13/09/2016
Winston Churchill’s £5 note enters circulation today
Tuesday sees the launch of the Bank of England’s new £5 note, initially available at a handful of cashpoints in major cities.
The new note is made of polymer and will be much more durable – and hygienic – than the old paper version. It will also include safety features designed to prevent fraud and reduce the number of fake notes in circulation.
Bank of England governor Mark Carney commented, “The use of polymer means it can better withstand being repeatedly folded into wallets or scrunched up inside pockets, and can also survive a spin in the washing machine.”
The notes are expected to be rolled out to banks nationally within a week, but will be dispensed from cash machines in London, Manchester, Leeds, Cardiff and several other major cities from today.
The new fiver will feature ex-Prime Minister Winston Churchill, a total of 440 million of which have been printed. After a long campaign to place a woman on a British note, a new polymer £10 note featuring Jane Austen is set to be released this time next year.
Fed Reserve official calms markets with dovish comments
Federal Reserve official Lael Brainard calmed jittery markets yesterday by warning against raising interest rates too soon.
Brainard, a member of the Fed’s Open Market Committee, traditional holds dovish views towards monetary policy and has consistently voted against raising rates. In her Chicago speech she said the US economy remains fragile and that such economic weakness “counsels prudence”.
However earlier on Monday Atlanta Federal Reserve president Dennis Lockhart spoke out in favour of the opposite approach, saying he believed the current economic conditions favoured a September rate rise.
Global markets had been volatile ahead of the Fed members’ comments, as fears of a rate rise pushed shares down. After Monday’s speeches Asian markets broadly moved into positive territory, with the Nikkei 225 up 0.34 percent and the Shanghai Composite up 0.05 percent.
The dollar fell however, down 0.19 percent against the pound.
13/09/2016
Britons may need visa for EU travel, says Rudd
Work permits are being considered for EU citizens as the UK prepares to leave the European Union, home secretary Amber Rudd has said.
The ‘work permit’ system is designed to control migration from the European Union, with Rudd telling the BBC that it “certainly has value”.
“What we’re going to look at is how we can get the best for the economy, driving the numbers down but protecting the people who really add value to the economy,” Rudd said.
“Whether we look at a work permit system or another system is something that my department is looking at closely at the moment.”
However, she conceded that it may have repercussions for UK citizens, including the need for a visa to travel to the EU on holiday. This news will likely come as a huge blow to international businesses and workers, as well as those who travel frequently with family and friends. The scheme could be operated by the 26-nation Schengen Zone, of which the UK has never been a member.
Rudd, one of May’s closest allies in government, says the UK will have “complete control” over immigration post-Brexit. She backs May’s plan to cut immigration from it current total of 327,000 to below 100,000.
12/09/2016
Global markets chaotic ahead of Fed speeches
Fears that the US Federal Reserve will raise interest rates next week dragged down global markets on Monday, with European shares following the lead of Asian markets.
Several Fed members have spoken of the need to raise rates in the next few weeks, with Boston Fed president Eric Rosengren causing stock market chaos on Friday by saying a rate rise is needed to stop the US economy “overheating”.
Just an hour and a half into the trading day the FTSE is down 1.71 percent, dragged by miners such as BHP Billiton and Glencore, both down around 4 percent.
Asian markets largely fell on Monday, with the Hang Seng down 3.36 percent and the Shanghai Composite down 1.85 percent.
Three further Fed officials are expected to speak later today, including the traditionally dovish Lael Brainard, whose comments may well calm the markets. In the past, she has urged the Fed to wait until inflation is closer to the central bank’s target before raising rates.
12/09/2016
BCC slashes UK growth forecast post-Brexit
The British Chamber of Commerce has cut its forecast for UK growth in the light of Brexit, despite recent reassuring data.
The BCC now expects growth of 1.8 percent this year, reduced from March’s forecast of 2.2 percent in March. For 2017, the group is now expecting 1 percent growth in 2017 instead of the 2.3 percent originally forecast.
Whilst the group do not expect a recession, it said that growth prospects would “dampen” as negotiations began for the UK’s exit. By 2018, the UK economy is expected £43.8 billion smaller than before the EU vote.
BCC acting director general, Dr Adam Marshall, commented:
“Although individual businesses continue to report strong trading conditions, the overall picture suggests a sharp slowdown in UK growth lies ahead.”
Recently economic data has been promising, with Bank of England governor saying he was “serene” over the effects of the referendum. Key figures such as retail spending and inflation are set to be released this week and will shed further light on the situation.
12/09/2016
UK consumer inflation expectations overshoot 2% target
The indicator for UK consumer inflation expectations, published by the Bank of England, has been revised upwards, overshooting the BoE’s inflation target.
