Economics Recap – by Magdalena Wiśniewska
Brexit approved by the referendum
In June national referendum the majority of British voted in favour of leaving the European Union, which is expected to have a robust impact on the world economy. After UK leaves the EU it will have to renegotiate the trade terms with both the EU and the WTO, and all the other partners outside of the organisations. The UK trade equals over $1.3 trillion a year and cannot be eased by attempt to strengthen the bonds with comparatively small India and China. The renegotiation is supposed to last at least several years.
Quantitative Easing continues
The level of QE was expanded from €60 to €80 billion and during August the ECB bought public and private sector assets worth €60 billion. Moreover, as an extension of QE programme, an additional component to asset purchase programme added on 8th of June, corporate sector purchase programme (CSPP), kicked off. CSPP is a sign of a further loosening of ECB’s monetary policy. It will allow the ECB to buy primary bond issued by EU companies and existing corporate bonds from secondary market. After the kick-off, the Central Bank was criticised for buying huge amounts of bonds in the secondary market on its very first day. As a result of the programme, the Eurozone corporate-bond market yields felt to the lowest rate in over a year and the level of the ECB’s role as a corporate sector lender has significantly raised.
FED interest rates remain constant
On the July 27th the Federal Reserve opted not to raise the interest rates, at the same time upgrading its perception of the economy’s state. The FOMC has kept its overnight interest rate target in the 0.25%-0.5% range. The labour market was claimed to strengthen due to indicators pointing to growth – nonfarm payrolls that rose from 11,000 to 287,000 over the one-month period. The statement noted that inflation remains mired and is expected to remain low in the short-term and then rise due to the decline in energy prices turns and the labour market strengthening. Potential rates hike is expected in September. Financial markets were assigning virtually no chance for a hike at this meeting, and the Fed has been sharply attuned to those expectations.
Brexit’s Effect on Asian Markets – by Hải Đăng Vũ
In a 15-page memorandum published by Tokyo earlier this week during the G-20 summit, Japanese officials demanded its counterpart in the United Kingdom to commit to a transparent and seamless process of withdrawal from the European Union (EU), with “predictability” and “certainty”. Japan also wants to ensure that the Brexit negotiation procedures should be undertaken whilst minimizing adverse effects on Japanese businesses and investments to UK. Tokyo also voiced its support in maintaining the “single passport” system, which promotes free movement of investment and capital between UK and EU; sending warnings that a large-scaled relocation of Japanese businesses will be necessary if the policy cannot be sustained. While no official responses have been heard from Westminster, this document could potentially stimulate other Asian economies to take substantial steps towards anticipating post-Brexit scenario.
During the summer, China has also recently announced their intentions to work out some provisional negotiation deals with the United Kingdom. As much as their colleagues in Japan, Chinese officials also dislike the “uncertainty” picture of Brexit that is being portrayed by worldwide media. However, multiple private investors openly expressed their optimism towards cooperatively establishing a better future for both parties.
South Korea also quickly responded to this unanticipated result, by outlining a bilateral trade agreement after an emergency council meeting being called shortly after the event. A rescue package was also secured to alleviate the repercussions causing by its lacking export industry.
Asia emerging markets, are having mixed reactions to the detachment of UK from EU. Modest global interest rate will continue to cement India’s strong position as investment-friendly consortium, albeit exports and foreign investments to UK will be hit substantially. Meanwhile, South East Asia conservatively asked local experts for close observation on the happenings of Brexit before making any adjustments to their economic strategies with EU and UK.
Business Recap – by Michel Mijlof
The summer was quite volatile for most assets markets. Especially June was a very volatile month for the Dutch stock market AEX. It started at 446 index points on the 1st of June and went down to 419 two weeks later. After this downfall, it went up to almost 450 index points on the 23th of June but at the very end of the month, it fell again to 411 index points. Other European stock markets had similar movements. One of the main reasons is, of course, the uncertainty about Great Britain leaving the European Union. Additionally, the oil price also went down during summer from $53 to $42.
Furthermore, there were some news within the mergers & acquisition sector. Ahold and Delhaize merged this summer to become the greatest supermarket in the Benelux. Ahold is the main supermarket in the Netherlands whereas Delhaize is one of the biggest supermarkets in Belgium. Moreover, some new IPOs are announced at the end of the summer, namely the one of TakeAway.nl. The popular company delivers food to many people in Europe, including the Netherlands.
