Tuesday 31st March 2015
NEWS TICKER: TUESDAY MARCH 31st 2015 : President of the European Council Donald Tusk’s meeting with Prime Minister of Spain Mariano Rajoy today covered many points, but concern over a lack of government in Libya and the causes and consequences of instability and insecurity in the Southern Neighbourhood took up much of the discussion. “The Prime Minister and I had a very open discussion on both the causes and consequences of instability and insecurity in the Southern Neighbourhood. We had a good exchange on what the European Union is already doing - in terms of assistance, counter-terrorism and migration - and how we can better target our efforts to make a real difference,” notes Tusk in a briefing note issued today - Data published today by the Association of Investment Companies (AIC) using Matrix Financial Clarity suggests that investment company total purchases on platforms by advisers and wealth managers were 19% higher least year (with purchases worth £452.7m) and more than double the figure in 2012. In Q4 2014, platform purchases of investment companies were at £110.3m, 10% higher than purchases of £100.3m in Q4 2013 and 90% higher than purchases of £58.1m in Q4 2012. Investment company purchases at £110.3m in Q4 2014 were stable when compared to £110.6m in Q3 2014. Whilst 2014 was a strong year for purchases there was also a significant increase in sales, which rose 40% to £290.9m compared to £208.4m in 2013, suggesting some advisers and wealth managers are taking profits and rebalancing portfolios. Ian Sayers, Chief Executive, AIC, said: “Though sales have increased, we should remember that this trading activity all helps to improve liquidity. The AIC has trained over 3,000 advisers in response to RDR, and has recently increased its resource in this area, with the recruitment of Nick Britton, the AIC’s Head of Training. This will help us to increase awareness and understanding of investment companies with a refreshed training programme and the capability to meet and support more advisers.” The Global and UK Equity Income sectors were the most popular for advisers and wealth managers in 2014 overall, accounting for 18% and 13% of purchases respectively. The Infrastructure and Property Direct – UK were the third and fourth most popular sectors over 2014, accounting for 8% and 7% of purchases respectively. Transact and Ascentric continue to be the top platforms for investment company purchases, accounting for 49% and 20% of the market respectively in 2014. Alliance Trust Savings are increasing in popularity with financial advisers, their market share increasing to 18% in 2014 from 12% in 2013 - The Straits Times Index (STI) ended -7.25 points lower or -0.21% to 3447.01, taking the year-to-date performance to +2.43%. The FTSE ST Mid Cap Index declined -0.17% while the FTSE ST Small Cap Index declined -0.24%. The top active stocks were SingTel (+0.46%), DBS (-0.10%), UOB (-0.99%), Global Logistic (+0.38%) and OCBC Bank (-0.75%). The outperforming sectors today were represented by the FTSE ST Technology Index (+1.08%). The two biggest stocks of the FTSE ST Technology Index are Silverlake Axis (+1.86%) and STATS ChipPAC (unchanged). The underperforming sector was the FTSE ST Basic Materials Index, which declined -1.88% with Midas Holdings’ share price declining -3.23% and Geo Energy Resources’ share price declining -0.52%. The three most active Exchange Traded Funds (ETFs) by value today were the IS MSCI India (+0.13%), DBXT MSCI China TRN ETF (+1.25%), DBXT FT China 25 ETF (+0.28%). The three most active Real Estate Investment Trusts (REITs) by value were CapitaMall Trust (+0.92%), Ascendas REIT (+1.17%), Suntec REIT (-1.07%). The most active index warrants by value today were HSI25000MBeCW150429 (+6.12%), HSI24800MBeCW150528 (+5.80%), HSI24000MBePW150528 (-7.32%) - Mississippi’s Rankin County School District has issued an online survey meant to gauge public opinion of a potential bond issue to build new classrooms. The bond issue would be used for construction of new instructional facilities, and school board officials have been discussing the possibility for a while. No specific details of the amount or number of facilities have been released, but school board Vice President Ann Sturdivant said district personnel are working to assess the needs. Rankin voters rejected a $169.5m bond issue in 2011 to upgrade and build new classrooms, but Sturdivant said she believes people see the need to remedy overcrowding issues, particularly in the Florence, Brandon and Northwest zones and that tapping the US debt capital markets will be a logical step -

Blog

The European Review

By Patrick Artus, chief economist at Natixis

The adjustment in France has not even begun

Wednesday, 30 May 2012 Written by 
The adjustment in France has not even begun The French have the impression that their economy has worsened significantly and that austerity policies are weakening employment and living standards yet this inevitable adjustment is still to come Indeed, when examining the situation of public finances, competitiveness, foreign trade, the sophistication of products and businesses, it is clear that the process of adjustment and improvement has hardly begun in France, whereas it has progressed a lot on some criteria in Spain, Italy and Portugal, and of course long ago in Germany. http://www.ftseglobalmarkets.com/

The French have the impression that their economy has worsened significantly and that austerity policies are weakening employment and living standards yet this inevitable adjustment is still to come Indeed, when examining the situation of public finances, competitiveness, foreign trade, the sophistication of products and businesses, it is clear that the process of adjustment and improvement has hardly begun in France, whereas it has progressed a lot on some criteria in Spain, Italy and Portugal, and of course long ago in Germany.

