China record steel output - Bloomberg

China's Giant Steel Industry Just Churned Out Record Supply
   Bloomberg News
April 15, 2016 — 12:16 PM AEST
Updated on April 15, 2016 — 5:43 PM AEST
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* Steel production rises in March, while quarterly figure drops

* `This is a significant increase,' says CRU Group's Bai

The world’s biggest steel producer pushed output to a record in March as mills in China fired up plants to take advantage of a price surge since the start of the year that’s rescued profit margins.
Output rose 2.9 percent to 70.65 million metric tons from a year earlier, the National Bureau of Statistics said on Friday. That’s the highest ever, according to data from state-owned researcher Beijing Antaike Information Development Co. Still, for the first quarter, supply fell 3.2 percent to 192 million tons.
The country’s steelmakers are ramping up output after cuts at the end of 2015 fueled a major price surge that has rippled out to world markets. The mills’ busiest-ever month came as figures showed that China’s economy stabilized, aided by a rebound in the property market. Last year, the country’s steel output shrank for the first time since 1981 as demand contracted and mills battled surging losses and too much capacity, and forecasters including Australia’s government expect a further decline in 2016.


“It’s normal to see higher output in March but this is a significant increase,” said Kevin Bai, a Beijing-based researcher at consultancy CRU Group. “Right now, the mills are making money. The market is still relatively tight and this has encouraged some producers to return.”
Surging Prices
The domestic price of benchmark hot-rolled sheet has surged 45 percent this year, while rebar futures on the Shanghai Futures Exchange advanced 30 percent. The increase has aided mills’ profitability even as iron ore prices rallied 36 percent in 2016.
The steel rally will soon end as Chinese mills lift output and traders end a flurry of restocking, HSBC Holdings Plc analysts said in a note on Thursday. China accounts for about half of global supply, with output used in everything from cars to skyscrapers.
The rise in Chinese output in March, coupled with figures earlier this week that showed a 30 percent increase in export volumes, will be a further concern to a beleaguered global steel industry. China exported a record amount last year, triggering a rise in trade tensions, battering profits at world producers and forcing India’s Tata Steel Ltd. to offload its ailing U.K. business.

Floor Space
The gross domestic product figures showed Asia’s top economy grew 6.7 percent in the first quarter, in line with expectations. Major steel-using sectors showed improvement as new floor space under construction expanded 19.2 percent in the quarter on-year while automobile output rose 8.9 percent in March.
Most observers still expect China’s steel production and demand to drop this year as policy makers pivot away from heavy industry. Output will probably decline to 781 million tons this year from 806 million in 2015, according a projection from Australia, the world’s largest shipper of iron ore.
Steel rebar on the Shanghai Futures Exchange dropped 1 percent on Friday to trim its weekly advance to 4.7 percent, while iron ore on the Dalian Commodity Exchange dropped the most this month by 2.2 percent.
China’s aluminum industry, also the world’s biggest and facing overcapacity, followed a similar dynamic to steel in the first quarter. Production of primary aluminum rose 2.7 percent to 2.62 million tons in March from a year earlier, while output was 2 percent lower at 7.34 million tons for the three months. Aluminum was unchanged on the Shanghai Futures Exchange after posting its highest close in nearly seven months on Thursday.

Bank of England warning on Brexit - The Independent

The Bank of England has issued its starkest warning yet over the consequences of Brexit for the British economy, stating that the country would be likely to face a long period of uncertainty if it left the EU, that would dampen demand and impact on UK assets.
Minutes from the latest meeting of the Bank’s Monetary Policy Committee also state that the looming referendum is already having a dampening effect on the economy, noting that many major capital spending decisions and property transactions were being delayed, pending the outcome of the vote.
Its warning, which was roundly criticised by the Leave campaign, came as the former Labour Chancellor Alistair Darling, who presided over the UK’s response to the 2008 global financial crisis, said that “dark clouds” were again “gathering on our horizon” and slammed Brexit campaigners for “turning a blind eye to credible warnings of economic disaster”.
In its minutes, the Bank of England said that a vote to leave the EU would “result in an extended period of uncertainty about the economic outlook including about the prospects for export growth”.
“This uncertainty would be likely to push down on demand in the short run…(and) have significant implications for asset prices, in particular the exchange rate.”
In a further warning, the Lloyds Banking Group became the first commercial bank to speak out officially on the referendum, stating that a vote to leave would cause short-term “economic uncertainty”.
However, the Bank’s statement added that the decision was “a matter for the UK electorate” and that the long-term impact was “unclear” because of uncertainty over the UK’s future relationship with Europe in the event of Brexit.
The trio of economic warnings will be welcomed by the Government, which has made financial stability a key pillar of its argument for backing a Remain vote.
Brexit campaigners have branded the approach “Project Fear”. Conservative MP Philip Davies accused Bank of England governor Mark Carney of “diminishing himself” with the Bank’s latest statement.
And John Longworth, chairman of the official campaign group Vote Leave’s business council, criticised Lloyds for its former support for the UK joining the Euro, 20 years ago.
“They were wrong then and they are wrong now,” he said. “What right do multinationals have to lecture us? The EU may work for the handful of large multinational banks that can afford the reams of red tape, but it will be the dynamic SMEs that will benefit if we Vote Leave on 23 June.”
However, in his speech on the EU, Mr Darling, who chaired the Better Together campaign during the Scottish Referendum, condemned the Brexit camp for failing to explain what form a new deal with the EU would take, branding their campaign “Project Fantasy”.
“They can’t guarantee trade without tariffs, which would push prices up. They can’t guarantee investors won’t leave Britain, risking jobs. They can’t guarantee our service sector will have free access to Europe, hitting growth…They are offering a fantasy future where we keep all the benefits of being in Europe without being part of the single market,” he said.
With the official EU campaigning period beginning today economics and security remain the two key battlegrounds.
Downing Street, which has argued that remaining in the EU makes Britain safer, welcomed a vote in the European Parliament which will pave the way for the bloc’s 28 member states to share airline passenger name records data, to assist in the fight against international crime and terrorism.
The Prime Minister’s spokesperson said: “This is something we have been calling for for a long time, particularly in wake of the rise in terror attacks that we have seen.
“Today’s vote shows that Britain can benefit and be safer staying in a reformed EU.”
Downing Street insisted that were no guarantees that Britain would be able to gain access to the EU-wide data in the event of Brexit.

