Federal Reserve May Be Forced to Print More Money to Avert Profound Recession September 30, 2011

As the de facto lender of last resort to the world, the Federal Reserve may be forced to print more money to avert a profound and prolonged recession, according to Oxford Analytica.

[IMAGE]The warnings issued last weekend during the IMF-World Bank annual meetings in Washington about Europe’s debt and banking crises have highlighted the threat level without, thus far, stepping up visible security measures.

If the euro-area lacks access to sufficient capital to deal with the potential scale of......

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Talk of Greek Default Could Become Self-Fulfilling Prophecy September 28, 2011

The gravity of the Greek debt situation is underlined by the growing acceptance among policymakers in Europe that default is possible — or in the view of some, inevitable — for Greece, writes Oxford Analytica. Attempts to ring-fence the default option while excluding Greece’s simultaneous exit from the euro-area are becoming ever more difficult.

[IMAGE]The more the argument is reduced to just two scenarios, whereby Greece defaults and either remains in the euro or leaves, the harder it......

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Strengthening Public Finance Institutions Will Likely Help China Manage Its Rising Local Government Debt September 28, 2011

China’s plan to bolster its public finance institutions is likely to be important in containing the surge in the country’s local government debt. That’s according to Strengthening Public Finance Institutions Will Likely Help China Manage Its Rising Local Government Debt, published today by Standard&Poor’s Ratings Services.

“The Chinese economy would be better positioned to absorb the currently sizable local government debt if its financial institutions strengthen,” said Standard&Poor’s credit......

Related Stocks:  AA, CHINA

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Pharma Market to Expand Share of US Healthcare Spending September 27, 2011

Healthcare reform will expand the  US pharmaceutical market, including as a percentage of overall healthcare spending, according to a new working paper from Harvard Business School. At the same time, firms will be pressured to cut rebate deals or otherwise lower prices through longer-term contracts with insurers, concludes Arthur Daemmrich, the paper’s author.

[IMAGE]The newly insured and elderly with greater prescription drug coverage under Medicare are likely to consume more prescriptions, in......

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US State Spending on Health and Welfare Set To Overtake Education Expenditures September 27, 2011

Fitch Ratings expects health care costs, particularly Medicaid, will present the biggest challenge for states to achieve balanced budgets in the coming years, according to a special report. Although education historically has made up the lion’s share of most state budgets, total state expenditures on health and welfare are on track to eclipse education over the next decade.

[IMAGE]Federal funding cuts not offset by reduced federal requirement would have a direct effect on states, possibly......

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New Financial Rules Will Hit Corporate Borrowing Harder In Europe Than In US September 27, 2011

The introduction of stricter regulatory frameworks for banks and insurers is likely to result, at best, in a repricing and, at worst, in a rationing of credit for corporates globally, in Standard & Poor’s Ratings Services view:

[IMAGE]We believe that European corporates will feel the effect more harshly than their US counterparts because they typically rely more heavily on banks for funding relative to capital market sources.

The details still need to be ironed out on the Basel III global......

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Gold Price Fall Primarily Reflects Market Correction September 26, 2011

The recent falls in the price of gold are primarily the result of the commodity being overbought says Fitch Ratings. While a number of factors are likely to have contributed to the recent falls, these are secondary considerations compared to what Fitch sees as this fundamental overpricing.

Other factors may have contributed to this apparent change in investor sentiment. These include increased margin requirements at the Chicago Mercantile Exchange, and the strengthening US dollar. Fitch......

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UK Banks Face Short-Term Challenge in Adapting to Interim Regulatory Reforms September 23, 2011

While the “ringfencing” provisions of the Independent Commission on Banking’s reform recommendations have stolen the headlines, Oxford Analytica argues that UK banks face more immediate challenges in implementing the IBC’s interim regime.

[IMAGE]Although the coalition government presented the Independent Commission on Banking’s reform recommendations (the ‘Vickers report’) as radical, they reflect the need to protect London’s position as a leading centre for international banking. The central......

