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London loses top financial centre ranking to New York

London has been replaced by New York as the world’s most attractive financial centre, a survey has indicated, as Brexit prompts banks to shift jobs out of the city to keep access to Europe’s single market.

Britain’s decision to leave the EU poses the biggest challenge to the City of London‘s finance industry since the 2007-2009 global crisis, since it may mean banks and insurers lose access to the world’s biggest trading bloc.

New York took first place, followed by London, Hong Kong and Singapore in the Z/Yen global financial centres index, which ranks 100 centres on factors such as infrastructure and access to quality staff.

London‘s score fell by eight points from six months ago, the biggest decline among the top contenders. The survey’s authors said this reflected the uncertainty around Britain’s departure next year.

“We are getting closer and closer to exit day and we still don’t know whether London will be able to trade with all the other European financial centres,” Mark Yeandle, co-creator of the index, said.

“The fear of losing business to other centres is driving the slight decline and people are concerned about London’s competitiveness.”

Since Britain voted in 2016 to leave the EU, some of the world’s most powerful finance companies have started moving staff from London to countries that will remain in the bloc to preserve the existing cross-border flow of trading.

Financial services firms, which account for about 12 per cent of Britain’s economic output and pay more tax than any other industry, potentially have a lot to lose from the end of unfettered access to the EU.

About 5,000 roles are expected to be shifted from London or created in the EU due to Brexit by March, a Reuters study published earlier this year found.

The head of the City of London predicted in July that 3,500 to 12,000 financial jobs would go because of Brexit in the short-term and more might disappear later.

Asian competitors are closing in, with Hong Kong only three points behind London, the survey found.

Many London executives have warned the biggest threats to London are not from other European centres but from global competitors, such as New York and Hong Kong.

The rankings, which are based on nearly 2,500 respondents working in the industry, provide a twice-yearly guide to the relative performance of financial centres globally.

The number of banks saying they plan to set up new EU subsidiaries after Brexit has picked up in the past year. Most major US, British and Japanese banks said they would build up operations in Frankfurt, Paris or Dublin.

Other European centres moved up in the global rankings. Zurich rose to ninth place from 16th six months ago and Frankfurt to 10th from 20th, while Amsterdam climbed to 35th place from 50th.

“London and New York have long vied for the top spot of this index and the uncertainty around the future shape of Brexit is likely to be a factor in their latest switch in positions,” said Miles Celic, chief executive of the lobbying group TheCityUK. “In a competitive world we cannot afford complacency.”

A Bank of England official expressed optimism on Wednesday about the future.

Currency PHOTO

GBP/USD – British Pound Unchanged after Carney Testimony

The British pound is showing little movement in the Tuesday session. In North American trade, GBP/USD is trading at 1.3427, unchanged on the day. On the release front, Britain posted a deficit of GBP 6.2 billion, below the estimate of 7.2 billion. This marked the first deficit after a string of three straight surpluses. British CBI Industrial Order Expectations disappointed with a reading of -3, missing the estimate of 2 points. This was the first decline since October. In the US, the Richmond Manufacturing Index jumped to 16, well above the estimate of 9 points. On Wednesday, the UK releases a host of inflation indicators, led by CPI. The Federal Reserve will release the minutes of its May policy meeting.

Bank of England Governor Mark Carney testified earlier on Tuesday before a parliamentary committee, but his remarks have had little impact on the British pound. Carney acknowledged that growth in the first quarter was weak, blaming “temporary and idiosyncratic factors”, such as massive snowstorms which hampered economic growth. The BoE has forecast growth in Q1 of just 0.4%. As for monetary policy, Carney was subtle, saying that “interest rates are more likely to go up than not, but at a gentle rate”. The bank balked at a rate hike earlier in May, due to weakening inflation and a spate of soft economic data. BoE policymakers are unlikely to raise rates before August at the earliest.

