BoE on slack: we’re even more confused than before 13 Aug 2014 The central bank has conceded the economy still contains slack, despite plummeting unemployment. It is easy enough to tweak wage growth assumptions that already looked way too bullish. Keeping investors interested in following BoE guidance will be rather harder.
How to avoid the emerging-market bond trap 13 Aug 2014 Issues by developing-economy governments rose 39 pct in the first half of 2014. Too much of the cash just funds trade deficits. Risk tolerance is high now, but crises are almost inevitable when the flows reverse. Investors should focus on countries that can withstand hard times.
World can fete royal credit upgrade tricentennial 13 Aug 2014 The Hanoverians were foreign and unpopular when they came to Britain in 1714. They had to depersonalize government, which made government bonds national obligations - and a decent credit risk. The lesson for now: for bond investors, solid institutions beat charisma hands down.
Euro-pessimists have only themselves to fear 13 Aug 2014 Gloom about the single currency is justified. Regional economic activity is weak, inflation is low, and the central bank is not-so-covertly promoting a lower exchange rate. In fact, almost the only thing that may support the euro in coming weeks is the ubiquity of pessimism.
A French revolution could disrupt U.S. mobile 13 Aug 2014 Xavier Niel’s Iliad is the Ryanair or Aldi of telecoms – lean and clever. Winning control of T-Mobile US could allow the French billionaire to repeat some of his tricks Stateside. That might guillotine market share and margins at AT&T and Verizon.
Barclays’ new chair does not need to be banker 13 Aug 2014 The ideal candidate would be a former banking CEO with a clean reputation, a grasp of complexity, a thick skin, and the ability to support boss Antony Jenkins while staying objective about his performance. But Barclays can’t have it all. The executive bank experience can be sacrificed.
Wages, not slack, will set U.S. and UK rate hikes 12 Aug 2014 The Fed and BoE say they’ll use the gap between actual and potential output to decide when to raise rates. Yet measuring this is a mug’s game. Investors struggling to estimate slack are better off watching wage growth. Right now, that means rates should stay where they are.
Pru just shades AIA in battle of Asian insurers 12 Aug 2014 Interim numbers show the UK-domiciled Prudential and its Hong Kong-based peer are both still growing new business at breakneck speed in Asia. AIA generates more cash right now. But the Pru’s geographic mix in the region makes its shares the slightly better long-term bet.
German stocks price in sanctions tail-risk 12 Aug 2014 Tension with Russia may slow growth in Europe’s powerhouse. But Germany’s domestic momentum should offset the drop in bilateral trade. Still, the DAX’s underperformance makes some sense. The economy would really suffer if Moscow cut back on gas exports.
Superpowers reclassify trade from end to means 11 Aug 2014 Before the 2008 crisis, leaders from Washington to Beijing mostly believed more trade creates greater prosperity. Trade liberalization was a goal in itself. That has changed, as Russian sanctions make clear. Governments are increasingly treating trade as a political lever.
Flight to safety is liable to persist 11 Aug 2014 Geopolitics has brought volatility back to global markets. The most serious risk is the impact of Russian sanctions and counter-sanctions on European growth. Markets’ recent soft patch may be more than a seasonal lull.
South Africa’s bank bail-in better than Portugal’s 11 Aug 2014 A public bailout for reckless ABIL is sub-optimal. But unlike Portugal’s BES rescue, senior creditors will take some losses. And while taxpayers remain exposed to the new bad bank, the political desire to maintain lending capacity to poorer citizens is understandable.
Pure politics can’t revive Italy’s coma economy 11 Aug 2014 Prime Minister Matteo Renzi offers promises and constitutional change, but has delayed tough reforms. Europe’s fourth-biggest economy is stuck in perma-recession. To awake from its deep sleep, Italy needs far more radical changes than are on offer.
Behold the unversion: an inversion in all but name 8 Aug 2014 U.S.-based data protection firm SafeNet may slash its tax rate as part of a cross-border deal. Instead of doing so by acquiring overseas, though, it is simply selling itself to Dutch digital security company Gemalto. It shows the limitations of a possible ban on inversions.
German entry into select bond club would bode ill 8 Aug 2014 Ten-year Bunds look set to fall below 1 percent for the first time. Germany would then join Japan and Switzerland in being able to borrow for so long for so little. But ultra-cheap debt seems to accompany weak growth and too-low inflation, and lead to desperate policy measures.
Metalworkers, not McKinsey, bend VW to their will 8 Aug 2014 The U.S. consultant has advised some of the most conservative institutions in the world – the Bank of England, even the Vatican. But that hasn’t stopped unions forcing the German carmaker to show it the door. It flags how hard it will be to execute VW’s turnaround plan.
BlackRock is right: European IPOs need more work 8 Aug 2014 The giant investor is griping again about new issues. In structure and deal volume, the market is far healthier than when BlackRock spoke out in 2011. Performance is OK, barring a few duds. But there are still too many banks per deal and buyers are still rushed into decisions.
Demographic doomsayers missing shades of grey 8 Aug 2014 Moody’s is the latest to predict slower GDP growth in ageing nations. Reality is likely to be much less gloomy. Besides, economic output is an especially poor gauge of prosperity when population gains slow and reverse. It’s the debt in the census trends that looks burdensome.
Euro zone’s biggest problem is debt, not slow growth 7 Aug 2014 Growth is stumbling in Italy, Germany and elsewhere. That in itself would not be a huge problem – except that the sovereign debt mountain has kept growing even in “austere” years. This means states cannot spend their way out of trouble, and another crisis remains a real risk.
Portugal bank panic betrays more than bad judgment 7 Aug 2014 Investors are fretting that Portuguese banks will have to pay for BES’s bailout. That mistakenly assumes new “good bank” Novo Banco is worthless. A better target for scepticism is BES’s bad bank, which looks overvalued. The real problem is Lisbon’s ropey record on bank oversight.