Money‚ Markets & Macroeconomics

Rich world has three ways to win over global South

15 May 2023

Leaders from the Group of Seven, who gather this week, need to develop a stronger pitch to poorer non-aligned nations. A strategy based on peace, prosperity and protecting the planet could work. It’s more effective than delivering lectures on democracy, says Hugo Dixon.

AI offers leisure, if not happiness

12 May 2023

Technology has outpaced economic growth for 50 years, while workers have long traded higher productivity for more leisure. These trends will continue as artificial intelligence automates more jobs. The salient question is how to distribute the gains – and the free time.

Gig work value is too great to rush a US overhaul

11 May 2023

Biden’s pick for Labor Secretary has moved to classify freelancers like Uber drivers as regular employees. That would give gig workers benefits, but risks discouraging firms from hiring them. With freelancers earning $1.4 trillion, a hiring slump could weaken the broader economy.

BoE pioneers can make a virtue out of uncertainty

11 May 2023

The Bank of England is living a central bank nightmare. Inflation is 10.1% but growth is stalling. After hiking by 25 basis points, its best option is to avoid the playbooks of US and European peers, pause and be ready to loosen or tighten policy based on what the economy does.

Ukraine banks’ robust health masks big challenges

11 May 2023

After previous central bank reforms and an influx of deposits, the Ukrainian financial sector remains strong. But bad loans are at 38% and the three largest banks are state-owned. To support Ukraine’s reconstruction they will need more balance sheet cleanups, and privatisations.

EU debt’s credibility problem is worsening

9 May 2023

Borrowing costs of the bloc’s jointly issued bonds have risen above those of similarly rated sovereigns. The EU’s inability to deliver on promised joint revenues is exacerbating the impact of higher rates. That in turn reinforces investor fears that Brussels debt isn’t permanent.

Chinese chip investors will prefer a cooler STAR

9 May 2023

Nexchip, two decades behind industry leader TSMC, had a muted IPO debut in Shanghai after pricing shares conservatively. That’s a far cry from the market’s famous triple-digit first-day pops. But it’s a welcome sign STAR is becoming more rational for companies and traders alike.

Joined-up G7 is best China deterrent

8 May 2023

To discourage the People’s Republic from invading Taiwan, US allies in Europe must first agree it’s in their vital interest to do so. Then Group of Seven leaders, who meet in Hiroshima this month, need to cut dependence on China while ramping up their defences, says Hugo Dixon.

American employers deliver bittersweet message

5 May 2023

Joblessness dipped back to a historically low 3.4% in April, while wages jumped to a healthy 4.4% annualized rate. With interest rates jacked up beyond 5%, the labor market’s strength defies convention. Good news for workers now signals higher borrowing costs for longer.

Inflation’s real benefits beat theoretical costs

5 May 2023

A barrage of shocks have battered the world’s developed economies, leaving central bankers struggling to adapt. Allowing prices to rise not only eases the economic adjustment but shrinks big debt piles, argues Felix Martin. That’s helpful to everyone – except bond investors.

Lagarde fine-tuning will aid sputtering euro zone

4 May 2023

The European Central Bank’s move to raise rates by just 25 basis points and speed up its exit from bond-buying signals a less aggressive approach. High inflation calls for more hikes, but Frankfurt’s decision to use a scalpel rather than a hammer will benefit Europe’s economy.

ECB risks interest-rate blunder after messy data

2 May 2023

The European Central Bank is none the wiser following a raft of new numbers. Lenders may be reining in credit, but headline inflation is rising. Hardliners will still push for a 50 basis point hike on Thursday. The uncertain conditions call for an increase half that size.

Slowing growth will crash European stock party

2 May 2023

The region’s shares have risen 22% since September, trouncing their US peers. A resilient economy and low valuations lured investors. Aggressive rate hikes and falling earnings will drive them away. High-quality bonds and emerging markets’ equities are good alternatives.

Hot money is cold comfort for China shares

2 May 2023

Foreign interest in Chinese equities revived in the start of 2023. Yet recent routs in New York, Hong Kong and Shanghai suggest inflows came mostly from fickle quick-hit traders. Beijing wants long-term investors to stabilise the market, but reassuring them will be tricky.

Orbán’s central bank attack is self-defeating

28 Apr 2023

Hungary’s premier has picked another fight with Europe by meddling with the country’s rate setter. That could complicate the release of over 10 bln euros of frozen EU aid. With sky-high inflation and zero growth, the autocratic leader may soon face a foreign investors’ strike.

Digital “Chicago Plan” fixes many financial woes

28 Apr 2023

In the 1930s, economists drew up a radical blueprint to create safer banks. The advent of digital currencies issued by central banks is an opportunity to revisit the idea, writes Edward Chancellor. A shift could stabilise banking, reduce inflation, and even lower government debt.

Dollar bulls are praying for a mild downturn

26 Apr 2023

The greenback has lost 14% versus the euro since September, as investors bet on Europe’s recovery and China’s reopening. Inflation and interest rate trends still favour the single currency. The best hope for the buck is a minor economic slowdown to boost its safe haven status.

Debt crisis is a scary white swan for US economy

25 Apr 2023

The US debt ceiling is Biden’s first re-election test, but Washington has made little progress toward averting a government default. Flirting with the deadline in 2011 rocked the financial system. Partisan bickering could inflict pointless and predictable harm on fragile markets.

Exploring the City of London’s existential dread

25 Apr 2023

The global financial centre is suffering a spasm of anxiety about its status, while the government is pushing post-Brexit reforms. In this Exchange podcast William Wright, founder of the New Financial think tank, discusses the roots of the malaise and what can be done to fix it.

Credit Suisse mess leaves scattered Swiss debris

24 Apr 2023

A $3 bln state-sponsored UBS takeover prevented the failure of Bern’s other big bank. Yet small, export-oriented Swiss firms now only have one large lender for their needs, and additional bank regulation is likely. Meanwhile, historic US tax issues may come home to roost.