Archives for June 2016

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

The bank said it stood ready to provide £250 billion to support the functioning of markets. The regulator promised to provide substantial liquidity in foreign currency, if required.

“The Bank of England is monitoring developments closely,” said a statement released on Friday after the referendum results caused a 10 percent fall in the value of the pound and a slump in government bond yields to a new record low.

The global equity and currency markets plunged dramatically after Britain voted for leaving the European Union.

The Bank of England previously said that the decision to leave the EU, which takes almost half of UK exports, could cause a financial blow to the economy. It also warned Brexit could push up inflation due to the hit on the sterling, complicating any decision to cut interest rates.

Bank governor Mark Carney said the best contribution of the regulator to this process is to continue to pursue relentlessly the responsibilities for monetary and financial stability.

“There will be no initial change in the way our people can travel, in the way our goods can move or the way our services can be sold,” he said, stressing that it would take some time for Britain to establish new relationships with Europe and the rest of the world. The governor expects temporary market and economic volatility as the process extends.

The regulator said it had been ready for the result. “It has undertaken extensive contingency planning and is working closely with Her Majesty’s Treasury, other domestic authorities and overseas central banks,” said Carney, adding that the capital requirements of UK’s largest banks were currently ten times higher than before the 2008 financial crisis.

The BoE stress tested the banks against scenarios more serious than the UK currently faces. As a result, the country’s lenders have raised over £130 billion in capital and have more than £600 billion in high quality liquid assets, according to the central bank.

“In the future we will not hesitate to take any additional measures required to meet our responsibilities as the United Kingdom moves forward,” the Bank of England announced.

The regulator appeared to calm the markets slightly. The FTSE 100 Index was down five percent as of 9:00am GMT after plunging nearly eight percent at the start of trading.

Article source: https://www.rt.com/business/348166-bank-england-support-markets/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Panicked investors dumped risky assets that had built up ahead of the referendum, which many assumed would have the opposite effect.

More than £100 billion was wiped off the FTSE 100 as the index plunged almost eight percent at the start of trade in London. It was the biggest market fall in UK history. The FTSE managed to pare losses during afternoon trading, trading over three percent lower by 13:20 GMT.

Germany’s DAX and the CAC 40 in Paris were down as much as eight percent.

Wall Street opened lower on Friday with the Dow Jones Industrials and the SP 500 down over two percent after the opening bell.

Russian stock markets were also sliding during Friday trading. The ruble denominated MICEX index was down over two percent to 1867 points, and the dollar-traded RTS index plunged over four percent to 901 points, as of 4:00pm Moscow time.

The carnage began in Asia after the Brexit vote with stocks dropping the most in five years. Japan’s Nikkei index closed almost eight percent in the red. China’s Shanghai composite was down over one percent and Hong Kong’s Hang Seng lost almost three percent by the closing bell.

“Investors are just trying to get out. You sell first and ask questions later. There was a massive miscalculation of risk and now you’re seeing all that unwind,” head of investment strategy at Perpetual Ltd. in Sydney, Matthew Sherwood, told Bloomberg.

The British pound plunged 10 percent, the most since 1985, the euro fell the furthest since its introduction in 1999, while the Japanese yen had its biggest surge since 1998.

Traders say currency moves are more extreme than during the 2008 financial crisis.

“Never seen anything like it. These are once-in-a-lifetime moves, bigger than Lehmans and Black Wednesday, and we haven’t even had the result yet,” Joe Rundle, head of trading at ETX Capital was cited as saying by BBC.

“We’re waiting for the big money to crank into action over the coming days and even weeks, which will likely exert further downward pressure on sterling,” he added.

Oil fell below $48 per barrel. Gold soared along with US Treasuries as panicked investors sought safe haven from the markets. Price of the precious metal, a traditional refuge from volatile stocks, jumped almost five percent to over $1,300 per ounce.

“All hell is breaking loose,” Bloomberg quotes Vishnu Varathan, a senior economist in Singapore at Mizuho Bank Ltd as saying. “The only sure [thing] is you buy yen, you buy US Treasuries, you buy gold, you sit tight.”

An appetite for riskier assets on the market has built up as polls suggested that the chance of Britain’s exit from the EU was unlikely. Oddsmakers had put the chances of Brexit at one in four.

Global central banks, government officials and financial experts had warned that Brexit would lead to market volatility.

Article source: https://www.rt.com/business/348121-global-stocks-plunge-brexit/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

The British pound plunged 10 percent, the most since 1985, the euro fell the furthest since its introduction in 1999, while the Japanese yen had its biggest surge since 1998.

