BoE stress tests: all you need to know

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

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Draghi: Eurozone will decline without vital productivity growth

It’s productivity, stupid. European Central Bank president Mario Draghi has become the latest major policymaker to warn of the long-term economic damage posed by chronically low productivity growth, as he urged eurozone governments to take action to lift growth and stoke innovation. Speaking in Madrid on Wednesday, Mr Draghi noted that productivity rises in the […]

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Asia markets tentative ahead of Opec meeting

Wednesday 2.30am GMT Overview Markets across Asia were treading cautiously on Wednesday, following mild overnight gains for Wall Street, a weakening of the US dollar and as investors turned their attention to a meeting between Opec members later today. What to watch Oil prices are in focus ahead of Wednesday’s Opec meeting in Vienna. The […]

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Banks, Financial

RBS emerges as biggest failure in tough UK bank stress tests

Royal Bank of Scotland has emerged as the biggest failure in the UK’s annual stress tests, forcing the state-controlled lender to present regulators with a new plan to bolster its capital position by at least £2bn. Barclays and Standard Chartered also failed to meet some of their minimum hurdles in the toughest stress scenario ever […]

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Barclays: life in the old dog yet

Barclays, a former basket case of British banking, is beginning to look inspiringly mediocre. The bank has failed Bank of England stress tests less resoundingly than Royal Bank of Scotland. Investors believe its assets are worth only 10 per cent less than their book value, judging from the share price. Although Barclays’s legal team have […]

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Categorized | Currencies

EM stocks get reprieve from ‘Trump tantrum’

Posted on November 22, 2016

Gains in Asian and Brazilian stocks are leading emerging market assets to a rare day of relief from the heavy sell-off triggered by Donald Trump’s US presidential election victory two weeks ago.

The MSCI Emerging Market Index gained 1.3 per cent to 858, its highest level since November 11 when it fell more than 3 per cent. The index has seen its gains over the past month dwindled down to just 1.7 per cent and remains some 4 per cent lower from its pre-Trump election levels on November 8.

South Korea’s benchmark Kospi index finished 0.9 per cent higher on Tuesday led by a 3 per cent rise in Samsung Electronics, the country’s largest listed company. Gains in large manufacturers such as TSMC and Hon Hai Precision also fueled a 1 per cent rise in Taiwan’s Taiex index.

In Latin America, Brazil’s Bovespa index was up 0.8 per cent, led by gains in mining giant Vale and credit card processor Cielo.

Currency markets are also enjoying a day of calm. The JPMorgan EM Currency Index was down 0.1 per cent but rose as much as 0.3 per cent earlier on Tuesday, following two straight sessions of gains. The South Korean won and South African rand both rose 0.9 per cent against the dollar, while the Turkish lira fell 0.7 per cent to 3.39 per dollar, nearing its record low.

Investors have fled EM assets in the wake of the US election. Expectations that Mr Trump would ramp up infrastructure spending and drive up inflation have led to a spike in US Treasuries and a rally in the dollar. But the so-called “Trumpflation trade” appeared to have lost some of its momentum. The 10-year US Treasury yield, which moves opposite to price, fell 3 basis points to 2.29 per cent on Tuesday while the dollar index, which measures the buck against a basket of major currencies, fell 0.1 per cent after snapping a 10-day winning streak on Monday.

The prospects of EM assets still look uncertain, however. “We believe 2017 will present a more challenging environment for EM assets,” said UBS strategist Bhanu Baweja, citing slower economic growth in Asia and a lack of tailwinds in 2016 such as rising property prices in China. Citi said “portfolio managers may seek to build precautionary cash balances fearing potential redemptions.”