On the run today (no, not like Boris). Just time to point you towards ......

Friday 1st July 2016

On the run today (no, not like Boris) . Just time to point you towards ......

ref :- "Now watch the shift in interest rates" , Gillian Tett , Comment in the Financial Times

Why would the Brexit vote cause a 14% fall in the share price of a rock-solid US insurer with very little exposure to the UK or Europe ? It's all about lower rates ..... the negative economic effects of Brexit obviously add to the pressure for lower rates in the UK in particular, but also in Europe and the world beyond. That's bad news for asset managers struggling to reap adequate returns. Brexit is big, big news by any standards, but there's a growing perception that it is just exacerbating an already established trend .... one for lower and lower rates in order to boost insipid growth and near-zero inflation. Nearly $12 trillion of global sovereign debt now returns negative yields, and you can't blame that all on Brexit. The danger of global recession is very real whichever side of the fence the UK decides is the greener, and the jury is definitely still out as whether experiments with ever-looser monetary policy are effective or even benign.< /div>

ref:- "Italy rescues lender after Renzi plea fails" , Brexit , the Financial Times

We spoke on Tuesday about Italian PM Matteo Renzi's unsuccessful attempts to get his EU partners to waive their rules banning on state intervention in aid of the acutely troubled Italian banking sector. His reasoning that Brexit had brought on "special circumstances" cut no ice. You've got to wonder, if they started , where would they stop ? We also mentioned the privately-funded rescue vehicle Atlante, or Atlas. To describe Atlas' ammunition for the likely task ahead as inadequate would itself be .... well, entirely inadequate.  News comes of Atlas stepping in to satisfy EU regulators demanding a 1 billion euro increase in the capital of Veneto Banca after attempts to raise the money elsewhere attracted ZERO interest.

This means that the rescue fund has used up approximately half its war-chest of 5 billion euros in taking control of a grand total of TWO regional banks. To put it mildly, that doesn't leave much to deal with about 200 billion euro of non-performing loans (aka NPLs, or "bad debts"), 85 billion of which are not yet written down. See the article for more of the problems faced by Italian banks, a sector whose shares have dropped by 54% this year.