Monday Digest #94

Weekly summary of finance, economic and tech news. Vision from DreamTeam. With 💜

The last meeting of OPEC was of a consultative nature, the participants have not developed any concrete proposals. However, they have agreed on the following consultations which are tentatively scheduled for 25–26 November. The final decision on the limitation of production is expected to be made at the OPEC meeting on 30 November in Vienna.

Experts believe that OPEC currently uses verbal intervention to raise quotes. In reality, the countries are unlikely to reduce their production. The maximum that can be achieved is the agreement on freezing production volumes, especially now that so many countries are producing record volumes.

In addition, the imbalance in the oil market has led to the accumulation of excess oil in an amount that is sufficient to fill about 160 supertankers. Therefore, even in the case of freezing on the expected level of production, the existing surplus of raw materials for the next year will be covered by only 11%.

Goldman and Citi: if Saudi Arabia will not be able to unite OPEC before the meeting in Vienna, oil prices can very quickly get to $ 40 or fall even lower.

Sales in the global bond market led to an increase in the yield of 10-year US treasury bonds to the highest level in nearly five months — up to 1,843%.
There is an opinion in the market that the US Treasuries were sold off, in particular, by Pimco (one of the largest players in the bond market).

Reason: Bond with longer maturity react sharply on the probability of rate hikes and the increase in the cost of cash lending.

Alexei Moiseev, Deputy Minister of Ministry of Finance of Russia, delivering a lecture, said that the ministry is working on a variant of the taxation of deposits.
If such a decision is taken, it reduces advantages of bank deposits over bonds for individuals, i.e. there will be a flow of financial resources from the credit market to the stock market (bonds sector) in the financial market of the Russian Federation. In turn, this will affect the reduction in bond market instruments’ yield, and can also lead to a slight increase in interest rates on bank deposits, as some banks will be forced to take protective measures to keep the depositors money.

A strong earthquake occurred on Sunday in central Italy. Typically, natural disasters have negative impact on the stock market.


#macro #finance

World-class funds have significantly reduced their investments in the UK after Brexit, considering it as “least favorable” region for the investment. Given the current uncertainty, the most reliable place to host finances is considered to be the continental Europe, as can be concluded from the chart below.

WSJ: Analysts expected that in the III quarter Deutsche Bank will incur 610 million euro loss, but on Thursday (27 oct) the bank reported a profit of 278 million euros. There was 6 billion euros loss over the same period in 2015.
The improved performance is a result of the growth of revenues from trade of credit, currency and interest rate instruments. The division of global markets has helped to boost total revenues by 2% to EUR 7.5 billion, which has also exceeded analysts’ expectations.

US GDP grew at the fastest pace since 2014.
Accelerated economic growth, along with the steady pace of recruitment is expected to push the Fed to raise rates in December. 
Fed Fund Futures are now showing 73.9% probability of a rate hike at the December meeting.

On Tuesday, 18 October, at auction in Hong Kong the Chinese currency fell to 6.7876 against the dollar.
One reason for the fall in the yuan offshore market can be the publication of a stronger-than-expected statistics on the industrial sector, which has provoked a stronger dollar.
In turn, the depreciation of the RMB has increased the demand for Bitcoin.
For the Chinese, buying Bitcoins is a way to protect themselves against the depreciation of the national currency against the background of the existing in the country capital controls. China accounts for about 90% of the world trade volumes of cryptocurrency.

Austria last week floated government bonds on 2 billion euros with maturity in November 2086.
It should be noted that the volume of placement of sovereign debt with over 10 years maturity has reached a record $733 billion since the beginning of 2016. The total value of these securities in the market has more than doubled since 2009 and is more than $6 trillion.

Short positions in futures on the ruble exchange rate against the dollar declined by more than 13 thous. to 654 contracts, the lowest level since the beginning of 2012.
Closing of 95% of short positions on the ruble by hedge funds may be associated with the fixation of damage — the ruble has strengthened this year by more than 15% — one of the best results among the emerging markets.

According to the Cambridge Alternative Finance center, online-lending volume in China reached $52.44 billion in 2015, while the entire business in the country has been credited for $39.63 billion.
Colleagues remember that the shadow economy is difficult enough to adjust gently and is quite expensive to be saved. But the rescue is necessary.
Also we would like to make the announcement that now our team is working on analytical report about China, where the isssue will be disclosed in details.


#INTERESTING

The largest US banks closed hundreds of branches.
In particular, Bank of America, which numbered more than 6 thousand branches before the financial crisis, as of the III quarter of this year, reduced the number of branches by 4629. Since last year, the bank has reduced its 112 financial centers.
Chief Financial Officer of Bank of America Paul Donofrio said that the closure of the branches is a part of the “transition to an independent customer service based on mobile phones, the Internet and ATMs.” According to the income statement for the III quarter, the bank has 21 million active users who use mobile banking, and 18% of deposit transactions are made through mobile devices.

Reuters: Australia’s largest financial conglomerate Commonwealth Bank of Australia (CBA), the company Brighann Cotton Marketing Australia and US financial services company Wells Fargo have become parties to the transaction on delivery of cotton from the US to China. The transaction was performed with the help of blockchain.
For more than 88 cotton bales Australian company paid $35,000 using blockchain.
Visa and Mastercard have changed the industry for 20 years, and the current situation is such that there is a revolution in blockchain and Bitcoin that will change the payment system very quickly. Tech-future is already here.

With the help of new pilot program of startup “Rapid Flow Technologies”, Pittsburghs’ 50 crossroads have become equipped with traffic lights that are controlled by the software, based on artificial intelligence called Surtrac, which reduces the waiting time on empty roads or during the traffic jams.
Since putting Surtrac into operation in 2012, a team of Rapid Flow has estimated that its traffic lights under AI control reduced harmful emissions by 21%, time of traveling by 25%, and the waiting time at idle by 40%.


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