Economics

China industrials shouldn’t ride to banks’ rescue

16 Apr 2010

Chinese banks may need $100 bln of capital in the next five years. Some cashrich industrial firms are eager to be their white knights. But they should stick to what they know. Bank stocks look especially risky. Companies might be better off returning cash to shareholders.

Western probes a risk for multinationals in Russia

16 Apr 2010

HewlettPackard is under investigation for paying bribes in Russia. It's the latest sign that western regulators are paying closer attention to Russian business practices. The resulting reputational risk may now be the biggest worry for foreign companies in Russia.

Russia will be fine – as long as oil goes to $100

16 Apr 2010

Demand for the country's first sovereign eurobond in a decade looks strong. Why not? Sovereign debt owned by foreigners comes to only 3 percent of GDP. But with excessive spending and half the government's revenue coming from oil and gas, Russia's fiscal position is sliding fast.

Greek debt suppliants play to thin houses in U.S.

15 Apr 2010

The euro zone's problem child fancied raising $510 billion in the U.S. dollar bond market. The plausible figure now looks much lower. Investors' wariness reflects the unsentimental reality: European bailout cash hasn't yet materialized, and Greece's finances remain precarious.

Stock markets bask as storm clouds gather

15 Apr 2010

Growth is returning, but not enough to make the Fed worry about inflation. That's a great mix for stocks and oil, and not bad for bonds. But sovereign debt and trade imbalances are becoming more threatening. A new crisis is possible, even without a rate rise.

Great Recession may make U.S. labor less efficient

15 Apr 2010

From 1985 to 2007, American workers kept finding suitable jobs easier to get. But the Great Recession may be reversing that progress. If the increase in longterm jobseekers makes skills atrophy, unfilled vacancies and unemployment rates could both rise an expensive mix.

Even curtailed, BRIC summit has valid purpose

15 Apr 2010

The departure of China's president cut short the meeting in Brasilia. The BRIC leaders might not have enough in common for two days of powwow, anyway. Yet China's 11.9 pct GDP growth underlines the four nations' economic power a potential counterbalance to the wealthy West.

Bank pay discipline slips as competition hots up

14 Apr 2010

The market for top banking talent is buoyant. Wounded banks, and firms with ambitious growth plans, are under pressure to cough up. While big payers may be following the letter of new regulations on compensation, they risk forgetting the spirit of the rules.

China can learn from Singapore’s revaluation

14 Apr 2010

Singapore has revalued its currency to control inflation. This approach is not open to China, which has a bigger economy and a more undervalued exchange rate. Nevertheless, Beijing can learn from Singapore's model, which offers a better balance between stability and flexibility.

High time to abolish carried interest tax break

14 Apr 2010

The U.S. House of Representatives has tried to lift private equity titans' tax rates into line with those of ordinary mortals before, but the Senate has, until now, resisted. Higher tax on carry won't eliminate America's deficit. But it's needed for the sake of fairness.

Russia’s growth spurt may be short-lived

13 Apr 2010

Strong oil prices are helping Russia emerge from last year's slump much faster than expected. But the factors that fuelled Russia's growth in recent history can't be counted on in the future. Without reforms to boost investment, Russia's mediumterm growth could well disappoint.

Euro zone will probably need its Greek bazooka

13 Apr 2010

The euro zone hopes promising lots of aid will reassure markets so much that a bailout isn't needed. That's similar to what Hank Paulson hoped to do with Fannie and Freddie. The former U.S. Treasury boss ultimately had to fire his bazooka and so probably will the euro zone.

Where does the yuan head next?

13 Apr 2010

China and the U.S. aren't quite friends yet, but the risk of a headon collision over the value of the yuan has receded. A stronger currency looks likely, but probably with some careful choreography. John Foley examines the whens and hows.

The other PIIGS are smart to help Greece

13 Apr 2010

It may seem odd that debtladen Portugal, Italy, Ireland and Spain will contribute 10.5 bln euros to Greece s 30 bln bailout facility. But not acting would be far more expensive, and the other PIIGS may even make money. Still, if another one needs a bailout, it won t be easy.

UK election may be fought on peak between dips

13 Apr 2010

The current government says it wants to win the UK election to secure the recovery. But data show the recovery is fragile despite the huge fiscal stimulus that must be withdrawn. Warring politicians aren't trumpeting the needed cuts or the real risks of a double dip.

Cablevision, others chip away at wall of debt

13 Apr 2010

Nearly $830 billion of risky U.S. dollar corporate debt comes due between 2012 and 2014. At first sight that casts a long shadow over credit markets. But borrowers are already tweaking their obligations. By the time 2012 comes around, the wall will be much less of a barrier.

Poland’s economic legacy is tribute to its victims

12 Apr 2010

The country grieves after the loss of its president, central bank head and other prominent figures. But Poland's institutions and economy look sound. Elections will be brought forward. The tragedy has not plunged Poland into crisis, and the economy should keep growing.

Business set for boost in Hungary

12 Apr 2010

Sunday's election puts Viktor Orban's centerright Fidesz party back in charge. Orban's plans include tax cuts and help for domestic entrepreneurs and farmers. If he can also achieve reductions in stillhigh public spending, Hungary's private sector could be among the winners.

Euro zone shows Greece a little love

12 Apr 2010

Euro members have agreed that 30 billion euros could be extended at a little over 5 percent higher than euro zone yields, but much lower than what markets were demanding. Athens would ideally prefer not to tap the funds. But either way, it still faces an uphill struggle.

BoE should beware of debt monetisation

8 Apr 2010

For now, the UK central bank is in wait and see mode. But big purchases of government debt with printed money have risks, as the Fed s Fisher has pointed out. If investors think government debt is being monetised, disaster looms. The BoE shouldn t rush to add to its gilt pile.