Dull Dutch economy is euro zone’s newest drag 15 Aug 2013 Triple-A rated Netherlands is starting to stand out, in a bad way. The 0.2 pct GDP fall in the second quarter provided an unhealthy reminder of the slow recovery from a housing boom and bust. The country is fundamentally sound, but there’s more pain to come.
Euro zone recovery isn’t real yet 14 Aug 2013 It’s cheering to see the euro zone exit recession after six quarters of falling GDP. The monthly momentum is encouraging too. But output is still 3 pct below its peak and increasing at about a 1 pct annual rate. It’s hard to believe in more than a feeble revival for now.
Battered E.ON and RWE still far from bottom 14 Aug 2013 The inexorable rise of renewable energy is fundamentally challenging German utilities’ business model, devaluing past investment and cutting back future profit. E.ON and RWE are just starting a long downsizing. The adjustment will be painful for already suffering investors.
Edward Hadas: UK’s economic woes are basically social 14 Aug 2013 Britain’s poor fiscal position and high inflation rate don’t match with the country’s status as global leader in high-value services. It should look more like Switzerland, trying to keep the currency from rising. The real problem: the residues of old class conflict.
Decoupling of UK bonds and CDS can be sustained 13 Aug 2013 The gap between British and German sovereign yields has increased, yet the cost of insuring against UK default has fallen almost to the low German level. After years when sovereign bond spreads and CDS often widened in lockstep, it’s evidence of a durable normalisation.
European CEOs should avoid starving capex for divis 13 Aug 2013 Corporate Europe is struggling to grow earnings as fast as dividends. That won’t matter if revenue picks up. The risk is that CEOs cut capex to protect precious income-growth records. It would be better to swallow payout pride today than cut investment in the payouts of tomorrow.
UK inflation is too high for zero rates 13 Aug 2013 The 2.8 pct rate was expected, but it is embarrassing for a central bank with a 2 pct target and ultra-stimulative policy. Now add in improving GDP, a big trade deficit and steadily increasing house price inflation. The UK has the wrong finances for its economy.
Late-payment fines release zero value 12 Aug 2013 The UK government might get tough on businesses that are slow to pay suppliers. The utopian goal is economically almost nonsensical, because it wouldn’t change the overall cost of financing. Politicians would do better to focus on keeping the banking system well capitalised.
Sterling flirts with safe-haven status 12 Aug 2013 The pound has a lot against it, including dovish central bank rhetoric, but Britain is returning to growth as the euro zone struggles. And while the U.S. may soon taper QE, the UK has already parked the policy. The cheap British currency looks like a good bet.
EU cap could reopen bank bonus wounds 12 Aug 2013 Europe’s misguided bonus cap has forced banks back to the drawing board on pay. They are sounding out investors about the least damaging way of complying with the rules. Higher base salaries are likely. But shareholders should demand tougher conditions for variable pay in return.
Prudential can put domicile issue on back burner 12 Aug 2013 The UK-based insurer is meeting cash-generation targets for its fast-growing Asian business. Ultimately it needs to decide if it should move its HQ there. But with the shares strong and potentially harmful EU reform up in the air, Pru can do without radical changes of emphasis.
Carlos Slim offers escape route to KPN investors 9 Aug 2013 America Movil, controlled by the Mexican mogul, intends to offer 7.2 bln euros to buy out the 70 pct of the Dutch telco it doesn’t own. Shares in KPN jumped to price in a deliverable deal. KPN could push Slim higher. But with all the doubts, investors who can take profits should.
Triple challenge forces Tesco’s Chinese retreat 9 Aug 2013 As Asian consumers become more prosperous, the UK group’s decision to fold its Chinese stores into a local joint venture seems odd. But old world grocery groups are grappling with low returns, stiffer competition, and web threats. Tesco’s response is disappointing but realistic.
Angry aluminium users should sue the Fed as well 9 Aug 2013 Lawsuits against JPMorgan, Glencore and Goldman allege they all artificially pumped up aluminium prices by keeping metal off the market. The ire is understandable, but some of it should be directed at central bankers. Their low rates make hoarding profitable.
Rio’s asset sale woes another case of bad timing 8 Aug 2013 The miner overpaid on acquisitions in the boom years. Now that the cycle has turned, planned sales - of a Canadian iron-ore mine, the diamonds business and some duff aluminium smelters - have stalled. The delay is not a disaster, but shows how vital timing is to miners’ returns.
Carney should worry about why Britain is different 8 Aug 2013 Forward guidance, the big idea of the new Bank of England boss, doesn’t address the UK’s biggest monetary problem - steadily higher inflation than peers. It’s hard to keep price rises down to 2 pct with the mix of weak currency, high dependence on imports and economic rigidity.
Nestle miss leaves the shares less than appetising 8 Aug 2013 The Swiss food group says it may fall short of its long-term 5 to 6 pct revenue growth target this year, after achieving only 4 pct in the first half. Investors should ask whether premium-rated Nestle is finding its diverse portfolio of business too broad to manage effectively.
Commerzbank recovery starts to convince 8 Aug 2013 Germany’s second-largest lender has delivered on its promises in the first half of 2013. Its restructuring plan remains in its infancy and for now is inflicting big charges. Complete transformation is still years away. But the investment story is getting easier to believe in.
Monte dei Paschi rescue tests Europe’s resolve 8 Aug 2013 The European Commission has been sniffy about the Italian lender’s bailout. That’s no surprise, given Brussels is toughening state-aid rules to prevent cushy bailouts. But the Commission faces a tricky balancing act between fixing MPS and causing political trauma in Italy.
Norway could make more of its huge oil fortune 8 Aug 2013 The Nordic state has the world’s largest sovereign wealth fund and one of the simplest investment strategies. Ahead of a general election, reforms are being mooted. It should review its largely passive approach, and take fewer bets on a wider variety of asset classes.