Archive
Reuters blog archive
from Breakingviews:
Apple tax fight needs global response
By Edward Hadas
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
In 1961, the six-year-old Steve Jobs probably didn’t notice U.S. President John Kennedy’s criticism of American companies’ use of foreign tax shelters. Corporate taxation had slid down the public agenda by the time the founder of Apple was achieving success, and it stayed that way for the rest of his life. But now it’s back, and Tim Cook, Jobs’ successor as Apple chief executive, has a public relations problem.
When Cook testifies on taxes before a U.S. Senate committee on Tuesday, his case will be reasonable. The company’s reported tax rate, which includes deferred taxes, was 25 percent in 2012. That is respectably high. Nor is the 17 percent cash rate (which was paid) shockingly low. Apple’s controversial Irish subsidiaries, which filed no returns despite receiving much of the company’s profit, were perfectly legal. The company has an obligation to its shareholders and customers to minimise tax payments.
Still, the world’s noses have become more sensitive to baroque tax plans, and Apple’s practices now fail the smell test. For example, it just doesn’t seem right that the Apple Operations International subsidiary did not even file a tax return, despite collecting 30 percent of global profit. It was able to take advantage of an ambiguous not-Irish, not-American legal status.
from Global Investing:
Weekly Radar: Draghi returns to London
ECB chief Mario Draghi returns to London next week almost 10 months on from his seminal “whatever it takes” speech to the global financial community in The City – a speech that not only drew a line under the euro financial crisis by flagging the ECB’s sovereign debt backstop OMT but one that framed the determination of the G4 central banks at large to reflate their economies via extraordinary monetary easing. Since then we’ve seen the Fed effectively commit to buying an addition trillion dollars of bonds this year to get the U.S. jobless rate down toward 6.5%, followed by the ‘shock-and-awe’ tactics of the new Japanese government and Bank of Japan to end decades.
And as Draghi returns 10 months on, there's little doubt that he and his U.S. and Japanese peers have succeeded in convincing financial investors of central bank doggedness at least. Don't fight the Fed and all that - or more pertinently, Don't fight the Fed/BoJ/ECB/BoE/SNB etc... G4 stock markets are surging ever higher through the Spring of 2013 even as global economic data bumbles along disappointingly through its by now annual ‘soft patch’. Looking at the number tallies, total returns for Spanish and Greek equities and euro zone bank stocks are up between 40 and 50% since Draghi's showstopper last July . Italian, French and German equities and Spanish and Irish 10-year government bonds have all returned about 30% or more. And you can add 7% on to all that if you happened to be a Boston-based investor due to a windfall from the net jump in the euro/dollar exchange rate. What’s more all of those have outperformed the 25% gains in Wall St’s S&P 500 since then, even though the latter is powering to uncharted record highs. And of course all pale in comparison with the eye-popping 75% rise in Japan’s Nikkei 225 in just six months!! Gold, metals and oil are all net losers and this is significant in a money-printing story where no one seems to see higher inflation anymore.
from MacroScope:
Finally, an Italian government
A weekend packed with action to reflect on with more to come.
Top of the list was the formation (finally) of an Italian coalition government. Market reaction is likely to be positive, although Italian assets rallied last week, and today’s auction of up to 6 billion euros of five- and 10-year bonds should continue this year’s trend of being snapped up by investors. Italian bond futures have opened about a third of a point higher.
Prime Minister Enrico Letto will seek a vote of confidence in parliament at 1300 GMT, which presumably should go without a hitch. But a coalition with the centre-left and Silvio Berlusconi does not necessarily look like a recipe for smooth government. It is quite possible that the leftward part of the centre-left will find it too hard to stomach, eventually leading to a split. Letta is expected to try to pass at least a few basic reforms quickly including a change to Italy's much criticised electoral laws and a cut in the size of parliament
from MacroScope:
German ghost of inflations past haunting European stability: Posen
"Reality is sticky." That was the core of Adam Posen's message to German policymakers on their home turf, at a recent conference in Berlin.
