Tucker vs Turner in public BoE job interview 6 Jul 2012 MPs probing the Libor affair will next week grill two top candidates to replace Mervyn King as BoE governor: Paul Tucker, his deputy; and Adair Turner, FSA chairman. What each says and how they say it could decide which if either man becomes the UK’s most powerful unelected official.
Market and Buba merciless to euro zone stragglers 6 Jul 2012 Italian and Spanish yields are sky-high again. Bundesbank head Jens Weidmann is bemoaning Europe’s softer stance on bailouts. The euro zone’s problem economies are inching forward. The continued pressure is needed but it may not avert further painful rescues.
Spain needs to get on with its to-do list 6 Jul 2012 The current Spanish government, like its predecessor, always seems behind the curve. Only now is it talking about additional measures to really get the country’s finances under control. The hope is that it won’t fall short.
China rate cut targets financial not economic ills 6 Jul 2012 The latest interest rate move won’t fire up demand for loans. But it will buy time for stretched borrowers and may bring lending business back to banks. It’s the right priority - a financial crisis fuelled by bad loans remains a bigger risk to China than an economic slowdown.
Samsung’s phones look smarter than its valuation 6 Jul 2012 A record quarterly operating profit estimate of $5.9 billion elicited only a market raspberry. Yet the Korean firm’s shares look cheap, its Apple-rivalling smartphones are booming and the Samsung brand just came out top in Asia. Investors may be missing the wood for the trees.
India’s PM can start by tackling silly laws 6 Jul 2012 Manmohan Singh is talking a good game. He wants to woo back investors. Symbolic wins on tax and foreign investment will help, but his real test will be to hack away India’s rampant red tape. It’s a vague ambition, but there are some obvious first steps and good ideas to follow.
Libor adds another worry for U.S. mega-bank owners 5 Jul 2012 So far only Barclays has been accused of wrongdoing in the unfolding scandal. But shareholders now must add an arcane interest rate to an already long list of risks. That’s going to make it more difficult for JPMorgan, Citigroup and BofA to trade above book value any time soon.
Falling gas prices might just fuel Obama this fall 5 Jul 2012 The U.S. president’s re-election hopes might not be doomed by his nation’s recent economic hiccups. Like last summer, consumers had sticker shock at the pump this spring. But gas peaked earlier this year and fell further. That could restore growth - and Obama’s chances.
Euro bank supervision could stir up hornets’ nest 5 Jul 2012 The last EU summit promised to break the vicious circle between banks and sovereigns; create a single supervisory mechanism for the industry involving the ECB; and let the ESM recapitalise banks. Grand statements so far. Filling in the details will require multiple battles.
Anti-euro prize strengthens case for euro 5 Jul 2012 The offer of 250,000 pounds for the best way to untangle the single currency was supposed to make a breakup more plausible. The winning Wolfson Prize entry shows how it might be done. But the proposal is so messy that it supports the opposite case: a breakup shouldn’t happen.
Migration can help resolve euro crisis 5 Jul 2012 Emigration is controversial in Portugal and immigration is unpopular in the UK. But resistance to the free movement of people is mostly economic nonsense. In Europe’s troubled single market, it’s dangerous nonsense. Labour mobility is a most helpful structural reform.
Coty’s IPO should give it a leg up on Avon 5 Jul 2012 The spurned Avon suitor has turned its affections to the public market where it hopes to sell $700 million of stock. Coty ought to fetch a pretty premium thanks to revenue growth and a proven management team. That would enable a second run at the lagging cosmetics group.
New mortgage seizure plan is the nuttiest idea yet 5 Jul 2012 A California county wants to use eminent domain rules to forcibly take underwater mortgages from investors. If it catches on, it will cost bondholders, and potentially taxpayers, billions. That’ll whack up mortgage costs and may leave the U.S government as the only lender.
Bankia probe will help Spanish banking cleanup 5 Jul 2012 The High Court has opened a case against 33 former board members of Bankia suspected of falsifying accounts and misleading investors. An investigation - which had been resisted by the current government - was long overdue. It may lead to more probes elsewhere.
Barclays can’t easily divorce BarCap 5 Jul 2012 Now that Bob Diamond has quit as CEO, one option for the UK bank might be to offload the investment bank he built up. But a standalone Barclays Capital would suffer by comparison with peers. Diamond’s successor will have little option but to slowly unpick his legacy over time.
