Financial system can still knock economies off course 5 Sep 2013 Remember 2007, when the halcyon days of Great Moderation were meant to last forever? Finance got in the way. Until recently, most thought emerging economies would grow fast for years too. Finance broke that dream. It could now undermine the nascent recovery in rich countries.
Euro’s shrinking FX market share is a puzzle 5 Sep 2013 It’s no surprise that daily currency turnover has hit a record high again, now topping $5 trillion. But it’s harder to explain why the euro’s share of the market has touched a record low. The reasons will matter to banks allocating resources within their FX businesses.
Not all Asian countries need to fear the Fed 5 Sep 2013 Plunging currencies have raised contagion concerns. But not all nations are equally vulnerable to receding tides of dollar liquidity. A Breakingviews interactive map shows that while no Asian economy is entirely immune, none is as badly exposed as India.
Middle East turmoil perpetuates OPEC charade 5 Sep 2013 Increasing energy supply from North America might have caused a global glut. But a steady stream of crises - in Iran, Iraq and Libya - has restrained OPEC’s output, and spared the cartel the difficulty of enforcing strict quotas on its more unruly members.
Rajan’s call to diaspora can’t stem rupee rout 5 Sep 2013 India’s new monetary czar can lure some funds from overseas Indians with a cheap dollar-rupee swap. The clever and relatively cheap ploy may buy some time, but the former IMF chief economist will only succeed as a central banker if he can break the country’s painful stagflation.
Emerging economies need to change to compete 5 Sep 2013 -The World Economic Forum’s annual competitiveness rankings hold little succour for some countries that are feeling market pressure. Brazil and India are deteriorating, Venezuela and Argentina plunging. Some Asian countries fare better but reforms are vital almost everywhere.
Amgen investors gain from investment banker CEO 4 Sep 2013 The biotech led by Bob Bradway, formerly of Morgan Stanley, made mincemeat of the value arguments put up by Onyx and its advisers, raising its offer only 4 pct to clinch a $10.4 bln deal last week. An M&A banker at the helm can work – when it’s negotiating prowess that matters.
"People’s senator" walks fine legislative line 4 Sep 2013 Elizabeth Warren is as outspoken about big banks and protecting consumers as before her election to the U.S. Senate last year. But her bills seem designed to cajole and influence rather than to get passed. That’s fine as long as neither her colleagues nor constituents object.
Edward Hadas: Has quantitative easing worked? 4 Sep 2013 Almost five years of QE is enough for passing judgment. Post-crisis monetary policy could have been worse and it should have been better. Central bankers avoided disaster, but they tried to do too much with too few tools. From here, they need both bravery and realism.
LinkedIn’s toppy stock sale is better than buying 4 Sep 2013 The $27 bln job-focused social network is raising another $1 bln. With $900 mln in cash and rising profit, it doesn’t need it. But when a company trades at over 1,000 times 2012 earnings, selling stock makes sense. At least it makes a change from firms doing overpriced buybacks.
Factory cost squeeze blots UK growth picture 4 Sep 2013 The economy is picking up but problems are brewing. British manufacturers face the strongest cost pressures in two-and-a-half years. They will either have to absorb them, to the detriment of profit margins and jobs, or pass them on, to the chagrin of the Bank of England.
China’s bad debt could leave $500 bln equity hole 4 Sep 2013 That’s how much the biggest lenders would need if 10 percent of their loans go bad and balance sheets continue to expand, according to a Breakingviews calculator. Though earnings can cover some of the shortfall, the potential hit explains why valuations are languishing.
Ryanair’s gloom may signal end of growth era 4 Sep 2013 Europe’s biggest low-cost airline has issued a profit warning barely a month after it got embroiled in a debate about potential safety issues. The group stresses that there’s no link between the two events. In any case, it looks like it must brace for times of slower growth.
Agricole looks back to future with Bankinter sale 4 Sep 2013 The French bank is trying to put together a coherent business model. Exiting a disastrous investment in Spain’s Bankinter means Agricole’s foolhardy foreign expansion has almost been unwound. Retail banking in France and Italy may be less exciting, but it is a better, safer bet.
Commodity decoupling hints at return to old normal 4 Sep 2013 Raw material prices have split from equities after a period of tight correlation. Different commodities are diverging, too. If the trends hold, it is a healthy sign. It suggests markets are more focused on supply and demand than money printing and financial distortion.
Petrobras biggest loser of Brazil’s currency blues 3 Sep 2013 With the bulk of revenue in reais, the state oil giant will find servicing its $70 bln of U.S. dollar-denominated debt a painful affair. While a default looks unlikely, the currency mismatch will make it harder for Petrobras to fund its $236 bln capital expenditure plan.
