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US Headlines Special 3: The Outcome
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28 March 2016 |
As has been the norm for several weeks now, this week has brought another extremely high profile individual wading into the debate regarding immigration and the EU. Richard Dearlove, the former head of MI6, the British foreign intelligence service, has come out arguing that one of the major advantages of leaving the European Union would be that it would provide the UK with “greater control over immigration from the EU”. He is of the opinion that ‘Brexit would bring two potentially important security gains: the ability to dump the European Convention on Human Rights and, more importantly, greater control over immigration from the European Union’. Nevertheless, on the contrary as the Guardian highlights that of the 300 arrested for terrorist offences in the year to March 2015, 78% considered themselves British or dual-British nationality, the majority of the threat of terrorism and our security may actually come from within.
Meanwhile, across the Atlantic, Reuters reports how the U.S. immigration authorities' lack of concrete improvements in automating their systems is compromising border security, making immigration greatly difficult and also inefficient. John Roth, the Inspector General for the Department of Homeland Security, informed a Senate Homeland Security Committee hearing that “We may be admitting individuals who wish to do us harm, or who do not meet the requirements for a visa”. Roth's office went even further when releasing the report stating that ‘it will take $1 billion and another three years; 11 years into the effort, to move from a paper-based system to automated benefit processing.’
Closer to home and the government has been defeated in the House of Lords as peers voted to allow 3,000 unaccompanied child refugees into the country. Peers voted by 306 votes to 204, a majority of 102, to amend the immigration bill in order to require the government to let the children, currently in Europe, come to Britain. The government was warned that it would have to take responsibility and act swiftly to take in the unaccompanied child refugees amid complaints from cross-party MPs that the children were suffering terrible conditions in Calais. In fact the vote came as three unaccompanied Syrian children, including one orphaned by war, already arrived in the UK from the Calais refugee camp in order to be reunited with relatives.
Much more positive news for the European Central Bank this week was, as Reuters reports, that Euro zone business activity ended the first quarter on a higher note, suggesting that the extra stimulus from the European Central Bank may already be having a positive effect. The ECB ‘chopped interest rates again and bolstered its asset purchase program’ earlier this month as part of an on-going battle to drive up growth and inflation in the 19-nation bloc, and in a survey complied by Markit, Purchasing Managers' Index (PMI) EUPMCF=ECI, regarded as a good growth indicator, jumped to 53.7 this month from February's 53.0.
An interesting reading this week was made by Louise Bours MEP, UKIP’s health spokesman who, as the Telegraph reports, argued that the NHS cannot survive if we remain in the European Union. She reasons this by stating that due to the Transatlantic Trade and Investment Partnership, TTIP, sometimes called TAFTA – the Transatlantic Free Trade Area, a free trade deal between the US and Europe, currently under negotiation, which would ‘cut tariffs and lower regulatory barriers to make trade easier between the two markets’, would lead to the privatisation of the NHS because the treaty includes 'market access' which bans state monopolies – including public services run by the state. Controversially, one part of the agreement allows big companies and corporations to take the government to court in secret due to the Investor-State Dispute Settlement (ISDS) mechanism, which allows companies to take legal action against countries they perceive to be hindering potential profit. Whilst much is still left to take shape, this is certainly a story to watch.
Continuing with a story that has engulfed Europe over the last few months, the latest development in the migrant crisis is further chaos and problems for European governments and the EU. The Telegraph reports how thousands of Afghans and Iraqis may escape deportation to Turkey as the EU's €6 billion (£4.7 billion) deal descends into chaos. In a major blow for Brussels, Turkish government sources have claimed they will not change their domestic law in order to grant Afghans and Iraqis refugee status in Turkey, and to prevent them being deported to warzones. The EU says those changes are essential to make the deal compliant with international law, and therefore to commence deportations. Without such changes, the whole deal may collapse which would cause further problems to an issue that is already overwhelming the whole of Europe.
With the referendum date set and in/out campaigns gathering speed, arguments for and against Brexit are continuing to be headline news. Last week, as reported by the Guardian, another major financial player entered the fray. Moody’s, the credit rating agency has claimed that Britain’s biggest companies could face a credit downgrade, potentially forcing up their borrowing costs, should the UK vote to leave the EU in June. Moody’s said ‘the prospect of lengthy and uncertain negotiations would deter foreign investors and limit the profits of mainstream corporations that trade with the rest of the EU’. However, it also predicted that both banking and insurance would be less affected than non-financial companies.
Following on from the previous headlines, on Wednesday 16th March, George Osborne announced the next UK budget to parliament. In his eighth budget as Chancellor, Osborne controversially announced a new sugar tax on the soft drinks industry to be introduced in two years' time, hoping to raise £520m a year to be spent on doubling funding for primary school sport in England. The budget also addressed the Growth forecast to be 2% in 2016, down from 2.4% in November's Autumn Statement and GDP predicted to grow 2.2% and 2.1% in 2017 and 2018, down from 2.4% and 2.5% forecast four months ago.
Despite continuous claims that we’re on the road to recovery, the vast impact of the 2008 financial crash is still evident. The Independent this week has stated that the damage of the financial crash has been bigger than anyone initially feared, even going as far to claim that the UK economy is now in the middle of a ‘lost decade’. In the areas of productivity, GDP per head, wages, interest rates and the size of the state, the impact of the economic collapse is still being felt and evidence demonstrates just how far the UK economy has suffered.
