Rising migration is fuelling German economic boom 25 Feb 2015 Germany is a magnet for well-educated workers from poorer EU countries. Net migration has almost doubled since 2008 to a 20-year high. Labour mobility stabilises the euro zone economy and bolsters growth. No wonder Berlin is fiercely defending the freedom of movement principle.
Singapore Exchange’s next CEO faces ho-hum job 25 Feb 2015 Departing chief Magnus Bocker’s successor will inherit a business suffering from existential angst. Trading volumes are static and big listings scarce. The outlook is brighter for derivatives, but given the absence of M&A targets it will be hard for debt-free SGX to grow.
India in depth: Time for big ideas in tight budget 25 Feb 2015 This week’s federal budget is likely to put a squeeze on public spending. But it also needs to strike a strongly pro-business note. Investor enthusiasm for Prime Minister Narendra Modi’s policies is starting to wane. Big-ticket reforms could give “Modinomics” a credibility boost.
JPMorgan optimism reinforces industry mediocrity 24 Feb 2015 Jamie Dimon and crew reckon growth, cost cuts and new fees can boost earnings 43 pct and help silence talk of a breakup. Trouble is, the bank’s 2017 target puts tangible ROE at just 15 pct. That’s not bad but underscores what an unimpressive investment big banking has become.
Vague Yellen more likely to surprise than soothe 24 Feb 2015 The Fed chair deftly parried conflicting calls for more patience and higher interest rates in congressional testimony on Tuesday. What she didn’t do is offer clarity on the timing of a rate hike. The strategy may calm markets now but ensures everyone will be caught off guard.
London’s FTSE can extend its record-breaking run 24 Feb 2015 At long last, Europe’s big name equity index has entered new territory. Yet while the FTSE 100 is higher than ever, and is hardly risk-free, it is also attractive. It is cheaper than the leading U.S. and pan-European benchmarks and has alluring diversity.
Reforms helping Greece might hurt Syriza 24 Feb 2015 The reforms agreed by Athens are both ambitious and fuzzy. They tick some of the favoured boxes of hawks in Germany and elsewhere. But Syriza’s election pledges are in tatters. Europe may be better off - but the domestic situation in Greece has become more volatile.
Hitachi’s $2 bln deal signals Italy open for M&A 24 Feb 2015 The Japanese firm is buying Finmeccanica’s rail units. In Italy and across Europe, sales of high-end industrial assets to the Far East can be unpopular. But Hitachi is a credible buyer paying a full price. It helps too that the seller is eager to slim down and cut debt.
Cheap oil highlights multifaceted resource curse 24 Feb 2015 Commodities-dependent nations got more bad news, as BHP warned on iron ore prices. To survive, many will need to turn their economies upside down. Resources prevent long-term strategies, dull the good and bad governance gap and ultimately cloud voters’ views of who’s responsible.
Lavish German pay hike helps entire euro zone 24 Feb 2015 Germany’s biggest union won a 3.4 pct pay rise, its highest in years. That should underpin a recovery in domestic demand, which the latest data shows is already rising. The country’s over-reliance on exports is fading. This is good news for the whole of the currency bloc.
Europe’s high-yield boom rewrites the rulebook 24 Feb 2015 This is a seller’s market, and one with a short history, so deal structures are less fixed than they are Stateside. Yields are already slim. Now borrowers and the buyout firms behind them are pushing bolder deal terms. That makes the risk-reward tradeoff for buyers even worse.
Spain has way to spread Bankia bill 24 Feb 2015 A high court judge has told the state-dominated lender and ex-management to set aside 800 mln euros for refunding investors in its botched 2011 IPO. Madrid deserves the most blame, and the biggest bill. Minority shareholders should cough up too, but with the amount capped.
Piketty meets pragmatism in Singapore tax hike 24 Feb 2015 The top rate for high earners will rise to 22 percent by 2017. The symbolic end to three decades of lower levies is a nod to economist Thomas Piketty’s inequality polemic. It’s also a shrewd bet that Singapore’s wealthy value clean air and social stability as well as money.
China takes least useful polluters to the cleaners 24 Feb 2015 A revamped law that makes it cheaper to clean up than mess up is facing its first test in the courts. Offenders now risk unlimited fines, shut-downs and jail time. It sounds encouraging, though like many of China’s reforms, it leaves room for Beijing to pick winners and losers.
Wall Street’s broker fight is another losing cause 23 Feb 2015 The White House is pushing new rules for agents and retirement advisers that the industry says will hurt investors and curb fees. Added duties are sensible, however. The clarity is probably worth the price and fledgling online startups should pick up some of the customer slack.
