Archive for the ‘Finance’ Category

Why even bears about the government-bond market can find merit in Treasuries

Thursday, May 24th, 2018

JOHN KENNETH GALBRAITH, a quotable economist, observed that one of the deeper mysteries is why, in a falling market, there is still a buyer for every seller. It is a conundrum that bond investors must now contemplate. Since January the yield on a ten-year Treasury bond has risen (and thus bond prices have fallen) with scarcely a backward step. It is above 3% for the first time in years.

In part, the fall in bond prices reflects a growing acceptance that the Federal Reserve will raise short-term interest rates to 2.75-3% by the end of 2019, as its median rate-setter expects. In part it reflects worries that tax cuts and rising oil prices will fuel higher inflation. And there is anxiety that the supply of Treasuries is about to increase (in order to pay for tax cuts) just as buyers may become scarcer. The Fed itself is running down its holdings. The higher cost of hedging currency risk in dollars is putting off some foreign buyers.

If sellers outgun buyers, prices will continue to fall. Who…Continue reading

What is an audit for?

Thursday, May 24th, 2018

AUDITS get noticed only when things go wrong. Last week British MPs issued a scathing attack on KPMG, an auditor, for failing to avert the collapse of Carillion, a contracting company. South African authorities are looking into Deloitte’s audit of Steinhoff, a retailer. PwC, another auditor, could face a court-damages verdict for hundreds of millions of dollars for not spotting fraud at Colonial Bank, a failed American lender. It is also fighting a $3bn lawsuit in Ukraine and a two-year ban in India.

Investors are also waking up to audits. They almost never vote against management’s choice of auditor. But last month over a third of shareholders at General Electric, an industrial conglomerate, voted against the reappointment of KPMG. Investors in Steinhoff are suing the company and Deloitte for $5bn for their losses.

These actions challenge an industry dominated by four big firms: Deloitte, EY, KPMG and PwC. Between them they earned $47bn from auditing most of the world’s largest…Continue reading

Dear oil helps some emerging economies and harms others

Thursday, May 24th, 2018

When they are not fretting about the American dollar or Chinese debt, policymakers in emerging economies keep a close eye on the oil market. The price of Brent crude has risen by nearly 50% in the past year to around $80 a barrel. It ranks as the 11th-biggest spike in the past 70 years (adjusted for inflation), according to UBS, a bank. So should emerging markets now worry that oil prices will carry on rising above $100, or that they will tumble below $50? The answer is yes.

Many emerging economies import oil; others export it. As a rule, higher prices hurt the first group and lower ones hurt the second. But it can be more complicated than that. Indonesia, for example, is a net importer of oil, but a net exporter of “energy”, more broadly defined, including coal and palm oil. Since coal, palm and oil prices tend to rise roughly in tandem, Indonesia would benefit overall from $100 oil, according to UBS. Mexico, like America, is also a net importer of crude. But in both countries a higher oil price…Continue reading

European firms are increasingly tackling the scourge of bribery

Thursday, May 24th, 2018

ONE of the more extreme recent cases of corporate bribery is that of LafargeHolcim, a giant Swiss-French cement-maker which was accused in 2016 of funnelling money to armed groups controlling roads and checkpoints around a factory in Syria. The firm still cannot be sure who pocketed its payoffs, via middlemen, that were intended to keep its facility running at all costs. The money may well have ended up funding Islamic State terrorists.

The investigation into LafargeHolcim is one sign of a wider change. The era when European firms could talk up lengthy “ethics codes” at home and behave badly abroad is over. Long gone are the days when German law counted bribes paid by the country’s industrial champions as tax-deductible. A spate of scandals in Europe suggest that prosecutors, as well as the politicians who influence how much freedom judicial investigators enjoy, are becoming ever less tolerant of corporate corruption.

Another big firm under pressure is Novartis, a Swiss drugmaker….Continue reading

Petrobras shares plunge after surprise diesel price cut

Thursday, May 24th, 2018

Scotland sets target of cutting greenhouse gases by 90% by 2050

Thursday, May 24th, 2018

Nicola Sturgeon claims the most ambitious climate change goals in the world

Russia and Saudi to discuss relaxing oil production caps

Thursday, May 24th, 2018

Meeting prepared amid unease over the rally in oil prices

A rare bipartisan moment allows a timid rollback of banking regulation

Thursday, May 24th, 2018

REPUBLICANS in the House of Representatives had hoped to cut a swathe through the Dodd-Frank act, a titanic set of financial regulations passed in 2010 in the wake of the 2007-09 crisis. The “Financial Choice Act”, drafted last year, would have lessened bureaucratic oversight and relied more on stiff capital requirements. Responsibilities and penalties would have been made clearer and regulators’ discretionary powers would have been reined in. President Donald Trump, who had promised on the campaign trail to “do a number on Dodd-Frank”, was effusive when the House endorsed the Choice Act last year.

But the bill approved by the House on May 22nd, and expected soon to be signed into law by Mr Trump, is a distinctly tamer affair. It moves the line between big, systemically risky banks and the rest, set in Dodd-Frank at $50bn in assets, to $250bn. That cuts the number of institutions subjected to stress tests and stricter supervision from 38 to 12. It also eases some restrictions on proprietary trading. But only the very smallest banks will be allowed to substitute higher capital for strict regulation. Even as bold thinking was thrown out, one truly bad idea made it in, presumably under pressure from representatives from heavily indebted states. Municipal bonds will be granted special treatment in the composition of bank capital, incentivising lenders to load up…Continue reading

Russia’s Gazprom dodges fine in EU antitrust settlement

Thursday, May 24th, 2018

Brazil truck strike forces Petrobras to slash diesel prices

Thursday, May 24th, 2018