The falling currency: A welcome adjustment?

It turns out we were in a false reality. No-one believed that Brexit was really going to happen. The response to comments by Theresa May at the Conservative Party conference – and the realisation that Brexit is not only going to happen, but likely to be ‘harder’ than expectation – has been a plunge in … Continue reading “The falling currency: A welcome adjustment?”

Deutsche Bank’s predicament dominates Europe in September

Europe briefing – European markets were overshadowed during September by concerns over the financial health of Germany’s Deutsche Bank, which was hit with a US$14 billion fine by the US Justice Department. Deutsche Bank’s shares lost over 20% of their value during September Inflation remained a headache for ECB policymakers Switzerland was named the world’s … Continue reading “Deutsche Bank’s predicament dominates Europe in September”

Bank of Japan issues Brexit warning

Asia including Japan briefing – During September, Japan’s Foreign Ministry warned the UK that Brexit could result in Japanese firms moving their European headquarters out of the UK. The Bank of Japan maintained its negative interest rate, instigated a new policy of yield control, and reiterated its relatively aggressive policy stance. Looking ahead, further cuts … Continue reading “Bank of Japan issues Brexit warning”

Concerns grow over China’s credit growth

Emerging markets briefing – As a whole, emerging equity markets outperformed developed markets during September. However, concerns appear to be growing over China’s credit-to-GDP gap, which has risen sharply, creating potential problems for the country’s financial sector. The IMF added China’s yuan to its basket of reserve currencies Russia’s key interest rate was cut from … Continue reading “Concerns grow over China’s credit growth”

US monetary policy remains in focus

Global Briefing – The prospect of higher US interest rates continued to hold investors’ attention during September.  Although the Fed left rates unchanged, the likelihood of further tightening before the end of 2016 remains strong. Opec announced a preliminary agreement to reduce oil production The banking sector came under pressure during the month amid concerns … Continue reading “US monetary policy remains in focus”

More details of the Lifetime ISA revealed

Earlier this year, the government announced a new Lifetime ISA will be launched in April 2017 to help young people buy their first home and save for retirement. What is a Lifetime ISA? The Lifetime ISA is to be a new option for those aged between 18 and 40 saving for retirement or a house … Continue reading “More details of the Lifetime ISA revealed”

Keynesian vs. Monetarism

There have been two schools of thought in the history of economics; Keynesian and Monetarism. The former rests on the belief that government actions can determine growth in the economy, spending money on say infrastructure projects when demand is slack and reining back once the economy picks up. Monetarism on the other hand believes the … Continue reading “Keynesian vs. Monetarism”

Forbidden fruit

There are unusual, even bizarre, aspects to the news that the European Commission has ordered Ireland to claw back €13 billion in back taxes from Apple. The figure represents the difference between Ireland’s standard corporation tax rate and the somewhat smaller figure paid by Apple over the past quarter-century. First, the Irish Government has decided … Continue reading “Forbidden fruit”

Where do you find a good yield?

Part of the big idea of Central Banks creating money and buying bonds is to drive other investors to buy riskier assets. They want to stimulate more activity. They hope that by taking interest rates down to very low levels some people will spend more instead of saving, and others will be more adventurous with … Continue reading “Where do you find a good yield?”

The Chinese liquidity trap

It is not just in developed markets that corporates are finding little productive use for easy money. Monetary easing in China, too, is having little apparent impact on the real economy. The M1-M21 gap in China, shown in the chart below, has historically functioned well as an indicator of GDP growth. Typically, if M1 growth … Continue reading “The Chinese liquidity trap”

Return-free risk

Bonds are at the epicentre of what is a highly fragile environment. “Brexit brought forward the size, scale, scope and speed of more monetary policy. No wonder markets are up!” – Former Federal Reserve (Fed) Governor, Kevin Warsh, July 2016 It is often stated that markets hate uncertainty. Like many things this cycle, this notion has been … Continue reading “Return-free risk”

Around the world and back again: has the globalisation theme turned full circle?

2008 may come eventually to be seen as the peak in the trend towards globalisation, the point at which the tide turned and the global spider’s web of supply chains and trade routes began to shrink. For several decades we have witnessed a continued expansion in the trade between economies around the world, crisscrossed by … Continue reading “Around the world and back again: has the globalisation theme turned full circle?”