Society

A warning from history about large-cap stock booms

21 Jun 2024

Five decades ago, shares in a handful of large companies like IBM and McDonald’s propelled the US stock market to new highs before collapsing. As investors pile into tech giants led by $3.3 trln Nvidia, the earlier period may be instructive for those who believe history rhymes.

Net zero arbitrage is large, but no one-way bet

14 Jun 2024

There’s a big gap between the rich world’s ambitions to reduce carbon emissions and the ability of governments to achieve that goal. Investors can try to exploit that disconnect. However, economic, technological and geopolitical constraints can quickly change in unexpected ways.

Euro zone banks’ periphery premium is here to stay

13 Jun 2024

Lenders in Ireland, Italy, Greece and Spain on average trade with a 30% higher price-to-tangible-book value than French, German and Dutch ones. It reflects a reversal of fortunes between the old periphery and core – but also different business models, meaning the gap may persist.

UK building plans will fail to get off the ground

6 Jun 2024

Rivals in the July 4 election promise 300,000 new houses a year to ease shortages and lower prices. A lack of builders makes that unlikely. More than 346,000 construction jobs have disappeared since 2019. Without immigration or training, Britain will remain cramped and expensive.

Russian bond rout raises risk of financial crunch

4 Jun 2024

Yields on the country’s debt are at 20-year highs on worries about the budget largesse lavished on the economy. With inflation rising and interest rates at 16%, President Vladimir Putin’s desire to keep funding the conflict in Ukraine could result in lasting fiscal turmoil.

Modi 3.0 offers limited opportunities for the West

3 Jun 2024

Western leaders’ hopes for India as a bulwark against China outweigh their concerns about Narendra Modi’s authoritarian streak. They will have more scope to work with the prime minister during his expected third term. But the overlap of interests and values is limited.

Tories’ obsession with French unions is obsolete

31 May 2024

UK PM Rishi Sunak accused Labour of plotting ‘French-style union laws’. But France has the lowest proportion of organised workers among big European nations. And there were fewer strikes in the last three years than in Britain. Time for the Conservatives to find another bogeyman.

Japan’s new widowmaker trade may have shorter life

23 May 2024

For more than two decades, investors who bet against Japanese government bonds lost their shirts. Taking a long position in the yen has been similarly painful recently as the currency dropped by 50% against the dollar. Yet there are several reasons why the slide could reverse.

Big Macs are pricing out American shoppers

23 May 2024

The driving force of the world’s largest economy, US consumers, may be buckling under higher costs on everything from lattes to burgers. In this Viewsroom podcast, Breakingviews columnists debate whether Main Street stalwarts like Starbucks or McDonald’s face a reckoning.

UK’s election gamble ends messy stalemate

22 May 2024

Prime Minister Rishi Sunak has called a national vote on July 4, much earlier than expected. His Conservative party trails Labour by 21 percentage points. The PM will point to a better economy but won’t offer more tax cuts. Still, a summer poll will provide much-needed clarity.

German consumer is poor substitute for China trade

21 May 2024

Consumption is up but won’t be enough to lift the country out of its funk, with growth of just 0.2% this year. Exports to the People’s Republic are threatened by worsening relations between Brussels and Beijing. Meanwhile a split Berlin government looks unable to launch reforms.

President’s death makes Iran even less predictable

20 May 2024

The demise of Ebrahim Raisi removes an obvious replacement for the ageing Ali Khamenei as Supreme Leader. Despite a recent attack on Israel, the Islamic Republic’s top figure is a known quantity. The risk is that Iran’s role in a febrile Middle East becomes even harder to gauge.

BoE cavalry will arrive too late for Rishi Sunak

8 May 2024

After a local polls rout, the UK prime minister badly needs an economic boost before this year’s national elections. But Bank of England Governor Andrew Bailey will only cut rates when inflation drops from the current 3.2%. By then, it could be too late for the government.

US economy is a victim of its own success

25 Apr 2024

The United States emerged as the world’s growth engine at the IMF summit last week. In this Viewsroom podcast, Breakingviews columnists debate whether this debt-fuelled strength means that interest rates will stay high for longer and how that could raise the risk of a recession.

European airlines’ hot summer belies sector clouds

23 Apr 2024

Jet shortages mean that carriers may be able to charge higher fares this summer, ending years of overcapacity. For stronger players like $25 bln Ryanair, that could mean fatter margins. But it’s likely to be a short-term reprieve for a sector that’s grappling with other costs.

Luxury’s great divide will get more striking

17 Apr 2024

Sales at $420 bln LVMH rose a dull 3% in the first quarter. The Tiffany-to-Dior behemoth’s insipid performance points to a broader fragility within the sector. With revenue in the luxury industry flattening, the gap between winners and losers is set to grow wider.

Germany sovereign pension fund is sound but small

3 Apr 2024

Berlin will borrow to invest up to 200 bln euros in global equities to help pay for the retirement of the country’s fast-ageing population. The vehicle’s modest size will limit its long-term impact, but Europe can learn from this blend of public and private schemes.

Profitability is next sacrifice at inflation altar

2 Apr 2024

Central bankers want LVMH, Pepsi and others to pay higher wages without raising prices. Bottom lines in the euro zone already have dipped to 40% of output, the lowest rate since 2020, and Big Tech accounts for most US margin growth. CEOs and investors can expect leaner times.

Japan’s rate shift will hit zombie firms hardest

14 Mar 2024

The central bank could end an era of negative borrowing costs as early as next week. In this Viewsroom podcast, Breakingviews columnists argue that large companies are ready for the tightening, but many struggling small businesses could hit the wall even if policymakers go slow.

UK monarchy suffers an impairment to its goodwill

13 Mar 2024

A poorly edited photo of the Princess of Wales has fanned a firestorm of speculation about her health. If Britain’s royal family were a listed company, it would have a fiduciary duty to provide more detail. While the hit to its brand equity is not visible, it’s still tangible.