Archives for June 2016

British Pound falls to 30-yr low against US dollar

SP lowered the UK sovereign rating by two notches – to AA from AAA, and maintained a negative outlook which means further downgrades could follow in the coming months.  

The EU referendum result could lead to “a deterioration of the UK’s economic performance, including its large financial services sector,” said SP. It described the choice to leave the EU as a “seminal event” that would weaken the “predictability, stability, and effectiveness” of UK policymaking.

Standard and Poor’s had been the only major agency to maintain an AAA rating for the UK, which has lost it for the first time since 1978. Britain is behind countries like Germany, Switzerland and Australia who still hold the triple-A elite grade from SP.

Fitch lowered its rating from AA+ to AA, forecasting an “abrupt slowdown” in growth in the short-term. It said less favorable terms for exports to the EU, lower immigration and a reduction in foreign direct investment would impact medium-term growth, along with an adjustment in the value of sterling and changes in the business environment.

READ MORE: ‘The country is going to be poorer’ because of Brexit – Osborne

The downgrades followed Chancellor Osborne’s attempts to reassure investors and calm the markets, saying the UK economy would need to “adjust” but is strong enough to cope.

Since Brexit:

£ hits 31-year low vs $

10y yield record low

£100B wiped off FTSE 100

UK taxpayer loses £8B on RBS

UK loses AAA rating

— Jamie McGeever (@ReutersJamie) June 27, 2016

Earlier, the Moody’s agency cut UK’s credit outlook to negative, saying the referendum result would herald “a prolonged period of uncertainty.” The negative effect from lower economic growth will outweigh the fiscal savings from the UK no longer having to contribute to the EU budget, according to Moody’s. It said the UK has one of the largest budget deficits among advanced economies.

Article source: https://www.rt.com/business/348669-sp-britain-rating-cut/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Post-Brexit world: Financial downturn, political turmoil protests

“I cannot say the names, but a number of Asian companies operating in the finance sector and located in London, have turned to us in recent weeks,” said Deputy Mayor Kajsa Ollongren, stressing that the firms want to move to the Dutch capital to provide services for mainland Europe.

The companies need to avoid uncertainty connected to labor legislation, taxation, currency rates as well as stability of the British economy, according to the official.

“Asia’s businessmen do not accept such a contingency,” the politician added.

Britain quitting Europe in the long-term puts the Dutch economy in jeopardy, according to Ollongren.

“After leaving the EU, Britain will get an opportunity to independently change the rules of taxing and provide more attractive conditions for business,” she said.

READ MORE: British Pound falls to 30-yr low against US dollar

Paris and Frankfurt are also jostling for London’s mantle.

Even before the UK referendum, Paris’s financial elite hosted a conference at which they promised to “roll out the red carpet” for City bankers in the event of Brexit. Frankfurt is also confident it can lure financiers from London.

“Brexit would be bad for Britain, for Germany and for the EU,” Hubertus Väth from Frankfurt Main Finance, a body that promotes the city as a financial center told the Financial Times. “But if it does happen, then Frankfurt is well placed to benefit.”

On Friday, UK citizens voted to leave the European Union by 52 to 48 percent in a national referendum. Now the decision has to be approved by the British Parliament.

Prime Minister David Cameron, a fierce proponent of staying in the EU, announced his resignation on Friday. A new prime minister will be chosen in October.

Article source: https://www.rt.com/business/348580-amsterdam-finance-center-brexit/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

China to build 400km/h train for Russia’s high-speed railway

The companies involved are Russian Railways, Russian investment company Sinara Group, China Railway, and the Chinese state owned rolling stock manufacturer CRRC.

“The agreement envisages localization of production in Russia and a lifecycle service for high-speed trains,” the statement said.

Under the deal, a plant will be built in Russia to produce 100 trains capable of reaching speeds of more than 300 kilometers per hour.

The trains will be designed for the Moscow-Kazan high-speed railway. In the future, the railway is planned to become part of a bigger project, the $100 billion high-speed railway connecting Moscow and Beijing.

