Better that the Americans take over the London Stock Exchange

The London Stock Exchange is no longer the red-hot crucible it once was, given the multifarious ways by which shares, bonds and derivatives now change hands. But the prospect of the LSE passing into the control of Deutsche Börse — in what was announced as a ‘merger of equals’, but with the Germans holding the larger stake and the top job — is a mighty provocation to Brexit campaigners. The Express claims it would reduce the London market ‘to an insignificant regional afterthought’. Brexit or not, there’s logic to a pan-European trading platform with shared technologies and harmonised listing rules: but who can doubt that the German agenda must be to hoover as much business as possible from London to Frankfurt?

So if the LSE is to lose independence, as has long been on the cards, let’s pray for a counterbidder — either Atlanta-based ICE (which owns the New York Stock Exchange) or the Chicago Mercantile Exchange. Synergies with one of those would be just as fruitful as with Frankfurt; and the Americans would be in it for money, whereas the Germans are in it for political advantage.

Forces of disequilibrium

A fortnight ago I said that negative official interest rates, as in Japan, Sweden, Switzerland and the eurozone, look like ‘sheer desperation’. But that’s the way the world’s moving. About a quarter of all government bonds in issue now show negative yields, yet few economists are convinced this last tool in the monetary box will stimulate growth and counteract deflation. Swedish inflation has ticked upwards, but elsewhere the effects look diminishing or negligible, while the distortions for banks and investors are enormous. Governor Carney says negative rates won’t happen here and central banks are not ‘out of ammunition’ — but who listens to him these days? None of us really has a clue where all this is heading: as Carney’s predecessor Mervyn King tells us in his new book, forces of disequilibrium are at work in the financial world.