Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Posts Tagged ‘WSJ’

Popular Investments Are Ripe for a Fall

Posted by hkarner - 27. August 2016

Date: 26-08-2016
Source: The Wall Street Journal

Investors’ complacency after piling into similar positions could be setting up markets for a burst of volatility

Investors are worried that some of this year’s most popular trades are vulnerable to a reversal.

Government bonds, dividend-paying stocks and emerging-market securities have been bid up in the global search for yield. In an unusually quiet market, any shift in sentiment could send investors who have piled into similar positions all heading to the exits at the same time. One test could come as soon as Friday, with Federal Reserve Chairwoman Janet Yellen scheduled to speak at the central bank’s annual conference in Jackson Hole, Wyo.

Investors’ complacency is setting up markets for a burst of volatility, many traders and analysts say. U.S. stock-trading volumes are near their lowest levels of the year, and the CBOE Volatility Index, which rises when investors are fearful of stock-market declines and are buying options to protect themselves, has fallen below 14. Its 10-year average is 21. Den Rest des Beitrags lesen »

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The Woman Who Revived Russia’s Markets

Posted by hkarner - 25. August 2016

Date: 24-08-2016
Source: The Wall Street Journal

Many investors credit central-bank chief Elvira Nabiullina for Russia’s resurgence

Nabullina CCElvira Nabiullina, chairwoman of the Russian Central Bank, has presided over Russia’s economic rebound.

Russian markets are red hot again.

Two years after plunging oil prices and Western economic sanctions fueled an investor exodus, the Micex stock index on Tuesday hit an all-time high. It is up 25% this year in dollar terms, making Russia the sixth-best performer among 23 emerging countries tracked by MSCI Inc.

The ruble has gained 13% against the dollar this year, ranking third among all emerging currencies. Russia’s local-currency bonds rank third this year in performance out of 15 countries tracked by J.P. Morgan Chase & Co.

Many investors credit central-bank chief Elvira Nabiullina for Russia’s resurgence. They cite her surprise decision to end the ruble’s peg to the dollar in November 2014 and then sharply raise interest rates to combat capital flight and knock down inflation.

The moves were painful for Russia’s economy, which went into a sharp recession as the value of the ruble slumped, reducing consumer and business purchasing power. But over time they have helped to restore some international-investor faith in a country still shadowed by its 1998 default. Den Rest des Beitrags lesen »

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China’s Latest Leap Forward Isn’t Just Great—It’s Quantum

Posted by hkarner - 17. August 2016

Date: 16-08-2016
Source: The Wall Street Journal

Beijing launches the world’s first quantum-communications satellite into orbit

MiciusChina launched Micius, said to be the world’s first quantum satellite, early Tuesday. The encryption technology it carries could put Beijing far ahead of its rivals in the global race for hack-proof communication.

Aboard the Micius satellite is encryption technology that, if successful, could propel China to the forefront of hack-proof communications. Professor Hoi Fung Chau of Hong Kong University explains how quantum physics can be used to frustrate hackers.

BEIJING—A rocket that shot skyward from the Gobi Desert early Tuesday is expected to propel China to the forefront of one of science’s most challenging fields.

It also is set to launch Beijing far ahead of its global rivals in the drive to acquire a highly coveted asset in the age of cyberespionage: hack-proof communications.

State media said China sent the world’s first quantum-communications satellite into orbit from a launch center in Inner Mongolia about 1:40 a.m. Tuesday. Five years in the making, the project is being closely watched in global scientific and security circles. Den Rest des Beitrags lesen »

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Three Questions to Determine Fate of Post-Brexit Britain

Posted by hkarner - 16. August 2016

Date: 15-08-2016
Source: The Wall Street Journal By SIMON NIXON

The ultimate cost of leaving the EU may be largely out of the U.K.’s hands, Simon Nixon writes

It is too soon to count with any certainty the immediate cost of the Brexit vote on the U.K. economy. Some indicators point to a possible recession on the horizon: New manufacturing orders, for instance showed the biggest decline in July for nearly 20 years, while business confidence has taken the steepest dive since 1974.

But other evidence suggests a less severe and shorter-lived shock: stock-market indexes are back above prereferendum levels; sterling has stabilized at around 11% below its prereferendum trade-weighted level; real-estate agents expect housing prices to recover and rise over the next year, while the amount of new commercial real-estate space leased in July was up 24% from the previous year.

