November 27th – The BESA Times

Twenty-eighth Edition - Sunday, November 27th

Every week, a complete snapshot of what happened around the world in the past seven days

Notable Headlines

Fidel Castro, the controversial and revolutionary leader, who established a communist regime in Cuba in 1959 and ruled for the following 5 decades died in Havana on November 25th at 10:29 PM local time, aged 90. The funeral will be held on December 4th, preceded by a nine-day period of mourning in Cuba. After a complicated surgery which Castro had undergone 10 years ago, he handed over the official government and party functions to his younger brother Raul. In 2006, Raul became a head of government and in 2008 he officially took over as a president and began a process of reforms called “update of socialist model of economy”. Since then, Castro stayed on the sidelines, announcing from time to time own comments on current events, such as Barack Obama’s visit in Cuba.

Saudi Arabia withdrew from planned talks with non-OPEC nations including Russia, as in their view the meeting was pointless taking into account that cartel had not yet reached deal itself. Although two months ago in Algiers, OPEC agreed to limit oil production to a level between 32.5m and 33m barrels a day, it is still unclear how the cuts would be distributed between cartel members. One of the major contributor to that gridlock is Iran, which insists it should be exempt from output constraints as the country is still recovering after years under western sanctions. Another country remaining reluctant to output reduction is Iraq, fighting an expensive war against Islamic State and disputing the exact level of cuts it is willing to accept. Amid these uncertainty, Brent fell 3.6 percent to $47.24 a barrel in London on Friday. The next OPEC meeting will be held on November 30th in Vienna.

US equities funds have experienced an inflow of more than $5.1bn last week as for the first time since 1999 the four major stock indices hit all-time high amid investors’ optimism reflecting Donald Trump’s statements about bolstering economic growth through infrastructure spending and tax cuts. Stronger dollar acted in favor of the smaller companies, relying more on domestic sales – The Russell 2000 index of small-caps has risen 12.3 per cent since the election. At the same time, global bond funds faced an outflow of $8.5bn, with more than 30 percent coming from the U.S., following a sharp increase of yields since the election. According to market strategists, this, combined with potential trade negotiations might work against larger companies, whereas the smaller ones should remain relatively insulated.

What to remember of last week’s news?

The world’s largest healthcare group, Johnson&Johnson announced on Friday that it is involved in preliminary discussions with the largest European biotech company, Swiss based Actelion, regarding a potential takeover. That move would allow J&J to diversify their prospects and obtain access to a portfolio of drugs predominantly focused on treating pulmonary arterial hypertension, enhancing the company’s existing pharma franchise. Actelion is currently valued at about $20bn.

The oldest bank in Peloponnese, National Bank of Greece declared that it is willing to sell its distressed debt in batches, once country risk dwindle and bids improve. Leonidas Fragkiadakis, the CEO, pointed on the presence of inflated risk premia chased by investors, which in his view might imply not so attractive prices. Like other country’s lenders, National Bank of Greece, with assets totaling 82 billion euros ($87 billion), is obliged to meet quarterly targets by reducing exposure to non-performing loans.

Understand in pictures…

Although Donald Trump’s victory in U.S. presidential election had been predicted to raise uncertainty and disturb the markets, we are observing a rally of American equities, including those from banking sector. Bloomberg explains why big banks love Donald Trump.

A week in the financial markets

Our Homemade Article

P2P Lending: A Bank by the People, of the People, for the People

by Evan Oliner & Felix Lim for BESA

What to expect for next week?

On November 30th a six-month OPEC Ministerial meeting will be held in Vienna. At the previous gathering in September, the cartel agreed to cut output to 32.5-33.0 million barrels per day, but details of the cuts were postponed until the November meeting. If participating countries do reach an agreement, the next steps will be focused on the talks with non-OPEC members with accelerated price boom if Russia agrees to co-operate with OPEC and limit production.

ECB’s Mario Draghi will informally open the week ahead where, appearing before the European Parliament’s Economy Committee in Brussels on Monday to answer questions from lawmakers concerning ECB’s view on economic and monetary developments and the impact of Brexit on financial stability in the region.

Did you know?

Bletchley Park, once the home of Britain’s codebreakers during World War 2, is preparing to host the first British national college of cyber education, aimed at 16- to 18-year-olds. Beside the National Museum of Computing, students, whose first intake is planned for September 2018, will learn not how to break codes, but rather how to protect them. The school, part privately and part publicly funded, will sit where computer scientists including famous Alan Turing - helped crack the German Enigma and Lorenz ciphers, contributing significantly to shortening the conflict. The plans for the endeavor were announced by QUFARO, a body formed by cyber security experts, as part of an initiative to establish a UK national cyber security hub. Moreover, the organization plans to launch a 50 million pound ($62.15 million) fund to pursue investment opportunities in the cybersecurity industry.