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.

A cultural association based near Barcelona is asking the mobile messaging service WhatsApp to add the porrón to its list of emojis, claiming the spouted glass pitcher possesses a “cultural and social meaning” that warrants recognition. In a petition at Change.org, the Blaus de Granollers argue that the wine flask – beloved of locals and feared and abused in equal measure by tourists who struggle to master its vinous stream – is “a symbol of our land” that occupies a unique place in Catalan culture. “[It] is much more than a kitchen tool,” the group says in a letter to WhatsApp’s CEO, Jan Koum. “It helps to create community, to strengthen bonds during meals.” The porrón, it adds, is passed from hand to hand, allowing many people to drink from the vessel, thereby creating a sense of cohesion and equality.  “It makes you feel part of a team. Besides, it helps us Catalans remember our roots – and you already know that if you lose your roots, you lose your identity.”

Perpetually weak growth has bedevilled attempts to tackle Greece’s chronic debt problem. Back in May 2010, when the European commission, the European Central Bank and the International Monetary Fund organised the first bailout, it was assumed that a rapid recovery and tight budget controls would see Greek national debt as a share of gross domestic product fall steadily. These forecasts proved to be wildly optimistic. As Greece sank deeper and deeper into recession, the debt ratio carried on rising, and now stands at about 180% of GDP.  Unfortunately, lessons have not been learned. The 2015 bailout package assumes that Greece will run a budget surplus, once debt interest payments are excluded, of 3.5% of GDP year in and year out. The IMF, which now has a more realistic assessment of Greece than the commission or the ECB, says few countries have managed to sustain budget surpluses of this size, and that Greece could do so only by further cutting wages and pensions. The IMF also thinks “it is no longer tenable” to imagine that Greece can move from having one of the eurozone’s weakest productivity growth rates to the highest. The IMF says that without debt relief, Greece’s debt could hit 250% of GDP by the middle of the century. Germany would prefer those discussions to be delayed until after its election in autumn next year. But the chances are that Greece will be back in the headlines before then.

   After the countless institutions and committees created on a European level, but also at the level of the EU member states, to ensure financial stability, why is the ECB bringing back the issue of state aid for banks?  Doesn't this automatically discredit the central bank in the Eurozone as overseer of the banks of systemic importance?  A day after the statements of the ECB officials, it was the turn of the governor of the Bank of Italy, Ignazio Visco, to mention that "in times of high uncertainty, the intervention of the state cannot be ruled out", because there is a risk of confidence in the banking system decreasing, as Financial Times writes. The questioning of the application of the European banking resolution framework, just a few months after its coming into effect, shows that indeed, the situation of the banking system in Europe is much more dire than the authorities will admit. Nevertheless, it is quite unlikely we will see defaults, in the classic sense of the word, among banks of systemic importance, but the escalation of the tensions between the governments of the Eurozone and the "separatist" tendencies is very likely. Until the market is allowed to function and to "clean up" the bank balance sheets, the European crisis will continue, despite the states' interventions, because it is increasingly clear that the printing press of the ECB will not help with financial stabilization and does not resolve the problem of the banks' solvency.  Any other "solution" does nothing but impose unbearable costs on European citizens and transform the resumption of economic growth into an impossible dream.