Casterrian Weekly Roundup

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Last week saw China, Hong Kong and Singapore announce economic measures to protect against the damage cause by the Coronavirus, Dublin named among the top FDI locations in Europe, and Japan’s first commercial-scale offshore wind farm reach a financial close.

Continue reading below to find your usual currency and market commentary and the latest headlines from around the business world.

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Currency and market commentary

Last week was a bad week for the euro, which declined against most major currencies.

Against the U.S. dollar, the euro hit a 34-month low of 1.0827, against the U.K. sterling the euro hit a 2-month low, against the Japanese yen the euro dropped to a 4-month low, and against the Swiss Franc, the common currency dropped to a near-five-year-low, at 1.0609.

In contrast to the euro, the dollar has been underpinned by the relative robustness of the U.S. economy. The dollar continues to register as the strongest of the main currencies for the year-to-date, with gains of around 4% versus the weakest of the main currencies, the Australian and New Zealand dollars.

Although the U.S. Fed has backed out of its tightening phase after hiking rates three times last year, the dollar has been underpinned by safe haven demand for Treasuries. The Eurozone economy, meanwhile, has been showing signs of sputtering.

In the U.K., the sterling rallied after an announcement that Chancellor of the Exchequer Sajid David was resigning to be replaced by Rishi Sunak. The change is part of a post-election cabinet reshuffle by prime minister Boris Johnson.

January data out of the U.K. confirmed something of a rebound in economic activity (potentially accentuated by the removal of uncertainty following the December general election). Though concerns around post Brexit divergence from the E.U. have not gone away.

The Japanese yen was fairly steady over last week, staying within a tight range.

Japan’s economy was also under increasing strain, with GDP figures released on Monday coming in far below economists’ forecasts, hitting Tokyo shares, even though reaction in the currency market was muted.

On Friday in commodities:

  • Oil closed at $52.05 (-14.8% YTD)
  • Gold closed at $1,583.80 (+4.4% YTD)

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

China, Hong Kong, and Singapore announce economic defences against coronavirus

China, Hong Kong, and Singapore are pledging extra fiscal stimulus to counter the economic hit from the coronavirus.

China said on Sunday that it will enact more-efficient stimulus measures despite a widening fiscal gap, including lower corporate taxes. Hong Kong’s top finance official said the city is facing “tsunami-like” shocks that may lead to a record budget deficit. While Singapore is headed for its biggest budget gap in almost two decades, according to analysts.

China’s Finance Minister said that Beijing would roll out targeted and phased tax and fee cuts and with the People’s Bank of China lowering one of its interest rates and making another liquidity injection.

Causing concern globally is the potential scale of the impact of disrupted supply chains.

As shown in the graphic below, the world uses a lot of Chinese intermediate products. Preventing the import of these products in an effort to arrest the spread of the coronavirus would therefore cause significant damage to global supply chains.

Source of graphic: Bloomberg.

The virus impact goes beyond retail, food and beverage and tourism-related industries, and shocks may cause unemployment to “deteriorate rapidly,” Hong Kong Financial Secretary Paul Chan said in a blog post Sunday.

Read the full report from Bloomberg by clicking here.

Irish Central Bank budget of €475m approved by oversight body

The Central Bank of Ireland’s oversight body has approved its budget for this year which includes €350 million in operating costs. But the governor, Gabriel Makhlouf, said it plans to undertake a full review of major costs in the organisation.

According to minutes of the Central Bank commission meeting of December 9th, it approved proposals for this year’s budget, which includes €103 million in investment and €22 million in contingency costs. All told, it involves a 4 per cent increase on the previous year.

The minutes, published on Tuesday, detail meetings of the Central Bank Commission, a body established after the financial crisis to ensure that the bank’s statutory functions are properly discharged. It consists of the governor, two deputy governors, the secretary general of the Department of Finance, and six members appointed by the Minister for Finance.

Read the full report in the Irish Times by clicking here.

Japan’s first commercial-scale offshore wind farm reaches financial close

On Friday it was announced that a USD $904m (JPY100 billion) Akita offshore wind farm project in Japan had successfully reached a financial close.

Developed by Akita Offshore Wind Corporation, the project is the first commercial-scale Japanese offshore wind farm to secure non-recourse debt financing from a syndicate of Japanese lenders.

The approximately 140-megawatt project is being constructed in Akita Prefecture in two phases, with sequential installation between the Akita port and Noshiro port wind farms.

Read the report on the Global Construction Review by clicking here.

Dublin among top FDI locations in Europe

Dublin has been named among the top European cities for foreign direct investment, according to a new survey compiled by FDI magazine.

The magazine is published by the Financial Times, and covers 505 location, 319 cities and 148 regions.

Its placings were driven by a top billing in economic potential and business friendliness categories, with an eighth place ranking for human capital and lifestyle, the first time it has broken into the top 10.

Dublin achieved third place in the table of “European Cities of the Future”, slightly behind Paris and London, and second place in the “European Regions of the Future”, with only Paris ahead.

Though London retained its position at the top of the table, the survey suggested that its grip might be likely to weaken in a post-Brexit landscape.

The reported stated that “in the financial sector, many companies are opting to move or expand away from London”.

Read the full report in the FDI magazine by clicking here.

RBS Group to change its name to NatWest

Royal Bank of Scotland (RBS) Group has said it plans to change its name later this year, as it reported a near doubling of annual profits.

The Edinburgh-based bank, which owns RBS, NatWest and Ulster Bank, said it would rename itself as NatWest Group.

The bank reported profits of £3.1bn for 2019, nearly double the £1.6bn seen the year before.

New RBS chief executive Alison Rose called the results the “start of a new era” for the bank.

It is thought that Ms Rose is hoping a rebrand will help shift the lender’s image away from its association with the financial crisis.

Read the full report from the BBC by clicking 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.