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from Breakingviews:

Review: A pained call for radical financial reform

By Edward Hadas

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Martin Wolf is still recovering from the financial crisis. In his new book, the Financial Times economics commentator admits to being surprised at the depth, breadth and length of the economic malaise which followed the near collapse of the global financial system in 2008.

“The Shifts and the Shocks: What We’ve Learned – and Have Still to Learn – from the Financial Crisis” is partly a cogent review of what went wrong before, during and after the crunch six years ago. But the part economists and policymakers could usefully focus on is the writer’s conclusion that the best ideas for the future are far from the mainstream.

Wolf digs far deeper than the obvious bad behaviour of banks and their employees. His main insight is broad and depressing. Finance has become fragile: “Over the last four decades, the world economy does not seem to have functioned without huge financial excesses somewhere.” Those excesses often end in a sharp reversal.

from Counterparties:

MORNING BID – European Deflation

Never say the Europeans aren’t cautious. The dollar has been on a roll of late, in part because of the market’s growing expectation for more stimulus from the European Central Bank before long that would include some kind of larger-scale quantitative easing program after a speech last week from Mario Draghi that European markets seem to still be reacting to several days later. Reuters, however, reported that the ECB isn’t quite likely to do move quite so fast (heard this one before) and that took some of the wind out of the dollar’s sails and boosted the euro a bit.

Some of the move in the euro will depend on the trend in European yields, where everything is going down – German Bunds continue to make their way rapidly toward zero, and Bund futures remain in an overwhelming bullish trend, per data from Bank of America-Merrill Lynch. Analysts there also anticipate the dollar is going to experience some kind of medium-term correction – but remains in rally mode otherwise. There’s a headwind there for equities from that – rising greenback makes U.S. goods more expensive, but the gains are still only in earlier stages, and haven’t pushed into territory that would otherwise indicate surprising strength that we haven’t seen in some time.

from Breakingviews:

Tragedy may reshape Brazil economy, not just vote

By Martin Hutchinson and Richard Beales

The authors are Breakingviews columnists. All opinions expressed are their own. 

Add Marina Silva to the challenges facing Dilma Rousseff. Brazil’s president faces a new opposition candidate in October’s election after Eduardo Campos’ death in a plane crash, and Silva looks a far bigger threat. If she ousts Rousseff, which polls show is possible, Brazil could gain economically from less state meddling.

from Breakingviews:

France’s housing slump is sign of deeper woes

By Pierre Briançon

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

François Hollande could live with a housing bubble. That would at least signal euphoria in a significant part of the French economy. But house prices are declining, a reflection of the depth of the country’s economic woes, and its president’s inability to address them.

from Breakingviews:

ECB deserves to lose market’s inflation confidence

By Swaha Pattanaik

The author is a Reuters Breakingviews columnist. The opinions expressed are her own. 

The case of the euro zone’s vanishing inflation rate has so far stumped European Central Bank President Mario Draghi. Quite rightly, investors’ faith in his ability to do anything about the problem is also evaporating.

from Breakingviews:

Blackstone finds way to outsource skin in the game

By Neil Unmack

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Blackstone has devised a novel definition of ”skin in the game”: other people’s money. The buyout and debt management firm is taking advantage of newly relaxed rules on how much risk needs to be retained in securitisations, to improve its returns. Its structure looks acceptable – but regulators and investors should still watch for sharp practice from future copycats.

from Breakingviews:

German yield curve is the safest one to play

By Swaha Pattanaik

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

 Bull flattening may sound like an exotic, and rather cruel, sport, but for today’s bond investor, it describes an investment opportunity. Some juicy bear flattening is also available, although it comes with somewhat more risk.

from Breakingviews:

Holiday email embargo a must-have, not an opt-in

By George Hay

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Daimler wants to stop email ruining the holidays of its 275,000 employees. So the German carmaker is giving them the right to have all messages received during vacation automatically re-routed, with the sender warned to try again later. In this case, choice may not be the best policy.

from Counterparties:

MORNING BID – Retail therapy

All that’s left for investors now when it comes to earnings season is the shouting, but if the rest of the retailers post results anything like Kate Spade did on Tuesday, the shouts will be screams of terror rather than anything that assuages investors over the state of the overall economy. Kate Spade’s executives went into some detail on its conference call as to the nature of its margins shortfall – which Belus Capital chief equity strategist and longtime retail analyst Brian Sozzi said are not likely to improve until the middle of 2015 – and the company then did itself no favors by declaring that it wouldn’t be discussing the margin issues any further on the call. (Craig Leavitt, the CEO, violated that rule to some degree, but basically, investors don’t like it when you tell them flat-out that you’re not going to talk about your problems, and when you’re a company with a forward price-to-earnings ratio of 77.5 and a price-to-book value of 119, that’s going to be particularly true.)

Other luxury retailers have noted their own problems with attracting customers at this time, including Michael Kors Holdings, which saw its own shares stumble of late after also warning of margin pressures due to expansion in Europe, but at least Kors has a forward P/E ratio around 19, which puts it in line with peers like Coach and Ralph Lauren.

from Breakingviews:

German stocks price in sanctions tail-risk

By Olaf Storbeck

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The German economic mini-miracle is on hold. Thursday’s announcement of second quarter GDP, which was not affected by Russian trade hostilities, will probably show a decline from the weather-boosted beginning of the year. Investors are looking for worse. The 8.7 percent drop in the DAX stock index since July 3 puts it among the worst performers of major European stock markets.

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