Diageo’s sober ambitions are yet to find favour 30 Jan 2014 Shares in the global spirits giant fell sharply on Jan. 30 as it outlined the impact of exposure to weakening emerging markets. Diageo’s bigger challenge is to convince investors it can generate attractive long-term growth without recourse to big-ticket acquisitions.
EM rate hikes aren’t enough to scare FX traders 29 Jan 2014 Turkey’s hefty rate rise gave the lira only fleeting respite. Traders scoffed at a smaller South African rate hike. Euro zone bond vigilantes folded at the ECB’s commitment to preserve the euro. But FX traders look set to test central banks’ capacity to defend EM currencies.
Fiat-Chrysler debut marred by Agnelli power grab 29 Jan 2014 The Italian carmaker not only bought its U.S. rival on the cheap. It’s also creating a “loyalty scheme” giving long-term holders extra voting rights. That may help ward off activist investors. But it could also boost the founding family’s control from 30 pct to more than 40 pct.
Carney deals intellectual blow to Scots’ secession 29 Jan 2014 The governor of the Bank of England studiously avoided criticising the idea of Scottish independence in his Edinburgh speech. But he said currency unions need watertight fiscal rules to work properly. As the euro zone is finding, that implies more political union - not less.
Barnier’s bank-split snafu mars his achievements 29 Jan 2014 Brussels’ financial tsar will soon move on, having made tangible progress on resolution, capital requirements and trading. But the European commissioner’s prop trading ban and curbs on market-making leave far too many grey areas. It needs a rewrite – which it will certainly get.
Edward Hadas: Don’t be afraid of deflation 29 Jan 2014 Christine Lagarde is wrong to call deflation an ogre. There’s no chance of falling into a destructive cycle of debt deflation, and mild deflation does no economic harm. If she wants to slay a monster, the IMF chief should take aim at the real beast – debt.
Turkish central bank in “whatever it takes” moment 29 Jan 2014 The massive overnight hike in interest rates aims to end the lira’s free fall. It soothes concerns about the central bank’s independence and will reassure foreign investors. But it can only work if the government seizes the chance to tackle the economy’s real defects.
Sainsbury’s succession scepticism is overdone 29 Jan 2014 Justin King could have gone on for longer as the retailer’s CEO. But a decade is the natural point to be stepping down. New market dynamics call for fresh leadership; internal succession makes sense in a company that isn’t broken. The negative market reaction looks knee-jerk.
UK GDP another blow for economics’ physics envy 28 Jan 2014 The latest growth figure - 1.9 percent for 2013 - was in line with most recent expectations. But that’s three times faster than the consensus in March. The UK’s fast turnaround is a typical forecasting failure for a would-be science that’s putting too much faith in faulty models.
In Europe, job destruction creates inequality 28 Jan 2014 Inequality, not traditionally a big issue in the EU, is gaining ground. Unemployment is increasing, especially among the vulnerable, and the fragile economic recovery is unlikely to recreate lost jobs. This will widen the rich-poor divide, turning it into a key problem for Europe.
Panama Canal can and should avoid project meltdown 28 Jan 2014 Work has slowed down to a crawl over a cost overrun dispute. Both sides have a strong incentive to fix the problem. The key question is how to finance the remaining costs while an arbitrator decides who owes what. Any solution is likely to pile more risk on the contractors.
ECB might be the most effective big central bank 28 Jan 2014 The Frankfurt institution gets less respect than the Federal Reserve, and trails both the Fed and the Bank of Japan in asset purchases. But the ECB has successfully pushed for reforms that really help the economy. Next step: find low-pain ways to write down sovereign debts.
Europe’s big bond traders lose out to Wall Street 28 Jan 2014 Both U.S. and European banks have to comply with new “leverage ratios.” But traditional business models mean firms like Deutsche Bank have to do more deleveraging than American rivals. Already, hard-won portions of the fixed-income pie are disappearing across the Atlantic.
Canadian bid does F&C shareholders a favour 28 Jan 2014 The venerable London fund manager saw assets fall for two years running. Its shares have traded well below peers’ and it is relatively small. There are some recent brighter signs. But investors will find it easy to accept a 708 mln stg takeover offer from BMO, the Montreal bank.
Market contagion argues for central bank caution 27 Jan 2014 Trouble in a few emerging market hot spots has turned into a wider rout. Investors began the year talking of a return to more discriminating judgments, but quickly relapsed into old “risk on-risk off” trading ways. Wise central bankers will tighten policy very slowly.
Google’s latest deal makes uncharacteristic sense 27 Jan 2014 The web giant is paying $662 mln for DeepMind Technologies, a UK startup with no sales. But compared to purchases of Nest and Boston Dynamics, the firm’s focus on using neuroscience to teach machines to learn sits firmly in Google’s core business. It’s the next frontier for search.
Bank bail-in dogs are only sleeping 27 Jan 2014 The punishment of bank creditors in the Cyprus bailout, and EU plans to “bail-in” the bondholders of failing lenders, mean that bank debt is no longer safe. Investors aren’t fretting – which is a mixed blessing. Cheap funds help banks lend. But markets may not always be so kind.
Merck share price slump pumps up M&A pressure 27 Jan 2014 Is anyone worth 880 million euros? Merck stock dropped 10 percent after its finance chief left abruptly. The plunge reflects the German pharma group’s challenges and inflated hopes of transformative M&A. Quick completion of its AZ Electronics purchase would calm fraying nerves.
Proof of potash cartel revival will be in pricing 27 Jan 2014 New Kremlin-backed owners at Russia’s Uralkali, the world’s biggest potash producer, appear open to reviving a marketing alliance with Belarus. But it’s far from a done deal. Even if the cartel returns, it’s unlikely to survive long once BHP Billiton enters the business.
Markets could be their own worst enemy in fear binge 27 Jan 2014 A predictable Argentine crisis and an expected Chinese slowdown triggered panic selling in lower quality assets. As yet, it’s just catchup with imperfect reality. But if investors don’t calm down - and central banks stay still - markets could spark the crisis they fear most.