Money‚ Markets & Macroeconomics

Asia emerges as refuge from global fears

5 Aug 2011

The region’s government bonds have soared amid this week’s panic. Not that investors are buying the theory it has decoupled from the West - Asian stocks are weakening. But with balance sheets that look pristine next to the U.S. and EU, Asian sovereigns are seen as a safe haven.

Panic and crisis need different solutions

5 Aug 2011

Markets are panicking amid fears of world recession. That looks overdone for now, and falling commodity prices support growth. So policymakers should keep cool. The euro zone faces systemic crisis but conventional policy would help: Italy and Spain must tighten fiscally - fast.

RBS’s uncertain road ahead gets even bumpier

5 Aug 2011

Though the UK bank met expectations in the first half, its shares are being savaged in the broader market sell-off. The balance sheet clean up is going well, but euro zone exposure is starting to hurt. The bank’s goal of 15 pct return on equity by 2013 is also looking vulnerable.

EU bank funding headed back to emergency room

5 Aug 2011

The 2008 liquidity squeeze triggered a credit crunch and massive bailouts. Though Europe’s banks are in better shape today, turmoil in the euro zone means some lenders can once more only get overnight funding. That leaves the European Central Bank squarely on the hook - again.

Plunging markets reflect ugly political paralysis

4 Aug 2011

This, rather than any particular headline, seems to be driving Thursday’s market freak-out. Brinksmanship in Europe and the U.S. makes for great theater, but it has done little to resolve what most troubles the global economy: too much debt and no clear plan to pay it off.

Reform bill could make "incoherent" SEC irrelevant

4 Aug 2011

From Madoff to mortgages, the U.S. regulator has had its misses. But a Republican bid to reshape it seems designed to hinder, not help. There’s room for improvement, but with its duties growing the self-funding watchdog needs more staff, more money and a buffer against Congress.

Euro zone isn’t ready for true euro bonds

4 Aug 2011

Could a common bond solve Europe’s sovereign crisis? The region’s bailout fund is already functioning like a joint debt issuer. But for now the zone lacks the political unity needed for a proper debt union. Euro bonds can’t be a quick fix.

Japan stems yen’s rise but only buys time

4 Aug 2011

Selling the currency saw the central bank push its price down. But with the EU, U.S. and China looking frail, global investors still want yen. Slowly, companies are adjusting to a stronger yen. That’s wise. Intervention can bring some relief but Japan needs deeper reform.

Global fear could force Fed’s hand on QE3

3 Aug 2011

Markets are panicking. Safe-haven assets reflect extreme risk aversion, pushing Switzerland and possibly Japan to intervene. Asia fears a weak U.S. and worsening euro zone. Macro worries look overdone; more money printing would be regrettable. But the Fed may feel it has to act.

China’s train crash sets new tests for freedoms

3 Aug 2011

Authorities’ attempt to censor coverage of China’s rail tragedy has backfired. Even official media defied orders or found ways to circumvent the ban. If Beijing now clamps down harder, the impact will be economic as much as social.

UK should tax the rich more intelligently

2 Aug 2011

Fresh calls for the 50 pct top rate to be abolished ignore political reality. Financially, tax cuts for the poor would do more to stimulate the economy. The real issue is that the tax system is a mess, and a property levy might tax the rich more effectively.

Italy overtakes Spain as euro zone’s main worry

2 Aug 2011

Yields on Italian bonds are soaring as the political vacuum fuels fears the government won’t be able to implement its fiscal plans. Spain is suffering too. But Madrid is tackling its problems, while Rome is stalling. Given the sheer size of Italy’s debt, that’s a major concern.

Loss of bankruptcy card would weaken cities’ hand

2 Aug 2011

In high-stakes talks with unions and bondholders, the threat to file for protection in U.S. court gives local officials leverage. But states are blocking that option, fearing it spooks markets. For teetering local governments, the alternatives may be costly defaults or bailouts.

Weak U.S. growth could swamp $1 trln deal on cuts

1 Aug 2011

The debt ceiling is set to rise. But Friday’s anemic GDP report casts doubt on the associated deficit reductions. On a simple analysis, if the official 3.25 pct economic growth assumption for 2011-16 falls short by 0.5 percentage point, the expected initial cuts disappear.

Bipartisan dislike of U.S. budget deal a good sign

1 Aug 2011

If a sign of compromise is a frown from both sides, then Congress is close to an equitable agreement. Members of both parties have major gripes about the debt deal cooked up by their leaders. Importantly for markets, the compact would maintain momentum for further fiscal fixes.

Can non-violent struggle bring down Syria’s Assad?

1 Aug 2011

Maybe not if it was purely spontaneous. But, in Syria, the campaign shows it can think strategically and organise effectively. In a style that departs from the typical Breakingviews approach, Hugo Dixon tells the tale through the eyes of a leading activist, Ausama Monajed.

Syria matters beyond Syria

1 Aug 2011

Unlike in Egypt and Tunisia, protestors are facing tanks. Unlike in Libya, they are barely resorting to violence. If Syria’s nonviolent demonstrators can topple such a repressive regime, many non-democratic governments - including Iran and even China - will feel vulnerable.

Rajoy needs to tell Spain some home truths

1 Aug 2011

The country’s probable next PM shouldn’t wait until after November’s election to level with the Spanish people about the actions needed to avoid getting sucked into the euro zone crisis and to restore competitiveness. Here’s the speech he should give now.

Foreign borrowing undermines China’s tightening

1 Aug 2011

Better-than-expected factories data shows China hasn’t over-tightened. Beijing has curbed domestic loans, but Hong Kong banks are lending and offshore bond issuance also surged. The practice adds risk for foreign investors, and hinders China’s efforts to squash inflation.

India needs solution to $1.5 trillion puzzle

24 Jan 2011

That’s what it will need to invest in infrastructure over the next decade if it is to reach 10 percent GDP growth. The government and banks won’t be able to carry that load on their own. Financial liberalisation could help fill the gap.