Draghi offers gift euro zone doesn’t need 11 Mar 2016 The ECB chief will soon buy corporate bonds. This should make borrowing cheaper for banks and small companies. But bond yields are already low and companies may use Mario Draghi’s largesse for M&A and share buybacks rather than useful investment. A small programme may be best.
Draghi pulls a risky rabbit out of his hat 10 Mar 2016 The ECB chief cut rates, said non-bank corporate bonds could qualify for a larger asset buying programme, and flagged new long-term loans. The good news is Mario Draghi is willing to go the extra mile. The bad: he may encourage excessive risk-taking without lifting inflation.
China hasn’t yet won fight against FX flight 7 Mar 2016 Foreign exchange reserves shrank by less than $30 bln to a still-massive $3.2 trln in February. The decline is slower than in recent months, suggesting efforts to talk up the yuan and discourage outflows are working. Long-term pressure on the currency, though, remains downward.
Spanish debt hangover easing but still painful 7 Mar 2016 Private debt has been falling since 2010 but is still high at 175 pct of GDP. Over-indebted companies are finally cleaning up balance sheets. Lenders may soon be able to increase net lending, which would be good for their earnings – though maybe not for a still-leveraged economy.
Portugal squall maps new territory in euro crisis 24 Feb 2016 The state’s left-wing government has reassured bond markets by passing an emergency budget and buying back debt. Yet the recent spike in bond yields shows Portugal remains vulnerable to high debt and low growth. And it shows that the calm from the ECB’s bond-buying can be broken.
Nordic bank low-rate survival kit is hard to copy 18 Feb 2016 Swedish and Danish banks have been dealing with negative policy rates for a while. But they have fee-driven business, low costs and strong capital ratios. They offer only a partial guide for European or Japanese peers for whom sub-zero interest rates are more novel.
Oil slump seriously harms Saudi Arabia’s health 1 Feb 2016 Big cuts to healthcare spending show the many ways in which low prices are putting strain on the Kingdom’s economy. Treating Saudi’s population of diabetics would absorb 15 percent of oil export revenue at $20 a barrel. Private investors will be needed to fill the gap.
Italy’s bad bank fit for its one real purpose 29 Jan 2016 The new plan to get bad loans off banks’ books is mind-bendingly complex. But the inputs are quite simple: banks’ desperation, investor greed and rating-agency whims. The lender where it’s most likely to work is Monte dei Paschi di Siena, which happens to be Italy’s biggest woe.
EU tax reform is flawed – get used to it 28 Jan 2016 European measures to kybosh flagrant corporate tax avoidance schemes look broadly welcome. Without global agreements, though, disparities will always let the likes of Apple and Alphabet whittle down bills. And binding sovereign countries to one approach is akin to herding cats.
Draghi’s words speak louder than his actions 21 Jan 2016 European Central Bank President Mario Draghi has driven euro and regional bond yields down by dangling the prospect of policy easing in March. But as with the bond-buying he unveiled a year ago, markets may be less impressed when the actual policy details emerge.
Sweden can be trailblazer for global rate-setters 19 Jan 2016 Small countries sometimes lead the way in monetary policy. Sweden can begin to challenge the global obsession with inflation-targeting by pursuing central bank reforms outlined in a new report co-authored by former Bank of England chief Mervyn King. This shift is overdue.
Gulf states are on a collision course with tax 23 Dec 2015 Wealthy populations in Arab sheikhdoms have mostly been spared taxation. Falling oil prices make that untenable. Laws are being drafted in the UAE for new levies on companies and consumers to offset falling revenue. Other countries in the region will follow.
The Fed may be cutting rates again within a year 17 Dec 2015 With official U.S. money finally costing something, there’s a risk that market overreaction saps funding in emerging markets and hurts exports as global demand softens. While a swift retreat might be insignificant on paper, it would harm the central bank’s credibility.
Euro banks’ post-Fed good cheer looks short-lived 17 Dec 2015 European bank shares are up after the U.S. rate rise, aided by hints that future increases will be gradual. But EU rates won’t follow anytime soon, and $9.8 trln of non-U.S. dollar credit could get harder to service. Nor is the pace of future Fed hikes set in stone.
South Africa’s Zuma discount is entrenched 14 Dec 2015 Assets of Africa’s second-largest economy are up after President Jacob Zuma’s rethink on a new finance minister. But 10-year bonds and shares are yet to recover all their losses. As the U.S. prepares to hike rates, the government has lost credibility at just the wrong time.
Far-right poll success jeopardises French reforms 7 Dec 2015 Marine Le Pen’s National Front won more votes than mainstream rivals in the first round of regional elections. Anti-euro and anti-immigration, the party espouses protectionism and state intervention. Its rise may force the ruling Socialists to rethink economic reform plans.
Congress punts gas tax hike in favor of bank raid 3 Dec 2015 A $305 bln transport spending plan may soon be law. Rather than raise the absurdly low U.S. fuel levy, though, lawmakers are plugging a $70 bln shortfall by swiping the Fed’s rainy-day funds and dividends it pays lenders. Creative, perhaps – but it’s no long-term solution.
Mario Draghi is central banking’s tragic hero 3 Dec 2015 Despite new easing measures, the ECB chief’s fight to revive inflation looks doomed. Forces beyond his control, such as oil prices, are too strong. Markets are moving against him. Draghi is admirably determined, but will probably be remembered for trying rather than succeeding.
Dollar peg remains Saudi Arabia’s best option 27 Nov 2015 Saudi Arabia is under pressure to break its currency peg with the dollar. The inflexible riyal means Saudi can’t devalue to offset weak oil prices. But given Riyadh’s huge forex reserves, the risks of moving to a floating currency still outweigh the rewards.
ECB has bright idea for targeted bank-bashing 26 Nov 2015 Imposing a staggered penalty on banks that hoard cash is one of many ways to ease policy being discussed by the European Central Bank. Such levies have drawbacks. But at least a split-level charge would encourage the biggest hoarders to boost cross-border lending.