UK inflation is too high for zero rates 13 Aug 2013 The 2.8 pct rate was expected, but it is embarrassing for a central bank with a 2 pct target and ultra-stimulative policy. Now add in improving GDP, a big trade deficit and steadily increasing house price inflation. The UK has the wrong finances for its economy.
Indian banks teeter on asset-quality abyss 13 Aug 2013 Bad loans at the country’s 10 largest state-controlled banks have doubled in two years. Now rising short-term bond yields are crimping earnings, making it harder to write off credit losses. The solution is to recapitalize the banking system, but New Delhi doesn’t have the money.
Fed front-runners can’t yet rule out a dark horse 12 Aug 2013 The president coyly hinted at other possible candidates for central bank chairman beyond Larry Summers and Janet Yellen, the two apparent favorites. Several other clearly qualified economists could be tapped. Who knows, maybe even Ben Bernanke could be persuaded to stick around.
Late-payment fines release zero value 12 Aug 2013 The UK government might get tough on businesses that are slow to pay suppliers. The utopian goal is economically almost nonsensical, because it wouldn’t change the overall cost of financing. Politicians would do better to focus on keeping the banking system well capitalised.
Sterling flirts with safe-haven status 12 Aug 2013 The pound has a lot against it, including dovish central bank rhetoric, but Britain is returning to growth as the euro zone struggles. And while the U.S. may soon taper QE, the UK has already parked the policy. The cheap British currency looks like a good bet.
EU cap could reopen bank bonus wounds 12 Aug 2013 Europe’s misguided bonus cap has forced banks back to the drawing board on pay. They are sounding out investors about the least damaging way of complying with the rules. Higher base salaries are likely. But shareholders should demand tougher conditions for variable pay in return.
Li Ning hits gruelling part of TPG fitness plan 12 Aug 2013 The Chinese sports brand has toned up since the buyout firm took charge, slimming losses and shedding inventory in the first half. But new investments, including the tie-up with basketball star Dwyane Wade, are yet to deliver results. Investors aren’t giving Li Ning much credit.
Triple challenge forces Tesco’s Chinese retreat 9 Aug 2013 As Asian consumers become more prosperous, the UK group’s decision to fold its Chinese stores into a local joint venture seems odd. But old world grocery groups are grappling with low returns, stiffer competition, and web threats. Tesco’s response is disappointing but realistic.
Two-child policy may be too late for China 9 Aug 2013 More children would counter the country’s ageing population and shrinking workforce. But relaxing the one-child policy may not reverse the decline in the birth rate caused by rising prosperity. Besides, the economic impact of a few million extra babies a year would be marginal.
Carney should worry about why Britain is different 8 Aug 2013 Forward guidance, the big idea of the new Bank of England boss, doesn’t address the UK’s biggest monetary problem - steadily higher inflation than peers. It’s hard to keep price rises down to 2 pct with the mix of weak currency, high dependence on imports and economic rigidity.
India’s rupee rescue is more prayer than plan 8 Aug 2013 The defence of the falling currency is three-pronged: reluctantly shore up interest rates, squeeze gold imports and score some quick export gains. But officials are clutching at straws. There is no easy way to finance India’s large trade gap, nor a painless way to lower it.
Japan Index: A second setback for Abe’s experiment 8 Aug 2013 The Breakingviews Abenomics Index has fallen for a second successive month, hitting its lowest level this year in June. Japan’s jittery bond markets and sliding inflation expectations were the culprits. But other indicators still suggest the end of deflation is near.
BoE guidance at risk of quick inflation knockout 7 Aug 2013 In setting a 7 pct unemployment-rate threshold for tighter policy, the UK central bank’s new Governor Mark Carney brings a de facto dual mandate. But his guidance weakens the inflation target, probably won’t hold yields down, and will have to be abandoned if prices keep rising.
Gold warns markets of an anxious September 7 Aug 2013 As in April, the yellow metal’s slide to a three-week low suggests broader troubles for markets. Better U.S. data means Fed asset purchases could be reduced in September. Less central bank cash is good for the dollar - and bad for most other global assets.
Investors, chew on this: the world wants more meat 7 Aug 2013 As the world gets richer and more urban, tastes get meatier. That places big demands on a fragile planet. But demographics and development also bring financial opportunity. The investment menu runs from fertilisers, seeds and irrigators, and now to burgers grown in the lab.
How Raghuram Rajan can end India’s mini-crisis 7 Aug 2013 The former IMF chief economist warned of the credit bubble in 2005. Now he must show he can manage crises as well as he can predict them. The current strategy for ending the rupee’s free fall will choke growth. As India’s next central bank chief, Rajan will need to switch gears.
Fed could do with "Luddite" like India’s Rajan 6 Aug 2013 Larry Summers said a 2005 paper by Raghuram Rajan, then chief IMF economist, was based on a “slightly Luddite” premise: new-style finance increased the risk of crisis. Rajan may actually be more qualified than Summers to run the U.S. central bank. But he’ll do the job for India.
Sony brush-off won’t end Dan Loeb campaign 6 Aug 2013 The Japanese group’s board has politely rejected the activist’s plan to spin off its entertainment arm. But Loeb isn’t backing down: he’s promising other value-creating ideas. Though his courteous tone is a departure from previous campaigns, Sony can’t afford to relax just yet.
Periphery can aspire to Irish-style stagnation 6 Aug 2013 Ireland has long been stuck with an in-and-out mild recession. Tentative green shoots are now sprouting, but Dublin’s dependence on external demand will keep the recovery slow and bumpy. Still, such relative stability is a fair aspiration for the rest of the euro zone periphery.
New-look HSBC beginning to emerge from fog 5 Aug 2013 Lower costs and fewer bad debts in the first half showed the benefits of CEO Stuart Gulliver’s strategy. The absence of regulatory fines also helped. Low interest rates continue to drag on revenue. But the biggest uncertainty concerns the severity of the emerging-market slowdown.