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Will Brexit Cause Market Repercussions?

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Will Brexit Cause Market Repercussions?

The market analysts are reporting expected global implications of a ripple effect pending the D-Day of Britain’s leaving the European Union, more commonly called the Brexit.

The date of Thursday, June 23, 2016 is when the carefully run referendum will finally gauge the population’s attitude towards the country’s Eurocentric policies and laws.

Anticipation regarding the possible decline in Britain’s status on the financial player platform is driving an over cautious market outlook, even bordering on pessimism.

In grasping the significance of how close the referendum will be, the graph below reflects the photo finish of the huge “should I stay or should I go” mindset of the populace. 

The graph is from the website of The Economist.

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It is first important the realize how significant the rare event of Britain is offering its citizens this chance to mold the future policy of the country, in an attempt to give a brief breakdown of some of the issues that are driving the voting.

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It is the government handing its country folk the opportunity to be active in forming its future while neatly absolving itself from any of the blame and negative repercussions that may follow.

And some of those negative impacts may be:

  • The loss of influence on a global scale regarding the policy is making of that part of the world.
  • Uncertainty and unpredictable outcomes on the Financial and Economic fronts.
  • The world stage is judging Britain’s stance on immigration.

To address the first issue. 

Would the US favor Europe over Britain when it comes to trade deals and policies that could impact its financial markets? 

According to certain statements made by President Obama, this is a possibility.

But is it? 

The US has always found an ally in Britain and this fellowship existed before the advent of the European Union, and will continue if it leaves the EU.

The EU has some leading countries with massive GDPs, but the drawbacks are that it has some countries that are real financial drags too. 

Surely the US will prefer the stability of one country speaking with one united voice and one market.

With the possibility of the US maybe favoring dealing with the EU over Britain, could this lead to the markets reflecting this bias in the short and long term?

As one sees from the below graph, which is kindly reprinted here from www.whatukthinks.org, that the referendum results are too close to have an impact in the short term. 

Long term market forecasts will be linked to many other factors.

j19.2

Finally, to bring up the primary cause and problem of why the British public wants to leave the EU that has been prevalent in all the reports – immigration. 

This is not such an unusual concern that is shaping the politics in the western world.

There has been massive rioting across Europe for the past decades when the distaste and anger over immigrants and refugees being accorded an almost favored status in the countries belonging to the EU.

It has been seen as a welcome diversification in the past but in the more stringent economic climate and a weak economy, it is perceived as unfair and a drain on the population native to the country.

There are many parallels to this dilemma in the US. 

The ongoing debate about immigration reform is driving the political platform of the candidates in the forthcoming election.

This has resulted in surprising wins for the candidates who are not afraid to voice the feelings and thoughts of many people who have been too repressed and hesitant to speak out themselves.

There has always been a strong backlash to government immigration practices in the face of unemployment and economic downswing.

This is shown in the knee-jerk reactions to candidates and political parties who find it an easy wagon to hitch their band.

So the Brexit event is showing a few negative impacts along the way to giving its population a voice in the issue of whether to stay in the European Union or not. 

It is too close to call at the moment and to state the outcome with any certainty. 

Where there is any unpredictability regarding the markets, it will always promote a cautious approach.

The long-term forecasts will always take into account that Britain has always been a dominant force in the global markets no matter whether it has been a member of any exchange agreement or not.

Well over 330,000 net immigrants were counted last year in Britain. 

That is not counting the ones who live there illegally. 

Whether this will affect the markets globally is too close to say with any degree of certainty.

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Stocks Rally as Oil, Jobless Claims Rocket Higher

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Stocks Rally as Oil, Jobless Claims Rocket Higher

The stock market rally continued yesterday with the Dow Jones Industrial Average jumping 2.24%, the S&P 500 gaining 2.28% and the Nasdaq up 1.72%.

Investors felt optimistic after President Trump tweeted that he had spoken with Saudi Arabian Crown Prince Mohammed bin Salman. Many were hoping that both Saudi Arabia and Russia were willing to end the price war and mutually agree to cut production by at least 10 million barrels per day.

“Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!” Trump tweeted.

However, some experts are doubting the reality of cutting production by such a significant amount.

Edward Marshall, a commodities trader at Global Risk, told The Wall Street Journal, “It’s physically impossible for Saudi Arabia and Russia to get 10 million barrels a day off the market—they’d burst their onshore storage and fill every ship in sight.”

News also broke that Saudi Arabia called for an emergency meeting of OPEC and other oil-producing countries. The country called for a meeting to talk about how they can stabilize the oil market. Prices have been in freefall since the last meeting ended without a production agreement beyond April 1.

This was enough to send oil prices rocketing higher. West Texas Intermediate crude gained as much as 34% intraday before settling at $25.32 per barrel, a 24.7% jump. This is its largest single-day percentage gain in history.

Even with prices moving higher, it may not be enough to prevent bankruptcies in the oil and gas sector. This wave of bankruptcies was kicked off by shale driller Whiting Petroleum Corp. on Wednesday.

