Archives for August 2016

UK industrial production shows fastest growth in 17 years

Before the European Union referendum, there were warnings the automotive industry could suffer a sharp slowdown should Britain vote in favor of leaving the 28-country bloc. The figures released by the Society of Motor Manufacturers and Traders (SMMT) seem to dispel those fears.

The July output rose 7.6 percent year-on-year with exports up six percent, according to the SMMT.

“UK car production in 2016 is booming, with new British-built models in demand across the world,” said Mike Hawes, SMMT chief executive, adding that the performance was in spite of the cautions from the Remain camp ahead of the Brexit-vote.

Production for the domestic market grew 14 percent, while almost four out of five vehicles manufactured in the country were for overseas markets.

Still, the outlook for the industry is uncertain as Britain chose to quit the European Union, according to Hawes.

“The latest increase in production output is the result of investment decisions made over a number of years, well before the referendum was even a prospect,” he said, stressing the importance of tariff-free access to the single market, economic stability and record levels of productivity from a highly skilled workforce.

UK car production up heavily so far this year, surge continues into July. Another indication that Brexit vote having no effect yet.

— Rodney Hobson (@RodneyHobson) August 25, 2016

The major car producers Nissan, Toyota and Mini, surveyed by the SMMT, expressed their concerns over the potential relationship between the UK and the rest of Europe following the vote.

Nearly 60 percent of the parts crucial to the industry are imported, mostly from the continent. More than half the SMMT members surveyed think Brexit would adversely affect their business.

The UK automotive sector has experienced a long period of growth. Production rose by 10.4 percent to almost 159,000 vehicles last month alone.

“Future success will depend on continued new car demand and attracting the next wave of investment so Britain must demonstrate it remains competitive and open for business,” Hawes said.

Article source: https://www.rt.com/business/357161-uk-car-industry-boom/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Spain Portugal avoid budget fines

The sum will include a €2.7 billion recapitalization provision, selling €1 billion in subordinated debt to private investors and converting €960 million of contingent convertible (CoCo) bonds into equity.

After Portugal had two bank rescues in 2014 and 2015, which has undermined investor confidence, its largest bank by assets CGD needs capital because of a number of bad loans.

Lisbon has been negotiating the deal with Brussels so the injection doesn’t count as state aid and therefore not subject to the budget deficit. Portugal has vowed to slash the budget deficit to 2.5 percent of GDP in 2016 from last year’s 4.5 percent.

“This is an innovative deal in Europe…This is good news not only for CGD but for the whole Portuguese banking system,” Finance Minister Mario Centeno said. The recapitalization will be “in line with market conditions.”

“The Commission’s analysis is that the recapitalization takes place on market terms, since the expected return for the state is sufficiently high and are in line with what a private investor would have accepted,” the bank said in a statement, stressing that the injection won’t count as state aid.

After Caixa posted a net loss of €205 million in the first half of 2016 due to bad loans, the government ordered an independent audit of the bank.

Since 2008, Portuguese authorities have injected €10 billion to four other non-state banks. The country’s financial sector has been blamed for poor lending practices and unpaid loans. Portugal also needed a €78 billion bailout in 2011 during the eurozone crisis.

Article source: https://www.rt.com/business/357159-potugal-caixa-bailout-eu/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Saudi Arabia will face cash crunch soon – expert

“It is only a matter of time before the borrowing costs start increasing unless the benchmark rates comes down in the medium term, which is unlikely given the liquidity situation and expected upward trajectory of US Fed rates, even at a slower pace,” said Pritish Devassy, a senior research analyst at Al Rajhi Capital, as quoted by Business Insider.

READ MORE: Saudi Arabia will face cash crunch soon – expert

The corporations with high leverage and low profitability are likely to be most affected. These include companies in the industrial, building and construction, agricultural and food sectors. Cement and telecom sectors are expected to avoid the damage.

“We believe the impact is noteworthy given the challenging operating environment and as companies are still trying to adjust to lower subsidies and higher energy costs announced by the government early this year,” the expert wrote.

