ECB

“No landing” talk leaves stocks in no man’s land

6 Mar 2023

Bond investors worry that strong economic data will keep borrowing costs high. That’s pushed yields on 10-year German debt to an 11-year high. Yet buoyant equity markets are pricing in a dream scenario of faster growth and falling interest rates. They are in for a rude awakening.

ECB’s inflation-fighting hose may have a blockage

20 Feb 2023

The central bank has hiked rates by 3 percentage points since July, pushing up corporate borrowing costs and squeezing demand for credit. Yet firms and households have longer-term debt than in the past. That means tighter monetary policy will take a while to cool the economy.

How central banks got the inflation crisis wrong

14 Feb 2023

Western policymakers have hiked interest rates by more than 10 percentage points since 2021. Yet prices remain high. In this Exchange podcast, Paul Donovan, chief economist at UBS Global Wealth Management, explains how rate-setters failed and what they should do next.

How investors can profit from Fed-ECB divergence

7 Feb 2023

As America flirts with a recession, the U.S. central bank is set to stop tightening as interest rates near 5%. That will leave ECB President Christine Lagarde as the West’s most hawkish policymaker. The transatlantic split is an opportunity for traders who bet on European assets.

Markets gulp down central banks’ half-full glass

2 Feb 2023

Three of the world’s most prominent central banks raised interest rates to multi-year highs this week. Investors loved it, reading the decisions as the beginning of the end for monetary tightening. Policymakers, and stubborn inflation, might prove them wrong.

Euro zone can afford to keep fiscal taps running

31 Jan 2023

The bloc’s governments pumped up spending by 3.75% of GDP over the past two years to cushion the blow of Covid-19 and higher energy prices. Now they are closing the spigots. That’s a mistake. Manageable debt costs leave room to support growth – and help the ECB fight inflation.

Central bankers will shift inflation goalposts

19 Dec 2022

The Federal Reserve, ECB and others insist they’re determined to get price increases back down to 2% a year. Though the target is arbitrary, changing it is tricky. But stubborn inflation means monetary authorities will have to find ways to tolerate rising prices for longer.

Bond-buying scars will open European can of worms

16 Dec 2022

The ECB faces large losses if it keeps hiking interest rates, because of higher payments to banks on 3.9 trln euros of reserves amassed through asset purchases. National central banks will pick up the tab. And governments will bicker on how to share the pain.

ECB, BoE will fight to regain anti-inflation mojo

15 Dec 2022

The European Central Bank and the Bank of England hiked rates by 50 basis points, less than recent jumbo increases. Recession fears, and the central banks’ initial hesitancy, are making investors sceptical of a sustained tightening. Sticky inflation will prove them wrong.

Capital Calls: Rio Tinto, Grocery delivery M&A

9 Dec 2022

Concise views on global finance: After a shambolic process, the $118 bln miner has succeeded in buying out the 49% of Turquoise Hill Resources it doesn’t own; Turkish grocery delivery player Getir gobbles up German rival Gorillas for $1.2 bln.

ECB’s bank loan-loss worries look overdone

7 Dec 2022

Chief supervisor Andrea Enria fears that BNP, ING and others are flying blind into a 2023 default storm. But rate hikes will give the 10 largest lenders a 120 bln euro profit buffer before their capital gets hit. The big banks can afford to keep going with dividends and buybacks.

Inflation confusion increases odds of ECB mistake

30 Nov 2022

Euro zone prices rose a less-than-expected 10% in November, yet remained stubbornly high after stripping out fuel. That leaves central bankers in a pickle. To burnish their hawkish credentials with a sceptical market, they may keep tightening policy even as the economy falters.

Europe’s diverging prices complicate ECB’s task

1 Nov 2022

Inflation is running at 7% a year in France and 22% in Estonia. These differences make the European Central Bank’s stance too aggressive for some states and too timid for others. The controversy about monetary policy will only intensify as the ECB pushes rates higher.

Capital Calls: ECB’s bank-earnings squeeze

27 Oct 2022

Concise views on global finance: Seeking to shrink its balance sheet, the European Central Bank introduced less favourable terms for cheap loans it offered to lenders during the pandemic.

ECB $2 trln bank-loan unwind is fraught with peril

25 Oct 2022

The European Central Bank may tweak a funding scheme to stop lenders minting money at its expense. Fiddling with the terms is legally dubious. Other options could undercut its fight against inflation. But the status quo, indirectly costing taxpayers billions, is unsustainable.

Capital Calls: Italy’s next finance minister

14 Oct 2022

Concise views on global finance: Rightist leader Giorgia Meloni is likely to pick a pro-European politician as finance chief.

UK mess bolsters case for Italian budget prudence

6 Oct 2022

Market turmoil forced British Prime Minister Liz Truss to partly ditch unfunded tax cuts. The humbling saga should help Italian would-be premier Giorgia Meloni resist her allies’ spending requests. Picking a technocrat as finance minister would give investors further comfort.

Capital Calls: Byju’s revenue fail

15 Sep 2022

Concise views on global finance: Byju’s topline shrunk after its auditor advised it to recognise its revenue differently.

Capital Calls: U.S. railways steer clear of crisis

15 Sep 2022

Concise views on global finance: Major U.S. railroads and unions reached a tentative deal, avoiding a shutdown that could have widespread consequences on the U.S. economy.

Capital Calls: Oil vs. ESG

13 Sep 2022

Concise views on global finance: The price of a barrel of Brent crude has fallen 30% since mid-summer, and over 10% in two weeks. If it stays below $100 a barrel, oil companies will start to become worse investments. That could help solve backlash to ESG investing.