Archives for September 2016

Warren Buffett biggest loser in Wells Fargo debacle

The independent board of Wells Fargo directors said on Tuesday that in the wake of the scandal, where the bank created accounts without customer consent, it is launching an investigation and forcing Stumpf and former consumer banking chief Carrie Tolstedt to forgo their bonuses.

Tolstedt, who headed the retail division at the time of the bank’s misdemeanor, will forfeit $19 million in unvested stock, and has also agreed not to cash in outstanding options during the investigation.

This is one of the biggest penalties ever imposed against a bank’s top executives. In the aftermath of the financial crisis of 2008, Wall Street lenders paid tens of billions of dollars in penalties for mortgage fraud and other dubious activities, but no CEO was obliged to give back bonuses.

The bank, with a market cap of $235 billion, has already agreed a $185 billion penalty with US regulators. A subsequent share sell-off cost Wells Fargo the status of the world’s most valuable bank to JP Morgan.

Wells Fargo slammed with multiple lawsuits over fake accounts bogus sales

Stumpf is due to testify soon in front of the US House Financial Services Committee, as Wells Fargo wanted to show the legislators it will not shelter its executives.

“We are deeply concerned by these matters, and we are committed to ensuring that all aspects of the company’s business are conducted with integrity, transparency and oversight. We will proceed with a sense of urgency but will take the time we need to conduct a thorough investigation,” Stephen Sanger, the board’s lead independent director, said in a statement.

Isaac Boltansky, an analyst at Compass Point Research Trading, criticized Wells Fargo’s slow response.

“It’s a dollar short and a day late. Lawmakers will focus intently on this coming two days before a congressional grilling, therefore appearing to be more about optics than substance,” he told Bloomberg.

Last week, Stumpf was interrogated by US Congress on why the bank allowed employees to open fake accounts for clients. “If I could turn the clock back, I — we all — wish we had done something earlier,” he said.

Elizabeth Warren, the Democratic senator known for blasting the banking sector, said, “Have you resigned as CEO or Chairman of Wells Fargo? Have you returned one nickel of the millions of dollars that you were paid while this scam was going on? I will take that as a no.” She also accused Stumpf of “gutless leadership.”

Article source: https://www.rt.com/business/360955-wells-fargo-ceo-money-forfeit/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

After a record plunge after the vote, the pound hit a three decade low at the beginning of July and still remains the worst performer of the year among the 16 major currencies.

What Brexit? UK jobless rate falls to 11-yr low

The pound has partially recouped the post-vote losses thanks to stronger than expected economic numbers. Rumors that Britain is heading for a quick exit from the bloc led the currency to resume the decline in recent weeks.

READ MORE: Booming UK car production tops 1mn in July

On Wednesday, the pound continued its downturn after Bank of England Deputy Governor Minouche Shafik said Britain was in the grip of a “sizable economic shock” after the vote and announced probable easing of monetary policy.

READ MORE: Record UK services index surge eases Brexit concerns

With the prospect of an extended aftermath from the decision, the Bank of England may further cut the key interest rate. Last month, the regulator reduced the rate for the first time in seven years from 0.5 percent to 0.25 percent.

READ MORE: UK cuts interest rates for first time in seven years, extends QE

“It seems likely to me that further monetary stimulus will be required at some point in order to help ensure that a slowdown in economic activity doesn’t turn into something more pernicious,” Shafik told Bloomberg.

The currency dropped 0.2 percent as of 9:12 GMT on Wednesday, down 2.3 percent since June 30. It fell to a 31-year low against the dollar on July 6.

“Sterling remains a very vulnerable currency given the scale of the work that needs to be done to take the UK from where it is now, with effectively unchanged trading relationships with Europe, to a completely new position,” said Jane Foley, a senior currency strategist at Rabobank International in London.

Article source: https://www.rt.com/business/360952-pound-longest-decline-decades-brexit/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Greece blames creditors over economy’s inability to recover

Public assets transferred include airports and motorways, as well as water and electricity utilities.

The new measures sparked demonstrations and public sector strikes across the country. Workers at Greece’s public water utility companies in Athens and Thessaloniki rushed to the streets in protest. “They are handing over the nation’s wealth and sovereignty,” said the head of the water company workers association George Sinioris as cited by Deutsche Welle.

