Category Archives: trade

City bankers warn against UK’s potential loss of influence in EU

EU ministers say they will resist David Cameron's efforts to restrict free movement in the bloc

David Cameron has promised a referendum on the UK’s membership of the European Union

Britain’s banks have launched a strong intervention in the debate over the nation’s membership of the European Union, calling for closer ties with Brussels and urging the government to raise its game in order to make the single market work.

The British Bankers’ Association has sent a submission to a Treasury review that counters fears over the split of powers between London and Brussels, saying the current balance was “broadly appropriate”. It added there was an “overwhelming” case for more resources to be devoted to relations with Europe and warned that the UK was significantly underpresented in Brussels.

In a sign of the concern in the City over the outcome of David Cameron’s pledged referendum on EU membership, Citigroup has separately made an explicit warning to the Treasury about the costs for the UK economy if Britain were to leave Europe.

Citi said that if the UK were to disengage significantly or completely from the single market the implications could be “dramatic”. The UK population would face a drop in living standards as a result of lower wages or a weaker pound so that the same export performance could be maintained within the EU.

Jim Cowles, Citi’s chief executive for Europe, the Middle East and Africa, told the Financial Times of “mounting concern” among clients about their ability to continue using the UK as a regional hub if the country were to exit.

“It’s not that international companies will stop investing in Britain, but their investment just won’t be at the scale we have become accustomed to,” he said.

The Citi and BBA interventions were made in submissions on financial services to the government’s “balance of competences” review, which assesses the division of powers between Westminster and Brussels.

They come as City figures watch the growing rift within the Conservative party over how to recast the UK’s relations with Europe. A group of MPs wrote to the prime minister this month demanding a veto over EU legislation.

Some Conservative MPs – along with the UK Independence party – have been dismayed by the initial wave of reports from the “balance of competences” review published last July which concluded that the balance of powers was broadly correct in six policy areas. The report on financial services is expected to be published in the summer.

The BBA warned of a sharp decline in the number of Britons working in European institutions – a concern shared by George Osborne, chancellor. It added there was an “overwhelming” case for the UK to devote more resources to boosting Britain’s influence in Europe

“The single market for financial services is a significant factor in the success of the UK as a financial centre and therefore of considerable value to the UK economy,” the City trade body said.

The BBA paper, seen by the FT, details a number of concerns about EU processes, including over the possibility of diverging interests between countries inside the single currency’s Banking Union and non-euro members.

It also argues that, while the balance of powers between London and Brussels was broadly correct, tpowersers were “not always exercised consistently”. It added that action on retail financial services should only to be taken at an EU level where the benefits can be “clearly demonstrated”.

Mr Cowles said: “Jobs and the growth of Britain’s economy depend on maintaining and increasing exports to the EU, particularly as the European economy begins to recover. This will be a much more difficult task if businesses have to contend with a Britain that has decided to exit the EU. Existing trade arrangements will be at risk and Britain will have no influence in making the rules in the future.”

Mr Osborne has insisted on changes to voting rules to protect the interests of non-eurozone countries – for instance in the field of banking regulation – and has gone to the European Court of Justice to oppose policies which he says are discriminatory in favour of eurozone countries.

The chancellor agrees that the City is best served by British engagement in a reformed EU, but Britain’s future membership has been called into doubt by David Cameron’s pledge to hold an in-out referendum on Britain’s membership in 2017.

Mr Osborne is concerned about the dwindling number of senior British officials working at the European Commission: indeed many of them are nearing retirement age, having joined the EU bureaucracy after Britain joined the club in the 1970s.

The fact that more decisions are being made at a eurozone level – with Britain excluded – has made a career in the EU civil service less attractive to Britons, in spite of efforts by the Foreign Office to rectify the situation.

The BBA cites figures showing that the number of UK nationals on the staff of the European Commission has fallen 24 per cent in seven years and stands at 4.6 per cent of the total – against 9.7 per cent for France.

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China 2013 new home sales surge past $1.1Trillion

China's real estate sales

China’s real estate frenzy continued unabated last year, with buyers snapping up more than $1.1trn of new homes, roughly the same amount as was spent on all home sales in the US in 2012.

