Petrodollar drought is new risk for markets 6 Jan 2015 Low oil prices are not only a blight for energy producers. They could hurt global financial markets too. After years of surplus petro-earnings gushing into a range of assets, notably fixed income, the flows are at risk of reversing. The sharp equity market fall may be a first sign.
Greece debt compromise not as hard as it looks 6 Jan 2015 The country looks set to elect a left-wing government intent on a debt haircut. Germany could not stomach that. Yet neither side will want a disorderly Grexit. If agreement can be reached on reform, financial engineering could help disguise debt reduction and save face for all.
UK bank firewalls need pragmatism not dogmatism 6 Jan 2015 Lloyds is questioning why it needs a separate board to oversee non-retail activities. If ring-fencing could cure all ills, carve-outs would merit short shrift. But the UK can act tough in better ways – especially by demanding adherence to global bail-in rules.
AirAsia’s minority structure clouds crash impact 6 Jan 2015 The Malaysian carrier owns just 49 percent of the tragedy-hit Indonesian unit. Accounting rules partly insulate the parent from profit fluctuations. But a shared brand, intercompany loans, and leasing agreements mean the woes of its minority partners aren’t neatly contained.
China’s innovators could use a patent war 6 Jan 2015 Conflict could breed creativity for China’s tech industry. New patents are being minted, but companies rarely go to court to protect them. There may be political reasons, but more discord would show Beijing is serious about enforcement, and not just against foreigners.
Animal spirits and crisis ghosts will shape 2015 5 Jan 2015 Breakingviews’ annual compendium of financial and economic predictions for the year ahead is out. From the UK election to IBM via the global economy and geopolitics, our columnists offer insightful, entertaining, provocative and – we hope – profitable ideas for the year ahead.
Detroit’s Vegas bet signals wider industry shift 5 Jan 2015 A record 10 carmakers are at the Consumer Electronics Show as gadgetry from connectivity to self-driving shifts into high gear. Regular car shindigs like Detroit’s are bigger. But the stakes in Vegas are higher as tech giants like Google threaten to upend the automotive future.
Edward Hadas: The oil price is just plain wrong 5 Jan 2015 At $55 a barrel, crude is still too expensive for the industry to be rational about development. But after the big price drop, some consumers will pay too little for a rational economy. And the market drama wastes resources. The right goals are a weak cartel and high user taxes.
A double-speak guide to modern markets 5 Jan 2015 As the market perpetually shifts, so do the rhetorical stylings its players use to talk their way out of problems. The past year saw above-average creativity when it came to saying one thing and meaning another. Breakingviews offers up 10 euphemisms we’d like to see disappear.
Water woes could open taps on corporate risk 5 Jan 2015 Two-thirds of the world’s biggest companies are worried about access to water. But few are well prepared for problems. That should change as ways to track and address concerns grow. And if bosses don’t take the initiative, activist investors may force them to.
Centre-left may have UK election edge 5 Jan 2015 Britain’s three main parties are weak. Its two nationalist groups are stronger. The economy might help the in-power Tories – or give voters confidence to swing left. If they also want public spending, a new Breakingviews calculator suggests a Labour-led coalition could win sway.
Euro carries buy-the-fact upside 5 Jan 2015 The single currency keeps weakening and the dollar keeps strengthening. The market’s thinking is monetary: America tightens while others loosen, and trade or cheap oil don’t matter. But when euro QE turns from talk to reality, the euro/dollar divergence could unwind.
Germany’s reform zeal peaked a decade ago 5 Jan 2015 Berlin often lectures its euro zone peers on structural reform. Germany indeed adopted radical labour market reforms in 2005. They were beneficial, but amounted to political suicide for Angela Merkel’s predecessor. Since then the Chancellor hasn’t shown much appetite for change.
Property default rattles China debt neighbourhood 5 Jan 2015 Developer Kaisa hasn’t repaid a loan that came due, even though it is not obviously strapped for cash. Lender HSBC may yet work out a deal. But given Chinese groups’ dependence on foreign capital markets, such apparently irrational behaviour ought to have investors on alert.
Crude slump will stoke European oil and gas M&A 2 Jan 2015 The sharp drop in the price of Brent might make it harder to get deals done in the short term. But if the downturn persists, financial distress will put some small players in play. Larger, more defensive mergers, designed to create value by sharing costs, are also possible.
Oil glut cracks foundation of U.S. export ban 2 Jan 2015 Cheap gasoline could make lawmakers consider loosening the 40-year-old prohibition on crude exports. Plentiful oil may also force a rethink of ethanol and natural gas policies. Help for domestic producers smarting from low prices could even bring a rare show of Washington unity.
Europe returns to Franco-German axis of neurosis 2 Jan 2015 A prolonged economic slump highlights Europe’s core problem: a crisis in the French-German partnership. Populist parties are rising and the UK could leave the EU. Although many countries still want to join, it’s up to Paris and Berlin to make the case for a rejuvenated Europe.
Current account is key Africa factor in 2015 2 Jan 2015 Rapid African growth is likely to continue. But too much spending and borrowing has led many countries into trade deficits. As lenders become more discriminating, the state of the balance of payments, along with freedom from Ebola, will become keys to continued growth.
Review: Two centuries of trust, frauds and finance 2 Jan 2015 Ian Klaus’ entertaining account of 19th century financial deceptions carries a serious lesson. As financial markets became more sophisticated, trust had to be built on stronger and more objective supports. The implication: honesty can always win out, but not without hard work.
Japan’s cash helicopter may be first to take off 2 Jan 2015 Quantitative easing is reaching its limits, but 2 percent inflation remains a distant goal. The Bank of Japan’s next step might be the ultimate stimulus: a cash gift to households. A “helicopter drop” would open a new front in the global fight against deflationary stagnation.
China index: Ending the year without a bang 2 Jan 2015 Breakingviews’ alternative growth gauge slowed slightly in November. In contrast to the same period last year, measures like residential property investment and export growth dragged. Shrinking steel production, rail freight and truck sales set the scene for a quiet year-end.