ECB

Forces lowering euro zone inflation aren’t all bad

7 Jan 2021

Euro zone consumer prices fell 0.3% in December from a year ago. Several factors, especially a weak economy, are to blame. Still, a long-term trend that also chips away at inflation is cheaper tech. That’s not something even ECB chief Christine Lagarde would want to see reversed.

Corona Capital: Icahn, Productivity, Natixis

4 Jan 2021

Concise views on the pandemic’s corporate and financial fallout: Carl Icahn sells half his Herbalife Nutrition stake; an ECB survey suggests Covid-19 will make big firms more productive, but that may not be all good news; and Natixis fast-tracks its overhaul.

ECB fiat anoints unlikely bank dividend heroes

16 Dec 2020

The regulator capped payouts as a proportion of earnings and assets. Well-capitalised lenders with richer valuations, like Nordea and KBC, now offer tiny yields compared with minnows like Liberbank. The risk is that a slow recovery causes restrictions to last beyond September.

Christine Lagarde’s baby bazooka needs backup

10 Dec 2020

The ECB boss will deploy emergency stimulus measures, such as asset buying and ultra-cheap loans to banks, for longer but came up with no new tricks to boost Europe’s economy. Central bankers have been innovative in the crisis. It’s now governments’ turn to do more of the work.

Chatty ECB has a communications problem

2 Dec 2020

Chief Economist Philip Lane has since March spoken with a series of financiers after policy meetings, his diary shows. A perception that a select few have privileged access is best avoided. The even bigger issue is why the central bank has to work so hard to land its message.

Lowly Europe bank values will outlast dividend ban

26 Nov 2020

Big lenders blame frozen payouts for depressing share prices, down 17% on average this year. But the selloff broadly matches the decline in profit forecasts for 2022, suggesting ultra-low interest rates are to blame. Even if dividends return, discount valuations may persist.

ECB has chance to avoid Fed’s strategy revamp flaw

12 Nov 2020

Christine Lagarde’s central bank is examining basics, like how it defines its price goal. Its U.S. peer earlier this year switched to aiming for inflation that averages 2% over time. But leaving things as vague as Jerome Powell did undermines efforts to lift price expectations.

Italy’s oldest bank risks becoming a new Alitalia

5 Nov 2020

Banca Monte dei Paschi di Siena needs another bailout. A government rescue would cost around 2 bln euros. Winding it down and selling the rump to a rival like UniCredit would be politically toxic. Like Rome’s loss-making airline, it is turning into a lasting burden on taxpayers.

Bank dividend bans have passed their sell-by date

30 Oct 2020

European supervisors in March halted payouts so that lenders could keep credit flowing and absorb losses. Yet earnings and capital have held up, while bond markets are booming. Regulators can drop the restrictions, as long as banks keep big shock absorbers and don’t cut lending.

European Union will be bond market’s new behemoth

7 Oct 2020

The need to fund pandemic aid schemes worth nearly 1 trillion euros will make the EU one of the region’s largest issuers. ECB bond buying and investors’ hunger for safe assets mean that is no problem. And the scale of issuance will make its debt more liquid, a prized quality.

ECB’s valiant “lowflation” brainstorm has a flaw

30 Sep 2020

President Christine Lagarde outlined several ways the central bank’s strategy might adapt to a world where prices rise too slowly, not too fast. For all its merits, the exercise assumes rate-setters have full control over inflation. The past decade shows they don’t.

How to build a European JPMorgan

25 Sep 2020

An EU bank of the U.S. behemoth’s size could help ensure reliable corporate funding and more tech investment. Fragmented liquidity, capital and bankruptcy rules make the necessary mega-deals hard. Though the ECB is helping, it’s really up to national regulators and politicians.

EU banks’ sovereign-debt relapse brings new risks

24 Aug 2020

Lenders from Italy’s Intesa Sanpaolo to Spain’s BBVA have boosted holdings of domestic government bonds, helped by cheap ECB funds. The exposure leaves them vulnerable if euro zone breakup fears return. And it makes completing Europe’s banking union and cross-border M&A harder.

Andrew Bailey can freeload on Fed and ECB largesse

18 Jun 2020

The Bank of England boss will buy an extra 100 billion pounds of bonds, but at a slower pace. His peers are being more open-handed. For example, banks just borrowed 1.3 trillion euros from the European Central Bank. Ample global liquidity will help Bailey contain UK debt yields.

Corona Capital: Next crisis, Overvalued markets

16 Jun 2020

Concise views on the pandemic’s corporate and financial fallout: Deutsche Bank analysts sound a warning about future catastrophes, while investors try to square overpriced stocks with their hopes of a recovery.

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.

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.

Curbing German exceptionalism has political price

11 May 2020

A national court’s ruling on ECB asset buying has challenged the primacy of EU law. If politicians can’t defuse the stand-off, Brussels will have to take legal action against Europe’s paymaster. The fiasco is likely to give Euroscepticism across the continent a boost.

ECB firefighters can circumvent German roadblock

5 May 2020

A ruling by Teutonic judges challenged the European Central Bank’s long-standing efforts to use bond buying to stimulate the euro zone economy. Inventive rate-setters will find ways to plough on to achieve their aims. But it’s a very German way to test their independence.