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DECPG Global Weekly
July 13, 2018--TAKING STOCK
U.S. producer and consumer price inflation picked up in June
The U.S. government announced a new round of tariffs on Chinese products
Euro Area industrial output rebounded in May; investor confidence improved in July
China's inflation rose in June; export growth remained solid
EMDE bond sales fell sharply in June.
U.S. producer and consumer price inflation picked up in June. The U.S. headline producer price index (PPI) rose from 3.1 percent (y/y) in May to 3.4 percent in June, the largest increase since June 2011, as rising fuel prices pushed up the cost of services (Figure 1). The core PPI-which excludes food, energy, and trade services-was up 2.7 percent (y/y), from 2.6 percent in May. The headline consumer price index (CPI) rose to 2.9 percent (y/y) in June, the highest level since February 2012, from 2.8 percent in May, while the core CPI edged up to 2.3 percent from 2.2 percent in May.
ETFGI reports ETFs and ETPs listed globally gathered net inflows of US$8.69 billion during June 2018
July 13, 2018--ETFGI, a leading independent research and consultancy firm covering trends in the global ETF/ETP ecosystem, reported today that ETFs and ETPs listed globally gathered US$8.69Bn in net inflows, the lowest monthly amount since January 2014 when the global ETF/ETP industry experienced net outflows of US$6.25Bn, according to ETFGI's June 2018 Global ETF and ETP industry landscape insights report, an annual paid-for research subscription service. (All dollar values in USD unless otherwise noted.)
Highlights
Net new assets gathered by ETFs/ETPs listed globally were $8.69Bn in June
53rd month of consecutive net inflows into ETFs/ETPs listed globally
442 new ETFs/ETPs have been listed in the first half of 2018, which is greater than the 408 new ETFs/ETPs in H1 2017
ISDA Publishes Consultation on Benchmark Fallbacks
July 12, 2018--The International Swaps and Derivatives Association, Inc. (ISDA) has launched a market-wide consultation on technical issues related to new benchmark fallbacks for derivatives contracts that reference certain interbank offered rates (IBORs). The consultation sets out options for adjustments that would apply to the fallback rate in the event an IBOR is permanently discontinued.
ISDA has been leading an industry effort to implement robust fallbacks for derivatives contracts referenced to certain IBORs since 2016, at the request of the Financial Stability Board's Official Sector Steering Group (FSB OSSG).
June ETF Flows: Is This the Start of an Endless Summer?
July 9, 2018--The idea of an "endless summer" originated with the 1960s surfing documentary bearing the same title. The premise is, with enough time and money, it's possible to follow summer around the world, making it endless.
Our endless summer is also a global story, but it's far from a free-spirited jaunt around the world to find the perfect breakers. Rather, we are riding an endless swell of uncertain political waves, stemming from the tit-for-tat trade negotiations battering the US, Europe and Asia.
The trouble stems from the fact that, despite the Trump administration's steadfast willingness to place tariffs on other nations, there is no clear strategy for the scope and timing of the next actions. So far, the path seems to be a random and reactive walk.
These are the three main problems affecting blockchain
July 17, 2018--Traditionally, records have been maintained by centralised entities. Distributed ledger technology (DLT) has provided us with a radical alternative to record information. DLT has the potential to be as ground-breaking as the invention of double-entry bookkeeping in 14th century Italy. It could revolutionise the record-keeping of financial transactions and ownership data.
Blockchains are a particular type of distributed ledger written by decentralised, usually anonymous groups of agents rather than known centralised parties. Consensus is attained by making the ledger publicly viewable and verifiable. Ideally, a ledger should:
record all information correctly;
be cost efficient; and
be fully decentralised to avoid any concentration of power.
Following the seminal white paper by Nakamoto (2008), much of the innovation in blockchain technology has been aimed at wresting power from centralised authorities or monopolies.
World Gold Council-Gold mid--year outlook 2018
July 16, 2018--In our outlook for second half of 2018, we have identified three key macro trends that will influence gold's behaviour:
positive but uneven global economic growth
trade wars and their impact on currency
rising inflation and an inverted yield curve.
Combined with attractive entry levels, we believe that these trends will increase gold's relevance for investors in the months ahead.
A rocky start for the year
The first half of 2018 proved quite eventful for financial markets. Stocks experienced a few pullbacks during the first quarter as geopolitical tensions rose but have been generally trading upward since the start of Q2. This was especially true in the US and Asia, where tech stocks captured most of the growth. So far, investors seemed to have shrugged off the escalating trade war rhetoric between the US and many of its trading partners or, at least, discounting the effect it may have on long-term economic growth.
IMF Working paper-Commodity Price Movements and Banking Crises
July 6, 2018--Summary:
We develop an empirical model to predict banking crises in a sample of 60 low-income countries (LICs) over the 1981-2015 period. Given the recent emergence of financial sector stress associated with low commodity prices in several LICs, we assign price movements in primary commodities a key role in our model.
Accounting for changes in commodity prices significantly increases the predictive power of the model. The commodity price effect is economically substantial and robust to the inclusion of a wide array of potential drivers of banking crises. We confirm that net capital inflows increase the likelihood of a crisis; however, in contrast to recent findings for advanced and emerging economies, credit growth and capital flow surges play no significant role in predicting banking crises in LICs.
view the IMF Working paper-Commodity Price Movements and Banking Crises
Commodity ETF Flows Show Investors Bracing for a Trade War
July 5, 2018--Trading spikes for soybean fund as tariffs loom on exports
Copper fund sees outflows; gold gains in safe-haven bid
The U.S.-China trade war's about to see its first shots fired, and investors in commodity exchange-traded funds spent the last month getting ready.
The group pulled the most money since February from an ETF that tracks copper, as investors grew concerned tariffs will sink the price of the industrial metal.
Prolonged low interest rates could affect financial stability, central banks find
July 5, 2018-- Low market interest rates for a long time could have implications for financial stability as well as for the health of individual financial institutions, a report by the Committee on the Global Financial System finds.
Financial stability implications of a prolonged period of low interest rates identifies channels through which a "low-for-long" interest rate scenario might affect the health of banks, insurance companies and private pension funds
This scenario would be harder on insurers and pension funds than on banks. Even though the CGFS analysis did not show that measures of firms' financial soundness dropped significantly, prolonged low rates could still involve material risks to financial stability. In particular, a "snapback", involving an unexpected sudden increase in market rates from currently low levels, could affect banks' solvency and create liquidity issues for insurers and pension funds.