After weeks of an escalating trade war between the US and China, there was a breakthrough of sorts on Sunday. The US dollar has posted gains after Treasury Secretary Steven Mnuchin announced that the two sides had made significant progress and the trade war was being ‘put on hold’. Just last week, the White House sounded pessimistic about a deal being reached with China. The two economic giants have imposed stiff tariffs on one another in recent weeks, worth billions in trade. These moves had raised fears of a bilateral trade war between the two largest economies in the world. The respite in tariffs means that the US can sit down with the Chinese and discuss the US trade deficit with China, which President Trump has long complained is a result of a non-level playing field with China. In addition to the trade deficit, the US wants to discuss technology transfers and cyber theft.

AMP PHOTO

AMP shareholders urged to clean out board after misconduct scandals

Shareholders have been urged to clean out the AMP board at this week’s general meeting, both to deter future misconduct and kickstart the process of renewal at the embattled wealth manager.

Three AMP directors are up for re-election at Thursday’s meeting and need the endorsement of investors angry at the wealth manager’s performance and the string of scandals exposed in the royal commission.

AMP’s new chairman, David Murray, on Monday urged investors to keep a cool head, saying the company needed a period of stability following the revelations of the royal commission.

“Serious investors have to consider whether anger is in itself a good enough frame of mind to make decisions,” Murray told the ABC. “I’m not defending anybody on the AMP board but they have to decide whether they want anger to prevail, or they’re confident that I can make the appropriate changes over time.”

The Australian Shareholders’ Association said a period of instability was regrettable but necessary.

ASA representative Ian Graves confirmed his organisation would use its sway to try to boot out three of AMP’s existing board members, including one who was only appointed last year. The three directors are Holly Kramer, Vanessa Wallace and Andrew Harmos.

“It could be destabilising,” Graves told Guardian Australia. “But as far as our view is concerned … the board renewal should start as quickly as possible because a) it gives a message to shareholders and b) it gives a message to staff, that their jobs are at risk if they ever repeat [this conduct].”

AMP has already begun a partial shake-up since the royal commission revelations and has slashed directors’ fees by 25%.

Its former chairwoman Catherine Brenner resigned, as did its general counsel, Brian Salter, and the chief executive, Craig Meller.

Brenner and Salter left AMP after evidence in the royal commission showing the company had repeatedly interfered with a supposedly independent investigation of its practise of charging clients without providing any service.

The royal commission heard AMP had interfered in a report prepared by the law firm Clayton Utz to minimise the involvement of senior executives. That report was later presented to the corporate regulator, the Australian Securities and Investments Commission.

The company sought to lay blame for the interference at Salter’s feet last week, saying in a statement that the board and Brenner “were unaware of and disappointed about the number of drafts and the extent of the group general counsel’s interaction with Clayton Utz”.

The royal commission has previously heard evidence that suggested Brenner was involved in viewing and suggesting amendments to the Clayton Utz report.

The royal commission heard last month that Clayton Utz partner Nicholas Mavrakis emailed Brenner a copy of the draft report on the fee-for-no-service scandal, before the pair had a phone call.

A later email from Salter to Mavrakis also suggested Brenner’s involvement.

“I spoke to Catherine earlier today,” Salter wrote on 4 October. “She said that she relayed a number of comments to you over the phone last week and confirmed that she has no more.

“Can you please let us have the next draft with the amendments marked up today?”

Technology and Healthcare boost stocks

The market’s biggest winners this year, technology and healthcare, powered U.S. stock indexes to more all-time highs on Tuesday.

Huge technology companies like Apple and Facebook continued their ascent, while strong reports from companies including medical device maker Medtronic and construction and technical services company Jacobs Engineering helped healthcare and industrial companies, respectively.

Basic materials companies, which have done better than the rest of the Standard & Poor’s 500 index, also rose. Telecommunications companies declined, while energy companies and banks didn’t do as well as the rest of the market.

Apple, Facebook, Alphabet, Microsoft and Amazon, the five most valuable companies on the stock market, all rose more than 1 percent, and they’ve all had a very strong year. JJ Kinahan, chief market strategist at TD Ameritrade, said that’s not about to stop.

“They’re seeing better earnings, better sales, better growth,” he said. “It’s difficult to argue with that.”

