May 15th – The BESA Times
Eighteenth Edition - Sunday, May 15th
Every week, a complete snapshot of what happened around the world in the past seven days
Notable Headlines
Apple has invested 1bn$ in Chinese Uber rival Didi Chuxing. This boost for the company may ward off competition from Uber and other competitors. Apple CEO Tim Cook said the deal would provide new opportunities for Apple in China. The tech giant reported its first fall in profits since 2003 in April with China being one of its weakest markets, following the closure by state regulators of the company’s online book and movie services.
After hours of negotiations, Republican candidate Donald Trump has secured the support of House Speaker Paul Ryan in his bid to become the next US President. This comes hours after he appeared to water down some of his policies such as a proposed temporary ban to all Muslims entering the US.
Brazil’s new leader Michel Tomer was sworn in as interim president this week, after MPs voted to back the impeachment trial against Dilma Rousseff. The country’s new cabinet is composed by formal central banker Henrique Meireilles and several business-friendly ministers. Mr. Tomer’s popularity is however not much higher than Ms. Rousseff’s, according to some surveys. The new president will stay in power until the trial against the former president is over. It should take no more than 180 days.
What to remember of last week's news?
Just days after being added to US watch-list for countries that may have an unfair foreign exchange advantage, Germany posted a record current account surplus of the value of 30.4 billion euros, its trade surplus reaching also record levels. Germany, China, Japan, South Korea and Taiwan were added to US’ watch-list at the end of April with the aim to monitor their foreign-exchange practices understanding whether they provide an unfair trade advantage over America.
What started as a rational expectation, that China’s economic stimulus and industrial reforms would lead to shortages of construction materials, quickly escalated into a full-blown commodities frenzy. As investors traded in sheer volumes throughout the past months, Bloomberg reports “they traded enough cotton in a single day last month to make one pair of jeans for everyone on Earth and shuffled around enough soybeans for 56 billion servings of tofu.” The rally in prices is still a far from the Shanghai Composite Index’s 159 percent advance to its peak last year, or the Nasdaq Composite Index’s 256 percent advance at the height of the dot-com boom 16 years ago, yet the situation is definitely a bubble with five commodities having gained already 50% from their lows of last month. Chinese authorities are now trying to prevent inflation introducing trading curbs.
In a written letter responding to Congressman Brad Sherman, the FED chief Janet Yellen didn’t exclude the option of resorting to negative interest rates in case of need, not failing to mention they are to be considered as a measure of last resort. She mentioned that in deciding to go negative and follow Japan’s example, the FED would need to consider a wide range of consequences, among which the unintended ones that may affect the economy negatively.
A week in the financial markets
Our Homemade Article
Money Falling from the Sky: a Utopia? by Maria Costanza Cau for BESA
Understand in pictures...
Fund management, why should we buy actively managed funds? The fund management industry used to have a good answer to that: they were experts in what they did and definitely capable of providing investors with long-term outperformance over the market as a whole. But now that is not an argument that washes particularly well any more. Most studies have shown that is quite impossible for a fund manager to stay in the top quartile for performance for more than a couple of years at a time. So why is it so hard to perform so well? What are managed funds like?
What to expect for next week?
Next Monday, 16th of May, Brazilian annual inflation rate will be revealed. The event will be a matter of strong interest, specially after President Dilma Rousseff impeachment, which has been approved by Brazilian senate, and will last 180 days. The focus will be on the financial markets and their reaction to the Senate’s decision.
On May 26th and 27th Japan will host the annual G7 summit, concerning the numerous challenges of the international community, such as global economy’s growth slowdown, terrorism and refugees crisis. The official Agenda also includes health, quality infrastructure investment and climate change. In particular, next week are scheduled two important meetings regarding Science and Technology Ministers on the 15th of May and Finance Ministers and Central Banks Governors on the 20th.
Did you know?
Apple is still the world’s most valuable company by the skin of its teeth. A renewed shiver of concern about the outlook for iPhone sales sent Apple’s shares down more than 2 per cent on Thursday to 32 cent below the peak it hit almost exactly a year ago!
WRITTEN BY THE BESA RESEARCH TEAM
PLEASE DIRECT ANY INQUIRY TO AS.BESA@UNIBOCCONI.IT
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