Tuesday 6th October 2015
NEWS TICKER: Tuesday, October 6th: Vistra (UK) Limited ('Vistra') is pleased to announce the appointment of Barry Gowdy as Director, effective 1st October. Gowdy joins Vistra from RBC Wealth Management, where he was responsible for the firm's UK property trust clients – According to NIBC the labour market report for September is one indicator that US economy is losing momentum. It is a view reflected by the weakening of business confidence surveys and a more moderate pace of job growth over the last few months. Although not related to the problems that have engulfed emerging markets over the last summer,, it appears that US businesses have on average accumulated too much in inventories. The number of non-farm payrolls increased by only 142k, whereas 200k was expected and the August reading was revised downwards from 173k to 136k. Additionally, underlying figures indicate that a relatively strong boost in the number of jobs in the public sector camouflaged the weakness in private sector job gains. Market participants were probably also intrigued by the slow rate of hourly wage (earnings) growth. These stayed flat in September compared to August, while the annual rate of wage growth stayed at 2.2%, in line with the annual rate in between 2.0 and 2.5% range this year - Global Jet Capital, a provider of financing solutions for large-cabin, long-range private jets, has agreed to purchase the aircraft lease and loan portfolio of GE Capital Corporate Aircraft in the Americas representing approximately $2.5bn of net assets. Shawn Vick, executive director of Global Jet Capital says, “We are investing heavily in growing the business both organically and through strategic acquisitions such as this one with GE. This is a prime example of our industry expertise and investment capital coming together to evaluate and identify an opportunity to expand the business in a disciplined, carefully measured way.” The price point of the aircraft range between $25m and $75m on average, and corporate users and high net worth individuals will seek competitive financing solutions rather than allocate their own cash resources which are better invested in their own businesses - Gresham Computing plc, a provider of real-time financial transaction control and enterprise data integrity solutions, today announced the appointment of Damian Canning as Sales Director for North America. Based in Gresham’s New York City office, Canning will be responsible for continuing the strong growth of Gresham’s Clareti Transaction Control (CTC) platform in North America - Spending on food, entry fees, insurance and entertainment over the three day Eid al-Adha festival, some 300,000 Saudis spent SAR400m ($107m), according to local press reports. Bahraini officials report higher than usual tourist inflows and spending. Roughly 50% of those who checked in the kingdom’s hotels were nationals of member states of the Gulf Cooperation Council, enjoying Bahrain’s more relaxed ambience - The Philippine unit of Royal Dutch Shell Plc said on Monday it was looking to launch a long-delayed initial public offering (IPO) sometime next year, and may sell even more than the minimum requirement of 10 percent of common stock. "We're getting ready for it," Shell Philippines Country Chairman Edgar Chua told reporters on the sidelines of a Shell event. "We've discussed it with the (Philippines Department of Energy), it's just a question of timing." Pilipinas Shell Petroleum Corp, which operates one of the country's two refineries, is required under a nearly two-decade local law to conduct an IPO. The company had previously cited unfavourable market conditions and the need to upgrade its local refinery in deferring a share sale. Shell's refinery upgrade is underway and could be completed hopefully by the middle of November says a Shell spokesman - European regulators have approved the London Stock Exchange's plan to link the operations of LCH.Clearnet and EuroCCP to offer investors more choice for clearing their trades on the UK bourse. The link is set to begin October 26th - The Straits Times Index (STI) ended 58.1 points or 2.08% higher to 2851.25, taking the year-to-date performance to -15.27%. The top active stocks today were SingTel, which gained 2.81%, DBS, which gained 2.36%, UOB, which gained1.64%, OCBC Bank, which gained2.05% and CapitaLand, with a 2.49%advance. The FTSE ST Mid Cap Index gained 1.45%, while the FTSE ST Small Cap Index rose 1.04%. - Morningstar has downgraded the Aberforth UK Small Companies fund to a Morningstar Analyst Rating™ of Silver. The fund previously held a Gold Rating. Samuel Meakin, manager research analyst at Morningstar, said: “Following a recent Morningstar Analyst Ratings meeting, we have moved the Aberforth UK Small Companies fund to a Morningstar Analyst Rating of Silver. The fund was previously rated Gold. Whilst we still hold the fund in high regard, the recent and upcoming changes to the management team have slightly reduced our level of conviction. Andy Bamford, one of the fund’s six managers, is set to retire at the end of this year; he follows David Ross, who retired in 2014.” - Rubicon Minerals Corporation (TSX: RMX)(NYSE MKT: RBY) was asked by Canada’s Ministry of Environment and Climate Change (MOECC) on September 30th to temporarily suspend mill operations at the Phoenix Gold Project) to treat elevated ammonia levels, discharge sufficient water from the tailings management facility (TMF), and to upgrade the TMF, under specific timelines. It also ordered Rubicon to undertake other operational and reporting obligations, including construction upgrades to the TMF. The company has been utilizing alternative technologies to address the ammonia levels in the TMF - LIFE, the global diaspora organisation of Lebanese finance executives says it has signed an academic partnership with Cambridge Judge Business School, the business school of the University of Cambridge – Figures shows that the United Kingdom’s HMRC collected a record £7.5bn in stamp duty from residential property transactions in 2014/2015, up from £6.45bn the previous year and from £4.9bn in 2012/2013 and the total tax collected from home buyers in the UK has grown by 165% over the last six years alone. Transactions in London contributed the most residential stamp duty revenue at just over £3bn, followed by the South East at £1.6bn and between 2008/2009 and 2014/2015, stamp duty revenues in London have grown by 248%, compared to around 158% in the East of England and 140% in the South East. The latest analysis reports from both Knight Frank and Savills look into the effect of this on the prime market in London and both conclude that the stamp duty changes introduced last December are still having an effect on sales 10 months on.

