The bank’s president, Mario Draghi, didn’t put it so baldly, of course, but the hints were there in a gloomy press conference that delivered a 1% fall in the value of the euro against the dollar. If the ECB is ready to adapt the “size, composition and duration” of the current programme, everything is up for grabs.
Two conclusions follow. First, the old one: the ECB launched QE too late. Even in the face of a deteriorating eurozone economy, it debated the policy for about 18 months before sceptics at the German Bundesbank could be persuaded. The doubters would surely have been won round earlier if they could have anticipated the ECB’s latest (lowered) inflation forecasts: 0.1% this year, 1.1% next, and then 1.7% in 2017.
The second is that China has plainly rattled Draghi. “We are observing a weakening of the prospects of the Chinese economy,” he said, noting that the ECB’s growth forecasts (also lowered) were compiled before the wobble in western stock markets.
For short-termists, it is comforting to hear central bankers sounding worried and talking about heavier doses of monetary medicine. Thus stock markets rallied yesterday. But that is just knee-jerk stuff. If the Chinese economy really has hit a brick wall, it will make little difference if the ECB buys, say, €80bn of bonds a month rather than the current €60bn.
HSBC leaves Midland Bank in the vault
Common sense has prevailed at HSBC. The UK branches will not be rebranded as the Midland Bank, an idea that always seemed unlikely to survive a collision with the views of customers. Those under 40 do not remember the Midland name. Those over that age recall an accident-prone organisation that could be relied on to run into most Latin American debt crises.
So, after listening to the punters, HSBC will leave “the listening bank” in the grave. The “new” name will be HSBC UK, which qualifies as a change only in the imagination of the bank’s top brass. Hold on, you might say, didn’t HSBC chief executive Stuart Gulliver decree in June that an entirely new name was required?
Yes, he did. New ringfencing rules in the UK, requiring retail and investment banking activities to be separated, were deemed such a fundamental reform that customers had to be able to tell the difference between a ringfenced bank and a non-ringfenced specimen.
That goal will not be achieved by adding UK to the moniker, but it matters little. Regulators don’t care what HSBC calls its UK retail business as long as it is properly separated to protect taxpayers in the next banking crisis.
One suspects this will not be the last time Gulliver marches everybody to the top of the hill, only to march them down again. His other big idea is a possible move of the group’s domicile to Hong Kong/China. As argued here earlier in the week, after Beijing’s alarming and crude attempts to find culprits for its stock market crisis, quitting the UK is another poorly conceived wheeze HSBC should abandon.
EasyJet’s late takeoff
What is the definition of a perfect summer for easyJet? Pretty much like the one we’ve had. The UK weather was lousy, the pound was strong against the euro, and French air traffic controllers did not strike.
Thus a boom in late bookings from the UK to the continent, the airline’s most important market, prompted a reverse profits warning: easyJet will make £675m to £700m this year, about £50m more than it had expected only a couple of months ago. Late bookers, as customers know and accept, pay higher prices.
The odd part is that easyJet’s golden summer took the City by surprise. None of those helpful factors was a secret and the ticket prices can be found on the website.
Shire/Baxalta battle has a sedative effect
It is the dullest $30bn (£20bn) bid battle in history. A full month has passed since Shire, the Anglo-Irish drug maker, launched its attempt to bounce Baxalta of the US into an all-share deal to form “the leading global biotech company focused on rare diseases”. Baxalta rejected the proposal and, despite the odd rumour that Shire would return with improved terms, nothing material has happened.
Shire continues to lobby Baxalta’s shareholders and, in theory, can sustain the bear-hug tactics for weeks yet because the US does not place UK-style “put up or shut up” demands on bidders. The UK way seems cleaner and fairer all round. More exciting, too.
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