Tuesday 9th February 2016
NEWS TICKER: February 8th 2016: SimCorp, a provider of investment management solutions says Vescore AG, a Swiss asset manager with $14bn in assets under management, has completed the implementation of SimCorp Dimension. Other divisions of the Vescore group will migrate to SimCorp Dimension in phase 2 of the implementation project, so the whole business will then operate on an integrated platform, designed to support modern, internationally active asset managers as they realize their growth potential. Frank Häusgen, senior sales & account manager at SimCorp says: “Vescore is another example that the ‘Investment Book of Record’ (IBOR) is so much more than a buzzword.” - S&P Capital IQ and SNL has rebranded as S&P Global Market Intelligence. The division’s new name is a strategic move forward as part of the integration of the two previously separate businesses, S&P Capital IQ and SNL Financial, under parent company McGraw Hill Financial (NYSE: MHFI). The businesses originally combined following the successful completion of the SNL Financial acquisition by MHFI on September 1, 2015. MHFI also recently announced its intention to rebrand at the corporate level as S&P Global, subject to shareholder vote in April of this year - RPMI Railpen has announced three new appointments to the in-house investment team for the Railways Pension Scheme. Sweta Chattopadhyay has joined as senior investment manager of the Private Markets team, joining from Adveq, a global alternative investment firm. Matthias Eifert has also joined the £22bn pension scheme from Macquarie Securities, and will take up the role of investment manager focusing on fundamental equity analysis and managing concentrated equity portfolios. Meanwhile, Tony Guida has joined the Alternative Risk Premia team at Railpen as an investment manager, from EDHEC Risk Institute - BCA Research, a provider of investment research, says has partnered with FiscalNote, a technology startup building a platform for analysing government risk, to integrate US policy data and analysis onto BCA’s digital platform BCA Edge. The collaboration will enable investors to factor in today’s complex regulatory landscape into their investment strategies and better understand how individual companies and industries are impacted by legislative actions, to identify alpha generating investment opportunities. The agreement with FiscalNote follows BCA’s collaboration with crowdsourced financial estimates platform Estimize to incorporate earnings and revenue estimates data on the BCA Edge platform - BroadSoft, Inc. (NASDAQ: BSFT), a global unified communication software as a service (UCaaS) provider, has acquired Transera, a provider of cloud-based contact center software for small-medium business (SMB) and large enterprises. The acquisition positions BroadSoft to lead the fast-growing Contact Center as a Service (CCaaS) market, while enabling service providers to offer a comprehensive cloud contact center portfolio with minimal new investments, rapid time-to-market, and seamless integration with BroadSoft's BroadWorks and BroadCloud solutions. BroadSoft believes that Transera's omni-channel (voice, email, chat and social) and analytics-driven cloud contact center software will enable businesses to optimise operational efficiency, strengthen financial performance and improve the business outcomes of customer interactions. "Today's acquisition brings together the leading cloud unified communications provider with a pioneer redefining contact center performance through omni-channel and big data analytics," says Michael Tessler, chief executive officer, BroadSoft. "The multi-billion-dollar contact center market is ripe for cloud disruption, and we now offer service providers a single stack solution with the flexibility to scale from SMB to large enterprise." "Cloud is rewriting the rules when it comes to how businesses can deliver a superior customer-engagement experience through simplicity, on-demand scalability, and advanced analytics," adds Prem Uppaluru, chairman and chief executive officer, Transera, who will assume the role of General Manager and Vice President of BroadSoft Cloud Contact Center - Singapore state-fund Temasek Holdings’ wholly owned investment arm Vertex Venture Holdings’ fourth Israel fund has been oversubscribed by as much as 50%, and is set to see its final close at $150m, according to Singaporean press reports. In the meantime, Temasek says it is set to close a new fund, Red Dot, also worth up to $150m to invest in mature Israeli high tech firms - Wealth manager Charles Stanley says it has appointed Vicky Casebourne and Elizabeth Feltwell as intermediary sales managers. Feltwell joins from The Ingenious Group and will work with financial advisers, solicitors and accountants across Scotland, Northern Ireland and London. Casebourne joined Charles Stanley in 2011 as a trainee investment manager from Brewin Dolphin. She worked as a central investment product specialist, assisting intermediaries with in-depth product analysis before moving to an intermediary sales manager role - Thin and thinner news from Asia today as Chinese New Year celebrations take over from worries about falling stock markets. The focus today is all on Japan: the Bank of Japan released the notes backing its decision to introduce negative interest rates (see news story below). Japan's Nikkei Stock Average rose 1.1%, but is still down 12% from the beginning of the year and is still at 12.8 times this year’s earnings according to S&P Capital IQ. Thailand's SET was up 0.4%. India's Sensex is up 0.1% (essentially flat), while Australia's S&P/ASX 200 ended down 0.01%. Other markets in Asia were closed for the Lunar New Year holiday. The pace of the US Federal Reserve’s tightening on monetary policy still hangs heavy on the market, as last Friday’s jobs figures showed a 151,000 increase in jobs while insurance claims for joblessness stayed flat overall on the previous month. Contrast that with slower and still slowing growth in China, a nervous monetary policy from the PBOC, which is being steered rather than steering markets, still volatile crude oil prices (which can only get worse not better as inventories continue to rise), a collapsing market in Brazil, concerns about NPLs at Indian banks, and the threat of ever looser monetary policy in Europe and you can see why investors are running on empty. Crude oil prices remain sharply lower compared with several months ago, but the pace of falls might be easing. New York Mercantile Exchange, light, sweet crude futures for delivery in March traded at $30.86 a barrel, down three cents from the previous close. The words rock and hard place come to mind this week as the US Federal Reserve will have to steer a delicate monetary course. On the one hand an increase might help cool the economy (but that won’t help US stocks); but if it says that the reason it doesn’t raise rates is because of worries about the global outlook, it will shake investor confidence in the markets and trigger another round of sell offs. The other key trend has been the steadily appreciating US dollar. The US dollar has risen since Friday, factoring in perhaps the possibility of an additional rate rise. The dollar was at ¥ 117.28 in late Asia, up from ¥ 116.82 late Friday in New York. The euro was at $1.1139, down from $1.1160. We’ll find out midweek, as Federal Reserve chair Yellen will testify before Congress on the progress of monetary policy on Wednesday.