Greece’s public sector union (ADEDY) also criticized the transfer of assets into the fund, saying it opens the way for a fire sale of strategic state-controlled companies to private investors.

“Health, education, electricity and water are not commodities. They belong to the people,” the union said in a statement.

Energy Minister Panos Skourletis said that transferring assets to the fund did not mean the state forfeits its property. “The Greek state remains the sole stakeholder of these assets,” he said. “Apart from privatization, there are other ways to gain value and we are concentrating on these other ways.”

The European Union warned this month it won’t release a new bailout tranche to Greece in September because Athens has managed to implement only two out of 15 reforms previously agreed with its international creditors.

The EU also said the country has slowed down the privatization process of its public assets.

Prime Minister Alexis Tsipras has called on the EU to recognize the Greek debt crisis as a “European problem.” He said the dispute between Greece and its international lenders on the country’s debt management was damaging the recovery.

Under the terms of the 2015 deal, the creditors including the International Monetary Fund, the European Central Bank and the eurozone are to provide €86 billion in aid to Greece by 2018 in return for unpopular austerity measures.

The eurozone authorities have already approved a tranche of €10.3 billion from the overall package with an initial €7.5 billion transferred to Athens in June.

Article source: https://www.rt.com/business/360947-greece-law-bailout-tranche/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

SP upgrades outlook for key Russian companies

“The Russian Federation fell into recession in 2015, with its GDP shrinking by 3.7 percent, but nonetheless remained rather stable in terms of its competitiveness,” according to the 2016-2017 report by the World Economic Forum (WEF).

Low prices for commodities affect Russia less than other European countries with the public debt remaining relatively low and gross national savings almost unchanged, according to the WEF data.

The analysts explain the country’s better result by “strengthened fundamentals,” such as the quality and quantity of education (up six positions), innovation capacity (up 12) as well as an improved domestic business environment along with less negative domestic business sentiment than expected.

However, the data shows that commodity prices still have a significant impact on the economy.

READ MORE: Stable ruble instills confidence in Russia’s business giants

“Sharply reduced public revenue and higher inflation, the Russian macroeconomic environment is much less sound, dropping to 51st place,” the report says.

The financial sector is still struggling with a lower inflow of capital related to mineral revenues and “quasi-closure of international financial markets to Russian entities.”

The GCI is calculated on the basis of 113 economic indicators covering 12 categories. The measure takes into account such factors as institutions, infrastructure, macroeconomic environment, health, education and training, goods market efficiency and labor market, financial market development and innovations.

Switzerland was ranked as the most competitive economy in the world, for the eighth straight year, followed by Singapore, the United States, Netherlands and Germany. The top ten list included Sweden, Britain, Japan, Hong Kong and Finland.

Article source: https://www.rt.com/business/360926-russia-global-competitiveness-index-wef/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Deutsche Bank shares plummet to record low as Merkel rules out bailout

After a massive sell-off on Monday, Deutsche Bank’s market value shrank to €14.5 billion. In dollar terms it is only $2 billion more than the $14 billion penalty the bank faces from the United States Department of Justice over its mortgage-backed securities business before the 2008 global crisis.

Deutsche’s problems have raised questions about the health of other big European lenders. The share price of the Royal Bank of Scotland has plunged 13 percent and Italy’s UniCredit is down 12 percent this month. The Bloomberg Europe 500 Banks and Financial Services Index is down 4.2 percent for September. This is the worst result since June, when the Brexit referendum heavily hit the markets.

The problems of Deutsche Bank are putting the German government in a difficult dilemma, as it must decide whether to save the bank, whose assets are valued at about €1.8 trillion, half the size of the German economy.

This month, German MEPs didn’t allow Italy to break eurozone rules and bail out the country’s troubled banks.

“German politicians have been particularly insistent that Italy deals with its problem banks without using taxpayer’s money, and by bailing in depositors and bondholders if necessary. In being so insistent they have backed themselves into a cul-de-sac of their own making, particularly if they choose to adopt different rules for their own largest and systemically important bank,” Michael Hewson, chief market analyst at CMC Markets UK told Express.co.uk.

