Hugo Dixon: Euro zone needs anti-boom activism 23 Sep 2013 The ECB’s plan to keep interest rates low for an extended period could ultimately fuel booms in countries such as Germany. That’s the problem with a one-size-fits-all monetary policy. The solution is for countries threatened by booms to pursue vigorous counter-cyclical policies.
Fed politics may just preserve Fed’s independence 20 Sep 2013 Inadvertently, that may be the case. The president’s guy, Larry Summers, was torpedoed by Congress, suggesting political meddling. But if the Fed’s internal choice, Janet Yellen, gets the job, isn’t the central bank’s power maintained? It’s a messy way to the right outcome.
Brazil’s pushy oil nationalism five years late 20 Sep 2013 Costs, poor terms and state meddling persuaded the likes of Exxon to avoid the auction for the country’s largest field. Brasilia may have gotten away with it before the jump in global reserves from the shale revolution. Now playing hardball may mean lower output – and less lucre.
Review: Merkel’s hidden European agenda 20 Sep 2013 Her recent electoral triumph highlights that Angela Merkel is clearly an effective politician. A new German biography depicts a principled woman who is committed to a Europe of strong nations - bound together more by mutual commitments than by Brussels bureaucracy.
Three key questions for Germany’s election night 20 Sep 2013 The outcome of the Bundestag election on Sunday isn’t as certain as it looked a few weeks ago. The results of the FDP’s liberals and of the new anti-euro party will be key to Angela Merkel’s future. And the social-democrats aren’t eager to form another grand coalition with her.
Raghuram Rajan wants to be India’s Paul Volcker 20 Sep 2013 Like the 1980s Fed chairman, India’s new central bank head wants to wring entrenched inflation out of a moribund economy. A surprise rate increase won’t win Rajan many friends. But he has sensibly retreated from his predecessor’s foolish plan to shore up the falling rupee.
RWE’s dividend cut vital, but poorly communicated 20 Sep 2013 Germany’s second-largest utility has bowed to the inevitable and slashed its dividend. Deep structural changes of the country’s energy market are mauling RWE’s medium-term profit prospects. While necessary, RWE’s painful actions could have been better stage-managed.
Foxtons makes fittingly brash London market debut 20 Sep 2013 The estate agent’s IPO got its full price and a 649 mln stg valuation. The stock popped 21 pct. BC Partners even sold a majority stake, a bit of a no-no for private equity nowadays. It’s London property all over: a sale at the asking price and the buyer still gets a quick flip.
Failed petrostates threatened by new oil bounty 20 Sep 2013 Oil majors are becoming less tolerant of the political risks and corruption they’ve coped with in the past. That’s bad news for the likes of Nigeria or violence-prone Libya. With safer crude on offer in the U.S. and elsewhere, troubled states risk an exodus of expertise.
Activist would contest Obama’s capital allocation 19 Sep 2013 The U.S. president is spending the biggest stock of his political fuel on security and defense, a Breakingviews analysis shows. If he were a CEO, an uppity shareholder would want more focus on the economy, jobs and fiscal challenges. Obama can deploy his dwindling capital better.
JPMorgan’s management failings beggar belief 19 Sep 2013 Many of the Whale fail’s gory details were already known. But U.S. and especially UK watchdogs have given the most jaw-dropping account yet of how the bank mismanaged the trading book, responded to the crisis and misled its regulators. CEO Jamie Dimon has even less wiggle room.
Fed does to Europe what ECB, BoE couldn’t 19 Sep 2013 The U.S. central bank’s non-taper has done more for European money market rates in one day than the ECB and the Bank of England’s “forward guidance” policies did in weeks. Policymakers across Europe will be glad for the help, but it makes them look weak. That is a problem.
Old HP sets breakup example for new HP 19 Sep 2013 Agilent is considered by Silicon Valley veterans as the “real Hewlett-Packard.” Spun off in 1999 with the company’s original testing products and research DNA, it has outperformed its former parent and is now splitting to create yet more value. HP can learn from its progeny.
Chinese cash could speed up Peugeot’s recovery 19 Sep 2013 Stricken carmaker Peugeot is reportedly contemplating a capital tie-up with its Chinese peer Dongfeng. If the French find a way to avoid antagonising their other key partner General Motors, such an alliance could send their tentative turnaround into higher gear.
Bernanke is trapped by a discredited assumption 19 Sep 2013 The Fed chairman’s continued bond-buying pours fuel on market fires. The dire legacy of the last credit boom is yet to be overcome but Ben Bernanke still seems to believe he can ignore the dangerous side effects of easy money. He needs to embrace macro-prudential regulation.
