Market Wrap-Up Week 6 by Nottingham Economics and Finance Society

Week Ending 25th November 2016

NEFS Research Division Presents:

The Weekly Market Wrap-Up 1

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Contents Macro Review 3 United Kingdom United States Eurozone Japan South Korea Australia & New Zealand Canada

Emerging Markets 10 China India Russia and Eastern Europe Latin America Africa Middle East South East Asia

Equities 18 Financials Technology Oil & Gas

Commodities 21 Energy Agriculturals

Currencies 23 EUR, USD, GBP AUD, JPY & Other Asian

Week Ending 25th November 2016

MACRO REVIEW United Kingdom Aside from Theresa May’s article in the FT ahead of her speech at the CBI’s annual conference, there is little else other than the Autumn Statement worth noting. This is, of course, owing to the gravitas that the Chancellor’s economic outlook commands, which given current eco-political uncertainties, is doubly important if we are to decipher the future direction of the UK economy. The budget encapsulated what the government has been trying to convey since the Brexit vote: opportunity. In the wake of a seismic shift on June 23rd, economic uncertainty and dithering has been the hallmark of the 5 months since, even despite the emergence of figures directly contradicting what we were told prereferendum. What is refreshing in this statement is the emphasis on supply-side policies, shifting us away from Cameron austerity and creating a fertile economic environment. Unarguably the announcement with the most potential is the National Productivity Investment Fund, a £23bn allowance designed to finance investment projects over the next five years, with a primacy placed on housing, R&D, and infrastructure, all of which, in my view, are economically and socially important. Worth noting, also, was the Chancellor’s emphasis on technological infrastructure, evinced through his parliamentary oration, and his setting aside of £400 mn. to aid firms’ investment in fibre optic broadband. In a world where transport may be avoided through technological connection, this is a refreshingly progressive step for the government to take.

£1.4bn on affordable homes and a recommitment to the Northern Powerhous e project. All combined, the government seems to be targeting plans to gently raise living standards, investment, and productivity. This is prudent given the latter’s stagnation since Q4 2007 (see graph). All of this must, of course, come at a cost, and there is no clearer manifestation of this than an abandonment of plans to reach a budget surplus by the end of this parliament, and a rather unconvincing promise to keep the deficit at 2% or less for the next five years, only envisaging to balance the accounts at some stage during the next parliament. This gives the Treasury some greatly needed headroom and flexibility, during what has been a demanding political time. This, naturally, is positive, but might we benefit from a clearer and more

convicted direction'? We just might have to wait until the Spring statement. Thomas Dooner

Slightly less high profile announcement s included the plans to extend to right-to-buy agreements, cut letting agent fees, spend

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United States The Tans-Pacific Partnership trade deal, known as TPP, made headlines this week as President-elect Donald Trump pledged on Monday to withdraw the United States from the deal within the first one-hundred days of his presidency. The TPP consists of the following twelve countries: United States, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru. Together, these countries make up 40% of the world's economy. The deal is intended to create a single market where the members enjoy a significant reduction in protectionary policies to facilitate easy movement of goods and capital. Additionally, the deal aims to create a universal standard of labour environmental standards, copyrights laws, patents and other legal protections between the counties.

American labour force, as countries such as Vietnam are said to be more labour competitive due to lax labour laws and lower wages. Critics argue American workers will be hit hard by this as jobs will be shifted overseas. President-elect Trump says he will abandon the deal to negotiate “fair bilateral trade deals” with each country individually to “bring jobs and industry back to America”. As seen in the graph blow, Vietnam is predicted to benefit from a 28.2% increase in GDP, while the United States is only expected to grow by 0.1% by 2025. But can the deal survive without the participation of the United States? The answer is no, as Japanese Prime Minister, Shinzo Abe, said on Monday the deal “would be meaningless without the United States”. Disun Holloway

As the deal covers over 16,000 tariffs, here’s an overview of some of those who stand to benefit from the deal. American farmers are said to benefit as there are typically taxed up to 35% in member markets. American beef farmers are also said to be benefit as the TTP eliminates tariffs and quotas in Canada, Mexico and Japan over the next 10 years. The American auto-industry will benefit from this as the deal eliminates the 70% tariff on American cars sold in Vietnam. Finally, American pharmaceuticals stand to benefit as intellectual property rights in biotechnology drugs will be in effect for 8 years. President Obama says the deal is intended to eliminate “the most parochial, most encumbered regulation” which have frequently been closed to US companies. That having been said, the main concern of the TPP is the effect it will have on the

Week Ending 25th November 2016

Eurozone Current fears over the security of the Eurozone have analysts predicting that one more unexpected outcome from the polls will cause enough damage to see Europe regressing back into a Eurozone crisis. Whilst the Eurozone has remained relatively sturdy following the outcome of Britain’s EU referendum and the American presidential election, the European Central Bank (ECB) predict that an unfavourable outcome in the upcoming Italian elections will be sufficient to inflict irreversible damage on the 19-country union, triggering its eventual break-up. In December, Italy will vote over constitutional changes that would make it easier for governments to pass legislation. However, if not voted in favour of, the current Prime Minister has threatened to resign. This would trigger an election that could lead to the Five Star Movement, Italy’s main Euro-Sceptic and anti-globalist political party, coming to power. March 2017 will see the Netherlands hold their national election, which current polls indicate the Dutch anti-immigration and anti-EU party could do very well in. Britain will also start discussions over formally leaving the EU, which could cause significant unrest to financial confidence within global markets. Finally, the French are holding their presidential elections in April 2017. Marine Le Pen, leader of the Far