In business news, German airline group Lufthansa has reported a 55% rise in underlying earnings to €1.8bn (£1.4bn), helped by lower fuel costs. ‘The increase comes despite a series of strikes by pilots and cabin crew over changes to working conditions, Lufthansa said it would resume dividend payments to shareholders and forecast slightly higher profits in 2016’. Despite the good news however, the group has warned that competition from rivals would continue to put pressure on ticket prices, so even with this considerable rise in underlying earnings, cheap flights this summer may not be on the horizon for consumers.
Continuing on its wave of success since the launch of the first product in 2007, Apple has unveiled the latest version of the flagship of its brand, the iPhone. The new phone, named the iPhone SE, is an upgrade of the older four-inch iPhone 5S, which was released in 2013. The device is primarily aimed at those consumers who are yet to upgrade to the bigger-screen iPhone 6 models that have been introduced over the past two years. Alongside the updated iPhone, the US tech giant also announced a new iPad tablet for business use and reduced the price of the Apple Watch. Technology analysts have responded positively to the announcements, arguing that they will build on its already global success and allow Apple to reach new markets.
One headline that we have followed in business news since it broke is the Volkswagen emissions scandal that hit the US at the end of 2015. Now, a US court has given Volkswagen until 21 April to come up with a plan to fix 600,000 cars that emit illegal levels of pollution. The US District Court Judge said: "This issue of what is to be done with these cars must be done by that date." If Volkswagen are unable to put a plan in place by the deadline, the court will consider what action to take. VW said it was committed to resolving the US investigation "as quickly as possible” and has even gone as far as to set aside €6.7bn (£5.2bn) to cover the costs of the scandal.
Despite being extremely aggressive within the international political arena and even with vast supplies of natural gas and crude oil, the Guardian reports how Russia’s recession-hit economy has propelled the country’s poverty rate to a nine-year high as it struggles to cope with a crippling economic crisis. It claims that an average of 19.2 million Russians, equaling 13.4% of the population, were living last year on less than 9,452 roubles ($139) a month, the minimum subsistence level determined by the Russian government in the fourth quarter. A combination of Western sanctions and global law oil prices having hit the country in the last twelve months have allowed this poverty figure to increase by 20%. With retail sales down 5.9% last month alongside the reality that real wages shrank 6.9% in comparison to the same period last year, as well as Russia’s newly-founded rating agency stating that it did not expect economic growth until 2018, it appears that it will be rocky road ahead for Russia’s people.
It is clear that China is entering into a period of great economic transformation. With the country’s leaders adamant about moving away from its previous manufacturing base and developing into a service-driven economy, changes are happening. Although Beijing says it can manage this transition, and that it is all part of the plan, moving, as it is from Old China, to New China, the BBC reports how China has a ‘bumpy road ahead’. China's past leader Deng Xiaoping is quoted as saying. "If our economy stagnates or develops only slowly, the people will make comparisons and ask why." This claim is undoubtedly true, and with China’s leaders meeting this week to discuss unemployment, possible stagnation and the emergence of New China, it is apparent that not all will survive in this new economic world.
With both the Democrat and Republic party campaigns in full swing as primary season continues, and with millions of dollars being spent, Reuters reports how donors of Republic Presidential candidate Donald Trump believe he may actually need their financial support. Despite repeatedly boasting at campaign rallies of his financial independence, donors to Trump’s campaign fear the amount his opponents are spending in order to attack him. Although they admire his determination, they ‘thought a cash boost would help keep his fight for the Republican U.S. nomination fair. So 767 people sent in small sums - $25 here, $100 there - hoping it would help prepare him to face his many, moneyed foes’.
As is common with news surrounding oil over the last 18 months, this week Reuters reports how Brazil's state-controlled oil company Petrobras has revealed its biggest-ever quarterly loss after booking a large write-down for oil fields and other assets as oil prices slumped and refinery projects faltered. ‘Petróleo Brasileiro SA, as the company at the epicenter of Brazil's massive corruption scandal is commonly known, had a consolidated net loss of 36.9 billion reais ($10.2 billion) in the fourth quarter, according to a securities filing. The bigger-than-expected shortfall was 48 percent larger than the 26.6 billion-real loss a year earlier, the previous record’. Owing to this loss, its Chief Executive Officer Almir Bendine confirmed that Petrobras will not be paying dividends to either its government or non-government investors and it also has no plans to make bonus payments to its employees.
Nevertheless, despite this loss in South America, the oil prices in the US actually steadied over the Easter break. This was predominantly owing to a renewed drop in US oilrigs, but some analysts and traders did state there could be another selloff in the coming week if U.S. crude stockpiles hit record highs again. However, Reuters did state how ‘oil prices remain about 50 per cent higher from multi-year lows hit in January from glut worries. While declining U.S. oil output and strong gasoline demand was responsible for some of that recovery, the bulk of it was powered by major producers' plans to freeze output at January's highs’.
Following on from previous headlines regarding the UK March budget, the BBC reports how George Osborne has offered help for oil and gas companies. The Chancellor of the Exchequer has announced that he will cut the supplementary charge on oil and gas from 20% to 10% and also abolish the petroleum revenue tax. Mr Osborne claimed that the falling price of oil has meant further action was needed to ensure the industry's long-term viability.