China – which embraced home ownership less than two decades ago – ramped up sales as the new premier Li Keqiang eased off on the previous administration’s attempt to artificially cap house prices.

Although individual cities continue to enact measures to prevent speculative real estate purchases – by raising the minimum down payment for second homes, for instance – Mr Li has preferred a light touch on housing prices.

The value of new home sales surged 27 per cent in 2013 year on year, compared with an increase of more than 17 per cent in residential floor space sold.

Wen Jiabao, China’s outgoing premier, had vowed to cap housing prices – one of the top causes of dissatisfaction among urban Chinese.

His unsuccessful attempt to starve private housing developers of credit helped drive a shadow market in high-interest loans and allowed state-backed companies to make inroads into the housing sector, once dominated by private groups.

Private home ownership in China began in the mid-1990s, when the Communist party allowed occupants to buy and then resell apartments that had formerly belonged to their work unit.

That reform and the subsequent boom in private housing developments created prosperity for many middle class Chinese, but it also unleashed a speculative bubble in luxury housing that leaves many young people convinced they can never afford their own home.

The 19 per cent rise in house prices in top-tier cities in 2013 outpaced income growth, “underlining the precarious nature of the real estate boom”, said Thomas Orlik, economist at Bloomberg Financial.

About three-fifths of city-dwelling Chinese own their own homes, according to Rosealea Yao, a consultant at data group Gavekal Dragonomics, resulting in pent-up demand for low-cost apartments.

Reforms to relax residency requirements known as the hukou system will allow more migrants to buy homes in cities, and fuel the housing market for several decades to come. China does not publish figures for home resales, but that market is estimated to be about a third the size of new home sales.

Housing restrictions have had little impact on purchases by the wealthy urban elite with multiple homes, who account for up to 20 per cent of housing stock, Ms Yao estimates.

At one small real estate office at a prime location in Beijing, eight buyers paid cash for apartments valued between $1m and $1.5m each last year.

“Most of them had the money already, although some had to sell other properties to comply with the restrictions on buying more than two,” said Wan Jie, an estate agent.

BP discovery offset by $1bn write-off

BP said it had made a “significant” discovery in the deepwater US Gulf of Mexico, but also said it was writing off $1.08bn after poor results from a well off the coast of Brazil.

The discovery in the Gila prospect caps what BP described as its most successful year for new field exploration for almost a decade.

Gila, co-owned with ConocoPhillips, is located in the Paleogene trend, where BP has already made two big oil finds in recent years – Kaskida in 2006 and Tiber in 2009.

Though BP did not indicate how much oil Gila could contain, the discovery underscores the company’s gradual recovery from the 2010 Deepwater Horizon disaster, when an explosion on a drilling rig it was leasing in the Gulf of Mexico killed 11 men and unleashed the worst offshore oil spill in US history.

Last month, BP said it had nine drilling rigs operating in the deepwater Gulf of Mexico – a record for the company. It said that reflected the “vital importance” of the oil-rich basin to BP’s future.

BP used news of the Gila find to boast of its recent exploration successes. It said that in the course of 2013 it had participated in 15 completed exploration wells which resulted in seven potentially commercial discoveries.

Lamar McKay, head of BP’s upstream division, said the successes now being delivered through the company’s increased exploration activity “confirm our confidence in our ability to sustain BP’s resource base”.

The company also reminded investors of two other big oil finds it and its partners had made in recent weeks. One was the Pitu well in the deepwater Potiguar Basin off Brazil’s equatorial margin, a discovery that was announced by BP’s partner Petrobras earlier this week.

The other was Lontra, which was announced by Cobalt International Energy in the “pre-salt” region offshore Angola on December 1.

But there was some bad news too. BP said it was relinquishing a licence block off the coast of Brazil, BM-CAL-13, because an exploration well drilled there, Pitanga, had not encountered any commercial quantities of oil or gas.

It said it would write off $230m in drilling costs related to Pitanga and $850m associated with the value of BM-CAL-13, which it acquired as part of a deal with US oil group Devon Energy in 2010. The write-off represents more than 10 per cent of the $7bn value of the Devon acquisition.

