The French group weathered luxury market headwinds well in 2014 and will pay a 530 mln euro special dividend. Rivals Kering and LVMH were hit harder but are recovering. That makes the silk tie-maker’s luxury valuation of 32 times forward earnings more difficult to justify.
Athens is hinting it will accept most of its bailout programme and wants to change the rest. The government insists on more fiscal leeway and a debt swap. The negotiations with other euro zone members will be tough. But at least there is a basis for reasonable conversation.
The European Central Bank’s easing and the Greek anti-austerity party’s electoral victory show the euro zone is breaking free of German dominance. With loose monetary policy and banking union, it seems ready for growth-friendly policies that don’t ignore economic reality.
At 1 trln euros or more, the European Central Bank’s long-expected bond-buying programme is powerful enough to impress markets and push down the euro. But partial nationalisation of any losses amounts to policy fragmentation. It risks undermining the euro zone’s foundations.
The killings at the Charlie Hebdo weekly put French and European authorities at the confluence of two dangers – individual acts of violence and excessive countermeasures. Fringe parties may benefit if the response is too weak. Media freedom might suffer if it is too strong.
A prolonged economic slump highlights Europe’s core problem: a crisis in the French-German partnership. Populist parties are rising and the UK could leave the EU. Although many countries still want to join, it’s up to Paris and Berlin to make the case for a rejuvenated Europe.
Markets worried about Europe’s economy in 2014. They will worry about Europe’s security in 2015. EU sanctions over Ukraine will weigh heavily on Russia’s economy. A lot depends on Vladimir Putin, but Europeans need to define what they want sanctions to achieve.
The Russian currency kept falling after the central bank hiked its key rate from 10.5 pct to 17 pct, leaving policymakers with few sensible short-term options. Further out, only higher oil prices and an end to the Ukrainian stand-off can soothe markets. That’s unlikely to happen soon.
Economy Minister Emmanuel Macron wants to show Europe that France is finally getting serious about reform. But his limited plan to deregulate some services faces fierce opposition from within the ruling socialist camp. What Macron is demonstrating is how tough his job is.
Most of Russia’s external debt is owed by the country’s banks and corporates. About $138 bln comes due in the next eighteen months. With the currency down 40 percent against the dollar this year, that will put a major strain on enterprises’ cashflows. Expect the state to step in.