block-time published-time 6.14pm GMT
European shares close lower
A continuing fall in the oil price as well as gloomy comments from the Bank of Japan about the economic outlook combined to help sent markets lower. With worries about growth after weak Chinese data over the weekend, mining shares were among the day’s biggest fallers. And in the
UK
a poll giving a lead to the campaign to leave the European Union also helped unsettle investors. The final scores showed:
- The FTSE 100 fell 34.60 points or 0.56% to 6139.97
- Germany’s Dax also dipped 0.56%, to 9933.85
- France’s Cac closed 0.75% lower at 4472.63
- Italy’s FTSE MIB lost 1.14% to 18,765.37
- Spain’s Ibex ended down 1.69% at 8988.3
- In
Greece
, the
Athens
market bucked the falling trend, adding 2.31% to 579.30
On Wall Street, the Dow Jones Industrial Average is virtually unchanged ahead of the US interest rate decision on Wednesday evening, down just 0.61 points.
On that note, it’s time to close for the evening. Thanks for all your comments, and we’ll be back tomorrow with the
UK
budget and the US rate news.
block-time published-time 5.36pm GMT
Earlier, the Serious Fraud Office has ended a long-running investigation into rigging of the £3.5tn-a-day foreign exchange markets without any charges being issued against banks or individuals. Jill Treanor’s story is here:
Related: SFO ends foreign exchange fraud inquiry with no charges brought
block-time published-time 5.10pm GMT
And in the currency markets:
enltrA bad day for the
UK
Pound £ as it falls below US
$1.42 and
Euro 1.28. Do we blame Brexit or the Budget?!—
Shaun Richards (@notayesmansecon)
March 15, 2016
block-time published-time 4.55pm GMT
Back with oil, and an interesting chart on US production:
enltrFracking now accounts for about half of
U.S.
crude oil production (via
@EIAgov )
pic.twitter.com/ZKrC19H9IN—
Georgi Kantchev (@georgikantchev)
March 15, 2016
block-time published-time 4.48pm GMT
On the fall in equities today, Tony Cross at Trustnet Direct said:
Markets around the globe lost ground on Tuesday as investors again became consumed by global growth fears. The FTSE was dragged lower by miners as
Japan
got a week of central bank announcements off to the worst possible start. The
Bank of Japan opted to keep monetary stimulus unchanged, instead it said it wanted to study risks to growth for the world’s third-largest economy, refusing to feed to investors insatiable appetitie for monetary stimulus.
US retail sales then reignited concerns about economy’s growth prospects, while investors were spooked by a report that China’s central bank is considering a tax on currency transactions to try to curb speculation in the foreign exchange markets.
It all contrived to dent investors’ appetite.
block-time published-time 4.43pm GMT
Oil slide continues
Crude oil prices are slipping lower for the second day, on fears of a continuing supply glut amid falling demand, as the recent rally runs out of steam
The latest economic data from
China
, the US and elsewhere, as well as a gloomy outlook from the
Bank of Japan earlier today, have combined to reinforce the view that the global economy is slowing down. At the same time there is no sign that oil producers have the ability to cut or even freeze production, especially with
Iran
keep to boost its output now sanctions have been lifted. Even the prospect of a meeting with Opec and
Russia
to discuss the oversupply situation has done little to support the price. Analyst
Phil Flynn at
Price Futures Group told Reuters:
The rally is now retreating on fears that Opec will continue to flood the market with oil in a world where demand may falter.
And investors are also wary ahead of US data due on Wednesday which could show crude inventories at record highs for the fifth week.
So Brent crude is down 2.5% at $38.54 a barrel while West Texas Intermediate, the US benchmark, has dropped 2.9% to $36.10.
Brent so far this year. Photograph: Reuters
block-time updated-timeUpdated at 4.45pm GMT
block-time published-time 4.03pm GMT
Nordic bank SEB is expecting a summer hike from the Fed. Economist Mattias Bruér said:
In all likelihood, the Fed will hold rates steady at the March meeting. The current low probability of a hike – four percent according to future market pricing – is relevant since the Fed wants to avoid big policy surprises at the current juncture. While the recent easing in financial conditions should have eased the committee’s domestic growth concerns, policymakers probably want to see real GDP growth picking up before hiking rates.