Jarden shines a light on its island of misfit toys 3 Sep 2013 The $1.75 bln acquisition of Yankee Candle builds on the U.S. company’s hodgepodge collection of brands. Jarden has defied the odds by successfully expanding a $5.3 bln conglomerate while most others of its ilk get carved up. The question will be whether it can handle the scale.
Nokia deal handcuffs next Microsoft boss 3 Sep 2013 Retiring Steve Ballmer is spending $7.2 bln, adding 32,000 staff and committing Microsoft to making mobile handsets. His M&A record is poor, and the company’s strength is in business software. Nokia’s Stephen Elop could follow Ballmer, but any new CEO needs freedom, not shackles.
Washington set to shake up autumn markets 3 Sep 2013 Lawmakers will soon return, most likely itching for another fight over the U.S. debt ceiling. Other market-sensitive policy is also brewing, notably the choice of a new leader for the Federal Reserve. Add in tinkering with housing, and investors need to brace for a turbulent fall.
Verizon puts AT&T’s acquisition willpower to test 3 Sep 2013 Growth in U.S. wireless is slowing, and AT&T learned the hard way that antitrust concerns preclude domestic deals. Vodafone’s newly lined pockets could now tempt AT&T to make a big move overseas. But fatter margins at home and the perils of cross-border M&A argue for discipline.
UK banks can resist offer to cut gilts buffer 3 Sep 2013 The Bank of England says Britain’s top banks can reduce the cushion of cash and gilts they hold against market shocks, and use the 90 bln stg freed up to support growth instead. But don’t expect a gilt glut. Banks will still be more inclined to hoard gilts than to dump them.
Hold the bubbly on French recovery 3 Sep 2013 The OECD sees France GDP growing 0.3 pct this year - three times faster than the government’s forecast. But without serious reform, the country’s worrying long-term economic trends will persist. The mild recovery offers a fine opportunity for action. Don’t expect much.
Nokia smartly leaves phone fightback to Microsoft 3 Sep 2013 An era is over in Finland. Nokia will sell Microsoft its phone unit in a surprise $7.2 bln deal to focus on equipment, maps and patents. Nokia cedes upside in a shaky recovery for a big slug of cash now. The new owner is far stronger, but may still struggle to win in smartphones.
Credit markets face bumpy ride into 2014 3 Sep 2013 The end of ultra-loose monetary policy means higher corporate funding costs. Bond-market theory says the pain should be offset by lower credit spreads, as earnings improve. But it’s not working out like that. Higher rates and volatile spreads will cause some upset in credit.
The lessons for China from Japan’s lost decade 3 Sep 2013 China faces many of the challenges that hobbled its Asian rival in the late 1980s: a debt-fuelled property boom, less competitive exports, and an ageing society. China is still urbanising and can avoid deflation, but only if it learns from Tokyo’s error by cleaning up its banks.
Minzhong reprieve doesn’t dispel short-seller risk 3 Sep 2013 A bid from the Chinese food group’s largest shareholder has neutralised questions about the company’s accounts. It’s a reminder of the risks for short-sellers going after Asian targets. But the ongoing slide at commodities trader Olam shows concerns aren’t easily dismissed.
Vodafone gets it: cash is king for wary investors 2 Sep 2013 The mobile giant’s $130 bln U.S. exit is tailored for a cautious age, and for safety-first European investors who prefer cash to grand plans. So $84 bln goes to shareholders; debt is cut; capex and divis get a boost. It’s not AOL-Time Warner. But this is what mega means in 2013.
Vodafone-Verizon flowback could be a challenge 2 Sep 2013 Investors in Vodafone will get shares in Verizon Communications as part of the Verizon Wireless deal. Some of the UK group’s domestic holders may want to sell at once. This sort of overhang is never easy to manage. Both sides will hope it’s already reflected in Verizon’s price.
Vodafone needs bolt-on M&A not more mega-deals 2 Sep 2013 A $130 bln U.S. exit would dramatically alter Vodafone’s profile. But there is no urgent need for the UK mobile operator to follow with another huge deal, like buying Liberty Global. Better to see if a foray into German cable works out, and if so, repeat the formula elsewhere.
Bale-in at Real Madrid won’t lead to bailout 2 Sep 2013 The Spanish soccer club is splashing out 100 mln euros on Welsh goal-scoring star Gareth Bale. The record-breaking fee stretches the spirit of financial fair play rules recently adopted by the sport. But Real Madrid’s wealth leaves the deal within the letter of the law.