Many economists now expect the U.K. will stagnate rather than tip into outright recession in coming quarters. The swift resolution of the post-Brexit political crisis after former Prime Minister David Cameron’s resignation has clearly steadied nerves. The market’s biggest fear was a chaotic or confrontational Brexit process, says Holger Schmeiding, chief economist of Berenberg Bank. “But new Prime Minister Theresa May has so far exuded calm, raising hopes of an orderly exit,” he says. At the same time, the Bank of England’s “kitchen-sink” stimulus package announced this month should also help boost domestic demand to offset some of the impact of uncertainty. Den Rest des Beitrags lesen »

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The No-Bailout Principle

Posted by hkarner - 15. August 2016

Date: 14-08-2016
Source: The Wall Street Journal

A euro in a Greek bank is clearly worth less than a euro in a German bank. The Greek bank and the Greek government are simply more likely to go belly-up.

Back in February 2010, with the Greek government’s borrowing costs climbing to new heights, Nobel Prize-winning economist Joseph Stiglitz—then an adviser to the Greek prime minister, George Papandreou—called for eurozone authorities to intervene in markets and “teach the speculators a lesson.” Greece had no need of a bailout, he said, no need of the International Monetary Fund (IMF). “There is clearly no risk of a default.”

Three months later, Greece accepted its first bailout package, amounting to $120 billion. To date it has received financial assistance, in the form of loans and write-offs for private-sector bondholders, amounting to $450 billion.

euro stiglitz eTHE EUROeuro stiglitz d
By Joseph Stiglitz
Norton, 416 pages, $28.95

Reading Mr. Stiglitz’s “The Euro: How a Common Currency Threatens the Future of Europe,” one gets no sense that he ever considered the Greek tragedy anything other than inevitable. “Successive governments,” he writes, “had run unconscionable deficits.” And the eurozone, which Greece joined in 2001, was an unforgiving home for such a spendthrift. It was built on the idea of each state for itself in fiscal affairs; there would be no bailouts. The belief was that European governments would run their economies so as to avoid any risk of the financial markets cutting them off. And just to make extra-sure, legally binding deficit limits were imposed.

But even fiscally prudent countries like Ireland and Spain blew through these limits when property busts wrecked their banks and sent unemployment soaring after 2008. Mr. Stiglitz is clear on who and what are at fault for the suffering that followed: Germany and its euro, created in the Prussian image of austere and merciless self-discipline. Den Rest des Beitrags lesen »

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For Top Banking Talent After Brexit, London Loses Some Allure

Posted by hkarner - 13. August 2016

Date: 12-08-2016
Source: The Wall Street Journal

Decision to leave EU creates many uncertainties

LONDON—Thomas Ozello, a student at France’s elite École Polytechnique, planned to follow the well-trodden path from applied mathematics to a London trading desk.

Then Brexit happened, and the 22-year-old Mr. Ozello set his sights on a new destination: Asia.

After the U.K. voted to quit the European Union, London’s position as a global financial talent magnet is in the spotlight. Top mathematicians and economists were traditionally lured from universities across Europe to earn big in the British capital. The City, with more relaxed labor laws than much of Europe and a large cluster of financial companies, was a natural springboard for future financiers.

Now the move isn’t such a no-brainer. “We don’t know whether it will be as good in terms of remuneration or jobs,” said Mr. Ozello, who has one more year of study left in France. “Brexit has created a lot of uncertainties.” So Mr. Ozello is considering a career move to Singapore. Den Rest des Beitrags lesen »

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European Parliament Must Grapple With EU’s Democratic Deficit

Posted by hkarner - 13. August 2016

Date: 12-08-2016
Source: The Wall Street Journal

Though the legislature has expanded its authority, it hasn’t gained broad public support

Merkel SchulzMartin Schulz, president of the European Parliament, pictured with Angela Merkel.

Among the many issues European Union leaders will have to consider as they seek to reinvigorate the bloc in the wake of Britain’s exit vote is how to address the complaint that decision-making isn’t properly accountable to the people.

The introduction of direct elections to the European Parliament was meant to fix that problem by creating an elected legislative chamber to oversee the process. It hasn’t.

