Finnish favouritism could unravel Greek rescue 19 Aug 2011 Greece’s bailout allows Finland to secure its loans with cash. Now other member states want the same deal, which would undermine the whole exercise. With either the rescue package or euro zone unity at stake, the EU’s biggest players may have to knock some heads together.
China’s bank rules promise safety, not stability 19 Aug 2011 Lenders will end up well padded against bad debts under new plans - a good job, since lots are coming. But the distortions that promote risky lending remain. With capital scarce, banks may also push more loans through China’s worryingly large “shadow” banking system.
UK should avoid handwringing over Autonomy sale 19 Aug 2011 It could have been Britain’s Google, say those who mourn the Cambridge software firm’s sale to HP. Maybe. But Autonomy’s founder has a right to an exit, while public companies have a duty to accept rich takeover bids. Its success is still an inspiration to would-be entrepreneurs.
HP says goodbye Compaq, hello IBM 19 Aug 2011 The U.S. tech giant may spin off its PC unit and stop making some mobile devices. It has also offered to buy UK data search software group Autonomy for $10 bln. Leaving the cutthroat hardware market for higher margin software can work, as IBM shows. But it won’t be quick or easy.
How to break Europe’s bank-sovereign "doom loop" 19 Aug 2011 The crisis of 2008 is repeating itself in reverse. Instead of saving the banks, European governments are now dragging them down. That threatens another credit crunch. Severing the link between states and lenders is essential to restoring calm. Here’s how it can be done.
EU bank shares braced for recession – and worse 18 Aug 2011 The huge sell-off in European bank stocks is partly due to sovereign-related funding fears. But it mainly reflects the hit to earnings that lenders would suffer in another economic downturn. Investors also seem to be pricing in another round of capital injections.
High volatility the price for still unfixed system 18 Aug 2011 The tail-risk fear of a Lehman sequel in the euro zone has whipsawed stocks, bonds and just about every other market. Gloomy data on the U.S. economy didn’t help on Thursday. While policymakers and fundamentals alike offer no conviction, global volatility is set to stay high.
Upstart M&A boutiques earn place at fee table 18 Aug 2011 Two newish shops opened by Blair Effron and Frank Quattrone worked on Google’s $12.5 bln deal this week. Along with firms run by Ken Moelis and Joe Perella, this quartet is eating away at the fee pool of big Wall Street banks. Conflicts and cash should keep them nourished.
Spain must seize the moment for more austerity 18 Aug 2011 The markets’ focus has been on Italy and France. Emergency ECB buying of Spanish bonds has helped bring down yields. Spain may not have crippling debt, but it’s plagued by low growth and a high deficit. Fresh austerity measures due this week need to be comprehensive and credible.
EU banks’ summer funding lull may bring autumn woe 18 Aug 2011 Post-crisis reforms and central bank backstops mean Europe’s lenders are less vulnerable to a short-term funding freeze. But if markets do not reopen in the autumn, or if wholesale borrowing costs remain high, the economic fallout for the euro zone could be nasty
Baidu smear campaign can’t be brushed aside 18 Aug 2011 Critical reports by Chinese state TV have knocked 9 percent off the dotcom giant’s shares. It may be professional envy rather than political conspiracy. Still, the Communist Party’s relationship with the web is fractious. And Baidu’s ownership structure may be an Achilles’ heel.
Is Hugo Chavez ahead of the investment curve? 17 Aug 2011 Venezuela plans to move billions of cash reserves from developed nations to BRIC countries, according to media reports. This may reflect politics, or the need to keep creditors sweet. But given U.S. and EU budget and bank woes, Chavez may not be alone seeking alternatives
Doubts over $29 bln pharmacy deal look overdone 17 Aug 2011 Based on the yawning 26 pct gap between the Express Scripts offer and where Medco shares trade - lower than even before the bid came along - investors are super-spooked about antitrust issues. The market pricing in zero chance of success makes it a cheap option to buy.
Targeting Sun Belt should be on Obama’s new list 17 Aug 2011 Swathes of the U.S. South and Southwest have replaced the Rust Belt as the nation’s economic runt. Housing-bust states like California and Nevada now have worse unemployment. The president’s fresh plans to jump-start the economy would do well to aim support at the region.
ECB’s dollar-swap safety net should cap bank pain 17 Aug 2011 The central bank has activated a facility that allows EU banks to access dollar funding. An unnamed lender has highlighted the stress in bank funding markets by paying up for seven-day liquidity. But the ECB’s ready supply of dollars should help prevent a Lehman-style crunch.
