The first OPEC cut in oil production since 2008 sent markets surging on Thursday, lifting the price of oil between 6 and 7 percent.
The landmark agreement is the first of its kind in eight years, with the Organisation of the Petroleum Exporting Countries saying they would reduce output to a range of 32.5 million-33.0 million per day, a decrease of around 0.7-2.2%.
Brent crude was up at $2.72 (5.9%), at $48.69 a barrel, which marks a more than two-week high of $48.96. Additionally, US West Texas Intermediate (WTI) crude jumped to 5.3%, to settle at $47.05, after a peak $47.45, its highest since 8th September.
OPEC is a 14-nation cartel that supplies most of the world’s crude oil supplies. This is the first time that the group have signalled a move in support of oil since the downturn in crude oil prices.
Similarly, the deal has also stimulated a bounce for certain world currencies. The dollar surged 1% against the yen amidst the news, its strongest rise since September 21st. The Australian dollar was also at a three year high of $0.7711.
The deal also led to a lift for various US energy company stocks. Shares in Exxon mobil reached 4.4pc and Chevron rose to around 32.pc.
The OPEC deal marks a significant development in relations between Iran and Saudi Arabia. Up until recently Iran has been subject to sanctions preventing the sale of their oil; since re-entering the market they have been heavily against agreeing to an output curb. However, Iran’s oil minister praised the output agreement last night as an “exceptional decision”.
He remarked that “after two-and-a-half years, OPEC reached consensus to manage the market.”
The exact specifics of the deal remain to be seen, leading to speculation over how much each country will be required to cut. The next formal OPEC meeting is scheduled for November, where the details will be finalised. Decisions will then be made over whether the deal will be extended to non-OPEC nations, such as Russia.
29/09/2016
The Californian born tech giant Apple is to move its London HQ to Battersea Power Station by 2021.
Apple plans to move 1,400 staff into the power station, occupying 500,000 sq ft. The move signals a renewed commitment to operations in London and expanding its UK presence. Currently Apple have seven other offices across London, the largest of which is in Hanover Street, Mayfair.
Apple’s HQ’s new location at Battersea Power Station, South-West London.
In a statement to The Evening Standard Apple said of the move, “This is a great opportunity to have our entire team working and collaborating in one location while supporting the renovation of a neighbourhood rich with history.”
Battersea Power Station stopped producing energy in 1985 and had been since left abandoned. Previous re-generation proposals include transforming the space into a theme-park or, alternatively, a new stadium for Chelsea FC.
Renovations of the Grade II Listed Building are currently underway. Aside from Apple, the space is also to include various other office and retail spaces, as well as a Northern line extension and a new power station terminal, which is expected to be completed by 2020.
The chief executive of Battersea Power Station Development Company, Rob Tincknell, said: “It is a testament to not only the fantastic building but the wider regeneration of the 42-acre site, which offers a carefully curated mix of homes, businesses and leisure amid extraordinary open spaces and new transport links.”
The announcement has been received warmly by UK politicians who have welcomed the development. London’s mayor Sadiq Khan said Apple’s decision was “a further sign that London is open to the biggest brands in the world”. Chancellor Phillip Hammond reiterated Sadiq Khan’s sentiment, labelling the move “another vote of confidence in the UK economy”.
Apple continues to dominate the global technology market, having opened a total of 453 retail stores in 16 countries. The recent launch of the iPhone 7 has proved a resounding success, with sale numbers already surpassing initial market expectations.
RBS bank has been delivered a £846m ($1.1bn) fine, after investigations into its involvement in causing the 2008 financial crash.
The fine is to be one of three scheduled, after extensive investigations conducted by the National Credit Union Administration (NCUA) board. This most recent fine is however, included within the stipulated £3.8bn that the bank had already allocated to address impending litigation. More penalties are nonetheless to be expected, as negotiations with the NCUA are set to continue into the new year.
Speaking about the settlement with the NCUA, RBS emphasised that it may be necessary to undertake extra provisions. The Bank stated that, in response to “investigations by the civil and criminal divisions of the US Department of Justice and various other members of the RMBS working group of the financial fraud enforcement task force… RMBS litigation and investigations may require additional provisions in future periods that in aggregate could be materially in excess of the (current) provisions,”.
RBS has been thus penalised for its involvement in mis-selling mortgage-backed securities in the lead up to 2008. RBS sold the securities to two credit unions, which collapsed following the US housing market crash. However, the fine does not include an admission of fault for these activities.