IMF down grades global outlook - Economist

IS THERE a global economic crisis on the horizon? Probably not. Is the world in danger of falling into recession? Not soon. Yet the IMF’s latest update of its forecasts is nevertheless resolutely downbeat. Speaking this week in Washington, DC, its chief economist, Maurice Obstfeld, outlined yet another downward revision to its prediction for global GDP growth. It is likely that the next revision will again be down. One of the big threats to the world economy, he said, is from “non-economic risks”—fund-speak for grubby politics. A world economy stuck in the doldrums, he cautioned, may be a perilous place politically.
The actual forecasts are far from horrible. The fund nudged down its estimate of global growth for 2016 from 3.4% to 3.2%. That is still a shade faster than in 2015. The revisions are broad-based: America, Europe and the emerging world as a bloc all saw similar downgrades (see chart). The forecast for sub-Saharan Africa was pared back the most, in large part because of a gloomier outlook for oil-rich Nigeria, the continent’s bigest economy. The recent recovery in crude prices will take some pressure off oil producers, but “we won’t be seeing prices at the $100 a barrel level for some time, if ever,” said Mr Obstfeld. Of biggish economies, only China escaped a downgrade. The fund is more confident than it was in January that stimulus measures there will work. But there is a concern about the quality of China’s growth, said Mr Obstfeld, as fresh credit is directed towards sputtering industries.
Related topics
* Europe

* World politics

* Chinese politics

* Asia-Pacific politics

* China

The scenario the fund seems most concerned about is a steady slide in global GDP growth that feeds on itself by discouraging investment, thereby exacerbating political tensions, which in turn make fixing the economy even harder. Brazil shows how a bad economy can be made worse by political paralysis. Low growth might add to the “rising tide of inward-looking nationalism” in the rich world, said Mr Obstfeld. Politics in America is moving against free trade. And there are various threats to Europe beyond the perennial problem of Greece. The refugee crisis has already put pressure on the European Union’s open-borders policy and there is a “real possibility” that Britain might leave the EU.
The IMF has some familiar remedies for the global economy: keep monetary policy loose, augment it with fiscal stimulus where possible and add some pro-growth reforms to the mix. Such action is needed to insure against the risks the fund identifies. But the world should also be making contingency plans for a co-ordinated response if a financial shock hits. “There is no longer much room for error,” said Mr Obstfeld, with a certain weariness.
From the print edition: Finance and economics

New Facebook features coming - TIME

Posted: 11 Apr 2016 10:59 AM PDT



Facebook’s future ambitions will be on full display at the company’s annual F8 developer conference, taking place on April 12 and 13.
The Menlo Park, Calif. firm began life as a way for college students to connect. Over a decade later, it wants a slice of everything we do online, from booking airline flights to watching cat videos. After all, the more Facebook knows about our Internet behavior, the more attractive it looks to big-spending advertisers.
Facebook should make its future plans more clear at F8. Here’s what to expect from the conference.
Chat Bots

Messenger bots aren’t new — think SmarterChild, from the AIM days. But Facebook and other firms are betting they’ll see a big renaissance thanks to improved artificial intelligence and other factors. The firm is expected to announce new tools that will help businesses create their own “chatbots” for Facebook Messenger, which could handle customer service queries, process transactions or help with marketing campaigns.
Chatbots are already alive and well on Messenger performing a variety of tasks. Disney built a Miss Piggy bot that chats with fans of her Facebook Page in order to promote ABC’s Muppets show. Uber’s bot helps users hail rides from within Facebook’s app. And KLM Royal Dutch Airlines just launched the first airline bot.
Facebook’s hope is that chatbots will keep more users glued to its app, where it can profit from their attention. The firm won’t make money from bots right away. But if they take off, Facebook could start taking a slice of other companies’ transactions on the platform. That would help Facebook finally monetize e-commerce, which it has largely failed to do. For Messenger bots to succeed, Facebook will have to convince users it’s easier to chat with a robot than open up another app.
Live Video
Again, online live-streaming is not a new innovation. But Facebook’s massive scale is bringing new life to the format via Live, the company’s new instant broadcasting feature. Facebook unleashed a torrent of Live updates last week, including a world map showing livestreams as they’re happening and a video portal that makes it easier for people to find Live videos after they’ve disappeared from the News Feed.
Currently, Facebook’s Live videos can only be shot using a smartphone. Facebook may announce the ability to shoot using higher-quality cameras at F8, according to Recode. That could help the company entice more media companies, especially from the world of television, to commit significant resources to Live. Already some unusual videos have managed to attract large audiences. A BuzzFeed stream of a watermelon exploding under pressure from rubber bands gained 800,000 live viewers.
Virtual Reality
Facebook-owned Oculus VR just released its Rift virtual reality headset, so it’s likely Facebook will be crowing about VR’s potential to change the way we communicate. F8’s schedule includes multiple sessions dedicated to optimizing optimizing 360-degree video for the Rift, so it’s possible Facebook will sneak in an announcement or two related to the format.

