Hugo Dixon: Cyprus is edging towards euro exit 8 Apr 2013 Quitting the single currency would devastate wealth, fuel inflation, lead to default and leave the small island isolated in a troubled neighbourhood. But the longer capital controls continue, the louder the voices calling for bringing back the Cyprus pound will grow.
New despair seeps out of U.S. employment numbers 5 Apr 2013 The economy added just 88,000 new jobs in March. And the number of people counted as available to work fell to its lowest level in 34 years, with disability claims up 25 pct since the boom. This new combination of low growth and long-term unemployable is a worrying trend.
Is Exxon building Big Oil’s skyscraper equivalent? 5 Apr 2013 The oil giant is planning a $24 bln floating facility to process gas. By the time this monster island is finished, the world could be awash in cheaper energy. It may one day resemble the towering edifices constructed on land that heralded market plunges and economic downturns.
Review: The Robespierres of central banking 5 Apr 2013 Ben Bernanke, Mervyn King and Jean-Claude Trichet turned central banking theory on its head in their efforts to fight the crisis, says Neil Irwin. Central bankers have become both more powerful and less independent in the process. Peace may have been preserved, but at what cost?
Japanese economy needs nuclear second chance 5 Apr 2013 Shinzo Abe’s goal of weakening the yen will make electricity even pricier in a country that imported over 80 pct of its energy even before the Fukushima disaster in 2011. The accident damaged confidence, but Japan’s revival could falter without a hefty nuclear energy program.
Ljubljana should take the bailout it doesn’t need 5 Apr 2013 Slovenia has less debt than Germany and a lower deficit than France. But its bond yields are through the roof. Comparisons with Cyprus are silly - but Slovenia should take a bailout to lower funding costs. A successful deal would help the euro zone undo the damage of Cyprus.
HBOS top brass reap what they sowed 4 Apr 2013 A report by the UK’s banking commission lays the blame for the lender’s collapse squarely on its two chief executives and its chairman. James Crosby, Andy Hornby and Dennis Stevenson may yet escape fines. But the report makes the scale of their responsibility clear.
Facebook super-app wants to live off Google 4 Apr 2013 The social network’s new Home software sits on top of the Android smartphone operating system. That encourages people to use Facebook over rival services for things like messaging and photo sharing. Google built Android, but Mark Zuckerberg’s creation wants a piece of it.
Merging NY banks offer rate-risk lesson for rivals 4 Apr 2013 America’s legions of small lenders have been piling into longer-dated loans, leaving them vulnerable to a spike in interest rates. New York banks Provident and Sterling were already exceptions. Combining should shield them further. Without action, their peers will be exposed.
Deal prospects make Vodafone look cheap 4 Apr 2013 Speculation about the mega-mobile operator is rife. There’s talk of a U.S. exit, a takeover by partner Verizon, or a breakup bid. Optimistically, shareholders could get a third more value - or nearly 32 bln pounds. But getting there would entail huge deals, with headaches to match.
Big boys gain as investment banking shrinks 4 Apr 2013 Goldman Sachs’s president sees only two post-crisis winners: his bank and JPMorgan. He exaggerates. Other behemoths will also gain as under-fire firms trim and shrink. But if the first quarter’s depressed trading volumes are a sign, there will be less business to fight over.
Cypriot bailout assumptions look too optimistic 4 Apr 2013 The official lenders will advance 10 bln euros to the stricken state on the basis of a model which shows an 11 pct GDP fall. But private sector analysts have good reasons to predict almost twice that. Cyprus won’t easily get its debt pile to equal its GDP by the 2020 deadline.
Kuroda does what he can for BOJ’s inflation goal 4 Apr 2013 Japan’s new central bank chief has launched his country’s most audacious bid to end deflation. The BOJ will print enough money to double the size of its balance sheet in just in two years. That improves the odds of hitting the 2 percent inflation target.
EU-shaped bonus cap might just fit fund managers 4 Apr 2013 A German MEP wants to impose limits on asset managers’ bonuses. It is hard to see why statutory intervention is required, but reform of pay policies could foster asset allocation behaviour that better serves clients’ long-term interests. Tighter-fitting bonus caps might help.
Washington risks becoming new subprime promoter 3 Apr 2013 The White House wants banks to provide riskier taxpayer-backed mortgages. Fed policy has helped boost the number of borrowers with poor credit getting auto loans. It’s no 2007. But it smacks of policymakers ignoring potential bubbles to boost growth. That’s a losing proposition.