The deal with Devon elicited considerable excitement at the time: vast amounts of oil have been discovered off Brazil over the past 6 years, particularly in the Santos Basin off the coast of Rio de Janeiro, home to the massive Lula “pre-salt” field. But the Devon blocks BP acquired in 2010 were far from the Santos.

A Penny Stock Called Nestor Just Surged 1900% Because People Confused It With The Company That Google Bought

Nestor Inc is a Providence, R.I.-based company that sells automated traffic enforcement systems to local governments. It has 89 employees and trades over-the-counter under the ticker “NEST.”

wolf of wall street jonah hill

That’s not to be confused with Nest — the high-tech thermostat and smoke detector company founded by former iPod genius Tony Fadell and sold to Google for a cool $3.2 billion earlier this week.

But don’t tell that to savvy investors! Nestor Inc. (the penny stock) is up 1900% on the news, as investors confuse the two companies. There’s actually pretty decent volume here too, suggesting that a good amount of people made the mistake or are trying to anticipate that people might. The surge was first noted by Kid Dynamite’s blog.

Bloomberg’s Matt Levine asks the natural follow-up question.

If you had advance knowledge of the Google/Nest deal, would you buy some Nestor, Inc. shares? And would that be insider trading?

— Matt Levine (@matt_levine) January 15, 2014

Basically, it would have been a pretty smart investing play to see the Nest deal, anticipate the dumb buyers making the Nest/Nestor mistake, and then ride the Nestor stock up.

It sounds like a scene out of “The Wolf of Wall Street.”

Reuters’ Felix Salmon and CNBC’s John Carney both argued on Twitter that, yes, that would in fact be insider trading. If you made material gains via non-public information of the deal, that’s insider trading folks! But we’re probably not likely to see this taken to court.

And, as Salmon noted, you might as well just wait for the deal to have been announced, since you’d make as much money the legal way.

THE ALLEGED CREATOR OF BITCOIN IS BEING CHASED AROUND LOS ANGELES

satoshi nakamotoSatoshi Nakamoto and an AP reporter he chose to interview him are being chased in Nakamoto’s Prius by all the other reporters apparently left behind, according to L.A. Times biz editor Joe Bel Bruno.

Bel Bruno says he and a colleague are two cars behind.

We’ve reached out to AP to ask who’s with Satoshi.

Earlier today, Leah McGrath Goodman reported she’d tracked down the Satoshi Nakamoto who wrote the first-ever Bitcoin spec paper. He is an engineer and former government contractor living near L.A.

Bel Bruno’s colleague Andrea Chang says Nakamoto is denying everything.

Here’s Bel Bruno’s feed so far:

OK, apparently #Nakamoto picked one reporter outside his house to take to sushi. Surreal #bitcoin

— Joe Bel Bruno (@JoeBelBruno) March 6, 2014

And now a dozen reporters camped out #Nakamoto‘s Temple City house are in chase. #bitcoin

— Joe Bel Bruno (@JoeBelBruno) March 6, 2014

So the AP reporter takes #Nakamoto to lunch for the #Bitcoin scoop, to a sushi restaurant in Temple City. Other reporters chase them.

— Joe Bel Bruno (@JoeBelBruno) March 6, 2014

Then reporters barge into the sushi restaurant, confront the @ap reporter and #Nakamoto

— Joe Bel Bruno (@JoeBelBruno) March 6, 2014

Follow along here »

Here’s a few more photos:

satoshi nakamoto
satoshi nakamoto

A man widely believed to be Bitcoin currency founder Satoshi Nakamoto is surrounded by reporters as he leaves his home in Temple City, California March 6, 2014.

Las Vegas Sands sites remain down, probe continues

Websites for casino giant Las Vegas Sands Corp. remained down for a fourth day on Friday, while company, state and U.S. investigators trace the origin and effect of a hacking intrusion. 

The Internet sites of Sands properties including the flagship Venetian and Palazzo in Las Vegas and its Pennsylvania, Singapore and Macau resorts remained inoperative, and  spokesman Ron Reese said officials were assessing which systems had been affected.

Sands took down websites for its properties on Tuesday morning, leaving a website-maintenance message and a checkerboard photo display of resort names and phone numbers for bookings and reservations.