Right National Front party that is in favour of leaving the EU, is expected to make it to at least the second round. Whilst polls indicate Le Pen doesn’t have a high chance of winning, any shock to French Government will have irrefutable repercussions across the Eurozone. Yet recent figures indicate the Eurozone is regaining strength, despite recent and upcoming elections. The Eurozone GDP growth rate has remained constant this past quarter, at an average rate of 0.3%. Furthermore, Eurozone business activity has expanded the most this past year in November. However, the Eurozone’s largest economy, Germany, is currently showing unfavourable economic signs. This quarter has seen German foreign trade fall by 0.4%, as well as its growth rate halve to 0.2% since October. Nevertheless, German confidence in the markets has reached a 31-month high. Additionally, the Eurozone inflation rate continues to persist below the ECB target of 2%, with no indication of improving anytime soon. Despite years of extremely loose monetary policy, that has included printing money, cutting interest rates and instigating quantitative easing, inflation has only risen minimally (see diagram below) to 0.8% in October 2016. Charlotte Alder

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Japan The magnitude 7.4 earthquake that hit off the coast of Fukushima on Tuesday briefly renewed fears from the 2011 disaster and caused a pause in the rally of the Tokyo Stock Exchange (TSE) as well as a momentary strengthening of the yen. Yet, both resumed their trajectories and on Friday the Nikkei 225 index hit a year high – closing 140.53 points above the previous day – and throughout the week the yen floated comfortably above the ¥110 per dollar mark. Meanwhile, the TOPIX index of the TSE completed an eleventh day of straight gains since the election (see graph). Owing to the weak yen, the bull market is being led by rising shares in exporters. Also during the week, came confirmation of what most investors had already priced in: a US pledge to exit the Trans-Pacific Partnership (TPP), a monumental freetrade agreement that was born from the efforts of President Obama’s administration. Chinese President Xi Jinping expressed his ambition to form a new open trade structure during the AsiaPacific Economic Cooperation summit last weekend, but the Japanese government, desiring to continue its close cooperation with the US, may opt to shelve the TPP until it can be negotiated with a US President

who is more favourable to the partnership. Ultimately, the confirmation by the US President-elect to abandon the agreement signifies at least a delay to what otherwise could promote optimal global production and assist emerging Asian and LatinAmerican economies in achieving their growth potentials. On the back of falling imports and a sustained drop in the price of crude oil, the trade surplus grew in October, expanding 32% over the previous month to ¥4.74 billion. The balance has expanded 4.7-fold since last October. The falling yen will make imports more expensive going forward, adding inflationary pressure. In October, the Core Price Index rose 0.1% year-on-year after it contracted -0.5% in September, marking a return to inflation. October was the first full month since the Bank of Japan pledged to overshoot its price stability target of 2%. The Producer Price Index of services also gained 0.5% in October over the previous year. However, the preliminary Producer Manufacturing Index of economic conditions slowed 0.3 points in November from the previous month. The finalised index will be released this week. Daniel Blaugher

Week Ending 25th November 2016

South Korea Although the South Korean won has attempted to recover post-geopolitical issues, including President Park Guenhye’s scandal, the United States’ election results, and rising expectations of an interest rate hike by the U.S Federal Reserve in December, the South Korean won has seen a devaluation of its currency with respect to the US dollar (USD/KRW) this week of 0.08%. Although the won has appreciated over the course of the past two months, as illustrated in the graph below, this weekly depreciation may have been inflicted by President’s Park impeachment becoming characterized as inevitable and the military intelligence sharing pact signed between South Korea and Japan on Wednesday. Furthermore, Korea’s household debt hit record highs as repayment burdens are set to rise, motivating the government to develop more measures to slow its rise. The household debt level, including credit purchases, rose to $1.1 trillion as of September, an 11% increase relative to last year’s value. However, the Bank of Korea has expressed that it will implement stricter loan screenings by banks on specific mortgages and lending from poorly inspected financial institutions. This debt followed the election of Donald Trump and the expectation of a rise in interest rates by the U.S Federal Reserve in December which is set to push global yields higher. This would subsequently drive domestic rates higher, adding to the debt repayment burden for South Koreans, especially the 60% of whom have

mortgages with floating-rate loans. The collectivistic culture of South Korea results in high levels of honesty and therefore delinquency ratios for bank loans are relatively low compared to other countries’. This gives South Korean policy makers confidence that private debt will not affect financial stability. As of next year, the Financial Services Commission has stated that banks will be required to implement tighter rules on loans, both by consumers and firms. Moreover, the increasing odds of a hike in U.S federal reserve interest rates in December (currently wedging 100%) has hit emerging markets, such as South Korea, the most since any increase in U.S yields could potentially result in riskier assets. Lastly, Asian currencies achieved their weakest value this decade, discouraging regional central banks from easing monetary policies since the potential increase in U.S borrowing costs next month raises concern about inflationary pressure and acceleration of fund outflows. Maria Fernandes Camaño Garcia

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Australia & New Zealand Many suspect that a recession is destined to hit Australia’s economy in the near future. The main causes of concern have been the housing and commodity markets, as well as uncertainties with the country’s largest trading partner, China. Australia’s resilience to the recession that is ‘supposed to hit’ is impressive, but still somehow not enough to ease public concern. The housing market is one of the main areas of suspicion. House prices have increased by 4.1% for the year, driving the increase in supply and residential home production. In Australia, the increasing prices and construction of new homes along with high household debts are factors stirring up paranoia on the stability of the Australian housing market. Perhaps the devastating effects of U.S. housing bubble burst in 2007 that sparked the Great Recession, is weighing on the conscience of the public. Another area of uncertainty in Australia’s economy is the global commodity rut. Countries like Brazil and Canada took significant hits, but Australia has managed to remain afloat. Australia is a resource rich economy whose top exports are iron ore and coal. The iron ore price index is currently at 58 points, down over 100 points since 2013. Prior to the rally in July, coal prices were nearly half the level they are today, currently 99 points on the coal price index. Australia managed better than others against the commodity rut thanks its strong infrastructure and economic shift from mining to services.

