1 Second yuan devaluation stuns global markets
(Phillip Inman & Fergus Ryan in The Guardian) China’s stunning of the
world’s financial markets on Wednesday by devaluing its currency for a second
consecutive day, has triggered fears its economy is in worse shape than investors
believed.
The move sent fresh shockwaves through global
markets, pushing shares sharply lower and sending commodity prices further into
reverse as traders feared the move could also ignite a currency war that would
destabilise the world economy.
The Chinese authorities have acted after a string of
poor economic figures showed that previous efforts to boost exports and growth
against the headwind of an overvalued currency had failed. A drop of 6.6% in
car sales in July followed data at the weekend showing an 8% fall in exports
and slowing business investment growth in the same month.
One financial analyst said the devaluation, which
pushed the yuan to a four-year low, heralded a tidal wave of cheap goods from
Asia as other south east Asian countries followed suit.
Oil prices remained below $50 a barrel, down from
more than $110 a barrel last summer when the slowdown in China first became
apparent. The prices of key industrial and construction metals – nickel, copper
and aluminium – hit six-year lows.
2 Kraft Heinz announces 2,500 job cuts (BBC) Kraft
Heinz has announced it is cutting about 2,500 jobs in the US and Canada
following its recent merger. A spokesmen said that about 700 of the jobs were
going at Kraft's headquarters in Illinois. Executives hope to save $1.5bn in
annual costs by 2017.
Kraft Heinz is the third largest food company in
North America following the merger between Kraft and Heinz earlier this year. The
deal was engineered by Heinz's owners, the Brazilian investment firm 3G
Capital, and billionaire investor Warren Buffett's Berkshire Hathaway. The food
giant owns brands including Jell-O, Heinz baked beans and Velveeta.
The merger was seen as attractive because it meant
manufacturing and distribution could be combined saving millions of dollars a
year.
3 Oil fall set to hurt Middle East banking sector
(Cleofe Maceda in Gulf News) After posting positive results in the past year,
Islamic banks in the UAE and the rest of the Gulf Cooperation Council (GCC)
region are likely to see profits slowing down in 2015 as the fall in oil
revenues threaten the growth of regional economies.
According to a report by Standard & Poor’s
Rating Services, the “gradual weakening in economic conditions” will “adversely”
affect the banking industry in the region. Growth of net income and deposits in
Gulf-based Islamic banks will slow down, while asset quality is seen to
deteriorate.
Since June last year, global oil prices have been
falling and a strong recovery in the near term seems unlikely. S&P predicts
that prices will remain “relatively weak through 2016”, with Brent crude
forecast to average $55 per barrel in 2015, $65 in 2016 and about $75 in 2017.
“Given the importance of oil-related revenues to the
region’s economies, the ensuing gradual weakening in economic conditions for
the sovereign states that make up the [GCC] – Bahrain, Kuwait, Oman, Qatar,
Saudi Arabia and the UAE – will in our view adversely affect their banking
sectors,” S&P said in a statement.
Sources in the industry have said that liquidity
conditions in the country are already tight. “There seems to be a worrying
trend. Government and public sector deposits are declining. Certificates of
deposits issued by [the Central Bank] to absorb excess liquidity in the sector
have been declining as well. All these signal a tightening liquidity
condition,” Alp Eke, senior economist at the National Bank of Abu Dhabi,
S&P, however, noted that demand for
Sharia-compliant products and supportive government actions will still enable
Islamic banks to continue to grow and gradually increase their market share. Among
the GCC economies, S&P said that the UAE, Qatar and Saudi Arabia continue
to offer the “strongest growth opportunities” in the region.
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