Latest Video

Blog

The European Review

By Patrick Artus, chief economist at Natixis

Without lax monetary and FX policies, fiscal consolidation in the euro zone is impossible

Friday, 01 June 2012 Written by 
Without lax monetary and FX policies, fiscal consolidation in the euro zone is impossible In the past, successful fiscal consolidations occurred through a combination of restrictive fiscal policy, expansionary monetary policy and sharp depreciation of the currency. In many euro-zone countries, as the policy mix is restrictive, fiscal consolidation is failing due to falling real economic activity. All possible ways to make monetary policy in the euro zone more expansionary must therefore be explored. Although there remains little leeway to lower short-term interest rates, it is possible to reduce long-term interest rates in the euro-zone countries where they are abnormally high, both by restoring fiscal credibility and through bond purchases by the ECB. Above all, the euro must be weakened, requiring interventions in the FX market. And if the current trend of restrictive fiscal policies without drastic monetary measures persists, euro-zone countries will end up in recession and with higher, not lower fiscal deficits. http://www.ftseglobalmarkets.com/

In the past, successful fiscal consolidations occurred through a combination of restrictive fiscal policy, expansionary monetary policy and sharp depreciation of the currency. In many euro-zone countries, as the policy mix is restrictive, fiscal consolidation is failing due to falling real economic activity. All possible ways to make monetary policy in the euro zone more expansionary must therefore be explored.

