US president Barack Obama holds a joint press conference with prime minister Theresa May ahead of the G20 summit in Hangzhou on Sunday. Speaking of the consequences of Britain’s decision to leave the EU, Obama says that, while he still believes that the world “benefitted enormously” from the UK’s membership of the European Union, he would work with May to ensure the consequences of the vote “don’t end up unravelling” the strong trade relationship between the two nations

• G20 meeting: Obama tells May that US won’t prioritise UK trade deal

 French president, Francois Hollande, will inaugurate the Airbus plant in Ghimbav on September 13th, according to sources close to the investors. According to Serge Durand, the CEO of Airbus Helicopters Industries, the first helicopter made in Ghimbav will only be delivered at the end of 2017, but starting with September 2016, the plant will become functional and operational. The company intends to bring in other projects to Braşov if the H215 project proves to be successful.   Serge Durand said: "For now, we have concluded a protocol with Romanian airlines- IAR Ghimbav, Aerostar, Aerotech and Turbomecanica - to become suppliers for the helicopter that will be manufactured in Romania, which will be entirely made out of parts manufactured in Romania".   Serge Durand also stated that Ghimbav will first of all manufacture the civilian version of H215, with production of the military version to be transferred in a few years from the factory in France to the one in Braşov. Moreover, in 2019, Durand hopes that over 30 Romanian engineers will be working on the design of the helicopters that will be manufactured in Ghimbav, with the company intending to develop an R&D center in Romania. The amount of the total investment in the new Airbus Helicopters project in Ghimbav is 55.7 million Euros, of which the aid of the Romanian state is a maximum of 5.2 million Euros. "We will reach 350 employees at the plant of in 2019, when we are going to start manufacturing 15 H215 helicopters a year", Durand further said.   Guillaume Faury, CEO Airbus Helicopters, said that in Ghimbav will be assembled the H215 helicopter, the latest member of the H aircraft family of the German French group, the "smaller" brother of H225. H215 is an advanced variant of the former AS332 Cie/L1e helicopter, which would be sold at "accessible prices", because "the costs are low".  Airbus Helicopters, a division of Airbus Group, offers solutions for civilian and military helicopters all over the world. The company has an operational fleet of approximately 12,000 helicopters operated by over 3,000 customers in approximately 154 countries. Airbus Helicopters has over 22,000 employees all over the world and has generated a revenue of 6.8 billion Euros in 2015. 

The annual inflation rate in the Eurozone has remained stable in August compared to July, at 0.2%, according to a preliminary estimate published on Wednesday by the European Statistics Office (Eurostat).  According to Eurostat, in the month of August, the most significant price increases were seem in food, alcohol and cigarettes, which have posted an annual increase of 1.3%, compared to 1.4% in July, followed by services, which have seen an annual increase of 1.1%, compared to 1.2% seen in July. On the other hand, energy prices have seen an annual decrease of 5.7% in August, compared to a decline of 6.7% seen in July.  Eurostat had previously announced that in July, compared to June 2016, annual inflation dropped in nine EU member countries, has remained stable in seven countries and has increased in 12 states, including Romania, according to Agerpres.  Eurostat has also announced on Wednesday that in July 2016, compared to June 2016, the unemployment rate has remained stable at 10.1% in the Eurozone, while in the European Union the unemployment rate has remained stable at 8.6%. Among the member states, the highest unemployment rates were seen in Greece, (23.5% in May 2016) and Spain (19.6%). On the opposite is Malta, with an unemployment rate of 3.9%, Czech Republic and Germany, both with 4.2%. Romania is below the EU average, with an unemployment rate of 6.1%. Compared to the situation in July 2015, the unemployment rate decreased in 24 member states, including Romania, has remained stable in Denmark and has increased in Estonia, Austria and Belgium.  In Romania's case, according to data notified by the National Statistics Institute, (INS), the annual inflation has remained in negative territory in July as well, at -0.8%, down from -0.7% in June. Calculated based on the harmonized consumer price index, the drop has been -0.3%, the INS states. The seasonally adjusted unemployment rate also stood at 6.1%, at the end of July, up 0.1 percentage points over the previous month (6%), according to the standards of the International Labor Bureau. 