The Fed is most likely to be still looking for policy normalisation. While a number of officials may well vote for only two hikes in 2016, the median of the dot plots [the Fed’s indicators of possible rate rises] will likely suggest three hikes in 2016 and four hikes in 2017. Our view is that the Fed likes to see better growth before hiking rates; real GDP growth slowed to just one per cent at an annual rate in the fourth quarter but seems to have picked up to above two per cent in the first quarter. Recession risks have certainly abated in recent weeks as US data has surprised to the high side and financial conditions have improved substantially, thus reversing the tightening seen in January and February. Moreover, the industrial sector is probably at an inflection point too; the most recent ISM manufacturing survey increased substantially and is expected to move back above the 50 level. However, with respect to the policy meeting currently underway, officials may still want to take more time to assess the spill-over effects from financial conditions tightening earlier this year.
The global growth outlook is a cause for concern too and as such we do not expect tomorrow’s statement to reintroduce the balance of risk assessment that was taken out of the January statement. By contrast, if the statement says that the balance of risks are ‘nearly balanced’, it would be a strong indication that the Committee is paving the way for an interest rate hike within the next few meetings. While we suspect that the Fed is currently eying the June 2014-2015 policy meeting, this is just a week ahead of the Brexit referendum.
block-time published-time 3.55pm GMT
Two big events coming up on Wednesday, the
UK
budget and the outcome of the latest US Federal Reserve meeting.
It is unlikely the Fed will raise rates this time round, with the latest US data in the form of a fall in retail sales . But that does not mean rate hikes will not happen later in the year. David Morrison, senior market strategist at Spreadco, said:
According to the Federal Funds futures market there is no likelihood of another rate hike to follow on from December’s move. However, the Federal Open Market Committee (FOMC) is expected to deliver a hawkish statement and talk up the probability of a rate rise at its June meeting. This may or may not lead to a rally in the US dollar. Given how the yen and euro reacted to recent monetary policy adjustments from the Bank of Japan (BOJ) and European Central Bank, nothing can be certain. At the end of January the BOJ took interest rates into negative territory. This was completely unexpected. Yet despite making a move designed to undermine the attraction of the Japanese yen, the BOJ was caught off-guard when the currency rallied sharply following their decision.
Last week the ECB took its deposit rate deeper into negative territory... Despite this, together with a trolley-load of stimulus measures, the euro (like the yen) defied expectations and rallied strongly. Investors inferred that the ECB had reached the limits when it came to easing monetary policy.
The
Federal Reserve in
Washington
. Photograph:
Kevin Lamarque/Reuters
So now we have the Fed. Back in December the FOMC projected an additional 100 basis-points of hikes for 2016. The dollar rallied as investors repositioned themselves for the widening divergence in monetary policy between the Fed and the rest of the developed world central banks. But the greenback fell sharply in early February as market turbulence, the ongoing sell-off in oil and concerns over high yield bonds led to a big risk-off move. Investors became convinced that the FOMC would have to dial back on its plan for tighter monetary policy, or even reverse its December hike.
We’ve had a big rally in risk assets since Janet Yellen delivered her testimony in
Washington
on 11 February. She managed to convince everyone that the US economy was steaming along at a decent clip, but there were sufficient global concerns for the central bank to be restrained when it came to tightening monetary policy. The
FOMC will want to keep the upside momentum going, so expect something similar from its statement and summary of economic projections tomorrow.
However, it may prove harder to keep things going this time round. The bounce-back in oil and equities looks to be losing momentum. The dollar is the key to where we go next. Conventional wisdom says that the dollar should strengthen as the Fed looks to tighten as other central banks continue with loose monetary policies. But this seems an obvious trade and one which is probably priced in to a large extent. If the dollar were to weaken now then it would take a lot of pressure off oil, other dollar-denominated commodities and emerging markets with dollar-denominated debt. It would also help the sales and earnings of US multinationals. Of course, the markets will do whatever they do. But no one is ready yet for an all-out currency war and January’s G20 meeting could have provided a venue for discussing a coordinated approach to future FX moves. After all, the BOJ Governor appears to have changed his mind on negative interest rates after meeting up with G20 colleagues. Who knows what else was discussed?
block-time published-time 3.07pm GMT
The slump in Valeant Pharmaceuticals is continuing, as investors react to the news that failing to file its annual report could trigger a default.
enltrValeant now down more than 42% https://t.co/aMjCM12787pic.twitter.com/bAOYLtiawe
— Bloomberg TV (@BloombergTV)
March 15, 2016
block-time published-time 3.03pm GMT
Brazil’s stock market is being pummelled today by the latest twists in the country’s corruption scandal.
