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News for November 27

A potential recession in the United States was in focus of the financial markets players again. As long as the chances for such a negative scenario jumped to 35% last week, billionaire investor Paul Tudor Jones joined the doves’ camp, suggesting that the corporate bubble could burst in the U.S. The recent growth in equities was caused by the tax cut and speculative positioning, according to Tudor Investment Corp’s owner, managing the fund with the total volume of 7 billion dollars. The soft monetary policy with zero or negative interest rates was influencing the market for an over-lending trend which is coming to an end. The corporate debt sector will face one of the toughest stress-tests in the latest history and this scenario promises to be scary for the markets. Jones also underlined that the current leverage levels are dangerous for the financial stability, even if the regulator would react accordingly. The Federal Reserve is expected to pause the monetary policy tightening cycle as early as in spring 2019. Equities, commodities and currencies are overbought, in Jones opinion, however, the uptrend might have a certain continuation before the bubble will burst.

Source: YouTube

Oil prices keep falling, creating a huge concern for the largest market players. Three countries - the U.S., Saudi Arabia and Russia - lead the market with the overall volume more than 15 OPEC members together. According to Julian Lee, three people control the price of oil currently - presidents Donald Trump and Vladimir Putin and Crown Prince Mohammed Ben Salman, influencing the oil price action in 2019. However, each of them has different goals. Saudi Arabia is dependant on the price of oil due to the country’s huge spending part of the budget in 2019 and the best level fo the price is $73.3 per barrel for the kingdom, according to the International Monetary Fund’s calculations. The current level of $53 per barrel is definitely not the scenario which Ben Salman was hoping for, and Saudi Arabia announced oil output cut by 500 thousand barrels per day in December. The kingdom is also pushing on OPEC members in order to decrease the overall production by 1 million barrels per day. That’s not the option for Donald Trump who started aggressive Twitter pressure, underlying the need for a fair price, regulated by supply-demand relations. Vladimir Putin was rather indifferent, stating that the price of $70 per barrel is completely suitable for Russian producers who do not want to cut the output, drilling more fields they’ve been investing in previously. Meantime, the global demand slowed down and oversupply weighs on oil market players, pushing the black gold price towards multi-month lows.

One of the main reasons for the price of oil to decline is the huge trend for electric cars demand. German giant car manufacturer - Volkswagen - joins the electric rush, planning to invest 44 billion euros (50 billion dollars) in electric cars development in the upcoming five years. The company’s target is to produce 25 million cars until 2025. Tesla’s achievements and the current demand for electric cars encouraged Volkswagen to change the company’s investment plans, shifting towards the new trend. Porsche and Audi's electric models are going to the market in 2019, while a budget brand VW I.D. is set for release in 2020 in the low-cost electric cars segment. At the same time, the company’s management is looking to the Chinese market closely, planning to invest $4.5 billion in the rapidly growing market, according to the Xinhua Agency. Electric cars manufacturing, charging stations development and other technological segments are among the directions to be funded. Volkswagen also made a partnership deal with Apple to produce the driverless car for Apple employees. The popular model of VW minivan T6 Transporter could be rebuilt in the self-driven shuttle.

France and German try to find new ways of the European consolidation by offering an idea of the common Eurozone budget. That plan did not meet support in Brussels though. In particular, Netherlands Finance Minister opposed that idea as the result of European finance ministers meeting on Monday. Vopke Hoekstra doubts that such a plan comes in accordance to Netherland tax payer’s interests. According to his words, other finance ministers have expressed concerns about that plans as well. At the same time, administrative authorities in Berlin and Paris have supported the idea of creating the common budget structure in order to keep the Eurozone stability. That plan is a part of new reforms offered by French President Emmanuel Macron earlier. However, the reaction from the German side is still rather modest, as Angela Merkel discussed the idea of creating a common EU army, ignoring other proposals. Budget planning is made in the European Union in terms of 7-years period. The current budget period started in 2014 and the next one will begin in 2021. The overall discussion of the budget reforms started in the scope of upcoming Euro Parliament elections which will take part in 2019.

One of the largest banks in the world, Deutsche Bank, faces a scandal with Russian money laundering. Deutsche Bank’s shares plunged to historical lows in Frankfurt exchange on Tuesday right after the announcement about the bank’s involvement in Russian shadow capital operations. According to Bloomberg's source close to the U.S. Department of Justice, Deutsche Bank used to perform operations as the clearing agent for Estonian department of Danske Bank, through which, as the investigation showed, the total volume of 200 billion euros was transferred from the Russian Federation to offshores and western jurisdictions. Although Deutsche Bank is not the subject of the investigation yet, investors run out of the bank suffering losses three years in a row, especially in the scope of such a painful topic as money laundering. The bank’s shares lost 48% of the value in 2018, cutting 19 billion euros from its capitalization.

Source: itespresso.es

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