Hollande could use electoral defeat to change tack 23 Dec 2013 No French president has been more unpopular than François Hollande, and the economy is stalling. Major defeats loom for his Socialist party at the municipal and European elections. That needn’t be such a bad thing if terrible results prompt him to change both style and substance.
China’s bureaucrats play online war games 23 Dec 2013 Who controls the internet? The authorities can’t decide. The Ministry of Culture is an unlikely favourite, after it clamped down on unsavoury online games. It’s a tussle between the online entrepreneurship China says it wants, and the old-school bureaucracy it actually has.
Detroit pension shakeout bares generational rifts 20 Dec 2013 The bankrupt U.S. city’s crisis manager wants pensioners to take a hit along with younger city-dwellers, who face higher taxes and degraded services. As Motown’s fate plays out in 2014, the legal and philosophical divisions may surface in other cash-strapped metropolises, too.
Wall Street watchdog to lose one of sharpest teeth 20 Dec 2013 The U.S. Supreme Court is poised to muzzle shareholder class action suits. While not part of the SEC’s official arsenal, they help deter fraud. Letting the regulator levy stiffer fines could fill some gaps. But clamping down on private litigation will remove some serious bite.
Target’s 40 mln hackees only tip of iceberg 20 Dec 2013 In this case the U.S. retailer’s in-store card readers may have been hacked. Fake ATMs are a clunkier hardware danger. But consumers who go online, especially on mobile devices, are running greater risks. By one broad definition, 1 mln of them suffer cybercrime every single day.
Colombia’s biggest challenge: reducing inequality 20 Dec 2013 The economy grew a robust 5.1 pct in Q3, thanks to a construction boom. But the country’s rigid social structure has contributed to the highest rich-poor gap in the region. For the sake of prosperity, and peace, this needs addressing. Rural infrastructure is one solution.
Germany will lift the soccer World Cup 20 Dec 2013 The football-mad Brazilian hosts have won five times, more than any other country. But on Breakingviews’ analysis of the hard numbers – the players’ transfer value, population, participation and public engagement – Teutonic power will squash the romantic dream of a sixth win.
Spain embarks on dispirited recovery 20 Dec 2013 The country may be growing again, but it won’t feel like it in 2014. Few will find jobs. The proportion of temporary workers will stay high. More people will emigrate. Without further action, Spain’s unemployment rate could remain double digit for the next 15 years.
Deutsche, MPS find convenient exit from swaps mess 20 Dec 2013 Monte dei Paschi has settled a lawsuit with Deutsche Bank over their controversial financing deal. MPS pays 220 mln euros less to close the position and pleases regulators by cutting exposure to Italian government bonds. Deutsche gets shot of one of its trickier legal issues.
China is moving closer to its “Dubai moment” 20 Dec 2013 The emirate in 2009 shocked lenders who assumed it stood behind all local debt. As China shifts to a more market-based financial system, it will have to draw a clearer line between public and private loans. A system for protecting bank deposits is crucial to limiting the fallout.
Richard Li’s $2.4bln CSL deal reconnects with past 20 Dec 2013 The Hong Kong mogul’s telecoms group HKT is paying 6.1 times adjusted EBITDA to buy back the mobile company he sold to Telstra in 2001. The synergies needed to justify a premium of roughly 31 percent aren’t too taxing. HKT ends up more indebted, but it’s basically a happy reunion.
M&A potential will succumb to laws of physics 19 Dec 2013 The investor love being heaped on acquirers should be a catalyst for takeovers amid plentiful cash and credit. Other market anachronisms also suggest the pendulum could swing. Yet CEOs and boards have settled into a cautious mindset. Inertia is about as powerful a force there is.
Wells will knock louder on bulge bracket’s door 19 Dec 2013 The California lender is now one of the top global investment banks, thanks to doubling underwriting and M&A fees since 2008. Much of that stems from smaller clients. If Wells Fargo decides to go after bigger fish, it could put Wall Street’s bigwigs on the back foot.
Dueling watchdogs’ crossfire harms fraud victims 19 Dec 2013 It’s Irving Picard’s job to recoup Madoff Ponzi scheme losses. Yet U.S. prosecutors are about to snatch a $2 bln JPMorgan deal from under his nose. Such rival efforts in this and other cases can raise costs and delay payouts. More cooperation would better serve duped investors.
Markets quaff perfectly mixed punch 19 Dec 2013 It sounds like a paradox: stocks go up when the Fed takes some money away. But investors have figured out that central bankers see economies which are strong enough to provide profit growth but too weak for serious tightening. The party could last until inflation reappears.
