ECB keeps hoping in ABS field of dreams 29 Aug 2014 Mario Draghi expects investors to come if he builds a market that he admits barely exists. Purchases of asset-backed securities might help growth and boost inflation. Yet the obstacles are substantial, and regulation is a thorn. Government aid would help.
Falling euro squeezes Swiss, Swedish central banks 29 Aug 2014 A lower currency helps the ECB fight disinflation. It’s a curse for Swiss and Swedish central banks, which are running out of traditional ways to stop an unwanted appreciation in their currencies. They may end up having to follow the euro zone into less charted policy waters.
Review: A pained call for radical financial reform 29 Aug 2014 Financial Times writer Martin Wolf’s new book is partly a cogent review of what went wrong in the 2008 crisis. But the message economists and policymakers should focus on, especially from a centrist intellectual, is that the best ideas for the future are far from the mainstream.
Emerging market watchdogs could dent car industry 29 Aug 2014 Rapid growth gives local regulators in developing markets extra influence. India has fined car companies $421 million and opened the market for spare parts wider than in the West. If Chinese regulators decide to take the same approach, carmakers’ earnings will suffer.
Vivendi boosts shareholder credentials in GVT sale 28 Aug 2014 The French media group says it favours Telefonica’s $10 bln bid for its Brazilian mobile unit. Telefonica could pay more, but it’s good that Vivendi has chosen the surest exit for shareholders. As for rival bidder Telecom Italia, it now faces an uncertain future.
Telefonica may have to inch higher for GVT 28 Aug 2014 The Spanish telecom group has given Vivendi a soft deadline to accept a new 7.5 bln euro cash-and-stock offer for Brazilian subsidiary GVT. Telecom Italia’s bid is only 7 bln euros, has less cash and is more conditional. Still, Vivendi could yet wring more out of this auction.
Risky AA just got riskier 28 Aug 2014 The chief exec and CFO are quitting the breakdown firm two months after the IPO. It may not be a post-float car crash: the market seems to like the show of decisiveness by the chairman, now de facto CEO. But the timing is troubling, as is AA’s rejection of conventional governance.
Edward Hadas: Central bankers’ reward for failure 28 Aug 2014 The supervisors who gathered last weekend in Wyoming were seen as saviours, or as possible destroyers, of a fragile financial system. That elevated status is an undeserved prize. As Keynes noted, economists are more like dentists. But central bankers lack the dentist’s toolkit.
Tesco should cut its dividend 27 Aug 2014 Shareholders ultimately lose out when too-high payouts prevent companies from responding well to problems. Right now, Tesco needs all the financial flexibility it can muster. With a new CEO coming, the UK grocer has a window of opportunity it would be wise to climb through.
Germany not yet moved by euro zone reshuffle 27 Aug 2014 France has a more credible government, Italy is moving towards reform and the ECB’s Draghi wants looser fiscal policies. So far, Berlin isn’t impressed. But a new EU Commission takes over soon, leaving more room for talks on growth-friendly policies – which will benefit Germany.
Time nudges Pfizer and Astra a bit further apart 27 Aug 2014 The U.S. pharma group is now allowed to renew its overtures to its UK peer. AstraZeneca has performed OK since May. That will support Astra’s recent view that any bid should be worth at least $123 bln. But Pfizer now has other options for tax-driven M&A.
Draghi leaves Germany in austerity team of one 26 Aug 2014 The ECB president is now calling for looser fiscal policies, with hints that he will follow up with monetary relief. The change of heart is a rational response to euro zone stagnation and persistent low inflation. All that’s needed now is to bring Angela Merkel along.
Currency still weak point of independent Scotland 26 Aug 2014 Alex Salmond used a second TV debate on Scottish independence to sketch out Plan Bs to a sterling currency union. The alternatives sound iffy. The leader of the secession campaign could probably negotiate a currency deal, but voters will still think twice about finding out.
France’s housing slump is sign of deeper woes 26 Aug 2014 House prices are falling and Paris is a buyer’s market. Hollande’s clumsy policies and lower interest rates should have the opposite effect. But the seriousness of the slowdown incites households and companies to hoard cash. Only shock therapy can end the death spiral.
Hollande buys credibility at political price 25 Aug 2014 French Economy Minister Arnaud Montebourg’s latest criticism of government policy proved too much for François Hollande, who has demanded a new cabinet. The French president’s move will get him kudos abroad. But the socialist left will become more vocal in its opposition to reform.
Italy caught between two slowdown theories 25 Aug 2014 No one questions that the euro zone’s third largest economy is in trouble. But Germans think the problem is institutional, while Keynesians think the challenge is monetary. They’re both right, and it might be possible to address both issues simultaneously.
ECB deserves to lose market’s inflation confidence 22 Aug 2014 Euro zone inflation is moribund. Investors are increasingly doubting Mario Draghi’s ability to boost it, according to normally quiescent market signals. That’s quite right, given how ineffectively monetary policymakers are addressing the problem.
Equity research revolution fails cost-benefit test 22 Aug 2014 The UK market watchdog wants fund managers to pay for stock analysis themselves instead of using client money. Pricing is opaque at best, and investors need protection. But the change could favour big banks and hike funding costs for smaller companies. Evolution is better.
Central banks should forget about inflation 21 Aug 2014 When they talk in Jackson Hole, central bankers will undoubtedly fret about prices. It’s a waste of time. Inflation and deflation rates are too low and stable to be a threat. The monetary authorities have more important worries: debt, reserves and managing rate rises.
Blackstone finds way to outsource skin in the game 21 Aug 2014 The private equity firm’s latest securitisation would normally require it to keep 5 percent of the risk. But Blackstone has found a way to outsource its equity sliver to other investors. The structure looks acceptable – but investors should be wary of copycats that might not be.