Global Financial News Recap for July 24, 2019
China-Russia Bombers
It has been reported that China and Russia have been patrolling Asian airspace drawing attention from the South Korean air force. South Korea responded to this surveillance intrusion by firing warning shots. Maybe this could be Russia simply stirring the Borscht, but it does show Russia’s growing allegiance with China and their engagement in war games. Russia denies these allegations stating that they were over a neutral territory and did nothing wrong. Theories as to why they may have done are that maybe it was to see if there was a coordinated response between South Korea and Japan. This is the idea because the two have deemed the air space to be both of theirs. However, remember Japan doesn’t have any military so that coordinated response would have been with the good ol’ US of A.
China’s Baic buys Daimler Stake
China’s Baic, an automotive company, bought a 5% stake in Daimler for around 2.5 Billion Euros. Baic took this position to block rival Geely’s desire to further expand their position. Who is Geely? Geely is another Chinese auto manufacturer and they own Volvo and Lotus, while also owning 9.69% of Daimler. You can see why Baic would want to get in the mix. As consumer confidence and subsidies falter, the Chinese are buying less domestic vehicles and foreign builds are less affected. This economic shift further shows why Baic wanted to take a position.
Diabeat their Earnings
Coco-Cola has raised their forecast expectations citing the global economy holding up better than expected thus leading to higher performance and an increase in share price. Their fears of growth in emerging markets have dissipated and demand is more than rosy. Latin America lead the way in this surge despite struggles in Argentina and Mexico. Diversification of their product line has also helped Coke increase their value being aided by a canned coffee beverage. Mmmm Caffeine.
Venezuela Power Outage
Venezuela just suffered a nation wide blackout highlighting the nation’s struggle with infrastructure. The nation’s utility company, Corpolec, has been restoring power throughout the 23 states that lie within Venezuela. Caracas is back on the map while parts of the nation remain in darkness. Naturally, this caused quite the disturbance as traffic lights failed and the people began to protest. “What does your sign say? I can’t really see it”. As for a cause, the socialist party believes it was an electromagnetic attack on their hydroelectric dam and the opposition believes it is simply due to neglect and mismanagement. Nevertheless, this event shows the instability in Venezuela and highlights a need for change.
Saudi and US Allegiance
The relationship between Saudi Arabia and America is growing more fruitful. During the Gulf War in the 90’s and post 9/11, people of the Arab world were not too pleased when Saudi Arabia allowed US military to be based in the country. As tensions between the US and Iran grow following the oil tanker debacle, Saudi Arabia has once again allowed the US military to base their operations within their borders. Today, the people aren’t upset. Tensions between the nations are decreasing since Obama was replaced by Trump. Trump is viewed in a more favorable light since he was willing to look the other way on the Khashoggi incident and back up the US’s allies. The US stands to benefit given Saudi’s strategic position in the middle east and the US will now be able to send a loud message to Iran.
Bonus Payments are going Down Under
Crikey! Executives at banks in Australia will need to wait up to 7 years to receive their bonuses and compensation will be more linked to non financial incentives. This comes on the heels of a misconduct inquiry in the financial sector. This plan is being proposed by the Australian Prudential Regulation Authority also known as APRA. These reforms will put Australia’s finance sector in line with many other nations following the 2008 debacle. The hope is that these changes will lead to more emphasis on culture and governance issues and a shift away from short term financial performance. Of course, people aren’t really down with the idea - 88% of people have opposed and APRA will makes it final decision before year end. Apra Kadabra, there goes your bonus.
BofA and UBS focus on Private Capital Arena
BofA and UBS are making a shift into the Private Equity arena because companies are putting off going public and fees for IPO’s are falling. Both firms have put together teams that will raise capital and advise privately owned businesses. The goal is to start relationships early and make money off their consulting. This follows suit of the major Wall Street Groups like Goldman, Morgan Stanley, and JP Morgan. Because the amount of money in the Private Sector is approaching that of the Public one- banks think they need to start their coverage now. This change is largely due to these private companies being able to raise funds from non-traditional routes - wealthy families, mid market leveraged buy out shops, sovereign wealth funds. These types of things, ya know? Another benefit of BoA and UBS doing this is that they have relationships with wealthy clientele already and can get them into the deals. For Free? Probably not… These “Ballers” will be inclined to partake as they understand the earlier you get in, the more growth you’ll see and the more Gucci flip flops you can buy. Furthermore, those who fear an economic downturn might be better sheltered in the Private market.
In Other News
There are more billionaires in China, people in Germany are getting more into short time work, Boris Johnson will be the UK’s prime minister and Beijing pledges to counter US sanctions. Japan could save $15billion a year if they moved to electronic payments, the Green party is on the rise in Europe, and you guessed it, Brexit is still a thing.