China stock bulls get rare help with timing 5 Jul 2012 Domestic shares look fairly cheap. Stimulus may work, and the coming change in the Communist Party’s leadership may also figure in the calculus for China’s economic managers. There are plenty of risks, but going long Shanghai could pay off later this year or early next.
Funding ties to Spain hurt Telefonica 5 Jul 2012 The telco’s credit ratings are suffering as Spain totters, even though most sales are abroad. Structural fixes like selling bonds through overseas units would only bring new problems. Telefonica may be forced to ditch cash dividends entirely to avert a cut to “junk”.
China can’t reproduce its way out of trouble 5 Jul 2012 Ditching the one-child policy is becoming a mainstream idea, and rightly so. But China will need to prepare for the 2.3-child world. Resource scarcity and strained government finances could ensue. And a bigger population is less important than a productive one.
India’s pro-poor policy may be getting healthier 5 Jul 2012 A $5.4 bln plan to provide free generic drugs could mean the government is finally addressing its woeful healthcare system. It has lost out to food and fuel subsidies for too long. The drugs plan may spook Big Pharma, but long term even foreign drugmakers could benefit.
Ireland may just be able to return to bond market 4 Jul 2012 Last week’s euro summit dangled a big carrot: that Dublin’s punishing bank bailout which brought the country to its knees may be rejigged. Irish bond yields are now as low as Spain’s. But much detail needs to be agreed, leaving scope for disappointment.
Private equity earns slick return from oil data 4 Jul 2012 The global race for natural resources has yielded a rich seam of profits for Wood Mackenzie, a PE-backed specialist in energy data. Owner Charterhouse will recoup three times its money through a $1.7 bln sale. Paying a full price in 2009 was bold, but the risk has been rewarded.
Ethical economy: Market tantrums should be tamed 4 Jul 2012 The headline could have come from a hundred places over the last hundred years. “Market has gone wild”, it read. Investor tantrums are bad for economies, but too often tolerated out of misguided respect for free markets. Authorities should be bold enough to say no.
What if Barclays hadn’t lowered Libor submissions? 4 Jul 2012 The bank certainly reduced its vulnerability by submitting lower rates mid-crisis. What would honesty have cost? Would Barclays have secured funds from Middle East investors, avoided nationalisation and protected bonuses? No one knows, but the timeline is suggestive.
Diamond should exit Barclays with decorum not cash 4 Jul 2012 The UK bank’s new ex-CEO could collect as much as 30 mln stg after his forced resignation. The lawyers and the board can argue about entitlements and ethics, but in the long term Diamond might well be better off financially if he agrees to leave empty handed.
Mongolia’s task: avoid Nigerian resource curse 4 Jul 2012 The country, which held elections last week, is growing at a blistering rate on the back of its Oyu Tolgoi mine. Nigeria shows what can go wrong when government and private fingers get sticky - the bonanza is wasted and non-resource activity is burdened and disincentivized.
How to say "soft power" in Chinese 4 Jul 2012 Hong Kong’s new leader CY Leung gave his inaugural speech in the mainland’s Mandarin, not the city’s native Cantonese. The language choice is a sign of who’s boss. Cantonese-speakers may resent the change, but the economic and political forces are probably irresistible.
Barclays lobs grenade at Bank of England 3 Jul 2012 The UK bank’s filing to lawmakers on Libor rigging raises awkward questions for the central bank - especially for Paul Tucker, the presumed next governor. He must now explain whether he implicitly endorsed lowering Libor submissions, and whether the government gave the nod.
Euro-bomb need not destroy global economy 3 Jul 2012 Global manufacturing output contracted in June by the most in three years. That sounds like an ominous sign of global recession. But there are also optimistic signals in the U.S. and China. And Europe’s summitry, together with a likely ECB rate cut, may help global confidence.
Will Microsoft learn through self-flagellation? 3 Jul 2012 The software giant squandered shareholder treasure for years to break into internet services, gaming and consumer electronics. Writing down the $6 bln it blew on aQuantive should mark a turning point where Microsoft at long last returns to its knitting and focuses on enterprise.
Best hacking defense isn’t really a good offense 3 Jul 2012 Computer break-ins have cost Citi, Sony and others millions of dollars in stolen data. Retaliation is tempting, but risky and probably illegal. Instead, law enforcers need sharper tactics like the FBI’s recent hacker sting. Otherwise, victims can’t be blamed for hacking back.