Archives for November 2016

The ailing bank has already set aside €627 million to cover claims.

On Monday, the Italian market watchdog approved the bank’s capital raising plan. Monte dei Paschi was acknowledged as Europe’s weakest major bank in July industry stress tests and wants to raise €5 billion through a debt swap and share sale.

The European Central Bank has required a detailed funding plan from the lender for each year to 2018 after finding the bank’s liquidity position had weakened.

Monte dei Paschi is on the point of collapse unless it receives state support. It has already been bailed out twice but is likely to need a third multi-billion euro cash injection from the government.

However, EU regulations ban member states from using public money to support failed banks.

The Tuscan bank needs to raise more than seven times its market value in cash to sell bad loans and boost capital. Banca Monte dei Paschi has over €360 billion ($400 billion) of non-performing loans, according to the IMF.

After posting a €1.15 billion loss in the quarter through September, the bank said it would cut 2,600 jobs and close 500 branches.

Italian ‘zombie’ banks put EU financial system at risk

Founded in 1472, Paschi employs over 25,000 people and has almost 2,000 branches.

Experts warn the bank’s possible collapse may have a domino effect on Italy’s battered banking sector, where other lenders may also need fresh capital to stay afloat.

They also predict market turmoil and turbulence in the coming months if Italy votes against constitutional reforms proposed by Prime Minister Matteo Renzi in Sunday’s nationwide referendum. If Renzi loses the vote the country will enter a period of considerable uncertainty as it will need to form a transitional government and find a new PM.

Experts add that investors will be less likely to help recapitalize Italy’s risky banks.

Article source: https://www.rt.com/business/368449-italian-bank-legal-claims/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Nobel Laureate Stiglitz predicts eurozone disintegration should Italy walk away

“Brexit is going to be a sideshow to the problems of Europe that are becoming more and more evident,” Mellon told Bloomberg.

“The euro as it stands at the moment is just a very inappropriate mechanism – I give the euro between one and five years of life,” he added.

According to the investor, unlike many others, he enjoyed the market bloodbath after the Brexit vote, saying his trades have returned almost 25 percent this year.

Before the British referendum, he predicted pound to drop to $1.32, and the reality turned out to be even worse for sterling.

Mellon said the euro will soon fall below parity against the dollar “sometime over the next year,” but warned against selling off the currency now, as it may see a short-term rebound. The euro was trading at $1.059 on Monday.

Instead, he is selling Italian debt ahead of the constitutional referendum on December 4.

“I have been a very big seller of any government bonds this year, anywhere basically, but my favorite are the Italian bonds. Everyone who participates in this stupid bond market should know that there is a serious duration risk. If you buy something for a very long period with no interest rates, you are going to get your head handed to you at some point,” Mellon told the media.

The prediction of a eurozone collapse is hardly new. In October, one of the architects of the single currency Otmar Issing said the euro ‘house of cards’ would collapse sooner or later.

Nobel Prize-winning economist Joseph Stiglitz has predicted Italy and many other members will leave the eurozone in the foreseeable future.

“The people in Italy are increasingly disappointed in the euro. Italians are starting to realize that Italy doesn’t work in the euro,” he said.

Some of these predictions have already turned out wrong. In 2014, Goldman Sachs gave a 90 percent chance Greece would quit the EU, a forecast the bank retracted this year.

Article source: https://www.rt.com/business/368444-investor-brexit-eurozone-collapse/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Japan’s parliament approves TPP deal, labeled ‘disaster’ by Trump

“We do not have to be affected by the other countries and blindly follow them. Japan needs to go by its own ideas and creeds. We cannot waver now,” Abe said at the plenary session of Japan’s Upper House of parliament.

However, the Japanese parliamentary opposition sharply criticizes the government’s approach, describing its policy on TPP as a “total failure.”

The deal had previously been approved by the Lower House of parliament, where the ruling coalition of the Liberal Democratic Party is in the majority as well as in the Upper House.

Last week, Donald Trump promised to withdraw the US from TPP that had been negotiated between twelve countries over seven years.

According to Trump, the TPP deal is “a potential disaster” for the US, as it hurts the country’s competitiveness and takes jobs away from Americans.