Khodorkovsky pardon comes too late to matter 19 Dec 2013 Russian President Vladimir Putin says he will pardon the jailed former oligarch. Years ago, such clemency might have signalled openness to reform. Today it has nothing to do with political or economic liberalisation. It just reflects a desire to make the Sochi games run smoothly.
Fixed income trading goes from bad to worse 19 Dec 2013 Revenue from rates, credit, currencies and commodities was down 18 pct in 2013. The effects of scandals, new rules and central bank policy could lop off at least as much again in the next 12 months. Recent changes at investment banks mean some will suffer more than others.
Italy gathers ingredients for a slow-cooked reform 19 Dec 2013 Shifts in Italian politics are making reform possible. Silvio Berlusconi has been chased out of government; a reformist leader is taking over the centre-left. Italy needs speedy political and economic medicine to escape its debt trap. At least 2014 won’t be worse than 2013.
Roland Berger offers strategic dilemma case study 19 Dec 2013 The professional know-it-alls dithered over selling their management consultancy to Deloitte, PwC or E&Y, and then opted to stay independent. Being swallowed would have changed the firm. But staying small in a consolidating sector will involve some suffering.
New U.S. mortgage bubble index is worth watching 19 Dec 2013 Many people thought the last U.S. housing boom was unsustainable – but couldn’t prove it. Metrics created by a Washington think tank could help spot the next round of home loan excesses as they emerge. It may repay investors and regulators to keep the new data on their checklists.
The wrongs and rights of the euro banking union 19 Dec 2013 The EU governments’ agreement on how to resolve failing lenders looks complex and hard to implement, and it could worsen the fragmentation of euro zone banks. But it is a start. And the final compromise lowers the political barriers to fixing the southern countries’ lending woes.
Astra’s $4.1 bln divorce from BMS JV looks happy 19 Dec 2013 The pharma group is taking full control of its diabetes venture with Bristol-Myers Squibb. It’s a logical and fairly priced move enabling each firm to focus on core strategies. The assets may not be great, but Astra’s fightback against its fundamental challenges is gaining ground.
Sochi showcases sub-zero Russian investment appeal 19 Dec 2013 The most expensive Olympics in the games’ history will be a window for Russia’s corruption and economic degradation. Investors will be reminded that Vladimir Putin is not a man to do business with.
Li Ka-shing IPOs could be HSBC’s breakout moment 19 Dec 2013 The Hong Kong tycoon has handed the bank juicy mandates to help list two of his companies. That’s significant. HSBC has never quite managed to turn its formidable Asian corporate banking relationships into deal fees, to rivals’ relief. Things might finally be coming together.
Translation tech will put a new accent on growth 19 Dec 2013 The mythical “universal speech translator” is close to being realised. Even if a truly perfect device remains years away, anything that erodes language barriers could boost global trade, tourism and investment. One day, watch out for wearable devices that also read body language.
Obama chooses economics over China diplomacy 19 Dec 2013 New Beijing ambassador Max Baucus has little international experience, and is at the end of his career. Economically, he’s a sound choice, and has been vocal on China’s undervalued currency. But in terms of optics, Japan, with rock-star diplomat Caroline Kennedy, looks favoured.
Fed finally lets data guide policy 18 Dec 2013 With U.S. unemployment down to 7 pct – a previously floated trigger – and other data solid, the central bank at last knocked $10 bln off its monthly bond purchases. This limits the Fed’s balance sheet and sets it on a course for normality – as long as it remains committed.
Can General Electric keep the activists at bay? 18 Dec 2013 If the gates at Apple, Microsoft and P&G can be rattled, complacency just isn’t an option for a $270 bln conglomerate. While GE’s strategy looks more coherent than ever, it still has soft targets for uppity investors: its finance arm and long-standing leader Jeff Immelt.
Raise a glass to Graham Mackay, king of Big Beer 18 Dec 2013 The SAB chairman, who died at 64, used M&A and a London listing to create South Africa’s most successful multinational. But the man who kicked off global consolidation of the brewing business didn’t live to see its logical apotheosis – a deal with Anheuser-Busch InBev.
Inflation is the sleeping dog in UK recovery 18 Dec 2013 Britain is creating jobs faster than expected, yet inflation is surprisingly benign. A high-employment recovery is welcome. But the housing market is bubbly and inflationary pressure will gradually build - in defiance of the Bank of England’s low-for-long policy on rates.