In the banking sector, there was a crisis with the oldest bank in the world namely Monte dei Paschi di Siena located in Italy. The Italian banks have a lot of bad outstanding loans and the Brexit referendum result had a negative effect on the banks within the Eurozone. As a result, the Italian bank suffered considerably. Fortunately, other Italian banks came together to the rescue. Other news in the banking sector is about the stress test from the European Central Bank. The Italian bank mentioned before ended up last in this test in which the ECB tests how financially healthy banks would be in case of a new financial crisis. The Dutch banks ended quite well in the test, which is a good sign for the banking sector.
Lastly, the worldwide hype of this summer: Pokémon Go also had an effect at the stock markets, especially for Nintendo. After releasing the mobile game, the stock price went up very high but after they announced that their share in the game was minimal, the stock went down very quick and very hard.
This is quite a short recap about the most important financial news that happened during the summer. One of the most important things to look forward to, especially in the Netherlands is ‘Prinsjesdag’ where the Minister of Finance will announce the financial plans of the Dutch government for the upcoming year. Moreover, the Presidential Elections in the United States will also be very important for the stock markets in the upcoming markets.
EU vs Apple – by Nando Slijkerman
Apple, one of the biggest fishes noted on the NASDAQ, is getting an enormous tax claim from the European Union. According to Commissioner for Competition Margrethe Vestager, Ireland has provided illegal government aid to Apple by making extremely profitable taxation agreements for the American computer company. Conclusion: The Irish tax authorities have to recover an amount of 13 billion Euros from Apple. This judgment will probably cause quite a stir between Europe and the United States of America. The US Treasury already let know not to accept the behaviour of the European Commission towards Apple. According to them, the worldwide stabled profits of Apple finally need to be settled according to US tax law, and paid to the US Treasury.
The tax rate that Apple needs to pay to the Irish treasury was in some years “very, very low” as stated by miss Verstager. In 2011, the tax rate amounted 0,005% on the profits that the firm booked that year (50 million Euros tax on 16 billion Euros of profit). In fact, that is just 50 Euros on every million that Apple makes! Even kids in high school are paying more than that in taxes for their side jobs, and they most probably do not make a million per year.
Despite the enormous amount, Apple can easily pay the bill. Due to the popularity of the iPhones, the company have a liquidity balance of 187 billion Euros! This is the result of the worldwide stabled profits of Apple. If they bring the cash back to the States, Apple needs to pay against a tax rate of 35%. This is way too high in the eyes of the Chief Executive Officer Tim Cook. Mr Cook is taking the support of several American multinationals which together hold more than 1000 billion Euros of worldwide stabled cash.
All in all, a very interesting case. The Rostra team is very curious about the outcome.
Pokémon Go – by Michael van Rhee
And the ‘Summer hype of 2016’ award goes to… Pokémon Go! Hands down. Who could’ve seen this crazy phenomenon coming? Not many people, that’s for sure. If anyone, then probably those who were already familiar with Ingress — Pokémon Go‘s ancestor video game, which also used data from Google Maps to create a so-called ‘augmented reality’. However, even the most fanatic Ingress players couldn’t have foreseen the incredible mayhem that would come from an innocent Pokémon game, that’s for sure. Chaos in public places, suspicious-looking situations in neighbourhoods, Pokémon Go road signs being stolen, traffic accidents… Hell, even Pokémon hamburgers! (And let’s be honest here: who doesn’t want a piece of that?) The hype was enormous. So big, in fact, that various companies started seeing moneymaking opportunities. More about that in a full article soon.
Pokémon Go was developed by Niantic, a company that was formerly part of Google and now receives financial support from Nintendo, which is a major shareholder of The Pokémon Company. Shortly after the release of Pokémon Go, Nintendo’s shares doubled in value, but by the end of July, they had already dropped by nearly 20%. This decline in share value is expected to continue as the hype around the game slowly dies down.
Politics Recap – by Artur Rymer
On the 14th of July, France once again became a victim of terrorism, when a cargo truck was driven into the crowds celebrating Bastille Day in Nice. As a result, 434 people were injured and 87 were killed, including the driver who was shot by the police. On the 26th of July, in Normandy, two young men, who swore allegiance to Daesh, slit the throat of a catholic priest celebrating a mass. They were killed by the police after the act. Germany also faced several attacks, including the Munich shooting, Würzburg train attack, Reutlingen attack and Ansbach bombing, with a total of almost 15 dead (including the attackers) and almost 20 wounded. It is worth noting that not all the attackers were affiliated with Daesh and the Munich shooting was caused by a right-wing extremist.
