Billionaire George Soros has cut his investments by almost 40% in shares of US-listed companies, in the first quarter of 2016, and has instead bought a USD 264 million stake in the world's biggest gold maker, "Barrick Gold" Corp., according to Bloomberg. The agency notes that the worth of the holdings of Soros' fund, Soros Fund Management, has decreased 37% between January and March 2016, to 3.5 billion dollars.   Soros has acquired 1.7% of "Barrick", a company headquartered in Toronto, whose shares have more than doubled this year, amid cost cutting and debt reduction measures. Just since March 31st, "Barrick" shares have risen 39%.  Soros also revealed he holds "call" options on 1.05 million shares in the SPDR Gold Trust, an ETF which tracks the price of gold. The American billionaire, who has built a fortune of 24 billion dollars through market investments, is turning to gold as the global economy is faced with risks. Soros recently warned about the risks China's economy could cause, saying that he was reminded of the crisis which affected the US in 2007-2008, generating a global recession.  In this context, investing in gold is seeing increased demand. June delivery gold futures prices rose 0.4% yesterday, at 10:17, on Comex New York, to 1,279.80 dollars an ounce. In early May, the price of gold passed 1,300 dollars an ounce, amid speculations that the US central bank would slow down the tightening of monetary measures, which have caused the dollar to weaken. According to "BNP Paribas" SA analysts, the price of gold will rise to 1,400 dollars/ounce this year, and "ABN Amro Group" NV predicts a price of 1,370 dollars/ounce.  Soros has sold a stakein"Level 3 Communications" Inc., which was worth 173 million dollars on December 31st, 2015, and a stake in "Dow Chemical" Co., which was worth 161 million dollars. The investor has also sold his stakes in "Endo International" Plc and "Delta Air Lines" Inc.
The price of spot gold has risen 16% in the first three months of 2016, the biggest quarterly rise since 1986, according to Bloomberg. The Bloomberg index which tracks the evolution of 14 major gold producers has doubled this year, after a decline of 76% in the 2011-2015 period.

The US central bank left interest rates unchanged at 0.25%-0.5% for a third time this year when it met in April. After the Fed raised rates from near zero for the first time in almost a decade in December, it was expected to hike rates four times this year. The forecast has since been adjusted to just two hikes in 2016.  The US Federal Reserve could raise interest rates as early as June, according to minutes from its April meeting, with Fed members arguing the risks of a slowdown in the global economy have receded. Yet even as the members have become more bullish about US economic resilience, they remained cautious about raising rates. They voted 11-1 to keep interest rates unchanged for a third time this year at the April meeting. The minutes released on Wednesday listed concerns about the slowing growth of US economy in the first quarter, Britain’s potential exit from the EU and lingering uncertainty over China’s economy. “Since the March FOMC [Federal Open Markets Committee] meeting, foreign financial market conditions eased, on net, and overall risk sentiment appeared to have improved,” the Fed noted in its minutes.  Yet concerns about potential risks of a slowing US economy and global markets remain.  “Many others indicated that they continued to see downside risks to the outlook either because of concerns that the recent slowdown in domestic spending might persist or because of remaining concerns about the global economic and financial outlook,” according to the minutes. “Some participants noted that global financial markets could be sensitive to the upcoming British referendum on membership in the European Union or to unanticipated developments associated with China’s management of its exchange rate.”

The GDP growth of emerging markets is set to fall from 4.4pc last year to just 4.2pc in 2016, before rising to 4.8pc in the following year. These economies have in recent years served as the engines of global growth.  Moody’s said weak oil commodity prices and falling demand for exports could also  drag on the world economy.  Growth forecasts for Argentina, Brazil, Mexico, and Turkey have been slashed. All are emerging market economies which have been at the sharp end of the commodities rout. It is thought that their weakness will have knock-on effects for the world’s advanced economies.

Despite the effective tax cut offered by low oil prices to importers of the commodity, the turmoil that engulfed financial markets at the beginning of the year will be enough to prompt a slowdown among advanced G20 markets this year, Moody’s believes. 

The rating agency expects the GDP of advanced major economies to rise by 1.7pc this year, compared with a 1.9pc increase in 2015. Elena Duggar, a Moody’s associate managing director, said advanced economies had failed to return to the growth rates enjoyed before the recession, as they have done historically following economic busts.  Ms Duggar said that the factors pulling down on global growth “may prove to be enduring, and global real GDP growth will remain low for some years”. She added that while “financial market volatility from earlier in the year has abated, it showed that the risks of weaker growth scenarios have become more tangible”.  “The global recovery has weakened further and prospects across countries remain uneven and generally weaker than over the past two decades. In addition, global trade remains subdued, while spillovers from emerging markets shocks to financial markets globally have increased substantially.” Moody’s anticipates that oil prices, currently just below $50 a barrel, will average $33 across 2016, before rising to an average of $39 in the following year. Alongside the commodity slump, the ratings agency warned that the possibility of higher US interest rates and the risk of a more severe slowdown in China could further darken the outlook.