Consumer inflation expectations at 2.2%
UK consumer inflation expectations, an indicator for consumers expectations of price inflation over the coming 12 months, has been revised upwards from 2% to 2.2%. This figure overshoots the BoE’s aim for inflation of 2%. High consumer inflation expectations can have an adverse effect on the economy, as consumers will aim to save more if they believe prices will be high in the future.BoE under criticism for expansionary policy
The BoE Monetary Policy Committee has recently been under criticism for acting to quickly in implementing expansionary monetary policy measures to combat possible recessionary pressures on the UK economy, following the Brexit-vote. Lately, a cohort of data have suggested that the UK economy is in good health, two months after the vote to leave the European Union. Last week, the IMF conceded in a note, that initial weaknesses in the financial markets seem to have been only of a short term nature and that the Brexit has not taken the adverse effect initially thought. Too much stimulus could have the effect of raising inflation expectations beyond the target, causing the adverse effect effect of reduced spending to favour saving as described above.Carney defends BoE policy approach
However, in an inquisition by the Treasury Select Committee this Wednesday, BoE governor Mark Carney defended his approach to monetary policy. According to Carney and many analysts, it is still to early to rule out that Brexit will have long-term adverse effects on the UK economy in the future. While it does not seem like the vote caused a grave reduction in economic activity in the two months after the vote, it cannot be concluded that negative developments have been completely averted.Katharina Fleiner 09/09/2016
Morning Round-Up: North Korea nuclear test hits shares, Iran oil slows, German data worrying
Asian shares fall on North Korea nuclear test
Asian shares fell again on Friday after North Korea shook markets with its most powerful nuclear test yet.
Shares fell from three day highs on Thursday, before stumbling further on Friday after a fifth nuclear test from North Korea that had more power than the bomb dropped on Hiroshima. A statement from North Korea said it had mastered the ability to mount a warhead on a ballistic missile.
South Korea’s KOSPI index was down 1.3 percent by close, with the Shanghai Composite down 0.55 percent. China’s CSI 300 also closed 0.25 percent down.
Iran oil production slows, despite plans
Iran’s oil output growth has slowed, according to Reuters and OPEC data, suggesting that the country may be struggling to fulfil plans to raise production to unprecedented highs.
Iran have just been freed from sanctions against their oil, causing them to shun all cooperation with OPEC states to freeze oil production and combat the oversupplied market. Tehran had planned to hike oil production, pushing output up to 3.64 million barrels per day.
However, output has stagnated since June and remains under their production target. The country have since signalled it may be prepared to rejoin OPEC talks and possibly join an output freeze.
German exports latest in weak data from Europe
German exports fell 10 percent year-on-year in July, the latest in a series of disappointing trade data from Europe’s industrial capital.
Imports also fell 6.5 percent, with the country’s trade surplus shrinking to 19.5 billion euros. The figures, published by the Federal Statistics Office on Friday, suggest a worrying impact on Europe’s biggest economy in the wake of Brexit.
The figures come just one day after the ECB failed to announce a further stimulus programme after the current one’s expiry in March 2017.
ING economist Carsten Brzeski commented: “A further cooling of the economy in the months ahead should give more support to just-started discussions about fiscal stimulus.”
09/09/2016
One month until P2P lending conference LendIt Europe 2016
The P2P lending conference, LendIt Europe 2016, will be taking place in London from the 10th to the 11th of October this year.
LendIt Europe 2016, the third of its kind in London, aims to connect lending platforms and investors to facilitate an exchange of information and offer an opportunity to network, as well as do business.
This year’s conference will be held at the Intercontinental London – The O2.
The two-day event will feature more than 150 speakers, including Lord Adair Turner, Senior Fellow at the Institute for New Economic Thinking, Christine Farnish, Chair of P2PFA, Samir Desai, CO-Founder and CEO of Funding Circle and Cormac Leech, Co-Founder and Director of Liberum Alternative Finance.
In over 50 sessions, participants will be able to learn and discuss important topics to the marketplace lending industry, such as “The state of the European Marketplace Lending Industry”, “Lessons Learned from UK P2P Lending” and “Financial Advisors – the untapped opportunity”.
There will also be a 2500m Expo Hall for businesses to display themselves.
Participants from more than 25 countries are expected to participate in this year’s conference and the event is supported by over 20 partners, the title sponsor being Funding Circle.
LendIt Europe 2016 is the third European P2P Lending conference organised by LendIt. LendIt was launched in the US in 2013, when co-founders Jason Jones and Bo Brustkern decided to organise a small meeting to engage with other professionals in the P2P lending industry and combined forces with P2P lending blogger Peter Renton.
Conferences in the US, as well as in Asia have been a great success. The first Europe conference in 2014, attracted more than 500 participants, a number which grew to over 750 attendees in the second round in 2015. This year, LendIt is hoping to attract more than 1000 people.
