Carney deals intellectual blow to Scots’ secession 29 Jan 2014 The governor of the Bank of England studiously avoided criticising the idea of Scottish independence in his Edinburgh speech. But he said currency unions need watertight fiscal rules to work properly. As the euro zone is finding, that implies more political union - not less.
Barnier’s bank-split snafu mars his achievements 29 Jan 2014 Brussels’ financial tsar will soon move on, having made tangible progress on resolution, capital requirements and trading. But the European commissioner’s prop trading ban and curbs on market-making leave far too many grey areas. It needs a rewrite – which it will certainly get.
Sotheby’s revamps financial science – now for art 29 Jan 2014 The auctioneer’s stock popped on news of a $300 mln special dividend and a more disciplined approach to investment. The plan addresses finance aspects of the critique by activist investor Dan Loeb. But governance and broader strategy – say, in contemporary art – remain at issue.
Edward Hadas: Don’t be afraid of deflation 29 Jan 2014 Christine Lagarde is wrong to call deflation an ogre. There’s no chance of falling into a destructive cycle of debt deflation, and mild deflation does no economic harm. If she wants to slay a monster, the IMF chief should take aim at the real beast – debt.
Turkish central bank in “whatever it takes” moment 29 Jan 2014 The massive overnight hike in interest rates aims to end the lira’s free fall. It soothes concerns about the central bank’s independence and will reassure foreign investors. But it can only work if the government seizes the chance to tackle the economy’s real defects.
Sainsbury’s succession scepticism is overdone 29 Jan 2014 Justin King could have gone on for longer as the retailer’s CEO. But a decade is the natural point to be stepping down. New market dynamics call for fresh leadership; internal succession makes sense in a company that isn’t broken. The negative market reaction looks knee-jerk.
Apple numbers show scale of China challenge 29 Jan 2014 Disappointing global sales increase pressure on the iPhone maker to gain ground in the People’s Republic. A deal with China Mobile helps. But lifting China market share to just 10 percent requires a 75 percent jump in orders this year. Lower-cost rivals make that a tall order.
Chinese online gaming stocks ripe for U.S. exit 29 Jan 2014 Shanda Games’ biggest shareholder is leading a $1.9 billion bid to take the Nasdaq-listed game developer private, valuing it at 7 times forecast earnings. Giant Interactive’s board is mulling a similar offer. Other cash-rich and lowly-valued rivals may be tempted to follow.
Guest view: The ECB is much too stodgy 29 Jan 2014 The central bank can bridge the muddle at the middle of the single currency - monetary union, fiscal divergence and weak national banks, a Princeton professor responds to Breakingviews. He says a more aggressive ECB on monetary policy and debt writedowns would protect the euro.
Ford finds silver lining in pension funding boost 28 Jan 2014 The carmaker beat profit estimates in the fourth quarter. But 2014 will be tougher as Ford prepares for new launches. Its retirement obligations, though, are now less daunting. That’s freeing up an extra $3 bln of cash even after the recent dividend hike. It’s a welcome breather.
Good corporate governance doesn’t go out of style 28 Jan 2014 Just ask the shareholders of mall fixture Abercrombie & Fitch. The no-longer so fashionable retailer separated the roles of chairman and CEO and dropped a poison pill. Its market value popped some 5 pct, or $130 mln. It’s worth giving shareholders the rights they deserve.
Miners make a tempting but risky activist target 28 Jan 2014 A hedge fund’s call to break up struggling iron ore producer Cliffs suggests U.S. mining may be a fertile sector for pushy investors, just as oil exploration has been. But long paybacks and gyrating commodity prices make even good strategic ideas tough to turn into timely profit.
UK GDP another blow for economics’ physics envy 28 Jan 2014 The latest growth figure - 1.9 percent for 2013 - was in line with most recent expectations. But that’s three times faster than the consensus in March. The UK’s fast turnaround is a typical forecasting failure for a would-be science that’s putting too much faith in faulty models.
In Europe, job destruction creates inequality 28 Jan 2014 Inequality, not traditionally a big issue in the EU, is gaining ground. Unemployment is increasing, especially among the vulnerable, and the fragile economic recovery is unlikely to recreate lost jobs. This will widen the rich-poor divide, turning it into a key problem for Europe.
Panama Canal can and should avoid project meltdown 28 Jan 2014 Work has slowed down to a crawl over a cost overrun dispute. Both sides have a strong incentive to fix the problem. The key question is how to finance the remaining costs while an arbitrator decides who owes what. Any solution is likely to pile more risk on the contractors.
