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29/09/2016

Weekly News Bites: King’s ransom

King’s ransom: Oil prices have risen by over 5% – Brent crude is trading at nearly $49 a barrel – as Saudi Arabia, the 900-pound gorilla of the oil world, and its arch-rival Iran, also a serious heavyweight, shocked markets by agreeing to limits on oil production. OPEC countries will now reportedly produce 32.5 million barrels per day from the current 33.2 million, an important, if symbolic, move. The Saudis have clearly softened their “market share at all costs” strategy; last year's budget deficit of 20% of GDP, about $100 billion, lacerated the country's reserves of $650 billion. Even the Saudis have limits. (29/09)

Bit of a Dragh: ECB President Mario Draghi attended yesterday’s European Affairs committee meeting of Germany's Bundestag. Given the huge opposition to ECB monetary loosening in Germany – which is seen to punish the country’s fiscal prudence – he may have felt as welcome as Sepp Blatter at a conference on business ethics. The message he delivered will probably not have endeared him to the audience any further, saying low rates are needed to revive growth and remain necessary. (29/09)

Company records: Standard & Poor's forecasts that current monetary policy will push outstanding corporate borrowing – through bond issuances or bank credit – to a record $62 trillion by 2020. The ratings agency believes this “heady pace” will lead to an “unavoidable correction”, with defaults spreading. S&P has named this hypothetical scenario “Crexit”, adding to a month already bursting with innovation in financial jargon (e.g. “Hard Brexit”, “yield curve control”). (28/09)

Getting harder: The pound dropped below €1.15 for a time yesterday, nearing its post-Brexit low, amid growing concerns about a "hard Brexit". This fabulous addition to the global financial lexicon means the UK giving up access to the EU single market in order to gain border sovereignty. (27/09)

Picking up where he left off: Jeremy Corbyn strengthened his grip on Britain’s opposition Labour Party this weekend – following a summer-long leadership struggle – winning 61.8% of the more than 500,000 votes cast. This was higher than the 59.5% he won a year ago when he was initially being propelled to the party's leadership, and leagues more than the 38.2% garnered by challenger Owen Smith. The result tightens Mr. Corbyn’s grip on the party, but does not resolve the deep fissures between many of the party's MPs, and its rapidly growing, more left-leaning membership. (26/09)

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