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Capital Flows to Increase Sharply, Driven by Emerging Market Wealth September 22, 2011

Oxford Analytica expects capital flows to grow rapidly as world financial wealth expands, especially in emerging market  countries.

[IMAGE]Given consensus forecasts for future global growth, total world financial wealth will probably rise to 450-550 trillion dollars range by 2020, up from today’s level of roughly 200-220 trillion dollars.Within this total, overall external financial wealth is likely to expand even faster thanks to gains on existing investments and the cumulative effect of......

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Deficit Reduction Creates Risks & Uncertainty but No Immediate Impact on State & Local Ratings September 21, 2011

Fitch Ratings does not expect any widespread near-term rating impact for US state and local government credits due to federal deficit reduction efforts, although the efforts present much uncertainty and risk.

Until decisions are made specifying the levels and allocations of spending reductions and other actions such as federal tax changes, the fiscal impact on individual state and local governments will not be known. Fitch notes that although both state and local governments receive aid......

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Global Uncertainties Weigh On Asia-Pacific Sovereign Credit Quality September 21, 2011

Risks associated with a weaker-than-expected global growth, sovereign debt concerns in Europe, and potential tightening in funding conditions weigh on Asia-Pacific’s sovereign credit trends, according to Standard&Poor’s Ratings Services.

The S&P report Asia-Pacific Sovereigns: Is The Positive Rating Trend On Hold?, said the weaker global conditions, combined with domestic inflation and specific weaknesses in some sovereigns, could slow the pace of upgrades for some Asia-Pacific sovereigns......

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Securitized Corporate Loans no Riskier than Unsecuritized Loans September 20, 2011

A new working paper from Harvard Business School finds that securitized corporate loans do not appear to be any riskier than unsecuritized loans.

The paper investigates whether securitization was associated with risky lending in the corporate loan market by examining the performance of individual loans held by CLOs. We employ two different datasets that identify loan holdings for a large set of CLOs and find that adverse selection problems in corporate loan securitizations are less severe than......

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Prolonged Market Stress is Negative for European Bank Credit Profiles September 20, 2011

Fitch Ratings says that while share price declines and credit spread widening among European banks will not in themselves trigger rating actions, if the current heightened market risk aversion persists for a prolonged period, pressure on liquidity, profitability and eventually capital positions will negatively affect banks’ credit profiles and ratings.

[IMAGE]Volatility and uncertainty across capital markets reflect increasingly acute and negative sentiment towards the overall banking......

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‘Third Way’ for Eurozone Could Provide Medium-term Crisis Solution September 20, 2011

Fitch Ratings expects the credit profiles of sovereigns and banks will continue to weaken and this will be reflected in their credit ratings even though Fitch does not expect any systemically important financial institution or sovereign to be allowed to default.

Whilst the public support and political will for a ‘United States of Europe’ involving full fiscal and political union simply does not exist, the costs of a break-up of the Eurozone are too great to allow – and this remains a key......

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Global IT Growth Seen Slowing to 5.5% in 2012 from 11.5% This Year September 19, 2011

The global market for business and government purchases of technology goods and services will see slowing, though still positive growth in 2012, according to Forrester’s Global Tech Market Outlook For 2011 And 2012 (Premium):

Growth in 2011 will be better, because vendors have had two quarters of generally strong demand before economic weakness surfaced in July and August, and that weakness won’t lead to slower tech market growth until Q4 2011. For 2011, these conditions plus a weaker US dollar......

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Radical Transformation Needed to Revive Global Banking September 19, 2011

Without radical action to shrink balance sheets, cut costs, and increase revenues, banks will be unable to attract sufficient new capital from the investment community and to play their critical role in underpinning economic recovery and growth.

That’s the conclusion of new report from McKinsey The State of Global Banking: In Search of a Sustainable Model.

McKinsey’s three key recommendations:

• Shrink the balance sheet. Banks in both Europe and North America must find ways to work with less......

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