Former president Luiz Inacio Lula da Silva, who was dramatically arrested two weeks ago, has reportedly accepted a position as a government minister.
Pleasingly for Lula, that will give him some immunity against prosecution. Last week, prosecutors accused him of money laundering and tax misrepresentation, but a judge has not yet accepted the charges.
Lula’s shock detainment in early March sent Brazilian assets soaring, as investors anticipated political change and a more market-friendly government potentially taking control. Live is never that simple in emerging markets, of course.
enltrBrazilian markets plunge as if idea that making ex-President a minister to get him immunity from corruption charges isn't a genius brainwave
—
Burnett Tabrum (@BTabrum)
March 15, 2016
block-time published-time 2.31pm GMT
Valeant shares plunge as scandal deepens
The clouds of worry swirling over US drugs firm Valeant Pharmaceuticals have darkened today.
Shares in Valeant have plunged by a third in early trading, after the company slashed its revenue forecast by 16% before the market opened.
It has also warned that it could default on its debts if it doesn’t file its annual report soon (it is already delayed).
Valeant has already promised to restate some historical financial results, following claims that it has over-inflated its sales figures.
Chief executive officer Mike Pearson has just held a ‘challenging’ conference call, in which he admitted that the company is “not operating on all cylinders.”
This drove shares down to a new three and a half-year low.
enltrVALEANT CONFERENCE CALL ENDS. Stock down -36%
— zerohedge (@zerohedge)
March 15, 2016
Pearson’s strategy for Valeant was to focus on drug distribution, rather than the costly business of research and development. But a series of critics have blasted the company for hiking prices. accusing it of ‘gouging’ profits out of vulnerable patients
Its links with mail-order pharma firm Philidor are also under scrutiny, amid allegations that some Valeant staff worked for Philidor using false names.
Fortune Magazine has a good timeline of how things unravelled at Valeant in recent months.
block-time published-time 2.04pm GMT
Markets hit by growth worries
Jitters over the oil price and persistent growth worries are hitting stock markets on both sides of the Atlantic.
Shares are falling on Wall Street at the start of trading, sending the Dow Jones industrial average down by 98 points or 0.6%.
New York
traders are disappointed by
today’s news that retail sales fell in January and February. The weakening oil price is another concern, with
Iran
determined to boost its production levels despite oversupply fears.
enltrWall Street stocks open lower with Dow down almost 100 points or 0.5%. S&P down 0.6%, Nasdaq down 0.4%
— CNBC Now (@CNBCnow)
March 15, 2016
European markets are also in the red. In
London
the
FTSE 100 is down 43 points, or 0.7%. Mining companies continue to be worst hit, after copper producer
Antofagasta posted a 34% plunge in profits and scrapped its dividend this morning.
And there are heavier losses across
Europe
, with the French CAC and Italian FTSE MIB both down over 1%.
Investors are in gloomier mood after the Bank of Japan downgraded its view of the economy overnight ( as covered in the opening post ).
European stock markets at 1.30pm GMT today Photograph:
Thomson Reuters
Some investors are also warning that the recent recovery in share prices simply went too far.
Russ Koesterich, BlackRock’s global chief investment strategist, predicts trouble ahead.
The equity rebound of the past month is a classic “relief rally,” where investors are relieved conditions are not as bad as they previously feared. This one has been partly predicated on hopes that
China
is stabilizing, which helps explain the sharp rise in commodity prices given that
China
is the biggest commodities consumer.
Unfortunately, signs of real improvement in
China
are scant. While the
U.S.
appears to be stabilizing, the Chinese economy remains challenged. The latest evidence came in the form of a 25% plunge in Chinese exports. This was the largest single-month drop since 2009. The government is likely to try to stem the decline with some palliative measures, but a large stimulus package remains unlikely. Furthermore, the drop in Chinese exports calls into question not just the state of the Chinese economy, but the global trade picture as well.