The railway may also be connected to Beijing’s New Silk Road project, which will link China to markets in Europe and the Middle East.

The new 770 kilometers of track between Moscow and Kazan, the capital of Russia’s Tatarstan, will go through seven regions of Russia.

It will have fifteen stops, including Vladimir, Nizhny Novgorod, Cheboksary and Kazan. The journey from Moscow to Kazan which currently takes 12 hours will be reduced to just 3.5 hours.

READ MORE: Russia China to invest $15bn in high-speed rail link from Moscow to Kazan

The project’s overall cost is expected to exceed $15 billion, and Beijing is ready to provide a $6 billion loan, according to Russian Railways.

China Daily has already reported Beijing is developing a new generation of high-speed trains for the Moscow-Kazan route.

Article source: https://www.rt.com/business/348564-russia-china-trains-venture/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Soros seeks safe haven in gold, concerned about possible EU collapse

“In fact, he was long on the British pound leading up to the vote,” the representative said, pointing out that George Soros profited from other investments, without specifying details.

Two days before the world-shaking vote the man, who made billions by betting against sterling in 1992, said that the decision to leave the EU would cause a bigger and more damaging fall of the British currency, sparking a second “black Friday” for the UK. Soros expected the pound to drop 15-20 percent.

“I would expect this devaluation to be bigger and also more disruptive than the 15 percent devaluation that occurred in September 1992, when I was fortunate enough to make a substantial profit for my hedge fund investors at the expense of the Bank of England and the British government,” Mr. Soros told The Guardian.

On Friday, sterling had its worst single-day fall against the US dollar, at one point losing 10 percent of its value, dropping as low as $1.30 against the greenback. The pound continued to reel on Monday, dropping another three percent against the US currency.

Whatever opportunity Soros missed by failing to predict Brexit, he made up for in commodities trading.

Earlier this year, the billionaire cut his US stock investments by a third and invested in gold and bought shares in gold mines.

READ MORE: Soros dumps US stocks, buys gold

The precious metal surged 4.8 percent on Friday, its biggest one-day gain since January 2009. Brexit triggered a mass selloff of riskier assets and investment in safe haven commodities such as gold.

Gold continued to rise on Monday, trading near two-year highs at $1,330 per troy ounce.

Article source: https://www.rt.com/business/348537-soros-bet-gold-pound/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Pound plummets: London markets lose $164 billion in 10 mins

The sterling dropped more than 3 percent to $1.32 against the US dollar as of 10:15 GMT. The euro is also under pressure, down almost one percent against the greenback.

“We are still looking for another 10 percent fall for the pound against the dollar in the coming months as data confirms the economic slowdown and monetary policy expectations increase,” said Jeremy Cook, chief economist at World First, as cited by the BBC.

Banking, airline and property shares plunged Monday on the London Stock Exchange.

Barclays shares were temporarily suspended after falling more than 10 percent, Royal Bank of Scotland fell nearly nine percent, while shares of airline EasyJet plummeted 16 percent.

London’s FTSE 100 index was down 1.31 percent, while the FTSE 250 index, which is mostly made up of UK-focused companies, fell 2.2 percent. The German DAX slid 1.49 percent and the French CAC 40 index more than one percent in early trading.

Following Friday’s eight percent fall, Japan’s Nikkei closed 2.4 percent higher on Monday backed by warnings from Japanese officials they may intervene in the currency markets to stabilize the yen.

Brexit gold rush: Scared Brits stockpile bars coins, just in case

Demand for safe haven assets such as gold remains strong. The price of the precious metal rose half a percent on Monday to $1,330 per troy ounce.

READ MORE: Dow plunges 600+ points following historic Brexit vote

Moody’s rating agency has cut UK’s credit outlook to negative, saying the referendum result would herald “a prolonged period of uncertainty”.

