Global Investing

German inflation to rescue euro economy?

March 5, 2012

With the ECB’s second cheap money flood in three months coursing through European banks and financial markets and the possibility at least of a further interest rate cut in offing, the relief in Europe’s austerity-wracked periphery is palpable. But what of the impact on the relatively buoyant “core” in Germany, the bloc’s largest economy and super-competitive export engine? Darren Williams at money managers Alliance Bernstein reckons  German inflation is being cooked up by this super-easy ECB money, coming as it does against a backdrop of  relatively brisk German credit growth and house price inflation there of some 5.5% last year which is “positively explosive by German standards”.

EM growth is passport out of West’s mess but has a price, says “Mr BRIC”

January 23, 2012

Anyone worried about Greece and the potential impact of the euro debt crisis on the world economy should have a chat with Jim O’Neill. O’Neill, the head of Goldman Sachs Asset Management ten years ago coined the BRIC acronym to describe the four biggest emerging economies and perhaps understandably, he is not too perturbed by the outcome of the Greek crisis. Speaking at a recent conference, the man who is often called Mr BRIC, pointed out that China’s economy is growing by $1 trillion a year  and that means it is adding the equivalent of a Greece every 4 months. And what if the market turns its guns on Italy, a far larger economy than Greece?  Italy’s economy was surpassed in size last year by Brazil, another of the BRICs, O’Neill counters, adding:

from Jeremy Gaunt:

Why is the euro still strong?

November 10, 2011

One of the more bizarre aspects of the euro zone crisis is that the currency in question -- the euro -- has actually not had that bad a year, certainly against the dollar. Even with Greece on the brink and Italy sending ripples of fear across financial markets, the single currency is still up  1.4 percent against the greenback for the year to date.

Are global investors slow to move on euro break-up risk?

November 9, 2011

No longer an idle “what if” game, investors are actively debating the chance of a breakup of the euro as a creditor strike  in the zone’s largest government bond market sends  Italian debt yields into the stratosphere — or at least beyond the circa 7% levels where government funding is seen as sustainable over time.  Emergency funding for Italy, along the lines of bailouts for Greece, Ireland and Portugal over the past two years, may now be needed but no one’s sure there’s enough money available — in large part due to Germany’s refusal to contemplate either a bigger bailout fund or open-ended debt purchases from the European Central Bank as a lender of last resort.

Phew! Emerging from euro fog

October 27, 2011

Holding your breath for instant and comprehensive European Union policies solutions has never been terribly wise.  And, as the past three months of summit-ology around the euro sovereign debt crisis attests, you’d be just a little blue in the face waiting for the ‘big bazooka’. And, no doubt, there will still be elements of this latest plan knocking around a year or more from now. Yet, the history of euro decision making also shows that Europe tends to deliver some sort of solution eventually and it typically has the firepower if not the automatic will to prevent systemic collapse.
And here’s where most global investors stand following the “framework” euro stabilisation agreement reached late on Wednesday. It had the basic ingredients, even if the precise recipe still needs to be nailed down. The headline, box-ticking numbers — a 50% Greek debt writedown, agreement to leverage the euro rescue fund to more than a trillion euros and provisions for bank recapitalisation of more than 100 billion euros — were broadly what was called for, if not the “shock and awe” some demanded.  Financial markets, who had fretted about the “tail risk” of a dysfunctional euro zone meltdown by yearend, have breathed a sigh of relief and equity and risk markets rose on Thursday. European bank stocks gained almost 6%, world equity indices and euro climbed to their highest in almost two months in an audible “Phew!”.

from Summit Notebook:

Does Germany need Europe?

December 6, 2010

Jim O'Neill, the new Goldman Sachs Asset Management chairman who is famous for coining the term BRICs for the world's new emerging economic giants, reckons he knows why Germany might not be rushing to bail out all the euro zone debt that is under pressure. Europe is not as important to Berlin as it was.

SWFs climbing the German wall

July 21, 2010

The Vale Columbia Center on Sustainable International Investment’s latest report on foreign direct investment looks at inward flows to Germany.  Things look like they were a bit better last year than the year before, apparently.

from MacroScope:

Germany 1919, Greece 2010

April 26, 2010

Greece's decision to ask for help from its European Union partners and the International Monetary Fund has triggered a new wave of notes on where the country's debt crisis stands and what will happen next. For the most part, they have managed to avoid groan-inducing headlines referencing marathons, tragedies, Hellas having no fury or even Big Fat Greek Defaults.

It’s the exit, stupid

January 26, 2010

Ghoul

Anyone wondering what ghoul is most haunting investors at the moment could see it clearly on Tuesday — it is the exit strategy from the past few years’ central bank liquidity-fest.

Not quite 99 emerging market beers on the wall

August 14, 2009

Should emerging market investors set aside their spreadsheets and crack open a cold one?