Against this backdrop of continued uncertainty in the global economy, the recent rally is beginning to look a bit excessive. This is particularly evident in the sharp drop in volatility. The VIX Index, a key measure of equity market volatility, has fallen to about half of its February peak. Meanwhile, the VVIX, which measures the volatility of volatility (or, more precisely, how frequently volatility spikes occur), is back to its lowest level since last August.
Given the still uneven pace of global growth and tighter financial market conditions, this may too be low. This, in turn, suggests the potential for a rise in volatility — which would imply another bout of stocks selling off. March may have come in like a lamb, but the lion may be lurking.
block-time published-time 1.59pm GMT
Tax expert: Tobin tax could backfire
Back to the main story of the morning, reports that
China
is considering imposing a financial transaction tax on foreign exchange trading.
As explained earlier, the move could potentially deter speculators from targeting the yuan.
But Ben Jones, partner and tax expert at law firm Eversheds, has warned that such a levy could backfire on
Beijing
. It could pose serious problems to Chinese firms, at a time when they’re coping with a slowing economy and market turbulence.
Jones writes:
“Tobin taxes have had a chequered past, with powerful examples of unintended market disruption and genuine concerns about how a Tobin tax can be effectively operated in a global economy. Sweden’s experiment with a Tobin tax in the 1980s ended disastrously, with significant trading activity moving from
Sweden
to other markets. More recently, the attempts by the EU to introduce an EU-wide Tobin tax have floundered, a key problem being the design of an effective system that discourages migration from the market while avoiding extra-territorial taxation.”
Currency trading in
China
represents a different, more focused target than other Tobin taxes and it may be that such a tax will have the desired effect of dampening yuan speculation. However, history has shown that the knock-on effects of such a tax can be significant and unexpected, and the legal and administrative framework of such taxes are often complex and burdensome. Ultimately, both outcomes are likely to create a more challenging business environment.”
Also.... Bloomberg economist Tom Orlik questions whether a levy would deter all speculative attacks.
He’s tweeted this chart, showing that the gap between buying and selling the yuan is already wider than for other currencies. A Tobin tax would make that gap wider still.
enltrChina's central bank mulling a Tobin tax. Wide bid-ask spreads suggest higher cost no barrier to yuan drop bets pic.twitter.com/ffdYeXZuVS
—
Tom Orlik (@TomOrlik)
March 15, 2016
block-time published-time 1.31pm GMT
MPs summon Mike Ashley over treatment of workers
Sports Direct boss Mike Ashley. Photograph:
Martin Rickett/PA
As chairman of relegation-threatened football team Newcastle United, Mike Ashley is no stranger to difficult away fixtures.
But the Sports Direct owner now faces another clash - he’s going to be summoned before MPs on the Business committee to answer concerns over how workers are treated.
The committee want to quiz Ashley about the Guardian’s recent revelations that staff at Sports Direct’s warehouse are searched after each shift - eating into their own time. They will also quiz him about the use of zero-hours contracts, and claims of ‘gulag’ working conditions.
Ashley has proved a tricky man to pin down, but the committee’s patience has now run out - they want to see him on June 7th.
Related: Sports Direct's Mike Ashley to be formally summoned before MPs
block-time updated-timeUpdated at 1.31pm GMT
block-time published-time 1.12pm GMT
Sky News’s Mark Kleinman has a good story - one of Britain’s largest private equity firms is plotting a £1bn takeover for the Land Registry.
The Land Registry holds the official details of who owns Britain’s property and real estate. Chancellor George Osborne is pushing to privatise it, to help tackle the UK’s budget deficit.
And Advent International is waiting in the wings, it seems. However, a sale could provoke union anger, as Kleinman explains:
The move could attract renewed opposition from trade unions which have warned previously that a sale of the Land Registry could undermine homebuyers’ confidence in its data.
Advent, whose investment portfolio includes stakes in companies such as DFS, the furniture retailer, and the FTSE-100 payments group Worldpay, is among a substantial number of private equity groups casting their eye over the Land Registry.
enltrExclusive: Buyout firm Advent plots £1bn Land Registry takeover as @George_Osborne privatisation spree continues. https://t.co/RihChKCg14
—
Mark Kleinman (@MarkKleinmanSky)
March 15, 2016
block-time published-time 12.58pm GMT
US retail sales fall
Consumer spending across the US dipped last month, suggesting that the country’s economy is a little fragile.