Saudi companies are struggling with weaker consumer demand and the need to curb prices, as well as lower government spending and reduced energy subsidies.

In April, the kingdom unveiled the Vision 2030 plan aimed at diversifying the economy to minimize the country’s reliance on oil. Riyadh announced plans to raise its share of non-oil exports in non-oil GDP from 16 percent to 50 percent.

READ MORE: Moody’s downgrades Saudi Arabia

In the first quarter the country’s economy grew just 1.5 percent, its slowest rate in 13 years. The non-oil private sector gained 0.2 percent year-on-year, the smallest increase in about 25 years. The construction sector fell 1.9 percent against the same period last year.

To raise money with oil revenues sliding, Saudi Arabia tapped the international bond market for the first time in its history.

Article source: https://www.rt.com/business/357140-saudi-arabia-economy-slowdown/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Spain’s national debt reaches highest level in over century

Acting Prime Minister Mariano Rajoy, whose conservative Popular Party won a rerun election in June, is still trying to form a coalition government.

However, “there is little evidence that this is having a significant impact” on the economic sector, according to Miguel Cardoso, chief economist for Spain at BBVA Research, citing a recovery in most indicators.

The Spanish economy, seen by the analyst as the most dynamic in the eurozone, increased by 3.2 percent, with the country’s output gaining for 12 straight quarters since the 2008 global financial crisis.

The GDP growth has been triggered by household spending that is expected to rise by three percent year-on-year in the second half of 2016, according to Cardoso.

The economist says the spending is being pushed by people who kept their jobs during the crisis and used the opportunity to purchase in better times.

Unemployment has fallen to 20 percent, its lowest level in almost six years, though still remains the second highest in the eurozone after Greece with the current government assuring a further fall to 16.6 percent next year.

European Commission wants to suspend funding Spain Portugal

The banking sector of the fourth largest eurozone economy has been gradually recovering since 2012, when Spain asked its European partners for a €100 billion bailout package. Thanks to the aid, Madrid managed to keep low interest rates for companies.

“In Spain, the effect of the ECB’s intervention has been doubly more intense than in other countries,” said Jose Carlos Diez, economics professor at the Alcala University, stressing that the country had just started to get out of the dire straits of the crisis.

Energy and construction sectors, traditionally the most subsidized and the most regulated, were expectedly most affected by the political deadlock, analysts say.

However, the corporations in the area of renewables such as Iberdrola, Endesa and Gas Natural Fenosa as well as construction companies, including ACS, Acciona, Ferrovial and OHL managed to overcome twists and turns in the home market by expanding beyond the borders.

Trading on the Madrid stock market is still very low despite the fact that Spain’s economic growth is higher than the eurozone average, says Victoria Torre, an analyst at Self Bank, pointing to worrying signs that are still obvious.

Article source: https://www.rt.com/business/357025-spain-economy-political-deadlock/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Users of hacked bitcoin exchange may be forced to share loss

The banks are working with London-based blockchain startup Clearmatics, and the official launch is expected in 2018, according to the media.

“Today trading between banks and institutions is difficult, time-consuming and costly, which is why we all have big back offices. This is about streamlining it and making it more efficient,” Julio Faura, head of RD and innovation at Santander told the FT.

All four banks are members of the 50-strong R3 consortium of financial institutions exploring ways of blockchain usage in the financial system.

“You need a form of digital cash on the distributed ledger in order to get maximum benefit from these technologies. What that allows us to do is to take away the time these processes take, such as waiting for payment to arrive. That frees up capital trapped during the process,” said Hyder Jaffrey, head of financial technology innovation at UBS.

According to a report by a consulting firm Oliver Wyman, the world spends up to $80 billion every year to clear and settle trades.