There are still many in Britain and beyond who see the EU as an out-of-touch decision-making machine rather than a democratic exercise in pooled sovereignty.

The bloc is currently stuck between two paths it could take on the dilemma, said Gerard Bökenkamp, deputy director of the Berlin branch of the Open Europe think tank. While one would carve out a stronger parliament in Brussels, others see the solution in stronger national government and parliaments, an option pushed by increasing euroskeptic sentiment.

In June 1979, Europe was starting its first experiment in what would eventually become monetary union and the bloc was on the path to expanded membership and deeper integration. Den Rest des Beitrags lesen »

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Brexit Success Hinges on Global Goodwill

Posted by hkarner - 12. August 2016

Date: 11-08-2016
Source: The Wall Street Journal By SIMON NIXON

Choosing what is the best trading relationship with the EU depends on how the rest of the world responds to the U.K. demands

May ccBritain’s Prime Minister Theresa May.

It is hard not to feel sympathy for British officials tasked with delivering Brexit—and indeed, Prime Minister Theresa May’s promise to “make a success of it”.

Less than two years ago, the civil service carried out a comprehensive assessment of the U.K.’s relationship with the European Union and concluded that, by and large, the current arrangements served British interests pretty well. Now that Brexit has been thrust upon them, they are, by their own analysis, in the realm of dealing with least bad options, a point clearly reinforced by a report from the Institute for Fiscal Studies published on Wednesday.

The respected London-based think tank analyzed the U.K.’s post-Brexit options for a new trading relationship with the EU and concluded that whichever path it chooses is likely to result in a sizable hit to the economy relative to the expected growth in output if it stuck with its current trading relationship.

It estimates the range of likely damage as lying somewhere between 2.5% and 6% of gross domestic product, depending on whether the U.K. opts to retain full membership of the EU single market or to trade with the EU on World Trade Organization terms. It puts the likely cost to the Treasury in extra borrowing at between £24 billion ($31.2 billion) and £39 billion by 2020. Den Rest des Beitrags lesen »

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U.S. Tech Firms Dominate Cloud Services in Western Europe

Posted by hkarner - 6. August 2016

Date: 05-08-2016
Source: The Wall Street Journal

Four American firms have 40% market share; local data centers to counter security concerns

U.S. technology firms are building more data centers in Europe in response to concerns about privacy and security.

When energy giant Enel SpA started looking last year for an outside company to manage its computer systems and files, the Italian firm had a red line: All its data had to stay in the European Union.

The company that got the contract? U.S. tech giant Amazon.com Inc., which won by promising that Enel’s data would be housed in a German facility that met Enel’s other requirements: “reliable, flexible, agile and cheap.”

Political and legal pressure has for years been mounting on European companies to store their sensitive information in Europe—in part to keep it away from what many suspect are prying American eyes. But the push toward so-called data localization has done little to slow the growth of U.S.-based cloud-computing businesses operating in Europe.

Behind the growth: Big European companies are moving more of their computing work to outside providers. American firms have the scale to offer low prices, and are quick to roll out new services and upgrades, analysts say.

Americans also have built at least a dozen new data centers in Europe in recent years, reducing European competitors’ home-field advantage and helping convince European firms that U.S. providers can keep their data safe.

The allegations in 2013 by former National Security Agency contractor Edward Snowden of widespread U.S. government surveillance and the potential involvement of technology firms triggered a backlash in Europe and led to calls by privacy advocates to protect European data.

U.S. firms disputed the scale of their cooperation and said they often challenged surveillance requests.

But, since then, the top four providers of cloud infrastructure in Western Europe are all U.S. firms, and they have expanded their market share by a third in the region, hitting 40% in 2015, according to market researcher IDC.

Rising CloudThe four companies—Amazon, Microsoft Corp., Alphabet Inc.’s Google and International Business Machines Corp.—nearly tripled their combined cloud-infrastructure revenue in the region to $2 billion by the end of the three-year period, IDC says. Together, Western European firms saw their revenue increase 86% during that period.

“On paper, European companies should be poised to take advantage of this growth. But they are less nimble,” said Jonathan Atkin, a senior analyst for RBC Capital Markets. American firms “have bigger checkbooks to make decisions on this scale.”

