Swiss caught in the wake of massive FX currents 19 Mar 2015 Exposure to the European economy has helped Switzerland. The euro has not. The failure of the franc’s peg to the single currency has cut into expected growth, and leaves the central bank searching for a new approach. The lesson: in currency wars, the little guys usually lose.
Russia occupies Ukraine’s debt talks 19 Mar 2015 The Kiev government needs to restructure its debt, but one of its big creditors is its foe Russia. The possibility of defaulting on that part of the debt complicates the talks and exacerbates tensions. But sparing Moscow could irk other creditors, and make an agreement harder.
UK gets its tax incentives in a muddle 18 Mar 2015 The latest budget used even more blatant taxpayer-funded subsidies for homebuyers, a further transfer from earners to owners. It also encumbered banks, curbing their ability to lend and grow capital. It’s an odd way to advance the concurrent goal of a stable financial system.
British economic triumphalism is premature 18 Mar 2015 Chancellor George Osborne used his pre-election budget to argue that Britain is seeing a balanced recovery and its citizens are better off. Upward growth revisions helped and UK stocks rose. In fact, GDP gains haven’t been impressive. And most of the UK’s big problems remain.
Deflation needle buried in haystack of history 18 Mar 2015 A BIS study of falling consumer prices going back to 1870 shows only a weak link with lower GDP growth. The cheery finding may lead policymakers astray. The sharp end of today’s deflation threat lies in depressed wages. It has drawn blood before, and could do so again.
Central bankers struggle to follow good advice 18 Mar 2015 Their global club, the BIS, is good at spotting trouble. Current worries include risk-taking enabled by easy money and illusory market liquidity. But rate-setters have to think domestic, not global. Their parochialism makes preventing crises much harder than predicting them.
Inditex shares no longer a bargain 18 Mar 2015 The Zara owner’s stock has risen more than 20 percent this year. The weakening euro is an advantage over rival H&M. The Spanish recovery and the group’s nimble business model justify a premium valuation. But at more than 30 times earnings, the good news is already in the shares.
London doesn’t need to stress-test foreign banks 18 Mar 2015 UK regulators deny they are planning U.S.-style formal exams for overseas banks. They will be reluctant to do anything to compromise the City’s attractiveness. But global resolution requirements for lenders to place bail-in capital in London mean they may not have to.
U.S. shows up Spain on money-laundering crackdown 18 Mar 2015 Tiny Banco de Madrid has filed for bankruptcy after the U.S. accused its Andorran parent of money laundering. Spain had actually investigated the issue, but hadn’t sent its report to prosecutors. As such, Madrid has missed a good chance to prove its bank oversight credentials.
Madrid acts late on private debt problem 17 Mar 2015 Spain’s new political parties have thrown the spotlight on the country’s private debt, equivalent to 180 pct of GDP. Now the government is passing a law to help indebted individuals reduce borrowings. It’s the right step, but largely formalises what banks were already doing.
BHP takes no chances with South32 spinoff 17 Mar 2015 The new mid-sized miner will emerge with comparatively little debt. While BHP Billiton is spinning off unloved assets, South32’s balance sheet will be strong enough to allow new investment. The low gearing could also make it an attractive takeover target for a debt-funded bidder.
Vienna gives bank bail-ins a political twist 17 Mar 2015 Austria’s resolution of its Heta bad bank means German and domestic lenders face losses. Investors should have seen the use of new EU bail-in rules coming. They may not have twigged that Vienna could cannily use the same laws to stop the Carinthia region getting its just deserts.
Clock ticks for Swatch in Apple Watch challenge 17 Mar 2015 Swatch CEO Nick Hayek is sanguine about the tech giant’s attempt to disrupt time. Yet he faces tricky options: lock horns with Tim Cook in a smartwatch war, or move upmarket where Apple will struggle to compete on craftsmanship. Swatch doesn’t look primed for either.
Alliance Trust makes a good target for Elliott 16 Mar 2015 The activist manager best known for suing Argentina wants to shake up the venerable UK investment trust run by Katherine Garrett-Cox. British investors don’t like pushy hedgies. Yet Elliott can point to average performance and unorthodox governance.
Lafarge-Holcim merger can be rescued as takeover 16 Mar 2015 The European cement makers disagree about the financial terms and governance of their planned tie-up. A “merger of equals” has foundered yet again. To keep the deal’s benefits, the way forward would be for Lafarge to agree to be bought for a suitable premium.
Euro merits more appreciation 16 Mar 2015 Diverging monetary policy has pushed the single currency down 13 percent against the dollar in 2015. But trade balances, inflation rates and fiscal positions all point to euro strength, not weakness. If euro zone GDP keeps picking up, the market’s focus may change.
Commerz’s $1.5 bln fine brings state sale closer 13 Mar 2015 The German bank had largely provisioned the $1.45 bln in fines paid to U.S. authorities for sanctions and other breaches. Yet closure should help Berlin sell its 17 pct stake. The return of bank M&A is another plus, though Commerz’s huge balance sheet means it is a distinct case.
Holcim can push for more in Lafarge tie-up 13 Mar 2015 The Swiss cement group is outperforming its French rival, creating cracks in their $44 bln union. A special dividend or higher exchange ratio could fix matters. That is more likely to happen than deal failure, given that both sides would suffer if it fell apart.
Euro zone recovery may dampen reform drive 13 Mar 2015 Governments are slowing reform across the euro zone. Brighter economic prospects and loose monetary policy seem to lessen the urgency for tough political choices. Yet the opposite is true: better times should make reform easier and less costly.
Dollar strength is biggest risk to strong dollar 12 Mar 2015 The greenback’s momentum towards parity against the euro is powerful. But the self-reinforcing rally rests on confidence in a Fed rate rise by autumn. If exporters’ pain from rapid dollar gains gives rate-setters second thoughts, it could stall. So far, there’s no sign of that.