ECB’s inflation-fighting hose may have a blockage 20 Feb 2023 The central bank has hiked rates by 3 percentage points since July, pushing up corporate borrowing costs and squeezing demand for credit. Yet firms and households have longer-term debt than in the past. That means tighter monetary policy will take a while to cool the economy.
Even a weak Russia is a problem for Europe 20 Feb 2023 A year after Vladimir Putin invaded Ukraine, Europe seems destined for an arms race and further economic decoupling from its neighbour. But extra defence spending, lost business and rebuilding costs will be minor compared to a scenario where Moscow crushes Kyiv, says Hugo Dixon.
Hydrogen is elemental to U.S.-EU green compromise 10 Feb 2023 Joe Biden’s Inflation Reduction Act has raised fears of a transatlantic subsidy spat. The sustainably produced version of hydrogen may be a way to de-escalate tensions. Because it’s a potential jobs engine rather than a current one, both sides have scope for a face-saving deal.
Europe is playing catch-up in green subsidy race 9 Feb 2023 The U.S. unveiled $369 bln of climate subsidies for consumers and manufacturers. In this Viewsroom podcast, Breakingviews columnists explain why Brussels may need to launch a similarly ambitious plan or risk losing its share of jobs of the future.
How investors can profit from Fed-ECB divergence 7 Feb 2023 As America flirts with a recession, the U.S. central bank is set to stop tightening as interest rates near 5%. That will leave ECB President Christine Lagarde as the West’s most hawkish policymaker. The transatlantic split is an opportunity for traders who bet on European assets.
China ban would slow, not halt, Western solar push 3 Feb 2023 Reacting to the chip war, Beijing may ban the export of technology for making solar panels, a $235 bln sector it currently dominates. Yet the West already has green energy know-how. Creating a rival industry without Chinese expertise may be slower and costlier but not impossible.
Markets gulp down central banks’ half-full glass 2 Feb 2023 Three of the world’s most prominent central banks raised interest rates to multi-year highs this week. Investors loved it, reading the decisions as the beginning of the end for monetary tightening. Policymakers, and stubborn inflation, might prove them wrong.
Italy may hold key to unlock EU green subsidies 1 Feb 2023 Europe’s response to the U.S. green-subsidy surge now hinges on tapping existing budgets, rather than new money. Ursula von der Leyen wants to channel unspent pandemic billions into tax credits and tweak state aid. Italy’s Giorgia Meloni may be the one to broker a deal.
Europe’s autos have weak defences against China 1 Feb 2023 Carmakers like Stellantis and Volkswagen are facing greater competition on their home turf from Chinese rivals. Higher tariffs or government subsidies might soothe the pain, but could also prompt a backlash in the Middle Kingdom. And Europe may even welcome the competition.
Euro zone can afford to keep fiscal taps running 31 Jan 2023 The bloc’s governments pumped up spending by 3.75% of GDP over the past two years to cushion the blow of Covid-19 and higher energy prices. Now they are closing the spigots. That’s a mistake. Manageable debt costs leave room to support growth – and help the ECB fight inflation.
European gas savings success hides darker reality 27 Jan 2023 Spurred by soaring prices, the continent used 12% less of the fossil fuel in 2022. Despite a push to conserve energy, much of the drop was due to companies switching to other pollutants or shutting plants. Gas-hungry sectors like chemicals and steel face a protracted struggle.
Three carry trades for a new monetary policy era 27 Jan 2023 Central banks’ moves mean that investors borrowing money in yen and placing it in U.S. assets – a once-popular “carry trade” – are no longer onto a sure-fire winner. They can do better by shorting the euro and investing in Mexico, Brazil or Hungary.
IPO bankers may as well hit the beach until autumn 26 Jan 2023 A handful of mid-sized European companies are working on stock market debuts. But the upcoming share offerings are too small to reopen Europe’s drowsy equity capital markets. Regional ECM bankers may as well take to their sun loungers until things pick up in the third quarter.
Euro-banks have done their time in valuation jail 26 Jan 2023 Deutsche Bank, BNP Paribas and peers are valued by investors as if they are headed for a bruising slump. Yet the region’s lenders have been treading more cautiously than they did before the 2008 crisis, and have pared back risky trades. Their rehabilitation deserves more credit.
High-flying airlines still face stiff headwinds 25 Jan 2023 EasyJet shares surged on improved expectations, as rising numbers of holiday-goers look set to push the sector back into the black. But recent meltdowns show air travel has an increasing problem with tech glitches. It’s premature for investors to settle back in their seats.
EU debt fears hinder U.S. green subsidies riposte 24 Jan 2023 Ursula von der Leyen has pledged a European response to protectionist U.S. energy handouts. The European Commission president can improve permitting speed and offer token subsidies. But her best weapon, a permanent form of the EU-wide pandemic bond-sale programme, is far off.
Expansionist dreams threaten ECB digital euro plan 17 Jan 2023 As the European Central Bank develops its own online currency, politicians want a big say. Hostility from some rubs against the ECB’s cautious enthusiasm. Yet if political forces push a digital euro to be more global than the ECB is ready for, it may weaken financial stability.
UK has wrong approach to EU-style strike limits 16 Jan 2023 British PM Rishi Sunak wants to force minimum service levels during public sector strikes, as exist in the rest of Europe. But the plan is too broad and coercive, looking like a knee-jerk reaction to the current unrest. It needs to be better thought-out, in a pacified atmosphere.
European stocks will defy bonds’ revival 16 Jan 2023 In the past decade, Western equities delivered far better returns than bonds. An ongoing central bank crusade to fight inflation points to a fixed income comeback in 2023. Yet cheap valuations and ECB rates hesitancy will help European stocks steal a march on local bonds.
Global energy prices face a turbulent 2023 12 Jan 2023 The cost of natural gas has halved from a peak last year thanks to warmer weather and bulky European stores. In this Viewsroom podcast, Breakingviews columnists discuss why it’s too early for companies and households to rule out further supply shocks and price volatility.