This Week in 30 Minutes
by: Diego Ibazeta Lucero, Mabel Kim Taveras, and Hugues Duron
September 26th, 2020
Hi there! We are two economists-to-be sharing + one Business & Law major sharing with you, every Saturday, what we believe are the most relevant and interesting news of the week. The newsletter will be divided between all of our LinkedIn profiles. Please share, like, and comment all your thoughts and suggestions. Enjoy!
- For Global News and Politics click here;
- For Start-ups & Tech news click here;
Brexit and the City: Brussels’ new battle to rival London in finance
Within hours of the UK’s Brexit referendum result in 2016, Jason Waight and colleagues at electronic trading platform MarketAxess met in their London offices to discuss opening a new operation in continental Europe. The decision was inevitable, he says, given the need to ensure EU27 clients do not suffer interrupted service as a result of the UK’s decision to quit the bloc. In 2018 the company, which traders use to buy and sell corporate bonds, opened a small office in a traditional townhouse overlooking a picturesque canal in Amsterdam. Yet as the clock ticks down to the UK’s departure from the single market at the end of December, Mr Waight says the pull exerted by London remains undeniable — something that will keep the EU’s own ambitions to boost its domestic financial services sector in check. Read more here.
ECB calls on Brussels to make recovery fund permanent
The European Central Bank has urged the EU to consider making its new pandemic recovery fund permanent, as it published data showing that Croatia, Bulgaria and Greece would be the fund’s biggest net beneficiaries. The EU plans to issue €750bn of debt to support a revival of the region’s pandemic-stricken economy by distributing grants and loans to member states, a move the ECB called “an important milestone in European economic policy integration”. The scheme’s centrepiece — €390bn of grants — would provide a net benefit worth more than 10 per cent of the pre-crisis Croatian and Bulgarian economies and almost 9 per cent for Greece, the ECB estimated in a research note published on Wednesday. Read more here.
Barclays and HSBC shares fall after reports of alleged suspicious transfers
Shares in the banking sector have fallen after media reports that some of the world’s largest banks moved large sums of allegedly illicit funds over nearly two decades, despite red flags about the origins of the money. Barclays fell by 4% in early trading in London on Monday and HSBC and Standard Chartered both lost 3%. Earlier in Hong Kong, HSBC dropped more than 4%, taking the shares to their lowest level since May 1995. The drop came after thousands of documents detailing $2tn (￡1.55tn) of potentially corrupt transactions that were washed through the US financial system were leaked to an international group of investigative journalists. Read more here.
Switzerland ready to hold down franc with sharper interventions
The Swiss National Bank said it was ready to accelerate huge interventions in foreign currency markets as successive bouts of economic uncertainty have placed upward pressure on the franc. Despite a smaller than expected hit to Switzerland’s economy from the coronavirus pandemic in the first half of the year — GDP contracted just 5 per cent — the bank said it intended to pursue its ultra-expansionary monetary policy for the foreseeable future. “The SNB’s expansionary monetary policy is necessary to ensure appropriate monetary conditions in Switzerland and to stabilise economic activity and price developments,” the central bank said in a statement. “In view of the fact that the Swiss franc is still highly valued, the SNB remains willing to intervene more strongly in the foreign exchange market.” Read more here.
US urged to subsidies e electric cars on national security grounds
The US must urgently build up an electric vehicles industry or risk becoming dependent on China for its automotive future, a group of senior military and business leaders have warned. China is in the process of consolidating control of the supply chain for electrified transport — from mineral extraction and battery production to manufacture and sales of the vehicles themselves — according to the group, Securing America’s Future Energy, which campaigns for US energy security. Failure by US authorities to counter Chinese dominance within the next five years risks the “withering of the US automobile industry” and the loss of millions jobs supported by the country’s auto sector today, said Admiral Dennis Blair, a former director of national intelligence, who sits on SAFE’s energy security leadership council. Read more here.
US sanctions China’s biggest chipmaker
The US government has sanctioned China’s biggest chipmaker, dealing further damage to the country’s semiconductor industry after cutting Huawei off from its chip suppliers. On Friday, the US Department of Commerce told companies that export to Semiconductor Manufacturing International Corporation (SMIC) posed an “unacceptable risk” of being diverted to “military end use”, according to a copy of the letter seen by the Financial Times. The move threatens to cut off China’s biggest chipmaker from crucial US software and chipmaking equipment. Companies now require licenses to export such products to SMIC. Read more here.
Investors flee US junk bond funds as concern for the economy grows
US junk bond funds have suffered their biggest weekly outflows since the depths of the coronavirus pandemic in March, as investors fret over the sustainability of the US economic recovery. Investors pulled $4.86bn from funds that buy US high-yield bonds in the week ending September 23, according to data from EPFR Global, the worst result since $5.6bn was withdrawn in the middle of March. The BlackRock iShares high-yield bond exchange traded fund — known by its stock market ticker HYG — suffered close to $2bn in outflows across Monday and Tuesday alone. Concerns over the persistent economic effects of the virus, alongside mounting fears of a contentious US presidential election, are pushing some investors to pare back their exposure to some of the riskiest companies in debt markets. This week President Donald Trump refused to commit to a peaceful transfer of power if he loses on election day. Read more here.