The deal was signed in February by the US, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru.

TPP aimed to strengthen ties between the partners, which cover about 40 percent of the global economy, as well as to boost growth by reducing tariffs. Labor and environmental standards, copyrights and patents issues, as well as some other legal protections, were among the key measures accepted by the members.

READ MORE: China ready to play leading role in Asia-Pacific as Trump threatens to dump TPP 

Japan’s Prime Minister earlier admitted TPP was meaningless without US participation.

Article source: https://www.rt.com/business/368413-us-abe-trump-ttp/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Indians google money laundering after Modi declares war on cash

The 500 and 1,000 (about $7.50, $15) rupee notes were withdrawn earlier this month, turning 86 percent of the cash in the country to paper.

The anti-corruption measure caused chaos as cash machines began to run out of money with people rushing banks to exchange their old currency. The banks called in thousands of police to manage long lines outside branches.

Almost all of India’s transactions are in cash and many people don’t have a bank account.

According to the opposition parties, the so-called ‘day of rage’ protests are likely to take place at central government offices as well as outside banks.

The main opposition Congress party will hold a protest march in the southern city of Bangalore, where several thousand people are expected to participate, the BBC reported.

No-one is happy with the government’s demonetization move, the parties say, adding the old notes should be returned.

“The 1000 and 500 rupee notes should be allowed for all legal transactions, payments and settlements… till alternative arrangements of making new currency notes available is put in place or until 30 December,” the Communist Party said.

Public anger and frustration were on the rise after the Indian government decided to get rid of the notes citing tax evasion and corruption.

Indian Prime Minister Narendra Modi has called for people to embrace digital payments and use less cash.

The finance minister said the demonetization move “expands the GDP and makes it cleaner; it pushes revenues, pushes the economy, pushes more money into the banking systems.”

Former Prime Minister Manmohan Singh, however, called the government’s move to ban the much-used banknotes a “monumental mismanagement,” predicting the country’s gross domestic product to fall “by about two percent” as a result.

Article source: https://www.rt.com/business/368410-india-rupee-ban-protests/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Between midnight and 5 p.m. ET on Thursday, US consumers spent $1.15 billion shopping online, Adobe estimates.

Alibaba’s Singles Day sales hit $1.5bn in seven minutes

“Online discounts are earlier and a lot bigger than last year,” said Tamara Gaffney, principal research analyst at Adobe Digital Index, as quoted be Reuters.

The holiday shopping season commonly starts the day after Thanksgiving, or Black Friday with all the retailers offering attractive discounts.

The popularity of store shopping has been declining due to online shopping as well as bargain purchases offered by e-commerce retailers like Amazon and Alibaba.

“We saw one of our strongest days ever online,” said Brian Cornell, chief executive of the second largest US discount retailer Target, stressing that online sales had grown by double digits.

“Initial reports show it’s steady and not very busy at stores around the country,” confirms Craig Johnson, president of the retail consultancy Customer Growth Partners, stressing that rain decreased customer traffic in the Northeast.

READ MORE: Shift to online sales costs US retailers billions of dollars

The holiday season covering the last two months of the year is vital for retailers as they may earn as much as 40 percent of their annual revenue in the period.

“Black Friday is no longer a one-day event; it has turned into a multi-week event,” said Christopher Baldwin, CEO of BJ’s Wholesale Club.

Holiday sales are expected to be up 3.6 percent this year to more than $655 billion, according to the National Retail Federation.

Article source: https://www.rt.com/business/368169-black-friday-online-sales-up/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Russia plans $4.6bn investment in Egypt’s industrial zone

“Egypt’s President Abdel Fattah al-Sisi has decided to allocate 80 hectares to us in the eastern part of Port Said on the Suez Canal. In the future Cairo is ready to expand this zone to 2,000 hectares,” Manturov said on Friday.

Manturov says work on the intergovernmental agreement may be finished in the first quarter of 2017. Construction of the industrial park will start in 2018.

The decision to build a Russian industrial zone in Egypt was agreed by President Vladimir Putin and his Egyptian counterpart in 2014. Negotiations were temporarily frozen after a Russian airliner was blown up by terrorists over the Sinai Peninsula in October 2015.

