Brexit: PM does not have to ask for extension – Court

The Scottish judge has today announced that the UK Prime Minister Boris Johnson does not have to ask for the extension to the Brexit-deal if there is no deal ready by 19 October.

The EU leaders summit is taking place 17-18 October and some MPs have asked that the UK Government should ask extension to Brexit if the leaders are not able to reach an agreement in order to avoid the no-deal scenario.

This positive sign for possible Brexit deal was welcomed in the markets and FTSE 100 -index closed up 0,59% to 7197 points in London. In Germany the markets closed also up and Dax-index rose 0,70 % to 12097 points. In France the CAC 40 -index closed up 0,61 % to 5521 points.

 

 

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WeWork´s layoffs and credit rating cut

The US office-rental company WeWork has said it is in the process of laying some of its employees after the abandoned IPO process. According to Bloomberg, the size of the layoffs will be published later this month.
The company faced also a credit rating cut from Fitch. According to Fitch, the office provider is now in the CCC+ category, which means a junk bond rating. The credit outlook is now negative.
WeWork was planning a 20 billion dollar IPO deal for this autumn, but the largest owner Softbank decided to postpone the IPO related to market conditions.
After the decision the company also announced changes in the top management. The company has now two co-CEOs Artie Minson and Sebastian Gunningham after the former CEO Adam Neumann decided to step back from operating role and focus on the board work.

 

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US stocks down – manufacturing data and trade tariffs

The US equity markets were clearly down in New York on Wednesday. The global growth concerns related to recent manufacturing and car sales data were the primary reasons. Dow Jones lost 1,86 % to 26078 points, the S&P 500 -index 1,79 % to 2887 points and the technology Nasdaq-index declined 1,56 % to 7785 points.

The US manufacturing data showed the global growth concern is having impact on the US economy. The US China trade talks have put pressures on the US manufacturing and for example the Ford Motor Company released its car sales figures, which were showing a decline in the third quarter.  Also the declining figures in German manufacturing is one part of the global concern.

Tesla (TSLA) also announced its third quarter deliveries, which were approximately 97,000 vehicles, according to the company release. According to Tesla the total deliveries were at record level, but according to Reuters the deliveries were down to Wall Street expectations and the share fell over 6 % after the bell. Last week the CEO Elon Musk was quoting that the company may reach a six-figures deliveries.

The US also announced a new trade tariffs to the EU related to the WTO Airbus decision. The new tariffs would include 7,5 billion dollars worth of goods. According to Bloomberg this would mean a new 10 % tariffs to aircraft goods and 25 % tariffs on farming and other industrial items. The new tariffs would be effective by October the 18th.

In the UK the FTSE -index also declined 3,23 % to 7122 points. The UK Prime Minister Boris Johnson delivered the new Brexit proposal to the EU. The country is aiming the EU leaders summit on the October 17th in order to seek the deal with the EU.

In Germany the DAX-index closed down 2,76  % to 11925 points and in France the CAC 40-index declined 3,12 % to 5422 points.

 

 

 

 

Business Finance

Google to increase renewable energies globally

The US tech company Google (GOOGL ) has announced that it has made its biggest corporate purchase of renewable energy ever. This include 1600 megawatt package of wind and solar agreements and 18 new energy deals. According to Google more than 2 billion dollars will go to building new infrastructure in the US, Europe and Chile.

– These renewable energy purchases aren’t only notable for their size. Up to now, most of our renewable energy purchases in the U.S. have been wind-driven, but the declining cost of solar (down more than 80 percent in the past decade) has made harnessing the sun increasingly cost-effective. Meanwhile, our Chile deal marks the first time we’ll buy power in a hybrid technology deal that combines solar and wind. Because the wind often blows at different times than the sun shines, pairing them will allow us to match our Chilean data center with carbon-free electricity for a larger portion of each day, Google says in its press release.

The purchase is equivalent to the capacity of a million solar rooftops the Google CEO Sundar Pichai said.

Other tech companies are also announcing their climate change mitigation actions and energy efficiency plans before the next weeks UN Climate Change meetings. For example Amazon (AMZN) has said it will run only by renewables by 2030 and is targeting carbon-neutral by 2040.

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BoE to keep rates unchanged – bank stocks surged in Europe

The UK Central Bank, the Bank of England kept its key base rate unchanged today in its meeting.  According to the central bank, the inflation target 2 % remains also the same. The bank also commented that the outlook for the global growth has weakened due to the US China trade talks since their earlier meeting.

– In the event of a no-deal Brexit, the exchange rate would probably fall, CPI inflation rise and GDP growth slow. The Committee’s interest rate decisions would need to balance the upward pressure on inflation, from the likely fall in sterling and any reduction in supply capacity, with the downward pressure from any reduction in demand. In this eventuality, the monetary policy response would not be automatic and could be in either direction, the bank said in its release.

Yesterday the US Federal Reserve cut the fed funds rates to be 1,75% to 2 %. The Fed also has been active in the money markets adding the liquidity three times during this week.

In Japan the Bank of Japan also kept the rates unchanged in its meeting today on Thursday. On the other hand the Hong Kong Monetary Authorities said that they have lowered the key rate accordingly to the Fed decision, to 2,25 % from 2,5%.

The German 10-year government bond yield was -0,51 %, the UK Gilt´s 0,63% and the US´s 10 year Treasury 1,77%. In France the 10 year bond was yielding -0,22%.

Euro was trading up 0,12 % at 1,10 dollars. Sterling was also up, 0,02 % to 1,247 dollars.

The stock markets surged in Europe today. The Dax-index closed up 6,34 % to 12 457 points, the CAC 40-index increased 5,35 % to 5659 points points in France and the FTSE 100-index closed up 2,32 % to 7356 points in London.

The banking sector were higher in Europe due to the European Central Banks decision to lower the long-term funding (TLTRO III)  for lenders. It became effective today.  The ECB also announced on the 12th September meeting that the maturity of the refinancing operations will be extended to three years.

 

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Fed to cut rates due to global growth

The US Federal Reserve FED has cut the short-term overnight rates to a range of 1,75 % to 2 % in its meeting today. The Federal Open Market Committee was not united about the decision, but voted  7- 3 to lower the rates. According to the Fed, the global growth concern and the US China trade talks were the main reasons for the uncertainties in the economic outlook.

– Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 1-3/4 to 2 percent. This action supports the Committee’s view that sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective are the most likely outcomes, but uncertainties about this outlook remain, the Fed said in its press release.

During the last few days, there has been a financial liquidity shortage in the repo-markets and the Fed has been in the markets to add the liquidity. According to Reuters, the central bank has added 125 billion dollars to the financial system during the couple of days.

One of the reasons why the liquidity was happening in the short-term, is the popular swapping. According to market participants, banks and investors are swapping different maturities in the interest rates markets and using the short-term repo-rates to fund the trades.

The Fed also published its economic outlook update and according to it, the inflation is expected to be 1,5 % during this year and 1,9 % in 2020. The GDP is expected to be 2,2% this year and 2,0% next year.

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