Monday 1st May 2017
NEWS TICKER, 28th April: On Wednesday May 3rd, immediately before the formal dissolution of Parliament, the House of Lords EU Energy and Environment Sub-Committee will publish its Brexit: agriculture report. The Committee has investigated the implications of Brexit for UK agriculture and food, particularly the impact of leaving the EU’s Common Agricultural Policy. It has taken evidence from key industry representatives, academic experts and the Government to identify priorities for a post-Brexit relationship with the EU. This inquiry will inform the Government, the House and the wider public on key priorities for UK agriculture and food - Deutsche Borse's failed merger with London Stock Exchange Group has the German exchange operator shopping for other acquisition possibilities outside its core business, including the areas of index, data and analytics. "One of the lessons learned is that the consolidation in the core exchange market seems to be a little bit difficult and politically not supported," the exchange group’s chief financial officer Gregor Pottmeyer told Reuters - “Investors are uncertain into the long weekend as early-week bullishness comes off the boil,” reports Michael van Dulken, at Accendo Markets in his market note today. “Trump has again failed to convince us that he can get Congress onside with his pro-growth policies. Results season has been good, but geopolitical risk simmers away with a North Korean threat and uncertain French election outcome. Uninspiring macro data prints and what could happen between now and Tuesday also contributes to waning optimism. The FTSE is trading 4-day lows with losses for BARC (disappointing results) and GBP strength weighing on big name international defensives (RB, AZN, BATS, DGE), overpowering gains for Miners and Oil majors (Oil price rebound) and UK banks (RBS results). The DAX is break-even with Commerzbank and Deutsche Post fighting off RWE, Vonovia, and Heidelberg Cement. The FTSE 100 has broken below yesterday's lows of 7225 now in a 2-day falling channel. The DAX 30 remains in a 12400-12460 falling channel from Tuesday's record highs. Dow Jones Futures have bounced off rising support at 20940. Gold is back above $1265, holding 6-week rising support.” -- Barclays says profits were more than double that of 2017 but investment banking operations fell short of expectations; meantime Royal Bank of Scotland turned £1bn net loss last year to a net profit this year of £259m but US mortgage mis-selling scandal still weighs. As Barclays and Royal Bank of Scotland update the market Helal Miah, investment research analyst at The Share Centre, explains what it means for investors. “Yesterday, Lloyds Bank, who has made good strides to put its legacy issues into the past, reported a good set of results that were encouraging on many fronts. This morning it was the turn of Barclays and the Royal Bank of Scotland for whom restructuring and the road to recovery has not been as smooth. Barclay’s Q1 2017 results showed group pre-tax profits of nearly £1.7bn, more than double the same period in 2016 partly driven by lower costs. However, its investment banking operation’s performance fell short of expectations and materially worse in comparison to peers due to weaker than expected fixed income trading. As a result, the shares are trading down by roughly 4%.” Barclays also noted this morning that there is a large impairment in relation to is disposed African operations, even so there were notable improvements in its cost to income ratio and CET1 ratio. While Barclays is showing some progress towards restructuring, such us focusing on its core operations, legacy issues are still hampering progress and there still remains some uncertainty over further regulatory fines -- Artemis Investment Management LLP says Kartik Kumar, who joined Artemis in 2012 as a graduate trainee and has been since 2013 an analyst on the £804m Artemis Strategic Assets Fund, has been promoted to fund manager with immediate effect. Kartik will now co-manage the fund alongside William Littlewood, who has managed the fund since its launch in May 2009.Commenting, the firm’s chairman John Dodd said: “Kartik has made a consistent and valuable contribution both to the business as a whole and to our Strategic Assets Fund in particular. This promotion recognises that, and we congratulate Kartik.” -- UK GDP growth recorded +0.3% in Q1 2017 (AXA IM & consensus forecast +0.4%). Evidence of a consumer slowdown was apparent in a contraction in distributive services, but there was also evidence of an unwind of previous erratic strength in other sub-sectors of services. AXA IM says UK GDP will expand by 1.7% in 2017 and 1.2% in 2018 (consensus 1.8% and 1.3%). Softer than expected Q1 GDP should also leave the monetary policy committee (MPC) more relaxed over its accommodative stance of policy. However, most analysts say the bank rate will not move for years yet (not under this government anyway; it would be politically toxic and unbalance the housing market which is looking particularly fragile at the moment. The slowdown in GDP was dominated by weaker consumer spending, with retail sales contracting by around 1½% in Q1. While this first release of GDP contains no estimates of the expenditure components, evidence of weaker retail activity was present in the 0.5% drop in distribution et al services sub-sector – a joint eight -year low. “However, the bigger surprise to us this quarter was a softer industrial output estimate (0.3% vs our expectation of 0.6%) and a fall in the transport and services sub-sector (-0.2% vs +0.9% in Q3). This sub-sector has