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News for November 13

Trump’s administration keeps pressuring on Iran, imposing a new round of sanctions against the country’s oil exports. A huge number of 700 records has been added to the blacklist including businesses and individuals related to the oil trade as well as the transportation sector. The U.S. limitations approached the level of Obama’s period before the nuclear deal with Iran in 2015. Several countries are still allowed to buy Iranian oil, however, the funds will be placed on special accounts in foreign banks and the government will be able to use them just for buying foods and medicine. The target is to get Iran out of the black gold market completely and force the local economy struggling due to the country’s unaccepted behaviour. The cut in Iranian supply might influence the oil price to rebound from the recent bottom level as it’s been declining for several weeks in a row. OPEC members are also interested in such a scenario, having negotiations to cut their production as well in order to lift oil prices.

Trade wars concerned have eased somewhat after Trump announced a deal with China as soon as in November during the G-20 summit in Argentina. Several key U.S. ministers have got a President’s order to start working on the deal conditions after Trump had a ‘long and promising’ conversation with his Chinese colleague Xi Jinping last week. Some analysts suggested that Donald Trump realized the consequences of his foreign policy on the stock market’s plunge in October and decided to ease the pressure in the scope of midterm elections in the United States. Anyway, the market players comprehended that news as positive for the risk appetite and equities managed to recover a significant part of October’s losses recently. If the deal did not happen in November, the U.S. Secretary of State would be ready to impose new import tariffs on the rest of the Chinese goods that are still out of the list with the total volume of $257 billion, according to official import data.

Source: US Embassy and Consulates in China

The Brexit topic keeps weighing on the UK financial sector with the negotiations still in process. British banks will get access to the European market after the Brexit, according to several sources in May’s government. The upcoming three weeks will answer the question of whether the UK - EU negotiations really reached a deal, as 95% of the issues were agreed lately. The financial market conditions will remain favourable for the British banks, leaving the door open for the financial institutions in the European market. As long as the British laws are still related to the European norms and the option of arbitrage definition for claims stays in the range of 30 days, either side would not have a chance to prohibit the banks’ participants in both sides of the agreement. The story keeps rolling while some of the analysts already lost the hope for a deal scenario.

One of the largest Japanese hedge funds, Mitsubishi UFJ Kokusai Asset Management Co., had increased its investment in the U.S. and Spanish government debt on the expectations of steepening the yield curve of the 10-year Treasuries. A potential economic slowdown would also influence the mixed market to become more attractive in the long-term perspective, as the U.S. Federal Reserve does not have any choice rather than keep hiking the interest rates. At the same time, the fund was selling European securities excluding Spanish bonds. Geopolitical tensions and protectionism, oil prices and equities’ volatility would have an impact on long-term bond yields to keep rising in the light of global economic slowdown. Mitsubishi UFJ has increased its portfolio of the U.S. Treasuries up to 46.4% from 36.8% in April. Although many economists predict the yield curve to steepen next year, there are still some doubts about a possible retention in the largest economy in the world, as the growth pace is sustainable and robust. Such uncertainty influences a mixed picture in the fixed-income market. Nevertheless, 10-year bond yields are still hovering near 7-year highs.

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