New tech battlegrounds pitch East against West 9 Jan 2015 Tech titans that have conquered their home markets are targeting new ones, like India and Indonesia, where leaders are yet to be crowned. Tie-ups between Japan’s SoftBank and e-commerce groups in Asia may signal a trend that could put Silicon Valley at a disadvantage.
Santander finally gets the message on capital 8 Jan 2015 The Spanish lender had resisted raising equity. Now new Chair Ana Botin is seeking 7.5 bln euros in a share sale. A 6-8 pct discount may be needed, and there are no pre-emption rights. But the bank gets capital sorted, boosted by a dividend cut, before markets potentially worsen.
UK boxed in by costly inflation measurement error 8 Jan 2015 A clever new report clearly shows the flaws of the unfairly high RPI index. Even if the government acts now, it will take decades to free gilts and state pensions from its clutches. The silver lining is that disinflation is making the problem somewhat less acute.
Tesco’s strategic reinvention is incomplete 8 Jan 2015 Britain’s top grocer will cut 1.35 bln stg of capex and head-office costs, ditch its dividend and close some stores. Price cuts will help it take on discounters. Yet there is still no chairman, no property revaluation, and no firm promise to retreat from Asia or Eastern Europe.
Merkel subjects Greece to risky tough love 8 Jan 2015 The German chancellor wishes to keep the euro zone intact – while playing up her indifference to the prospect of Greece leaving it. She just wants to make sure the next government in Athens will back reforms. That’s the only way to make a deal politically acceptable in Berlin.
Response to Paris attacks caught between two risks 7 Jan 2015 The killings at the Charlie Hebdo weekly put French and European authorities at the confluence of two dangers – individual acts of violence and excessive countermeasures. Fringe parties may benefit if the response is too weak. Media freedom might suffer if it is too strong.
Sliding sterling set for more turbulence 7 Jan 2015 The pound is falling against a broadly strong dollar but also against a less-than-mighty euro. There are reasons to be pessimistic about the British currency. UK rate rises are expected to start later, political uncertainty is rife. But it’s even safer to bet on high volatility.
Falling prices show ECB failed at its only mandate 7 Jan 2015 Euro zone inflation is now negative. Sinking oil prices played a part, but market expectations were falling well before. The European Central Bank has long been seen as doing too little, too late. No wonder investors have lost faith in the bank’s ability to fulfill its mission.
Overseeing the Bank of England will never be easy 7 Jan 2015 Newly released minutes show the UK central bank’s supervisory Court did little in the 2007-9 crisis. No surprise there. Subsequent reforms have brought private board standards to this public institution. The changes may help, but no board can take politics out of monetary policy.
Sainsbury defies the gloom in UK retail 7 Jan 2015 The British grocer had a relatively happy Christmas. Like-for-like sales fell 1.7 pct in its third quarter – a surprisingly strong performance in a brutal market. Much depends on the recovery plans of bigger rival Tesco. But Sainsbury’s shares look oversold.
No-yield world removes some of gold’s tarnish 6 Jan 2015 One good reason not to buy the yellow metal used to be that alternative safe investments had much higher yields. That disadvantage is dwindling with negative yields and deferred rate rise expectations. The price of gold may still fall, but it has become a less expensive haven.
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.
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.
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.
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.
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.