Friday 25th July 2014
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New opportunities for European businesses, affordable energy bills for consumers, increased energy security through a significant reduction of natural gas imports and a positive impact on the environment: these are some of the expected benefits of the energy efficiency target for 2030 put forward today by the European Commission in a Communication. The proposed target of 30 % builds on the achievements already reached: new buildings use half the energy they did in the 1980s and industry is about 19% less energy intensive than in 2001. The proposed target goes beyond the 25% energy savings target which would be required to achieve a 40% reduction of CO2 emissions by 2030. At the same time the framework on energy efficiency put forward today aims to strike the right balance between benefits and costs - The California Pension Fund (CalPERS) has told the American press that it might cutting back on its investments into the hedge fund arena by as much as 40%. A CalPERS spokesman told papers that the investment staff will make a formal recommendation to the board in the fall. CalPERS reported a preliminary 18.4% return on investments for the 12 months that ended June 30th this year. CalPERS’ assets at the end of the fiscal year stood at more than $300bn - The number of funds notifying the Jersey Financial Services Commission (JFSC) of their intention to privately place into Europe under AIFMD rules broke through the 150 mark ahead of the end of the AIFMD transitional phase this week. The JFSC figures show that, as at 22 July, a total of 164 funds had opted to make use of Jersey’s private placement route into Europe, and that the UK was the top intended market for managers, followed by Sweden, Belgium, and the Netherlands - Vodafone Group’s debt rating was cut one level at Moody’s Investors Service after the carrier made multibillion-dollar acquisitions to expand in Spain and Germany. The second-largest wireless company’s senior unsecured debt was cut to Baa1, the third-lowest investment grade, from A3, says Moody. The outlook is stable. Newbury, England-based Vodafone reported net debt of £13.7bn ($23.3bn) for the quarter ended March 31st. It is the first time Moody’s has given Vodafone a rating lower than A3 since 2007. Standard & Poor’s and Fitch Ratings rank Vodafone’s debt at A-, the fourth-lowest investment grade. Vodafone’s acquisition of cable operators in Europe and falling revenue in some of its biggest markets contributed to the cut, Moody’s said - In a separate report issued this week, Moody's says the stable outlook on the European Bank for Reconstruction and Development's Aaa rating reflects the bank's conservative capital and liquidity practices, which should support its solid financial performances despite the challenging operating environment. The rating agency's report is an update to the markets and does not constitute a rating action. Moody's also notes that the bank benefits from very high liquidity, owing to its prudent treasury management policies, favourable debt structure and strong market access.

The push and pull of willpower & politics

Friday, 25 May 2012
The push and pull of willpower & politics June will be a battle between political will and economics. While European leaders continue to insist that they want Greece to remain in the eurozone, they are continually being reminded of the economic reality that a break-up of the single currency is almost certain. What is becoming more apparent day by day is that the markets will simply not allow the likes of Greece to have their cake and eat it without paying for it too. Whether Europe’s politicians will listen to those market siren calls for change has yet to be determined. http://www.ftseglobalmarkets.com/

June will be a battle between political will and economics. While European leaders continue to insist that they want Greece to remain in the eurozone, they are continually being reminded of the economic reality that a break-up of the single currency is almost certain. What is becoming more apparent day by day is that the markets will simply not allow the likes of Greece to have their cake and eat it without paying for it too. Whether Europe’s politicians will listen to those market siren calls for change has yet to be determined.

If the Germans and French remain reluctant to put their money in the pockets by either using the ECB’s potential firepower or create a special eurobond then they could themselves become the very nemesis of the single currency that they tell us they are so desperate to keep. Even so, risk aversion continues to whittle down the markets; at the time of writing the index is at 5380, down some 25 points. Traders are watching term support trends at 5335, 5300 and 5275; hopeful bulls out there will be looking for resistance at 5490, 5615/45. This near term downward trend sees the index capped by a downward trend line that also puts some resistance at 5450. Over the longer term now that the index has broken below its 200 day moving average and its upward trend line a close below 5400 could been seen as very negative and we’re now in the ­territory of people not wanting to catch a falling knife.

While immediate market focus will remain on Europe and its affect on the macro picture, there are a couple of important pieces of data that UK investors should note. First, following a surprising improvement in April, unemployment numbers are likely to show a weakening labour market.  There’s little in the way of encouraging data from the UK at the moment, but last month’s data was the first ­indication that unemployment is ­starting to peak. Job creation has come largely from part time rather than ­permanent work and the tick downwards to 8.3% in the rate of unemployment is expected to rise back to 8.4%. Second, it will be interesting to see whether the upcoming Bank of England’s inflation report will encourage the central bank to stick to their hawkish guns or whether the ­confirmation of the double dip recession and a further downgrading of growth projections will result in a more dove-ish tone.

Other European indicators are not great either: Italian ten year yields have crossed back above 6% and for Spain back above 6.5%, meanwhile risk adverse investors piled into German bunds driving their cost of borrowing even lower. This is classic fear gripping the markets once again as the vicissitudes of 2012 look to be playing out in a very similar fashion to 2011. Financial markets detest uncertainty and at the moment they are riddled with them since Greece has been unable to form a government and has had to call for a new round of  elections on 17th June. Up until that point we can expect volatility to remain high and continued pressure to the downside.

The euro made a low of $1.2720 as the situation in Greece continues to deteriorate. Bears sold the single ­currency heavily after socialist leader Evangelos Venizelos announced that talks to form a coalition government had failed and that the public would have to go back to the polls next month. Gold continued to fall as traders dumped risky assets and piled into the safety of the US dollar. Spot gold traded as low as $1541 an ounce.  With little technical support seen until $1531 and no turn around in Greece on the horizon, the down trend looks set to stay firmly in place.

On top of all the European woes there’s also the growing concern that China is slowing down quicker than was previously thought. Add any downturn to the euro crisis and it has negative connotations for global growth.

As ever, ladies and gentlemen, place your bets...

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