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Blog Profile / Reuters Breakingviews Blog

Filed Under:News
Posts on Regator:3127
Posts / Week:17
Archived Since:June 19, 2011

Blog Post Archive

China embraces troublesome cult of consumption

E-commerce giant Alibaba shifted $2 billion of goods in the first hour of its “Singles’ Day” shopping festival. It looks like consumers are doing their bit to rebalance China’s economy. But like investment, consumption is a poor target. It can be wasteful as well as productive.

Global banks prepare for un-level playing field

Under new rules, taxpayer-funded bailouts will be less likely, because banks will hold bail-inable debt of as much as 25 pct of risk-weighted assets. But emerging market banks and non-systemic peers are exempt. That could mean the days of borderless banking are numbered.

Obama and Xi compete to put the “I” in “APEC”

Both the U.S. and Chinese leaders are using the Beijing summit to push their own rival trade and investment deals. Sift through the alphabet soup and domestic politics is clearly foremost. There’s room for these big personalities to compromise, but also for dangerous mistakes.

Sears investors too giddy about slow-mo breakup

The stock jumped 35 pct on news its hedge fund boss Eddie Lampert might create a REIT for many of its stores and lease them back. It’d raise much-needed cash. But shareholders, Lampert included, would finance the deal. And the prospects for the rump retailer remain pretty dim.

Review: The secret cause of economic crises

Trust, not self-interest, is the main support of market economies, says Geoffrey Hosking. He persuasively argues that widespread trust is crucial for growth. He explains how business cycles are propelled by mutual confidence, too little at the bottom and far too much at the top.

America: land of phantom job openings

At 4.8 mln, it’s the most positions free since January 2001. Yet the hiring rate keeps falling. The largest gap is in low-wage roles. Comparatively high unemployment for less-educated workers suggests a skills deficit isn’t the problem. Companies just aren’t adding personnel.

Only Putin can stop rouble’s fall

Russia’s currency is sinking. The central bank is blameless. Neither intervention nor higher rates can support the rouble. The economy is deteriorating and reform hopes are fading as Moscow retreats into isolation. The situation will persist until the president changes policy.

Japan’s banks may swap old nemesis for new foe

The central bank’s bond-buying spree will relieve lenders of the burden of financing an overextended government. But if companies don’t invest, lenders may use cheap cash to stoke bubbles in stocks and property. Japanese banks may start living more dangerously than before.

Cable M&A wave washes over the Caribbean

Cable & Wireless Communications is buying Barbados-based Columbus Intl for $3 bln with debt. As with many European cable deals, the high price must be offset with cost savings and growth. CWC shares dived. That’s not all down to a big share placing in a smallish stock.

Gold bulls have precious little to cling to

The asset was first to swoon when investors awoke to the end of U.S. money-printing. Coin sales, a recovering Indian rupee and declining supply offer some hope. But even after a near-40 pct fall, the price hasn’t adjusted to the end of speculative fervour. Sub-$1,000/oz looms.

China’s next GDP goal: trash the target

The old model – pick a number, mould the economy to fit – is no longer helpful. But China doesn’t seem ready to abandon numerical goals. One way forward would be to set a range instead, say 6 to 7 pct. That could provide direction, with wiggle room for things China can’t control.

Carlyle buys a shovel-maker for deal gold rush

The private equity firm is teaming up with publisher Euromoney for a $700 mln buyout of Dealogic, the financial data provider. With IPOs, debt issuance and M&A soaring, the acquisition will be a 2014 test of an old adage: in most booms it pays to sell the necessary tools.

German carmakers tune up the basics of banking

The in-house operations of VW, Daimler and BMW are all solidly profitable. They follow some basic rules that rivals and bigger institutions often forget. Lend to people who can repay, expand carefully and find secure and cheap funding. Successful owners also help.

Bank of Japan bond vault may resemble a black hole

The central bank will suck more than 7 percent of outstanding government bonds into its gravitational pull next year. The longer this goes on, the stronger the investors’ belief that they will never see that debt again. Any dent in that confidence could be highly upsetting.

Alibaba delivers chunky growth, but at a cost

The Chinese e-commerce giant pulled off a 54 pct revenue increase for the second quarter, its first results since listing in New York. But earnings slipped, only in part because of big IPO payouts to staff. Alibaba also says it targets sales, not margins. That’s not reassuring.

End of U.S. QE is actually good for world economy

Investors worry about the end of America’s quantitative easing but global consumers, especially the poor, can welcome it. The halt has helped make oil and food cheaper, lowering inflation. That will also keep interest rates down. In all, it may be more stimulating.

Xiaomi’s upward valuation hike hard to justify

A new funding round could give the Chinese smartphone group a valuation of $50 billion - five times its mooted price last August. That suggests a valuation comparable to tech giant Apple. While Xiaomi is growing fast, it lacks its U.S. rival’s dominance or innovation.

Music rally can shake off discordant Taylor Swift

The 24-year-old pop star yanked her latest album and catalog from Spotify. The digital streaming service and its ilk offer low per-song royalties but subscriptions give labels higher margins than CDs or downloads. Buyer habits are also changing, even if Swift is stuck in 1989.

LabCorp deal tests positive for value destruction

The firm that checks patients’ blood is paying $6.1 bln for clinical trial outsourcer Covance. The strategic logic is hazy. Shareholders’ financial diagnosis is damning, too. They swabbed some $700 mln off LabCorp as cost cuts fell far short of the 32 pct premium paid.

Don’t blame the messenger, Jefferies

Top brass at the $45 bln Wall Street firm peed in cups and chastised the press for writing about salacious charges against one of its rainmakers. The response is not exactly confidence-inducing behavior for a business built as much on trust as the assets on the balance sheet.

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