Retail spending dropped by 0.1% in February, the Commerce Department says.
And January’s data has been revised down to show a 0.4% fall, not the 0.2% rise that was initially recorded.
It could mean that the financial turmoil that hit world markets at the start of 2016 may have hit the real economy.
And that would mean even less chance of a US interest rate rise being announced tomorrow, or possibly for several months.
block-time updated-timeUpdated at 3.38pm GMT
block-time published-time 12.35pm GMT
Back in the markets, oil is seeping deeper below the $40 per barrel mark.
Brent crude has shed 2% so far today, to around $38.65 per barrel - its lowest since March 4th, on renewed oversupply fears.
Traders are calculating that the recent rally went too far, as predictions that oil producers would agree cutbacks haven’t come true. Instead,
Iran
is insisting it will raise its output to 4 million barrels per day.
Iran’s intransigence could push the oil price lower, as FXTM research analyst Lukman Otunuga explains:
This commodity is heavily bearish and the pain over the unrelenting oversupply in the oil markets has periodically diminished investor attraction while fears over a potential decline in demand continue to sabotage any solid recovery in price.
enltrOil falls again after
Iran
boosts exports and avoids output freeze
https://t.co/dd3ylm7UJjpic.twitter.com/EooK6dF7cj— Bloomberg Business (@business)
March 15, 2016
block-time published-time 11.45am GMT
Corporate news round-up
Sainsbury’s executives could be tucking into some Taste The Difference champagne, after announcing their first rise in profits in two years.
The results strengthen CEO Mike Coupe’s hand, as he ponders whether to launch a higher takeover bid for Home Retail, owner of the Argos chain.
Related: Sainsbury’s reveals first quarterly sales growth in more than two years
But it’s a gloomy picture at French Connection. Shares have fallen 4%, after it posted another full-year loss following weak demand for its spring and summer clothes last year.
That means no dividend for the long-suffering FCUK shareholders.
Related: French Connection shares slump as annual loss hits £4.7m
Online supermarket Ocado beat expectations, with a 15.3% jump in sales. But analysts are disappointed that the company still hasn’t landed major partnerships abroad, leaving it struggling to turn a decent profit in the
UK
.
Amazon’s arrival in the
UK
web grocery market, through a tie-up with Morrison’s, is a looming threat too.
Steve Clayton, Head of Equity Research, Hargreaves Lansdown, doesn’t sound very impressed with Ocado:
The market wants to see deals. Big deals, with upfront licence fees and lovely, lovely royalties ever after. But so far, Ocado has not been able to get anyone to sign on the dotted. CEO Tim Steiner thinks they will, but, we feel compelled to point out, to go ahead and start a venture such as Ocado in the first place, one has to be a bit of an optimist.
Ocado is a technological triumph, hamstrung by the difficulties of persuading customers to pay the full cost of delivering the goods. In theory, shorn of the costs of a store estate, highly efficient customer fulfillment centres (CFCs), churning out hundreds and thousands of orders each and every day, largely without human intervention, ought to make good margins. But the cost of getting the goods to the doorstep always seems to outweigh the starting advantage.
block-time updated-timeUpdated at 12.21pm GMT
block-time published-time 11.14am GMT
Europe’s long-running jobs crisis has eased a little.
Employment across the eurozone rose by 0.3% in the final quarter of 2015, new Eurostat figures show, and was 0.1% higher across the wider European Union.
That means there are now 151.9 million people employed in the eurozone, but 10.3% of adults are out of work./
Eurostat reports that employment rose in most countries in the last three months of 2015, but not in the
UK
.
They say:
Among Member States for which data are available,
Malta
(+1.7%) and
Croatia
(+0.8%) recorded the highest increases in the fourth quarter of 2015 compared with the previous quarter, followed by
Spain
, Luxembourg,
Poland
,
Portugal
and
Sweden
(all +0.7%).
Estonia
(-2.4%), the
United Kingdom
(-1.0%) and
Lithuania
(-0.3%) recorded decreases.
block-time published-time 10.25am GMT
A new opinion poll showing that
Britain
is more likely to vote to leave the
European Union has hit the pound.