Registrations are currently open at http://www.lendit.com/europe/2016
Katharina Fleiner 08/09/2016
European markets down & EUR strengthens on ECB decision
European stock and futures markets took a tumble on the disappointing news that the ECB refrained from lowering interest rates further at today’s monetary policy meeting. The Euro initially gained strength against the Pound and the Dollar but has weakened again since the end of the ECB press conference.
Stock markets suffer losses
By 2.05pm, the Euro STOXX 50, as well as the German DAX, lost -1.29%. The FTSE100 dropped 0.27%. After the initial drop, stock markets recovered some of their losses. At market close the Euro STOXX 50 was down 0.25%, the DAX was down 0.75% and the FTSE100 was up 0.18%.Futures fall
By 3.05pm, Euro STOXX 50 futures dropped 25 points. DAX 30 futures lost as much as 114.50 points. FSTE100 futures retracted gains from earlier in the day, to +15.5 points. However, futures also regained a significant part of their losses by market close. Euro STOXX 50 futures closed down 8 points and DAX30 futures lost 81 points. FTSE100 futures were up 16.5 points.Euro strengthens against Pound and Dollar
The EUR/GBP gained 0.56% between 12.10 and 2.20pm, to a week high of 0.84892. It later withdrew 0.25%, to 0.84678 by 4.27pm. The EUR/USD rose to a new two-week high at 1.13157 by 2.20pm. After peaking at 1.13157, the rate retracted 0.41% to stand at 1.12690 at 4.34pm.ECB interest rate remains unchanged – Fiscal policy must support EMU recovery
The ECB left interest rates unchanged at their monetary policy meeting this month and neglected to extend their quantitive easing programme, causing European shares to drop after the announcement.
In the press conference following the release, ECB President Mario Draghi spoke on the factors currently dampening Euro Area recovery and the importance of fiscal policy to achieve balanced economic growth.
Rates remain unchanged
Interest rates on main refinancing operations, marginal lending facilities and the deposit facilities will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The current monthly asset purchasing program of €80 billion will run until at least the end of March 2017, subject to further extension if necessary to achieve the Banks goal of inflation just below but close to 2%. However, markets were expecting the announcement of a further quantitive easing programme ahead of March 2017.At the press conference, Mario Draghi stated:
“We continue to expect them [interest rates] to remain at present or lower levels for an extended period of time and well past the horizon of our net asset purchases.”While EMU recovery continues, subdued foreign demand has some adverse impact
Draghi drew attention to improvements in the labour market, as well as low oil prices, which have improved households’ purchasing power. Data suggests that Euro Area recovery continued to progress at a slow but steady pace. However, Draghi also pointed to “subdued foreign demand, partly due to the uncertainty after the recent Brexit vote, necessary balance sheet adjustments in a number of sectors and the “sluggish pace of implementation of structural reforms”, as several factors which continue to negatively impact the Euro Area’s recovery. The annual GDP projections were revised upwards to 1.7% in 2016, but downwards to 1.6% in both 2017 and 2018. The economic recovery of the Euro Area is expected to continue on its slow but steady upward trajectory for the rest of the year.Draghi commented:
“If warranted we will act by using all the instruments available within our mandate.”Low interest rates are not hurting banks
In response to questions relating to the efficiency and negative impacts of low interest rates, Draghi stated that “the transmission of monetary policy has never worked better than it does today”. Transmission of interest rates to lending rates has been almost immediate and has not negatively impacted the abilities of banks to make loans. Service demand and supply has increased, driving lending, thanks to heightened competition between banks. Banks had reported profits dropping as much as 20% in the second quarter of both 2015 and 16. However Draghi mentioned that this has been a consequence of huge profits in the first quarters of both years, due to the beginning of the ECB’s asset purchasing programs. He also stressed that low interest rates should not be used to excuse all that has “gone wrong” with banks lately. There has been no evidence of cash hoarding, a commonly mentioned possible negative consequence of negative interest rates.Draghi: “Interest rates need to be low today for being high tomorrow”
While Draghi recognised that prolonged low interest rates are likely to evenutally have adverse consequences for banks, he asked for patience from the markets. He underlined that interest rates need to stay low to support of the EMU’s economic recovery which, in the future, will also benefit banks.Draghi stresses importance of fiscal policy
In his opening statement, as well as on later inquiry in the Q&A session, Draghi stressed that structural reforms, aimed at raising productivity and an improved business environment, are necessary throughout the Euro Area, to support the region’s economic recovery.Quoting a G20 press communique from the 5th September, he stated:
“…monetary policy alone cannot lead to balanced growth, underscoring the essential role of structural reforms, we emphasise that our fiscal strategies are equally important in supporting our common growth subjective.”Katharina Fleiner 08/09/2016