Armstrong flooring spin suggests breakup ceiling 23 Feb 2015 Investors typically roll out the welcome mat for corporate splits. Yet the $3 bln building materials group’s shares were nearly as flat as hardwood boards after it revealed plans to house its two units under separate roofs. Financial engineering can’t cover up every crack.
Investor tolerance for low bond yields has limits 23 Feb 2015 Economic fundamentals can’t fully explain why U.S. and UK yields have risen sharply, decoupling from German ones. Perhaps investors are finally tiring of meagre returns. If so, planned ECB asset purchases may only cap euro zone yields, rather than driving them down much further.
Frontier markets make dangerous investment concept 23 Feb 2015 It’s probably right to think most poor countries will gradually get richer. And nations short of capital and expertise can benefit from foreigners who make serious commitments. But the “frontier” indexes have the wrong member countries and aim at an unsuitable sort of investor.
Deal junkie Valeant shoots up on $10 bln fix 23 Feb 2015 The drugmaker’s pledge last year to focus on organic growth and debt reduction didn’t last long. Cost cuts and tax savings from buying Salix proved irresistible. What Valeant’s injecting isn’t clear. Salix’s numbers are fuzzy after it admitted pumping clients full of inventory.
GM agitators run into union roadblock 23 Feb 2015 Dennis Williams, boss of 8.7 pct shareholder UAW, calls an $8 bln stock buyback demand from hedgie-backed Harry Wilson premature. GM may have loads of cash, but also investment needs and $26 bln of retiree costs. A smaller repurchase would be smarter and may avoid a bigger clash.
HSBC’s operating woes trump Swiss tax furore 23 Feb 2015 CEO Stuart Gulliver’s offshore accounts bring new scrutiny of past fiscal fiddles. They also raise the bar for future good behaviour. The main concern for investors, though, is the bank’s lacklustre financial performance. Even a reduced 10 percent ROE target is some way off.
Reed at $38 bln rubs up against new class of peers 23 Feb 2015 Reed Elsevier is set to report another year of metronomic financial performance. As the threat of “open access” journals fades, optimists will argue the Anglo-Dutch group now looks more like Nestle than a humble publisher. That still looks a bit of a stretch.
EU capital markets union is still just a slogan 23 Feb 2015 For non-bank finance to flow, the single market needs cross-border insolvency laws and tax incentives for investment in SMEs. Securitisation cheerleading aside, these key barriers have yet to be tackled. They will have to be if capital markets union is to get off the ground.
Japan’s inflation test: Mapping the road to 2 pct 23 Feb 2015 The central bank may yet hit its elusive goal, provided consumers spend, workers are productive and bond investors stay calm. A new Breakingviews calculator shows how much inflation Japan can expect after money-printing has ended. A 2017 sales tax hike would make the road harder.
Hugo Dixon: Time for Alexis Tsipras to keep his nerve 21 Feb 2015 The new Greek PM has crossed a Rubicon in asking for an extension to the country’s hated bailout programme while abandoning many election promises. Tsipras should realise there is no turning back. But he can snatch victory from defeat if he embraces radical reforms with vigour.
Dividend shocker puts Lufthansa aerobatics to test 20 Feb 2015 The airline is scrapping payouts for the second time in three years - after two profit warnings and a long-running labour dispute. And new CEO Carsten Spohr has a worrying appetite for growth in a challenged industry. He needs some successes before his credibility is grounded.
Trustbusters cook up simpler way to fry food deal 20 Feb 2015 The FTC need only raise “serious” questions to thwart Sysco’s $3.5 bln US Foods purchase. It’s an unusually low hurdle that has helped stall mergers like Whole Foods and Wild Oats. A bill that would change the rule may not pass in time to keep Sysco’s from going up in smoke.
Argentina pays price as truth and fiction vie 20 Feb 2015 The mysterious death of a prosecutor investigating President Cristina Fernandez has the stamp of cheap fiction. It’s emblematic of her rule, which ends later this year. Official data mask a looming recession and rising inflation. She’s leaving a credibility deficit for her successor.
FX traders will find cheap funding hard to exploit 20 Feb 2015 Carry trades should be child’s play when so many policy rates are near or even below zero. But borrowing in low-yielding currencies and buying ones with higher returns is far from easy in current market conditions. Volatility and a murky FX outlook pose the biggest dangers.
Nigeria’s currency still looks vulnerable 20 Feb 2015 The central bank wants to stabilise the naira against the dollar, after a 22 pct drop since September. But Africa’s biggest economy is beset by political strife, corruption, poor infrastructure and plunging oil exports. The former star “frontier market” is in a tight spot.