What is Trump’s wildcard presidential nomination doing to financial markets?
Stocks, currencies and bonds are all sensitive to political change and a US presidential election is always a period of uncertainty for the markets. So how are the various markets likely to be impacted by the run up to the 2016 US presidential election, which takes place on 8 November?
Nikolas Xenofontos, Director of Risk Management at leading online trading services provider easyMarkets, believes that the wildcard factor of Donald Trump in this year’s election could have a big impact on the US economy. He explains,
“The rise of an anti-establishment candidate like Donald Trump speaks volumes about the desire for change in the US. Party-line politics have been left behind, with Trump standing out as a self-financed candidate who isn’t beholden to any special interest groups and doesn’t plan on following the usual script that most successful candidates use to reach the White House. This independence is both refreshing and worrying when it comes to the financial markets, as there are a lot of unknown factors at play, which could serve to make investors nervous over the coming months.”
Donald Trump’s musings on economic change and policy, should he become president, have already caused a stir. He has floated the idea of replacing Janet Yellen as Chair of the Federal Reserve and has highlighted the benefits of a weak dollar, commenting,
“While there are certain benefits, it sounds better to have a strong dollar than in actuality it is.”
Currency intervention is a risky business. A weaker dollar could benefit US multinationals, which have been struggling of late in the face of the greenback’s strength: Wall Street is in the process of recording its fourth consecutive quarter of earnings decline, in the face of weak international demand. However, currency intervention could easily prompt countries with a history of intervention, such as Japan, China and South Korea, to introduce additional measures to make their currencies more competitive.
In true establishment fashion, Mrs. Clinton has refused to make explicit comments on how to handle currency devaluation.
The US’s international trading position could also be under threat from Donald Trump’s approach to trade deals. His hardball approach includes large tariffs on imports, which could lead to both rising prices for consumers and tariff retaliation from other countries, making US exports less attractive. Trump’s planned major overhaul of US-China trade relations is also likely to cause a shift in the status quo. He has commented that he is not, “too afraid to protect and advance American interests and to challenge China to live up to its obligations.” However, the businessman has also promised to “win more” deals and successful negotiations certainly have the potential to strengthen the US’s trade position.
The uncertainty created by an upcoming election often weighs most heavily on stocks. Uncertainty is the bane of the financial markets, and investors react in unpredictable ways when they’re worried about the future. Investors are already wary of healthcare stocks, which Donald Trump’s repeatedly mentioned repeal of the Affordable Care Act could throw into a tailspin.
Content by online trading services provider easymarkets.com
Morning Round-Up: UK unemployment at record low, FTSE dragged by Admiral, HFI shows post-Brexit recovery
UK unemployment hits record low
The UK’s unemployment rate remained at 4.9% between April and June, its lowest rate for eight years.
The total number of unemployed fell by 52,000 to 1.64 million between April and June, with the labour market continuing on a “strong trend”.
In terms of the effect of Brexit, however, ONS statistician David Freeman commented, “little of today’s data covers the period since the result of the EU referendum became known, with only claimant count and vacancies going beyond June – to July for the former and to May-July for the latter.”
FTSE dragged by Admiral
The FTSE 100 dropped this morning after open, pulled down by an 8 percent fall in Admiral shares.
The insurance firm saw reasonably strong results, with a pre-tax profit of £189.5 million in line with forecasts. However it warned of risks moving forward with Brexit, and highlighted the current effect if has had on their solvency ratio.
Admiral (LON:ADM) are currently trading down 8.21 percent at 2,068.84 (1030GMT).
Households more positive post-Brexit in August – Markit
British households have recovered slightly from post-Brexit uncertainty, according to Markit’s Household Finance Index.
The HFI figure for August hit its highest level in four months at 44.9. Markit senior economist Jack Kennedy said in a statement:
“Concerns seem to have eased in line with the removal of some of the immediate political uncertainty arising from the shock referendum result, combined with a strong monetary policy response from the Bank of England.”