Pound surges to 2016 high as Britons start voting in EU referendum

Traders say currency moves are more extreme than during the 2008 financial crisis.

“Never seen anything like it. These are once-in-a-lifetime moves, bigger than Lehmans and Black Wednesday, and we haven’t even had the result yet,” Joe Rundle, head of trading at ETX Capital was cited as saying by BBC.

“We’re waiting for the big money to crank into action over the coming days and even weeks, which will likely exert further downward pressure on sterling,” he added.

Asian stocks dropped the most in five years. Japan’s Nikkei index closed almost eight percent in the red. China’s Shanghai composite was down over one percent and Hong Kong’s Hang Seng was losing over four percent before the closing bell.

The FTSE 100 Index plunged at the start of trade in London. US SP 500 Index futures contracts are deep in the red.

“Investors are just trying to get out. You sell first and ask questions later. There was a massive miscalculation of risk and now you’re seeing all that unwind,” head of investment strategy at Perpetual Ltd. in Sydney, Matthew Sherwood, told Bloomberg.

Oil fell below $48 per barrel. Gold soared along with US Treasuries as panicked investors sought safe haven from the markets. Price of the precious metal, a traditional refuge from volatile markets, jumped almost five percent to over $1,300 per ounce.

“All hell is breaking loose,” Bloomberg quotes Vishnu Varathan, a senior economist in Singapore at Mizuho Bank Ltd as saying. “The only sure [thing] is you buy yen, you buy US Treasuries, you buy gold, you sit tight.”

An appetite for riskier assets on the market has built up as polls suggested that the chance of Britain’s exit from the EU was unlikely. Oddsmakers had put the chances of Brexit at one in four.

Global central banks, government officials and financial experts had warned that Brexit would lead to market volatility.

Article source: https://www.rt.com/business/348121-global-stocks-plunge-brexit/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

There are 5.1 million people in the Asia-Pacific region worth more than a million dollars, and they now control more wealth than millionaires in North America, Europe and other regions.

“If past growth rates hold, Asia-Pacific is likely to continue to be a dominant force over the next decade, representing two-fifths of the world’s HNWI [high net worth individuals –Ed.] wealth, more than that of Europe, Latin America, and the Middle East and Africa combined,” Capgemini said.

Driven by China and Japan, Asian millionaires saw their wealth jump by almost 10 percent in 2015, the report showed. Poor performance in the equity markets in the US and Canada slowed growth in North America to 2.3 percent last year.

1% of world population owns almost half of its wealth

The total wealth of Asia’s richest has almost doubled since 2006, worth $17.4 trillion last year. North America’s 4.8 million millionaires socked away $16.6 trillion in 2015.

READ MORE: Richest 1% own 50% of world wealth- Credit Suisse report

The report also said that Latin American millionaires suffered a decline in net worth of 3.7 percent, driven by political volatility and a turbulent stock market in Brazil.

European growth was steady, with a 4.8 percent increase led by Spain and the Netherlands. In total, Europe has 4.2 million millionaires, and 1.2 million of them hail from Germany.

Globally, the wealth of millionaires rose by four percent last year to nearly $60 trillion, which is four times higher than 30 years ago. It could rise to $100 trillion by 2025, according to Capgemini.

Article source: https://www.rt.com/business/347970-asia-millionaires-record-report/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Germany boosts Russian gas imports by 19% through April

According to Gazprom Deputy Chairman Aleksandr Medvedev, Warsaw has bid for 11 billion cubic meters of Russian gas coming through the projected Nord Stream-2 pipeline.

Medvedev added that even though Nord Stream-2 will significantly increase gas reverse supplies through Poland, its antitrust authorities will delay the decision to ratify the pipeline and “send new demands that have nothing to do with the matter.”

The contract to deliver Russian gas to Poland expires in 2022. Medvedev said Gazprom offered to extend it by 25-30 years, but has received no reply. He added that Poland is harming itself and annoying Europe.

Poland is pumping 30 billion cubic meters of Russian gas per year, and Gazprom has offered the same volume in the new contract, said the deputy chairman. However, the new contract can’t be signed under the old conditions as EU laws have changed.

A gas contract auction for the pipeline’s future capacity will be held next year, according to Medvedev. Besides Poland, there are other bidders, but he refused to name them.

The Nord Stream-2 gas pipeline is expected to provide an additional direct route for Russian natural gas to Germany via the Baltic Sea bypassing Ukraine. It will deliver up to 55 billion cubic meters of gas per year, doubling the supplies through the existing Nord Stream pipeline.

Russia’s Gazprom holds a 50 percent stake in the project. The other 50 percent is divided equally between Royal Dutch Shell, Germany’s E.ON and BASF, Austria’s OMV and France’s Engie.