China’s economy plays an important role in the outlook for the Aussie economy, as China accounts for 32% and 23% of total exports and imports, respectively. Many uncertainties surround activities in China, such as their ability to manage capital flows and the yuan, their shift toward services away from manufacturing, and the possible manipulation of GDP growth reports. Since the end of 2015, capital flows have remained in surplus, however, outflows have been steadily increasing relative to inflows. In recent months, this trend has been losing momentum, depicting the recovery of foreign demand for Australian assets, which should help settle the stomachs of the doubtful. Today’s capital account surplus is 14bn AUD, which equates to about 10.5bn USD. Next week, Australia releases housing data on new home sales and building permits, which can provide valuable insight to its housing market. Coming up in the latter half of the week are releases for Q3 capital expenditures and October retail sales. Dan Minicucci

Week Ending 25th November 2016

Canada Canadian GDP growth for the second quarter was quite disappointing back in June, when it clocked in at 0.9% year on year (YoY), even contracting 0.4% quarter on quarter (QoQ). Yet forecasts for the third quarter (Q3) are more promising – projected to come in at 1.5% at the end of this month. Considering events that have taken place since figures were last released – notably the election of a protectionist president, Donald Trump, in the U.S., and the vote for Brexit in June – a 1.5% forecast may be overly optimistic. Indeed, there are several worries. Concerns regarding Trump’s antiTPP and NAFTA (North American Free Trade Area) rhetoric have been aplenty. John Manley, the president of the Business Council of Canada, addressed Trumps attitude with the fact that U.S. corporations have $27 billion in deposits in various Canadian financial institutions – “he says he's going to get that money home. Do the multiplier on what that level of deposits coming out of Canadian financial institutions means to liquidity in Canada.” Aside from the buzz around President-elect Trump, the Conference Board of Canada have released a report that states there is a one-in-three chance of a 9.0 magnitude earthquake hitting British Columbia within

the next 50 years. The same report by the not-for-profit research group claims that such an earthquake could clock up a total economic cost to the Canadian economy of $127.5bn. Deputy chief economist, Pedro Antunes, puts this in part down to the structure of the insurance industry, who are currently required to back each other’s debt to ensure claimants are paid if one firm goes bust – “The issue is that the way the current [insurance] system is in place, it backstops itself. If you’ve got a situation where the total claims are greater than what the industry can handle, then that system actually causes the whole thing to unravel.” This situation is akin to Japan in 2011, whereas the economic fallout of a catastrophic earthquake and tsunami tipped their economy back into recession. Canada, less prone to earthquakes, is less well prepared for such a situation whilst also struggling to accelerate its growth. The Conference Board hope to encourage more government action with this report. However, one expert, David Edgington, disagrees – even pointing to Japan as an example where “the markets thought just one part of the country going under wasn’t the end of the world.” Jamie Peake

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EMERGING MARKETS

India The debate has continued over the past week in India as to whether Prime Minister Narendra Modi’s decision to abolish 86% of India’s cash circulation was the correct decision to make. The short-term effects of the controversial and sudden redundancy of both 500 and 1000 rupee notes have been detrimental to the Indian economy. Around 90% of India’s economic activity is completed through cash and therefore, the withdrawal of a large proportion of the money circulation has been damaging to trade. There has been a recorded decline in the activities of small grocers while supply chains have also been disrupted as it has become troublesome for business owners to pay some of their workers. Previous Indian Prime Minister, Manmohan Singh, has labelled the move as ‘monumental mismanagement’, and believes that GDP growth will contract by 2% due to a decision which will ‘weaken and erode our people's confidence in the currency system and in the banking system.’ As well as the effects on consumer confidence, the timing of the move, accompanied by the logistical nightmare it has provided for many Indian citizens, has led to further criticism. Farmers have complained that the cash withdrawal has reduced their ability to spend on seeds and fertiliser during the

planting season. Frustrations have also been growing as Indian citizens must wait in long queues to deposit or exchange their redundant cash stocks in banks. Narendra Modi has recognised that this transitional process has not been as smooth as it could have been, but he continues to believe that the policy will be hugely beneficial eventually, as he attempts to limit corruption in India and reduce the size of the ‘black economy’. The swiftness and surprise of the move has been defended as it does not allow tax avoiders to quickly convert their cash into assets such as gold. In addition, the move has been a stimulant to India’s financial sector with bank deposits rising by around 5.1 trillion rupees since the decision was made. A large proportion of the Indian population did not previously have a bank account. Therefore, the move can be viewed as an incentive to formalise India’s banking sector. Although the short-term effects of the withdrawal of 500 and 1000 rupee notes have been undesirable, Modi and the Bharatiya Janata Party remain hopeful that the move will be beneficial for the Indian economy in the near future. Isher Hehar