Travel tech IPO charts familiar round trip 28 Jan 2014 Seven years after taking airline reservations operator Sabre private for $5 bln, TPG and Silver Lake are making the return journey to public markets. It’s one of many big buyouts that should land safely despite a badly timed takeoff. The tardiness will cost investors, though.
ECB might be the most effective big central bank 28 Jan 2014 The Frankfurt institution gets less respect than the Federal Reserve, and trails both the Fed and the Bank of Japan in asset purchases. But the ECB has successfully pushed for reforms that really help the economy. Next step: find low-pain ways to write down sovereign debts.
Exportless recovery adds to emerging market risks 28 Jan 2014 The peso turmoil in Argentina challenges the cheery 2014 consensus on the global economy. Fed’s taper and slowing Chinese demand aren’t the only dangers. Rich nations are recovering without importing more. That, too, could imperil growth and stability in developing countries.
China shadow banks run on fear of embarrassment 28 Jan 2014 A stricken miner has been saved at the eleventh hour, and so have buyers of wealth products backed by its debt. Even if the government will tolerate failure, institutions selling such products may not. Desire to avoid public shame works wonders, as long as liquidity is plentiful.
Europe’s big bond traders lose out to Wall Street 28 Jan 2014 Both U.S. and European banks have to comply with new “leverage ratios.” But traditional business models mean firms like Deutsche Bank have to do more deleveraging than American rivals. Already, hard-won portions of the fixed-income pie are disappearing across the Atlantic.
Canadian bid does F&C shareholders a favour 28 Jan 2014 The venerable London fund manager saw assets fall for two years running. Its shares have traded well below peers’ and it is relatively small. There are some recent brighter signs. But investors will find it easy to accept a 708 mln stg takeover offer from BMO, the Montreal bank.
Apple’s cart needs refilling with fresher products 27 Jan 2014 The tech giant’s modest quarterly results highlight the risks of relying on just a few aging mega-hits. The iPhone and other top offerings have made the firm worth more than any other in the world. But eroding market share, and $40 bln in vaporized value, portend trouble.
Jamie Dimon no longer banking’s favorite banker 27 Jan 2014 JPMorgan’s CEO used to be the voice of choice for the beleaguered finance industry. The London Whale and billions of dollars in penalties stripped him of that distinction. Now his bumper pay raise after a messy two years may have rivals wishing he would just keep his head down.
Caterpillar shows how to dig in mining downturn 27 Jan 2014 The U.S. heavy equipment maker finally beat estimates after several poor quarters. But a commodities recovery to boost mining equipment sales looks a ways off. Cost cuts, a new buyback and a better construction-unit showing give investors something to hold on to in the meantime.
Market contagion argues for central bank caution 27 Jan 2014 Trouble in a few emerging market hot spots has turned into a wider rout. Investors began the year talking of a return to more discriminating judgments, but quickly relapsed into old “risk on-risk off” trading ways. Wise central bankers will tighten policy very slowly.
Google’s latest deal makes uncharacteristic sense 27 Jan 2014 The web giant is paying $662 mln for DeepMind Technologies, a UK startup with no sales. But compared to purchases of Nest and Boston Dynamics, the firm’s focus on using neuroscience to teach machines to learn sits firmly in Google’s core business. It’s the next frontier for search.
Bank bail-in dogs are only sleeping 27 Jan 2014 The punishment of bank creditors in the Cyprus bailout, and EU plans to “bail-in” the bondholders of failing lenders, mean that bank debt is no longer safe. Investors aren’t fretting – which is a mixed blessing. Cheap funds help banks lend. But markets may not always be so kind.
Merck share price slump pumps up M&A pressure 27 Jan 2014 Is anyone worth 880 million euros? Merck stock dropped 10 percent after its finance chief left abruptly. The plunge reflects the German pharma group’s challenges and inflated hopes of transformative M&A. Quick completion of its AZ Electronics purchase would calm fraying nerves.
Proof of potash cartel revival will be in pricing 27 Jan 2014 New Kremlin-backed owners at Russia’s Uralkali, the world’s biggest potash producer, appear open to reviving a marketing alliance with Belarus. But it’s far from a done deal. Even if the cartel returns, it’s unlikely to survive long once BHP Billiton enters the business.
Markets could be their own worst enemy in fear binge 27 Jan 2014 A predictable Argentine crisis and an expected Chinese slowdown triggered panic selling in lower quality assets. As yet, it’s just catchup with imperfect reality. But if investors don’t calm down - and central banks stay still - markets could spark the crisis they fear most.