“In Moody’s view, the negative effect from lower economic growth will outweigh the fiscal savings from the UK no longer having to contribute to the EU budget,” said the rating agency. It added the UK had one of the largest budget deficits among advanced economies.

Standard and Poor’s has also threatened to downgrade the UK’s rating.

Article source: https://www.rt.com/business/348536-pound-markets-drop-rating/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

“Fifty-eight various business initiatives with the total volume of investments being $50 billion, have been selected,” Putin told journalists in the Chinese capital. Twelve of the projects are already being implemented, he added.

Putin is accompanied by a number of top officials and companies’ heads on the trip. The head of the Kremlin Administration Sergey Ivanov, five deputy prime-ministers and several ministers, as well as the heads of Rosneft and Gazprom oil and gas companies, all went to China. Some 50 documents were expected to be signed during the visit, with Putin meeting not only President Xi Jinping, but also other top Chinese officials.

A number of energy deals have been secured between the two nations, including agreements on selling of stakes in several Russian projects to Chinese companies. Russia’s top oil producer, Rosneft agreed with China National Chemical Corporation (ChemChina) that the Chinese firm would take a 40 percent stake in Rosneft’s planned petrochemical complex in Russia’s Far East.

An oil supply contract, under which Russia could deliver up to 2.4 million ton of crude oil to ChemChina in a year’s time, has also been agreed upon.

Russia wants Hyperloop for super-fast transport in Far East, seeks Chinese funds

An intergovernmental agreement on a large aviation project has also been reached. The sides have agreed to work on a new wide-body long-range aircraft, which could carry up to 300 passengers. The new plane in the works is seen as a potential rival to Airbus and Boeing, to become part not only of Russian and Chinese, but also other nations’ fleets.

Saying that Moscow and Beijing have been doing “very meaningful work,” and can boast a “very profound discussion that ends with a result,” the Russian president stressed that the two nations always manage to find “a balance of interests.”

This time, the two states have agreed to expand mutual payments in national currencies, to decrease dependency on external factors.

While Russia-China bilateral relations are mostly based on economic cooperation, the two nations still successfully build their partnership in other spheres, including international affairs, Putin said.

READ MORE: Unwise Obama policy pushes China and Russia closer together

Putin stressed that such joint efforts “contribute to the stability of world affairs,” where Russian and Chinese views “are either very similar or coincide.” Besides the United Nations, Putin noted the importance of cooperation within the Shanghai Cooperation Organization (SCO) and BRICS (Brazil, Russia, India, China and South Africa association). The SCO, Putin said, remains an “essential element” that ensures stability and security in the region, as he expressed hope that more nations would join the bloc.

‘Our views are either similar or coincide’: Putin on comprehensive strategic China-Russia alliance

The two leaders have also discussed the G20 summit, which China will be hosting this year in September. While Xi has officially invited Putin to the summit, Russia’s leader promised his counterpart support and possible assistance in hosting the summit.

Putin arrived in Beijing the day after he met with Xi on the sidelines of SCO summit in Uzbekistan. Putin’s last official visit to Beijing was less than a year ago, in September. Last year, the two presidents met as many as five times. Since 2013, they’ve had some 15 meetings.

Regular interactions between Moscow and Beijing strengthen “good-neighborly” relations and cooperation, Putin said. Addressing Xi as “dear friend,” he said: “We meet very frequently and regularly… each of our meetings is profound in character. This is not just due to the formal event, the 15th anniversary of the Treaty of Friendship, good-neighborly relations and cooperation… It’s [also] due to the demand from the Chinese and the Russian people to strengthen and develop our relations.”

Article source: https://www.rt.com/business/348391-putin-china-visit-rosneft/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Ratings agency Standard and Poor’s threatened to downgrade the UK’s rating, which is currently triple A.

Moody’s agency echoed the warning, saying Brexit “heralds a prolonged period of policy uncertainty that will weigh on the UK’s economic and financial performance.”

The financial collapse in the UK is now worse than any crisis over the past three decades. The country – as well as EU countries – lost billions in the space of one morning.