Wall Street drew two conclusions from the news that the US jobs engine shifted down into a lower gear last month. The first – that a September increase in interest rates is now a non-starter – was almost certainly right.  Putting up the cost of borrowing so close to the presidential election in early November always looked like an outside bet. It would have taken thunderously good figures for job creation to have persuaded the more dove-ish policymakers at the Federal Reserve to move, and the ones released on Friday were average at best.  To be sure, the August non-farm payrolls have come in worse than expected for the past decade, suggesting that there might be some problem with the way the raw data is seasonally adjusted. What’s more, the two previous months – June and July – saw strong increases in demand for labour, so the three-month average for non-farm payrolls is running at a healthy 200,000. That could persuade some of the hawks at the Fed to move, but they will not be able to muster a majority. The second conclusion drawn by Wall Street is more questionable. That is the assumption that the rate rise some analysts had pencilled in for September has now simply been put back to a later date. Some economists believe the Fed won’t waste any time once US voters have chosen who will be Barack Obama’s successor at the White House; some think the central bank will wait until March next year. There is, though, a different way of looking at the numbers. For most of this year, the strength of the US labour market has been at odds with data showing the economy growing only slowly. Sooner or later, the theory went, growth would accelerate and come into line with employment numbers, so justifying higher interest rates.

The annual inflation rate in the Eurozone has remained stable in August compared to July, at 0.2%, according to a preliminary estimate published on Wednesday by the European Statistics Office (Eurostat).  According to Eurostat, in the month of August, the most significant price increases were seem in food, alcohol and cigarettes, which have posted an annual increase of 1.3%, compared to 1.4% in July, followed by services, which have seen an annual increase of 1.1%, compared to 1.2% seen in July. On the other hand, energy prices have seen an annual decrease of 5.7% in August, compared to a decline of 6.7% seen in July.  Eurostat had previously announced that in July, compared to June 2016, annual inflation dropped in nine EU member countries, has remained stable in seven countries and has increased in 12 states, including Romania, according to Agerpres.   Eurostat has also announced on Wednesday that in July 2016, compared to June 2016, the unemployment rate has remained stable at 10.1% in the Eurozone, while in the European Union the unemployment rate has remained stable at 8.6%. Among the member states, the highest unemployment rates were seen in Greece, (23.5% in May 2016) and Spain (19.6%). On the opposite is Malta, with an unemployment rate of 3.9%, Czech Republic and Germany, both with 4.2%. Romania is below the EU average, with an unemployment rate of 6.1%. Compared to the situation in July 2015, the unemployment rate decreased in 24 member states, including Romania, has remained stable in Denmark and has increased in Estonia, Austria and Belgium.  In Romania's case, according to data notified by the National Statistics Institute, (INS), the annual inflation has remained in negative territory in July as well, at -0.8%, down from -0.7% in June. Calculated based on the harmonized consumer price index, the drop has been -0.3%, the INS states. The seasonally adjusted unemployment rate also stood at 6.1%, at the end of July, up 0.1 percentage points over the previous month (6%), according to the standards of the International Labor Bureau.

Hiring in the US slowed in August following a summer surge in a sign that the Federal Reserve will hold off on raising interest rates this month. Employers added 151,000 staff to their payrolls last month, according to the US Labor Department. This was below the 180,000 expected by analysts, and down from an upwardly revised increase of 275,000 in July. The steady jobs growth kept the unemployment rate at 4.9pc. Economists expected the rate to fall to 4.8pc.  The dollar fell against the pound and the euro after the data were released, while traders reduced their bets on a September rate hike.  Financial markets now believe there is a 26pc that the Fed will raise rates this month, down from 34pc just before the jobs data were released.  The probability of a rate hike this year fell to 56pc, from 60pc.... Janet Yellen, the chairman of the Federal Reserve, said last week that she believed that the case for raising interest rates in the world’s largest economy was strengthening. Stanley Fischer, vice chairman of the Fed, signalled that two rate increases were possible, though Ms Yellen and Mr Fischer stressed that any move up from the current federal funds target of between 0.25pc and 0.5pc would depend on the data they saw. The average monthly jobs gain over the past 12 months has been 204,000.  Separate US data showed the trade deficit narrowed in July as exports rose to their highest level in 10 months.  This suggests economic growth picked up at the start of the third quarter following annualised growth of 1.1pc in the second quarter.

