Friday, July 1, 2016

HSBC and Barclays: We're staying despite the Brexit

HSBC and Barclays: We're staying despite the Brexit

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In this Thursday, Aug. 2, 2012 photo, British fans wearing leotards in the colors of the flag pose for other spectators to take pictures of them in front of the Orbit Tower in Olympic Park at the 2012 Summer Olympics, in London. Patriotism and the games have always gone together, but gone are the days when one just waved a flag. Now flags are worn, seen all over London and especially at Olympic Park and other spots where the games are being played. ()HSBC and Barclays have committed to staying in the UK despite the Brexit vote. AP Photo/Ben Curtis
HSBC and Barclays' top bosses have committed to keeping the two banks headquartered in the UK, despite the Brexit vote.
The Financial Times reports that chairman Douglas Flint said at an event in the City on Thursday that last week's shock EU referendum result would not prompt a review of the bank's headquarters. HSBC concluded a 10-month review into where to base its HQ in February,deciding to stay in London.
Flint told the audience: "We said at the time we made the decision that we’d taken that [a Brexit] into consideration and that in the event of this outcome we would not call for that to be revisited."
HSBC had warned prior to the referendum that it may have to relocate 1,000 jobs from London to elsewhere in the EU in the event of a Brexit. Flint said on Thursday: "Nobody wants to move their staff and have the complication of potential writedowns on their property where they have to find new tenants unless that is absolutely necessary. Nothing is going to happen soon."
Barclays CEO Jes Staley has also committed to keeping his bank in the UK, telling the BBC Barclays would remain "anchored in Great Britain."
Staley said: "Right now we are not making any plans to pick up and move people from one location to another."
Fears have been raised by banks themselves that London could see a mass exodus of trading talent in a post-Brexit world as banks flee uncertainty and relocate roles to the EU. JPMorgan and UBS both warned in notes this week that they expect jobs to be relocated away from London.
Britain's status as the financial centre of Europe depends on its ability to retain its "passporting" powers. This allows banks based here to operate across the EU using their UK licence, without having to apply to licences in each of the 27 member countries.

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Deflation is back in Japan, and it's only getting stronger

Deflation is back in Japan, and it's only getting stronger

Business Insider Australia
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Jaapan gloomyAdam Pretty/Getty Images
Deflationary pressures are intensifying in Japan, again.
According to data released by the Japanese government on Friday, core CPI, that which excludes fresh food prices, fell by 0.4% in the 12 months to May. 
The figure, in line with expectations, marked the steepest drop in prices since May 2013. In annualised terms, prices have now fallen for three consecutive months.
Japan core cpi May 2016Business Insider Australia
Suggesting that deflation is likely to persist for sometime yet, core consumer prices in Tokyo fell by 0.5% from June 2015, unchanged from the level seen in May.
Given this is released one month ahead of the national figure, it is a reasonable lead indicator on what to expect in other parts of the country.
So called core-core inflation, more akin to core CPI measures used in other nations give it excludes movements in food and energy prices, rose by 0.6% over the same period, decelerating from the 0.7% pace recorded in the year to April.
Including all items, headline inflation fell by 0.5% from May 2015, unchanged from the rate seen in April. 
The weak price data will do little to dispel the view that the Bank of Japan will deliver additional monetary stimulus to the Japanese economy, perhaps as early as its upcoming meeting on July 15-16.
Still, given what it has already implemented, one has to question what further stimulus will deliver given it’s failed to lift inflationary pressures.
The saying “pushing on a piece of string,” comes to mind.
Read the original article on Business Insider Australia. Copyright 2016. Follow Business Insider Australia on Twitter.