Week Ending 25th November 2016

China The world’s second-largest economy seems to have exceeded the expectations of many, with a plethora of measures/indexes reflecting a growing economy. A manufacturing index comprised of satellite imagery had risen to a 5-year high, larger companies are relatively confident and steel manufacturers appear to be experiencing higher levels of sales & orders. The same, however, cannot be said for SME’s, who appear to be less confident than their larger counterparts. The steel industry, currently producing one of China’s largest exports, appears to be relatively stable and on an upward trajectory, as the S&P Global Platts China Steel Sentiment Index jumped to 59.37 in November from 48.92 in October, caused mainly by higher prices. The index, based on a survey of around 90 China-based steel mills and traders, is emblematic of an expanding economy. Business leaders further reflected the sentiment, signalling that conditions at large companies appear to be relatively favourable. The MNI China business sentiment index increased to 53.1 in November, up from 52.2 in October – shown below. The index compiles data from a survey conducted with executives of companies listed on the Shanghai and Shenzhen stock exchanges. Andy Wu, senior economist at MNI indicators noted that some businesses ‘benefit from the depreciating currency’, allowing the economy to continue upon a ‘stabilising

path.’ Companies seem to be relatively optimistic regarding future expectations of production and consumer demand. Nonetheless, smaller businesses appear relatively optimistic regarding the Chinese economy. Standard Chartered PLC’s SME Confidence Index, surprisingly, declined to 55 in November from 56.1 in October. Whilst current activities certainly improved in November, a sub-index in future expectations fell to a 10-year low; indicative of structural issues that lie ahead for the Chinese economy. Shen Lan, a Beijingbased economist, also noted that lending to smaller firms has also decreased. It appears policy measures tailored to ‘cool’ the property market has ‘dampened sentiment’. Provincial growth figures displayed widened disparities, as contraction continued in Liaoning, commonly referred to as a ‘rust-belt’ marred with pervasive corruption. GDP in the region declined by a further 2.2%. Amongst China’s 31 provinces, municipalities, and autonomous regions, Chongqing and Tibet reported the highest growth rates of 10.7%. Two other provinces reported growth rates below the national average; Shanxi and Heilongjiang reporting growth of 4% and 6% respectively. Julia Wang, economist at HSBC, claims that the result is ‘not surprising’, given that Liaoning is a province heavily reliant on energy. Usman Marghoob

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Russia & Eastern Europe The past couple of weeks have been marked with political excitement in Eastern Europe. Presidential elections in Bulgaria and Moldova, both electing pro-Russian candidates, have sparked fears regarding the countries’ positions within the EU. The fact that Moldova is smaller, poorer and not a full EU or NATO member makes it more susceptible to deep ties with Russia, more so than Bulgaria. Thus, the elections in Moldova, resulting in the appointment of the former Communistturned-Socialist Igor Dodon, have been worrying. His party has vowed to dismantle the 2014 EU-Moldova association accord and instead join Russia’s Eurasian economic union, which could potentially serve as an example for other pro-Russia governments in Eastern Europe – a great worry for Western Europe. The picture, however, is not as grey as it may seem. The economic ties between the EU and Moldova have become stronger than ever, with 60% of Moldova’s exports sold on EU ground. Hence, it is not surprising that, according to EU officials, Dodon privately assured that he will not be looking to scrap the EU accord during his campaign. Nevertheless, Dodon’s election was not a result of his pro-Russian views, but a decision based on disappointment from previous corrupt politicians, who happened to be pro-EU.

For Bulgaria, the election of Rumen Radev, a political independent backed by the Socialists, should not be seen as a threat to the country’s relationship with the EU. Despite being branded as “the red general” by his opponents during his campaign, because of his aim to seek closeness with Russia, the president has no intention to disrupt Bulgaria’s membership in the EU. “Bulgaria’s membership of the EU and NATO is not negotiable,” he said. “But to be pro-European doesn’t necessarily mean being anti-Russian.” This is not surprising, given that the country is supposed to receive about €10bn in aid between 2014 and 2020. However, tough months lie in front of the country following the election. Last week, Prime Minister Boyko Borissov honoured his pledge to step down if his GERB party’s candidate, Cecka Cacheva, were to lose. The collapse of the government is the third one in five years, and will trigger a new snap election. Since then, three high-level officials from Borissov’s government have been charged with abuse of office, creating an even bigger chaos in the country’s political stage. The economic implications of this uncertainty are not to be underestimated. Desislava Tartova

Week Ending 25th November 2016

Latin America There has been mixed news across the region this week as the major Latin American economies released contrasting data. This week’s market results sum up the performance of the Latin American region in the past few months. On Monday, the Brazilian Central Bank released October’s data for the current account. The BCB announced that the deficit was to the tune of $3.34 billion, a substantial increase on last month’s $0.47 billion, and the analyst consensus of $3 billion. The last time Brazil registered a current account surplus was back in May (see graph). The latest results will unnerve investors, who have been backing exportled growth to drive Brazil out of recession. On the contrary, Michel Temer received positive news from the latest Foreign Direct Investment (FDI) figures, which came in at $8.4 Billion for October, up on last month’s figures and projections by over 60%. Mixed news for Mexico came on Wednesday, as Q3 GDP figures were released. QoQ, GDP was up 1% (double the forecast), but yoy down 0.6% at 2%. With Brent Crude prices hovering around the mid-high $40’s in the past 3 months, Mexico is struggling to plug the shortfall on what was an extremely profitable commodity. In light of recent oil price shocks, the Mexican government has been