‘Europe is extremely sick’, says Deutsche Bank chief economist

According to the analyst, Deutsche Bank is much more important than Lehman Brothers, which wasn’t rescued by US authorities and kicked off the 2008 global crisis.

“Markets got a taste of the turmoil unleashed in the aftermath of Lehman Brothers and it wasn’t anywhere near as systemically important as Deutsche Bank is, which means there is no way to accurately measure what any ripple out effects might be, if investors lose confidence even more and Germany leaves the bank to its fate,” he said.

The record sell-off on Monday was provoked by a report in the German Focus magazine, which wrote Chancellor Angela Merkel has ruled out any state assistance for Deutsche next year in talks with CEO John Cryan.

German daily Die Zeit reported on Wednesday that the Bundestag and financial authorities are preparing a rescue plan for the bank if it is unable to raise capital to pay for litigation with the US authorities.

Christopher Wheeler, banks analyst at Atlantic Equities pointed out that Deutsche Bank is in a better position than Lehman Brothers was in 2008, as it has €250 billion of sellable assets that can meet any demands from customers.

Deutsche CEO John Cryan told German daily Bild on Wednesday that the bank never asked for help from authorities.

Article source: https://www.rt.com/business/360917-deutsche-bank-lehman-crisis/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Putin brings box of Russian ice-cream for Xi, who turns out to be a fan

According to the Manzhouli Entry-Exit Inspection and Quarantine Bureau it is 267 percent increase from last year.

A staff member with the bureau, Xie Jinyong said the import of top quality Russian ice cream has also risen this year.

“A cup of Russian ice cream usually sells at 15 yuan ($2.24), 25 yuan or 30 yuan, and the top quality one sells for up to 50 yuan ($7.49),” Xie said.

An affordable price, partly due to the fall of the Russian ruble, along with the quality and taste has improved the marketability of Russian ice cream in the Chinese market, according to newspaper.

Ice cream from Russia is generally less expensive than many premium brands available in China. A 100 grams package of Russian ice cream is typically priced at 10 yuan, while a small cup of Haagen-Dazs ice cream weighing about 80 grams costs 33 yuan.

“I particularly like Russian ice cream, as it has a flavorful milk taste, strictly selected raw materials without any additives, and it’s reasonably priced,” said Chen Xiaochen, a 32-year-old resident of Harbin.

The Russian ice cream craze took off this year, and got an even bigger boost after Russian President Vladimir Putin sent his Chinese counterpart a box of ice cream during the G20 Summit in Hangzhou this month. President Xi Jinping, who turned out to be a fan of Russian ice cream, said he always sampled the frozen treat during his trips to Russia.

Wang Xianzhe, manager from Manzhouli Ange Import Export Company which is a major importer of Russian ice cream into China, also attributed the surge in sales to Putin’s gift to Xi Jinping. According to him, the imported brands and flavors have expanded from 50 to 400 since then. “It surely served as an advertisement,” he said.

Article source: https://www.rt.com/business/360915-china-russian-ice-cream/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

WTO expects trade growth to more than double in 2014

According to the WTO, global trade will expand by merely 1.7 percent this year which is well below the April forecast of 2.8 percent.

The forecast for 2017 has also been downgraded. Trade is now expected to grow between 1.8 percent and 3.1 percent, down from 3.6 percent.

“The dramatic slowing of trade growth is serious and should serve as a wake-up call. It is particularly concerning in the context of growing anti-globalization sentiment,” said WTO Director General Roberto Azevedo.

Trade has grown 1.5 times faster than gross domestic product over the long-term, and twice as fast when globalization picked up in the 1990s, according to the report.

This year trade will grow only 80 percent as fast as the global economy, the WTO said, adding it will be “the first reversal of globalization since 2001 and only the second since 1982.”

The recent run of weak trade and economic growth comes as a result of creeping protectionism as governments trying to shield their own industries and economies are increasingly driven by domestic consumption, the report said.

The downturn in trade reflects the slowdown in countries such as China and Brazil, as well as lower levels of imports into the US.

