1 Global banking fears hit shares (Jill Treanor in
The Guardian) Growing anxiety about whether banks can withstand continued low
interest rates and fears of a re-run of the 2008 financial crisis continued to
stalk markets when shares fell to a three-year low and bank shares remained
volatile.
As shares in Deutsche Bank plumbed new depths on
Tuesday and the bank’s chief executive had to reassure its 100,000 staff that
it was “rock solid”, concerns mounted about the health of the global banking
sector. “Many are asking ‘crisis’ questions: ‘Is there risk of a financial crisis
re-run’ and ‘can a large European bank face a liquidity event’?” said analysts
at Goldman Sachs.
The Goldman analysts reckon the alarm bells are
ringing too loudly. They recognise that market confidence is “fast
deteriorating” but point to the €800bn (£625bn) of capital that European banks
have raised since the 2008 crisis as evidence that the fears are overdone –
together with the fact that customers are continuing to make deposits and there
are no signs of strain in the crucial money markets.
The collapse in confidence in the banking sector
since the start of the year has been dramatic. Shares in Deutsche Bank have
slumped by almost 40%, UniCredit of Italy is down more than 40% while Credit
Suisse is down 37%. The Europe-wide Stoxx 600 banking index is down 27%.
In the UK, Standard Chartered and Barclays bothfell
more than 25% while Goldman Sachs and Morgan Stanley in the US were also caught
up in the rout, down 17% and 25% respectively.
When the US banks reported their results last month,
they barely met market expectations. Major European banks such as Deutsche and
Credit Suisse have recorded their first losses since the 2008 crisis.
The last financial crisis was exacerbated by
little-understood investment vehicles such as CDOs (collaterialised debt
obligations), synthetic CDOs and monoline insurers. But this time the issues
are more straightforward: they centre on concerns about economic growth and the
impact of low oil prices. It is proving harder for banks to generate profits
and is calling into question the business models of some banks – Deutsche and
Barclays among them.
2 Oil glut threatens price recovery (BBC) A recent
rise in oil prices is a "false dawn" and the oversupply of crude is
set to worsen, according to the International Energy Agency (IEA). The IEA
expects oil stocks to grow by two million barrels a day in the first quarter
and 1.5 million barrels a day in the following three months.
In January, Brent crude hit a 13-year low of $27.67.
It recovered a bit, but on Tuesday was down 7.2% at $30.50. But that is still a
long way from the $112 level reached in June 2014.
The IEA forecast that stock building could continue
in the second half of 2016 at a rate of 300 million barrels a day. It said:
"If these numbers prove to be accurate, and with the market already awash
in oil, it is very hard to see how oil prices can rise significantly in the
short term."
Meanwhile demand for oil is expected to weaken. The
IEA forecasts that demand growth will fall to 1.2 million barrels a day this
year, from the 1.6 million barrels a day seen in 2015, the IEA said. The think
tank also questioned whether the recent rise in prices was a "false
dawn" and concluded that a number of conditions increased the risk of weak
oil prices.
These included doubts that Opec, the oil cartel, was
in talks with other oil producing nations to reduce supply. It also quashed
speculation that Opec nations would cut output this year, stating that output
from Iraq reached a new record in January. Iran has increased production ahead
of sanctions being removed and preliminary data suggested that Saudi Arabia's
shipments had increased.
3 India rupee free-fall to continue (Abdul Basit in
Khaleej Times) The free-fall of the Indian rupee against the US dollar is
expected to continue for a couple of months for numerous reasons, according to
an industry specialist. On Monday, the rupee closed at 67.93 versus a dollar
while its exchange rate jumped from Rs17.96 on January 1 to Rs18.49 against the
UAE dirham. The rupee opened this year at 66.17 against the greenback.
A weaker rupee will boost remittances in rupee terms
from the UAE and other Gulf countries and at the same it will also help Indian
exporters to remain competitive in international market where the greenback is
strong against all currencies, UAE Exchange president Y. Sudhir Kumar Shetty said.
The global economic scenario is not good as large
economies in Europe are not doing well in addition to China problem, Shetty
said, adding that there is no point for a stronger Indian currency when other
currencies are weak. He pointed out that it's ideal if the rupee will remain
weak, so Indian exporters will become competitive with other exporters in the
international market.
Shetty explained that dollar strength was one of the
causes of the rupee being very weak. Another reason is stock markets in India
are going lower and lower so foreign investors have taken their money out of
India resulting in strong demand for dollar, he added.
"None of the factors are helping the rupee to
strengthen. It's a fact that historically, the rupee gets weaker on average
five per cent per annum. The trend will continue but it could be four per cent
or three per cent."
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