This Week in 30 Minutes
by: Diego Ibazeta Lucero, Mabel Kim Taveras, and Hugues Duron
August 15th, 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!
1.For Global News and Politics click here .
2. For Start-ups and Tech news click here.
Belarus Bonds Dumped by Investors Fearful of EU sanctions
Investors in Belarus’s sovereign debt are growing jittery about the threat of international sanctions against the country in the wake of last Sunday’s disputed election. A sell-off in Belarusian debt has accelerated in recent days as authorities continue their crackdown on protests against the contested victory for Alexander Lukashenko, which would continue the strongman president’s 26-year rule of the former Soviet state. Dollar bonds issued by Belarus fell 2 per cent to 3 per cent in price on Thursday. A bond maturing in 2026, part of a $1.25bn sale of new debt by Minsk in late June, was trading at less than 92 cents on the dollar early on Friday afternoon, having been issued at just below 99 cents. Read more here.
Amid a brutal Contraction, Corporate Germany Assesses the damage
It was even worse than expected. On July 30th Destatis, Germany’s federal statistics agency, announced that the economy shrank by 10.1% in the second quarter, compared with the first—largely the result of the government’s measures to contain the spread of covid-19. The drop was the deepest in half a century. Destatis also reported associated slumps in exports and imports, household consumption and investment in machinery and equipment. The plunge in output returned GDP to where it was ten years ago. Even so, according to Florian Hense, an economist at Berenberg, a German private bank, it “could have been much worse”. Germany’s lockdown was softer and shorter than in other European countries. Moreover the government responded with one of the most comprehensive fiscal stimuli around the globe, writes Mr Hense, which further cushioned the blow to the economy and accelerated its recovery. On the day after the grim German announcement France, Italy and Spain reported even sharper contractions, of 13.8%, 12.4 % and 18.5% respectively. Read more here
European Banks Urged to Stop Funding Oil Trade in Amazon
Indigenous people living at the headwaters of the Amazon have called on European banks to stop financing oil development in the region, as it poses a threat to them and damages a fragile ecosystem, after a new report found $10bn in previously undisclosed funding for oil in the region. The headwaters of the Amazon in Ecuador and Peru are home to more than 500,000 indigenous people, including some who choose to live in voluntary isolation. The area, covering about 30m hectares (74m acres), hosts a diverse rainforest ecosystem, but it is threatened by the expansion of oil drilling. Many banks have pledged to halt or limit the finance they provide to fossil fuel projects, particularly in delicate ecosystems, but the new report focuses on a grey area of bank lending: instead of project finance, the authors looked at trade finance. Project finance is used to start and develop oil wells, fossil fuel extraction, refineries and pipelines, but trade finance is used to move the oil and gas from production to refineries. Read more here
Funds Branded ‘ESG’ are Laden with Technology Stocks
Investment funds branded as “sustainable” are under fire for their heavy exposures to US tech giants at the centre of controversies over data privacy, labour practices and monopolistic behaviour. Interest in sustainable investing — where funds are supposed to steer money towards companies with strong environmental, social or corporate governance standards — has grown this year, with global assets in such funds reaching $1tn, according to Morningstar, the data provider. Analysts have lauded solid returns for managers pursuing ESG mandates, suggesting good business practices are a contributing factor. But there is another force at play: ownership of tech stocks that have soared in recent years — and especially during the Covid-19 crisis. Read more here
The Trump Administration Wants a US-China Commercial Split
During his term in office, Donald Trump has often bashed China while occasionally praising its leader, Xi Jinping. Similar two-mindedness characterizes his administration. China hawks, led by Robert Lighthizer, his trade representative, and Mike Pompeo, the secretary of state, have tussled for influence with more dovish figures such as Steven Mnuchin, the treasury secretary, who have tried to prevent a rupture between the two giants. Companies and investors from both countries have watched the contest closely. In the past 18 months the hawks have been ascendant. Now, blaming China for spreading the covid-19 virus that has pushed America and the rest of the world into recession, thus helping to dent the president’s chances of re-election in November, they have prevailed. Read more here
Profits Fall Sharply at Saudi Aramco, the World’s Biggest Oil Firm
In December, when Saudi Aramco listed 1.5% of its shares on the Riyadh stock exchange, it became the world’s most valuable listed company, with a market capitalization of $1.9trn or so. The state-backed oil behemoth’s bosses assured investors that low costs and vast reserves would make it resilient in a downturn. Since then Saudi Arabia and Russia waged a short but brutal price war, covid-19 has provoked the most sudden collapse in oil demand on record, and Aramco lost its stock market crown to Apple, whose market value has risen by nearly 50% this year to $1.9trn, while Aramco’s has edged down by 6%. Then, on August 9th, the firm reported a 73% year-on-year fall in second-quarter profits. The events are a Rorschach test both for Aramco’s boosters and its critics. Proponents see a firm that can produce more oil, more profitably than anyone on Earth. Sceptics point to unusual vulnerabilities, notably its majority owner’s dependence on its profits. As with all Rorschach tests, there is no one right assessment. Read more here
US Treasury Forced to Pay Up to Fund Record Stimulus
The US government faced Lacklustre demand for its latest record auction of long-dated Treasury bonds, marking one of its first mis-steps in funding historic spending packages passed by US legislators since March. On Thursday, the Treasury department struggled to offload $26bn of 30-year bonds at record-low interest rates. Instead, the bonds were sold at a yield of 1.4 per cent, more than 0.02 percentage points above market expectations at the time of the auction deadline. Investors submitted bids for 2.14 times the amount on offer, the lowest bid-to-cover ratio for 30-year bonds since July 2019, according to Thomas Simons, a money market economist at Jefferies. Read more here
JPMorgan Report Reveals ‘Dramatic’ Covid Shift to Electronic Bond Trading
The coronavirus crisis has ushered in a “dramatic” shift in the world’s largest bond market away from traditional trading by phone towards electronic execution, according to a report produced by JPMorgan Chase. The figures from the Wall Street bank, one of the biggest Treasury dealers, suggest that a gradual drift towards electronification of the market for US government bonds was accelerated by the impact of the pandemic as many of the bank’s clients — who found themselves suddenly working from home in a volatile market meltdown — preferred to transact based on prices quoted on a screen rather than picking up the phone to negotiate with a human trader. Read more here.
Singapore Charges Wirecard Agent with Falsification of Accounts
A Singaporean businessman with multiple ties to Wirecard has been charged with falsification of accounts, marking the first set of charges issued by the city-state since it kicked off an investigation into the collapsed German payments company last year. R Shanmugaratnam is suspected of being a key figure in an alleged multiyear fraud, accused of playing the role of trustee for fake bank accounts, which Wirecard told auditors were filled with cash. Read more here.
1.For Global News and Politics click here .
2. For Start-ups and Tech news click here.
See you next week!