The WTO’s biggest downward revisions on imports from its April forecast came in South America (-4.5 percent to -8.3 percent), the US (4.1percent to 1.9 percent) and Asia (3.2 percent to 1.6 percent). It predicted European imports would rise to 3.7 percent from 3.2 percent.

Export growth in 2016 was downgraded for most regions, with the strongest revisions applied to Asia.

The WTO also said growth will slow in the UK in 2017, but it will not fall into recession.

Article source: https://www.rt.com/business/360817-world-trade-gloomy-forecast/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

N. Korea claims satellite-capable rocket engine test

“I want to stress that we oppose any country enacting so-called long arm jurisdiction, using its own laws against a Chinese entity or individual,” said Chinese Foreign Ministry spokesman Geng Shuang quoted by Reuters.

Earlier this week, the US Treasury and Justice Departments announced criminal charges and corresponding punitive measures against China’s Dandong Hongxiang Industrial Development Company and four executives, including the firm’s founder Ma Xiaohong, for alleged support of North Korea’s nuclear program.

The US Justice Department (DoJ) accused the company and its top managers of evading sanctions and money laundering.

Dandong Hongxiang allegedly acted on behalf of North Korea’s Korea Kwangson Banking Corp that is on the US and UN sanctions list for supporting the proliferation of weapons of mass destruction.

The DoJ said bank accounts associated with the Chinese firm and front companies received hundreds of millions of dollars that transited through the United States.

“Today’s action exposes a key illicit network supporting North Korea’s weapons proliferation,” said Adam Szubin, the Treasury Department’s acting under secretary for terrorism and financial intelligence.

Last week, China launched an investigation into the firm over “illegal behavior” and “economic crimes.” The step followed the provisions of UN resolution 2270, which imposed tighter sanctions on North Korea earlier this year.

READ MORE: China halts cash flow to North Korea – media

“We have been earnestly and faithfully implementing Security Council resolutions related to (North Korea) in their entirety and fulfilling our international obligations in non-proliferation export controls,” said Chinese embassy spokeswoman Fang Hong.

Article source: https://www.rt.com/business/360809-china-us-sanctions-korea-nuclear/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Iran Saudi Arabia boost output ahead of freeze talks

“It’s not our agenda to reach agreement in these two days. We are here for the IEF and to have a consultative informal meeting in OPEC to exchange views. Not more,” Zanganeh told the media.

Iran is OPEC’s third-largest producer with daily output of 3.6 million barrels in August.

Algerian Energy Minister Noureddine Bouterfa said the meeting on the sidelines of the forum could become official since other OPEC members will be present, including Iran.

Last week, Iran declined a suggestion from Saudi Arabia to freeze production at January levels if Tehran agreed to do the same.

Zanganeh added that Iran wants to get back its 13 percent pre-sanctions share in OPEC production. The cartel pumped 33.7 million barrels per day last month, meaning Iran’s share should be 4.4 million. However, he didn’t rule out a formal agreement during OPEC’s official November meeting in Vienna.

Saudi Arabia cuts ministers’ salaries, reduces public sector bonuses

Speaking to reporters on Tuesday, Saudi Arabian Energy Minister Khalid al-Falih said the kingdom is also regarding the meeting as consultative and sees it as a first step to future rapprochement.

“This is a consultative meeting, as said by many of my colleagues. We will consult with everyone else, we will hear the views, we will hear the secretariat of OPEC and also hear from consumers today,” said Falih.

Oil producers are seeking ways of eliminating the one million barrel per day glut that is weighing down crude prices.

Russian Energy Minister Aleksandr Novak said on Tuesday the production freeze is negotiable, but Moscow wants to cap production at the current level. Russian Deputy Oil Minister Kirill Molodtsov said last week that output in the country had exceeded the all-time high of 11 million barrels per day.

Oil prices lost over a dollar on Tuesday, with Brent crude trading at $46.10 per barrel, while US benchmark WTI cost $44.69, as of 2:30pm GMT.

Article source: https://www.rt.com/business/360805-iran-unready-to-freeze-oil/?utm_source=rss&utm_medium=rss&utm_campaign=RSS