Terrorist attacks in France in the last two years have caused powerful social tensions in the French society. One of the effects was the so-called Burkini ban, which started when the Mayor of Cannes banned women from wearing burkinis at public beaches. This has spurred a discussion about whether the move was a protection of French secularism or an infringement on human rights. Until further court decisions, the Council of State has reversed the ban.
As of the 13th of July, United Kingdom has a new Prime Minister Theresa May. The new government is supposed to lead the Brexit negotiations and the new PM has said that there will be no second referendum and no early elections. Despite that, many still hope that ultimately Britain will stay in the European Union, despite the result of the June referendum. Additionally, there is no clear plan as to when the (in)famous Article 50 should be triggered and what is UK’s idea of a departure from the European Union. On top of that, the Labour Party is in the midst of its leadership contest, however the incumbent leader Jeremy Corbyn will most probably win the party elections, despite the opposition from many prominent Labour politicians.
Australia hit the headlines once again due to the abuse of refugees in a refugee facility on the Pacific island of Nauru. The treatment is said to be so harsh that it results in many refugees attempting suicide. Yet again a developed country is under fire for ignoring human suffering and the rights of refugees.
July saw both the Republican and Democratic National Conventions, during which the two major US parties have chosen their candidates for the autumn presidential elections. Controversial (to say the least) Donald Trump is the official Republican candidate, while Hillary Clinton is the first woman in the US history to be a major party’s presidential nominee.
On the 31st of August, Brasil’s President Dilma Rousseff has been removed from the office by the Senate and was succeeded by her Vice-President Michel Temer. If you would like to learn more about what lead to the impeachment, check out the Rostra article on the topic by Brunno Fontanetti.
Built on Lies – by Raffaele Di Carlo
In the early hours of August 24th, an earthquake of magnitude 6.0-6.2 struck Central Italy, causing the partial or complete destruction of many small towns and villages in the Latium region (around Rome), including Amatrice, famous for being home to the worldwide known recipe bucatini alla amatriciana. Sadly enough, the earthquake happened to strike Amatrice and the surrounding region – otherwise mostly deserted throughout the year – during the yearly festival dedicated to the culinary heritage of the city, which dramatically raised the death toll: as of September 5th, there were 295 registered victims, and as the rescue operations proceed, the body count is bound to rise. The earthquake also caused significant architectural damage to the considerable cultural heritage of the area, including medieval boroughs dating back to as far as the 13th century, and several gothic and romanic churches. The region’s prosecutor’s office is currently carrying out an investigation in order to establish the responsibilities in a tragedy that shouldn’t have happened: although little can be done to secure historical buildings to anti-seismic standards, many residential buildings and even public facilities such as hospitals and schools were found to be unsafe.
¿Plata o plomo? In the Philippines – by Raffaele Di Carlo
While worldwide efforts to legalize or at the very least decriminalize drugs increase, there seems to be somebody swimming against the stream: it is the case in the Philippines, where President Rodrigo Duterte recently started his own very personal crusade against drug dealers (and criminals in general) in his country. As of 2013, the trade for illegal drugs in the Philippines was estimated to be worth around $8.4 billion, with the principal products being cannabis and methamphetamine, of which the Philippines registered the highest abuse rate in the 2011 UN Drug Report. Duterte’s campaign against drug lords and dealers knows no half measures: granting special powers to the National Police and even publicly endorsing action from citizens who own weapons, he declared a full-fledged war on drugs that has already taken its toll. The Inquirer’s Kill List reports 465 deaths related to illegal drug trade between June 30th, when Duterte rose to power, and August 1st. President Duterte stated his efforts are aimed at preventing the Philippines from becoming a puppet to local and international drug lords. However, this means raised unprecedented concern among human rights groups and suggests he might have a sketchier agenda.