been erratic in recent quarters – a 2.6% gain explaining forecast error in Q3 and accounting for most of the 0.1% forecast error in Q1. First estimates of GDP are often revised and some aspects of the weaker industrial production could end a little firmer (electricity and gas production was particularly weak), but an unwind of the transport et al. sub-sector looks reasonable to us. However, the scale of contraction in retail activity looks volatile and we suspect a rebound in Q2 is likely to support faster expansion in Q2,” says AXA IM. In its latest minutes the Bank of England (BoE) stated it expected GDP growth of 0.6% in Q1. The BoE forecasts more mature versions of GDP than the official release, but today’s 0.3% clearly presents downside risks to their 2.0% GDP outlook for 2017. Commenting on the latest UK GDP figures, Michael Baxter, economics commentator for The Share Centre says, “Whichever way you cut it, the UK’s economic performance in Q1 was a disappointment, expanding by just 0.3%, from a growth rate of 0.7% in Q3. This was the slowest rate of growth in a year. It seems that the falls in the pound seen after the EU referendum are beginning to take their toll. Falling retail sales and sales in the accommodation sector meant that the UK’s key services sector only expanded by 0.3%. Production also grew by 0.3%, as did agriculture with construction expanding by 0.2%. It is arguable that sterling may have fallen with or without the Brexit vote. What is clear is that recent rises in inflation are having an adverse effect. The surveys, such as purchasing managers’ indexes, had pointed to a slightly better performance, but they also suggested that the UK’s growth has slowed. As a result of this disappointing data, the odds of a hike in UK interest rates this year have fallen. Companies that are primarily focused on the domestic economy are likely to be the losers from the current slowdown. But investors need to bear in mind that the global economy is looking quite strong, at the moment, and recent data on the euro area, which remains the UK’s main trading area, has been promising. The UK stock market, especially the FTSE 100, is as much a gauge of the global economy as it is of the UK economy, and the fall in the pound is helping the valuation of UK listed companies that trade abroad. Exporters or multinational companies may well benefit from the anticipated pick-up in the global economy.” -- The UK must focus on encouraging tech SMEs to list, according to founding member of the European Tech Alliance. European Council President Donald Tusk says agreement on a UK trade deal is not the priority in Brexit negotiations, with discussions about the future relationship coming after agreement on "people, money and Ireland". As a solution to any funding shortfalls which take place as a result of these negotiations, the UK should focus on encouraging more small and medium enterprises (SMEs) to list, according to a founding member of the European Tech Alliance. Speaking to the BBC , Gianpiero Lotito, a founder and CEO working in deep tech with human language search platform FacilityLive, said that getting the conditions right now could put Europe between 5 to 10 years away from producing a giant on the scale of Google or Amazon. Europe already has more public listed tech companies than the US or China but there is still a lack of giants. Our European funding model is not as mature as in California, but we shouldn’t be looking to mimic the Silicon Valley model like for like anyway. We have to create conditions that are suited to the quirks of the European market. For instance, in the UK the classic success trajectory is to sell out to a US or Asian giant and pull in about £100-300million, missing out on the eventual multi-billion pound listings achieved elsewhere. So we need initiatives like the London Stock Exchange and Borsa Italiana ELITE programme, which help SMEs like mine to get ready to list – because we need to encourage European tech companies to stay the distance here. There is an important link between successful IPOs and boosting confidence amongst both investors and entrepreneurs – so that they make bigger bets on the European market.” -- A day after President Trump’s new proposed tax plan, analysts report the market response has been mixed, particularly on its expected effect on the Chinese economy; very little at this stage. Some say t the tax cut will encourage US companies to repatriate earnings from China, reigniting capital outflow pressures that had recently subsided. However, China is not a tax haven for corporates to park earnings, leading some to believe profits will continue to be reinvested in the mainland. However, Chinese officials have reacted more strongly and government mouthpiece, the China People’s Daily has suggested that the new plan could incite a tax war, forcing other countries to readjust the tax environment to mitigate outflows -- According to Greek government officials a staff level agreement with the institutions (EC/ECB/ESM/IMF) in the context of the 2nd programme review is likely by Wednesday at the latest. Following the staff level agreement the required measures are expected be legislated by the Hellenic Parliament by May 15th while a global deal will consequently be sealed at the May 22nd Eurogroup where more clarity on the issue of medium term debt relief is also expected to be provided. Eurostat released yesterday the business and consumer survey results for April 2017 according to which the Economic Sentiment Indicator in Greece rose slightly for the second month in a row to 94.9 index units (i.u.) from 93.4 i.u. in March --