What did the former UK Monetary Policy Committee member mean? Quite simply, that the types of structural economic changes that Germany has been pushing on the euro zone are not only destructive but also bound to fail, at least if history is any guide.
from Breakingviews:
Euro zone daren’t flunk Lisbon’s solidarity test
By Neil Unmack
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Euro zone finance ministers took the risk of sending the Cypriot economy back to the stone age, with a tough bank restructuring and conservative approach on how much debt the country could take on. They now have a chance to show their sensitive side by giving Portugal and Ireland an extension on their bailout loans. They should seize it: playing hardball again would be self-defeating.
from Global Investing:
Rich investors betting on emerging equities
By Philip Baillie
Emerging equities may have significantly underperformed their richer peers so far this year (they are about 4 percent in the red compared with gains of more than 6 percent for their MSCI's index of developed stocks) , but almost a third of high net-worth individuals are betting on a rebound in coming months.
A survey of more than 1,000 high net-worth investors by J.P. Morgan Private Bank reveals that 28 percent of respondents expect emerging market equities to perform best in the next 12 months, outstripping the 24 per cent that bet their money on U.S. stocks.
from MacroScope:
Euro bailouts — one out, one in
We had thought the end-of-week EU summit was going to be a lacklustre affair but things are starting to bubble up.
Ireland announced last night it would issue its first new 10-year bond since it was bailed out in 2010. It sounds like the books on the syndicated issue will open today with dealers predicting strong demand. This is a crucial step in Dublin becoming the success story the euro zone desperately craves. Some European Central Bank policymakers have said the bank’s bond-buying programme could be deployed to help Ireland once it has demonstrated its ability to issue debt in a variety of maturities. Others, notably Bundesbank chief Jens Weidmann, appear less keen on the idea.
from MacroScope:
Euro zone week ahead
Italy will continue to cast a long shadow and has clearly opened a chink in the euro zone’s armour. It looks like the best investors can expect is populist Beppe Grillo supporting some measures put forward by a minority, centre-left government but refusing any sort of formal alliance. That sounds like a recipe for the sort of instability that could have investors running a mile. The markets’ best case was for outgoing technocrat prime minister Monti to support the centre-left in coalition, thereby guaranteeing continuation of economic reforms. But he just didn’t get enough votes. Fresh elections are probably the nightmare scenario given the unpredictability of what could result.
The story of the last five months has been the bond-buying safety net cast by the European Central Bank which took the sting out of the currency bloc’s debt crisis. But now it has an Achilles’ Heel. The ECB has stated it will only buy the bonds of a country on certain policy conditions. An unwilling or unstable Italian government may be unable to meet those conditions so in theory the ECB should stand back. But what if the euro zone’s third biggest economy comes under serious market attack? Without ECB support the whole bloc would be thrown back into crisis and yet if it does intervene, some ECB policymakers and German lawmakers will throw their hands up in horror, potentially calling the whole programme in to question.
from MacroScope:
Super, or not so super, Thursday
For those who thought the euro zone had lost the power to liven things up, today should make you think again.
ITEM 1. The European Central Bank meeting and Mario Draghi’s hour-long press conference to follow. Rarely has a meeting which will deliver no monetary policy change been so pregnant with possibilities.
from John Lloyd:
The moment for Irish unity is nearly over
The latest “troubles” in Northern Ireland began 45 years ago, and though much reduced, sometimes to invisibility, they are not over yet and will not be for some time. Protests over the Republican-dominated Belfast Council’s decision to fly the Union Jack just on certain days happened again over the weekend, if smaller and less violent than in the past few weeks.
This is what can happen after more than a century of demand for Irish independence: violence, on both sides, takes time to lose its attraction, and its adherents. Yet the bid for Irish unity, which from the late sixties to the late nineties was written almost daily in blood, has failed. Now, as we’re witnessing what may be its long withdrawal from politics, republicanism may not have another chance.
