Takeaway: Central banks take centre stage as the spotlight moves back to the Euro – via the Swiss Franc It was almost inevitable that the upbeat tone driving capital markets activity in the first two weeks of the year would be broken, but the nature in which it was broken was anything but expected. In a week dominated by macro-economic and central bank news flow, markets are now picking through the details – and potential ramifications – of the ECB’s Quantitative Easing (QE) plans announced yesterday.
Takeaways: Some of the trends for the year discussed last week are already apparent in events during the first weeks of 2015. Innovation is driving IP-centric M&A and divergent economic performances is showing where future stress points may appear.
Takeaways: Last year had its moments, but the last 12 months could look pedestrian compared to 2015. Of course change and even faster growth can bring challenge along with opportunity. Time to wheel out that old, but true, maxim that recovery can be the best, but also the worst of times for companies – and this is no ordinary recovery. The year ahead is full of possibility for the resilient, the flexible and the innovative – but potentially full of pitfalls for those unable to adapt.
I’m not sure Santa will be able to deliver everything on central bankers’ lists this year. Mario must be wondering if he’s made the ‘naughty’ list as Eurozone inflation expectations dip again. Haruhiko got an early present in the form of an Abe election win – a green light for stimulus – and more inflation will be on his list. Meanwhile, Janet might be asking for a crystal ball – and a loudhailer. The Fed has a tricky year ahead, where timing will be everything and, troublingly, it doesn’t look like the bond markets are on the same page. It could be a rollercoaster ride if expectations don’t converge – or for different reasons, if Russia troubles continue to deepen. Moscow’s woes highlight again how the previously coupled emerging markets have diverse wants and needs. No-one is hoarding food and dollars on the streets of Shanghai. Indeed, our research shows that China’s executives have more in common with their US counterparts than the rest of the ‘BRICS’. All this adds up to ‘risk-off’ as we move into 2015. Next year might bring more growth, but increasing volatility will keep self-help measures – including a prudent approach to M&A – high up corporate agendas. Continue reading →
Takeways:The impact of dollar and oil trends on divergent emerging markets caught our eye this week. A timely reminder to check and update plans for different geographies and sectors and realign strategies. As with so much these days, past performance is no guarantee of future growth. Although some things don’t change: Greece is the word once again in Europe. Meanwhile, borrowers have never had so many debt options available to fund their strategic plans. In low growth environments these plans increasing include cross-border M&A to combat against downturn and deflation. The year ahead is shaping up to be a complex and interesting time with new risks – but also great opportunities.
Takeaways: We still live in interesting times. The year ahead will bring further gyrations in monetary policy, currency and commodity prices along with political change and undoubtedly something from leftfield. Stakeholders are increasingly applying the “how does this look with….?” test, be that $60 oil, a stronger pound, Eurozone deflation or higher interest rates. Companies need to demonstrate resilience in these markets. Volatility encourages selectivity. Oilfield service and equipment companies were feeling the pressure at $100 a barrel – $70 (and below) requires a new more resilient approach. Meanwhile, there is still every incentive for strong companies to secure profitable growth via acquisition and shifting sector dynamics are creating ‘motivated’ buyers and sellers. For those looking for a different type of financing, direct lending funds are certainly coming of age.
Takeways: US and European markets are dancing around record highs. Only one appears to be driven by economic fundamentals, but it would be misleading to suggest the US rally comes without disquiet or that Eurozone markets are all about Mario. European companies’ focus on operational improvement will provide opportunities for discerning investors. Stronger US growth could advance the first rate rise to spring 2015 – amplifying the opportunities and risks of divergence we highlighted last week. Of course, there’s a debate to be had about the balance of growth and risk in 2015, which we’ll kick off here. GDP forecasts might actually stick for the first time since 2010….but we can still hear those liquidity canaries sing. Sector dynamics continues to provide strong imperatives to do deals: from oil at $80$75 $70 a barrel to the necessity to improve customer retention and meet capex demands as TMT convergence comes of age.