United States of America

Asian equity sell-off reflects three flavours of fear

9 Aug 2011

While the region’s economies are in good shape, investors fear the impact of a U.S. recession - both on exports, which remain key to growth, and on closely linked capital markets. A third worry is that plunging asset prices could cause a real pullback in credit and investment.

Fed’s firm compass setting puts it all at sea

9 Aug 2011

The FOMC’s decision to keep rates ultra-low till mid-2013 suggests excessive faith in its forecasting power. Inflation, jobs and growth have already surprised the Fed this year. Locking in a course for two years as a sop to markets only makes it harder to navigate choppy waters.

China’s diatribe on U.S. debt could backfire

8 Aug 2011

Official media’s sharp criticism may help shift domestic focus to U.S. economic woes and away from China’s train crash. But using the situation to attack Washington’s military policy in Asia won’t work. If anything, the tirade risks inviting U.S. pressure on trade and currency.

ECB’s bazooka has a limited shelf life

8 Aug 2011

The central bank’s decision to buy Italian and Spanish bonds has calmed investors’ nerves. But the ECB is only buying time until the euro zone governments’ bailout facility is ready to step in. And the repercussions of Friday’s U.S. ratings downgrade could limit future rescues.

BofA leads banks back into mortgage abyss

8 Aug 2011

Its shares fell 15 pct after the U.S. debt downgrade and AIG’s $10 bln home-loan lawsuit. Other mortgage-heavy banks were hit, but none as bad as BofA. Investors now reckon it’s worth $135 bln less than breakup value. That’s a huge housing hole for CEO Brian Moynihan to escape.

Don’t blame S&P for the madness of markets

8 Aug 2011

The credit rating agency targeted U.S. debt, but it was stocks not Treasuries that got clobbered. The counterintuitive reaction is less bonkers than it seems. An economic slowdown combined with dithering leaders and limited central bank resources is a bad mix for risky assets.

Different duty may call for U.S. Treasury boss

8 Aug 2011

There was little upside for the president to let Tim Geithner go back to New York. Finding a replacement would be a political pain. And with markets nervous, Obama needs someone with crisis experience. But Geithner may have a smaller role in this latest stage of the crisis.

Timing of S&P U.S. downgrade couldn’t be better

6 Aug 2011

Markets may be wobbly, but interest rates are at historic lows and buyers of U.S. debt plentiful as the world braces for another economic slowdown. There may be some initial turbulence, but it would be worse for Uncle Sam if the rating agency waited until markets acted first.

Credit ratings love-hate has simple answer

6 Aug 2011

The White House doesn’t like S&P’s downgrade of U.S. debt. European officials don’t welcome critiques of sovereign credit, either. Yet governments also mostly want to hold big raters closer by regulating them. The better idea is to push through nascent efforts to cut them loose.

US jobs report reaffirms the pain of a new normal

5 Aug 2011

July’s 117,000 new jobs may have stopped investors from panicking further, but they do little to dispel the gloom about the economy’s prospects. Fears of a double-dip recession look premature. But the data confirm the arduous task ahead of getting Americans back to work.

Investors in Motown see nothing but recession

4 Aug 2011

GM posted its best earnings in years and Ford’s looking solid even with subdued U.S. sales. Both are sitting on piles of cash. Yet shareholders have wiped a combined $49 bln off their value since January amid economic worries. They’re right to be cautious. But it looks overdone.

Voting equality could bring big payoff for Murdoch

3 Aug 2011

Change is needed at News Corp. Scrapping the dual share structure would signal a fresh start and could create a big slug of value. Reform could also reward the Murdochs handsomely for ceding control. A rejig would dilute today’s non-voters, but even they might end up ahead.

Corzine covenant smacks more of PR than protection

3 Aug 2011

Bondholder activism is a good thing. But investors in MF Global’s $300 mln offering have only $3 mln a year to gain and little to obviously lose if the former Goldman Sachs boss and New Jersey governor heads to Washington. This key-man clause benefits Corzine more than creditors.

Debt deal suggests ideal successor for Geithner

2 Aug 2011

The U.S Treasury boss may go now that Congress has reached agreement. But the conclusions of last year’s deficit commission, jointly led by Erskine Bowles, are back in focus. Obama snubbed the former Clinton official’s fiscal ideas then - but might see the value of a rethink.

Investors right to shake up S&P parent

2 Aug 2011

An Ontario pension fund and JANA Partners have bought 5 pct of McGraw-Hill and want strategic changes. The $13 bln textbook-to-credit rating group trades at a discount and is already considering its options, but restless investors may force action sooner rather than later.

Loss of bankruptcy card would weaken cities’ hand

2 Aug 2011

In high-stakes talks with unions and bondholders, the threat to file for protection in U.S. court gives local officials leverage. But states are blocking that option, fearing it spooks markets. For teetering local governments, the alternatives may be costly defaults or bailouts.

Sweeter PR not enough to revitalize M&A deal

1 Aug 2011

U.S. reinsurer Validus may hope that by switching flacks in the heat of battle it can persuade its shareholders to like the bid for $3.2 bln rival Transatlantic they have so far scorned. But messaging doesn’t win deals, numbers do. On that score, Validus isn’t far enough ahead.

Weak U.S. growth could swamp $1 trln deal on cuts

1 Aug 2011

The debt ceiling is set to rise. But Friday’s anemic GDP report casts doubt on the associated deficit reductions. On a simple analysis, if the official 3.25 pct economic growth assumption for 2011-16 falls short by 0.5 percentage point, the expected initial cuts disappear.

Bipartisan dislike of U.S. budget deal a good sign

1 Aug 2011

If a sign of compromise is a frown from both sides, then Congress is close to an equitable agreement. Members of both parties have major gripes about the debt deal cooked up by their leaders. Importantly for markets, the compact would maintain momentum for further fiscal fixes.

Foreign borrowing undermines China’s tightening

1 Aug 2011

Better-than-expected factories data shows China hasn’t over-tightened. Beijing has curbed domestic loans, but Hong Kong banks are lending and offshore bond issuance also surged. The practice adds risk for foreign investors, and hinders China’s efforts to squash inflation.