Turkey misses easy chance to win credibility 24 Jul 2018 The lira slumped after the central bank left interest rates unchanged. With inflation at 14-year highs, there was every reason to tighten policy. Inaction will only reinforce investors’ concern that President Tayyip Erdogan’s distaste for higher rates is exerting undue influence.
Bank of Japan’s trial balloon shot down on runway 23 Jul 2018 Bond yields and the yen rose after Reuters reported the central bank was debating whether to scale back monetary stimulus. The move would be good for bank investors. But the scale of the market reaction and economic reality will make it hard for Governor Haruhiko Kuroda to act.
Powell is ideal Fed chief for Trumpian times 20 Jul 2018 The U.S. president’s criticism of interest-rate hikes is a challenge to the Federal Reserve’s independence - but it shouldn’t trouble investors. Chair Jerome Powell is politically savvy and has earned bipartisan praise. Not being an econo-wonk like his predecessor probably helps.
Powell could help stiffen Congress’ spine on trade 17 Jul 2018 The Fed chief told lawmakers U.S. tariffs could threaten wage growth, but said it was unpredictable. Trade policy isn’t the Fed’s remit. Politicians are, though, worried at the early effects – yet they don’t want to anger Trump. A stronger steer from Powell might tip the balance.
Boring Chinese GDP data just got interesting again 16 Jul 2018 Economic growth clocked in at 6.7 pct in the second quarter from a year ago, down a tick from earlier this year. The figure has been uncannily steady, making it easy to shrug off. As a trade war and deleveraging bite harder, though, overseas investors should pay closer attention.
China’s flirtation with Europe is a tease 13 Jul 2018 Beijing is wooing continental leaders like Germany’s Angela Merkel, hoping for allies against Trump. Despite some common interests, Brussels is sceptical of China’s market opening gestures, plus it still needs U.S. security guarantees. Sweet free trade nothings won’t cut it.
ECB asset check puts investment banks on the spot 12 Jul 2018 The European Central Bank is probing how lenders including Deutsche Bank, BNP Paribas and Société Générale value illiquid holdings. Like bad debts, regulators want to improve comparability. For the three banks, the result could be higher capital charges on 44 bln euros of assets.
China’s share slump spotlights super-regulator 11 Jul 2018 Exchanges rebounded briefly on reports Beijing might delay investment restrictions due to market ructions. A new regulatory structure put in place after a botched response to the 2015 crash hasn’t overreacted to this year’s 16 pct slump yet. But big problems haven’t been fixed.
China’s offshore debt crackdown adds outflow risk 9 Jul 2018 Officials are curbing dollar bond issuance as the yuan weakens. Regulation of the $775 bln market has always been haphazard. This move looks reactive and clumsy. It will put more downward pressure on a faltering currency, and could inadvertently encourage capital leakage.
Chinese markets have much to fear from fear itself 4 Jul 2018 A stronger dollar largely accounts for a recent 6 pct fall in the yuan, with the central bank managing the pace. Tumbling Chinese stocks can be weathered, and some defaults are healthy. Patience is not one of President Xi’s virtues, though, and panicked intervention is a risk.
Fed lets Goldman, Morgan Stanley off lightly 29 Jun 2018 Neither firm can boost buybacks or dividends after their leverage ratio fell below the stress-test minimum. A one-time hit from last year’s tax changes caused it. But Amex, JPMorgan and others handled that smoothly. The two Wall Street banks are lucky the Fed didn’t flunk them.
Debt relief puts floor under Greek bank pains 28 Jun 2018 A government deal with creditors should lower funding costs for Greece’s big four lenders. With bad loans accounting for 48 percent of lending, normality remains a way off. But ending shareholder angst over debt sustainability could be the first step in banks’ rehabilitation.
Derivatives spat is bad omen for UK-EU regulation 27 Jun 2018 The Bank of England wants European authorities to provide assurance that contracts worth 100 trillion pounds will be valid after Brexit. The EU’s watchdog says banks must prepare for the worst. Playing politics with financial stability bodes ill for future regulatory cooperation.
Trump gives China a fresh excuse to push bailouts 25 Jun 2018 Beijing will release $108 bln into the banking system to calm markets rattled by trade war talk. Unfortunately, officials want lenders to use most of the cash to swap bad debt for equity in ailing state commodity firms. The private sector needs the money more.
BoE wrangle reflects rate setters’ identity crisis 22 Jun 2018 The opposition Labour party wants the Bank of England to include productivity targets in its mandate. The idea seems flawed - monetary policy is a weak tool for boosting efficiency. But it reflects a growing political dissatisfaction with independent yet impotent central banks.
Market swoon undercuts Chinese consumer tale 20 Jun 2018 Mainland stocks are at their lowest in a year, and bonds and the yuan have slumped as fears of a full-blown tariff war intensify. This economy relies less on exports than it used to do, but domestic demand isn’t immune to trade tension. The central bank’s jitters are justified.
Argentina’s road to normality hits more zigzags 15 Jun 2018 The replacement of the central bank chief should help stabilize the peso, along with IMF assistance, despite Thursday’s 6 percent drop. It’s all part of President Macri’s long haul to turn his country’s economic pathology into more mainstream travails. It won’t be smooth going.
ECB staggered retreat from QE makes sense 14 Jun 2018 Europe’s central bank said it would stop adding to its bond portfolio, but hinted rates would stay low. The move averts fears quantitative easing will help Italy’s spendthrift government. But trade wars and a weak euro zone mean it has little choice but to keep its options open.
China starts trading debt for growth 14 Jun 2018 Shadow bank lending slowed sharply in May, and investment growth slipped to just 6.1 pct. For now, Beijing’s target of increasing GDP by 6.5 pct annually is safe. But officials will be thinking about creative ways to keep credit flowing, even as they discourage riskier behaviour.
Fed steps closer to horns of interest-rate dilemma 13 Jun 2018 The U.S. central bank raised rates again as expected. Low unemployment and building inflation will force the Fed to consider how high it should go to prevent overheating – a shift from worrying about keeping rates low to support the economy. Trade wars are another complication.