Tag: Business and finance

FOR the second time this year, investors have been hit by a political shock: first, the Brexit referendum; now, Donald Trump’s election victory. And the reaction has been very similar; a knee-jerk sell-off followed by a pause to consider whether there might be some profitable opportunities after all.

As election night unfolded, markets moved pretty much as they had during the campaign when Mr Trump surged in the polls. Equities fell, Treasury bonds rose in price (causing yields to fall) and the Mexican peso took a battering. The futures contract on the Dow Jones Industrial Average dropped by more than 800 points at one stage. Asia followed suit with widespread declines: the Japanese stockmarket dropped by 4.6%. The Mexican peso dived to a new low of nearly 20.8 to the dollar. Gold gained ground, as if often does when investors are nervous.

But the nature of the financial markets is that sharp moves bring out the bargain-hunters. In this respect, the optimists were helped by a fairly emollient acceptance speech from Mr Trump and the very vagueness of his policy proposals. As Fathom Consulting, an economic research group, put it,…Continue reading

GOLD is Donald Trump’s favourite metal. The taps on his private jet are 24-karat gold-plated. His $100 vodka is adorned with a golden “T”. He even hankers after the gold standard. He must have found it gratifying, therefore, that gold soared to its highest price since Brexit after his overnight victory in America’s presidential election. But copper and industrial metals also rallied. They tell a similar story: prepare for reflation.

Gold is both a haven and a hedge against inflation. Initially, its rally appeared to be a rush for safety. The dollar and stockmarkets plunged as Mr Trump headed closer to victory, pushing panic-driven flows into the yellow metal. It pared gains from a high above $1,330 an ounce to below $1,300 as other markets took heart when the president-elect, in his victory speech, promised to double American growth and rebuild the country’s infrastructure. But gold bugs remain bullish because Mr Trump is likely to expand the fiscal deficit, and the uncertainty over the implications of his election may make it harder for the Federal Reserve to raise interest rates. Fiscal expansion and continued monetary looseness are both…Continue reading

FROM late January, Donald Trump will have all the authority of the American executive, and the support of a unified Republican Congress, behind him. He will, therefore, be in a position to deliver profound and lasting change. The near-term economic effect of a Trump presidency is perhaps not of foremost concern to vulnerable racial and religious minorities in America, or to nervous Nato allies in eastern Europe. But the economic consequences of Mr Trump’s presidency could be enormous, and costly.

In the short run, the market reaction will receive most attention. Mr Trump will not be president until early in 2017, and so it falls to markets to anticipate, and price in, expected policy changes. Stockmarkets are set to open down today, and the election could presage a longer slump if investors feel that the uncertainty generated by Mr Trump’s victory will harm growth and corporate profits. But volatility, rather than a bear market, might be the more probable outcome, given the lack of clarity as to what Mr Trump will prioritise in office. Bond prices will probably wobble a lot as markets seek insurance against risk. Normally, American bonds are the world’s great safe haven….Continue reading

FINANCIAL markets went into the election night both favouring and expecting a Clinton victory. And the early results seemed to point to success for the Democrat candidate. But as the night wore on, Donald Trump’s position steadily improved and investors started to lose their nerve.

The Mexican peso was the most sensitive emerging market currency to the election news, given Donald Trump’s promises to build a wall on the border and his talk of renegotiating the Nafta free trade agreement. During the day, the peso was around 18.5/$ and it reached as high as 18.18/$ in early polling. But as the key state of Florida moved from a Clinton to a Trump lead, the peso plunged to more than 20 to the dollar. In contrast, the dollar lost ground against other major currencies, falling 3% against the yen.

A similar reaction was seen in equities. On November 7th, when Clinton’s lead in the polls was strengthening, the Dow jumped 300…Continue reading

IT SHOULD have been a good year for French tourism. After all, as host of the Euros, the continent’s quadrennial international football tournament, it had the perfect chance to showcase its many charms. Instead, 2016 has been a disaster. Visits to the world’s most popular tourist destination have fallen by over 8% in the year to October, according to Bloomberg, compared with the same period in 2015. The number of nights spent in Parisian hotels fell by 21%.