17/08/2016
Economic Sentiment in Euro-Zone recovers from post Brexit slump
After economic sentiment in the European Monetary Union had slumped to its lowest since August 2012 last month, figures recovered into positive territory. This indicates that only seven weeks after the Brexit vote, the majority of investors are once again optimistic about the economic situation in the Euro-Zone.
The August figure for the ZEW Survey indicator for economic sentiment in the Euro-Zone came in at 4.6; showing the positive sentiment of investors and constituting a major improvement on July’s measure at minus 14.7, the lowest rating since August 2012. The figure also beat analysts’ estimates by 10.7.
ZEW Survey of economic sentiment in Germany also positive
Investor sentiment has also bettered in Germany, where the ZEW Survey of economic sentiment came in at 0.5 in August, 7.3 points higher than July figures. However, the measure missed estimates by 1.3 points. The ZEW survey evaluation of the current economic situation in Germany reported a figure of 57.6, up 7.8 points from July and beating estimates by 7.6 points. This further indicates that a large share of investors are optimistic about the future of the German economy once again.Eurostat published promising data on Euro-Zone June trade balance
At the same time as these positive results came in from the Centre of European Economic Research, Eurostat published its data on the Euro-Zone trade balance in June. Non-seasonally-adjusted trade balance grew from €24.6 billion in May to €29.2 billion in June, beating estimates by €3.4 billion and adding to the cohort of positive EMU economic data.UK Retail Price Index in July also promising
The release of positive economic data from the Euro-Zone followed shortly after the UK’s National Statistics published its’ July data on Producer – as well as Retail Price Index with equally promising figures. The producer price index year on year jumped 0.5 percentage points, to 0.3% in July, beating estimated by 0.1%. National Statistics reported the retail price index year on year figure at 1.9%. The figure grew 0.3% compared to June and beat analysts’ estimates by 0.2%.Euro trades up against the US Dollar
The Euro has today risen gradually against the US Dollar with the EUR/USD gaining around 1.1% until 1.25pm. At 1.25pm the EUR/USD stood at 1.13008. The EUR/GBP pair yo-yoed greatly in the first half of the day as economic data from both the Euro-Zone and the UK spelled good news for the two currencies. At 1.30pm the EUR/GBP stood at 1.13008.Katharina Fleiner 16/08/2016
Rail prices to rise again – but is nationalisation really the answer?
With train fares set to rise again today, commuters’ anger over Britain’s overpriced, under-performing rail service once again bubbles to the surface. The news that fares have increased at double the pace of wages over the past six years will surprise no one who commutes by rail, and helped along by Jeremy Corbyn, has stirred up serious anti-privatisation sentiment.
British Rail was privatised in 1993 and has since seen a rise in the number of passengers and journeys offered – as well as ticket prices. However, the UK’s rail network is more complicated than simple private/public status – Network Rail was set up by the government in 2002 and owns and operates most of the rail infrastructure in England, Wales and Scotland, with the government giving train companies subsidies to run services for a certain period. Labour leader Jeremy Corbyn has made no secret of the fact that, should he become Prime Minister, the state would assume control of private rail franchises as they expire – making a third of the network publicly owned by 2025. With prices rising by 25 percent in the last six years alone, several groups have lobbied for the re-nationalisation of the UK’s rail network. Research by WeOwnIt suggests taking back the railways could save £352 million per year. Privately owned companies have a legal duty to maximise returns for shareholders, putting prices above customer satisfaction. Network Rail is wasteful and inadequately managed, yet its bosses take big bonuses – the maximum amount sits at 20 percent of the annual salary, brought down by CEO Mark Carne from its previous limit of 160 percent.Whilst about half of ticket prices are regulated, the rest are not – making it difficult and time-consuming for customers to suss out the best deal. Tickets in the UK cost nearly twice as much as other European countries, including France, Italy and Germany, who have more high speed networks and better infrastructure.
In nearly 20 years since its privatisation publicly owned Network Rail has accumulated £41 billion worth of debt, meaning the government may well sell off the remaining ownership of the British railways.
However, whilst YouGov research shows that the majority of the public is behind nationalisation – would it be a better option, or is it simply more of Corbyn’s idealistic rhetoric?
