The first half of 2016 has been a roller-coaster for financial markets. A combination of uncertainties surrounding the U.K.’s vote to leave the European Union and weaker-than-expected corporate earnings results across the region means a tough second half looms.
European banks, in particular, have had a very tough six months as the shock and volatility around Brexit sent banking stocks south. Major European banks like Deutsche Bank and Credit Suisse saw their shares in free-fall after the referendum’s results were announced. In the U.K., RBS was the worst-hit, with its shares plunging by more than 30 percent since June 24.
The current uncertainty over when the U.K. will start the process of quitting the EU has banks on tenterhooks. But a source told CNBC that banks are “preparing for an economic nuclear winter situation.”
Italian bank stocks are crashing (with BMPS down 40% year-to-date) as Reuters reports that investors are growing increasingly nervous about how the sector will cope with lower interest rates and a 200 billion euro ($218 billion) pile of loans that are unlikely to be repaid. The broad banking sector is down 4% with stocks suspended, and in light of this bloodbath, Italian regulators have decided in their wisdom, to ban short-selling of some bank stocks (which has driven hedgers into the CDS market, spking BMPS credit risk). Continue reading →
Asian shares have retreated. Even the Nikkei has fallen back to two-year lows, following Chinese shares as they further their sharp correction plunge, dropping so far as 2.8%. There are fears of a continuing economic decline in the Chinese economy. The Shanghai Composite Index (SSEC) has fallen another 2.8% after Tuesday’s 6% drop. Continue reading →
The AIIB agreement was signed in Beijing on June 29.
A framework agreement for the operations of the Chinese-led Asian Infrastructure Investment Bank was officially signed in Beijing today, with representatives from the 57 founding members gathering for the ceremony. However, only 50 countries actually signed the agreement – seven (Denmark, Kuwait, Malaysia, the Netherlands, the Philippines, South Africa, and Thailand) have to get the AIIB charter formally passed through domestic processes before they can officially sign. Chinese media said the seven are expected to join by the end of the year (although things may be more complicated in the case of the Philippines).
Despite the 6.5% stock market rally over the last three months, a handful of billionaires are quietly dumping their American stocks . . . and fast.
Warren Buffett, who has been a cheerleader for U.S. stocks for quite some time, is dumping shares at an alarming rate. He recently complained of “disappointing performance” in dyed-in-the-wool American companies like Johnson & Johnson, Procter & Gamble, and Kraft Foods.
In the latest filing for Buffett’s holding company Berkshire Hathaway, Buffett has been drastically reducing his exposure to stocks that depend on consumer purchasing habits. Berkshire sold roughly 19 million shares of Johnson & Johnson, and reduced his overall stake in “consumer product stocks” by 21%. Berkshire Hathaway also sold its entire stake in California-based computer parts supplier Intel. Continue reading →