China hospitals ticket touts problem - Reuter

As day breaks, hundreds of patients wait to see doctors in a line that snakes around the Peking Union hospital in Beijing. Many will wait in vain - "scalpers" like Yu Wei have already illegally bought and sold appointment tickets for the day ahead.

Yu, 32, makes a living touting the tickets that Chinese hospitals sell in advance for consultations. His tickets will get a patient in front of a doctor in two days, he says, compared with a wait that can be up to a fortnight.

Dodging passing police patrols as part of his daily routine, Yu charges 850 yuan ($131) for a "special care" appointment ticket - almost three times the face value. He told Reuters he keeps 200 yuan from each sale, with the rest of the profit going to hospital insiders who he said help him secure the tickets.

"The city's upper middle class are always willing to pay this amount or even higher - as long as they can get an appointment," Yu said, speaking between frequent phone calls that he said came from would-be clients. In the background, other scalpers competed for custom, shouting out their prices.

The street crime casts light on the scale of the challenge President Xi Jinping faces as he looks to overhaul a creaking and underfunded public health system to deliver on a promise of affordable and accessible care for all.

In line with this drive, authorities have tried to crack down on healthcare corruption and police say they have detained some 240 scalpers in Beijing alone this year. Many patients and doctors say, though, the time-served practice is just a symptom of deeper issues: a dearth of doctors and low salaries meaning graft is endemic.

"Scalpers are a real headache for us," a spokeswoman for the Peking Union hospital surnamed Chen told Reuters by phone. "There's a crackdown on them, but it's a hard problem to cure."

The spokeswoman added the hospital and its doctors were victims of scalpers and were not involved in the practice.

DOZENS OF SCALPERS

A viral video earlier this year of a woman with her sick mother raging against scalpers brought a public outcry and calls for arrests and tough jail sentences. (here)

Authorities have promised to intensify their crackdown. But when Reuters visited hospitals in Shanghai and Beijing, dozens of scalpers operated in plain sight, loudly offering tickets for sale.

A spokesman at the Beijing city health department said police needed to "strengthen" their efforts, and it would take some time to see any real results. China's national health ministry did not immediately respond to requests for comment.

Feng Jianqi, a police officer involved in leading the crackdown on scalpers in Beijing, said the police could not resolve the issue alone. Part of the problem was that so many patients wanted to see the same doctors, he said.

"It's just not realistic to totally eradicate scalpers. It's just too hard," he told Reuters by phone.

The problem is acute for patients like Cao Dongxian. The middle-aged school teacher traveled to Beijing in May last year from his home in Shandong province after local doctors refused to carry out a risky intestinal cancer operation. 

State insurance coverage is limited in China, meaning patients often have to pay a large part if healthcare costs themselves, especially those with major long-term diseases like cancer or diabetes.

Keen to avoid paying scalpers, Cao spent months queuing in hospital lines for repeat tests before doctors eventually said his cancer needed an urgent operation. Cao was then told he would have to begin queuing again: this time for a hospital bed.

"It was October by the time I got to have my operation ... more than four months," Cao said. "On top of that your body's in pain - it really hurts." 

'MARKET PRICE'

In hindsight, Cao said he wished he had gone to scalpers straight away. Doctors also appear resigned to the practice, as wealth spreads in China and patients accept the reality that paying more will bring speedier treatment.

"(Basic) appointment fees don't reflect the economic value of doctors' skills and experience," said Wu Yuan, an eye doctor at the Peking University First Hospital in Beijing.

"Scalpers are simply selling the doctor's appointment at a price the market is prepared to pay," Wu said. He said the practice was routine but that he had no knowledge of any doctor involvement in ticket resales.

Even as China's hospitals suffer, the broader market for drugs and services is a lure for firms like e-commerce giant Alibaba Group Holding and hospital operator Phoenix Healthcare, attracted by a wider healthcare bill that is set to hit $1.3 trillion by 2020.

For patients like Cao or Zhang Pengyu, a 38-year-old realtor from the outskirts of Beijing, scalpers are source of frustration and anger, but sometimes a necessary evil.

He waited unsuccessfully for three nights to see an ear, nose and throat doctor at Beijing Tongren Hospital. He finally gave in to scalpers, paying 3,000 yuan for a 10-minute appointment that should have cost just 200 yuan.

