Central Banks

Strong U.S. equity returns tell wrong story

13 January 2020

The S&P 500 Index rose roughly 30% in 2019, even as over $180 billion drained out of U.S. equity funds. This bumper return is mostly down to falling interest rates – with some help from around $735 billion in stock buybacks. Investors ought to watch flows, not just prices.

Mark Carney has reason to ease before he leaves

13 January 2020

The UK economy grew at its slowest annual pace since 2012 in November. The Bank of England boss has one more policy meeting left before Andrew Bailey takes over. Catching up with recent easing by the U.S. Federal Reserve and European Central Bank would be the best handover gift.

Euro zone bank rally is built on sand

9 January 2020

The bloc’s 20 largest lenders, such as BNP and ING, are worth $84 bln more than in October. Investors believe the ECB is now done with rate cuts, which squeeze profit. But renewed trade frictions could change such thinking. And rising capital requirements will weigh on returns.

Hotter inflation is the best surprise to hope for

2 January 2020

The absence of much price pressure is a head-scratcher for the Fed given the tight U.S. labor market. It’s behind debilitating negative interest rates in Europe and Japan. It’s a problem for pension funds, insurers, savers and banks. A mild return would be unexpected but welcome.

Turkey set for good year before economic reckoning

27 December 2019

More fiscal and central bank stimulus will push growth towards President Tayyip Erdogan’s 5% goal for 2020. Yet inflation will be restrained thanks to lira stability. A credit binge encouraged by Ankara’s policies can last the better part of a year before screeching to a halt.

Beijing will dilute Hong Kong with Shenzhen

27 December 2019

Protests in the former British colony endanger China’s gateway to international markets. Past attempts to turn neighbouring Shenzhen into a rival financial hub have been half-hearted. Now Beijing has reason to press harder, especially with bold reform to capital controls.

China’s e-yuan will be more cryptic than crypto

23 December 2019

Beijing is primed to launch the world's first digital sovereign currency in 2020. The rollout will give authorities a powerful tool to tackle fraud and money laundering. Deploying the breakout innovation into the wheeling-dealing banking system could also aid a cleanup.

New BoE boss is only partly the safe choice

20 December 2019

Andrew Bailey is the next governor of the Bank of England. His CV is more complete than internal rivals, and Brexit arguably means the role needs an unflashy Brit more than a carbon copy of Canadian incumbent Mark Carney. But Bailey will need to prove that his BoE is independent.

Viewsroom: Jack Dorsey’s heroic year ahead

19 December 2019

From banning political ads to developing cryptocurrency plans, the CEO of Twitter and Square has been politically more astute than rivals like Facebook. That sets him up for a good 2020. Also: the different ways that shareholders, the Fed and M&A bankers will tackle climate risk.

Audio feed goof makes BoE look naive – and stingy

19 December 2019

Traders got faster access to Bank of England briefings by paying the contractor responsible for internal broadcasts. The BoE should have better monitored what was happening. But the problem could have been avoided altogether had it invested in overhauling its two-speed system.

Jay Powell has golden chance to avow independence

18 December 2019

The Fed boss can distance himself from President Donald Trump by nudging the U.S. central bank to join a global green network that already includes 51 peers. This will defuse criticism that he has been too malleable on rates. And it may even help to save the planet from frying.

Lebanon’s financial alchemy is losing its magic

18 December 2019

The world’s third most indebted nation – with borrowings north of 150% of GDP – may be careening toward a default and an IMF rescue. A complex financial engineering scheme that propped up the banking system is now sputtering. Local banks and foreign bondholders could take a hit.

Hadas: Maybe Paul Volcker wasn’t all that great

17 December 2019

The U.S. central banker, who died on Dec. 8, supposedly broke the 1970s inflation with recession-inducing high interest rates. After 40 years of falling inflation worldwide, his contribution looks less certain. He also missed an early chance to criticise financial deregulation.

New Bank of England boss may request magic powers

16 December 2019

The name of the UK central bank’s next governor is expected shortly. He or she will hope for a smooth exit from the EU. A badly done Brexit could bring recession, inflation, a currency crisis, fiscal incontinence and political interference. If only there was an effective spell.

ECB feuding will have a new front in coming year

11 December 2019

Christine Lagarde took the helm of the European Central Bank with a promise to review strategy. A debate on how to define its price stability mandate will embolden those rate setters who are fed up of ultra-loose policies. The battle will be bitter and played out in public.

Wall Street finally gets some capital satisfaction

9 December 2019

The likes of JPMorgan, BofA and Goldman Sachs have barely benefited from Trump administration regulatory rollbacks. But recent repo ructions will spur the Fed to change the rules so that banks won’t have to keep as much cash in reserve. It’ll be a small but welcome relief.

Now we’ve lost Paul Volcker, we must find another

9 December 2019

Opposed by politicians and economists, the former Fed chairman raised interest rates, overcoming inflation in the 1980s. A great central banker needs monetary policies that fit their time as well as rarer qualities like determination and integrity. Volcker had both.

Look out for Narendra Modi’s big economic surprise

9 December 2019

India’s prime minister is less than a year into a second term and growth is faltering. There’s a crisis of confidence. He surprised markets in good and bad ways in his first term. Investors should prepare for radical actions his government might take to jump-start India in 2020.

Sweden will manage a singular rate rise

6 December 2019

The Nordic country’s rate setters want to lift the policy rate out of sub-zero territory in December. Sluggish growth, lower inflation and trade weakness mean they face a high burden of proof to justify such a move. Their explanation may not stretch to a second hike anytime soon.

Shinzo Abe fires off another feeble arrow

5 December 2019

Japan’s latest fiscal stimulus package, worth just over $120 billion, will avert stagnation or worse. But a recent consumption tax hike and slower global activity pose risks that policymakers lack the firepower to tackle. Healthy growth and inflation will prove elusive.