Headlines

Brazilian politicians inflated growth estimates to facilitate an agreement between the federal government and Rio de Janeiro to resolve the state’s financial crisis, raising doubts over the viability of the deal. The projections, even if proven true, would still leave the state running a deficit by 2021, according to two people with direct knowledge of the matter who were not authorized to speak publicly, Bloomberg News reported. The deal was crucial as it sets a precedent for other states in financial difficulties.

Deteriorating credit outlooks for two U.K. retailers serving different ends of the wealth spectrum show that investors may drive a hard bargain when those companies next tap the debt market, Bloomberg News reported. First S&P Global Ratings downgraded value clothing chain Matalan one notch further into high-yield territory to CCC, citing a proposal to buy back some debt in the secondary market. This could amount to a "selective default," if it purchases debt at a market price that’s below par, S&P said.

Fewer French businesses failed last year than at any time since the 2008 financial crisis, the latest sign that the euro area’s second-largest economy is strengthening, a report published Tuesday showed. A total of 57,844 French companies filed for protection for creditors, entered receivership or went bankrupt in 2016, according to Altares, which analysis corporate data, Bloomberg News reported. That’s down 8.3 percent from 2015. The number of jobs threatened by insolvencies fell 15 percent to 200,000.

Italian banks are speeding up the sale of distressed loans backed by real estate, in an effort to mend balance sheets weakened by enormous piles of debt, The Wall Street Journal reported. But the banks still have a long way to go. For many loans, they are assigning a higher value than what buyers are willing to pay, meaning that the process of unloading bad loans is likely to remain drawn out. Bolstering the outlook are signs that Italy is coming out of a property slump, which would make it easier to sell more distressed loans. Italy is lagging the U.S.

The eurozone economy kept pace with that of the U.S. for the first time since 2008 last year and its jobless rate fell to a seven-year low, putting the currency area on a steadier footing at the start of a year clouded by political uncertainty, The Wall Street Journal reported. A fourth-quarter pickup allowed the eurozone economy to expand by 1.7% compared with 1.6% for the U.S.

Brazil plans to overhaul its bankruptcy law to help troubled companies survive a two-year recession that has led a record number of them to suspend debt payments, a senior member of the government's economic team said on Tuesday, Reuters reported. President Michel Temer also plans to announce new measures next week to increase productivity and bolster the construction sector, said the official, who requested anonymity to speak freely.

Europeans are more confident about their economy than they’ve been in nearly six years, but you wouldn’t know it by looking at the markets, Bloomberg News reported. Investors dumped bonds and stocks across the region on Monday, spurred by a confluence of risks that echoed the euro-zone debt crisis. French and Italian election campaigns stoked concerns over the rise of anti-euro political powers, while inflation in Germany signaled European Central Bank stimulus may not last much longer. Meantime, Greece, the catalyst for the original crisis, reached another crossroads with its creditors.

The European Union should create a bloc-wide bad bank to help tackle the 1.2 trillion euros ($1.3 trillion) of soured loans on lenders’ books, policy makers said. Andrea Enria, chairman of the European Banking Authority, proposed setting up a common asset management company to take over and manage the sell-off of the loans, Bloomberg News reported. The bad bank would bridge the gap between the “real economic value” of banks’ bad loans and the price that investors are willing to pay.

The fuel subsidies Latin American governments have used for decades to spread the bounty of natural resources are fading as the region’s largest economies shift toward market-driven policies, deepening public ire in difficult economic times, The Wall Street Journal reported. Mexico jacked up fuel prices by as much as 20% on Jan. 1 as part of an ambitious effort begun in 2013 to liberalize its oil industry.

Greece will only receive more loans from the euro zone if the International Monetary Fund joins its latest aid programme, the head of the bloc's bailout fund said on Monday, spelling out a condition thus far disregarded by Athens's creditors, the International New York Times reported on a Reuters story. Greece needs a new tranche of financial aid under its 86 billion euro bailout by the third quarter of the year or it faces the risk of defaulting on its debts.