"I wanted to queue myself and not pay so much money, but I just couldn't wait any more. I didn't have time," said Zhang. 

(Reporting by SHANGHAI newsroom and Adam Jourdan; Additional reporting by Elaine Tan in MANILA and Natalie Thomas in BEIJING; Editing by Kenneth Maxwell)

SpaceX first shipment for ISS - TIME

Posted: 09 Apr 2016 06:01 AM PDT



(CAPE CANAVERAL, Fla.) — SpaceX resumed station deliveries for NASA on Friday, and in a double triumph, successfully landed its booster rocket on an ocean platform for the first time.
The unmanned Falcon rocket soared into a clear afternoon sky, carrying a full load of supplies for the International Space Station as well as a futuristic pop-up room.
After sending the Dragon capsule on its way, the first-stage booster peeled away. Instead of dropping into the Atlantic like leftover junk, the 15-story booster steered to an upright touchdown on the barge, withstanding 50 mph gusts. Engines slowed its descent, supporting legs popped out and the final touchdown appeared neat and clean.
“The rocket landed instead of putting a hole in the ship — or tipping over — so we’re really excited about that,” SpaceX founder and chief executive Elon Musk told reporters at the Florida launch site.
His employees gathered outside the company’s glassed-in mission control in Hawthorne, California, cheered wildly, jumped up and down, and chanted, “USA, USA, USA!” when the booster touched down. President Barack Obama later chimed in via Twitter, praising SpaceX as an innovator.
Bigelow Aerospace, the Nevada company behind the equally innovative inflatable compartment bound for the space station, offered congratulations for the “beautiful launch and barge landing.”
Although SpaceX managed to land a spent booster rocket on the ground at Cape Canaveral in December, touchdowns at sea had proven elusive, with several attempts over the past year ending in explosions on the barge.
Musk’s goal is to make rockets as reusable as airplanes and as cost-effective, too. He hopes to reuse this particular booster in June on another orbital flight, following 10 test firings on the pad.
SpaceX stands to save tens of millions of dollars per flight, Musk said, by recycling the boosters. He’s looking forward to the day when booster landings become boring: “So when it’s like, ‘Oh yeah, another landing, OK, no news there.’ That’s actually when it will be successful.”
Sea touchdowns are actually quite tricky, Musk said, since the targets are relatively small — about the size of a football field — and bobbing in the waves. The boosters will need to land at sea, versus the shore, when they are traveling too fast and using too much fuel to get their spacecraft into super-high orbits — or out of Earth’s orbit altogether.
Blue Origin, run by another high-tech billionaire, Jeff Bezos, successfully has landed his rockets in West Texas in recent months, but those flights were suborbital and therefore not flying nearly as fast or high as the SpaceX Falcon.
This marks SpaceX’s first shipment for the space station in a year. Its last delivery attempt in June ended in flames after just two minutes, doomed by a snapped strut in the oxygen tank of the upper stage. The company resumed Falcon launches late last year with satellites.
The Dragon and its 7,000 pounds of freight — including the attention-grabbing payload — should reach the spacestation Sunday.
Bigelow Aerospace’s expandable compartment will swell to the size of a small bedroom, once inflated next month. It’s a testbed for orbiting rental property that the Nevada company hopes to launch in four years, and also for moon and Mars habitats.
Traffic has been heavy lately at the 260-mile-high complex. NASA’s other commercial shipper, Orbital ATK, made a delivery at the end of March, then Russia just last weekend. SpaceX’s Dragon will join three cargo carriers and two crew capsules already parked there.
Besides a bevy of biological experiments — including 20 mice for a muscle study, and cabbage and lettuce plants for research as well as crew consumption — the Dragon capsule holds the pioneering pod.
The Bigelow Expandable Activity Module, or BEAM, will be attached to the space station in about a week, but won’t be inflated until the end of May.
BEAM is a 21st-century reincarnation of NASA’s TransHab, which never got beyond blueprints and ground mock-ups in the 1990s. Hotel entrepreneur Robert Bigelow bought rights to TransHab, then persuaded NASA to host BEAM at the space station.
Empty except for sensors, the experimental BEAM is Bigelow’s first soft-sided space structure meant for people. Astronauts will enter periodically during the two years it’s at the station.
Bigelow hopes to have two station-size inflatables ready to launch around 2020 for commercial use, potentially followed by inflatable moon bases. NASA, meanwhile, envisions using inflatable habitats during 2030s Mars expeditions.
On the eve of the launch, Bigelow said the mission promises to “change the entire dynamic for human habitation.”
As does the booster landing for the future of spaceflight, Musk said.
“It’s another step toward the stars. In order for us to really open up access to space, we’ve got to achieve full and rapid reusability,” he said.
Musk said it will take a few years to make the landing process smooth and efficient, and failures likely will occur, “but I think it’s proven that it can work.”

What are Panama papers & why they matter ? - Economist

BENJAMIN FRANKLIN had not heard of Mossack Fonseca when he observed “nothing can be said to be certain, except death and taxes,” and the Panama-based law firm might have changed his mind. Mossack is at the centre of a huge tax and money-laundering scandal, now coming to light thanks to the so-called “Panama papers”. What exactly are these papers and why do they matter?