Brexit hasn’t helped. Britain is the country’s second biggest source of overseas visitors. As sterling has plunged, France has become more expensive for those used to popping across the channel to stock up on plonk and Pont-l’Évêque. Consequently, arrivals from Britain are down by 4%.

But terrorism is the main reason for tourists’ squeamishness. Horrific attacks in Paris and Nice over the past 12 months that claimed hundreds of innocent lives, as well as several other well-publicised atrocities, have made Asians, in particular, think again. Nearly 40% fewer…Continue reading

LIBERAL democracies, while not exactly on the brink of a descent into fascism, are facing a period of crisis. Tomorrow, when Americans go to the polls, one of the major-party candidates will be a man whose campaign has dispensed with the notion that its talking points should bear any resemblance to truth, and who has routinely promised to take measures in office which would violate the spirit or letter of the law and constitution. In Britain, meanwhile, parts of the public reacted with fury when a British court carried out its constitutional role as it saw fit, suggesting its judgment concerning the role of Parliament in invoking Article 50 was a betrayal of the people. These developments seem to presage something far worse—maybe, some worry, the end of functional democracy and its replacement by fascism. In the Financial Times today, Mark Mazower finds parallels in Germany before the Nazis…Continue reading

IT HAS been a turbulent year for airlines in Europe. A slowdown in the growth of demand for air travel across the continent has hit both passenger volumes and fare levels. Last month, Europe’s two biggest low-cost carriers, Ryanair of Ireland and easyJet of Britain, slashed their profit forecasts following the post-referendum fall in the pound. Average fares in Europe could drop by as much as 15% year-on-year this winter as airlines try to keep planes full.

Yet earlier today, Ryanair’s results for the six months ending September took investors and analysts by surprise, and in a good way. In spite of fares falling by a tenth, post-tax profits increased 7% to €1.17bn ($1.29bn) compared with the same period last year. Revenues, too, were up slightly. Although the airline has been hit by Brexit, it says it will respond by shifting capacity growth next year from Britain to countries such as Germany, Italy and Poland.

Although this is all good news for travellers wanting to fly around Europe at the lowest possible cost, traditional full-service outfits should be worried by Ryanair’s ebullient mood. Ryanair has traditionally focused on…Continue reading

GAMBLERS seem to think Donald Trump is a 3-1 outsider to win the election on Tuesday. The Predictit market has Hillary Clinton on 77% (where 100% is certainty). But what does that really tell us? On June 21, two days before the British referendum on the EU, Betfair was implying odds of 75% for Remain and 25% for Leave. This was despite quite a large number of polls that showed Leave ahead. As we know, Leave won 52% to 48%.

The idea of looking at betting markets is that “smart money” can assess all the information far more efficiently than opinion pollsters or newspaper columnists. It’s efficient market theory for politics. But what are the gamblers assessing? They are looking at the same poll as everyone else. in the EU referendum, some people seemed to believe that despite the polls, a status quo bias would ensure that Remain won (such a thing had been seen in previous referendums). But that wasn’t the case. Instead, as I feared in my Continue reading

FOR decades, when asked to imagine the technology of the future, the stock answer has been flying cars. In reality, the passage of time has brought us innovations of a sort we never foresaw: the ability to send information instantaneously to the other side of the world, to look up any known fact with the click of a button, and to swap faces with a cat. Meanwhile, cars have remained earthbound and transportation technology—planes, trains and automobiles—has retained its familiar form.

Until now, perhaps. Last week Uber, a ride-hailing app, released a 97-page white paper. Its title was “Fast-Forwarding to a Future of On-Demand Urban Air Transportation”, and it proposed a programme called Elevate. But the two words that everyone took away from the report were the same ones that have always come to mind when the future is mentioned: flying cars.

Within the next decade, Uber aims to launch a network of flying cars that will turn a two-hour road trip into a 15-minute flight. And it…Continue reading