Miners are finding that disinvestment pays 20 Feb 2014 For an industry wrestling with the end of a once-in-a-lifetime demand surge, big miners aren’t faring badly. Prices are still high, and results at Rio Tinto and BHP Billiton show austerity working. Supply trends favor lower ore prices, but diggers may reap big profits for a while yet.
G20 can get past angry stares and platitudes 20 Feb 2014 This weekend, the world’s leading finance ministers will probably argue about U.S. monetary policy and then agree on a bland statement. That would be an opportunity missed. Now is the right time to work hard on safety rules for capital controls and current account excesses.
Nigeria’s oil scandal may yet help it emerge 20 Feb 2014 President Jonathan suspended the central bank chief after he pointed a finger at the state oil company. Local markets roiled, but Nigeria’s non-petroleum economy is actually growing smartly. With any luck, more attention on corruption will curb one of the country’s biggest drags.
ECB uses poor measure to dismiss disinflation fear 20 Feb 2014 The euro zone central bank’s non-worry about deflation is partly based on the market’s long-term inflation expectations. But the ECB’s pet measures look too far in the future to be helpful. And the chosen gauges are so placid that they will probably only move after it’s too late.
BAE investors shoot first, ask questions later 20 Feb 2014 Europe’s largest defence contractor spooked shareholders with a gloomy 2014 outlook and a $1.5 bln writedown. As with Rolls-Royce, investors have been slow to price in the effects of lower U.S. military spending. But the reaction - a 9 pct slump in BAE shares - looks overdone.
NAFTA’s three heads could haggle better than one 19 Feb 2014 The United States, Canada and Mexico are negotiating separate pacts with EU and Pacific Rim nations. A combined effort, however, would offer more leverage and lead to simplified commerce within North America. The trade accord’s 20th anniversary is a good time to show solidarity.
British retail IPOs: watch the back of the queue 19 Feb 2014 Investors are hungry for new issues, consumers are cheering up, and buyout firms have plenty to offload. So a whole basketful of retailers is set to float. The best have shaken things up by ruling a niche, offering bargains or embracing online. Others will be a harder sell.
Santander gains cheap foothold in France 19 Feb 2014 The Spanish bank is in talks to finance Peugeot’s future sales in 11 European countries as the French state leaves the carmaker’s finance arm. Santander gets access to millions of captive clients and some legacy loans at a discount. Peugeot will benefit from cheaper funding.
EU left with a few bad choices on Ukraine 19 Feb 2014 After clashes left more than 25 dead in Kiev, EU governments want sanctions. But economic measures would be crude. More important, Europe must first decide whether to try to keep on dealing with Ukraine – or to write off partnering with the current regime as a lost cause.
Pimped-up Peugeot ready to steer away from crisis 19 Feb 2014 The French carmaker’s 3 bln euro capital hike is the missing link in its turnaround. Peugeot has tackled overcapacity and costs, invested in new cars, and found a capable new CEO. It is set to go global. But it will be encumbered by its new, complex shareholder structure.
U.S. rules show limits of global bank resolution 19 Feb 2014 The Federal Reserve’s decision to make European lenders hold more capital against their American operations could push up funding costs and make banking less global. But it is an admission of reality. Cross-border resolution without national safety nets is still a non-starter.
Italy would have much to gain from Renzi’s success 19 Feb 2014 The power grab by the 39-year-old would-be prime minister has pushed Italian bond yields to near-record lows. If Matteo Renzi can form a government that delivers reform, investors will start to price in the country’s growth potential. The Italian rally could go much further.
Unusual monetary policy may be here to stay 18 Feb 2014 The BoE reckons UK rates will peak well below pre-crisis levels. Unless inflation jumps, the same will be true in the United States and euro zone. That will leave little room for traditional stimulus when economies next slow. Once radical, quantitative easing may turn mainstream.
Spain’s job creation machine still needs major fix 18 Feb 2014 A global economic recovery means Spain is finally adding jobs. The government’s labour reforms have helped. But these fell short in a few key areas, notably in tackling long-term unemployment. It’s a drag on Spain’s recovery story.
UK disinflation will delay rate rises 18 Feb 2014 The drop in UK inflation to 1.9 percent is not a one-off. Energy and wage growth trends could pull the rate still lower. The Bank of England has more scope to hold off on interest-rate rises than the market thinks. The pound should ease, and bond yields fall.
Cleaned-up ISS is finally ready to go public 18 Feb 2014 A $1.5 bln-plus IPO would amend for previous failed sales and listings. The private equity-backed “facility services” firm is a tidier story today. Luckily it’s also springtime in the markets. The Danish group’s sheer scale is a management challenge, and it still has big debts.
Whole FX business belongs in the dock 18 Feb 2014 Some traders may have committed malpractice in the gigantic foreign exchange market, but the currency business itself has the hallmarks of an economic crime. It is much too big to serve any useful purpose. Its volatility is destabilising. And FX hedges are mostly pointless.
Bank bonus flexibility is a myth – cap or no cap 17 Feb 2014 Bankers have savaged the forthcoming EU cap on bonuses for reducing wiggle room on pay. But even if bosses did want to cut payouts in bad years, a big chunk of variable remuneration is now deferred. That means bonuses are already more fixed than it might appear.
Securitisation muzzling does more harm than good 17 Feb 2014 Over-egging the practice of repackaging loans as bonds helped cause the 2008 crisis. Yet supervisors keen to avoid a repeat are loading investors in asset-backed debt with excessive capital charges. Smart firms may find workarounds, but the reforms hamper a key source of credit.
Currency wars pose disinflation risk for losers 17 Feb 2014 The dollar and the euro are rising against many currencies. It means that U.S. and euro zone exports are more expensive, and imports cheaper. They can absorb the trade hit. But with inflation already worryingly low, the downward pressure on prices might be harder to take.