Companies such as Mossack specialise in helping foreigners hide wealth. Clients may want to keep money away from soon-to-be ex-wives, dodge sanctions, launder money or evade taxes. The main tools for doing so are anonymous shell companies (which exist only on paper) and offshore accounts in tax havens (which often come with perks such as banking secrecy and low to no taxes). These structures obscure the identity of the true owner of money parked in or routed through jurisdictions such as Panama.

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But authorities (and disgruntled ex-wives) just caught a break. Over 11m documents have been leaked from Mossack’s secretive offices. The International Consortium of Investigative Journalists (ICIJ) this weekend went public with its findings that the firm had, wittingly or unwittingly, helped clients evade or avoid tax, launder money or mask its origins. More astonishing than their methods, which are well known, was the scale of activity and the people involved. The 2.6 terabytes of data are thought to contain information about 214,500 companies in 21 offshore jurisdictions and name over 14,000 middlemen (such as banks and law firms) with whom the law firm has allegedly worked. Although by no means all of these are criminal or even shady, the first public examples make for telling reading. On the naughty list are people such as Ukraine’s president, Petro Poroshenko, who promised to sell his business interests on taking office. He seems to have merely transferred assets to an offshore shell. Other heads of government, such as Russia’s Vladimir Putin and Iceland’s Sigmundur David Gunnlaugsson are suspected of hiding ownership of offshore assets by putting them in the names of friends or relatives. Mossack denies any wrongdoing, as does Mr Gunnlaugsson. A spokesman for Mr Putin has denounced the allegations as a case of “Putinophobia”.

“The Panama Papers” in graphics

After the initial naming and shaming, it will become clearer in the coming weeks who was using these structures for dodgy reasons. While examples of the offshore industry enabling dictators, terrorists and drug cartels will (rightly) capture much of the attention, it would be a shame if other miscreants escape. The global industry of service providers, which sell financial secrecy to those who can afford it, have in some cases done more than just feast on poorly designed tax policies. The Panama documents suggest that some actively looked the other way when faced with a less-than-clean client. An estimated 8% of the world’s wealth ($7.6 trillion according to Gabriel Zucman, an economist) is stuffed away in offshore accounts, most of it done perfectly legally, as a raft of public relations people hasten to say as their clients’ names are flung around in the press. But legal or not, the newspapers taking aim at Mossack and the like will strike a chord. They are in tune with contemporary sentiment: the fundamental disconnect between global elites and the rest, for whom taxes are as certain as death.

Dig deeper: The furore from the Panama papers will only grow bigger

European Central Bank minutes - Financial Times

News
APRIL 7, 2016
ECB minutes expose divisions
Accounts of the European Central Bank’s latest policy vote have laid bare divisions between the eurozone’s monetary policymakers over their new stimulus package.
Last month the ECB cut interest rates to fresh record lows, expanded its quantitative easing package by €20bn to €80bn-worth of purchases a month, and unveiled series of auctions to lower banks’ funding costs, writes Claire Jones.
The minutes also reveal that the 25-member governing council discussed the introduction of a Bank of Japan-style tiered deposit rate system, protecting lenders from the levy imposed on them by negative rates. A shift to this system was rejected by most officials on the grounds that it was too complex operationally and that there was, as yet, “little evidence” of the negative side effects of negative rates on banks’ profitability.

The ECB confirmed that its deposit rate, cut by 10 basis points to minus 0.4 per cent in March, could fall further should inflation and growth in the single currency area weaken again. The lower bound on interest rates had not been reached.
Two of the 21 voting members of the governing council were against the package that did pass, while another two non-voting members objected, according to a person familiar with the matter. Those four include the council’s two German members, Bundesbank president Jens Weidmann and board member Sabine Lautenschlaeger, and head of the Dutch central bank Klaas Knot.
“These views are a minority, but they indicate that Mr. Draghi is taking the central bank down an uncomfortable path from the point of view of the Bundesbank,” said Claus Vistesen at Pantheon Macroeconomics.
Jonathan Loynes at Capital Economics said the minutes “may reinforce concerns that the Governing Council is starting to run out of ammunition.”
The minutes highlight disagreement over several elements of the package — including four new auctions of ECB cash which will in effect subsidise lending by eurozone’s banks, the rate cuts and the expansion of QE to include corporate bonds.
The auctions, known in central bank parlance as Targeted Longer-Term Refinancing Operations or TLTROs, will run each quarter from June until next March.
The account said there was “very broad support” for the view that the central bank should provide “strong price incentives” through the new auctions in order to spur lending to the eurozone’s businesses and households.
However, “a few members” of the governing council were concerned about the size of the incentives offered. The auctions will pay banks up to 0.4 per cent to bloat their loan book to businesses and households. The rate tallies with the deposit rate, which now stands at minus 0.4 per cent.
“The price reduction of up to the level of the deposit facility rate seemed to be rather generous, could lead to market distortions and could contribute to the preservation of weak business models by some banks,” the minutes said.
Other members thought the decision to purchase high-grade corporate bonds under the QE programme could lead to market distortions.
The minutes said:
In the euro area, the market for these bonds was generally not very liquid or large. The direct impact on corporate financing conditions and investment behaviour appeared doubtful, as the eurosystem (of central banks) would mainly purchase bonds from highly-rated, cash-rich corporations, whose financing costs were already very low.
The inclusion of corporate bonds in QE was seen by others as “strengthening the credibility” of the ECB keeping to its target of €80bn-worth of bond buying from now until at least March 2017.
It could also benefit credit conditions for smaller companies, with no access to bond markets, by forcing banks to lend to them rather than large corporates which can issue debt themselves.

