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Government Shutdown Still Hurts US Market-ForeTime

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Data in the US got off to a weak start last week, with the Retail Sales figures for September disappointing expectations of a 0.2% rise, having fallen by 0.1%.

The poor figure was somewhat vindicated by the fact that sales dropped only in the auto sector, which weighed on the overall percentage for retail sales as a whole.

Whilst this is still bad news for the US, other sectors outside the auto sector fared relatively well and core sales rose by 0.4% as expected. Consumer Confidence experienced a drastic fall in October, sliding to 71.2 points; despite the fact that forecasts told of a fall, it was estimated that the drop would be from 79.7 to 75 points. The actual figure marked a 6 month low and revealed that Americans were significantly disconcerted in October due to the 16 day government shutdown, as reported by ForexTime.

Employment data also suffered last week, with data released on October 31st showing a gain of just 130K in October, the lowest figure since

May and lower than the anticipated 151K. Jobless claims are finally beginning to be more accurate again, as the backlog created due to a glitch in systems in California in September is finally starting to clear. Jobless claims declined to 340K, much in line with expectations.

The result of the Fed meeting which took place on October 31st was none other than the predicted: the monetary policy was left unchanged and bond buying will remain at $85 billion per month.

The Fed expects to see a more substantial improvement in the economy before modifying the pace of bond purchases.

The current week will reveal the US Annualized GDP which is to be released on November 7th and predicted to rise by 2.0%, the Personal Consumption Expenditures released on the same day and predicted to rise by 0.8% and the Nonfarm Payrolls for October, due out on November 18th and estimated at 130K.

Trouble seems to have arrived in the eurozone’s ace of spades, Germany, with the unemployment change released at 2K for October, double the estimated 1K, making for a total of 2.97 million of the population unemployed. This is the third consecutive month that the German unemployment rate has increased and it clearly spells out a slowdown in the eurozone’s strongest economy.

Further dampening spirits was the eurozone Core Inflation which hit a four year low of 0.7% in October, dropping from September’s 1.1% and remaining substantially below the ECB’s 2% target.

The Core CPI for the eurozone also declined in October, rising by just 0.8% in comparison to September’s 1%.

The euro suffered following the announcement of the negative chain of news last week, trading at 1.3676. On November 7th, the ECB will announce its interest rate decision which is largely expected to stay unchanged, but will also at the same time likely attempt to deliver the message that it will not hesitate to take action to alleviate monetary conditions.

The eurozone is far from safe when it comes to financial difficulties and if ECB President Mario Draghi allows his concern to show during the ECB Press Conference on the 7th, the euro is likely to plunge again.

On the British front, last week seems to have ended on a high, with more and more mortgage approvals adding up to make for a 5 year high of 66,735, indicating a strong economic recovery through the housing sector. The end of the month came with the release of the Gfk Consumer Confidence for September which has continued in its gradual improvement, up to -8 points following on from August’s 5 year high of -10. Nationwide housing prices also skyrocketed according to data released on October 31st, rising by 5.8% and marking a 3 year high whilst acting as a central factor in boosting the UK’s economic recovery.

The most important releases to look out for this week in the UK include the GDP Estimate on November 6th, the Asset Purchase Facility on November 7th which is predicted to stay at £375B and the Bank of England Interest Rate Decision which is expected to remain the same. Estimates foretell that the interest rate is not likely to be raised until 2015 because despite the fact that the UK economy is progressing so rapidly, the unemployment rate is still not at the level desired by the Bank of England.

Japanese households surprised the economy pleasantly according to the September figures released by the Statistics Bureau on October 28th, household spending increasing by 3.7% after declining by 1.6% in August and soaring above expectations of a mere 0.5% rise. Good news followed for the rest of the week, industrial production in Japan also rising by 1.5% and the national unemployment rate declining to 4%, exactly in line with expectations.