This is after an initial worrisome plunge in Deutsche Bank shares, following market anxieties about the scale of the fine to be issued by the Department of Justice. The DOJ ultimately issued a $14bn penalty to Deutsche Bank, for its similar activity involving mortgage-backed securities. However, today, Deutsche bank stock rebounded by just over 3%.
Nevertheless, RBS have felt the effects of Deutsche Bank’s plunge, closing at around 175p. This is significantly below the average price paid by taxpayers of 502p. Taxpayers continue to own a 73% stake in the Scottish Bank, following extensive bailout measures undertaken by the Government following the crash.
Financial service provider APS launched a £5 million bond offering today, enabling investors to earn 7 percent fixed interest on a four-year investment.
The APS bond is suitable for investments of between £1,000 and £250,000, with interest paid twice yearly. The bonds will mature after four years, and will support the launch of new products and services for SMEs, and enhance APS financial’s digital assets and underlying technology to continue its aspiration to provide a best in class customer experience for banking services.
APS is a data-driven digital banking services pioneer, developing a full suite of digital banking products over the past ten years. The group’s aim is to provide better banking services and credit to small businesses and individuals, and became the first non-bank to leverage the over the counter Banking Services from the UK Post Office.
APS’s bank accounts take around eight minutes to open, allowing access to banking for SMEs far quicker than traditional high street banks. APS boasts 70,000 SMEs who choose to use its services, with 900,000 personal customers.
Rich Wagner, CEO, said that offering a bond was a “deliberate decision”, allowing them to “fund the next stages of our growth in a way that allowed our loyal customers and the general public to participate in our success.”
“The funds will enable us to enhance our suite of services loved by the thousands of small businesses and individuals in search of faster and smarter solutions. Our growth, track record and high levels of customer satisfaction have proven that you don’t need to be a bank to provide a trusted banking service”, he continued.
APS as a group have seen significant growth over the last four years, with a 29 percent increase in revenue and 69 percent hike in EBITDA CAGR. In the 12 months to March 31st 2016, APS generated revenues of £25.3 million and EBITDA of £4.1 million.
Asian shares broadly closed up on Tuesday, as polls showed Hillary Clinton performed best in the first US presidential debate.
Democrat Hillary Clinton represents continuity for the markets, with investors largely reacting positively to her performance on TV last night. The presidential race has been neck and neck so fair, with the latest Reuters/Ipsos polling showing Clinton pulling into the lead by 4 percentage points.
Sean Callow, a senior currency analyst at Westpac in Sydney, commented:
“Markets started to call the debate for Hillary within the first 15 minutes or so, with the Mexican peso surging in what is probably its busiest Asian session in years.”
The Mexican peso rallied strongly on the debate, up 1.7 percent against the dollar after plunging to record lows at the prospect of a Trump presidency. Trump’s anti-Mexican rhetoric has raised concerns that his presidency would threaten Mexico’s exports to the United States, its single biggest market.
The Shanghai Composite is up 0.60 percent, with the Nikkei 225 up 0.84 percent. Hong Kong’s Hang Seng index rose 1.09 percent. The FTSE 100 also got off to a good start on Tuesday, rising 0.15 percent in early trade.
Shares in British travel operator Thomas Cook spiked on Tuesday, after reiterating its profit guidance for 2016.
An attack on tourists in Istanbul in January and a failed coup in July led to a significant drop in demand for summer holidays to Turkey, with Thomas Cook warning in July of a quarterly loss and a lower profit guidance.
However, for the twelve months to September 30th Thomas Cook reiterated its operating profit of £300 million, helped by an 8 percent increase in bookings outside of Turkey.
Thomas Cook (LON:TCG) shares rose 4 percent on the news at market open, before dropping back down. They are currently trading up 0.14 percent at 70.10 (0918GMT).
Peter Fankhauser, Thomas Cook’s chief executive, commented:
“The summer season has progressed largely as expected. Customers’ desire to go abroad on holiday has remained strong with the exception of Turkey where demand continues to be volatile. To date, sales for the winter season are in line with last year while sales so far for summer 2017 suggest customers are booking early in an effort to secure their first-choice destination and hotel.”
Travel operators have had a tricky time of late, with terrorist attacks in Tunisia, Istanbul and across Europe impacting strongly on consumer demand. Thomas Cook’s largest competitor, TUI, have felt less of an impact from a drop in Turkish holiday demand after limiting their exposure to the region.
The IFO index on businesses assessment of the current business climate in Germany has risen to its highest level since June 2014, according to a report published by CESifoGroup on Monday.