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The European Review

By Patrick Artus, chief economist at Natixis

Why the ECB will need to purchase bonds again

Friday, 27 July 2012 Written by 
Why the ECB will need to purchase bonds again Even if the European Central Bank (ECB) does not particularly like the idea, it will soon have to return to buying government bonds from several eurozone countries. The reasoning behind this prediction lies in a chain of events already taking place. http://www.ftseglobalmarkets.com/

Even if the European Central Bank (ECB) does not particularly like the idea, it will soon have to return to buying government bonds from several eurozone countries. The reasoning behind this prediction lies in a chain of events already taking place.

Earlier this year the ECB froze its securities market programme (SMP), which, since its inception in 2010, has bought over €210bn worth of sovereign bonds. The responsibility of buying sovereign bonds from various eurozone countries, it said, would now shift to the European Financial Stability Fund (EFSF) and European Stability Mechanism (ESM).

Despite the high level of interest rates in Spain and Italy, the ECB has not resumed its purchases of government bonds, and shows no enthusiasm for doing so. As mentioned, its official stance is that government bond purchases should be carried out by the EFSF/ESM.

However, many analysts (us included) believe the EFSF/ESM will not be able to react sufficiently – mainly due to its size but also the fact it lacks access to monetary creation, which the lender of last resort for governments must have.

To see the chain of events taking place, we only need look at the economic position of Spain, Italy, France and Portugal – which are all deteriorating. This reinforces the risk that investors will refuse to finance these countries, which will push interest rates to the point where there is a threat of default.

In these countries (obviously to different extents):

  • the private sector continues to deleverage;
  • the fiscal policy is and will be restrictive;
  • there is a decline in real wages since labour's bargaining power is weakening;
  • household demand is deteriorating, which leads to companies reducing their investment rate;
  • sluggish activity is leading to job losses and preventing these countries from improving their public finances; and
  • despite the decline in domestic demand in Italy, Spain and Portugal, there remains a substantial external deficit; in France, on the other hand, domestic demand has not started to fall yet, but the external deficit is rising.

The improvement in competitiveness due to the fall in wages (in Spain, Italy and Portugal, but not yet in France) is unable to improve foreign trade, either because the industrial sector is too small as a proportion of the whole economy (Spain, Portugal, France), or because this improvement is insufficient (Italy).

So there is clearly a downward spiralling risk. The crisis spreads from one country to the next via foreign trade and, since the external deficits are only partially being reduced, the crisis may be exacerbated by the rise in interest rates.

Therefore, we can see a continuous weakening of the economy. If the countries’ economic situation deteriorates, it will be increasingly difficult to finance their debts. Investors will be concerned about the countries’ situation and their solvency – in fiscal and external terms. Interest rates will rise further, and this means that countries and governments will be threatened with default.

Realistically, if this occurs the ECB will have to intervene because the officially planned solution (bond purchases by the EFSF/ESM) will not be sufficient. Given the size of the countries’ debts, the need to buy bonds will exceed the capacity of a bond issuer such as the EFSF/ESM – especially in the event of a bond market crisis affecting several eurozone countries.

Given that the lender of last resort for governments must have access to monetary creation, the only institution capable of buying bonds at the volumes required will be the ECB.

We believe that at the end of this process the ECB will have to intervene via massive government bond purchases (similar to the action taken by Bank of England). This is legal, provided that it relates to purchases in the secondary market, irrespective of some countries’ reservations.

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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