Brexit strips world’s 400 richest people of $127bn – Bloomberg

London’s FTSE fell six percent in early deals, having shed USD$164 billion in 600 dramatic seconds. The city’s banking stocks lost $60 billion, USA Today reported.

Thousands flooded the streets, forming long queues to buy currency ahead of vacation time. Travel giant Thomas Cook even put a £1,000-per-person limit on exchanges.

Germany and France’s CAC 40 dropped by 7.5 and nine percent respectively on Friday. Brexit dealt an even bigger blow to southern European economies, as Italian and Spanish markets fell by over 11 percent.

The pound is now seven percent lower against the dollar, languishing at $1.3782.

The central bank expressed its readiness to provide £250 billion in additional funds to support the markets, according to the governor of the Bank of England Mark Carney.

Calais mayor wants French migrant camps moved to UK after Brexit vote

Another threat is looming for the City of London, as it risks losing its so-called ‘EU passport’, which allows UK banks to operate freely with European banks.

The European Central Bank’s Governing Council member, Francois Villeroy de Galhau, told France Inter radio that if the UK leaves the EU, the country wouldn’t be able to keep the passport, and continue relations with the bloc’s banking sector unhindered.

There is a solution that would still require the UK to comply with European rules.

“There is a precedent, it is the Norwegian model of European Economic Area, that would allow Britain to keep access to the single market, but by committing to implement all EU rules,” he said.

“It would be a bit paradoxical to leave the EU and apply all EU rules, but that is one solution if Britain wants to keep access to the single market,” de Galhau added.

However, not everyone is prophesying doom and gloom. Jeremy Leach, chief executive officer at asset managers Managing Partners Group, told the Telegraph that eventually, sterling “will strengthen against the euro because the UK’s economy is in much better shape than many of its European peers.”

Article source: https://www.rt.com/business/348366-pound-markets-brexit-164/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

The British voters’ decision to leave the European Union caused profound ripples in all major global equity markets.

The Brexit vote has sent European markets into the steepest decline since 2008. The pound plummeted to a record low, not seen since Margaret Thatcher was prime minister some 30 years ago.

The Bloomberg Billionaires Index says billionaires lost 3.2 percent of their total net worth, now estimated at $3.9 trillion.

The worst losses among European billionaires were suffered by Amancio Ortega, Europe’s richest person, who hemorrhaged $6 billion. Many other mega rich individuals took a massive hit, including Bill Gates and Amazon magnate Jeff Bezos, who lost over $1 billion each.

Britain’s wealthiest person Gerald Cavendish Grosvenor dropped more than $1 billion. However, for the UK’s wealthiest Brexit was surprisingly less devastating than for others in the billionaire class. Altogether, Britain’s 15 richest people lost “only” $5.5 billion.

British co-founder of stockbroker Hargreaves Lansdown, Peter Hargreaves, lost the most, seeing his fortune shrink by 19 percent to US$2.9 billion.

In a major irony, Hargreaves was the largest donor to the Leave campaign, donating £3.2 million, according to the UK’s Electoral Commission.

Hargreaves has shown no regret, and says he is ready to work with the British government to shape the nation’s economic future once the country stops being an EU member state.

“I have enormous experience of business, enormous experience of negotiation, enormous experience of economics, and I’m one of Britain’s most successful businessmen,” Hargreaves said. “If they don’t involve me, they’re crazy.”

Richard Branson, a vocal advocate of the UK staying with the EU, has made peace with the decision of the majority, stressing that the British people’s “determination, resolve and sense of what is right” would be necessary “over the testing months and years to come.”

The richest person in South Africa, Christo Wiese, who has vast investments in the UK economy, believes the current crisis doesn’t mean the end of the EU.

“I think it’s the end of [the] EU as it’s currently structured,” the Stuff cited Wiese as saying. “It’s always had unattractive features alongside its attractive features. This will make people sit up and say how can we make it better,” Wiese said.