In March, Poland, Latvia, Estonia, Lithuania, Hungary, Romania, Slovakia, and the Czech Republic sent a letter to the European Commission President Jean-Claude Juncker, saying Nord Stream-2 could pose risks to energy security in Central and Eastern Europe.

Article source: https://www.rt.com/business/347967-nord-stream2-poland-gazprom/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Dubai plans world’s tallest skyscraper

The decision caters to Western visitors, and aims to increase revenue tourists and alcohol taxes bring to the Islamic city state.

Previously, those wishing for a glass of wine or a beer had to wait until sundown, when Muslims break the Ramadan fast. The city’s bars and restaurants traditionally played quiet music and hid drinkers behind tinted glass and closed doors during the holy month.

This year Dubai’s Department of Tourism and Commerce Marketing relaxed the standard rules for hotels, as opposed to limiting alcohol sales hours during the month-long fasting period.

The tourism department expects visitors to respect Ramadan rules.

“With nearly one million tourists expected to visit and enjoy all the aspects of our city over Ramadan, we expect all operators and travelers to be respectful of the holy month and be mindful of cultural sensitivities,” the statement says.

Home to the world’s tallest building – the Burj Khalifa – Dubai wants to become a tourism hub.

Alcohol sales help Dubai’s tourism as Iran, Saudi Arabia and Kuwait, and the neighboring emirate of Sharjah ban liquor and beer sales.

Every alcoholic beverage sold in Dubai is subject to a 30 percent municipality tax. The country also imposes a 50 percent tax on imported liquor. Tourists have to buy from duty free stores at Dubai’s airports or from bootleggers.

Despite restrictions, 67.2 million liters of beer and 20 million liters of spirits were sold in the United Arab Emirates in 2014, according to research firm Euromonitor International. By 2019, the researchers expect 91.2 million liters of beer and 27 million liters of spirits will be sold in the country.

Article source: https://www.rt.com/business/347956-dubai-eases-ramadan-alcohol/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

OPEC is dead, says Rosneft

The negative effect of the 1998 financial crisis on Asian economies and competition between Iran and Saudi Arabia for market share forced OPEC prices down to $10 per barrel. By 2014, crude prices had risen to $115 per barrel before collapsing to $27 per barrel this January. Oil has since rebounded to the current $50.

OPEC’s oil revenues were down by nearly half last year, falling 45.8 percent from 2014 to $518.2 billion, the lowest since 2005. The cartel’s exports slid in value by 29.1 percent year-on-year, while total imports declined by 8.7 percent.

According to the OPEC report, global crude demand was 93 million barrels per day last year, up 1.7 percent. The biggest upsurge in demand took place in the Middle East, Africa and Asia Pacific.

The biggest OPEC loser from falling revenues was Venezuela, which has a budget deficit of about 20 percent of the country’s GDP.

READ MORE: OPEC fails to reach crude production freeze agreement, but Saudis promise to ‘play nice’

On average, the OPEC Reference Basket cost $49.49 per barrel last year, down from $96.29 the year before. The last time OPEC’s crude was that cheap was in 2004.

In 2015, the largest oil producing countries were Saudi Arabia (10.19 million bpd, Russia (10.11 million bpd) and the United States (9.43 million bpd). Overall, global crude production grew 1.75 million bpd, the second-highest increase in a decade.

The US increased output by 0.72 million bpd last year. The 8.3 percent growth in American oil production was the biggest increase in the world. UK oil production grew by 0.10 million bpd, or 13.4 percent, for the first time since 1999.

Article source: https://www.rt.com/business/347901-opec-collective-deficit-oil/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

The British currency advanced almost 1.5 percent to over $1.49 against the US dollar by 10:48 GMT during trading in London.

Traders who are anxiously waiting to learn if Britain votes to stay or leave the EU expect the currency markets to move once the first results are known.

“It is pretty clear evidence that the currency market believes that the UK will stay in … I would think it will continue to strengthen,” Ron Liesching, chairman of Mountain Pacific Group was cited as saying by the Financial Times.

A record number of people, almost 46.5 million, have been registered to take part in the vote. The registered voters include people from England, Wales, Scotland, Northern Ireland and Gibraltar which is a British territory on the tip of southern Spain.

The final nationwide result is expected to be announced Friday morning.

The UK has been a member of the European Union (and its precursors) since 1973. It is only the third nationwide referendum in UK history and comes after a four-month battle for votes between the Leave and Remain campaigns.

Recently conducted polls showed the sides are evenly split, with 45 percent for ‘leave’ versus 44 percent for ‘remain’. Supporters of the Leave campaign argue Brexit would be for the best while it would lead to tighter border controls and freedom from EU regulations on immigration and the economy.