If implemented, the new cryptocurrency would be the first to be used officially between major financial institutions. The concept resembles the IMF’s Special Drawing Right (SDR), introduced in 1964. Based on a basket of currencies (the US dollar, euro, the Japanese yen, pound sterling and the soon to be joined Chinese yuan this October), it is used to supplement the IMF’s member countries’ official reserve. As of March 2016, 204.1 billion SDRs equivalent to about $285 billion had been created and allocated to countries.

Article source: https://www.rt.com/business/356992-big-banks-blockchain-bitcoin/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Oil output freeze self-destructive for OPEC – Goldman

OPEC’s third-largest producer has been increasing output after the rollback of Western sanctions in January, aiming to reach four million barrels per day. Iran refused to join a previous attempt to freeze production in April. Talks collapsed after Saudi Arabia said it would not make a deal without its rival at the table.

“Iran is reaching its pre-sanctions production level soon and after that it can cooperate with the others. In general, Iran prefers more actions from the OPEC side rather than just freezing at the maximum production level of all members. If this freezing issue helps prices to improve, Iran by positive words of support, will help,” a source familiar with Tehran’s stance told Reuters.

July numbers show Iran is getting close to its goal, as production reached 3.6 million barrels per day.

OPEC is scheduled to meet in Algeria next month to hold informal talks on the sidelines of the International Energy Forum. Russia is also attending. After the failure of the recent talks, Moscow is unwilling to discuss any output freeze unless OPEC reaches and agreement within the cartel.

Since Khalid al-Falih replaced Ali al-Naimi as Saudi energy minister in April, the Kingdom has softened its rhetoric about Iran’s oil program.

“Negotiations are ongoing. I see positive signs coming from OPEC ‘majors’,” a senior industry source familiar with the talks told Reuters, referring to Saudi Arabia and Iran.

A possible production freeze has boosted oil prices more than 20 percent this month. On Wednesday, Brent blend was trading near $50 per barrel while US benchmark West Texas Intermediate was above $47.

Market analysts say the oil rally is unlikely to continue, as the global glut persists.

Additionally, a rise in oil prices can revive US oil production, mitigating the effect of an output cap elsewhere.

Article source: https://www.rt.com/business/356967-iran-ready-for-crude-output-talks/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Poland asks US to buy apples banned by Russia

“The situation in the Polish apple market is rather difficult. Poland’s growers have been hit hardest by the [Russian] embargo,” said Anna Staszewska, an export specialist at EUROSAD, in an interview with the Financial Times. EUROSAD unites more than 30 farms and 700 hectares of orchards in the country.

Poland produces more than 30 percent of all European apples, and the country is expecting 3.5 million tons this summer. But the record harvest is hurting prices, which are at one zloty (€0.23) a kilo for dessert apples and €0.05 a kilo for industrial apples. This is a 20 percent drop since 2011, according to FT calculations.

“On one hand the higher harvest is a success. But at the same time, it poses a huge challenge for Polish farmers . . . There is no profit with the market in this situation,” said food and agribusiness analyst at Bank Zachodni WBK, Grzegorz Rykaczewski.

“We feel anxious about the situation. If it continues, and there will be a lot of apples and the prices will be low, I think that farms will start to go bankrupt,” said the owner of Fresh Fruit Services Marcin Hermanowicz.

The EU imposed sanctions on Russia after accusing Moscow of involvement in the military conflict in Eastern Ukraine and after Crimea voted to rejoin Russia. The Kremlin responded by imposing an embargo on agricultural produce, food and raw materials against countries that joined anti-Russian sanctions.

READ MORE: Moscow extends contraband food destruction

After the Russian embargo was imposed, the Polish government started a campaign to eat apples ‘against Putin’, which increased consumption, but after a while apple sales in Poland returned to normal.

Article source: https://www.rt.com/business/356858-polish-apple-farmers-russian-embargo/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Spain Portugal avoid budget fines

The tax on an apartment with decent views and facing south may go up 20 percent, reports The Portugal News.

At the same time, the levy on dwellings overlooking a cemetery, or located on the ground floor, or facing north may be reduced by 10 percent. The degree of a so-called noise pollution will be reportedly factored into the tax calculations.