The new industrial zone will have a friendlier tax regime for resident Russian firms. It is expected to provide 77,000 jobs, and the companies expect revenues to reach $11.6 billion. The tax rate for businesses in the project and personal income tax will be 10 percent. Sales tax will be abolished.

Russian companies will design and construct the industrial facilities, jointly produce and supply various types of equipment, and provide the necessary technical assistance.

It is estimated around $4.6 billion will be invested in the construction of the industrial park by 2035.

Two years ago Egypt announced the modernization of the Suez Canal, which is one of the world’s major transportation routes. Originally, it was planned to complete the work in three years, but later it was reduced to 12 months. The new Suez Canal will include a vast range of services, as well as several industrial parks, including Russian, Chinese and Italian.

Article source: https://www.rt.com/business/368167-egypt-russian-industrial-zone/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

UK labor market resilient to Brexit vote

CBI figures show October sales grew 7.4 percent.

The confederation added that the retail sales balance rose to +26 in November from +21 in October, its highest since September 2015. Reuters-polled analysts had predicted a fall to +12.

“While we expect to see decent growth in the near term, retailers are keeping a close eye on price rises coming down the track and the impact on consumer spending,” CBI chief economist Rain Newton-Smith said.

UK retailers have warned of price increases next year with the falling pound making imports more expensive. Sterling has fallen nearly 20 percent against the US dollar since the June referendum, trading at $1.244 on Friday.

Another report on Friday, posted by the Office for National Statistics said household spending went up 0.7 percent from the second quarter and business investment increased 0.9 percent in the first full quarter after Britons voted to leave the European Union.

British GDP grew the same 0.5 percent in the third quarter with trade being the primary contributor.

“Investment by businesses held up well in the immediate aftermath of the EU referendum, though it’s likely most of these investment decisions were taken before polling day,” said ONS statistician Darren Morgan.

“That, coupled with growing consumer spending fueled by rising household income, and a strong performance in the dominant service industries, kept the economy expanding broadly in line with its historical average,” he added.

Some analysts were surprised by the strong data in the British economy, but also warned some business decisions had been made before the Brexit vote.

“In light of Brexit, there was a case for uncertainty holding back investment. However, things are never black and white. Projects to build planes, ships, buildings, etc. will have been signed off 12-18 months ago and that activity won’t shut off overnight,” said Alan Clarke at Scotiabank in London, as quoted by Bloomberg.

Article source: https://www.rt.com/business/368166-uk-economy-consumers-pound/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Rich tourists stay away from France in wake of terror attacks

More than 4,000 households left France in 2014 (it’s the most recent year with available statistics), according to Les Echos newspaper which has obtained the report.

For those earning over €100,000 the trend has continued since 2007.

In 2014, about 589 people earning over €300,000 a year left the country. The figure was down from 659 the year before.

For those earning €700,000 or more per year, 127 people said ‘au revoir’ to France in 2014, down from 179 people a year earlier.

Experts cite France’s relatively high tax rate as one of the main reasons for the outflow of millionaires. Taxes were significantly increased in 2012 with a ‘supertax’ of 75 percent on the rich which was meant to force the wealthy help the country out of the economic crisis. The unpopular measure was introduced by France’s President Francois Hollande, but two years later the supertax was adjusted to a 50 percent rate due to accusations of it being anti-business.

The report, however, found that over half the top earners leave France for “professional reasons,” while 30 percent move for personal or family reasons.

Some other studies also show the massive exodus was more likely linked with a new job, a change of scene, or for family reasons. Very few high earners blamed taxes for causing them to move.

The top four countries to resettle were the UK, the US, Switzerland, and Belgium.

Last month’s study from the Ipsos research company revealed the French are more pessimistic about the future of their country than anyone else in the world. A total of 88 percent of respondents said the country was heading down the wrong path. They considered terrorism to be the “most worrying topic” in France, followed by unemployment, taxes, and poverty/social inequality.

Article source: https://www.rt.com/business/368145-france-wealthy-leaving-country/?utm_source=rss&utm_medium=rss&utm_campaign=RSS