"It's simply incorrect to say that terrorism came only with the refugees," Merkel said.  "It was already here in myriad forms and with the various potential attackers that we have been watching,” she added, referring to the fact that most of the recent attacks in Europe had been perpetrated by EU nationals.  The chancellor’s mea culpa was issued on the one-year anniversary of her statement “wir schaffen das", or "we can do this”, which came to symbolise her open-door policy to migrants.  Germany last year took in almost 1 million people, prompting a political backlash against the government and rising support for anti-EU and anti-immigrant groups such as the AfD party and the Pegida movement.  Germany's top migration official Frank-Juergen Weise said last Sunday he expected the country to take in another 250,000 to 300,000 people this year.  Other EU leaders have also blamed Merkel’s policies for acting as a pull factor for refugees.  But her comments on how the problem had been initially mishandled could be aimed at central and eastern European leaders, who still reject migrant quotas, ahead of a summit on EU reform due in Bratislava later this month.  “It doesn’t work for some countries to say: ‘We don’t want to have Muslims at all, even if it’s necessary for humanitarian reasons’,” she told German broadcaster ARD on Sunday.

The leaders of the Czech Republic and Hungary say a "joint European army" is needed to bolster security in the EU.  They were speaking ahead of talks in Warsaw with German Chancellor Angela Merkel. They dislike her welcome for Muslim migrants from outside the EU.  Hungary's Prime Minister Viktor Orban said "we must give priority to security, so let's start setting up a joint European army".  The UK government has strongly opposed any such moves outside Nato's scope. The Czech, Hungarian, Polish and Slovak leaders are coordinating their foreign policy as the "Visegrad Group". Czech Prime Minister Bohuslav Sobotka said building a joint European army would not be easy, but he called for discussion to start on it.  The EU has joint defence capabilities in the form of 1,500-strong battle groups, but they have not been tested in combat yet.  Last year European Commission President Jean-Claude Juncker called for a European army to give the EU muscle in confronting threats from Russia or elsewhere.

Business confidence in Europe's biggest economy, Germany, has fallen unexpectedly after the UK Brexit vote, according to a closely watched survey.  The Ifo business confidence index, based on about 7,000 company responses, fell to 106.2 points for August from 108.3 in July.  It was the steepest monthly fall in more than four years and took the index to its lowest since December 2014.

Despite the gloom, the euro was up slightly against the pound and dollar  The latest drop follows a much smaller decline in confidence in July immediately after the UK voted to leave the EU.  Economist Carsten Brzeski at ING-DiBa said the ongoing decline "suggests that German businesses have suddenly woken up to Brexit reality".  "It is not the first time that the Ifo reacts with a delay of one or two months to global events,'' he said, adding that at present, the German economy remained in a "virtuous circle".  Across the sectors it examines, the Ifo found confidence had fallen in all but construction and services.  "The German economy has fallen into a summer slump," Ifo president Clemens Fuest said.  Other official figures released earlier this month showed the German economy grew 0.4% in the second quarter compared with the previous three-month period.  That was a slower pace than the 0.7% growth in the first quarter, but double what economists had expected.

Hundreds of aftershocks have rocked devastated areas of central Italy, hampering search efforts after a deadly earthquake.  A strong tremor with magnitude 4.3 struck on Thursday afternoon, sending rescuers fleeing from already fragile buildings.  About 5,000 rescue workers are combing through rubble for survivors using heavy machinery or bare hands.  At least 250 people are now known to have died after Wednesday's quake.  The 6.2-magnitude quake hit at 03:36 (01:36 GMT), 100km (65 miles) north-east of Rome in mountainous central Italy.  More than 300 people have been treated in hospital and dozens are believed to be trapped under rubble.  Worst affected are the towns of Amatrice, Arquata, Accumoli and Pescara del Tronto.  The towns are usually sparsely populated but have been swelled by tourists visiting for summer, making estimates for the precise number missing difficult.  The hunt for survivors continued throughout Wednesday night and into Thursday. With many buildings unsafe, some people were forced to sleep in their cars or in tents.

Search teams have asked locals to disable their wi-fi passwords to help efforts.

The Italian Red Cross says residents' home networks can assist with communications during the search for survivors.  Rescuers have advised journalists and bystanders to leave Amatrice urgently, as "the town is crumbling", the BBC's Jenny Hill says.

