Week 22 2017

Week 22 2017

29 May – 02 June

 

29 May

 

There are few things studied as closely by the Chinese Communist party as how to avoid the fate of its Soviet counterpart. In an internal meeting after he assumed power in 2012, President Xi Jinping said no one in the Soviet Union had been “man enough” to stand up to Mikhail Gorbachev and glasnost.

 

Taormina’s blooming bougainvillea, narrow streets and spectacular sea views were meant to provide the perfect scenery for a show of unity among longtime allies. Instead the Sicilian hillside town chosen for the presidential summit of the Group of Seven leading industrial nations became the backdrop for a damage control exercise laying bare the diplomatic gulf between the US and its partners.

 

The Co-operative Bank is aiming to strike a deal within two weeks that shores up its balance sheet amid mounting concern that large depositors, including charities and mutual groups, face large losses if it is wound up.

 

Virtually every class of US debt — sovereign, corporate, unsecured household/personal, auto loans and student debt — is at record highs. Americans now owe $1tn in credit card debt, and a roughly equivalent amount of student loans and auto-loans which, like the subprime mortgage quality that set off the 2008 financial crisis, are of largely low credit quality (and therefore high risk).

 

30 May

 

Japan’s unemployment rate held at a multi-decade low in April as the ratio of jobs to applicants rose more than expected.

 

Building approvals bounced back in April from their biggest drop in half a year, boosted by a rise in apartments. Growth in approvals came in at 4.4 per cent month-on-month in April, a turnround from March’s upwardly revised 10.3 per cent fall (previously a 13.4 per cent fall), according to the Australian Bureau of Statistics. This was also a stronger result than the 3 per cent economists had pencilled in.

 

Big banks are throttling back from the $1.2tn US car loan market, fearing that consumers have taken on more debt than they can handle.

 

Asian currencies were broadly weaker on Tuesday but the yen rallied following a round of positive economic data. Japan’s yen was stronger in the wake of data that showed retail sales growth sped up in April and the unemployment rate held steady at the lowest level in decades for a third month straight. The currency was 0.4 per cent firmer against the dollar at ¥110.83.

 

31 May

 

The euro struggled to stay above the $1.12 threshold on Tuesday as London-based currency traders returned from a long weekend and sold the currency following dovish comments from Mario Draghi on the outlook for monetary policy.

 

The US showed signs it was leaving behind a soft start to 2017 as new data revealed consumer spending grew at its quickest pace of the year in April, suggesting the world’s biggest economy was shrugging off political turmoil and was again poised to lead a global recovery.

 

British Airways chief executive Alex Cruz made his name in his native Spain, where he was largely seen to have done a good job at the country’s low-cost carrier Vueling.

 

Oil prices took a further hit on Tuesday, reflecting disappointment among traders that Opec and its allies agreed to only extend, but not deepen, production cuts to drain the market of excess inventories.

 

01 June

 

An independent survey of China’s manufacturers indicates the sector fell into contraction last month as sluggish demand dragged on production and output prices fell for the first time in more than a year, suggesting second-quarter growth could prove markedly softer after a strong showing in the first three months of 2017.

 

Capital expenditure in Australia grew by the most in 18 months with a return to growth at the start of 2017 as manufacturers and miners stepped up investment. The gain was not as much as economists had hoped, but some other good news was that a contraction at the end of last year was not as deep as first revealed.

 

Six Group, the Swiss financial infrastructure group which runs the country’s stock exchange, has announced its chief executive will step down at the end of the 2017 business year.

 

For more than two months, protesters and government forces have faced off all over Venezuela, leaving more than 50 dead and hundreds wounded and imprisoned. The stand-off occurs against the backdrop of a fall of nearly a third in per capita income, the second deepest economic collapse in Latin American history.

 

02 June

 

Markets were jolted by disappointing jobs numbers on Friday, as sluggish hiring and tame wage growth in the US overshadowed a fall in the nation’s unemployment rate to a 16-year low. 

 

President Donald Trump decision to ditch the Paris accord on climate change has alarmed the US’s western European allies, as the cracks in the transatlantic alliance have widened.

 

The EU’s markets watchdog has fined Moody’s €1.24m for failing to explain publicly how it made a series of ratings decisions about the financial health of global institutions.

 

Investors in emerging markets took fright when Donald Trump won the US election, pulling tens of billions of dollars from investment funds over fears that the new president’s policies would usher in a wave of problems for the asset class.