Money‚ Markets & Macroeconomics

Fed clarity effectively sends a strong buy signal

20 Sep 2023

Benchmark US interest rates probably will hover around 5.5% for a while. A stable cost of capital gives companies, consumers and investors good reason to stop putting off decisions any longer. It should help resolve valuation ambiguities and restart M&A, IPO and housing activity.

Capital Calls: Disney, Cazoo

20 Sep 2023

Concise views on global finance: Boss Bob Iger’s $60 bln splash on theme parks and cruises invites further scrutiny of the Magic Kingdom’s wild cash flow ride; the UK-based online car retailer, valued at $7 bln in a SPAC deal two years ago, is handing the keys to bondholders.

New economic rules shatter US bonds’ crystal ball

19 Sep 2023

Government debt has been signaling a downturn for 440 days, but there’s been no recession. The famed predictive power of the yield gap between different vintages of Treasuries is waning. As the global economy evolves, warnings from the fixed-income markets can be safely ignored.

Capital Calls: Four-day workweek

19 Sep 2023

Concise views on global finance: US Senator Bernie Sanders joined striking autoworkers in urging a conversation about shortening the workweek. Rising productivity has long enabled labor to win fewer hours. With disruptive new technologies rising, bigger victories make sense.

How Ukraine’s banks can survive another war

19 Sep 2023

The country’s former central bank Governor Valeria Gontareva explains on The Exchange podcast how the radical steps implemented in 2014 helped Ukrainian lenders withstand the Russian invasion and kept the financial system afloat, and why Ukraine needs to keep reforming.

Sunak and Bailey agree on higher UK rates, for now

19 Sep 2023

The PM and the Bank of England chief both favour raising borrowing costs in the short run to curb price growth. But their paths may soon diverge. Downing Street would love easier monetary policy before an election in late 2024. The BoE cannot relent until inflation hits 2%.

Big oil lawsuits are riskier than quitting tobacco

18 Sep 2023

California is suing fossil-fuel companies, alleging tens of billions in climate-related damages. Decades of litigation forced tobacco firms to pay up. The tension is that, while global warming’s ravages imply higher costs, US oil production is crucial amid tightening supply.

China’s property price caps have two sharp edges

18 Sep 2023

Price caps were introduced in 2016 to contain runaway home prices. Ditching them now will allow indebted developers to sell down their bloated inventory and help the market find a bottom. Officials are flirting with the idea, but Beijing will need to brave the social fallout.

Deaths haunt Corporate America via labor strikes

15 Sep 2023

Auto workers, pilots, and truck drivers have had upper hands in labor strikes. That’s despite labor supply healing. One reason may be that men have left the workforce. Opioids and Covid are partly to blame. But it highlights the dangers of demographically concentrated jobs.

Capital Calls: Ford’s threats

15 Sep 2023

Concise views on global finance: The $50 bln automaker’s boss suggests that a strike could have dire consequences. The problem is that workers can see the $10 billion in cash sitting on Ford’s balance sheet.

Detroit profit engine could screech to a halt

14 Sep 2023

Years-long employment contracts meant auto workers missed out on post-pandemic gains. New demands could halve Ford and GM profit. The companies may prefer one-off rewards. But unions have little incentive to accept. Instead, transition plans may be wounded, and both sides pay.

ECB’s rear-view policy risks crashing the economy

14 Sep 2023

Fears of stubbornly high consumer prices prompted President Christine Lagarde to push rates to a record 4% on Thursday. Yet the central bank admits inflation will be around the 2% target by 2025. The bloc’s growth is already stagnating. The latest action will worsen its plight.

Klaviyo is better bellwether than Arm or Instacart

13 Sep 2023

Unlike its hyped peers, the marketing firm is paving the way for garden-variety tech IPOs, targeting an $8 bln valuation. It’s profitable, growing and even has its own invented metric, making it a better gauge of investor sentiment. One wrinkle is its reliance on backer Shopify.

Erdogan’s orthodoxy creates new economic problems

13 Sep 2023

Turkey’s president finally ditched his love of low interest rates and pledged to curb inflation, currently at 59%. But Tayyip Erdogan still needs growth and will boost spending to get that. Soaring budget deficits and a weak currency will keep the economy under pressure.

China’s growth is buried under great wall of debt

13 Sep 2023

Local government investment arms owe $11 trln to creditors including state banks. That’s hobbling the world’s second-largest economy. Beijing needs to force asset sales and let some fail. It will be painful but relying on consumers who are unwilling to spend is a dead end.

Apple investors grow fat on iPhone’s thinning buzz

12 Sep 2023

The tech giant’s latest handset, to be unveiled Tuesday, may offer incremental improvements. Sharper pictures and faster charging won’t spur many upgrades. The $2.8 trln group’s main innovation is persuading investors to pay a higher multiple for slower-growing revenue.

Capital Calls: British wages

12 Sep 2023

Concise views on global finance: UK pay rose by an annualised 8.5% in the three months to July – more than inflation. That’s good for retirees, whose pensions will rise by that amount. But such a hot labour market is likely to prompt the Bank of England to hike rates next week.

Smucker takes big fat chance on anti-obesity drugs

11 Sep 2023

The peanut butter and jelly company is paying an unhealthy $5.6 bln to buy Twinkies maker Hostess. Boss Mark Smucker makes no bones about doubling down on sweet snacks. As Ozempic and other treatments threaten demand, it’s a strategy that would work if it weren’t so expensive.

Flood insurance swamps US government

11 Sep 2023

A federal scheme to back policies for water-logged homes is set to be renewed. Failing to do that would worsen a housing shortage. But the program is already laden with debt. Fixes like flood-prevention infrastructure can lower costs for the government and homebuyers alike.

Lagarde can stop fretting about rising salaries

11 Sep 2023

The European Central Bank chief worries that consumer prices will stay high because wages are growing at the fastest rate in 30 years. Yet raises are below inflation and slowing. In the past, the ECB cut rates even with strong labour markets. It may have to do so again soon.