Fed brings Asia short-term relief, long-term risks 19 Sep 2013 The U.S. central bank’s decision to keep printing money eases the pressure on India and Indonesia to cure their dollar addiction by squeezing domestic growth. But if the reprieve lasts more than a few months, it may encourage complacency. That poses fresh dangers for the region.
China property boom built on blind faith 19 Sep 2013 House prices rose at their fastest pace in almost three years in August. Investors like KKR and Blackstone believe they can sift good property from bad. Almost everyone believes the government will never allow the market crash. Neither assumption looks solid.
Huishan Dairy IPO comes with full-fat premium 19 Sep 2013 The Chinese farm operator’s $1.3 billion Hong Kong listing taps a growing thirst for milk. Huishan squeezes more revenue from its herds than rivals, and relies less on commodity markets. But the growth plan looks ambitious for a company with little in the way of a track record.
Fed’s non-tapering amounts to bigger money-drop 18 Sep 2013 Despite an improving economy, the U.S. central bank stuck with buying $85 bln of bonds each month. With government borrowing needs and mortgage volumes down, Ben Bernanke is effectively increasing monetary stimulus. No wonder markets were taken pleasantly aback.
Sports betting case may draw ace at top U.S. court 18 Sep 2013 A New Jersey law allowing gambling on the Super Bowl and the like was blocked in a lower U.S. court. But one judge countered that the ruling undermines state constitutional rights. That’s a rare, high-stakes issue that could tempt the Supremes. The Garden State needn’t fold yet.
Grand Theft Auto grapples with brutal economics 18 Sep 2013 The latest instalment of the gangland video game could bag $1 bln in sales. That would relieve investors in developer Take-Two. Cranking out apps is cheap, but console game makers have development times and budgets to match Hollywood. With costs still rising, high scores matter.
Jefferies shows fixed income isn’t for everyone 18 Sep 2013 Revenue generated from trading bonds, currencies and commodities slumped 85 pct in Q3, far more than larger rivals are expecting. Jefferies, as a relative newcomer, is struggling with volatility. The same may prove true for FICC downsizers Credit Suisse, Morgan Stanley and UBS.
Early end to Cyprus’ capital controls no sure bet 18 Sep 2013 The Cypriot president says that restrictions in place since March could be lifted in January. Nicosia has been getting through the many reforms needed before such a move can be safely contemplated. But whenever it happens, more remains to be done to avoid a capital flight.
UK growth story is good, but not that good 18 Sep 2013 Hopes for a British economic recovery are running high. The news on inflation is a bit better too. But households have been saving less to spend more and the unhealthy addiction to housing bubbles is back. The enthusiasm for the UK economy needs to be tempered.
Emerging markets’ foreign debt is no time bomb 18 Sep 2013 Companies and banks in developing countries have borrowed almost $6 trillion from foreign lenders, a 50 percent jump in four years. But unlike the 1990s, a big chunk of this debt is from local subsidiaries - and in local currencies. That lowers the risk of a funding crunch.
Hong Kong bank bids require heroic assumptions 18 Sep 2013 Shares in the city-state’s small lenders have soared following takeover approaches. Though targets are scarce, Hong Kong’s bank sector is highly concentrated and liquidity inflows look set to reverse. If offers materialise, buyers may struggle to justify their enthusiasm.
Santander gets "board diversity" all wrong 18 Sep 2013 The Spanish lender has appointed Rodrigo Rato to sit on its international advisory board. The ex-Bankia chairman may yet escape legal censure for the savings bank’s collapse. But the point of these sinecures is to give banks good PR, not make them look silly.
Markets aren’t pricing in new monetary order 18 Sep 2013 Even a modest reduction of Fed bond purchases would start the reversal of five years of extreme monetary policy. Investors may say they know what’s coming, but they will find the new financial world much less friendly - in both emerging and developed markets.
Oxy’s quest for value looks half-cocked 17 Sep 2013 The oil giant is considering selling a stake in its Middle East wells. Not only does CEO Stephen Chazen appear to have put a cheap price on the asset. It also means he’s eschewing a better way to boost returns for shareholders: offloading products like chemicals and pipelines.
Puerto Rico can’t count on an Uncle Sam bailout 17 Sep 2013 The island economy, beset by lost tax breaks, a construction bust and youth emigration, has suffered a 20 pct fall in GDP since 2006. Without a swift recovery, its $70 bln of bonds are in danger. It’s not too big to fail and Washington risks muni moral hazard with a rescue.