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15/12/2016

Weekly News Bites: Tech issues

Our top picks from this week's Morning Chat

Tech issues: In a public capitulation of sorts, the biggest names in the Tech – Tim Cook (Apple), Elon Musk (Tesla), Jeff Bezos (Amazon) and Sheryl Sandberg (Facebook) – went to Trump Tower to meet the US president-elect. During the campaign, Mr. Trump lacerated them for being tax-dodgers with un-American hiring practices. While they were undoubtedly being pragmatic, they were criticized nonetheless by some for going. For example, Pierre Omidyar, the founder of eBay, tweeted, “tech leaders must stand up for human dignity.”  (15/12)

3 x 3: As expected, the Federal Reserve raised its interest rate by 0.25%. More importantly, most Fed policymakers expect three rate hikes in each of the next three years – ending at 3% in the “longer run” – but Chair Janet Yellen has said to take all this with a pinch of salt given a "cloud of uncertainty". For a much heralded hike, and with projections not dramatically different than what could be expected, market reaction has been rather strong: $1 buys ¥117; €1 buys less than $1.05; 10-year US yields have jumped to nearly 2.6%. (15/12)

Falling flat: While annual UK inflation has risen to 1.2%, house prices – not included in CPI calculations – have increased by a much faster 6.9%, to £217k, on average. London houses cost more than twice that, at £474k, but annual growth rates have slowed to 7.7% from 15% pre-Brexit, and are now more closely aligned with the rest of country. Particularly leafy bits of the capital, such as Kensington, have actually fallen in value by 5% since last year to £1.2 million. In US dollar terms, that’s over 20% cheaper. Some will view it as a bargain. (14/12)

Nature's call: With US equities hitting all-time highs becoming rather mundane – it happened three times in a row last week – the price of call options betting the S&P 500 will go up another 10% from current levels are at their most expensive in years. The price of these derivatives partly rests on a surge in demand from speculators flocking hard-like to risk assets. Just this summer, in the heat of "Brexit", these same call options were at their cheapest ever, even more so than in the aftermath of the financial crisis. Those who had been contrarian then would have been far ahead of the pack now.  (13/12)

The full Monte: Shares and bonds in Italy’s third largest lender, Monte Dei Paschi, plummeted as the European Central Bank rejected its request for more time to find private sector money to stay solvent. If MDP fails, it would threaten the savings of thousands of small-scale retail investors. The Italian government could just ride to the rescue – the €5 billion needed is 0.6% of the government’s tax intake, steep but not insurmountable – but it would contravene EU rules. So, either to Italian government keeps its word to Brussels, or protects its weakest citizens. This will be on Italian Foreign Minister Paolo Gentiloni's mind as he attempts to form a new government today.  (12/12)

 

 

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