Jobless Claims Set Record

The market’s rally yesterday came in spite of some very bad news early in the day. Initial jobless claims for the week ending March 28 came in at 6.6 million. This figure is nearly double the previous week’s then-record of 3.2 million.

To put this number in a historical perspective, prior to the last two weeks, the previous record number of claims in a single week sat at 665,000 in March 2009 during the Great Recession.

To put it simply, this week’s initial jobless claims number was equal to the total claims filed during the entire Great Recession.

Chris Rupkey, chief financial economist for MUFG Banks, wrote in an email, “We knew that massive job losses were coming because of reports that many workers were unable to file a claim for benefits even after waiting on line for hours. Everywhere you look Washington and state governments were not prepared for the rapid spread of the virus and the devastating damage that would be done to the economy if businesses were shut down and workers sent home.”

He added “In a normal recession, job layoffs build over the many months of recession until they peak. In this pandemic-based recession, the job losses are immediate where the economy’s weakest hour is right now.”

Why was the market able to rally despite historically bad jobless claims?

JJ Kinahan, chief market strategist at TD Ameritrade, says it’s possible that the market knows it’s going to get worse. He also mentioned that this number won’t seem as bad in the coming weeks.

“Overall this is a little bit of a victory in and of the fact that it was such a bad number and the market did kind of shake it off. It is also the market preparing for a lot more bad numbers.”

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US Federal Reserve Makes Emergency Interest Rate Cut

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US Federal Reserve Makes Emergency Interest Rate Cut

The US Federal Reserve has slashed interest rates in an emergency move to protect the world’s largest economy from the coronavirus outbreak, ramping up the global response as the disease spreads.

In a dramatic intervention as the G7 group of wealthy nations promised action around the world to protect jobs and growth amid the unfolding crisis, the US central bank said it was cutting interest rates by half a percentage point to a target range of 1% to 1.25%.

Launching the emergency measure as a pre-emptive strike to protect the US economy after pressure from Donald Trump to act, the Fed warned: “The fundamentals of the US economy remain strong. However, the coronavirus poses evolving risks to economic activity.”

Jerome Powell, its chair, said: “Of course the ultimate solutions to this challenge will come from others, particularly health professionals. We can and will do our part, however, to keep the US economy strong as we meet this challenge.”

As the economic costs mount in a pivotal US election year, Trump said the Fed had not cut rates enough and should go further. Powell insisted the emergency move was not in response to the president’s pressure. “We are never going to consider any political considerations whatsoever,” he said.

Financial markets around the world rallied after the worst week for stocks since the financial crisis, in anticipation of massive coordinated stimulus to protect the global economy. The FTSE 100 closed up around 1% at 6,718.20. However, Wall Street slumped after a rebound on Monday, and was down 600 points by mid-afternoon in New York.

On a day of rapid developments in response to the escalating health crisis:

  • The G7 issued a statement saying wealthy nations would use “ all appropriate policy tools ” to tackle the economic fallout.
  • The UK government outlined contingency plans, including limits on police and fire service callouts.
  • Growing numbers of companies announced profit warnings and told staff to work from home.

Speaking on Tuesday morning before the emergency move from his transatlantic counterpart, Mark Carney said the Bank of England stood ready to cut rates if the British economy required.

In his final hearing before MPs on the Treasury committee before standing down on 15 March, when he will be replaced by Andrew Bailey, the Bank’s outgoing governor said the fallout in Britain could include an “economic shock that could prove large but will ultimately be temporary”.

“The Bank will take all necessary steps to support the UK economy and the financial system,” he added.

Carney said that lines of communication were open with other central banks, that the Bank’s rate-setting monetary policy committee (MPC) met on Monday and that it was still “assessing the economic impacts and considering the policy implications of various different scenarios”.

The next MPC rate decision is due on 26 March, after Carney leaves. However, economists at the Japanese bank Nomura said they anticipated an emergency UK rate cut before the end of the week.

Threadneedle Street has limited room to cut borrowing costs with interest rates at 0.75%, among the lowest levels in its 325-year history. There are also growing expectations that the chancellor, Rishi Sunak, will use next week’s budget to announce financial support to try to lessen the impact of Covid-19.

The coronavirus outbreak is causing widespread alarm. The Paris-based Organisation for Economic Cooperation and Development has warned global growth could be cut in half.

UK banks are starting to offer emergency financing to businesses that are showing signs of strain. Barclays, RBS and Santander have sent messages to thousands of firms to check whether factory disruptions in China have put their supply chains and cash flow at risk.

Barclays has extended its first batch of overdrafts and short-term loans, while the Guardian understands RBS is contacting about 5,000 of its large and small business customers who may be exposed to disruption, offering them similar support.

Twitter told its staff to work from home in response to the outbreak. It has made remote working mandatory for employees in Hong Kong, Japan and South Korea and said it was “strongly encouraging” its global workforce of 5,000 employees to do the same.

