade 20 Jul 2011 The hedge fund group went deep on E*Trade back when Ken Griffin still had visions of greater grandeur for his firm. Now he's left agitating for a sale, helping give a lift to the cratered stock. Still hopelessly underwater, it's no wonder Griffin's getting uppity.
Three questions the Greek debt summit must answer 20 Jul 2011 By agreeing to meet, euro zone leaders have raised hopes of an agreement on a second Greek bailout. To signal their determination to address the euro's problems and to avert a broader market panic, governments must show they have made progress in three key areas.
UK IPOs need more independent help on pricing 20 Jul 2011 Thirty European IPOs were pulled in the first half of 2011. Unfortunately, proposed reforms that would delay fees paid to bank advisers may not work. The focus should be on fair value pricing and to that end candidates must be subjected to more independent scrutiny.
Australia is the canary in China’s coalmine 19 Jul 2011 Chinese commodities demand created a mining boom, and turned Australia's credit market into a proxy for its trade partner's economy. That market is now flashing red for Australia's exposure to a Chinese slowdown. Even if China averts a dreaded hard landing, Australia may not.
Swiss franc gain may cause east Europe slowdown 19 Jul 2011 The Swiss franc safehaven trade is set to run on: but for Poles and Hungarians who borrowed in the Alpine currency that means growing debt pain. Stronger Poland seems better placed to tough it out. But central banks may have to bolster the zloty and forint and forgo growth.
Apple gorges on all it can eat Chinese buffet 19 Jul 2011 The $350 bln iPhone maker's sales surged 82 pct in the past quarter from a year earlier. Much of this eyepopping increase can be pinned on Greater China, where revenue rocketed more than sixfold. Growth there shouldn't slow any time soon but keeping up could be a challenge.
Chavez’s new oil reserves likely to stay buried 19 Jul 2011 Leapfrogging Saudi's oil reserves gives the Venezuelan strongman bragging rights. But with output down 25 pct since 2000, citizens and oil users should hold their applause. Only with better Brazilstyle relations with foreign firms and a revamped PDVSA will production ramp up.
Europe’s bank levy idea looks messy and dangerous 19 Jul 2011 The euro zone's quest to avoid a Greek ratings default keeps generating cockeyed ideas. The latest proposal is to fund a bailout by taxing the financial sector. That might help avert contagion. But designing a levy would be heinously complex and would encourage moral hazard.
U.S. Congress scrambles to avoid credit rating cut 19 Jul 2011 Even if lawmakers increase the federal borrowing cap, America's AAA credit rating may still be under threat. Raters want to see solid plans for deficit reduction, too. The bipartisan Gang of Six senators has a $3.7 trln proposal. But it may be too much, too late.
BofA boss needs to kick it up a notch – or two 19 Jul 2011 CEO Brian Moynihan has spent much of his tenure cleaning up his predecessor's mess. Despite the yeoman efforts, he hasn't persuaded investors he's turning the firm around and another lackluster quarter hasn't helped. He may be running out of time to win them over.
Hoarding gold makes sense only for the hopeless 19 Jul 2011 Compared to U.S. share prices, gold has rarely been more expensive. The yellow metal was even more valuable during the economic disasters of the 1930s and 1970s. Today's worries could push it higher. But only the gloomiest can think gold will maintain its glittering trajectory.
Goldman bankers overshadow stumbling traders 19 Jul 2011 Fixed income revenue declined a whopping 63 pct in Q2, causing the bank to miss Wall Street's expectations for the second time in a year. Goldman's M&A advisers delivered the only bright spot. If the trend keeps up, it could rekindle an internal battle for dominance.
South Sudan joins African growth club 19 Jul 2011 The continent's growth rate is forecast at 5 pct in 2011, well above past levels. That has a lot to do with high commodity prices and increased foreign investment. At least while money stays cheap, Africa should get the needed resources. Club membership could be valuable.
Murdoch junior leaps to defence of feebler father 19 Jul 2011 Shaving foam apart, News Corp's founder and his son escaped their UK hearing broadly unscathed. Their display of contrition neutered MPs' questions. But Rupert seemed out of touch while James was more assured. If the scandal lifts, power in the media empire may shift to him.
Europe dances with danger 19 Jul 2011 The region's leaders have been consistently behind the curve when addressing problems from Italy to Greece. As credibility shrivels, they need to do much more to restore confidence. This week's summit is the last good chance.
Spain’s Bankia set to pass its own stress test 18 Jul 2011 The country's largest savings bank has cut its IPO price by 15 pct to drum up more demand from foreigners. The snag is that it will raise less capital. But a successful float is crucial to restructuring Spain's banking sector. Getting it away in a dire market is no small feat.