Economics

Intesa deal may be future of hybrid bank debt

27 Sep 2010

The Italian bank has issued a 1 bln euro bond it hopes will comply with future bank capital rules. That suggests there may be a viable market for the riskier, lossabsorbing debt that regulators want to see. But the future of the capital instruments is still far from sure.

Confidence the missing link for real M&A recovery

24 Sep 2010

The market is doing a good impression of being back on its feet, after a disastrous 2009. But the numbers are flattered by some blockbuster deals. Stronger balance sheets, cheap finance and the need to cut costs mean the ingredients are there. What's missing is confident CEOs.

Mongolia may benefit from being late to party

24 Sep 2010

This Mortar Economy wedged between two BRICs has been slow to open up to global finance. But it may soon have a stock market, perhaps run by the LSE. Mongolia's tardy arrival may help it capitalize on the convergence of booms in China, commodities and pioneer markets.

Too soon to take Spain out of PIGS

23 Sep 2010

Spanish bonds are trading closer to Italy's than Ireland's. Some think the S should be taken out of the acronym PIGS. But the property crash has yet to be absorbed, unemployment is terrible, competitiveness will be hard to regain and Spain's private debt is big.

China Sea skirmish a worrying sign for trade

23 Sep 2010

A territorial spat with Japan has reopened old wounds with China even reportedly blocking some key exports by way of reprisal. China's ascent will cause more frictions with trade partners over time. But for now, deep trade linkages mean both countries need to work it out.

Reversing Obama is insufficient agenda for GOP

23 Sep 2010

The party of no has revealed what it will say yes to. But a new Republican manifesto offers little more than undoing Obama s reforms, with vague talk of balanced budgets. Maybe that s smart politics. But America s longterm economic and fiscal woes call for bolder leadership.

U.S. and China must both give way in currency war

23 Sep 2010

China must revalue the yuan, says America. Chinese premier Wen Jiabao dislikes the message and is talking down expectations. But the dollar is cheap against the euro, yen and many Asian currencies. Compromise is needed: China should let the yuan rise, the U.S. should be patient.

Summers’ exit a chance for détente with business

22 Sep 2010

If deftly handled, the departure of brilliantbuttesty White House economic adviser Lawrence Summers could be addition by subtraction. Summers' departure gives President Obama an opportunity to fill a gaping hole in his administration's skill set: private sector experience.

Wall Street squeeze explains i-bank job jitters

22 Sep 2010

A couple of tough quarters right after starting to hire again means the industry has less revenue to feed more mouths. Some banks, like BofA, may already be trimming staff. Others, like Morgan Stanley, have more leeway. But if business doesn t pick up, there ll be cuts all round.

World torn between inflation and deflation

21 Sep 2010

While the U.S. Fed mulls the deflationary threat, Australia and India are worrying about inflation. Soaring food and commodity prices reflect China's boom. If global growth prevails, inflation should overcome deflation but stagflation may trouble weaker economies.

Betfair should break UK tech IPO jinx

21 Sep 2010

Tech groups floating in London this year have tanked. Now Betfair is seeking a possible 1.3 bln stg valuation. But it generates cash, has no debt or private equity investor rushing for the exit, and its online betting exchange has transformed the industry. It should be different.

U.S. yuan raid idea is fascinating but flawed

21 Sep 2010

A top think tank proposed a U.S. raid on China's forwards market to force the currency to appreciate. It sounds neat, but would be difficult to execute, and Beijing could neutralise its effects. Washington stands a better chance using multilateral pressure to force change.

UK’s bank commission must revisit Lloyds merger

20 Sep 2010

The probe into UK banking is set to explain how it will proceed. Lack of competition is enabling banks to gouge semicaptive small borrowers, so the focus must be on how to increase it. A breakup of Lloyds, which strengthened its dominance via the HBOS deal, is one obvious way.

Ireland’s IMF scare must be a spur

20 Sep 2010

A rumour that the IMF is heading to Ireland isn't wholly credible: the government has its financing sorted into 2011. But the scare must spur Ireland on. Like Iceland, Ireland must adjust to the reality of a broken boom. The adjustment will be hard but not impossible.

New rules are set to squeeze Chinese lenders

17 Sep 2010

China's banks have enjoyed rapid loan growth, guaranteed margins, low bad debt and plump balance sheets. All four are under attack from new rules. Regulators want to prepare banks for a rainy day and allow more competition. Bank shares look set to struggle as a result.

China’s yuan hide-and-seek won’t wash this time

16 Sep 2010

Beijing put the yuan on an appreciation burst ahead of U.S. Treasury Secretary's testimony on Thursday. But U.S. lawmakers are losing patience with those welltimed baby steps. The yuan needs a oneoff revaluation of say 25 pct to avoid trade penalties.

UK runs high risk of a dip in 2011

15 Sep 2010

Consensus says the UK recovery will continue next year. But big government spending cuts, public sector job losses, tax increases, houseprice falls, slipping wages and struggling exports suggest the UK faces a high chance of recession even if the global economy is recovering.

Japan’s yen intervention shows welcome activism

15 Sep 2010

For the first time in six years and the day after prime minister Naoto Kan retained his post, Japan's finance ministry sold yen to weaken the currency. The Bank of Japan is now murmuring about monetary policy loosening. The newfound urge to combat deflation is a big step forward.

Kan must weaken yen and defeat deflation

14 Sep 2010

Japan's stock market preferred his rival's spending promises but it's good that Naoto Kan, the prime minister, narrowly survived a leadership challenge. Kan is right to stress fiscal caution but he must now be bolder and put pressure on the Bank of Japan to defeat deflation.

The UK’s got inflation, but don’t be jealous

14 Sep 2010

Administrations across the West are desperately trying to avoid deflation. In Britain, they've succeeded. Inflation is brisk and persistently above the Bank of England's target. The central bank's forecasts look increasingly unconvincing.