Wall Street down – trade talks and yield in focus

Wall Street fell sharply onTuesday due to the new concers over the US China trade talks and the Treasury yield curve.

According to markets, the Treasury 10-year yield curve, which indicates the coming recession, was one of the market concerns and the 10-yield hit its lowest value since September. The demand for longer-dated Treasuries rose.

Also President Donald Trump said on Tuesday that if the countries cannot solve the trade issues and differences, he is a “tariff man”.

Dow Jones fell 2,66 % and was 25 138 points. S&P 500 index fell 2,17 % to 2729 points and Nasdaq dropped 3,21 % and ended at 7202.

In Europe the decline was modest. In London the FTSE100  fell 0,56 % to 7022 points and German Dax-index 1,14 % to 11 335. In Paris the CAC40 -index ended down 0,82 % and was 5012. In Asia the stock markets were mixed and for example in Hong Kong the stocks rose 0,29 % , but in Tokyo the markets fell 2,39 %.

The UK Parliament was having Brexit discussions and the Parliament voted about the legal advice related to the topic. The outcome was that the Goverment will have to publish the full disclosure of the Brexit legal advice.

Euro and sterling ended slightly down and euro was 1,1341 dollars and sterling 1,2716 dollars.

The US stock and bond markets will be closed on Wednesday.

Business Finance

Global markets up on Monday -busy week ahead

The stock markets ended up on the Monday trading in Asia, Europe and Wall Street. According to the markets, one of the biggest reasons for the positive trend was the agreed US China tradewar situation with the new 90 days negotiations timetable.

Dow Jones -index was up 1,13 % to 25 826, S&P 500 index was up 1,09 % to 2790 points and Nasdaq 1,51 % to 7441 points.  In Paris CAC 40-index increased 1 % 5053 points and in Frankufrt the Dax-index ended up 1,85 % to 11 465 points. In London the FTSE all shares index was up 1,04 % to 3863 points.

In Asia the Shanghai index was up 2,57 % to 2654 points and HangSeng in Hong Kong + 2,55 % to 27 182 points.

There are major happenings during this week. For example in London, the Parliament is having debate about the Brexit deal before the vote on next Monday the 11th. On Wednesday there will be the US national day of late President George H. W Bush.

Federal Reserve´s  Vice Chairman Richard Clarida said in the Bloomberg interview on Monday that the US economy is in good shape and that the outlook is solid.

Finance Business

BoE: No-Brexit deal would sink property prises

According to the Bank of England the no-Brexit deal would have major severe impact on the British economy and financial markets. The Central Bank published its scenarios, not forcasts in London today. The scenarios illustrate what could happen, but not necessarily what is most likely to happen.

The bank have made different scenarios related to the Brexit-decision and according to the study in the situation with no-Brexit deal (with many severe delays at the UK boarders and loss of confidence in the financial markets) it would mean that the British economy would be hit like the oil shock in the 1970´s.

The gross domestic product would decline by 8 percent and unemployment would rise to 7,5 percent. House prises would decrease by 30 percent and the commercial property prises would sink by 48 percent. Inflation could be 6 percent. Sterling could loose 25 percent of its value and for example the UK Goverment Bond yield could rise by 100 bps.

The most reliance industry sectors on EU trade would be oil & gas, chemicals & pharma, finance and cars/transportation.

On the other hand, the Bank of England also published its financial stability report on the same day and according to the central bank “the UK banking system is strong enough to continue to serve the UK households and businesses even in the event of a disorderly Brexit.”

BoE wrote that since the financial crisis, major UK banks have substantially reduced their reliance on wholesale funding.

–  At group level, they hold more than £1 trillion of high-quality liquid assets. They are able to withstand more than three months of stress in wholesale funding markets.
As a result of supervisory actions and their own prudent risk management, major banks have aligned the currency of their liquid assets to that of their maturing wholesale funding. They can now withstand many months without access to foreign exchange markets, the study finds.

– In addition, banks have pre-positioned collateral at the Bank of England that would allow them to borrow a further 300 billion. The Bank is able to lend in all major currencies. The Bank, other UK authorities and financial companies have engaged in extensive contingency planning, the bank says.

The UK Parliament is having the Brexit-vote on the 11th December.

Business Finance

Brexit: EU and Britain agree on the treaty draft

Britain and the European Union have agreed the Brexit draft treaty on Thursday.

-The deal that will enable us to do this is now within our grasp. In these crucial 72 hours ahead, I will do everything possible to deliver it for the British people, PM Theresa May said.

According to Reuters, the main text of the political declaration is that the countries have agreed to develop an ambitious, wide-ranging and balanced econonomic relationship.

The aim during this week is still that the UK and EU will meet on Saturday to finalise the treaty for the EU leaders summit on Sunday. After that the treaty will be discussed in the UK Parliament for final approval. The UK exit from EU would happen on 29th March 2019.

The transition period, which is to end in December 2020 can be extended for two more years. May has said it must end before a British election due in mid 2022.

Financial markets were mixed today on Friday in the Asian markets and Shanghai- index was down 2,14 % and Hang Seng -index -0,64 % in Hong Kong.  On the other hand the Nikkei 225  -index was up 0,65 % in Tokyo.

Wall Street was closed yesterday due to the Thanksgiving and today on Friday the trading will be closed at 1 pm Eastern time in New York.

Euro was trading up 0,08 % against US-dollar at 1,1412 and sterling- US-dollar was down 0,05 % at 1,287 dollars.

 

Business Finance

Brexit: May to talk with Juncker on Saturday

UK Prime Minister Theresa May and EU Commission head Jean-Claude Juncker will continue the Brexit-dialoque on next Saturday before the EU Leaders meeting on Sunday. There are still issues like Gibraltar and Fisheries on the agenda.

