Greece: The Midnight Hour

Takeaways:  Efforts to limit direct exposure means Greece is increasingly morphing into a political, rather than a financial crisis; but that can quickly change if companies and markets freeze or the political crisis extends elsewhere. The ECB’s move today to extend QE asset eligibility was necessary in any case…and possibly pre-emptive.

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Greece – could all roads lead to Euro breakdown?

Takeaways: With Greece on the edge, markets have maintained remarkable poise.  Meanwhile, there’s a warning that UK interest rates might rise this summer. Another Maradona moment?   Labour markets might be ‘fizzing’, but a rate rise this summer feels premature, with echoes of the ECB’s move in 2008. Continue reading

Disciplined M&A, unruly markets and emerging problems

Takeways: In some areas of the market it might feel a bit, well 2006-7. The rise in M&A ‘mega deals’, for instance, which could drive overall deal values to record highs in 2015. However, this M&A cycle differs in one vital respect: financial discipline. It’s a somewhat notable trait given the highly tempting yields on offer from lenders. Indeed, arguably the imbalance between limited supply and veracious demand is the foundation for recent debt market volatility.

The next stage of recovery is adjusting to normality – and it’s often a bumpy ride. Watch for more volatility and growing pains – most obviously in emerging markets, hitting areas like luxury and capital goods suppliers. Slower emergers might keep a lid on commodity prices and inflation – but El Niño is back the great unknown in everyone’s 2015-6 equations.

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Deals into the light; lending into the shadows

Takeaways: Greece is taking this to the 11th hour, so we turn our attention to buying and lending. Global M&A is still going great guns despite the slowdown in Q1…or is that because of? Meanwhile, more data on shadow banking pushes it out into the light and further to the notice of regulators. But there’s also pressure to open up the market as it increasingly becomes a vital source of funding

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On the rebound?

Takeaways: Knowing when the game’s up might be the theme of the week. The Greek saga rumbles on with both sides not able to agree now on how close they are to a deal. Eurozone markets remain sanguine. UK markets are even buoyant, with rising earnings expectations providing support. But will the recent lack of profit warnings continue? challenges to UK profits go beyond oil and sterling. Meanwhile, cash remains high up the agenda. Some companies struggle with a lack, others are ‘burdened’ with a surfeit. A nice problem to have? Not if shareholder pressure is on and there isn’t an easy way to invest or return it.

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The minute waltz

Takeaways: It’s a week that’s pushed US and UK rate expectations back, brought ECB buying forward and dragged all three currencies, but especially the euro down. The UK’s brush with negative inflation added to the ‘loose’ narrative – just don’t call it deflation or get complacent. All this has helped steady bond markets, but it’s an uneasy peace.  Meanwhile, news of an early-July ‘Budget’ will focus attention on outsourcing opportunities – but any search for efficiencies will extend to the contracts themselves Continue reading

Five questions

Takeaways: We wouldn’t be so presumptuous as to say these are the biggest questions out there, but they’ve been exercising our minds these week and we’d welcome your views. We’re still waiting on Greece’s fate, whilst we ponder the bond sell off, ask where oil is going, wonder about corporate cash piles, and reflect on the potential impact of the now upcoming UK EU Referendum.  There isn’t an easy answer to any of these. So, above all, we’re thinking about how companies can navigate these known unknowns – which in turn may help with the unknown unknowns and any other Rumsfeldian permutations the rest of 2015 throws up.  The outlook looks hazy, rather than gloomy. However, with multiple scenarios on offer, it makes sense for companies to think about their capital, market, operational and stakeholder resilience. We said 2015 would be ‘interesting’.
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