French cabinet reshuffle creates policy confusion 2 Apr 2014 Francois Hollande has chosen an odd couple to tackle France’s economic malaise. Old hand Michel Sapin will be finance minister while anti-globalisation crusader Arnaud Montebourg will run the economy ministry. The crude effort to please both markets and the public will backfire.
ASOS’s glitzy rating assumes a lot goes right 2 Apr 2014 Even after a blip last month, the UK fashion and tech darling still fetches more than 75 times forward earnings. Ploughing money into new warehouses is vital, but could create supply disruptions. Global expansion is causing headaches. And other retailers won’t stand still.
Big German public pay hike is good news for Europe 2 Apr 2014 More than 2 mln civil servants in Germany will see their pay rise 5.7 pct over the next two years. That means real income growth, and it will be a benchmark for the private sector. But much hinges on what consumers will do with the extra money in a country where savings are high.
ECB could fight currency war – by buying Treasuries 2 Apr 2014 The euro is at uncomfortable levels partly because quantitative easing is pulling down other currencies. A radical idea is that the ECB could respond by adopting QE and buying U.S. Treasuries. Direct FX intervention would break the rules but might lead to discussion and disarmament.
BHP spinoff would swap one problem for another 1 Apr 2014 The miner wants to simplify its portfolio, possibly by demerging less attractive assets. But it’s not certain this would create shareholder value, and the move could cost financial and operational synergies. BHP may be better off patiently selling down as opportunities arise.
Deflationary world can still stoke asset inflation 1 Apr 2014 The U.S. economy is a test case for the baffling coexistence of inflated asset prices and disinflation in consumer prices. Poor capital utilization and wonky income distribution – a sharp drop in workers’ share, a jump in financiers’ take – help resolve the mystery.
Weir may struggle to extract a merger from Metso 1 Apr 2014 The Scottish engineer has tentatively bid for its $5 bln Finnish rival. A merger makes sense. But Metso has just shed a problem unit, has clear self-help plans, and is at a cyclical low thanks to its focus on mining. With two powerful backers, the Finns can afford to be patient.
New French PM’s main challenge: his own party 1 Apr 2014 Manuel Valls will take over the French government after the ruling Socialist Party’s debacle in municipal elections. The interior minister’s free-market leanings suit President Hollande’s new supply-side views. But to conquer, Valls must fight off more traditional Socialists.
Telecom Italia renewal has further to go 1 Apr 2014 Under pressure from a dissident investor, Italy’s main phone company will soon get a strong, independent board. That’s good for outside shareholders. But the intentions of key stakeholder Telefonica remain opaque. TI’s undemocratic voting system needs an overhaul too.
How to avoid another second-class UK privatisation 1 Apr 2014 Royal Mail’s IPO looks awfully cheap in hindsight. So an official post-mortem will embarrass politicians and bankers alike. Still, there are lessons for future privatisations. Sell down slowly, be more flexible in book-building, and handle retail offers with extreme care.
Alstom warms up turnaround plans with $1 bln sale 1 Apr 2014 The ailing French engineering giant is selling its heat exchanger unit to private equity group Triton for 730 mln euros. It’s an important milestone, but Alstom’s asset disposal programme will have to go further. The group is also under pressure to deliver on cost cuts.
Ukraine needs gas efficiency more than imports 31 Mar 2014 Congress is debating speeding up U.S. gas exports to curb Russia’s sway over its former satellite. A cheaper solution lies closer to home. Ukraine is the world’s second most wasteful energy user. Merely matching Romania’s efficiency would slash Ukraine’s gas bill by two-thirds.
ECB has to cope with global disinflation illness 31 Mar 2014 The malaise of meagre price increases and high sovereign debt is almost global, but the euro zone is suffering particularly badly. The ECB is constrained, too, because it has so many national masters. Still, a bold QE campaign might be able to keep deflation away.
UK authorities show worrying market ignorance 31 Mar 2014 Insurance stocks fluctuated wildly after the government and the regulator each broke price-sensitive news in a clumsy fashion. The failure to anticipate market mayhem betrays poor instincts. It argues for tighter rules around dissemination of news by those that supervise.
Companies risk changing euro view at wrong time 31 Mar 2014 A rising single currency has confounded and hurt European exporters. An increasing number are becoming euro bulls, but their conversion could be ill-timed. While the currency’s rally may not be over, the ECB seems too unhappy with euro strength for it to last past autumn.
Monte Paschi swaps tail risk for bid speculation 31 Mar 2014 The foundation that was the Italian bank’s largest shareholder has sold yet more stock, this time to BTG Pactual and another Latin American investor. With all three supporting MPS’ upcoming rights issue, higher returns – or a bid – are replacing the threat of nationalisation.
Global house price surge calls for QE door to shut 31 Mar 2014 It’s too soon to call it a global bubble, but house prices are rising in most countries outside southern Europe. U.S. quantitative easing is a big factor, because capital inflows generated credit growth in emerging economies. Tighter monetary policy, now, is the simplest cure.
Hugo Dixon: Don’t bet on EU treaty change 31 Mar 2014 Wolfgang Schaeuble and George Osborne, the German and UK finance ministers, want European treaties redrafted to shore up the euro zone and keep Britain in the EU. But just because they want this, doesn’t mean it will happen – not least because treaty change isn’t needed.
UK insurance investors learn to assume the worst 28 Mar 2014 Shares in Britain’s big insurers have fallen sharply on news of a probe into possible mistreatment of some customers. As with recently announced pension reforms, incomplete information has added to the fear. Still, it is possible to rationalise the 4 bln stg hit to market values.
Intesa’s spring cleaning heralds return to health 28 Mar 2014 Italy’s largest retail bank is taking a massive 6.8 bln euro goodwill hit on the half-dozen mergers that created it. With a new bad bank, that prepares it for the ECB’s stress tests. But the pledge of 10 bln euros in cash payouts is the best sign Intesa is out of convalescence.