Although there remains little leeway to lower short-term interest rates, it is possible to reduce long-term interest rates in the euro-zone countries where they are abnormally high, both by restoring fiscal credibility and through bond purchases by the ECB. Above all, the euro must be weakened, requiring interventions in the FX market. And if the current trend of restrictive fiscal policies without drastic monetary measures persists, euro-zone countries will end up in recession and with higher, not lower fiscal deficits.

Monetary measures during fiscal consolidations in the past

In the nineties, Sweden, Canada, Finland and Italy all successfully consolidated their fiscal position through rapid reductions in fiscal deficits, without negative effects on economic growth and unemployment. This was because fiscal consolidation was systematically combined with a very expansionary monetary policy that included lower interest rates and, above all, a sharp depreciation in the exchange rate to kick things off.



In these countries, the fall in government expenditure was offset by an increase in exports linked to the devaluation of the currency as well as an increase in domestic demand linked to the fall in interest rates.

In the absence of sufficient monetary measures, the fiscal consolidations in several euro-zone countries are failing

The ECB’s policy rate is actually low, but long-term interest rates in the troubled countries have risen markedly, which results in long-term interest rates for the euro zone as a whole that are far too high.

Moreover, although it has depreciated since 2008, the euro is still overvalued against the dollar. And, since euro-zone countries want to reduce their fiscal deficits as quickly as possible, the euro zone’s policy mix is on the whole too restrictive. So it is unsurprising that activity is declining in countries with restrictive fiscal policies: Greece, Portugal, Italy, Spain, Ireland and even the Netherlands.

Indeed, the decline in growth is so substantial that fiscal deficits stopped narrowing in early 2012 in several countries (Spain, Greece, France, Italy and Portugal), requiring additional fiscal austerity measures to be adopted. But these measures will further weaken growth, especially because they are being adopted simultaneously by most of Europe (the euro zone and the United Kingdom). This could lead to an absurd situation later in the year whereby unemployment soars while the fiscal deficits fail to fall. European countries are moving increasingly to the right of the Laffer curve, where a more restrictive fiscal policy subsequently leads to a higher fiscal deficit due to a fall in economic activity.

The only solution: Expansionary monetary and exchange-rate policy

Euro-zone countries are at an impasse if the current policy mix is too restrictive, and the resulting fall in economic activity prevents them from reducing their fiscal deficits. The only solution is then to emulate the successful fiscal consolidations in the nineties by changing over to an expansionary monetary and exchange-rate policy. So – while there is no longer much to be gained from short-term interest rates in the euro zone – it is possible to reduce long-term interest rates in the countries where they are abnormally high.

In order to achieve this, these countries need to regain medium-term fiscal credibility, i.e. financial markets need to be convinced of their determination to stabilise their public debt ratios. This would enable the ECB to resume its government bond purchase programme (SMP) – aimed at accelerating the decline in interest rates – without fear of encouraging these countries to not reduce their deficits.

Furthermore, the euro must be weakened. Indeed, exchange-rate depreciation played an important role in the fiscal consolidation programmes of the nineties. And like Switzerland, China, or once again Japan, the ECB could accumulate foreign exchange reserves (in dollars in the ECB’s case) to push down the euro’s exchange rate against the dollar.

A depreciation of the euro would directly benefit the countries with large-scale industry (Germany, Italy, Ireland, Finland, Austria and Belgium) as well as countries with large-scale exports outside the euro zone (Belgium, Ireland, the Netherlands and Germany), while Spain, France, Portugal and Greece would indirectly benefit from the positive effects of the euro depreciation on these other euro-zone countries.

Averting disaster

Although resuming its government bond purchase programme and accumulating foreign exchange reserves runs counter to the ECB’s culture, if it does not do this, several euro-zone countries will soon reach the absurd situation of the simultaneous increase in both unemployment and fiscal deficits at the same time that fiscal deficit reduction policies are being carried out. Indeed, the examples from the past clearly show that successful fiscal consolidations have always been combined with expansionary monetary and exchange-rate policy.

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

Related News

Related Articles

Related Blogs

Related Videos

Current Issue