Monday Digest #78
Weekly summary of finance, economic and tech news. Vision from Russia. With 💜
China changes the method of calculating the gross domestic product (GDP), adding to the calculations the cost of research and development (R & D).
This will increase the value of the GDP, but will barely affect the growth rate, which have provided the rapid growth of the global GDP in recent years.
Investors are fleeing from risky assets, buying more reliable tools to save their money.
Against this backdrop, the yields of government bonds of different countries are literally updating historical lows daily.
Bloomberg: Gold prices experience 2-year-hights against the background of the fleeing of investors from risky assets.
The Silver prices also show an increase — from the 23d of June, 2016 the metal rose by 17%
In The Digest # 77 we wrote that many citizens wanted to leave the EU in France.
Italy has joint to the “WhoExit” list in which the referendum is being actively discussed. This appears to be a major political risk for Europe, which in turn puts pressure on the country’s government bonds.
On Wednesday three real estate funds additionally have limited withdrawals after Brexit in the UK. Thus, it has affected six funds, which hold more than half of the 25 billion pounds invested by retail investors in commercial real estate. # BearSterns2.0
Interestingly, banks are the main debt holders of the UK property #dominoeffect.
Italy may cause the effect: 360 billion euros of bad debts have accumulated in Italian banks, which exceeds 20% of the country’s GDP.
It was known about the problems of Italian banks, but the British referendum on the exit from the EU had aggravated it.
Basically, the critical situation is connected with the bank Banca Monte dei Paschi di Siena SpA.
Monte Paschi, which is the oldest bank in the world and takes the third place in terms of assets in Italy. On Monday it was announced that the ECB has required Monte Paschi to reduce the amount of bad debts, which constitute one third of its portfolio, from € 24.4 billion to € 14.6 billion in 2018.
Its shares have lost 99% over the last 5 years.
Italy plans to save the banking system by the direct infusion of money into it from the budget, but this contradicts the EU rules.
The #dominoeffect will work out quite fast, because the banking system of Europe and the rest of the world are highly correlated with each other.
On Thursday, oil fell by 5% to 2 month lows on the background of news about the US reserves, which fell less than the analysts had forecast.
In our opinion, this is a strange reaction of the market, which at the moment looks like a short-term speculation. For a reliant reversal of the upward trend stronger data on the growth of oil reserves, which would indicate that the change in the balance of supply and demand in the market is needed.
#macro #finance
Rating agencies in the first half of 2016 reduced the sovereign rating at a record pace.
So, Fitch has lowered the ratings of 14 sovereigns, including the United Kingdom; S & P — 16; Moody’s — 24.
State-owned companies in China reduced their profit in January-May.
The decrease in profits occur against the background of weak growth in industrial production in China, which for the first five months of 2016 rose by only 5.9% in annual terms.
WSJ: This year, 20 of the largest global banks have lost a quarter of its total market capitalization, or about $ 465 billion.
Because of this, it will be much harder for them to raise the capital.
The Italian UniCredit, whose market capitalization has fallen by almost two thirds, suffers the maximum loss.
The cost of Royal Bank of Scotland fell by 56%, while Credit Suisse, Deutsche Bank and Barclays fell almost twice.
The fall of the value of bank shares is due to several factors: the influence of China’s economy status on the markets, the expectation of change of Fed interest rates and oil prices. British referendum on secession from the EU has only exacerbated this trend.
#interesting
The authorities of Los Angeles (CA) are planning to put into operation the most powerful battery in the world by 2021. The battery will be an array of 18 thousand lithium-ion batteries capable of delivery of 100 megawatts within four hours.
The battery is able to reduce the peak load on the gas power plants in Los Angeles, which is attributed to the second half of the day.
«Yandex» and «Baring Vostok» invested $ 5.5 million in medical startup.
According to Russian standards, the investment of $ 5.5 million in startup is quite a large tranche, which can be considered as an argument “in favor of the prospect and huge potential” of the project.
Sberbank Venture Fund «SBT Venture Fund» invested in a call taxi service Uber. The amount of investments is not disclosed.
Microsoft has launched a new bot called Murphy, that is able to combine images of people on the photos.
Interestingly, all the inhabitants on the Earth, who have access to the Internet, create a little more than half of the world’s Web traffic.
They account for 51 percent of the transmitted information, while the remaining 49 percent is transmitted by bots.
That is to say, the industry is becoming more popular from year to year, and many companies and organizations launch bots that help them to solve certain tasks.
#opinion [Press]
Live on Top Russian Finance TV Stream (RBC) on 7/07/16.
Aleksandr Butmanov, Managing Partner, Founder & CEO at Dream Team Investments, shared his opinion why the Fed has to raise rates at least one time this year:
“Operation “enforcement to take risks” still continues globally: in January, 2016 it was China, now it is Brexit, then there will be Frexit, Itexit…
All the global problems, including a drop in oil prices, commodity assets, have begun because of the interest rate (Fed) has a little bit jumped up. Imagine what may happen when the rates will globally go up, and they definitely will, the only question is when.
The Fed will be forced to do it at least once this year; otherwise investors will demand higher premiums on long-term bonds for a hypothetical further inflation.
Politically, the US regulator cannot give back because the policy of tightening rates has been announced: they have to prove it; otherwise the market will not trust them.
It turns out to be the choice between bad or the worst — if the Fed does nothing, the market will realize that it will be able to blackmail the Central Bank (this is not normal).
It is better to shoot yourself in the foot, but to continue the movement.
Therefore, the rate will be increased, so that not to show Fed Fund Futures this year.”
To discover it, just see this video (on Russian).
More about Dream Team Investments
Follow VISION on Medium