In the UK, the impact of the outbreak was reflected in company statements and updates on consumer behaviour. Kantar, the data company, said consumers were stockpiling hand sanitiser, with sales up 225% in February.

The British insurer Direct Line said it had received £1m of travel insurance claims relating to the outbreak. It will pay out for cancellation or curtailment of trips to places such as China, South Korea and northern Italy, if they were booked before the government advised against travel.

The product-testing company Intertek warned that temporary disruption to the supply chains of its clients in China would hit its 2020 performance, while Greggs said the coronavirus added a cloud of uncertainty to its future sales forecasts if shoppers stayed away from high streets.

The tour operator Tui also said it had suffered weaker bookings and set out plans to cut costs with a hiring freeze and postponing non-essential projects. After a plunge in its share value amid the coronavirus outbreak, the travel business is likely to be ejected from the FTSE 100 on Wednesday in the quarterly reshuffle of the index of leading UK company shares.

Copyright © 2020 theguardian.com. All rights reserved.

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How To Teach Your Kids About Credit Cards

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If you have kids in college, this article is for you. Teaching kids about credit cards is one of the most important tools you can give them The world of credit cards can be confusing and giving your kids a little education might save them a lot of headache and debt.

Students need to learn credit card lessons

BY JULIE JASON

Do you have children in college? Have you talked with them about how to handle credit?
When I wrote about this topic in 2008, students were inundated with credit card offers. According to Benjamin Lawsky, who, as a special assistant to the New York state attorney general, testified before the U.S. House of Representatives’ Subcommittee of Financial Institutions and Consumer Credit, “marketers set up tables in high-traffic spots on campus, such as cafeterias, student unions, bookstores, and other campus buildings … [and at] campus events including freshman orientation, activity fairs, athletic events and graduation fairs.”

Then came the Credit Card Accountability Responsibility and Disclosure Act of 2009 (the CARD Act).

Now, companies cannot sign up individuals under the age of 21 without a co-signer or proof of personal financial resources. Marketers offering incentives like pizza can no longer do so while at “an institution of higher education” or even within 1,000 feet of the school. They also may not make such offers “at an event sponsored by or related to” the school. Pre-approved offers of credit to individuals under the age of 21 also are prohibited.

Still, card offers are being made, and students need to know whether to act on them. You can expect that student credit cards will have less favorable terms than those offered to people who have a credit history; students are higher-risk borrowers.
Further, students, even those over age 21, may not understand that missing a payment or making a late payment not only increases the cost of credit, but also creates a negative credit history, something everyone should work to avoid.

“A bad credit history can make it harder for you to get mortgages, car loans and credit cards in the future,” explained Matt Schulz, a senior industry analyst at CreditCards.com, a credit card comparison website.

“If you do get them, crummy credit can also cost you a fortune over the years in the form of higher interest rates and fees. It can also stand in the way of getting a job,” explained Schulz.

What can a parent do?
Since going away to college is the first step toward independence, you want to be sure that you respect your child’s need for self-sufficiency. But that doesn’t mean he or she has to go it alone. There are simply too many serious, long-lasting repercussions.

Communication and planning are key.

First, before your child leaves for school, talk to him or her about the benefits and the detriments of getting a student card. Establishing a credit history is a benefit. So is learning the discipline of paying bills on time to avoid a negative history.

Second, research options together with your child. Look online at CreditCards.com (search for “student cards”), WalletHub.com (click on “Credit Cards,” then “College Student”) or creditkarma.com (go to “Credit Cards,” then “Student”). Consider the fees, rates and penalties of different cards, and make a joint decision on the type of card that might make sense. For example, you might consider prepaid cards or secured cards. Prepaid cards work like debit cards. No credit is extended. You prepay the card, and when the balance is low, you fund it. Secured cards require a cash deposit that acts as the credit line for the account. This allows a credit limit to be established, without risk to the bank.

Third, decide on an acceptable monthly budget and what to do if it isn’t followed.  Talk about how you would like your child to communicate with you if that happens.

Fourth, determine whether you and your child agree that he or she should not accept credit card offers before reviewing them with you.

Fifth, agree on how the two of you should check in with each other. Will you talk each month about finances, perhaps setting a date in advance? Will you encourage your child to let you know about challenges before they become problems?

In the beginning, your child will benefit from some gentle guidance. You don’t want him or her to be adrift in a financial morass that could have been avoided with a little planning and care. Financial literacy calls for learning a new skill, and it is not reasonable to expect a child to go on this financial journey alone.

For information on the impact of the CARD Act, read the Consumer Financial Protection Bureau’s report (the Card Act Report), which you can find at https://www.consumerfinance.gov.

* * *
Julie Jason, JD, LLM, a personal money manager (Jackson, Grant of Stamford, Conn.) and award-winning author, welcomes your questions/comments ([email protected]). To hear Julie speak, visit www.juliejason.com/events.

(c) 2018 Julie Jason.
Distributed by King Features Syndicate Inc.

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