The expanding share of American firms in Europe’s cloud-infrastructure business comes as something of a surprise.

After the Snowden leaks, industry-supported think tank Information Technology & Innovation Foundation estimated that the fallout would cost American cloud firms between $21.5 billion and $35 billion globally over three years.

Initially, European firms looked poised to take advantage, and used fear of U.S. government surveillance as a marketing tool. Deutsche Telekom AG sold “Email made in Germany.” Two French consortia, including one run by Orange SA, promoted their own “sovereign cloud” offerings with promises of €150 million ($167 million) in government backing to get these ventures off the ground.

Pressure on U.S. companies mounted last year when the EU’s top court struck down a trans-Atlantic privacy accord that allowed companies in Europe to easily store data on U.S. servers. It wasn’t until July that the EU and the U.S. completed a replacement agreement, which would give European companies more confidence to store data with U.S. firms—through privacy advocates promise to challenge the deal in court.

American tech firms responded to the threats to their European growth with more investment.

Since 2013, IBM says it has doubled the number of its data centers in Europe to 12, with one more going online in the fall. Amazon, in late 2014, opened a new set of data centers in the Frankfurt area, on top of another set in Dublin. Microsoft opened three new data hubs, and last year announced a deal to allow customers in Germany to designate Deutsche Telecom as the trustee in control of their data.

“In a post-Snowden world, people want to know what governments can get access to their information and when,” said John Frank, Microsoft’s vice president of EU government affairs.

Google has taken a different tack and doesn’t promise to keep Europeans’ data only in the EU, noting that such localization can be inefficient. The company, nevertheless, has expanded its data centers in Belgium, Finland and Ireland, and is opening a new one in the Netherlands.

U.S. firms face tough local competition in a fragmented market. European telecom giants have networks that enable them to offer competitive cloud infrastructure. Germany business-software giant SAP SE competes in the related market for business services that run on top of basic cloud infrastructure, where analysts say much of the cloud business’s growth is set to come.

Still, many European companies use U.S. cloud firms, including France’s Schneider Electric, BMW AG and Spotify AB.

Enel, for instance, began its process of shifting to the cloud last year, even though using European infrastructure comes at an added cost. The standard cost of hosting data in Frankfurt is 8% more expensive than Amazon’s least expensive U.S. facilities, such as those in Virginia, the company said. Still, Enel says it has saved roughly 11% in computation costs and 48% in storage costs over the past year.

“It comes down to scale, economics, automation of these big players,” said Jack Sepple, senior managing director of cloud for consulting firm Accenture, which advised Enel on the shift to Amazon. “Local companies have trouble keeping up.”

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Italy’s Shaky Bank-Rescue Plan

Posted by hkarner - 5. August 2016

Date: 04-08-2016
Source: The Wall Street Journal

Effects of deal for Monte dei Paschi di Siena could ripple into other financial institutions

Renzi Hollande ccPrime Minister Matteo Renzi speaks during a meeting with French President Francois Hollande.

The best that can be said for Italy’s latest plan to rescue its third-largest bank is that it might just work.

Monte dei Paschi di Siena announced on Friday a complex deal that would see it offload €40 billion ($44.7 billion) of its most toxic bad debts—equivalent to around 15% of its loan book—into a newly created privately-funded vehicle, paving the way for the lender to raise around €5 billion in fresh capital.

Without a deal on the table, it is a fair bet that MPS would have been unable to open for business on Monday following a European Banking Authority stress test, also released on Friday, that showed the bank’s entire capital would be wiped out under its adverse scenario. This rescue plan is fraught with risk, but depositors kept their cash in the bank.

Of course, the situation never should have gotten to this point. The full scope of Italy’s banking problems has been clear for years; nine out of 14 Italian banks failed the European Central Bank stress tests in 2014. The International Monetary Fund estimates that systemwide bad debts total €360 billion, equivalent to 18% of all loans.

Ireland and Spain cleaned up their banking systems years ago and are now the fastest-growing countries in the eurozone. Yet Rome ignored pleas from its European partners and international institutions to deal with its bad debt problem before new European Union rules came into force in January. Those rules require creditors to take losses before any public money is used to save banks. Now, its banking problem has become a major risk to the entire eurozone. Den Rest des Beitrags lesen »

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