Article source: https://www.rt.com/business-projects/348345-richest-people-losses-brexit/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

“G7 central banks have taken steps to ensure adequate liquidity and to support (the) functioning of markets,” Osborne wrote on Twitter, adding he has discussed the market consequences with G7 finance ministers and will do “all he can” to make it work.

G7 central banks have taken steps to ensure adequate liquidity and to support functioning of markets

— George Osborne (@George_Osborne) June 24, 2016

In a statement, the G7 finance ministers and central bank governors said they “respect the intention expressed by the people of the United Kingdom to exit from the European Union.”

They added that they are monitoring market developments and will cooperate and support markets as “excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability.”

Bank of England to support markets after Brexit financial fallout (VIDEO)

“We affirm our assessment that the UK economy and financial sector remain resilient and are confident the UK authorities are well-positioned to address the consequences of the referendum outcome,” the G7 statement said.

The G7 countries include the United States, Canada, France, Germany, Italy, Japan, and the United Kingdom.

George Osborne also said the Bank of England and the UK Treasury were closely monitoring the situation.

The British financial regulator said it would “take all steps necessary” to protect the country’s economy in the wake of the UK’s vote to leave the EU which has created turmoil on the financial markets.

The bank added it was ready to provide £250 billion to support the functioning of markets, as well as substantial liquidity in foreign currency, if required.

READ MORE: Sterling pounded in market bloodbath as UK votes to leave EU, Cameron quits

Global stock markets collapsed on Friday as Britons voted to leave the European Union and David Cameron announced plans to resign as prime minister. The British pound suffered its biggest plunge since 1985, while the euro saw its biggest fall ever.

Article source: https://www.rt.com/business/348232-g7-banks-brexit-markets/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

There is a need to maintain stability despite growing concerns that uncertainty about the consequences of the vote will harm the economy, they said, adding the government should guarantee EU citizens have the right to remain in the UK.

The appeals come as some business leaders tried to reassure workers in the UK that their companies would adapt to the country leaving the EU while others expressed disappointment at the result and warned they would have to restructure their business.

READ MORE: Bank of England to support markets after Brexit financial fallout (VIDEO)

Brexit might seriously affect all sectors of the economy, business groups warn.

Oil and Gas UK said “we ask the UK Government clearly outlines the process which will follow.”

The British Chambers of Commerce (BCC) said the government’s response to the vote would be vital for businesses. According to BCC Director General Adam Marshall, companies would now want immediate clarity about a timetable to leave the EU.

“Business will also want to see a detailed plan to support the economy during the coming transition period – as confidence, investment, hiring and growth would all be deeply affected by a prolonged period of uncertainty,” Marshall said.

He also added that “if ever there were a time to ditch the straight-jacket of fiscal rules for investment in a better business infrastructure, this is it.”

The chief executive of the British multinational advertising company WPP, Sir Martin Sorrell, said he was “very disappointed” with the vote result. “This decision will create tremendous uncertainty, which will slow economic activity and decision making,” he was cited by the BBC.

READ MORE: Banks divided over London exodus after Brexit

JP Morgan which employs 16,000 people in the UK said in a statement it “may need to make changes to our European legal entity structure and the location of some roles.” The bank added it will maintain a large presence in London, Bournemouth, and Scotland.

According to the CEO of Aston Martin, Andy Palmer, the firm is preparing for new trade tariff barriers. “Aston Martin will now orientate its business to deliver our mid-term plan in the context of the exit and the market volatility that may exist during the period of transition.”

The UK is the EU’s second-largest market for new cars and a key base for car production.

Another major employer, carmaker BMW said “While it is clear there will now be a period of uncertainty, there will be no immediate change to our operations in the UK.”

Business leaders have been overwhelmingly calling for Britain to remain in the EU. Just days before the referendum more than 1,000 chief executives signed a letter backing the “remain” vote.

Article source: https://www.rt.com/business/348184-businesses-reaction-brexit-economy/?utm_source=rss&utm_medium=rss&utm_campaign=RSS