 

Austrian authorities pushed to extend their internal border control checks to include all of Italy but were shot down by other EU states.  The Council, representing member states, on Thursday (12 May), agreed to extend existing border control checks in Austria, Germany, Denmark, Sweden and Norway for another six months. Member states approved a recommendation by the EU commission to extend existing checks because of "deficiencies" in the protection of EU external borders in Greece.  The recommendation authorised Austria to continue checks at its borders with Hungary and Slovenia.  Two EU officials confirmed Vienna had at an EU ambassadors meeting on Wednesday attempted to expand the scope of its existing controls to also include Italy. "The question came from Austria: 'What about all of our borders, what about our border with Italy? Can we not use controls there?' The commission said ‘No' and the council said ‘No'," said the EU official.  Another EU official said Austria had also attempted it "but didn't get support".  A diplomat in Brussels said the Austrians had wanted to have some flexibility, but the EU commission insisted the extension would only apply to checks already in place.

Austria's interior minister Wolfgang Sobotka in April had threatened to seal the border at the Brenner Pass with Italy over fears refugees would seek to enter from Italy.  Plans are in place to erect a 370 metre chain-link fence with four checkpoints on the Alpine highway that links the two nations.  The plan is to be ready to put into practice a border management like between Austria and Slovenia, if necessary," noted a diplomat.  Italy's prime minister Matteo Renzi has critised any barrier along the pass by the Austrians as "flagrantly against European rules, as well as against history, against logic and against the future".  But the move by Austria point to growing fears in Vienna that a sudden influx of people will cross from Libya into Italy over the summer months. Austria can invoke a different set of rules under the Schengen Borders Code to impose controls with Italy, should it so choose.   "They [Austria] can unilaterally introduce controls for eight months if they are proportionate and justified by the evidence," noted the EU official. EU law allows member states to impose a two-month control in unforeseen circumstances if there is an emergency. It can then impose another six months for foreseen circumstances. The EU commissioner for migration Dimitris Avramopoulos has no desire to see any controls at the Brenner pass.  Last week, he sent a letter to the Austrian authorities outlining EU rules on the matter. I have sent a letter that we do not agree with the introduction of border controls or border checks," Avramopoulos told euro-deputies in Strasbourg on Wednesday.  The existing internal controls in Austria, Germany, Denmark, Sweden and Norway will be maintained despite a dramatic drop in the flow of refugees into Europe when compared to April and May last year. The move to extend the checks was launched following an unannounced visit by experts from the EU border agency Frontex to verify Greek border controls last November.

They said Greece had "serious deficiencies" on how it manages its borders, posing a larger existential threat over the entire passport-free Schengen area. The threat gave the EU the legal basis to prolong the checks. Greece, for its part, denies that it cannot manage its own borders and notes it has met some 43 out of 50 recommendations from the EU commission to plug the gaps.

 FT notes that even though China's debt generates fears, more worrisome is the speed it has been accrued at. If it has now reached 237% of the GDP, at the end of 2007, China's debt was 148% of the GDP. "Every major country that has rapid increases in debt has faced either a financial crisis, or an extended slowdown of the growth of the GDP", says Ha Jiming, chief investment strategist at "Goldman Sachs".  The IMF has recently warned that the Asian country is posing an increasingly higher risk to the developed economies, due to the size of its debt and the ties it has with the global financial marketing.  According to specialists, it is difficult for any economy to productively use such a volume of capital over the short term, due to the limited number of profitable projects.   As the investments' returns decrease, even more loans are at risk of becoming non-performing, according to FT.   Economists feel that China's health is at risk, but their opinions on the country's future vary. One of the extreme scenarios is an acute crisis - a "Lehman" moment which will resemble the one in the US in 2008, when that bank collapsed, and other lenders crashed, paralyzing the market. Other economists estimate a chronic slump in China, as has been happening in Japan, where economic growth has been stagnant for years.

 According to data from the Bank for International Settlements (BIS), the total debt of emerging markets was 175% of the GDP in the third quarter of 2015. The BIS estimates China's debt at 249% of the GDP, compared to 270% in the Eurozone and 248% - the US' debt.  Foreign investors are set to remove approximately 538 billion dollars from the Chinese economy in 2016, the International Institute for Finance estimated yesterday, according to Reuters.   According to the IIF, the pace of capital outflows from China has slowed down, as this year's amount will be approximately 20% lower than the 764 billion dollars investors took out last year, according to Agerpres. However, the IIF warns that that capital outflows may pick up speed again, if concerns over a disorderly depreciation of the Chinese Yuan were to appear.  "A sudden drop of the Yuan would spark off new sell-offs of risky assets and a flight of capital portfolios to the emerging markets", a recent report of the IIF states, which mentions: "Furthermore, a sudden depreciation of the Yuan could spark off a devaluation of other emerging markets, especially among those with strong commercial ties with China".  Approximately 35 billion dollars have exited China in March, which takes the total since the beginning of the year to approximately 175 billion dollars, far below the outflows that took place in the first half of 2015.