engaged in an oil hedging programme, enlisting help from the likes of JP Morgan Chase, Goldman Sachs and Citigroup. This year’s option will provide a windfall around the mark of $3 billion, making the operation the biggest of its kind in the derivatives market. In 2015, the programme took $6.4 billion after hedging crude at $76.4 a barrel. On top of this, analysts estimate that the Mexican Central Bank (BdeM) could transfer $20bn to the government budget, due to the increase in value of the BdeM’s dollar reserves. From the minor economies of the region, the central bank of Paraguay voted to hold the nations interest rate at 5.5%, after consumer prices rose on target, staying below the target of 4.5%. Costa Rica announced a slightly increased balance of trade deficit for October; the figure stands at $461 million. Columbia and Panama added to the fray this week as Columbia announced producer price levels were down 3.9% compared to this time last year, whilst Panama updated their economic activity forecasts to show a growth of 4.09% yoy. Next week, investors eye Brazil’s key interest rate which has been widely predicted to receive a 25bp cut. Alistair Grant

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Africa During the past week, South Africa appeared to be in a troubled state as three of the nation’s major macroeconomic indicators, inflation, unemployment and political stability, all seemed vulnerable. Africa’s real GDP grew at an average of 3.3% a year between 2010 and 2015, considerably slower than the 5.4% from 2000 to 2010, with the continents 3rd largest economy being the latest victim of this slowdown in growth and development. Firstly, unemployment is a real issue, as according to data from the International Monetary Fund, South Africa’s rate rose to 27.1% from 26.6% in the last quarter – the highest unemployment rate since 2003. This fact has already alarmed many in the country; Lesiba Mothata, head of market and economic research at Investment Solutions in Johannesburg, being one of them. Mothata argues that “We need faster GDP growth, because once we do that we will find that a lot more people are absorbed in the labour force”. Indeed, an accurate solution to the issue, however, statistics released in the last month showed that gross domestic product growth stayed below 3.5% annually, and is projected by the government to slow to 0.5% this year. This does not ease fears, but rather heightens them.

On a similarly bleak note, South Africa’s inflation accelerated to an eight-month high in October, increasing to 6.4 % from 6.1 % a month earlier, a figure that has led to the weakening of the currency. This is because high inflation is suggestive of political instability or generally poor macroeconomic management. Furthermore, more recently, there have been attempts to prosecute Finance Minister Pravin Gordhan for fraud, a further example of political uncertainty, that is causing current South African rand volatility. Labour reform is possibly the only shining light amid the current economic dreariness, as attempts have been made to improve labour welfare, as the recommendation of an increase in the minimum wage to 3,500 rand ($246) a month to be phased in over two years, was made over the weekend. Despite the fact that the nation’s biggest union has rejected the initial proposal on the grounds of the possible negative effect on overall employment levels, it nonetheless does look as if only a large amount of political stability and willpower can direct the nation back on course to being a major emerging market. Mikun Olupona

Week Ending 25th November 2016

Middle East News came on Friday that Saudi Arabian officials will not be attending OPEC’s meeting in Vienna next week. Monday’s meeting will be between OPEC members and non-members with plans to discuss limiting OPEC’s oil output in order to raise prices. The proposed limit is to reduce the millions of barrels per day from 33.64 – as was produced in October – to between 32.5 and 33 million barrels of oil per day. Regarding this potential agreement, a Saudi Arabian source said, "Before we meet with non-OPEC and ask them to participate in any action, we have to have an agreement that is credible with clear numbers and a system that the market believes". As the greatest global oil exporter, Saudi Arabia’s presence in the meeting is sure to be missed, and even as the news broke on Friday of its planned absence from the meeting, oil prices quickly fell during the day, as can be seen from the graph below. Further news, which came on Friday, was of the World Bank revising its economic forecast for Turkey, reducing the country’s 2016 growth forecast from the 3.5% prediction made in July, to 3.1%. The World Bank said that following July’s failed coup attempt, private investment and consumption, and subsequently Turkey’s GDP growth, had slowed. The bank also said that the recent depreciation of the

Turkish lira had led to strained corporate finances. This analysis follows Thursday’s news of the Turkish central bank increasing interest rates for the first time in almost three years, in an attempt to improve the value of the lira which fell by 10% against the dollar this month, following a series of terrorist attacks and uncertainty surrounding the Turkish economy. The interest rate rose from 7.5% to 8%, the first rise since early 2014. Following the announcement by the central bank, the lira rose by 0.74% against the dollar, a small but positive sign that the monetary policy change was necessary. The statement issued by the central bank said, “Exchange rate movements due to recently heightened global uncertainty and volatility pose… risks on the inflation outlook… The committee decided to implement monetary tightening to contain adverse impact of these developments on expectations and the pricing behavior.” Only in the coming months will it be clear whether this interest rate rise will restore investors’ confidence and boost Turkey’s economy. Nikou Asgari

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Southeast Asia This week we focus on major data releases for the region, with both Thailand and Singapore releasing GDP figures for the third quarter. Thailand posted lacklustre GDP figures on Monday, with year-on-year growth expanding 3.2% in the third quarter of 2016. This was 0.2% below market estimates, and reflected a quarterly growth rate of only 0.6% – the weakest since the second quarter of 2015. Analysts have largely attributed this to short-term economic disruption arising from the death of King Bhumibol, and a 5.8% contraction in government spending in the third quarter. Worryingly, this downward trend is likely to continue, with the Asia Economist at Capital Economics predicting that “growth in Thailand will slow further in Q4”. Despite this, Thailand’s economic future remains relatively bright. Exports registered positive growth for the first time in seven quarters, and thanks to its domestic-orientated economy, the country is shielded from the recent growth of protectionist trade policies around the world. Provided that Prime Minister ChanOcha honours his pledge to increase government investment, Thailand should see an increase in growth over the next 12 months.