The Nomura/ JMMA manufacturing PMI climbed to 54.2 for the month of October, indicating positive movement in the Japanese manufacturing sector. As for the Bank of Japan interest rate, it has remained unchanged at 0.1% as attempts to end the long years of deflation continue. This week, on Tuesday November 5th, the Bank of Japan Monetary Meeting Minutes will be released with comments due to on the state of the economy and the current policies.

 


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Banks Fingered in $2trn Dirty Money Scam

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Some of the world’s top banks have been found to be complicit in aiding criminals move $2 trillion in dirty money around the world, according to leaked government files.

Banks Fingered in $2trn Dirty Money Scam

The exposition was done by Buzzfeed News and shared with the International Consortium of Investigative Journalists (ICIJ), a group that brings together investigative journalists from around the world, which distributed them to 108 news organisations in 88 countries.

In the revealing documents, they said: “global banks including JPMorgan, HSBC, Standard Chartered Bank, Deutsche Bank, Bank of New York Mellon, among others defied money laundering crackdowns by moving staggering sums of illicit cash for shadowy characters and criminal networks that have spread chaos and undermined democracy around the world.”

It was also revealed that they kept profiting from these powerful and dangerous players even after the United States authorities fined these financial institutions for earlier failures to stem flows of dirty money.

FinCEN is the US Financial Crimes Enforcement Network. These are the people at the US Treasury who combat financial crime. Concerns about transactions made in US dollars need to be sent to FinCEN, even if they took place outside the US.

Known as the FinCEN files, these are more than 2,600 documents which banks sent to the US authorities between 2000 and 2017 which help show that these banks raise concerns about what their clients might be doing.

They have also been regarded as some of the international banking system’s most closely guarded secrets.

Some of what has been found so far showed that JPMorgan, the largest bank based in the United States, moved money for people and companies tied to the massive looting of public funds in Malaysia, Venezuela and Ukraine, the leaked documents reveal.

The bank moved more than $1 billion for the fugitive financier behind Malaysia’s 1MDB scandal, the records show, and more than $2 million for a young energy mogul’s company that has been accused of cheating Venezuela’s government and helping cause electrical blackouts that crippled large parts of the country.

JPMorgan also processed more than $50 million in payments over a decade, the records show, for Paul Manafort, the former campaign manager for President Donald Trump. The bank shuttled at least $6.9 million in Manafort transactions in the 14 months after he resigned from the campaign amid a swirl of money laundering and corruption allegations spawning from his work with a pro-Russian political party in Ukraine.

It was also revealed that one of Russian President Vladimir Putin’s closest associates used Barclays bank in London to avoid sanctions which were meant to stop him from using financial services in the West. Some of the cash was used to buy works of art.

HSBC allowed fraudsters to transfer millions of dollars around the world even after it had learned of their scam, leaked secret files show.

Britain’s biggest bank moved the money through its US business to HSBC accounts in Hong Kong in 2013 and 2014.

The United Arab Emirates’ central bank failed to act on warnings about a local firm which was helping Iran evade sanctions.

Deutsche Bank moved money launderers’ dirty money for organised crime, terrorists and drug traffickers.

Standard Chartered moved cash for Arab Bank for more than a decade after clients’ accounts at the Jordanian bank had been used in funding terrorism.

The FinCEN Files represent less than 0.02 per cent of the more than 12 million suspicious activity reports that financial institutions filed with FinCEN between 2011 and 2017.

Mr Fergus Shiel from ICIJ said the leaked files were an “insight into what banks know about the vast flows of dirty money across the globe”. He said the documents also highlighted the extraordinarily large amounts of money involved.


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SEC Boosts Investor Protection with Digital Assets

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The Securities and Exchange Commission (SEC) has explained that its Digital Assets and their Classification and Treatment is aimed at boosting investors’ protection in the capital market.

Emomotimi Agama, Head, Registration, Exchanges, Market Infrastructure and Innovation of the SEC speaking on the guidelines in an interview said: “The first thing the SEC bothers about is investor protection.

“This is no different from what we have been doing. We are looking at investor protection, integrity, transparency and of course we want to make sure that the market is safe and everyone is comfortable with what is going on in the investment climate”.