Japanese Emperor Hints at Prohibited Abdication – by Leonie Ernst
In the first week of August, the people in Japan were startled by a video message from their Emperor Akihito. It was the second time during his 26-year reign that he spoke to his people on television. In this speech, he spoke about his doubts concerning his own health and ability to carry out his duties and tasks. What is so remarkable about the speech, is that the Emperor is explicitly prohibited to make political statements. With his doubts about his ability to carry out his job, he hints at a wish to abdicate. For abdication, an amendment of the Imperial House Law would be required. According to it, an Emperor reigns until death. Changing a law is a political action and, therefore, the Emperor is forbidden to make statements about it. The message caused some confusion in the country. Most Japanese inhabitants think the law should be reconsidered if the Emperor could not fulfil his duties in a satisfactory way, but the other part of the nation thinks the Emperor should follow the law.
The reason the Emperor may not involve himself in political issues is his position in the nation. The Emperor is a symbol for the whole nation and is closely related to the national religion Shinto. If the Emperor is involved in politics, he is not a neutral person that symbolizes the unity of the country.
The 82-year-old Emperor Akihito said he ‘considers that his fitness level is gradually declining and he is worried that it may become difficult for him to carry out his duties as the symbol of the State with his whole being as he has done until now’.
After his message was aired on television, the political debate concerning the revision of the Imperial House Law has flared again and we will see what the decision about this old tradition of reigning till death will be.
Olympics in Rio – by Brunno Fontanetti
Delayed constructions, the Zika virus, unstable political and economic moment.. and BAM! The opening of the Rio Olympics starts and everything is left behind, amazing everyone that was watching it. It’s true that most people, including me, were expecting this Olympics to be an absolute chaos. Considering the fact I lived in Rio for most of my life, I can tell you: you would be as amazed as I am with the overall result, if you knew the city before the Olympic games. But what ended up coming to light the most was the overwhelming climate created by everyone involved in the event, including the athletes.
Sports wise, it was a memorable event: more than 50 world records were broken, and, of course, some athletes performance was just a separate show of its own. Michael Phelps won 5 gold (what a surprise) and 1 silver medal and Usain Bolt showed again his dominance in athleticism winning 3 gold medals. Besides the already known athletes, other ones also went to the headlines either for performance, or behavior, during the Olympics. Two Americans made the headlines in Brazil during the event: Hope Solo, because of her picture saying she was ready for the Olympics while using a lot of protection for mosquitos (apparently she was making a joke about the Zika virus), and, of course, Ryan Lochte and his swimming crew, which were recorded on camera depredating a gas station. For Lochte I can’t say much was done by the general public while he was participating since this incident happened after he was already out of the competition, but for Hope Solo, I can say she tasted the best brazil has to offer: very few people that don’t understand Portuguese know about this, but every time she touched the ball, the whole crowd would scream together, in a rising voice, “ZIKA!”. Speaking of Brazilian fans, a lot of compliments and at the same time complaints were made. Some athletes said they were too loud, some said they were really supportive.. Let’s just say some of them weren’t ready for some Brazilian love/hate.
Besides all the sports, the parties and the problems, political activism was also a pretty important subject during the event. For example, the Ethiopian athlete Feyisa Lilesa showed his support by making a political gesture while he was crossing the final line of the Male marathon. He was manifesting against the political persecution of the people that are from his region, and for that he might never come back to Ethiopia again.
Brazil showed again it’s potential, it’s warmness and receptiveness. Don’t be mistaken: we are still living a pretty rough moment politically and economically. But, as we say in Rio, the best thing about Brasil is the Brazilians. Ah, just a final remark, that cannot go unnoticed: The prime minister of Japan appeared on stage, in the closing ceremony, using a Mario costume! Tokyo 2020 come fast because I’m already missing the Olympics too much.
Turkish Coup d’Etat Attempt – by Yana Chernysh
During the 15th and 16th of July 2016, a part of Turkish military made an attempt of a coup.However, the attempt was not successful.
First, some of the politically important territories in Ankara, Istanbul, Konya, Kars as well as some others were occupied. At night, the access to television and Internet was blocked, moreover, airport in Istanbul was closed and all the flights from and into Turkey were cancelled. An announcement of the power being in hands of attackers was made. The militaries were occupying territories of Istanbul through the night, as well as making several bombings. Turkish Premier minister stated that the opposition will be fought and encouraged people not to give up. A big demonstration was held in favor of the existing government system.
Closer to the morning the government started to take the occupied territories back. During the day around 900 soldiers surrendered to the government.
Several versions of who was behind the coup are discussed, one of them being that it was planned by the president himself.
Now, Turkey is willing to find all the guilty ones and make life as safe as possible for its citizens. For now, started from 20th of July, state of emergency in the country is announced for the period of three months.