Central Banks

Central bankers’ new headache is V-shaped

8 Jun 2020

Fed boss Jay Powell and ECB chief Christine Lagarde have succeeded in crushing yield premiums on risky debt. Now optimism about the post-Covid recovery is pushing up interest rates on benchmark U.S. and German government bonds. Squashing those will be their next battle.

Corona Capital: Marijuana

5 Jun 2020

Concise views on the pandemic’s corporate and financial fallout: Cannabis retailers in California miss out on pandemic surge in vices.

Christine Lagarde is having a good crisis

4 Jun 2020

The ECB boss will buy more assets and for longer than initially planned. She is as decisive as her predecessor, Mario Draghi, but luckier. Politicians are splurging to revive economies. Growth will recover faster because fiscal and monetary policies are pulling the same way.

Corona Capital: ZoomInfo IPO, U.S. trade

4 Jun 2020

Concise views on the pandemic’s corporate and financial fallout: ZoomInfo goes public with a big pop despite Covid-19; and America’s goods-trade deficit with Europe will test Washington’s mood.

Corona Capital: Bank fears, Payments M&A, Coal

2 Jun 2020

Concise views on the pandemic’s corporate and financial fallout: A new U.S. regulator wants cities to reopen to prevent bank robberies. Western Union may bid for struggling rival MoneyGram. And the pandemic is hastening the decline of U.S. coal.

Corona Capital: GE cash burn, Macy’s lifeline

28 May 2020

Concise views on the pandemic’s corporate and financial fallout: General Electric’s cash flow will be more negative than expected as Covid-19 damages its aviation and power businesses; and U.S. department-store chain Macy’s borrows more, buying time but not much else.

Kotak cash call shows India Inc’s fear and greed

28 May 2020

A well-subscribed $1 bln share placement is sufficient to defend the richly valued lender against credit-quality doomsday. Barring that, it’s a massive war chest for acquisitions. Boss Uday Kotak, Asia’s richest banker, is prepared for both deep disruption and deep discounts.

Apply political-capital discount to Abe’s cash

27 May 2020

Japan’s prime minister is prepping $930 bln of fresh stimulus. Funds are critical as the economy staggers, but the crisis also offers a golden chance to ram through overdue changes for Japan Inc. Alas, Abe’s sinking popularity hobbles his ability to do much more than spend.

Guest view: Debt crisis will delay global recovery

25 May 2020

The world is facing an emerging market blowup of unprecedented breadth that will damage confidence in the international financial system, former Citibank Chairman William Rhodes and Stuart Mackintosh argue. Easing the blow requires the United States and China to work together.

Stimulus blunder Down Under sends Big Data alert

25 May 2020

Australia overfunded an $85 bln wage subsidy programme due to excessively pessimistic epidemic models and data entry errors. Canberra thought 6.5 mln workers needed help, nearly twice the real number. Others will find it similarly difficult to cut through the noise.

China guts growth goal for greater good

22 May 2020

Beijing has ditched its annual GDP target for the first time. This relieves officials from making up for slumping demand by juicing industrial overcapacity with sloppy credit, and puts employment into focus. What’s good for China will be mixed news for trading partners.

Wall Street front opens wide in U.S.-China combat

21 May 2020

A political war of words, including over Covid-19, is intensifying and spurring more action. BlackRock’s Chinese investments are now targeted while attacks on U.S.-listed mainland companies threaten $1 trln in market value. It’ll be hard to avoid collateral damage in finance.

Debt hero role awaits China at rich price

21 May 2020

Beijing has deferred loan payments from poor countries, but with over $900 bln in IOUs from emerging markets, officials are hesitant to do more. China’s banking opacity deters cooperation. If it wants to seize leadership, it will have to come clean.

Fed’s credit market duct tape will come unstuck

20 May 2020

Junk bond yields have fallen from March peaks despite dire economic forecasts thanks to Federal Reserve boss Jay Powell’s new asset buying plans. He can’t make bad business models sustainable and may even encourage bad decisions. Investors will be out on a limb if things blow up.

To win, U.S. Treasury needs to be ready to lose

19 May 2020

The Fed’s $600 bln Main Street bailout is still not up and running. Among the hurdles are terms that banks may not like, partly due to the Treasury’s conservativism. Steven Mnuchin told senators he was willing to take losses. It's a necessary investment to reduce future trouble.

Franco-German motor nudges EU off virus crash lane

19 May 2020

The pair proposed a 500 bln euro fund to help pandemic-hit states. That recognises the need to share the fiscal burden and rely less on ECB boss Christine Lagarde. But market jubilance is premature. Opposition from northern countries means the plan will probably be watered down.

Negative rates would trigger UK banking rollup

19 May 2020

British rate-setters including BoE Chief Economist Andy Haldane are contemplating taking policy rates below zero. Bank margins would suffer, but big ones like Barclays have more fee income to rely on. Stragglers like Virgin Money and Metro may have to put themselves up for sale.

India’s economic pick-me-up earns half marks

18 May 2020

The five-part, $277 bln plan includes jobs for fleeing migrants and relaxed rules on debt defaults. A privatisation push is one of many longer-term vows. Upfront spending is sparing, however, and bailouts absent. Growth will take a bigger hit before it has a chance to roar back.

Breakdown: Fed is right to nix negative rates

15 May 2020

Futures markets are pricing in a small chance of policy interest rates going below zero even though Jay Powell, chair of the U.S. central bank, rebuffed the idea this week. Europe and Japan are already in that territory. Breakingviews explains why D.C. can afford to say no.

Review: Eurocrat’s unity dream faces virus reality

15 May 2020

In “Walking the Highwire” former EU Commissioner Olli Rehn reflects on the euro zone crisis and concludes the single currency needs more cooperation. The pandemic is an opportunity to do so. But a familiar reluctance to share financial burdens suggests the vision remains far off.