Investment Advice Just Got a Lot Safer - TIME Business

Investment Advice Just Got a Lot Safer

Posted: 07 Apr 2016 07:00 AM PDT

When you go to your doctor, he or she has an official duty to offer you the best possible care—that’s what the Hippocratic Oath is all about. But until now, when you’ve gone to see an investment broker or retirement planner, the same hasn’t necessarily been true. Financial advisors, brokers and other such professionals have been able to offer all sorts of products that aren’t necessarily in their clients’ best interest, as long as they qualified as “suitable,” a very low bar to pass.
That’s all about to change. After years of wrangling with lobbyists from the financial industry, the Department of Labor has finally managed to pass a new fiduciary requirement, set to take effect next year, that would require brokers and many sorts of financial advisors and planners to offer investment advice that is in their clients’ “best interest.” That means that they have to put clients’ needs above their own financial benefit, even if they lose money in the process. (Most likely from fees associated with selling certain types of investments.) That means you are going to see a raft of money flowing out of higher fee mutual funds in the next few years, and into low- or no-fee indexed products.

That’s going to save all of us a heck of a lot of money. “Defined contribution” retirement plans, like IRAs and corporate-run 401(k)s, represent $12.4 trillion in wealth. Yet the system is opaque, expensive, and serves mostly the upper 40% of our society, people who work in the kind of jobs where they can benefit from corporate programs that match their savings. But even many of those people are being fleeced by financial advisors. They have long tried to push investors out of index funds and into mutual funds that systemically under-perform the market as a whole, often because of manic trading that rarely produces gains over the long haul. (Though they might show higher returns in the short term.)
For this, brokers may collect fees from various funds they are representing – but we all end up paying more for less. A particularly telling 2014 piece of research done by Yale academics found that index funds always outperform actively managed portfolios by a significant amount ‚ and that 16% of the time, the impact of high fees actually offset the entire tax benefit of investing in a 401(k) plan. In another study on the topic, Stanford professor and Nobel laureate William Sharpe calculated that investing in low- or no-cost funds rather than actively managed funds would save people so much money that it would result in a 20% higher standard of living in retirement.
Jack Bogle, the founder of Vanguard Funds and longtime index investing advocate, has run his own numbers, including not only the lower returns for active funds but additional hidden fees from portfolio turnover costs, charges for investment advice and other such expenses. As he put it in testimony before the Senate Finance Committee, “The high cost of ownership of mutual fund shares, over the long term, are likely to confiscate as much as 65% or more of the wealth that retirement plan investors could otherwise easily earn, simply by diverting market returns from fund investors to fund managers.” He adds, “Many of the infirmities of our retirement system are the result of the heavy costs incurred by investors because of our bloated financial system.”
Amen. While investors will still have to read the fine print when they sign up for investment advice (not all advisors will be included in the new rules all of the time), most of us will, by next year, be able to rest assured that we are getting the financial advice we really deserve. That’s particularly good news as the market moves into what may be years of higher than normal volatility.

New Bitcoin technology - Wall Street Journal

ENLARGE

Citigroup took part in a successful test of the record-keeping technology behind bitcoin. PHOTO: MARCOS BRINDICCI/REUTERS

By

Telis Demos

April 7, 2016 5:30 a.m. ET

Banks including J.P. Morgan Chase & Co. and Citigroup Inc. have successfully tested the record-keeping technology behind bitcoin on credit-default swaps, a move that could help it gain a foothold in mainstream finance.

The swaps are essentially insurance contracts that pay off if a bond goes bad, and the process of keeping track of the over-the-counter products can be a burden. Banks match buyers and sellers, transmit the trades via a service run by data provider Markit Ltd. and send a record to Wall Street’s central bookkeeper, Depository Trust & Clearing Corp.

The new test showed that a portion of that record-keeping task could be accomplished using “blockchain,” a common ledger that each party can view in much the same way that multiple users can work on shared computer documents.

DTCC will now discuss whether the results are strong enough to warrant using the technology for live trades or across a broader swath of credit-default swaps, a market with trillions of dollars in outstanding contracts.

“The ink is still drying on the results, but they are positive,” said Chris Childs, chief executive of the DTCC unit that oversees over-the-counter derivatives.

The test helps make the case for using blockchain in core Wall Street activities. While alternative currency bitcoin itself has been embroiled in legal battles and volatility, the underlying ledger—which can be edited anywhere and instantly validated—has drawn heavy interest from mainstream finance.

Big banks recently have invested teams of people and millions of dollars finding ways to apply private blockchains to cut out middlemen and save money. Barclays PLC on Wednesday announced a partnership with bitcoin startup Circle Internet Financial Ltd. to enable the digital-currency startup’s mobile app to send and receive British pounds and to swap them for U.S. dollars.