Mrs May travelled to meet Mr Juncker in Brussels today, but they could not finalize the Brexit-deal yet. According to Reuters, May said the negotiators from both sides would continue working on the text during the week.

– I believe we have been able to give sufficient direction for them to be able to resolve those remaining issues, she said according to Reuters.

Financial markets turned mostly positive today for the first time this week after the tech-stocks decline. For example Apple´s CEO Tim Cook said in an interview this week, that he expects the regulators to give new guidances for tech-companies. He was referring to the global discussions of consumer privacy issues.

In Paris the CAC40 -index ended up 1,03 %, Frankfurt Dax closed up 1,61 % and OMX Stockholm ended up 1,48 %. In London, the FTSE 100 -index closed up 1,47 %.

In Wall Street, Dow Jones ended flat, Nasdaq + 0,92 % and S&P 500 -index up 0,30 %. Also the natural resources like gold, platinum, brent and copper were having positive trend.

Euro gained against US dollar and was up 0,14 % at 1,138 dollars, but sterling was down 0, 09 % and was trading at 1,277 dollars

 

 

Finance

Helsinki2018: How about the investments?

helsinki2018-logo

The tradewars between the US, China and the EU are escalating in all frontiers. The world economies are already suffering of the lack of confidence and stability. It really needs a crystal ball to see behind the unexpected and C-level executives are trying to navigate in the day-to-day  ever changing economic environment. It is clear that the tradewars  and sanctions will be one of the top questions in the #Helsinki2018 meeting with presidents Donald Trump and Vladimir Putin.

The world economy is mixed up. The discussion in the NATO meeting in Brussels this week also showed the power of the US. The defence budget of 2 procent of the NATO-country´s GDP is one of the questions but also the questions of next investments and taxes. Which country will be the next growth country to invite international investments and money? And what will happen to institutions, are they ready to renew their way to operate and engage? It seems clear that Nato in not the only one, there might also be the UN and for example IMF and World Bank in the financial markets.

It is no wonder that the space will be the next generation growth area. At the moment there are no internationally and generally accepted laws and rules how to proceed with the new technology and investments. It offers taxfree for everybody who could have the access to ride to the moon. And that is why it is important for countries to have as much co-operation and network as possible in order to be along in the process. Like for Finland, which is a small, but quite innovative country, to be part of the technology development.

The number two is also important for the European Central Bank (ECB). This is the inflation target of the EU area. The bank´s monetary policy says that the main target for the central bank is to keep price stability and the inflation below, but close the 2 % over the medium term. This is the mechanism how the EU area will have growth and jobs, but also how to keep the value of euro.

One can say that this is also the same what president Donald Trump is doing with “corporate America and America first”. And so far it seems working – the earnings of listed companies have risen by 22 % compared to year ago and investments are up 19 procent. The relaxation of banking rules and corporate taxes have fueled the economy.

The new inflation numbers from the US show the trend – inflation is on rise and it has strengthen the dollar.  The figure 2,9 % is a clear sign for the Federal Reserve to rise the interest rates- it is estimated that there will be at least two increases this year.

The euro has fallen to 1,17 dollars. And naturally the ECB is worried about the overall economic situation in the Eurozone. Tradewars and sanctions are not helping the economic growth and rising inflation on the other hand will increase the pressures to rise the interest rates.

It seems clear that old rules are not working any more. In order to avoid the global economic and financial crisis, action, co-operation and readyness is needed from cabinets. Maybe we see something about this on Monday in #Helsinki2018?

Päivi Härkönen

 

Business Finance

TaskForce: Four key areas related to climate change and financial disclosures

Financial Stability Board and its working group, the Task Force, has published its recommendations for companies related to climate change and financial disclosures. This working group was established in December 2015  to set a voluntary, consistent disclosure for companies.

The 32 industry members of the Task Force, who are drawn from a wide range of industries and countries from around the globe, finalised the recommendations after extensive public engagement and consultation, including public consultation on a draft of the recommendations in December 2016.

The TCFD developed four recommendations on climate-related financial disclosures that are applicable to organisations across sectors and jurisdictions. The recommendations are structured around four thematic areas:

  • Governance: The organisation’s governance around climate-related risks and opportunities
  • Strategy: The actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning
  • Risk Management: The processes used by the organisation to identify, assess and manage climate-related risks
  • Metrics and Targets: The metrics and targets used to assess and manage relevant climate-related risks and opportunities

In a joint statement, the TaskForce leaders say: “We encourage other business leaders to join us in this united effort to improve disclosure across sectors and regions. The Task Force’s recommendations will catalyze more consistent, comparable, and reliable disclosure of climate-related information that will facilitate more informed business and investment decision-making. These disclosures are an important step forward in enabling market forces to drive efficient allocation of capital and support a smooth transition to a low-carbon economy.” This private-sector TaskForce was chaired by Michael R. Bloomberg.

The signatories include for example companies like Aviva, Bank of America, Barclays, BNP Paribas, Borsa Italiana, London Stock Exchange, Calpers, Citigroup, Deloitte, EY, KPMG, PWC, ING Group, Moody´s, S&P and UBS Group.

The recommendations are backed by over 100 companies with market capitalisations of over 3,3 trillion US dollars and financial firms responsible for assets of more than 24 trillion US dollars.

The Financial Stability Board promotes international financial stability; it does so by coordinating national financial authorities and international standard-setting bodies as they work toward developing strong regulatory, supervisory and other financial sector policies.

Business Finance