Officials said the culprits remained unknown, and the U.S. Secret Service, FBI and Nevada casino regulators were among agencies investigating. The Secret Service is charged with safeguarding the country’s financial systems.

Social Security information for Sands employees in Bethlehem, Pennsylvania, was posted at one point on company sites. The hacking disrupted Sands email accounts and hampered access to company work computers.

Nevada State Gaming Control Board Chairman A.G. Burnett said Friday there was no new information to make public. He has said it wasn’t clear if patron data including credit-card information had been compromised.

The first sign of trouble came Monday morning, when email malfunctioned.

By Tuesday morning, hackers posted a map with flames marking Sands casino locations, a photo of Sands CEO Sheldon Adelson posing with Israel Prime Minister Benjamin Netanyahu, and a message condemning the use of weapons of mass destruction.

Adelson is an outspoken supporter of Israel and a generous donor to U.S. Republican Party campaigns. He spoke in October about dropping a nuclear bomb on Iran, saying strength was the only thing the country understands.

The hackers at one point referred to themselves as “Anti WMD Team.”

Sands employs about 5,000 people at its various properties.

Here’s The Advice Goldman Sachs Is Giving Its Millionaire Clients

After witnessing the S&P 500 surge 30% in 2013, and return 200% since the market trough in March 2009, investors are wondering what they should do next.

ferrari wealthy top hat rich

A man walks from his Ferrari as a carriage passes during the fourth day of the Royal Ascot horse racing festival at Ascot, southern England, June 21, 2013.

Goldman Sachs’ Sharmin Mossavar-Rahmani and Brett Nelson are recommending that the firm’s private wealth clients should “stay fully invested at their strategic allocation to U.S. equities.”

Goldman’s Private Wealth Investment Management division will manage money for folks with at least $10 million.

While this recommendation is the same as recommendations they made in Dec. 2008, Apr. 2012, and Apr. 2013, Goldman says their current view is a more “nuanced” this time because valuations aren’t the tailwind they once were.

“We believe that having a long-term investment horizon is particularly important at this time because it gives our clients a comparative advantage over other investors whose investment horizons are hampered by institutional constraints such as quarterly reporting periods or public finance considerations,” Mossavar-Rahmani and Nelson write.

“In addition, the current monetary policy environment of zero interest rates makes cash and high-quality fixed income assets much less attractive over the next one and five years, which, in turn, increases the attractiveness of equities.”

They point out that the “the penalty of being wrong when underweighting US equities are very high.”

Another factor in this recommendation is that bull markets “do not die of old age.” Instead, they need some shock to trigger a bear market. In the past, these triggers have been tighter monetary policy or an external shock like the dot com bubble or housing bust and there seem to be no signs of any such triggers at the moment.

Of course, there are a few key things that pose a risk to U.S. equity markets: 1. The U.S. economy stalls and goes into recession; 2. The Fed’s exit from quantitative easing is more disruptive than anticipated; 3. The eurozone sovereign debt crisis bubbles over; 4. Confidence in Japan’s three arrows of Abenomics wanes; 5. Emerging market countries see a hard landing; 6. There are geopolitical disruptions through military engagement.

Meanwhile, here are Goldman’s key investment themes for 2014:

  • Underweight investment grade bonds, including intermediate municipal bonds and 10-year Treasuries, because they are expected to have slightly negative total returns for 2014 and modest positive returns over the next five years.
  • Overweight high-yield bonds and bank loans as they are expected to outpeform investment grade bonds and cash in the near term and over next five years.
  • Maintain exposure to hedge funds as they should have mid-single-digit returns and should outperform bonds.
  • Stay fully invested in U.S. equities will have modest single-digit returns of about 3% in 2014 and slightly higher returns over the next five years.
  • Overweight Euro Stoxx 50 because they “will continue to have some of the most attractive near-term and long-term returns.”
  • “US banks will have more subdued returns than last year but will still be quite attractive in absolute terms.”
  • “Emerging market equities are likely to provide higher returns than investment-grade bonds and US equities, but we expect emerging market bonds to lag US high-yield bonds and bank loans.”

Overall, Goldman is more cautious now, and is proceeding with “extra vigilance, knowing that the summit is in sight.”

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