The measure will only affect newly built properties as well as the property currently being reappraised.

The step does not aim to gain additional revenue, but rather to tax people according to the homes and luxuries they enjoy, according to State Secretary for Finance Rocha Andrade, as quoted by the daily.

“Our objective is firstly to introduce greater fiscal equity,” he said, stressing that the measure would more precisely reflect the variations in current house prices.

Portugal: communist govt to raise property tax according to sunlight exposure and “pleasant sights” of homes. 1/2

— morning (@_Morning_) August 2, 2016

Most residential blocks built in Portugal within the last ten years face south to maximize exposure to the sun for energy reasons.

“Now we are going to be penalized for doing what we thought was the right thing?” questioned a leading property surveyor, Joao Fonseca.

The Association of Lisbon Homeowners (ALP) criticized the move as well.

“These are people’s homes and many of them could now face not being able to pay these new taxes,” said the ALP president, Luis Menezes Leitao, stressing that homeowners with large mortgages initially had not counted on any increases in council taxes, as they had chosen to buy the property they thought they could afford.

In Portugal, foreign retirees pay no property tax for 10 years. Add free healthcare you have a good retirement option…

— Brasilmagic (@Brasilmagic) August 21, 2016

Portugal has failed to reach its deficit reduction targets in recent years.

In 2010, Portugal’s fiscal deficit was a record 10 percent. The government aimed to reduce the figure to 2.5 percent by 2015, but missed the target only reaching 4.4 percent.

According to EU fiscal rules, budget deficits should be no more than three percent of the country’s GDP.

Earlier this summer, the EU decided not to fine Portugal for failing to reach its budget deficit goals, setting “new fiscal paths” for the country.

Article source: https://www.rt.com/business/356855-portugal-tax-window-view/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Paris wants Moscow to lift embargo on French produce

“Following two years of relative stability, prices have risen the highest since 2013,” the report says.

According to the survey which focuses on apples, melons, apricots, cherries, strawberries, peaches, nectarines and pears, the average price of a kilo of fruit rose by €0.53. Vegetable prices, including eggplant, carrots, zucchini, green beans, green peppers, potatoes, tomatoes and the lettuce, are up €0.20.

READ MORE: Bird flu outbreak recorded outside restriction zone in France

Potatoes, strawberries and melons saw the biggest price increase, while tomatoes were 4.9 percent cheaper and carrots were down 4.4 percent.
Prices for organic products have also surged. Fruit prices are up 21 percent to an average of €6.95 per kilo. Vegetables saw a 4.1 percent increase to €4.10 per kilo.

READ MORE: Russia won’t lift French food ban – Agriculture Minister

The price gap between organic and conventional products has significantly widened to its largest since 2007. A kilo of organic tomatoes cost €4.46 against €1.93 for a kilo of non-organic.

The price spike is explained by poor harvests this year across the country as a result of bad weather.

A mild winter, followed by a wet and cold spring, has led to a 30 percent drop in production in some sectors with significant deterioration in quality, according the last week’s report by the ministry of agriculture.

Apricots and peaches are among the most affected with the harvest of Bergeron, the most popular variety of apricot in France, down 70 percent compared to last year and peach production down by nearly 30 percent year-on-year. The cherry harvest fell 16 percent.

Overall, crops in Brittany, which provides 77 percent of French vegetables, have fallen 19 percent after a cold June.
Another reason given for the poor crop was the ban on the use of the chemical pesticide Dimethoate.

READ MORE: Tractors in Paris: Hundreds of farmers block roads in French capital, demanding ‘fair prices’

“The feature of this year is that the difficulties were not limited to France with all the European market affected,” Luc Barbier, president of the national federation of fruit producers, told France 3, noting a decline in Spain and Italy.

Article source: https://www.rt.com/business/356831-france-fruit-vegetables-prices/?utm_source=rss&utm_medium=rss&utm_campaign=RSS