Agama noted that last year the Commission launched the Fintech Road map and after that was done, it went ahead to set up the block chain virtual financial assets committee.

“These committees are both market wide and principally done to engage the market, to be able to have discussions with the market and get their buy-in into what we are doing.

“What we found out today is that a lot of persons, youths are all involved in this space and it is important that even as far as that is the case, the SEC lives up to the expectations  and making sure that those people that are getting into the business are protected

“Clearly, that is our aim and the market is part of this and indeed the feedback has been wonderful. People are happy with what we are doing, being able to provide some clarity as to where we stand in terms of digital assets regulation.

“Digital assets is the next thing, our idea is not to stifle innovation, but to promote innovation within a reasonable space and that is exactly what we are doing. Section 13 of the ISA empowers us to do this and so we are doing what we have been empowered to do by law,” he said.

On what internal capacities the SEC is developing to meet the challenges of this fast changing digital financial world, Agama said “the SEC is a knowledge based institution and before we come out of this kind of initiatives, we would have done so much research.

“I need to tell you that the Cambridge Centre for Alternative Finance has been partnering with the SEC and up to this point, we have been engaging with them and several of our staff have been part of their programmes.

“The World Bank and other institutions are also working with us on Fintech to see that the Nigerian landscape is not left barren but guided with basic principles, we will not leave any stone unturned, but ensure that everyone within the SEC that has the responsibility to guiding investors and the populace in making sure we have an investment environment that people will be proud of is provided.

“Capacity building is a continuous exercise, we will continue to upgrade ourselves, we will continue to learn because knowledge is for life”.


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Rising Covid-19 Cases Keep Risk Assets Under Pressure

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By Hussein Sayed, Chief Market Strategist at FXTM

Equity markets kicked off Monday on the back foot following three weeks of consecutive declines in US stocks, which marked the longest weekly losing streak since 2019. Investors are becoming increasingly worried about the momentum in the economic recovery given the resurgent numbers of global Covid-19 cases and lack of progress on a new US stimulus package.

Although President Trump signaled his readiness to back a bigger stimulus bill last week, the Supreme Court’s empty seat left by the passing of Ruth Bader Ginsburg is likely to complicate the matter. The fight between the President and Congressional Democrats on whether to fill the vacant seat now or wait until after the election is expected to lead to more delays in reaching a middle ground on a new fiscal package. Hence, we would expect that the much-needed stimulus will be pushed back until after the US elections.

Given that the list of uncertainties is growing, especially on the pandemic front, risk is now skewed to the downside. We have US elections just around the corner, hefty valuations in growth sectors despite the recent correction and the high stakes of possible national lockdowns in the UK and elsewhere all pointing to waning momentum in the economic recovery. All these factors indicate more volatile times for the next several weeks.

Datawise, investors need to keep a close eye on September’s flash PMIs coming out of Germany, France and the UK this week for further indications on how the big European economies are faring following the strong rebound in early Q3. Signs of weakness here will be a strong signal that the economic recovery is indeed losing its way and further action is needed from fiscal and monetary policymakers.

Currency markets are not yet reflecting the risk aversion seen in equities. The Dollar is trading slightly lower against its major peers, with the DXY -0.15% at the time of writing. The Fed is clearly the winner among other central banks in providing the most accommodative monetary policy, which means the long-term projections for the Dollar remain to the downside. However, if the selloff in US equities accelerates this week, expect the greenback to regain some support.

In commodity markets, Brent fell by 1% after trading slightly higher in early Asian trade. The battle between the bulls and bears is keeping prices rangebound between $40 and $45. At this stage, the demand outlook is far more important than the supply side. That’s why oil traders need to keep a close eye on the trajectory of the virus, especially if it’s going to lead to renewed lockdowns. Gold is also another commodity stuck in a narrow range as traders await new clues on the Fed’s policy approach towards inflation.  This could happen later this week as Chairman Jerome Powell may provide new hints when he appears before the Congress on Tuesday.

 


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