The drama of Brexit may soon be matched or eclipsed by crystallizing events in France, where the Long Slump is at last taking its political toll.  A democracy can endure deflation policies for only so long. The attrition has wasted the French centre-right and the centre-left by turns, and now threatens the Fifth Republic itself.  The maturing crisis has echoes of 1936, when the French people tired of 'deflation decrees' and turned to the once unthinkable Front Populaire, smashing what remained of the Gold Standard.  Former Gaulliste president Nicolas Sarkozy has caught the headlines this week, launching a come-back bid with a package of hard-Right policies unseen in a western European democracy in modern times.  But the uproar on the Left is just as revealing. Arnaud Montebourg, the enfant terrible of the Socialist movement, has launched his own bid for the Socialist Party with a critique of such ferocity that it bears examination.

France has a host of home-grown economic woes that have nothing to do with the EU. The social model is funded by punitive taxes on employing labour, creating one of the worst 'tax wedges' in the world.  A quarter of French aged 60-64 are in work – compared with 40pc for the OECD average – due to early retirement incentives. The state consumes 56pc of GDP, a Nordic level without Nordic labour flexibility.  There are 360 separate taxes, some predating the revolution. Trade unions have a legal lockhold on companies with over 50 employees, yet command 7pc of membership. "It is an inferno that sadly lacks the poetry of Dante," says Prof Brigitte Granville, a french economist at Queen Mary University London.

Hard reforms were put off by leaders of all parties. They coasted through the boom years of the euro, and now it is too late. France is trapped within the straight-jacket of monetary union. The International Monetary Fund's health check in June said the 'real effective exchange rate' is up to 9pc overvalued. It is roughly 16pc overvalued against Germany. The only practical way France can claw back competitiveness is through deeper deflation than in the rest of the eurozone, but this would prolong the slump and play havoc with nominal GDP and debt dynamics. It would be self-defeating.

 

Oil has finally found a strong bull in Savita Subramanian, commodity strategist at BofA Merrill Lynch, who believes oil will rally to $54 a barrel by this year-end and continue its march higher to touch $69 a barrel by June of next year.  The commodity team led by Savita has upgraded the energy sector to outperform. The analysts have added Devon Energy to the firm’s US 1 list and raised ratings on four other stocks.  “Oil production continues to fall as global oil & gas investment has been cut by nearly $300bn (41%) and rig counts have dropped by 37% since the 2014 peak. In contrast, low oil prices continue to drive healthy demand growth, putting the oil market on pace to see its biggest supply-demand deficit since 2011,” the report noted. They estimate the shortfall to last through 2020, if prices remain below $80 a barrel.  The firm has raised the outlook for the energy sector from marketweight to overweight considering the following factors.

List of stocks that have been upgraded by Merril Lynch

1. Marathon Oil Corp. (NYSE: MRO) to a buy from neutral, with a price target of $21, which is higher than the $18 consensus of various analysts. The new target price implies a gain of more than 33% from the current price of $15.7.

2. Noble Corporation PLC (NYSE: NE) from underweight to neutral. However, the target price of the stock is unchanged at $7.5, which is below the consensus target price of $8. The stock closed at $6.39 hitting a new multi-year low.

3. Patterson-UTI Energy Inc. (NASDAQ: PTEN) to neutral from underperform. The new target price on the stock is $22, whereas the consensus target price is also the same. The stock closed at $19.96.

4. Sasol LTD. (NYSE: SSL) to a buy from an earlier rating of neutral. While the consensus target price of the stock is $32.09, the stock closed the day at $27.71.

5. Devon Energy Corp. (NYSE: DVN) makes it to the US 1 list of top ideas for Merrill.

Notwithstanding, the valuations of the energy sector at 40 times its forward price-to-earnings (P/E) is more than double to the S&P 500’s forward P/E of 17, according to Yardeni Research.

Though the Merrill Lynch report agrees that “energy looks expensive on depressed earnings,” they believe that “higher oil prices should drive higher earnings estimates. Investors are still underweight the sector and the sector’s weight in the S&P 500 has fallen to historically bullish levels”.

Elderly Germans may have to keep working until the age of 69 if a Bundesbank proposal is adopted.

