Daily Agenda: Brexit Jitters Hit European Markets

PBOC raises capital ratios for banks; Goldman Sachs to unveil research-based ETF; Citi to drop retail banking in Brazil, Argentina.


Jasper Juinen

U.K. Prime Minister David Cameron concluded a marathon negotiating session in Brussels overnight only to resume conversations today as he struggles to secure a politically viable deal for the U.K. to remain within the European Union. As the so-called Brexit debate rages throughout the country — especially among Scottish voters who are facing their own independence issues — the pound sterling continues to retreat versus the euro as investors assess the risk of a breakup. Risk narratives have now shifted from discussions of an exit to one of “hard” or “soft” versions of a withdrawal from the EU that would present different ramifications for cross-border trade. A reminder of how critical the U.K. economy remains for the region was provided today by a release from the U.K. National Office of Statistics with total retail sales surging by more than 2 percent in January, as shoppers there shrugged off macro concerns.

PBOC raise capital targets for smaller banks. The People’s Bank of China, China’s central bank, issued a statement today that outlined higher capital reserve ratios for some lenders. The move comes as the central bank grapples with higher nonperforming loan ratios at small and midsized banks sparking concerns that these smaller players may have become overly aggressive commercial lenders in recent quarters. Separately, China’s Ministry of Finance today announced favorable tax treatment changes for real-estate transactions.

Citi to depart private client business in South America. Multiple media outlets reported today that Citigroup will cease retail banking operations in Brazil and Argentina as South America’s largest economies continue to suffer a sharp economic downturn in the wake of collapsing commodity prices. The move, which follows similar retreats from private client markets in other geographies as the bank simplifies operations, will end a century of retail operations in the region for the New York–based global bank.

Goldman to issue research-driven ETF. A registration statement filed with the Securities and Exchange Commission by Goldman Sachs Group last week indicates that the New York bank plans to release an exchange-traded fund based on its research. The ETF will track securities held by large hedge funds followed by Goldman strategists that compile its Hedge Fund Trend Monitor, which is compiled using regulatory filings.

Feds raid REIT office. The Federal Bureau of Investigation visited the Texas headquarters of United Development Funding IV yesterday in Grapevine, Texas, a suburb of Dallas, and secured documents and computers as part of an investigation into the firm’s practices. The sponsor of real estate investment trusts has seen its share price plunge in recent months after Hayman Capital Management and other activist funds targeted it based on perceived conflicts of interest. The firm has had a capital introduction relationship in the past with controversial brokerage RCS Capital, which was controlled by investor Nicholas Schorsch.