Financial Markets – Primal Group

Divergent Paths Open Up in the Commodity Sector

A report just released by the Australian Bureau of Meteorology states 2015 sea-surface temperature anomalies in the central Pacific will be the highest in 19 years, are continuing to rise and may surpass the record temperatures set in 1997. El Niño influenced sea surface temperatures are currently 2.9F above normal and are forecast to climb by an additional 4.9F in total by the end of December 2015 and start of 2016.

In response, investors have been fast increasing their exposure to agricultural investments, through indices or exchange-traded funds (ETFs). These saw net inflows of $800m during April and May 2015, in marked contrast to the net outflows of $2.4 billion during Q4 2014.…

Raising the Stakes in Global Development Banking

The fastest emerging economies in the world, which account for $16 trillion in GDP and 40% of the population, are consolidating their resources with the aim to break the monopoly of the International Monetary Fund and the World Bank. And why not? If they are managed well, banks will become high profile, prestige institutions that demonstrate power and intent, as well as being profitable businesses. Both the Asian Infrastructure Investment Bank (AIIB) and the BRICS’ New Development Bank (NDB) are aiming to create financial systems that better serve their own interests. Using their own resources to finance joint, large-scale projects in transport, energy and industrial development they will – if successful, disrupt, if not dethrone, six decades of US dollar hegemony.…

China’s Slowdown Matters So Much More Than You Think

The slowdown in the Chinese economy may be inevitable, but it is also unwelcome at a time of lingering economic uncertainty across much of the globe. After 30 years of growth averaging 10%, the 7.4% reported for 2014 was the slowest since 1990. Yet it is almost certain that the world, and even perhaps sections of the Chinese government, have been operating under false pretenses. This mattered less when the world’s most populous country was expanding, shifting from a rural agrarian based economy to an urban based manufacturing one. Yet as the current credit supplied and manufacturing model slows, a creaking property bubble, opaque banking sector and drop in demand for goods from the rest of the world are coalescing.…

Biting the Bullet to Restore Market Confidence

After much delay, the release of Petrobras’ audited 4Q 2014 results proved to be a muted and anti-climatic affair though it was very, very expensive. There was relief that the booked losses, and specifically the write down attributed to an on-going corruption scandal, were finally quantified and out in the open.

The numbers themselves were eye-wateringly high – a Brl 50.8 billion ($16.8 billion) write-down, with 12 percent of that directly attributed to bribery and kick backs linked to a number of political parties, including most prominently the president’s own Worker’s Party (PT). With investors and the public in the dark about the multi-year costs associated with the corruption scandal, the eventual Brl 6.2 billion identified as being the direct result of the kick-backs, if not exactly pleasant surprise, really was one that could have been a lot worse.…