Debt collectors bulk up to deal with US property loan defaults
Debt collectors for US property loans have been on a hiring spree to deal with a deluge of defaults and prepare for lenders to assume control of shops and hotels — an alarming omen for owners of billions of dollars worth of commercial mortgage-backed securities. When property loans that have been bundled into these bonds come under severe stress they are passed to so-called special servicers, which work with borrowers to either find a way to keep them paying their mortgage, or to eventually foreclose on the property and recoup cash for bondholders. The onset of coronavirus and worldwide lockdowns have plunged a vast number of commercial properties into jeopardy, putting these companies in demand. “It’s a naturally countercyclical business,” said Alex Killick, head of special servicing at CW Capital, who joined from JPMorgan Chase at the start of 2008. Read more here.
Tech rally fails to prevent fourth negative week for US stocks
US stocks fell for a fourth straight week, despite notching gains on Friday, as investors confronted the reality of a second coronavirus wave in Europe and broader uncertainty about the prospects of additional stimulus measures from Congress. The S&P 500 closed up 1.6 per cent on Friday, extending gains from the day before. But steeper losses on Monday and Wednesday dragged down the benchmark index, resulting in a 0.6 per cent decline for the week. The tech-heavy Nasdaq Composite fared better, rising 2.3 per cent on Friday for a 1.1 per cent gain on the week. Read more here.
African countries ‘ready to open our doors again to the world’
Cape Town’s international convention centre, converted into Africa’s biggest field hospital during the pandemic, has started booking events, albeit socially distanced ones. Lagos, Nigeria’s commercial capital, plans to reopen some schools on Monday. And in Ghana, where Accra’s international airport has been open since the start of the month, bars, restaurants and places of worship are slowly getting back to normal. All over Africa, encouraged by low or declining death and infection rates, countries are tentatively opening up in the hope of reviving pandemic-scarred economies. With significant variation from country to country, schools are reopening, curfews and travel restrictions are lifting, and markets are getting back to full capacity. Read more here.
The pandemic is plunging millions back into extreme poverty
For more than a decade Suresh Aryal has flogged momos, steamed dumplings from Nepal, on the streets of New Delhi. On a good day the 32-year-old could take home as much as 6,000 rupees ($82). Then in March, as covid-19 spread, India shut down. Mr Aryal waited for things to improve for three months. When they did not, he returned to his home village in Nepal. India has since eased its lockdown. But Mr Aryal has no plans to return to the Indian capital. While people are still strapped for cash and reluctant to eat on crowded kerbsides, there is little point. Years spent surviving in a big city and sending money home to his family have left him with no savings. He has been getting by on loans from neighbours, but such generosity has its limits. Jobs are scarce in the village and Mr Aryal does not qualify for government support. “I don’t have a plan,” he says. “I’m going to have to hustle to feed my family.” Read more here.
Oil exports to resume from blockaded Libyan port
The first oil exports from a Libyan port blockaded since January by Khalifa Haftar, the renegade general trying to seize power in the country, are due to be loaded on to a tanker on Wednesday, according to the state-owned Arabian Gulf Oil Company. Agoco said that the Delta Hellas tanker would enter Hariga port on Wednesday and load 1m barrels of oil from the port's storage. The export of oil from Hariga was made possible by a controversial Russian-backed agreement announced on Friday between Gen Haftar and Ahmed Maiteeg, deputy prime minister of the internationally recognised government based in the Libyan capital, Tripoli. The deal was negotiated by Mr Maiteeg independently of ministers in the Government of National Accord, which Gen Haftar has been trying to unseat. Russia is a main backer of the military strongman who has a power base in eastern Libya. Read more here.
Coronavirus pandemic has wiped out $3.5tn in work income, says ILO
The economic fallout from the coronavirus pandemic has wiped out $3.5tn (￡2.75tn) of earnings for millions of people around the world, according to the UN’s labour body. The International Labour Organization (ILO) said income from work declined by an estimated 10.7% in the first three-quarters of 2020 compared with the same period in 2019. Underscoring the “massive” impact on workers from growing numbers of job cuts, reductions in working hours and lack of opportunities, the Geneva-based UN body said the biggest drop was in lower-income countries and the Americas. Income from work fell 15.1% in lower to middle-income countries, such as Bangladesh, Cambodia, Nigeria and Ukraine. In regional terms, the Americas had the biggest decline, down 12.1%. Read more here.
- For Global News and Politics click here;
- For Start-ups & Tech news click here;
See you next week!