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Key Stories from FTSE Global Markets

Although long standing, in 2016 the country’s privatisation programme was harnessed by the government to encourage foreign investment in minority stakes in a gamut of state-owned firms, include the country’s flagship National Company KazMunaiGas. Since then, the programme has sometimes been mired in questions around governance. Partners, Carter Brod and Aset Shyngyssov of global law firm Morgan Lewis examine the viability of Kazakhstan’s privatisation plans.

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Set against a dynamic business backdrop in its own backyard, the European Energy Exchange (EEX) has adopted a confident and bold strategy to establish its global footprint within the exchange industry. Last year’s move into new commodity focused asset classes marks a new dimension in EEX’s growth and its continued transition from Europe’s leading energy exchange towards a global, multi-commodity exchange group. It has provided EEX and its parent company, Deutsche Börse Group, a growing competitive edge, given that it can also provide the vertical post trade support infrastructure required to back its expansion plans. Why has EEX been so successful in Europe, and how does that translate into its plans for global growth?

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Wednesday, 21 October 2015

Egypt opts for development funds

For the third time this year, the Central Bank of Egypt (CBE) has depreciated the Egyptian pound against the dollar in a foreign exchange auction in mid-October, taking the currency's decline for the year to 9.8%. The pound fell 1.3%(10 piasters) to 7.93 per dollar sell side and 7.88 buy side according to a report by the state-owned Middle East News Agency, which announced that the CBE offered $40m at a regular dollar sale to local lenders. Can the country pick its way out of the blues?

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The make-up of shareholders in Turkey’s banking segment has always been a touchstone of wider market change. The country has always been a swing market and the banking system has remained vulnerable, even with an improved capital base, as it has an ultra-high dependency on foreign funding of lending. That vulnerability has resulted in some significant changes in the investment in the country’s banking segment by foreign financial firms who have shown little stickiness in the country when the going gets tougher.

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Wednesday, 21 October 2015

Political uncertainty weighs on Turkey

A survey of 947 respondents in Turkey by Washington think tank PewCentre Research suggests Turks are dissatisfied with the direction of their country. Rising prices, crime and inequality are concerns. Moreover after years of quasi-Islamic rule that has been antipathetic to the military; survey respondents say the military is the only group with a “good influence on the country”. Opinions of the police, national government, religious leaders and the courts are mixed, while views of the media tilt to the negative. More pertinently perhaps, 52% of Turks think their children will be worse off financially in the future. The findings come as voters are scheduled to revisit national government elections on November 1st after the AKP party failed to form a coalition government in June. The upcoming elections will be closely watched, both as a bellwether of wider change in the eastern Mediterranean and as an indicator of the near term prospects for a lynchpin emerging market.

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THE EVOLUTION OF CUSTODY IN A POST T-2S WORLD

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