Qatar’s debt bonanza stores up problems for future 27 May 2016 Too much of a good thing could be bad for the Gulf state. It has just raised a whopping $9 billion in the bond market thanks to investors’ hunger for yield. Loading up on debt will help Qatar cope with lower energy prices, but just dodges its biggest problem: lavish spending.
G7 pact offers minimal cover for Abenomics reset 27 May 2016 Shinzo Abe’s plan to revitalise Japan needs a boost. The PM didn’t get as much backing as he might have liked from hosting the club of rich nations. But he may just about be able to spin the summit statement as an endorsement of fiscal stimulus and a tax standstill.
A truly international yuan is a long way off 27 May 2016 New data shows use of the Chinese currency for global payments is declining and has fallen behind the Canadian dollar. China’s plans to internationalise the yuan are at odds with capital controls. Pressure on the yuan makes this a tricky time to liberalise the currency regime.
Bank returns paradox cannot hold 25 May 2016 Why do banks seek double-digit returns when interest rates are so low? The Bank of England is among those wondering. Return expectations may be too high, or banks may still be too risky. Investors don’t appear to care. If they did, banks might face calls to break up.
Trump cheerfully digs deeper hole on his wealth 18 May 2016 The White House wannabe boasts a net worth of over $10 bln and self-declared income of $557 mln. He also insists there’s nothing to see in his actual tax returns. With inequality and job angst driving voter anger, Trump’s braggadocio is characteristically counterintuitive.
Europe treats Italy with pragmatic kid gloves 18 May 2016 Brussels is giving Italy some deficit leeway. The country faces a banking crisis and Prime Minister Matteo Renzi’s job is on the line over a key constitutional reform. Once this hurdle is out of the way, he can get down to tackling debt. That’s worth some fiscal flexibility.
Illinois governor all but summons bond vigilantes 17 May 2016 In an interview with Breakingviews, Republican Bruce Rauner challenged a pervasive belief in markets that governments can always just raise taxes to plug deficits. The issue resonates beyond his state’s $140 bln fiscal mess. Debt investors have neglected to focus political minds.
Abenomics has over-promised and under-delivered 17 May 2016 Shinzo Abe has spent more than three years pushing for higher growth, faster inflation and a nimbler economy. But success eludes the Japanese prime minister, who has been too timid with the public purse. Keeping the project going calls for extra spending and even easier money.
Money trail shows China sticking to bad habits 16 May 2016 Total credit jumped again in April, suggesting Beijing is making little progress weaning the economy off its addiction to debt. Infrastructure and property investment are still expanding quickly. Despite renewed talk of reform, growth still seems to be the main priority.
India’s Modi can reclaim his "wow" factor 16 May 2016 Two years after a landslide election, business executives are losing confidence in Prime Minister Narendra Modi. Passing a bankruptcy code last week was a major achievement but other landmark reforms look harder to achieve unless Modi reins in his party from divisive politicking.
China trade spat risks blowing out of proportion 13 May 2016 Europe’s parliament voted against granting China “market economy status” at the World Trade Organisation. Yet the move only affects potential anti-dumping defences on 1.4 pct of bilateral trade. China and its partners are attaching too much symbolic importance to the issue.
Brazil tries new Olympic event: the fiscal dash 13 May 2016 Interim President Michel Temer has grabbed the baton from hapless Dilma Rousseff less than 90 days before the Rio games begin. That’s also roughly how long he may have to get fiscal reforms moving in Latin America’s No. 1 economy before political discord or scandal slow him down.
Trump tries morphing political fantasy into reality 12 May 2016 The White House hopeful had a kumbaya moment with GOP leaders. He has also dialed back some of his ideas on taxes, entitlements and U.S. debt. Broadening his appeal is key to wooing party elders, donors and voters. The biggest obstacle to the balancing act is Trump himself.
Star status is Philippines’ to lose 9 May 2016 The former sick man of Asia is in rude economic health. But a motley crew are vying for votes in Monday’s election, including a Trump-like strongman and the daughter of a film star. If outgoing President Aquino’s reform drive is abandoned, foreign investors may bail out.
India shows China the way to deal with bad debt 6 May 2016 State-backed banks in both countries have lent too much to politically connected companies that are now in trouble. While India is pushing lenders to come clean, China is still not admitting the extent of the problem. Future growth depends on a proper cleanup.
Meirelles’ magic touch may offer Brazil new hope 4 May 2016 The former central bank chief, an investor favorite, is likely to become finance minister of Latin America’s No. 1 economy if President Rousseff steps down. At best, he could restore confidence and kick-start a recovery. But political discord and scandal may stymie his efforts.
Financiers may want to keep a closer eye on Trump 4 May 2016 The bellicose real-estate mogul has all but sewed up the Republican presidential nomination. Markets are pricing in a Hillary Clinton victory, however, as Carlyle’s David Rubenstein told an elite Beverly Hills gathering. Trump doubters have learned how the odds can swing quickly.
Euro zone needs better glue than Canadian kindness 29 Apr 2016 Portugal’s eligibility for ECB bond-buying hangs on the rating of Toronto-based agency DBRS. Effectively, the ECB has outsourced the decision of whether to cut off a country. It works to a point: it’s hard to imagine the ECB abandoning Italy or France whatever their ratings.
Investment is real star of strong French growth 29 Apr 2016 GDP increased by a surprisingly robust 0.5 percent in the first quarter, boosted by the biggest rise in household spending in more than a decade. Nationwide shopping sprees may just be the flipside of the frugal end to last year. The pickup in investment is far more cheering.
Will retirees get just 4 pct long-term returns? 28 Apr 2016 That’s a scenario laid out in a new McKinsey Global Institute report. The idea is that returns in recent decades – and expectations that are still above 7 pct – have been inflated by effects that are now disappearing. If so, Gen Xers will retire even poorer than they expect.