The British government was forced to privatise the railways in 1993 because the network had deteriorated beyond what the government could afford to repair; underfunded, dirty and unreliable, the network’s passenger numbers fell by about a third between 1960 and 1995. Since its privatisation, they have more than doubled in just under 20 years.
Without competition and the motive of customer satisfaction to turn a profit, a nationalised rail network could be inefficient and just as costly as the current arrangement. As it stands, the quasi-privatised system used at the moment ensures that fares and ticketing – or at least, 50 percent of them – are controlled by regulation, services are subsided by around £4 billion of public funds, and the infrastructure is owned by the tax-payer. This begs the question – will a costly nationalisation process really make any difference?
In 1993, a hasty privatisation plan was pushed through – and it had several law flaws. 20 years on however, the system is starting to work. Undeniably overcrowding is a problem – but the biggest issue causing this is outdated infrastructure rather than inadequate train companies. If Network Rail can modernise the railways and work with the franchise holders, both bound by legal standards, there is no reason why the British rail network cannot thrive without nationalisation.
Miranda Wadham on 16/08/2016
Ruroc races ahead in Crowd2Fund crowdfunding campaign for expansion
UK extreme sports brand Ruroc, who have created the world’s first integrated ski helmet, goggle and mask, are beginning their second crowdfunding round with Crowd2Fund.
Ruroc are looking for £400,000 of equity investment to design and launch a road and motor certified helmet, alongside a number of other new products. Since their last crowdfunding campaign, Ruroc has expanded, offshored production to China and trebled its staff count; all leading to an impressive turnover in 2015 and close to £1.5 million in sales.
Established in 2010, Ruroc have already made a significant stamp on the market with their helmets being used by over 30,000 people, and have cultivated a strong social media following.
Their last crowdfunding campaign was a £150,000 revenue loan, this year the company have made the decision to raise funds by selling equity; partly due to a recent ownership structure change and a new focus on long term development.
Established in 2010, Ruroc have already made a significant stamp on the market with their helmets being used by over 30,000 people, and have cultivated a strong social media following.
Their last crowdfunding campaign was a £150,000 revenue loan, this year the company have made the decision to raise funds by selling equity; partly due to a recent ownership structure change and a new focus on long term development.
Managing Director Dan Rees commented:
“The [crowdfunded] loan raise was perfect for where we were. We’d just completed stage one of our MBO and acquired the majority stake in Ruroc; we needed to stabilise the business and understand exactly how we were going to take it from £1 million to £10 million.
“Now we have our road map and a product release plan for the next five years we know exactly what we are going to need not just financially but also internally.”
Additionally, the company received several enquiries from private equity funds off after the high-profile crowdfunded debt raise. The vote to leave the European Union in June also weighed on the decision to raise further funds:
“We are determined to make the most of the opportunities which Brexit brings for a UK export company like ours. We are partnering with Crowd2Fund to allow us to raise finance and extend our investor team to meet the demands of an increasing global customer base online.”
Conversely, Ruroc’s fortune have initially increased post Brexit, due to their products becoming more attractive due to fluctuations in sterling currency rates making their products more competitively price in the market place.
It is planned that the funds will be used to develop and launch an innovative road/motor certified helmet in 2017. The company have already hit 50% of their target, and Rees hopes that the campaign will reach the attention of a number of industry experts.
For more information on how to get involved, visit their campaign page on Crowd2Fund.
16/08/2016
The future of London FinTech– London Accelerator Scheme an indicator to watch
Speculation is increasing over the future of the London FinTech industry; some business leaders in the sector believe that the UK’s exit from the European Union may mean Fintech companies will move to another European country. In 20 days the Startupbootcamp is launching its next London Fintech Accelerator. The outcome of the program may shed some light of the changing climate for FinTech companies in Europe’s FinTech hub.