Merkel and Sarkozy live down to low expectations 17 Aug 2011 The Franco-German summit produced proposals for further euro zone integration. But the demand for balanced budgets was unmatched by any promise of more aid for peripheral states, while the mooted tax on financial transactions misses the point. Investors are rightly sceptical.
SAB may yet brew up friendly Foster’s takeover 17 Aug 2011 The UK-listed brewer is canny to go hostile with an unchanged $10 billion bid days ahead of its Aussie target’s results. Peace may yet break out. Hostile takeovers are hard Down Under, and Foster’s has no white knight. With a small sweetener, both sides may get what they want.
Barclays’ star trader exit won’t be the last 17 Aug 2011 The UK bank is parting company with big-shot commodities trader Todd Edgar. Curbs on proprietary trading are one factor, and his contract terms may make it logical to go now. But with revenues in trading under pressure, the underlying trend is shrinkage in any case.
India’s botched crackdown may be turning point 17 Aug 2011 Arresting an anti-corruption hunger striker has cost the Singh government political capital. That could jeopardise reforms hanging in the balance, and may worsen supply bottlenecks and inflation. But it could also be a spur to tougher action on graft - another big economic drag.
Europe shouldn’t dally on Syrian oil boycott 17 Aug 2011 Proceeds from the country’s oil exports are helping to prop up an increasingly brutal regime. Global markets can withstand the loss of Syria’s supplies. Even if there is a chance that Syria can circumvent sanctions, they remain the best tool available to weaken the regime.
Balanced budget laws are flawed but not useless 16 Aug 2011 Sarkozy and Merkel like them, and they feature in America, too. But politicians often fudge the numbers, or just change the rules. Nonetheless, in reasonably honest systems such laws slow the build-up of deficits. Perhaps as importantly, they also stigmatize bad behavior.
James Murdoch’s perch gets shakier by the second 16 Aug 2011 First, Rupert says Chase Carey is his under-the-bus replacement. Now, the onetime heir apparent faces fresh allegations about News of the World phone hacking. A News Corp law firm even joined the attack. Being an effective boss in the media empire looks much tougher for James.
Rick Perry needs to backtrack on Fed charge 16 Aug 2011 The Texas governor and GOP White House candidate, like the U.S. central bank’s Dallas branch, doesn’t much like its money-printing policies of late. But words like “treasonous” cross a line and further dent Fed independence. Perry could struggle if he doesn’t tone it down.
HP purchase of patent-rich Palm now looks smarter 16 Aug 2011 Google’s $12.5 bln buy of Motorola Mobility and earlier frenzied bidding for Nortel’s patents reveal the riches in the intellectual property of mobile computing. HP snatched Palm’s trove over a year ago for a price that now looks cheap. Yet for HP, cashing in is a challenge.
Battered U.S. junk deserves high-yield name again 16 Aug 2011 With markets volatile, typical junk bonds are yielding north of 8 pct. That’s tasty for those starving on the Fed’s zero-rate diet. And default rates look low, refinancing needs limited and the deal flow manageable. Despite investor wariness, today’s junk looks almost nutritious.
Sell-off tests hedge funds’ post-crisis resilience 16 Aug 2011 Hedgies have doubtless suffered in the market rout. But painful lessons learned in 2008 have made them more robust in turbulent conditions. Their funding is more secure, and they’ve borrowed less. Still, it’s far from clear their performance merits the high fees.
Over-reaction to BP Gulf spill costing U.S. jobs 16 Aug 2011 Oil regulators may have swung from gung-ho to too cautious. Painfully slow drilling approvals mean America could be missing out on 230,000 jobs - and tax revenue, too. Safety matters. But with unemployment and the deficit top national concerns, red tape should be kept in check.
German slowdown adds to pressure on euro zone 16 Aug 2011 Weak Q2 GDP confirms fears that the EU’s largest economy has entered a soft patch. That makes it harder for Europe to grow its way out of crisis. The euro zone can’t afford to relax near-term fiscal austerity just yet. But further rate hikes by the ECB must now be on hold.
World must let U.S. win currency war 16 Aug 2011 With the Fed bent on inflating the U.S. economy with cheap dollars, export economies may be tempted to suppress their currencies in response. They must resist. Painful as it seems, stronger currencies are a necessary cost of reviving customer No. 1 and preserving global growth.
Solar firm’s demise signals gray industry forecast 16 Aug 2011 Onetime investor darling Evergreen Solar, among the first U.S. green energy companies to go public, just went bankrupt, victimized by a global supply glut. Growing Chinese competition and waning European subsidies mean the solar sector will probably get darker before the dawn.