The S&P 500 index climbed 16.89 points, or 0.7 percent, to 2,599.03. The Dow Jones industrial average gained 160.50 points, or 0.7 percent, to 23,590.83. The Nasdaq composite added 71.76 points, or 1.1 percent, to 6,862.48.

The Russell 2000 index of smaller-company stocks rose for a fourth day and picked up 15.49 points, or 1 percent, to 1,518.89. All four indexes set records. The Russell had struggled in recent weeks, but on Tuesday it beat its record close from early October.

Big-name technology companies led the way overall. Apple rose $3.16, or 1.9 percent, to $173.14 and Facebook added $3.12, or 1.7 percent, to $181.86. Health care companies climbed as well. Those two sectors are the best-performing parts of the market this year.

Homebuilders climbed after the National Association of Realtors said sales of homes grew in October. They’re down slightly from last year because there are so few houses on the market, but the tight supply and rising prices have sent homebuilder stocks soaring this year. On Tuesday, NVR advanced $59.69, or 1.8 percent, to $3,377, while D.R. Horton gained $1.15, or 2.4 percent, to $49.35.

Along with those reports, investors were cheered by projections from Goldman Sachs analyst David Kostin, who forecast that the S&P 500 will rise 14 percent in 2018 if corporate taxes are cut.

Kim Jong PHOTO

North Korea’s economy may not survive another year, defector says

North Korea is so weak its economy might not last long under tough United Nations sanctions, a high-ranking defector said Monday in his first public speaking engagement in the U.S.

The former insider’s view of dictator Kim Jong Un’s oppressive regime comes just as North Korea’s deputy U.N. ambassador stepped up the tough talk. “Nuclear war may break out any moment,” Kim In Ryong said Monday.

But North Korea may just be bluffing.

“I don’t know if North Korea will survive a year [under] sanctions. Many people will die,” said Ri Jong Ho, a former senior North Korean economic official. He was speaking through a translator at the Asia Society in New York.

“There is not enough to eat there” and the sanctions have “completely blocked” trade, he said, forcing the government to send tens of thousands of laborers overseas. Ordinary North Korean households have no electricity, he added, while the capital city only gets three to four hours a day.

Ri was last posted in Dalian, China, where he helped run Office 39, a secret organization responsible for obtaining cash for the ruling Kim family. Ri also won the highest civilian honor in the dictatorship. But after a series of purges, he defected with his family in late 2014 and now lives in the greater Washington, D.C. area.

The defector painted his birth country as one in dire straits. China, North Korea’s largest trade partner, is “very upset” with the rogue state for not reforming its economy and instead “begging” its giant neighbor for food, Ri said. On the other hand, Ri said, North Korean leaders met with Russian President Vladimir Putin but diplomacy “was not as easy as it might have been thought.”

Kim is also offended that he has never met with Chinese President Xi Jinping. Xi also once chose to visit the southern part of the peninsula before the north.

During a 2014 meeting with North Korean officials, Kim Jong Un called Xi a “son of a b—-” and the Chinese “sons of b——,” Ri said, adding that there is fear China will “betray” North Korea.

As a result, building a relationship with the United States is the rogue state’s primary focus.

Ri likened Kim’s war of words with President Donald Trump to a “child and adult dispute.”

The dictator thinks help from the U.S. will enable him to solidify his leadership, just as North Koreans generally think alliance with the U.S. helped South Korea prosper, Ri said. “North Korea is very fearful of South Korea.”

To address its insecurities, North Korea fires missile after missile. Invariably, the world worries about the pariah state’s growing nuclear threat and China repeatedly calls for dialogue. Ri, however, said he sees the solution as more than simply gathering together for talks.

When negotiating, the parties need to know what they want, which is far from the case here due to lack of understanding on both sides, Ri said. In order to successfully turn the situation around, foreign diplomats need to understand what is in Kim Jong Un’s head and “change what he thinks.”

London Stock

Pound jumps as Bank of England hints at rate rise

The Bank of England has said that higher inflation and a pick up in growth could lead to a rate hike in “the coming months”.

Members of the Bank’s nine-strong Monetary Policy Committee voted 7-2 to keep interest rates on hold at 0.25%. Read more