Each week QFINANCE will endeavor to bring you some of the biggest news stories from the past five days in finance and business, as well as some of the most fascinating websites and links that have crossed our path. We hope you'll enjoy reading, we hope you'll have a great weekend and we hope that you'll come back each Friday to brush up on your finance and business knowledge.
Monday September 19
It was announced at the beginning of this week that the property tycoon Vincent Tchenguiz has settled his £1.5bn lawsuit against Kaupthing, the Icelandic bank that collapsed in 2008. Tchenguiz will apparently regain control of assets that were put forward as securities for a series of loans, which the bank’s administrators had effectively frozen. It was not stated whether or not Tchenguiz will receive any compensation for the lengthy legal battle, which the tycoon has disclosed to have cost him millions of pounds in legal expenses alone. Tchenguiz said: “I am delighted that we have been able to bring this complex matter to a satisfactory conclusion and to have dispensed with all the uncertainties, which have proved so restricting”.
Read about Vincent Tchenguiz and his lawsuit again Icelandic bank Kaupthing in more depth here.
Tuesday September 20
In the latest worrying development of the Eurozone debt crisis, Standard & Poor’s decided to cut Italy’s credit rating by one level from A+ to A. The credit ratings agency explained that this was down to Italy’s weak growth, criticizing Rome’s debt crisis management so far. It also mentioned that political uncertainty could be problematic for the country in the future. Italy’s Prime Minister Silvio Berlusconi commented that the decision had been influenced by “political considerations” and that media reaction had dictated the move, as opposed to real economic circumstances. S&P released a statement saying: “We believe the reduced pace of Italy’s economic activity to date will make the government’s revised fiscal targets difficult to achieve.” The agency remarked on the austerity budget’s perhaps overly strong reliance on tax rises, and that, as the taxes in Italy are already rather high, this would affect growth.
Read about Standard and Poor's decision to cut Italy's credit rating in more depth here.
Wednesday September 21
On Wednesday Ben Bernanke announced two new “twists” to the Federal Reserve’s plan to stimulate the troubled US economy, justifying its latest move by saying “there are significant downsides risks to the economic outlook, including strains in global financial markets”. The plan involves buying $400bn (£253bn) long-term Treasury securities by the end of June 2012, and will be funded by selling the same amount in short-term paper. The Fed hopes that this intervention will weigh down interest rates, thus boosting borrowing and demand in the economy. The second “twist” is directed to the ailing housing market, as plans were announced to recycle money from maturing mortgage and housing agency bonds back into the mortgage markets. The news sent prices up in the market for mortgage-backed securities (MBS), but the stock market in New York dropped following this gloomy news from the Fed, coupled with their refusal to throw in a third round of quantitative easing (QE3).
Read about Ben Bernanke and the Federal Reserve's two new twists in more depth here.
Thursday September 22
On Thursday, Greece was hit by a 24-hour public transport strike in response to the latest austerity measures being imposed. The Greek government, in an attempt to gain €8bn-worth of aid and avoid default, has strengthened its measures, suspending a larger number of civil servants and cutting pensions. The cuts will hopefully convince eurozone countries and the IMF to inject another tranche of aid in the form of a €110bn ($150bn) package, preventing default on outstanding debt payments, which would spell doom for the eurozone. Olli Rehn, Economic and Monetary Affairs Commissioner said, “An uncontrolled default or exit of Greece from the eurozone would cause enormous economic and social damage, not only to Greece, but to the European Union as a whole, and have serious spillovers to the world economy… We will not let this happen”. In addition to the transport action, which drew the country to a standstill, Greece’s main private sector union, the GSEE, has demanded more industrial action next month.
Read about Greek austerity measures and the transport strike in more depth here.
Friday September 23
In a move designed to stabilize the Korean won, which has declined 10% against the US dollar in the past month, the Bank of Korea has stepped into the money markets, saying it was taking appropriate steps to stem the falls. Similar action was made by the Indonesian central bank on Thursday to shore up the rupiah. These sharp declines in currency come at a time when both Asian economies are attempting to control rising consumer prices, as high rates of inflation becomes a strong topic within the region. Analysts tie currency values to these problems, as Arjuna Mahendran of HSBC Private Bank explains “the lower your currency goes, the higher the cost of imports becomes, and that adds to price growth”. Rising inflation acts as a threat to these countries’ growth, and this was also reported in last week’s QFINANCE news blog, when the Reserve Bank of India raised the policy on its lending rate by 25 basis points to 8.25%.
Read about the Bank of Korea, currency wars and Asian inflation issues in more depth here.
Come back next Friday for another report on the world of business and finance.
More links from the week:The 22nd Edition: SOX Compliance & Evolution to GRC Conference will take place from November 15-16, 2011 in Chicago. Come hear from leading SOX and Compliance practitioners as they review the required blend of compliance and risk-based strategies to meet federal mandates while developing greater efficiency across their GRC footprint. For more information, please contact Michele Westergaard at Michelew@marcusevansch.com.
Tags: Arjuna Mahendran , Asian economies , Bank of Korea , Ben Bernanke , credit rating agencies , currency wars , downgrade , Economic and Monetary Affairs Commissioner , european debt crisis , eurozone , Greece , GSEE , HSBC Private Bank , Iceland , Italy , Kaupthing , legal battle , Olli Rehn , qe3 , Reserve Bank of India , Silvio Berlusconi , Standard & Poor's , transport strike , US Federal Reserve , Vincent Tchenguiz