It says Berlin should consider raising the retirement age to that level by 2060, from around 65 at the moment.  The central bank says that otherwise the country may struggle to honour its pension commitments. It points out that the state pension system is in good financial health at present, but will come under pressure in coming decades. The Bundesbank says that as baby-boomers - those born in the post-World War Two period - retire, there will be fewer younger workers to replace them.. The retirement age for Germans is set to rise gradually to 67 by 2030.  However, the bank believes that from 2050 this increase will not be enough for the German government to keep state pensions at their target level of at least 43% of the average income.  It is therefore proposing pushing the retirement age up to 69.  "Further changes are unavoidable to secure the financial sustainability (of the state pension system)," the Bundesbank said in its monthly report.  But German government spokesman Steffen Seibert said they stood by retirement at 67.  "Retirement at 67 is a sensible and necessary measure given the demographic development in Germany. That's why we will implement it as we agreed - step by step," he added.

Investors’ love for bonds continued in July, with intermediate-term bonds seeing an inflow of $15 billion for the month — the largest inflow of any Morningstar category. Intermediate-term bonds, which have gained 4.74% the past 12 months, have led Morningstar’s monthly report for the past five months. At the same time, investors — mainly with advisers at their sides — yanked $27.3 billion from U.S. stock funds and $5.3 billion from international stock funds. For the most part, investors seem to be driven by fear, not greed, said Todd Rosenbluth, director of ETF and mutual fund research at S&P Global Market Intelligence. “There’s a nervousness among investors, given that we’re in the 8th year of a bull market,” Mr. Rosenbluth said. Rotating into investment-grade corporates isn’t exactly a daring move. “Verizon, ATT, General Electric are all doing fine.” Investors also seem to be less convinced that passively managed fixed income funds are better than actively managed ones, Mr. Rosenbluth said, despite the fact that any supporting data for active management is “mixed at best.” Investors put $13.5 billion into actively managed bond funds, vs. $20.5 billion for passively managed once. In contrast, investors pulled $32.9 billion from actively managed stock funds and added $33.8 billion to actively managed stock funds. The big worry is whether investors are seeking riskier types of bonds in their search for yield. Unfortunately, the answer seems to be “yes.” High-yield bonds, which have returned an average 13.59% this year, saw a $3.2 billion inflow in July. Emerging-markets bond funds saw a $2.9 billion inflow. Those funds have gained 12.88% this year.  Rising interest rates could short-circuit any bond rally, although that doesn’t seem to be a danger in Europe, where the economy is still stagnant. But both high-yield funds and emerging-markets funds could take significant hits if the U.S. or world economy falls further.

Oil charges into bull market territory on hopes of output freeze Brent crude charged into bull market territory, smashing $50 a-barrel, as the world’s biggest oil producers prepared to discuss a possible output freeze at next month’s Opec meeting in an attempt to curb the global supply glut.Since hitting a low of $41.69 on August 3, oil has rallied almost 22pc, touching an intraday high of $50.87 yesterday - its highest level since July 4 when it touched $51.29. The latest leg up in the black stuff is pinned on the hopes that Opec’s meeting in Algeria on September 26 to 28, which takes place on the sidelines of the International Energy Forum, will revive talks on freezing production levels to help bolster prices. It was also lifted by the weak dollar which makes commodities cheaper for other currency holders. However, the oil price bounce comes less than three weeks after it fell into bear market territory, having fallen by more than 20pc from June 8 to July 29 amid oversupply concerns and pressures about slowing economic growth. Joshua Mahony, of IG, cautioned: “Given that this market turned higher almost instantaneously after confirming a bear market earlier in the month, perhaps this definition should be something to worry about rather than drive enthusiasm.”

The return of the bulls prompted oil majors to make gains, BP rose 2.8p at 435.6p, Tullow Oil climbed 5.5p to 239.6p and Amec Foster Wheeler advanced 13.5p to 540.5p.

Britain’s economy will slow down but should not go anywhere close to a recession, according to economists at credit ratings agency Moody’s, while growth in the rest of the world is also “stabilising.” Although markets dived on the referendum result in June, stock prices have recovered and now economists also believe the impact of the vote will be relatively modest, compared with some early fears.  The lower pound should support economic growth in the UK, Moody’s said, while the government is expected to loosen the purse strings to shore up GDP.

Moody’s economists predict growth of 1.5pc this year and 1.2pc in 2017.