Analysts at Autonomous Research say using blockchain could cut trading settlement costs by a third, or $16 billion a year, and cut capital requirements by $120 billion. A recent report by Citigroup forecast that automation including blockchain could eliminate two million banking jobs, largely in processing, over the next decade.

The new test replicated a month’s worth of trades in the single-name credit default swap market, which has a total of $6.7 trillion in face value of outstanding contracts, not accounting for offsetting trades, according to DTCC figures. Electronic CDS agreements on individual servers were replaced with a record on a shared blockchain network.

The test included Bank of America Corp. and Credit Suisse Group AG, which worked with J.P. Morgan, Citigroup, Markit and technology firm Axoni, a new venture focused on applying the bitcoin technology of blockchain to banking.

Markit has about half-dozen active blockchain projects, but the CDS test is “the most real proof-of-concept going on,” said Jeffrey Billingham, vice president in Markit’s processing division and a lead in its “Chain Gang” testing blockchain uses. The test “revealed to everybody the ways you can improve efficiencies and minimize costs.”

Any live implementation of blockchain in swaps trading could be years away. DTCC says the next step is testing the appetite of other banks and regulators to use blockchain in the market. Some may be reluctant to make changes that threaten their own market share or introduce new complexity to current systems that have been tested and refined over the years.

DTCC, a bank-owned utility, will be an important player. It handles settlements for quadrillions of dollars worth of transactions. While bitcoin and blockchain were intended to eliminate the need for a middleman, DTCC has argued that U.S. regulators would likely still require oversight by a central body.

Regulators including the Federal Reserve, Commodity Futures Trading Commission and Securities and Exchange Commission say they are monitoring blockchain.

Last week, DTCC said it had separately started working with Digital Asset Holdings LLC, the startup led by former J.P. Morgan executive Blythe Masters, to see whether short-term lending arrangements between dealers known as repos could be settled using blockchain.

Write to Telis Demos at telis.demos@wsj.com

Behind the Panama Papers: How the Massive Document Leak Came to Be - Fortune

Behind the Panama Papers: How the Massive Document Leak Came to Be

Posted: 05 Apr 2016 12:33 AM PDT

A quiet spring weekend was suddenly shattered on Sunday when news of the “Panama Papers” investigation broke. The massive international project involved approximately 400 journalists across 75 countries, plowing through roughly 11.5 million documents from a secretive Panamanian law firm specializing in creating offshore holding companies.
The investigation took more than a year, commencing after Bastian Obermayer, a reporter for the German newspaper Suddeutsche Zeitung, was contacted by a still-unknown figure. The source asked whether the paper wanted access to 40 years worth of information from the Panama firm, including the details of holding companies and accounts related to dozens of prominent European politicians.

Hello. This is John Doe. Interested in data? I'm happy to share- this is how it started more than a year ago #panamapapers #craziestyearever

— Bastian Obermayer (@b_obermayer) April 3, 2016

Suddeutsche Zeitung subsequently partnered with the International Consortium of Investigative Journalists, which in turn is an arm of the U.S.-based nonprofit Center for Public Integrity. By the time the project was complete, hundreds of journalists from more than 100 media outlets around the world had worked on the investigation.
ICIJ director Gerard Ryle described to Wired magazine about how the organization coordinated the giant project. Although he didn’t go into any detail about how the massive database (more than 2.5 terabytes) was stored or shared, Ryle said the project even had a chat function so that reporters for different publications could discuss the information.
“If you wanted to look into the Brazilian documents, you could find a Brazilian reporter,” Ryle told Wired. “You could see who was awake and working and communicate openly. We encouraged everyone to tell everyone what they were doing.”
This isn’t the first large, multi-national research project in which the ICIJ has been involved. The group also helped coordinate reporting around a previous leak of offshore banking information in 2013. But the Panama Papers is much larger than even that project was. It is also much larger than the WikiLeaks diplomatic cables release in 2010.
So far, there is no publicly searchable database of Panama Papers, although some media outlets have uploaded specific documents to Document Cloud. According to some reports, the ICIJ plans to make at least some of the database public within the next month or so, but the organization doesn’t want to release records that might implicate innocent people.
WikiLeaks also used media partners to help verify and curate its diplomatic cable and other leaks. Much like WikiLeaks did by using the Guardian, Die Zeit and the New York Times, the distributed nature of the ICIJ project makes it harder for governments to retaliate against specific outlets.

