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.
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.
Vienna offers a model for stable foreign policy 31 Dec 2014 The 1815 Congress of Vienna ended the Napoleonic Wars, and its participants worked together over the next decade to prevent destabilizing regime change. This principle could have reversed many bad intervention decisions over the last 40 years. Its lessons are worth studying.
Goldman/Espirito Santo mess raises valid question 31 Dec 2014 The U.S. bank may take a hit after a loan to failed lender Espirito Santo was moved by Portugal’s regulator into BES’ bad bank. Goldman has fallen foul of Portuguese law, and its own complex business. The fiasco highlights the need for greater clarity over bank resolution.
Lithuania keeps euro’s little flame alive 31 Dec 2014 The monetary union will welcome its 19th member on Jan. 1. Never mind widespread euro gloom and a looming new Greek crisis, the Lithuanian people heartily support adhesion – for political as well as economic reasons. Other euro zone members can raise a feeble cheer.
Banks will make asset managers pay for regulation 31 Dec 2014 Persistently low returns are spurring investment banks to re-price products like repo financing and prime broking. In 2015, expect firms to get serious about passing on the pain of capital and liquidity rules. Higher costs could in turn force some money managers to consolidate.
What we wrote – and you read – in 2014 31 Dec 2014 Some of the most-read views covered the Harvard endowment, the pope’s economics and China’s hunger for property. Corporate topics included Morgan Stanley, Espirito Santo, Alibaba and Facebook. First prize, though, went to a piece on how Breakingviews picked a World Cup winner.
Tesco will have to fight for its independence 30 Dec 2014 At $40 bln, the UK’s No. 1 grocer would be an M&A mouthful. A leveraged buyout looks tricky but strategic buyers have a rare opportunity. Tesco’s long-suffering current shareholders might jump at a chance to cash out. Much depends on the person chosen as the new chair.
UK faces risk of cold-weather blackouts 30 Dec 2014 Britain’s electricity system is ageing and the mix of generating technology is changing. Both factors increase the danger of power cuts at peak times. Contingency plans include paying companies to accept temporary grid outages. New capacity can’t come soon enough.
Greek limbo will weaken Europe’s recovery 29 Dec 2014 The failure of Greece’s deputies to agree on the country’s president will lead to new elections. That may bring left-wing Syriza to power, putting Athens at odds with its creditors. Reforms will stall, while uncertainty could undermine the ECB’s plan to boost growth in the euro zone.