The impression in France of a significant deterioration of the economy and living standards

The French are extremely pessimistic about the economy and living standards, as showed by a recent international optimism poll conducted by BVA – Gallup international. Yet, the French unemployment rate is lower than Spain and Portugal, and households' real income and spending are still increasing while they are falling in Spain, Italy and Portugal. The French fear a reduction in of social welfare, even though the welfare system has actually become more generous at a time when it has declined in Germany.



State of progress in France’s adjustment

In terms of the adjustment process, let us look at French public finances, competitiveness and foreign trade, and the financial position of French businesses and their product sophistication.

1. Public finances

In 2012, only Spain will still have a fiscal deficit higher than that of France. Meanwhile, the debt ratio will continue to increase in France at a time when it is falling in Germany and has stabilised in Italy.

2. Competitiveness, foreign trade

France and Italy have a higher unit wage cost than Germany, which explains the continuing losses of export market shares for these two countries; whereas Spanish and Portuguese exports, where producer costs are low, are now growing rapidly.

Indeed, France has a large trade balance deficit in manufactured goods yet Spain and Portugal now have an even trade balance. Meanwhile, Italy and Germany have trade balance surpluses. As long as international capital mobility remains low in the euro zone, due to the “renationalisation” of investors' portfolios caused by the crisis; countries will be subject to an external balance constraint. Indeed, France is the only country that has not yet reduced its current-account deficit.

An improvement in foreign trade can be achieved either through an improvement in cost-competitiveness, hence a fall in wage costs, or through a contraction of domestic demand, which reduces imports. At present, the unit wage cost is increasing faster in France than in Germany and all the other struggling euro-zone countries causing domestic demand to continue to increase instead of fall as in Spain, Italy and Portugal.

3. Financial position of businesses and product sophistication

In contrast to other euro-zone countries, the financial position of French businesses continues to deteriorate. It is clear that the deterioration of corporate profitability is due to the low level of product sophistication in French industrial output, which means that French businesses find it harder to pass on rises in production costs to consumers, contrary to what can be seen in Germany, Spain and even Portugal. This is extended by France’s slow productivity gains (efficiency in producing products), which are recovering in Spain and Portugal.

All in all, practically everything remains to be done in France:

France still needs to reduce its fiscal deficit, improve competitiveness/ foreign trade, and restore profitability (productivity) and product sophistication.

Meanwhile, these adjustments have been completed in Germany and are progressing well in the other euro-zone countries. Italy and Portugal now have small fiscal deficits; Spain and Portugal have seen improvement in cost-competitiveness; external deficits have been reduced in Italy, Spain and Portugal while both corporate profitability and productivity have also improved; and Spanish and Portuguese products have become more sophisticated as shown from their ability to pass on higher production costs to consumers.

This all points to a risk of more restrictive fiscal policies in France, a fall in wages, and efforts to restore productivity by businesses (as in Spain and Portugal), which will inevitably be costly in terms of employment.

Patrick Artus

A graduate of Ecole Polytechnique, of Ecole Nationale de la Statistique et de l'Adminstration Economique and of Institut d'Etudes Politiques de Paris, Patrick Artus is today the Chief Economist at Natixis. He began his career in 1975 where his work included economic forecasting and modelisation. He then worked at the Economics Department of the OECD (1980), before becoming Head of Research at the ENSAE. Thereafter, Patrick taught seminars on research at Paris Dauphine (1982) and was Professor at a number of Universities (including Dauphine, ENSAE, Centre des Hautes Etudes de l'Armement, Ecole Nationale des Ponts et Chaussées and HEC Lausanne).

Patrick is now Professor of Economics at University Paris I Panthéon-Sorbonne. He combines these responsibilities with his research work at Natixis. Patrick was awarded "Best Economist of the year 1996" by the "Nouvel Economiste", and today is a member of the council of economic advisors to the French Prime Minister. He is also a board member at Total and Ipsos.

Website: cib.natixis.com/research/economic.aspx

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