In other news, Singapore recorded yearon-year growth of 1.1% for the third quarter. This was 0.1% above market estimates, and crucially 0.5% above preliminary readings, which had predicted the country to grow at its slowest rate since 2009. Despite these improvements, the economy shrank 2% relative to the previous quarter (see chart), and a technical recession (two consecutive quarters of negative growth) remains a real possibility. Indeed, Singapore’s services sector has suffered three consecutive quarters of contraction for the first time in almost 20 years, and the recent international backlash against globalisation poses significant risks for a country so dependent on trade. This sentiment was shared by AZ economist, Weiwen Ng, stating that Thursday’s figures illustrate “that sequential growth still remains entrenched in negative territory”. In the face of weak external demand and business investment, many experts are calling for more targeted measures in relation to the labour market to help support businesses over the coming months. Next week we will focus on inflation, with Malaysia and Singapore releasing CPI data for October, and a further three countries releasing data for November 2016. Daniel Pettman

Week Ending 25th November 2016

EQUITIES Financials The Autumn Statement has provided a macabre outlook on the future of the economy. On Wednesday, the new Chancellor of the Exchequer, Phillip Hammond, announced he would move ‘as soon as possible’ on a new initiative which sees a ban placed on agents charging tenants fees for administrative services. The reasoning behind this move is in the private rental market where letting agents are currently able to charge unregulated and sometimes unfair fees to tenants. However, it is likely that agents will pass on the assault on their income in the form of higher rent for tenants, but the ramifications of this move do not end there. The promise of a £2.3bn housing infrastructure fund was not enough to offset the loss in confidence in the housing market. On the stock market, estate agencies were crippled by the announcement, plummeting down the FTSE 250. The stock of Foxtons – the London real estate chain – plummeted 14% whilst Countrywide’s shares fell 5.2%. LSL Property saw 207p wiped off their shares value with no estate agent left unmarked. This author appreciates that Hammond intends to benefit newer letting agencies with a strong online presence and lower costs to tenants in time when the housing

market is shrouded in avarice. However, I believe landlords and estate agents will vehemently resist attempts to pass the costs onto them, and it will have a negative impact on tenants in a time when the squeeze on disposable income has a lot of them by the throat. It is suggested by this author that a cap on letting fees, rather than a ban, should be put under careful consideration. However, the Autumn Statement did not prescribe doom and gloom to all industries. Shares in CityFiber – the UK largest alternative Internet service provider – leapt 4.1% for the day to 57.5p after the chancellor announced a £1bn fund for digital infrastructure. When juxtaposed with the fact that shares were up only 0.5% the day before the statement, the profound impact of Hammond’s statement on all sectors of investment is clear. In the aftermath of the statement, former Conservative Chancellor, Kenneth Clarke, said the ‘economic reality of the country has been spelled out’. That reality will be received with joy in some parts and trepidation in many. Vincent Egunlae

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Technology Social media giant Facebook opened trading on Monday with its share price up by 4% to $121.77. This steep climb, as you can follow from the chart below, happened after Facebook announced that it will buy back as much as $6 billion in shares starting from the first quarter of next year. A share repurchase programme allows a company to reduce the number of shares outstanding, therefore increasing its earnings per share, and elevating the market value of the remaining shares. The repurchase programme is announced in a bid to return value to shareholders while other longer-term investments play-out. It also allows Facebook to take advantage of a fall in its share price which was triggered earlier this month by speculation of future slow growth, as well as uncertainty in the tech sector about how Donald Trump’s policies on protectionism and immigration will affect the industry. Meanwhile, reports came out on Thursday that Amazon is in discussion of a $1 billion acquisition of Dubai-based online retailer Souq.com. No final agreement has been reached as of yet. If the deal happens, this will allow Amazon to get a foothold in the high growth market of the Middle East, and

get scaling on a large business that already has access to a growing consumer market of a young population who are increasingly going online for shopping. There have also been some interesting developments occurring in unlisted tech companies. Most notably, British technology company, Skyscanner, was confirmed to be acquired by Chinese travel giant, Ctrip. The deal which went through on Thursday is for a reported $1.7 billion and it allows China’s leading online travel company to gain a strong foothold in Europe, as well its domestic market in China. James Liang, Chairman of Ctrip, told analysts that “the investment will strengthen our positioning on a global scale, serving customers in other parts of the world.” The news of this acquisition comes a day after UK Chancellor Phillip Hammond mentioned the problem of British technology companies’ inability to grow on an international scale, and hence raises the question of whether Britain can still compete globally in the tech industry. Bunyamin Bardak

