Casterrian Weekly Roundup

Good morning and welcome to the Casterrian Weekly Roundup!

Last week was dominated by growing concern around the coronavirus outbreak emanating from China. Below, we’ll explore this in further detail, along with a review of how markets and currencies have reacted.

As usual, you’ll also be able to catch up on the latest headlines from around the business world.

If you have any questions about the content of this article, please do not hesitate to contact us on info@casterrian.com.

Currency and market commentary

The euro slid against the U.S. dollar and was down slightly against sterling over the week after the ECB’s monetary policy meeting in Frankfurt. In the meeting the ECB left policy and guidance unchanged and the central bank’s new president, Christine Lagarde, said that economic risks remain tilted to the downside and that accommodative monetary policy would remain in place for the foreseeable future.

In the U.K., sterling was reasonably firm over the week, rising slightly against the U.S. dollar and euro. U.K. markets seem to have de-scaled expectations for the Bank of England to cut rates at next week’s policy meeting. Most policymakers on the Monetary Policy Committee will likely want more time to judge the impact of the December election result, especially with the global economy looking to be holding up, and with the government set to pursue a more expansive fiscal policy.

China, Taiwan and South Korea markets were closed for Lunar New Year holidays, with the former two now closed through to the end of next week. Heavily affecting markets in the region was news of the coronavirus outbreak which originated in the Chinese city of Wuhan.

With cases now being reported in the U.S. and Europe, markets are waiting to see how well China and other nations will contain the coronavirus outbreak.

Despite this backdrop, the U.S. dollar was down slightly against the Japanese yen, before both currencies rallied modestly in N.Y. trade on Friday, with safe-haven buying the main driver into the weekend.

On Friday in commodities:

  • Oil closed at $54.19
  • Gold closed at $1,571.85

Sources: Commodity prices – Markets Insider, Currencies – XE.

Coronavirus outbreak has world watching with caution

The volume of news focusing on the Coronavirus outbreak grew towards the end of the week.

Some 25 million people are now effectively in quarantine in China, and Chinese cities, including Beijing, have cancelled New Year celebrations, while the World Health Organization labelled the outbreak an emergency.

On Sunday evening, the FT reported that China was warning the spread of the deadly virus will accelerate, and that more Chinese cities will restrict movements.

The escalating public health emergency comes as China celebrates the lunar new year, the most important holiday of the year in which hundreds of millions of people make trips to celebrate with family and friends.

China will lengthen the lunar new year holiday period and delay the reopening of schools as authorities try to stem the spread of the deadly coronavirus, state media reported on Sunday.

Li Keqiang, Chinese premier, and other top officials in a new working group decided the country would extend the holiday period “appropriately” to “reduce people’s movement”.

Read the full Financial Times report here.

For information from The Foxrock Academy about how this has will impact law firms, click here.

European Central Bank leaves rates unchanged

On Thursday, the European Central Bank announced that the Governing Council had decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50% respectively.

The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2%.

The Governing Council will continue to make net purchases under its asset purchase programme (APP) at a monthly pace of €20 billion. The Governing Council expects them to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates.

The press release published by the ECB after their meeting can be viewed here.

World Economic Forum meets in Davos

Despite being the 50th gathering of the World Economic Forum, the occasion in Davos seems to have lost its prominence across much discussion in business and financial news outlets.

Many of the sessions were devoted to climate change, and outgoing Bank of England governor Mark Carney used a talk he gave at the event to give his backing to climate activist Greta Thunberg.

Thunberg brought a stark message to the business elite gathering in Davos: Everybody is talking about climate change, but nobody is doing anything.

Bloomberg reported on Tuesday that “Thunberg is giving relevance to the Davos gathering, which for years has suffered from criticism that it was largely a billionaires’ playground where the rich debated among themselves without hearing outside voices.”

The full report from Bloomberg can be found here.

Goldman Sachs’ new rule: At least 1 woman on the board or you can’t go public

Goldman Sachs won’t take companies public anymore unless they have at least one “diverse” board member, the bank’s CEO David Solomon said on Thursday.

“From a governance perspective, diversity on boards is a very, very important issue,” Solomon said in an interview with CNBC at the World Economic Forum in Davos, Switzerland.

Goldman’s push for diversity will be focused primarily on women: Over the past four years, initial public offerings of companies in the United States with at least one female director on their boards performed “significantly better” compared to those without, the CEO said.

The initiative will kick off on July 1 in the United States and Europe. By 2021, the bank will look for two diverse board members, Solomon said.

Read the full report from CNN Business here.

Ethiopia, Egypt and Sudan agree framework for $5billion GERD dam

After a two-day conference in Washington, DC over 13-15 January, ministers from Ethiopia, Egypt and Sudan signed their names to six “points” concerning the filling and operation of the $5bn Grand Renaissance Ethiopian Dame (GERD) that Ethiopia is building on a tributary of the Nile.

The most substantive point was that filling would take place during the wet season from July to August, and will continue in September, subject to certain conditions.

US treasury secretary Steven Mnuchin and the President of the World Bank, David Malpass, attended the conference as observers.

The joint statement did not settle the contentious issues that have fuelled a long-running diplomatic crisis between Ethiopia and Egypt over the dam, but it did prompt a change to softer language after multiple trilateral meetings failed to produce a resolution.

Read the full report from the Global Construction Review here.

Disclaimer: The Casterrian Weekly Roundup is a marketing communication and should not be used for any investment research. This document is a general communication being provided for informational purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products.