Startupbootcamp London FinTech 2016 will support nine promising FinTech start-ups
Starting on the 5th September, the Startupbootcamp London FinTech Accelerator 2016 hopes to boost the development of nine new and promising FinTech start-ups by offering them free office space in the UK’s capital, as well as £15,000 in funding and access to Angels and venture capitalist firms for both further funding and mentoring. The program sounds promising; it is backed by big names in the financial industry and other sectors including MasterCard, Lloyds Bank, Intel, PwC and Amazon WebServices.349 applications from 61 countries fought for places on popular program
Participants’ interest was high, with 349 start-ups from 61 countries applying to gain a spot on the sought-after program. Much of the interest will have been down to the location; London is currently Europe’s flourishing hub for innovation and growth in the FinTech sector. Participating in a program organised with the help of mentors in a prime industry spot, as well as being offered own free office space right in the beating heart of the European FinTech industry, draws much excitement.Alumni Start-Up BondIT has since been greatly successful
Alumni of the program have seen strong business growth since their participation. BondIT is an Israel based start-up, focusing on efficient, algorithmic income portfolio management. It participated in the London FinTech Accelerator in 2015. Since then it has greatly expanded its team size and global reach. Head offices are located in Hong Kong as well as Israel. The firm has also been selected to present their latest innovations at next month’s Wealth Management Association (WMA) Fintech conference at the KPMG London Headquarters.London accelerator might lay foundation for future of London FinTech
However, this year’s London accelerator commences at a time where the future of the London FinTech industry is less certain. The Brexit vote in June has shifted opinion on the viability of setting up a business in London – and especially in the FinTech sector. Some have started to rethink geographic strategy. Loss of access to the common European market may decrease the growth potential of a London FinTech start-up. Not all views are that gloomy. There are optimists in the industry who believe that London will be able to sustain its culture of innovation and growth. The new and popular round of the London FinTech accelerator may be one program to watch to gain some understanding on how FinTech will develop and struggle in post-Brexit economic uncertainty. Its success may also influence the decision if next year’s Startupbootcamp accelerators will add another European location on the FinTech-programs list. Applications are already open for FinTech & Cyber Security Accelerator in Amsterdam which will begin in January 2017.Katharina Fleiner 16/08/2016
Morning Round-Up: rail fares increasing faster than wages, wages to decrease post-Brexit
Rail fares increase twice as fast as wages
The next increase in rail fares will be set this morning, sparking anger from commuters over the cost of travel on “overcrowded” trains.
According to research by the TUC and Action for Rail fares have risen 25 percent in the past six years alone, and have increased at double the speed of wages.
The governments sets a cap for regulated train fares, which make up around half of the trains in the UK, and will not rise by more than the RPI rate for the duration of this parliament. June’s RPI rate was 1.6 percent, and today’s increase will take into account July’s figure, released at 0930.
TUC general secretary Frances O’Grady said, “fares go up while trains remain overcrowded, stations are unstaffed, and rail companies cut the guards who ensure journeys run smoothly and safely.”
Wages set to decrease in the wake of Brexit
Reducing immigration in the wake of Brexit could have a serious impact on low-paying sectors of the economy, according to research by the Resolution Foundation.
Sectors such as food manufacturing and domestic personnel, where over 30 percent of the workers are migrants, will have to adjust their business models if immigration is curbed or risk losing money.
Earnings Round-Up Tuesday 16th: Santander, BHP Billiton, Antofagasta
Santander disclose strong figures
Santander UK warned that the British banking industry is “facing some serious headwinds”, as it released its half yearly results this morning.
Profit before tax rose to £1,079 million in the six months to June 30th, up from £929 million the year before. Non interest income also saw a 34 percent rise to £671 million. The bank’s retail banking sector was helped by a 20 percent decrease in charges after a lower FSCS charge.
In a statement, the bank said they were “well prepared to serve the needs of our retail and business customers as they steer their way through the opportunities and challenges ahead”
Looking ahead to the rest of the year, “some downside risks are likely to be mitigated by monetary policy actions by the Bank of England and the capital and liquidity strength of the banking sector”.
Santander made headlines this weekend by becoming the first bank to slash its interest rates, cutting the interest paid on its current account from 3 percent to 1.5 percent.