Week Ending 25th November 2016

Oil & Gas While the US stock market staged a bull run around the Thanksgiving holiday to hit record highs, oil and gas stocks wavered between gains and losses across America and Europe on mixed news flow ahead of an OPEC meeting on November 30 to seek an output reduction agreement. Over the week, the possible policy shift of Presidentelect Donald Trump to relax the rules on the energy sector in the United States has been one of the drivers behind the gains recently. Exxon (XOM) closed at $86.92 on Wednesday before the Thanksgiving Day, gaining 1.92% over the first three trading sessions of the week, while Chevron (CVX) gained 1.65% to close at $111, slightly off its 22-month high of $110.62 recorded on Tuesday. ConocoPhillips (COP), an exploration and production company, gained 3.44% over the three session. The NYSE Energy Index closed at 10,996.94 on Wednesday, the highest since midOctober. Meanwhile, the prices of oil and natural gas futures went separate ways. Oil futures recorded minor loss on Wednesday. Traders were wary as data from Baker Hughes showed the number of active U.S. rigs drilling for oil climbed by 3 to 474. The

total number of oil and natural-gas rigs active also climbed by 5 to 593. The weakness resulting from the news was partly offset by the influence of a US Energy Information Administration report saying that US crude supplies in the previous week fell by 1.3 million barrels, due to both higher refinery runs and lower imports. Natural-gas futures ended at its highest level in over three weeks on Wednesday. In Europe, energy stocks closed lower on Friday, amid fluctuations in sentiments on the OPEC meeting. British Petroleum (BP: LSE) lost 2.75 pounds, or 0.6 %, to close at 456.1 on Friday. Royal Dutch Shell (RDSA: LSE) lost 0.21% to close 2,016.83 pounds. West Texas Intermediate (CLF7) and Brent crude futures both fell by over 3% on Friday to $47 and $48 a barrel, respectively. The news from the OPEC meeting is expected to underpin market price movements before the oil cartel possibly deliver anything on November 30. Whereas the energy ministers have expressed optimism previously, it is not easy to produce an agreement on output cut. Michael Chen

NEFS M arket Wrap-Up

COMMODITIES Energy Tuesday saw natural gas prices close at a three-week high after the news came of forecasts for normal temperatures which boosted the outlook for demand. Previous weeks of higher than average temperatures have weighed on demand, but it is now thought that an expected colder climate will lead to withdrawals of record high storage levels. With this anticipation, prices closed on Tuesday up 1.1% at $2.9820 a million British thermal units. Oil prices were also up this week, largely due to anticipation of the OPEC meeting scheduled for next week in Vienna. There is a growing consensus amongst analysts that the cartel will strike a deal to cut crude production. OPEC producers are under pressure to implement an accord reached in Algiers in September to cap production at a level that is at least 800,000 barrels a day lower than its current output rate. The oil price increase was carried into Tuesday when it was aided by the announcement by the Iraqi Prime Minister Haider al-Abadi that Iraq would “Shoulder responsibility” for some of the planned cuts of oil. As a result, at market close, Brent Crude Oil – the global benchmark rose 20 cents to $49.28

a barrel following the news thought to help bolster the oil price come next week. This is up from the previous $48.56 per barrel, furthermore Western Texas intermediate (WTI) increased 25 cents to $48.27 from a low of $47.40. Despite this, the second half of the week was not so strong, with prices falling slightly, amid investor doubts that OPEC will agree to a production cut large enough to make a significant dent in the global glut of crude as U.S drilling rises, with analysts predicting that if OPEC fails to agree on production cuts next week, U.S oil prices could fall to $35 a barrel at the beginning of next year. Thus, with volatility still high in anticipation, prices dropped for WTI to $47.96 a barrel and to $48.95 for Brent crude with prices still dropping into Friday, as demonstrated on the graph below. William Bunnis

Week Ending 25th November 2016

Agriculturals Sugar approached bear market territory this week, falling 3.59% further from the multi-year high of $0.238/lb reached on October 5th to settle at $0.196/lb (as shown below). The dramatic shift in market sentiment can be attributed to improving weather conditions in Brazil, with Monday’s data release from Unica (Brazilian sugar can body) showing that rain in major production regions has not impacted on crop yields as seriously as initially feared. The US dollar also continued to strengthen against the Brazilian real this week, boosting exports further. The sugar slump has followed the International Sugar Organisation’s prediction that world supply would catch up with demand during the 2017/18 harvest seasons, bringing the market into balance for the first time in more than 2 years. However, it should be noted that this prediction assumes generally positive weather conditions, which is far from guaranteed. The United States Department for Agriculture (USDA) currently estimates the gap between supply and demand to be 2.6m tonnes, with stocks now being at their lowest level in 5 years. A volatile week for soybean traders ended with prices touching a 4-month high of $10.35/ ¼ BU. Interest from traders gathered momentum on Monday when

Goldman Sachs advised buying commodities in a memo to clients – the first time it has done so in 4 years. However, USDA estimates of a record soybean crop for the 2017/18 harvest season lowered prices on Wednesday, before recovering quickly on Thursday. The current high price levels have drawn scepticism from many analysts this week, who cite historically average stock levels and positive weather conditions in South America as arguments for soybean futures looking overpriced. Meanwhile, Malaysian palm oil futures soared as much as 4% to a four-year high of 3,098 r inggit a tonne on Thursday as the US Environmental Protection Agency unexpectedly lifted its forecast of US biodiesel consumption by 6.5% for 2017. The EPA’s move "was a surprise, especially as it was released a day before a major US holiday. It caught traders off guard," said Terry Reilly, at Chicago broker Futures International. In other markets, rubber rose by 13% to 237JPY/KG, taking its annual increase to 45% - making it the strongest performing agricultural commodity this year. The improved weather conditions in Brazil have also impacted on oat and coffee futures markets, which are down by 10.1% and 4.69% respectively this week. Aidan Dominy

