Time running out for Greece

Takeaways: D-Day rapidly approaching for Greece as time is running out to agree a deal with its international creditors, secure the release of badly needed bailout funds and avoid defaulting on its obligations.

Rumours are rife that the Syriza government is preparing to take the dramatic step of declaring a default. The country is rapidly running out of funds to pay public sector salaries, state pensions and repayments, due to the IMF at the end of April and start of May.  The official party line from government officials in Athens, however, is to strongly deny that a default is being considered and continue to reiterate the government’s commitment to strike a deal with its creditors.

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With the 2015 General Election campaign trail just beginning, what’s being said?

Takeaways: Our newspapers, TVs and social media are becoming inundated with all-things-political as the UK trundles towards May’s General Election.  Celebrity endorsements, campaign posters, Tony Blair taking centre-stage once again and not least, Margaret Thatcher’s 18-tonne bombproof ‘battle bus’ used in her 1983 campaign going up for sale  – a steal for just £25,000.

With 2014 Q4 GDP revised upwards and the latest EY ITEM club highlighting that the UK economy is set for an expansion of close to 3% in 2015, what has come out from the first few weeks of campaigning which could have a bearing?

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Good time to buy, great time to sell?

Takeways: The rapid pace of change in today’s markets means companies need to be constantly reassessing their portfolios in order to stay on the right side of the ‘economic success line’. Luckily, this looks like a great time to sell with buyers coming back into the market in Europe. Many emerging nations, however, are finding the going tougher and tougher…

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As we power ahead, what next for the UK borrowers?

Takeaways:

  • UK economy picks up steam with GDP, employment growth and government borrowing performing strongly
  • Demand for credit from UK companies is on the up, with supply gaps being filled from the increasingly established alternative funders
  • Outlook appears robust for debt capital supply, with the potential UK EU referendum a key risk on the horizon

Growth up, employment up, the budget deficit down and inflation at record lows – the UK would appear to be in a strong and accelerating position, and can now add the title of fastest growing developed world economy in 2014 to the trophy case following the most recent update from the Office of Budget Responsibility.

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How will changing earnings forecasts shape the agenda?

Earnings: Dilemmas, divergence and disquiet…..

Takeaways: Last night the Fed played down the dollar’s impact on the US economy, but its rise is certainly the hottest topic on Wall Street. Janet Yellen’s dovish tone has taken Euro parity off the table for now, but policy divergences will keep the greenback strong. Meanwhile, European earnings expectations are moving rapidly higher, buoyed by the Euro’s fall, cheap oil and policy support. Private Equity is making hay, using this window to sell off assets at record rates – after all, Eurozone realities may bite again soon. It’s a good time to divest, although rising asset prices create an obvious flipside and currency volatility is complicating deals, even before the Fed really changes its tune. It is still a volatile world – enough to challenge earnings expectations again in 2015 – but uncertainty isn’t the only earnings concern. There is disquiet over sustainability. When the cost cutting and buybacks are done, can companies keep the earnings show on the road?

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Eyes down for a fresh look…

Takeaways: The Eurozone, UK and ‘emerging markets’ have something in common: the sharp juxtaposition of optimism and concern. In varying degrees; but the contrast between opportunity and threat highlights the complicated patchwork of growth and risk companies are navigating. Was it ever thus? Risk isn’t new, but perhaps there is more flying in from ‘leftfield’ and there are certainly greater forays into market unknowns – such as the great Fed unwind. Markets remain highly accommodative, but they still have the potential to twitch. Opportunities abound, but selectivity is still vital with smart divestment playing its part.  In these markets, companies can also expect greater interest in how they perceive the future. Time to take a fresh look at countries, markets and corporate portfolios…

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Feeling negative?

Takeaways: As negative yields spread, the divergence between Euro and dollar borrowing costs becomes more marked. Add the Euro at an 11-year low and it’s no wonder Mr Buffet – and a growing number of his US compatriots – are not only shopping in the European aisles, but borrowing in the Euromarket. Of course there’s a flipside. The ECB’s bond buying driving much of this yield decline comes from a position of weakness. However, there are brighter spots emerging across Europe and transactions aren’t just a bet on recovery; they can help to build resilience through increased market share, diversification, lower costs and innovation. Good reasons why the deal appetites we saw return in 2014 should continue to improve in 2015.

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