Wikileaks' most important innovation wasn't secure servers but cross-border syndication of analysis. Shutdown-proof. https://t.co/0KTyKq1tLi

— Clay Shirky (@cshirky) April 4, 2016

One interesting aspect of the ICIJ project is that while it involves more than 100 media partners around the world, very few of them are located in the United States. The only American media entities are the McClatchy chain of newspapers — including the Miami Herald and the Charlotte Observer — and the Univision network with its online offshoot Fusion, which has reported on the project.
A number of media industry watchers have noted the absence of prominent U.S. outlets such as the New York Times, the Washington Post or the Wall Street Journal. Did they decline to participate, or were they not invited to do so? Coverage of the leak and its implications has been sparse or non-existent in those publications.
It could be that U.S. publications simply aren’t that interested in the Panama Papers database because it doesn’t implicate any high-ranking officials. So far, there haven’t been any bombshells about U.S. involvement, although the online editor of Suddeutsche Zeitung suggested in a tweet on Sunday that more information is coming soon. (NYT public editor Margaret Sullivan wrote about why the paper didn’t have more on the leaks).
The ICIJ hasn’t commented on why it chose certain media companies to work with on the project and not others (I’ve asked several senior executives of the organization for comment, as well as the New York Times, and I’ll update this post if and when I get a response). Some have speculated that it could be because the ICIJ and CPI want the limelight to themselves, especially since the CPI has been struggling financially.
Some insiders say the ICIJ chose not to work with certain large U.S. media companies like the New York Times because they don’t co-operate well on big stories. In a blog post about one of its previous offshore leak projects, the organization noted that the media outlets it chose to work with “are team players and are willing to share their work with other colleagues around the world.”
In a comment to Mashable, ICIJ deputy director Marina Walker said that some U.S. publications were not invited to be part of the project because “openness to collaboration was essential.” But she said this wouldn’t preclude working with the New York Times or Washington Post now that the leak project has been made public.

Some of the criticisms of the #PanamaPapers I've seen so far; 1. Closed-shop cherry-picking by media outlets 2. Publicly inaccessible docs

— Asher Wolf (@Asher_Wolf) April 4, 2016

There are also some conspiracy theories floating around about the lack of U.S. involvement. Craig Murray, a former British ambassador to Uzbekistan, suggested in a blog post that large Western media entities aren’t involved because the ICIJ and its parent are funded by prominent U.S. organizations, such as the Ford Foundation and financier George Soros.
Meanwhile, the Panamanian documents have triggered a number of major news stories in several different countries. The prime minister of Iceland is under fire for having an offshore company that held banking assets during a time when the country’s financial sector was going through allegations of fraud and poor regulation. He walked out of a recent interview when the subject was brought up.
The documents also show that a number of holding companies with about $2 billion in assets are connected to a network of associates of Russian president Vladimir Putin, although the Russian government has rejected the suggestion of any impropriety.
Others implicated in the investigation include the presidents of Ukraine and Pakistan. Chinese leader Xi Jinping also appears to be connected to a number of holding companies as a way of avoiding tax, and so is British prime minister David Cameron, whose father appears to have used an offshore corporation to do so. Cameron has campaigned publicly against the avoidance of tax through similar means.
This article originally appeared on Fortune.com

Deutsche loses top 3 slot in investment bank rankings - Financial Times

Deutsche loses top 3 slot in investment bank rankings

JPMorgan and Goldman head benchmark industry league table

Deutsche Bank has lost its position as a top three global investment bank — an accolade it has held since before the financial crisis — after the weak euro and the bank’s restructuring relegated Germany’s biggest bank into fifth place in a benchmark industry league table. 

The latest data from industry research house Coalition, which rank global investment banks by total revenue from fees and trading, show Deutsche Bank is now behind Citigroup and Bank of America, which both shared the number three spot with the German bank last year. 

JPMorgan retains its title at the top of the league tables, followed by Goldman Sachs, which consolidated its hold on second place after a strong performance in G10 rates trading, cash equities and G10 foreign exchange products. 

Ram Nayak, Deutsche Bank’s head of fixed income, said the results were “not surprising”, adding: “They reflect a well-flagged shift in our strategy that has seen us focus on delivering a better quality of service to a smaller number of clients over a more targeted range of products.” 

The bank announced in October that it was cutting 9,000 jobs, pilling out of 10 countries, reducing resources to its markets division and halting some markets activities as part of a five-year strategy designed to restore investor confidence. 

Deutsche Bank had begun making changes earlier in 2015, pulling out of activities including securitised trading. The net effect was a like-for-like 10 per cent reduction in the markets unit’s balance sheet over 2015, which Deutsche believes cost it around 2.5 per cent of its markets revenues. 

The bank was also hurt by Coalition’s convention of converting revenues to dollars, since Deutsche Bank earns a greater share of its income in euro and sterling, which both depreciated against the dollar in 2015. 

With as little as a few hundred million dollars — or a few percentage points — separating the banks at the top of the league table, Deutsche Bank could reappear in the top 3, though management’s ambition is for the investment bank to hit return targets rather than absolute growth or size targets. 

Deutsche’s corporate banking and securities division actually grew total revenues by 4 per cent last year, but the fourth quarter was a bruising one as was the first quarter of 2016, when analysts expect the bank to have suffered a sharp fall in trading revenues. 

Goldman Sachs held the number two position globally for the second year in a row. Pablo Salame, co-head of Goldman’s securities division, said the US bank had adapted “aggressively” to the significant change that regulations and technology had brought to the industry. 

Last year was the best for Goldman’s investment banking division since 2007. Its fixed income division suffered a 13 per cent fall in revenues last year — a good performance relative to rivals — while equities revenues were up 16 per cent. 

The league tables also showed 2015 was a good year for France’s investment banks, even though they are ranked number 11 and 12 respectively, occupying the bottom two slots. BNP Paribas and Société Générale had the biggest year-on-year revenue gains on constant currency basis, Coalition’s research shows. 

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