BHP Billiton shares steady despite 81 percent drop in profit
Mining giant BHP Billiton released their results for the year ended June 30th on Tuesday, showing an 81 percent slump in underlying profit to $12.3 million, citing the imapct of weaker commodity prices.
Their profit is the weakest since the merger of BHP and Billiton in 2001 but slightly ahead of analysts’ expectations. The figures were helped by a reduction in operating costs, with capital expenditure declining by 42 percent.
Net debt remained unchanged at $26.1 billion.
CEO Andrew Mackenzie conceded the last 12 months had been “challenging” for the company, but said the “results demonstrate the resilience of our portfolio and the diverse ways in which we can create value for shareholders despite low commodity prices.”
BHP Billiton’s (ASX:BHP) share price has remained steady, currently up 0.45 percent at 20.25 (0857GMT).
Antofagasta profits slip on weak commodity prices
FTSE 100 miner Antofagasta also saw profits slip in the six months to June 30th, largely due to the slide in commodity prices.
Revenue fell 18.5 percent to $1.44 billion, with pre-tax profit down 8.4 percent to $276.1 million. Earnings per share also took a 3.3 percent hit, with group net debt of $1,039.7 million unchanged from December.
However, shares have risen 3.5 percent on the news, currently trading at 532.00 (0902GMT).
16/08/2016
Hacked bitcoin platform Bitfinex face lawsuit
Crypto-currency exchange Bitfinex, who recently saw $72 million worth of Bitcoin stolen by hackers, risk being sued for its plan to spread the loss across its whole customer base.
The Hong-Kong based exchange told customers they would have to forfeit 36 percent of their holdings after the theft, in exchange for “BFX tokens” that could be redeemed at the exchange or converted into shares in its parent company.
The announcement came after hackers stole $72 million of bitcoin from a minority of customers’ accounts on the 2nd August. However, lawyers have since said that their plan could be open to legal challenge.
Bitfinex may well be breaching a special banking relationship, going against the company’s terms of service; many customers are angry at the arrangement, saying the possibility of their funds being used to keep Bitfinex afloat was not disclosed to them before placing money with the platform.
15/08/2016
Morning Round-Up: William Hill rejects 888 bid, Japanese growth slows, oil up
William Hill rejects second takeover offer
William Hill has rejected a second takeover offer from 888 Holdings and Rank Group, saying that is still “substantially” undervalues the company.
The consortium or casino heavyweight Rank Group and online gambling site 888 are aiming to create Britain’s largest multi-channel gambling group, saving £100 million per year. However, William Hill called their offer of 352p per share – up from their previous offer of 339p per share – “highly opportunistic”.
William Hill’s chairman, Gareth Davis, commented, “this revised proposal continues to substantially undervalue the company and the cash element of the proposal has not changed. Therefore, the board sees no merit in engaging.”
William Hill (LON:WMH) shares are down 2.46 percent this morning at 325.50 (0944GMT).
Japanese growth slows further in the second quarter
Japanese growth slowed again in the second quarter, coming in under analysts’ expectations and further undermining Premier Shinzo Abe’s economic policies
The Japanese economy expanded by just 0.2 percent in the second quarter, less than the 0.7 percent increase expected and steep drop 2 percent increase in the first quarter of the year, according to the latest Cabinet Office data.
Japan has grappled with twenty years of deflation despite the stimuli introduced by Abe’s “Abenomic” measures. The economy’s failure to respond positively suggests a further policy review is needed.
Oil up amidst further oversupply agreement speculation
Oil prices rose further gain on Monday, as hopes rise yet again for an agreement on oversupply.
Brent crude is up 11 percent on the start of the month, with West Texas Intermediate up 7 percent. WTI is currently trading at $44.49 per barrel, with Brent at $46.97.
Prices have risen steadily over the course of this year since the record lows seen at the height of the oil rout. Speculation is now increasing over potential producer action the curb the chronic overproduction forcing down prices, amidst a battle between Middle Eastern producers for Asian market share.
15/08/2016