 

SAN FRANCISCO — Cisco Systems, the computer-networking giant that is in the midst of a major technological pivot, on Wednesday said it will eliminate up to 5,500 jobs.

The job reduction is Cisco's second major one in two years. The San Jose, Calif.-based company laid off 6,000 in a restructuring in 2014.  The Silicon Valley company announced the cuts — about 7% of its global workforce — during its fiscal fourth-quarter earnings report. Sluggish spending by corporations and telecom carriers on network switches and routers, Cisco's big moneymakers, have prompted it to shake up staff ranks as it turns toward other fields, such as cloud computing.  The news sent Cisco shares (CSCO) down 1%, to $30.36, in after-hours trading.

Cisco slightly beat analysts’ estimates with a quarterly profit of $2.8 billion, or 56 cents a share, on revenue of $12.64 billion, off 1.6% from a year ago. Adjusted profits would have been 63 cents. Analysts surveyed by FactSet predicted adjusted earnings of 60 cents a share on revenue of $12.57 billion.

The Financial Services and Markets Authority (FSMA) of Belgium has issued an announcement to inform that the authority establishes a framework for the distribution of OTC Derivatives (Binary options, CFDs, etc.).According to FSMA’s announcement, the distribution of certain financial derivatives among Belgian retail clients will be restricted as from 18 August 2016. Certain derivatives such as binary options, CFDs with leverage, etc. may not be distributed, and certain distribution practices will also be prohibited. The Regulation drawn up by the Financial Services and Markets Authority (FSMA) on this matter has been approved by royal decree.  The Royal Decree of 21 July 2016 is published with today’s date in the Belgisch Staatsblad/Moniteur belge (Belgian Official Gazette). The Royal Decree approves the FSMA’s Regulation (published in French and Dutch) on the distribution of OTC derivatives. The Regulation applies to derivative contracts distributed to consumers in Belgium, usually from abroad, via electronic trading platforms. According to the providers, these are products that can generate high yields at a time of historically low interest rates. In reality, however, these are products that are marketed aggressively and are extremely risky, often involving transactions over a very short period and without any connection to the real economy.

The Regulation consists of two elements which apply cumulatively. The first element is a ban on distribution of a few specific types of derivative contracts to consumers via electronic trading platforms. These are:

• binary options: a binary option is a contract in which one party undertakes to pay the other party a specified amount if the value of a given asset (listed share, currency, commodity, index, precious metal, etc.) changes in a specified direction within a predetermined – sometimes very short – period (a few seconds or minutes);
• derivative contracts whose maturity is less than one hour;
• derivative contracts with leverage, such as contracts for difference (CFDs) and rolling spot forex contracts. A CFD is a contract between a buyer and a seller in which the parties agree to exchange the difference between the current price of an underlying asset (listed share, currency, commodity, index, precious metal, etc.) and the price of that asset at the end of the contract. A rolling spot forex contract is a type of contract for a foreign exchange transaction which is renewed indefinitely until one of the parties closes its position; at that point, the transaction is settled in cash on the basis of the changes in the underlying currency since the beginning of the contract.

IMF surveillance, intended to detect economic vulnerabilities and imbalances, was inadequate. While staff sometimes pointed to booming credit, gaping current-account deficits or stagnant productivity, they downplayed the implications. This reflected a tendency, conscious or not, to think that Europe was different. Its advanced economies did not display the same vulnerabilities as emerging markets. Strong institutions such as the European commission and the European Central Bank (ECB) had superior management skills. Monetary union, for some less-than-fully articulated reason, changed the rules of the game. Such self-serving claims were in the interest of European officials, but why was the IMF prepared to accept them? One answer is that European governments are large shareholders in the Fund. Another is that the IMF is a predominantly European institution, with a European managing director, a heavily European staff and a European culture.  Still on familiar ground, the report goes on to criticise the IMF for acquiescing to European resistance to debt restructuring by Greece in 2010; and for setting ambitious targets for fiscal consolidation – necessary if debt restructuring was to be avoided – but underestimating austerity’s damaging economic effects.  More interestingly, the report then asks how the IMF should coordinate its operations with regional bodies such as the European commission and the ECB, the other members of the so-called troika of Greece’s official creditors. The report rejects claims that the IMF was effectively a junior member of the troika, insisting that all decisions were made by consensus.