Sterling has shed around 1% this morning, from $1.43 to $1.416 against the US dollar, after the Daily Telegraph reported a narrow lead for the Brexit campaign.
Their latest opinion poll showed Leave on 49% of the vote, with Remain holding 47%. But once people’s likelyhood to vote is included, Leave’s lead swells to 52% vs 45%. Here’s the story.
The pound first tumbled three weeks ago, when
London
Mayor
Boris Johnson backed the Leave campaigh, but then recovered most of its losses (until today).Pound vs dollar for the last three montas Photograph: Thomson Reuters
block-time updated-timeUpdated at 11.01am GMT
block-time published-time 10.02am GMT
Women's leggings in, but nightclub fees out
Women’s leggings, coffee pods, microwave rice and computer game downloads have all been added to the ‘basket of goods’ used to measure
UK
inflation, while CD Roms and nightclub fees are out.
This is the Office for National Statistics’s annual attempt to better reflect the nation’s spending habits.
This year’s changes show the popularity of Nespresso-style drinks machines, and rising demand for rice packs which can be quickly blasted in the microwave.
George Clooney’s Nespresso commercials may have boosted demand for coffee pods Photograph:
Rainer Hosch/Splash News/Corbis
Readers who enjoy a cheeky shot of Bailey’s will be better represented, as cream liquors are now in the basket.
And women’s leggings, which the ONS magisterially calls “a type of casual clothing not currently covered but widely purchased” also get in.
The ONS has also reacted to the latest changes in technology by adding computer game downloads, and ditching rewritable media (as people increasingly use personal video recorders and download services instead).
But the days of shivering in the cold to get into a nightclub are waning, apparently. The ONS has decided to stop counting entry fees, due to “collection difficulties and reduced expenditure as the number of nightclubs is declining.”
Here’s the full list of what’s in, and what’s out.
block-time updated-timeUpdated at 10.09am GMT
block-time published-time 9.19am GMT
European stock markets are fallen by around 0.6% in early trading, after Japan’s central bank struck a gloomier tone after today’s monetary policy meeting.
In
London
, the
FTSE 100 has shed 41 points or 0.7% to 6133.
Mining shares are doing the damage, with Antofagasta plunging by 9% after it slashed its dividend. It also reported that profits had tumbled by 34% last year, due to the commodity rout.
The biggest fallers on the
FTSE 100 this morning Photograph: Thomson Reuters
Tony Cross, market analyst at Trustnet Direct, reports that investors are more worried about the mining sector and oil prices.
The up-trend that had become established off those mid-February lows is looking set to fail and this is knocking confidence in the natural resources sector in general, although the miners are finding themselves under added pressure this morning as Antofagasta becomes the latest in the sector to axe dividend payments.
block-time published-time 8.44am GMT
Bangladesh
central bank governor quits after
$101m cyber theft Bangladesh’s central bank governor
Atiur Rahman. Photograph: Reuters Photographer/Reuters
There’s drama in
Bangladesh
this morning too, where the central bank governor has resigned following one of the biggest cyber thefts ever.
Atiur Rahman fell on his sword today, six weeks after online thieves made off with $101m from the central bank.
Back in February, they backed into its computer systems of BangladeshBank and transferred the money from its account at the Federal Reserve Bank of New York to casinos in
the Philippines
.
$20m has been recovered, but investigators are still struggling to locate the missing
$81m
Rahman told Reuters’ bureau in
Dhaka
that:
“I resigned and the prime minister accepted it,”
Yesterday, Bangladesh’s finance ministry said it was furious that it hadn’t been immediately informed about the breach and blasted the central bank for being “very incompetent”.
Amazingly, the thieves could have escaped with $1bn, but they blundered by mis-spelling ‘foundation’ on a web form - triggering a security alert.
Rahman, who left school because of financial hardship, is known for fighting poverty in
Bangladesh
and has won several awards for his work.
block-time updated-timeUpdated at 9.00am GMT
block-time published-time 8.25am GMT
Experienced City analyst George Magnus believes
China
would lose any hopes of challenging the supremacy of the US dollar if it imposed a levy on financial transactions.
enltrRMB as reserve currency RIP. Not that it was likely anyway but now as controls tightened,
China
plans Tobin tax.
https://t.co/ZyIaCuLzGI—
George Magnus (@georgemagnus1)
March 15, 2016
block-time published-time 8.21am GMT
Christopher Balding, professor of economics at Peking University, believes
Beijing
could be preparing to weaken the yuan again.
enltrSerious question: explosion outward investment, Tobin tax, tightening capital controls....is this leading up to a surprise depreciation?