IFO Business indices rise
The IFO current climate index came in at 109.5 for September, rising 3.2 points from the previous month. This measure beats estimates by 3.1 points. The index last recorded a figure this high more than two years ago, reaching 109.7 in June 2014.
The IFO current assessment and future expectations indices also beat estimates, rising to 114.7 and 104.5 respectively.
Recent data suggested adverse Brexit effect on Euro-Zone economies
Recently, data has been suggesting, that the Euro-Zone and Germany in particular have felt some adverse economic pressure since the UK’s decision to leave the European Union.
After the latest ECB monetary policy decision, President Mario Draghi stated, that the Euro-Zone recovery seems to be on track, thanks to effective monetary policy. However, he admitted, that the recent Brexit vote has had some negative effects on European economies.
Inflation has not been approaching the sought after two percent target, with business as well as investor sentiment has been falling slightly.
Yesterday, data published by Markit economics indicated a reduction in growth in the services sector. The Markit PMI Services fell from 51.7, the previous month, to 50.6 in September.
Last Tuesday, the ZEW Survey indicator for economic sentiment in Germany came in at 0.5. This measure missed expectations by two points and represented no improvement to August’s figure.
Economists and entrepreneurs remain faithful
However, Mario Draghi and the ECB have been confident that the adverse impact of economic uncertainty following the UK’s Leave vote can be tackled.
The latest data on German business sentiment seems to show that German entrepreneurs agree with this notion and are hopeful for the future.
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Several high profile politicians have come under fire following the leak of 1.3 internal files from a off-shore register located in the Bahamas.
The Home Secretary, Amber Rudd, is one of the key individuals to have been uncovered as involved by the compromising findings. According to investigations conducted by The Guardian, Ms Rudd has been revealed to have connections to a fund in which a director was convicted for propagating misleading statements to prospective and existing investors.
Similarly, former EU commissioner Neelie Kroes has also been exposed in the leak, and was forced to issue a subsequent apology for breaching the code of conduct. Kroes is culpable of failing to disclose her directorship position in an offshore company, whilst simultaneously investigating multinationals. Kroes issued a formal statement through her lawyer, who stated “My client agrees that formally she should have declared this directorship … Mrs Kroes will inform the president of the European commission of this oversight and will take full responsibility for it.”
This revelation comes just months after the Panama Papers scandal, which revealed off-shore activities of former Prime Minister David Cameron, amongst others. Cameron has recently abdicated from his MP position for Witney, following a tumultuous summer in which the Brexit vote saw the demise of his premiership.
However, various legislation remains in place which has meant that any attempt to initiate investigations into any holdings in the Bahamas remains a difficult endeavour. Unlike other offshore locations such as the Cayman Islands, registry details in the Bahamas are harder to ascertain and there is no concrete legal requirement to disclose directorships to the authorities.
The ICIJ director, Gerard Ryle, said of this obstacle, “We believe this kind of basic information, the names of people who are linked to what companies, is something that should be openly available – just as the former prime minister David Cameron himself once indicated,”
“We are publishing this information as a public service”, he added.
The Bahamas harbours around $223 billion (£172bn) in off-shore funds, 26 times its own national GDP.
Lloyd’s of London have reiterated concerns over Brexit, referring to it as a “major issue” despite promising profit figures.
Pre-tax profits were recorded at £1.46 billion in the first months of 2016, which is up 22pc from the previous year. Despite posting record profits today, the London-based insurance market has issued stark warnings over Brexit and concerns over the future of passport rights. Lloyd’s’ strong performance has been attributed to the strong Dollar in the wake of Brexit and similarly, a slight increase in investment returns.
However, in a joint statement, Lloyd’s chief executive and John Nelson the market’s chairman, remained tentative. In their statement, these factors were dismissed, stressing that they did not “represent sustainable profitability”
Ms Beale stated that, “The UK’s referendum on its EU membership is a major issue for us to deal with”.
“We are now focusing our attention on having in place the plans that will ensure Lloyd’s continues trading across Europe”, she continued.
Earlier this week, Bundesbank President, Jens Wiedmann warned of the serious consequences that revoking said EU passporting rights would have upon the financial industry and the city.
It has been suggested that up to 5,000 UK financial institutions will be affected by these developments. Of these, more than 2,700 are insurance brokers, and 200 are insurers. The insurance mediation directive is one the more popular type of passports that regulates brokers and is potentially jeopardized by Brexit.
Nonetheless, Lloyd’s emphasised that, “It is important to be clear that the referendum result has no immediate impact on the UK’s ability to keep trading with the EU,” Moreover, Ms Beale and Mr Nelson maintained that, “We continue to trade under the current passporting regime.”
