Hugo Dixon: EU needs more non-bank finance 2 Jun 2014 Banks are on the back foot and won’t be able to fund growth on their own. Non-bank finance has to take up the slack. The ECB and Bank of England have identified the importance of securitisation. Similar leadership in other non-bank areas, such as equity capital, is required.
UK’s duff credit easing is still a model for ECB 30 May 2014 The Bank of England’s Funding for Lending scheme isn’t boosting bank credit. A rumoured ECB version will likewise fail to spur a massive wave of lending if demand is weak. But a round of credit easing that cuts elevated peripheral bank funding costs would still be worth a try.
Markets hold breath over Japan taper talk 30 May 2014 The central bank is debating an exit from its record monetary stimulus. A hasty move would risk a repeat of its mistimed 2006 decision to end quantitative easing. Investors think the talk is little more than hot air. Yet any change in expectations could be self-fulfilling.
Low volatility and high doubt hamstring markets 29 May 2014 Trading volumes are dipping in several asset classes. Low price volatility and tougher regulation can be blamed. So can investors’ bruised confidence, after some big bets went awry this year. It’s safer to sit still than to move in what might prove to be the wrong direction.
Negative rates lost potency as ECB dithered 22 May 2014 Talk that the ECB could take its deposit rate into negative territory at its June meeting is growing. Doing so in the heart of the crisis would have been dangerous – but potentially powerful. Now the effect may be muted, and the ECB has better tools at its disposal.
Fed bigwigs short of signs on path to higher rates 21 May 2014 New York’s Dudley thinks interest rates should rise slowly, Philly’s Plosser reckons they should go up faster, and Bullard of St. Louis has crunched numbers implying rates should already be at “normal” levels. Veering off the beaten track has left the Fed uncertain how to return.
ECB deflation omerta hinders EU bank stress tests 20 May 2014 The pan-European financial health check wasn’t credible in 2011 because it didn’t test for investors’ biggest fear – a sovereign default. This year banks won’t be stressed against a deflationary spiral. The common theme: both scenarios would imply the ECB isn’t doing its job.
Asia can give the West a bubble-popping lecture 16 May 2014 Regulators in Asia have been developing tools to smooth economic cycles for years. Yet the debate over “macroprudential” policy in the U.S. and Europe largely ignores this experience. Western regulators haven’t overcome the intellectual myopia that led them into the crisis.
Bond bears’ ordeal will only get worse 15 May 2014 There is more pain in store for investors who have bet on falling bond prices. With the ECB likely to ease and the Fed and BoE unexpectedly dovish, higher rates are a way off. The result is an epic search for yield. Resistance looks futile, but surrender will amplify the trend.
ECB can’t scratch where euro zone really itches 15 May 2014 The euro zone central bank is set to ease policy in June. That might help hold off deflation, although the ECB will be puffing lightly against a global gale. But no monetary policy can do much to perk up the first quarter’s sub-1 percent annual pace of GDP growth.
BoE’s low-rates enthusiasm makes sense for now 14 May 2014 Investors think the UK is almost ready for higher rates but Mark Carney disagrees. The BoE governor still sees slack and thinks his Financial Policy Committee can tackle housing excess. He will try to delay a rise as long as he can. It’s a risky call, but probably right.
China again faces finance’s unsolved problem 14 May 2014 Despite many attempts, nobody knows how to reverse financial excess without severe economic damage. Debts either cause trouble right away or spur more bad behaviour after rescues. China’s state has advantages, which were displayed in a 1998 rescue. Next time could be different.
Markets better renew flagging faith in Draghi 13 May 2014 Financial markets are more convinced by Mario Draghi’s hint of a June easing after reports the Bundesbank could support the move. Traders who are still ruling out a deposit rate cut may want to reconsider if they don’t want to be caught on the wrong side of the ECB.
China’s central bank tames unruly internet finance 12 May 2014 Authorities are reining in the banking ambitions of the country’s web giants. News of potential curbs on online payments and funds has alarmed investors. But by providing some much-needed order in web finance, China’s central bank seems to be endorsing rather than killing it.
Guest view: Fed set to limit inequality it fueled 9 May 2014 By propelling stocks in particular, quantitative easing inadvertently increased the U.S. wealth gap, argues Alexander Friedman, global chief investment officer at UBS Wealth Management. Tapering should help narrow it again. That’s one reason to welcome tighter monetary policy.
Why central bankers won’t change their minds 8 May 2014 The ECB is inadvertently hawkish, the U.S. and UK central banks are perpetual doves, and the Bank of Japan is stuck in monetary stimulus overdrive. The stories differ, but there is a common theme. With so many variables to balance, change looks riskier than staying the course.
Fed’s glasnost era dies, age 9: an obituary 8 May 2014 The U.S. central bank’s campaign to provide transparent policy guidance has lost its battle with market misinterpretation. Chair Janet Yellen, who helped nurture the effort, and other officials revealed the sad news this week. Its demise leaves investors worldwide bereft.
Pound joins euro as weak dollar victim 8 May 2014 The Federal Reserve keeps printing money and Europe isn’t. That forces the greenback down, and the euro and now sterling up. The euro zone’s deflationary risks are rising while the UK recovery is becoming more unbalanced. When Fed policy finally changes, the UK looks more at risk.
ECB easing would be better this month than next 5 May 2014 The central bank last eased policy half a year ago. It can always find excuses to prevaricate longer. The euro rally has paused, rises in short-term market rates have yet to lift longer ones, inflation is inching up. But the economy needs help, and the quicker the better.
Don’t trust the $20 trillion global GDP uplift 30 Apr 2014 Dollars go further in poorer countries than at home. The World Bank’s latest effort to quantify by how much adds 29 pct to global GDP. But the method, using theoretical exchange rates, is questionable. And the endeavour risks understating the problems of challenged economies.