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China's manufacturing sector was dead flat in June

China's manufacturing sector was dead flat in June

Business Insider Australia
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ice fall slide skateMaddie Meyer/Getty Images
Activity levels across China’s manufacturing sector held steady in June, continuing the theme of recent months.
The latest manufacturing purchasing managers’ index (PMI) released by the National Bureau of Statistics (NBS) came in at 50, a figure that was in line with expectations.
The index measures changes in activity levels from one month to the next. Anything above 50 signals growth, while anything below that level means contraction -— so the higher the number the better.
At 50, activity levels neither improved or deteriorated in June. Exciting, right?
China manufacturing PMI June 2016Business Insider Australia
According to the NBS, improved activity levels at larger firms offset weakness in small and medium sized enterprises. The large manufacturers PMI came in at 51.0, significantly above the 49.1 and 47.4 levels reported for medium and smaller sized firms.
Of the major survey inputs, production came in at 52.5, the highest reading seen in a year. 
Elsewhere new orders expanded fractionally, coming in at 50.5 from 50.7 reported previously. They have now expanded for four consecutive months. Although total orders grew, those coming from abroad actually fell, slipping to 49.6. It was the first time since February that export orders had contracted. 
While the manufacturing print was another non-event, there was some better news for the nation’s services sector which saw activity levels improve from May.
The NBS’ non-manufacturing PMI gauge ticked up to 53.7, an improvement on the 53.1 level of May. It now sits at a three-month high.
Although the manufacturing survey tends to get more attention from the markets, reflecting China’s industrial past, the services gauge is now perhaps of more importance given it is now the largest component of the Chinese economy.
As the chart below reveals, activity levels continue to expand at a fast clip, mirroring the rapid growth in China’s tertiary sector over the same period.
China non manufacturing PMI June 2016Business Insider Australia
Following the release of the two official PMI surveys from the government, markets now await the release of the Caixin-Markit manufacturing PMI survey for June.
It’s a private sector survey, concentrating on small and medium sized firms from the nation’s private sector. It differs from the NBS PMI report which captures activity levels at firms of all sizes from both the public and private sectors.
Given reliability concerns surrounding official Chinese data, some market participants — whether rightly or wrongly — place more weight on the Caixin-Markit survey.
It will be released at 11.45am AEST.
Read the original article on Business Insider Australia. Copyright 2016. Follow Business Insider Australia on Twitter.

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Puerto Rico will default on $1 billion of debt on Friday

Puerto Rico will default on $1 billion of debt on Friday

  • Jun. 29, 2016, 12:01 PM
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puerto RicoThe Capitol in Puerto Rico. Joe Raedle/Getty Images
Puerto Rico is going to default, again.
The governor of the commonwealth, Alejandro García-Padilla, wrote in an article for CNBC on Wednesday that Puerto Rico would not make some $1 billion in bond payments on Friday as it struggles with the long-term implications of its massive deficits.
"On July 1, 2016, Puerto Rico will default on more than $1 billion in general obligation bonds, the island's senior credits protected by a constitutional lien on revenues," he said in the article.
García-Padilla also emphasized the need for a long-term restructuring of the island's more than $70 billion in debt, saying Puerto Rico's obligations "must be restructured fairly and equitably" for both the creditors and citizens.
Just hours after García-Padilla's article was published, the US Senate on Wednesday appeared close to passing a bill that will allow Puerto Rico some of the same bankruptcy protections afforded to states. Those protections are not currently allowed under US law. The vote Wednesday was the last procedural hurdle before final passage, which is expected to come as soon as Thursday, according to Bloomberg.
Under the new bill, which is expected to be signed quickly by President Barack Obama, the commonwealth will have to cut some of its public services and establish an outside board to guide the restructuring.
García-Padilla disagreed with the board provision but had been campaigning for the bill's passage on Capitol Hill as recently as Tuesday.
"It creates an oversight board that unnecessarily undercuts the democratic institution of the Commonwealth of Puerto Rico," his article said. "But facing the upsides and downsides of the bill, it gives Puerto Rico no true choice at this point in time."
Puerto Rico ran deficits with low taxes to attract businesses for a long period of time, but businesses left as some tax breaks expired. This led to a spike in the unemployment, a crumbling economy, and eventually the crisis the island finds itself in.
García-Padilla also used the platform to criticize hedge funds that have been attempting to get returns on their huge investments in Puerto Rico's debt.
"Creditors and bond insurers have initiated multiple lawsuits and last week, hedge funds filed an injunction before the Southern District of New York claiming the 'absolute highest priority' over government resources, including those needed for essential public services," the article said.
"That complaint minces no words and states that, in 'times of scarcity,' bondholders should be paid before essential services."
In closing, García-Padilla acknowledged that the default was just another step in a strong of efforts to turn Puerto Rico around and that there was work left to be done.

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