U.S. auto sales put brakes on economy’s detractors 3 Apr 2013 Americans are buying more cars. Cheap loans and pent-up demand are factors. But so is the housing recovery. That and other economic data suggest consumers are looking beyond slimmer paychecks. Federal spending cuts allowing, that means the U.S. engine may be about to purr.
Groundhog day in Rome 3 Apr 2013 Italy’s warring politicians keep on failing to agree on how to reform the country and the political system. Neither a lingering recession nor the rise of the anti-establishment 5-Star Movement has concentrated minds. Political stasis has a high cost for the Italian economy.
German eurosceptics strong enough to nudge Merkel 3 Apr 2013 A new anti-euro party is unlikely to make it into parliament in the 2013 elections, but its appeal will make it harder for the chancellor to appear too generous to troubled periphery nations, despite her popularity. The rest of the euro zone should understand her predicament.
Ethical economy: Poverty and renunciation 3 Apr 2013 In a world where higher GDP sometimes seems to be the highest good, the new pope’s decision to live relatively modestly is counter-cultural. There’s far too much poverty around, but Francis’s voluntary renunciation of wealth sets a salutary example of solidarity and detachment.
New review of old Barclays roughs up Diamond era 3 Apr 2013 The Salz review of Barclays’ culture pulls few punches. The bank grew too fast, vested power at the top and became difficult to manage, it says. Hard-nosed Barclays bankers may scoff at the findings. But it provides helpful ammunition for those who want to change the bank.
Tele2’s Russia retreat may spur mobile competition 3 Apr 2013 The Swedish telco was hobbled in Russia by a lack of spectrum for data. Now VTB bank is buying Tele2 out for a decent $3.5 bln. Attempts to gatecrash the Kremlin-blessed deal look forlorn. And a stronger Moscow-backed player could make life harder for bigger mobile operators.
Tencent’s troubles reflect monopolistic shift 3 Apr 2013 The Chinese dot-com’s killer app, WeChat, has been targeted by envious telcos who face losing profit. It’s not just a case of squashing innovation. It’s more like an old monopoly fighting to keep its economic rents, and an upstart hoping to create some of its own.
Hugo Dixon: Cyprus bank "resolution" a bad joke 3 Apr 2013 Resolution, a new buzzword in financial regulation, is supposed to stop taxpayers having to bail out banks, while imposing pain fairly on shareholders and creditors. In Cyprus, Greek deposits and favoured groups at home are exempt from haircuts. It’s anything but fair.
Nasdaq paying price of dealmaking gone wrong 2 Apr 2013 Nearly two years after it failed to supersize by acquiring the NYSE, the bourse is aiming smaller with a $750 mln plan to buy eSpeed. Investors erased 90 pct of the price tag from Nasdaq’s market value. That ignores the target’s income and the buyer’s cost discipline.
More hat, less cattle in M&A and patent fight site 2 Apr 2013 Texas’ renown for favoring plaintiffs in merger and intellectual property lawsuits looks overblown. Judges recently tossed several such claims that seemed headed for big verdicts and legal fees. Dealmakers and targets of patent owners need not cower before the Lone Star State.
American immigration deal looks too clever by half 2 Apr 2013 Big Business and Big Labor managed to strike a compromise on immigration reform. They want Congress to adopt a new program for lesser-skilled foreign workers. It looks sensible on paper, but its many rules and conditions may be too expensive and cumbersome for it to succeed.
Six reasons to love or hate higher interest rates 2 Apr 2013 U.S. 10-year yields under 2 pct are hardly alarming. But assuming the recovery continues, market forces will push rates higher and the Fed will have to start reversing its expansive monetary policy. Bond investors and housing could be losers - but there will be winners too.
R.I.P. the FSA: the watchdog with little bite 2 Apr 2013 So farewell then, the UK Financial Services Authority. You gave the world “light-touch” regulation and suffered the consequences. The belated zeal you found to issue fines and tackle insider trading was too little, too late. Few - bar the odd fraudster - will mourn your passing.
German minimum wage talk mostly symbolic for now 2 Apr 2013 The country is one of the few in the EU without a minimum wage. Political parties agree it’s time to end that anomaly. The macroeconomic impact of the reform will be muted. Yet the debate suggests there’s a limit to Berlin’s appetite for deregulated labour markets.
Fannie’s record profit sets U.S. reform back further 2 Apr 2013 The failed housing agency earned $17.2 bln in its latest fiscal year, two-thirds of which it handed to the federal government. A recovering housing market should keep Fannie profitable for some time. That’s good for Uncle Sam’s finances but terrible for fixing a broken system.