Scepter of spin: Both pro-EU Brexit campaigns are ‘spreading misinformation’

Over the months leading up to the vote there has been a media fear campaign with politicians and business leaders from Britain and abroad warning of dire consequences for the UK economy if the country chooses to leave the EU. Brexit supporters have called on voters to ignore the so-called ‘project fear’ campaign.  

READ MORE: Brexit or love: Friends family, including PM’s wife, fighting over EU referendum

Chancellor George Osborne has warned he will be forced to cut public spending and ratchet up taxes in order to fill a £30 billion “black hole” left in the budget if Britain votes to leave the EU in the June 23 referendum.

Meanwhile, EU leaders have warned there will be no turning back from a vote to quit the 28-member bloc.

“Out is out,” European Commission chief Jean-Claude Juncker said, dismissing any chances of a post-vote renegotiation of Britain’s EU membership terms.

Article source: https://www.rt.com/business/347894-brexit-referendum-pound-growth/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Daimler to begin Mercedes-Benz production in Moscow region

“An agreement was signed with Mercedes at the St. Petersburg International Economic Forum on the distribution of production in Moscow region. In 2019, when, hopefully, the production starts, it will improve business environment in the Solnechnogorsk district,” he said on Wednesday.

The official added that at the moment such an agreement is particularly important from a political point of view.

The construction of the new plant may start by the end of this year, business daily Vedomosti cited its sources as saying.

The Russian Trade Ministry has agreed earlier this month that German automaker Daimler AG could start the assembly of Mercedes-Benz vehicles in the Esipovo Industrial Park in the Moscow Region.

Deputy Director of Transportation Vsevolod Babushkin then said the plan had been approved by the ministry and was awaiting the green light from the regional authorities, adding that “the Moscow Region was interested in the project.”

EU envoys agree to extend Russia sanctions by 6 months – sources

The new plant will assemble E-Class, S-Class, A-Class model sedans as well as ML and GL models. The company intends to produce 25,000 cars annually.

The German automaker currently has a joint venture with KAMAZ, which produces trucks under the Mercedes-Benz brand in the Russian Republic of Tatarstan. Daimler owns a 15 percent stake in the enterprise. Daimler also has an assembly line for Mercedes-Benz Sprinter Classic minibuses at the Nizhny Novgorod facilities of Russian automaker GAZ Group.

In light of the current political situation, European companies are striving to localize production in Russia to avoid counter-sanctions and hold on to their share of the Russian market.

Article source: https://www.rt.com/business/347784-mercedes-agreement-russia-production/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

“Hyperloop can improve life dramatically for the 16 million people in the greater Moscow area, cutting their commute to a fraction of what it is today,” Shervin Pishevar, co-founder of Hyperloop One, was cited as saying by Reuters.

A Hyperloop system involves using magnets to levitate pods inside an airless tube, creating conditions in which the floating pods could transport people and cargo at speeds of up to 750 mph (1,200 kph).

The sides also plan to build a new Silk Road to transport cargo at ultra-high speeds between China and the Mediterranean Sea.

“Our longer term vision is to work with Russia to implement a transformative new Silk Road: a cargo Hyperloop that whisks freight containers from China to Europe in a day,” Pishevar said.

According to Hyperloop One CEO Rob Lloyd, it’s unclear how much it will cost to build a Hyperloop in Moscow, and the system would not necessarily travel at its top speed in a metropolitan area like the Russian capital. Last month Lloyd said the company will build a system capable of transporting cargo by 2019 and passengers by 2021.

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

Transportation infrastructure developer Summa Group and Hyperloop One signed a memorandum of understanding last week at the St. Petersburg International Economic Forum. Russian President Vladimir Putin met with Pishevar during the forum and expressed his support for the project. The president’s backing though didn’t mean public fund investments and tax breaks because it’s a private investment project, according to Kremlin spokesman Dmitry Peskov.

Hyperloop was first proposed in 2013 by US billionaire Elon Musk as an up-to-date, open-sourced concept.

At the moment there are no functioning Hyperloops in the world, and skeptics claim the idea of traveling at such high speeds in a sealed tube seems like a sci-fi dream – with many challenges the designers will have to overcome, such as motion sickness.

Hyperloop feasibility studies are underway in Finland, Sweden, the Netherlands, Switzerland, Dubai, the Port of Los Angeles, and the United Kingdom.

Article source: https://www.rt.com/business/347727-hyperloop-russia-silk-road/?utm_source=rss&utm_medium=rss&utm_campaign=RSS