—
Christopher Balding (@BaldingsWorld)
March 15, 2016
block-time published-time 8.12am GMT
American macroeconomist James Tobin first pitched the idea of a transaction tax in the 1970s. He suggested a small levy on every financial transaction to ‘throw sand in the wheels’ of reckless speculation.
It’s a popular idea in among critics of the current financial system, who believe it could raise funds to pay for the financial crisis and avoid a repeat.
However, a Tobin tax on currency trading would undermine China’s attempts to get the yuan fully accepted in the financial system.
Bloomberg’s Michael McDonough explains:
enltrChina's said to draft Tobin tax rules on FX trading, while this may provide near-term stability, it counters internationalization plans.
—
Michael McDonough (@M_McDonough)
March 15, 2016
enltrA Tobin tax could deter legitimate yuan transactions, reduce liquidity & make it harder to hedge (tough to differentiate from speculators).
—
Michael McDonough (@M_McDonough)
March 15, 2016
block-time published-time 8.04am GMT
China
'planning Tobin tax' The People’s
Bank of China (PBOC) in central
Beijing, China
. Photograph:
Peter Trebitsch/EPA
China
is reportedly planning a new transaction tax on currency trades, in a new attempt to tighten control of its financial system.
According to Bloomberg, a levy could be imposed on foreign exchange transactions. It would be pitched as a way of curbing reckless currency speculation.
However, it could also effectively act as a capital control, as it would make it more expensive to shift yuan deposits into other currencies.
Bloomberg explains that the new tax would be imposed carefully:
The initial rate of the so-called Tobin tax may be kept at zero to allow authorities time to refine the rules, said the people, who asked not to be identified as the discussions are private. The tax is not designed to disrupt hedging and other foreign-exchange transactions undertaken by companies, they said.
Imposing a levy on foreign-exchange trading would be the most extreme step yet by policy makers to prevent speculative bets against the Chinese currency, after state-run banks repeatedly intervened to support the yuan and the government intensified a crackdown on capital outflows.
A Tobin tax would complicate plans by
China
to create an international reserve currency and could undermine the leadership’s pledge to increase the role of market forces in the world’s second-largest economy.
Here’s the full story:
China Drafts Rules for Tobin Tax on Currency Transactions
I’ll pull together some reaction now.....
block-time updated-timeUpdated at 8.04am GMT
block-time published-time 7.48am GMT
Introduction:
Bank of Japan sits tight
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Central bankers are in the limelight again today. Overnight, the Bank of Japan has left monetary policy unchanged while it watches the impact of its recent move into negative interest rates.
Any hopes (or fears) of fresh fireworks were dashed when the BoJ simply maintained its commitment to raise the monetary base by 80 trillion yen per year, and continued to charge commercial banks 0.1% for reserves left in its vaults.
The BoJ also sounded gloomier about economic prospects, which might weigh on markets this morning.
A Japanese flag flutters on the
Bank of Japan building in
Tokyo
today. Photograph:
Toru Hanai/Reuters
Chris Weston of IG explain why:
The focus of the session was the Bank of Japan, who ultimately delivered…. very little. It certainly seems that the BoJ have little desire to lower the deposit rate deeper into negative territory.
This ‘no change’ sets the tone for the US Federal Reserve, which begins its own two-day meeting.
Inflation, or the lack of it, is dogging policymakers around the globe. And Britain’s statistics office is going to make the whole thing more interesting by shaking up the contents of the basket used to measure price changes. Usually it ditches a few dusty old relics that no-one buys any more, and chucks in a few trendy new items (last year it was “craft” beers).
And on the corporate front, supermarket group J Sainsbury has just announced its first quarterly sales growth in two years (more on that later).
The City are also getting results from online supermarket Ocado, engineering firm Balfour Beatty and retailer French Connection.
We’ll be covering all the main events through the day....
block-time updated-timeUpdated at 8.02am GMT
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