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Daily Agenda: China Opens Door to Foreign Investors

EU anticipates prolonged low inflation in euro zone; Shell earnings hit by low oil prices; Credit Suisse announces $5.8 billion drawdown.

In a major move towards opening mainland markets, China’s State Administration of Foreign Exchange today changed quotas for Qualified Foreign Institutional Investors to allow up to $5 billion in assets to be held based on assets under management. Open-ended investment vehicles will also be allowed to have daily liquidity in equity markets. The move comes as authorities in Beijing continue to struggle to support Chinese stock markets and as inclusion remains elusive for shares at the Shanghai bourse into benchmark MSCI indexes globally used by institutions.

EU body scales back inflation forecasts. The European Commission today announced a reduced inflation forecast for the 19-nation common currency zone. At 0.5 percent for full-year 2016, the projections fall well short of the European Central Bank’s 2 percent goal for the consumer price index as stubbornly low fuel and food commodity inputs prevent broad price appreciation. For bond markets, the prospect of an announcement of increased asset purchases by the ECB during the March meeting remains a primary narrative.

Shell profits slump along with oil. Fourth-quarter financial results released today by Royal Dutch Shell included a 44 percent decline in profits versus the same three months in 2014, as the energy sector feels the weight of the ongoing oil supply glut. Adjusted earnings were in line with consensus estimates by analysts. Shell is pressing ahead with the integration of BG Group operations despite adverse commodity market conditions.

Credit Suisse announces massive losses at investment bank. Earnings for the final three months of 2015 announced by Credit Suisse Group today included the firm’s largest quarterly loss since the credit crisis. A $5.8 billion drawdown was driven largely by losses in trading divisions and provisions for regulatory settlements. In accompanying statements, Credit Suisse CEO Tidjane Thiam announced layoffs and other belt-tightening as the bank refocuses on its core wealth management franchise.

BOE leaves rates unchanged. A unanimous vote by the Bank of England’s Monetary Policy Committee on Thursday resulted in the UK’s benchmark rate remaining at historic lows. While the decision was widely anticipated by economists, one surprise was the positive vote by noted inflation hawk Ian McCafferty.

Yum earnings rise on Chinese sales. In advance of plans to spin off a portion of its Asian operations a 7 percent year-over-year increase in sales in Chinese stores helped propel Yum! Brands Inc. earnings higher than consensus estimates for the final quarter of 2015. The Louisville based company reported adjusted earnings of $0.68 per share for the period versus forecasts for $0.66.

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