NEFS M arket Wrap-Up

CURRENCIES Major Currencies A slightly less turbulent week than the last as the dollar continued its staggering rally. The sterling gained a slight reprieve from the new Chancellor of the Exchequer’s inaugural Autumn Statement and the euro has finally stopped losing. Starting with the euro this week, it flatlined at $1.0625, spiking to $1.078 at the start of the week. The drivers for the euro this week has all been political with Monday’s gains eliminating the 10-day losing streak of the euro against the greenback. With Angela Merkel announcing she will run for her fourth term as German Chancellor, and France’s Republican party coming closer to picking its presidential candidate, knocking out former leader Sarkozy in the process, this has pushed the euro up as the strengthening dollar has been holding it back for the last two weeks. A weaker euro would be good news for the European Central Bank, however, which has been on a two-year bid to raise growth and inflation in the Eurozone. Policymakers at the ECB are widely expected to extend their landmark asset purchases beyond March 2017 next month – a move that should add pressure on the single currency. The dollar continues to strengthen (against the euro) as it opens at 0.941 and closed

slightly higher at 0.943. This comes as US manufacturing looks brighter, with the Commerce Department seeing orders for durable goods – products such as cars, tractors and refrigerators designed to last longer than three years – jump 4.8% in October. This is against the 0.3% decline in the prior month and crushed the 1.7% market expectation. Excluding the volatile transportation component, orders were up 1%, also topping expectations of a 0.2% increase. Opening at $1.2414 and finishing a bit higher at $1.2458, the pound effectively flatlined this week on the back of the Autumn Statement. With a downgrade on UK growth for 2017 and higher borrowing targets, along with a rise in government debt to 90% of GDP, nothing surprised the markets nor caused any concern. Overall, the trend of the pound is yet to be seen until Brexit unfolds further, but expect continued volatility. As the market, has now fully priced in a rate hike this December in the US, we await to see the effects following this and in the Euro space, we sit tightly, and cautiously, to see how it politically unwinds. Robert Tse

Week Ending 25th November 2016

Minor Currencies This week we look at the causes of a substantial depreciation of one of Asia’s strongest currencies- the Malaysian ringgit. We then look at how some emerging market currencies have been fairing amidst fears of depreciation. Asia’s worst-performing currency since Donald Trump’s surprise U.S. election victory is putting a Malaysian interest-rate cut out of sight for now. After surprising the market with a reduction in July, economists, in the days leading up to the U.S. election, had forecast another cut this year. Trump’s win, and the ensuing U.S. dollar rally, have swept those bets away, and Bank Negara Malaysia (the Malaysian Central Bank) held the overnight policy rate at 3% on Wednesday, 23rd November. The ringgit has fallen more than 5% since the Nov. 8 U.S. elections, as emerging Asian economies suffered about $11 billion of outflows, as shown below. This was primarily due to the capital flight to U.S. Treasuries as their yields rose rapidly in response to Trump’s policies. The Malaysian currency fell for 10 straight days through Tuesday and was trading at the lowest level since October 2015.

order to prevent a further reduction in its exchange rate. The Japanese yen remains under pressure, as USD/JPY continues to trade at its highest level since March. Tokyo Core CPI, the primary gauge of consumer inflation, which came in at -0.4% in the November report, has failed to post a gain in 2016. China faces an uphill battle to maintain an orderly depreciation of the yuan as investors pile up bearish bets against the currency. However, the Indian rupee on Friday closed stronger, the maximum gains in 2 months against the US dollar, supported by the suspected intervention of the Reserve Bank of India (RBI) in the currency market. In summary, the pace of depreciation has quickened since Donald Trump’s surprise U.S. presidential-election win sent the greenback soaring, and emerging-market currencies tumbling. U.S. 2016 GDP figures will be released on Tuesday, which could potentially be market moving news for minor currencies. Angelo Perera

"Given the currency weakness and potentially an uptick in inflation next year, the room for deeper rate cuts is slimmer,” said Julia Goh, an economist with United Overseas Bank Ltd. in Kuala Lumpur. Other central banks in the region are also holding off from adding stimulus, with Indonesia last week keeping its benchmark rate unchanged after six cuts this year, in

NEFS M arket Wrap-Up

About the Research Division The Research Division was formed in early 2011 and is a part of the Nottingham Economics and Finance Society (NEFS, formerly knowninas NFS2011 and and UNIS). consists teams of analysts closely The Research Division was formed early is aIt part of theofNottingham Economics monitoring particular markets and providing insightsas into theirand developments, digestedofinteams our NEFS and Finance Society (NEFS, formerly known NFS UNIS). It consists of Weekly Market Wrap-Up. analysts closely monitoring particular markets and providing insights into their developments, digested in our NEFS Weekly Market Wrap-Up. The goal of the division is both the development of the analysts’ writing skills and market knowledge, providing NEFS with quality them up date with The goalasofwell the as division is both themembers development of the analysis, analysts’keeping writing skills andtomarket the knowledge, most important financial news. NEFS members with quality analysis, keeping them up to as well as providing date with the most important financial news. We would appreciate any feedback you may have as we strive to grow the quality and usefulness of weekly market wrap-ups. We would appreciate any feedback you may have as we strive to grow the quality and usefulness of weekly market wrap-ups. For any queries, please contact Homairah Ginwalla at hginwalla@nefs.org.uk. For any queries, please contact Josh Martin at jmartin@nefs.org.uk. Sincerely Yours, Sincerely Yours, Director of the Nottingham Economics & Finance Society Research Division Homairah Ginwalla, Josh Martin, Director of the Nottingham Economics & Finance Society Research Division

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