EU leaders tell Britain to exit swiftly, market rout halts

LONDON/BRUSSELS - European leaders told Britain on Tuesday to act quickly to resolve the political and economic chaos unleashed by its vote to leave the European Union, a move the IMF said could put pressure on global growth.

Financial markets recovered slightly after the result of Thursday's referendum wiped a record $3 trillion off global shares and sterling fell to its lowest level in 31 years, but trading was volatile and policymakers said they would take all necessary measures to protect their economies.

British Finance Minister George Osborne, whose attempt to calm markets had fallen on deaf ears on Monday, said the country would have to cut spending and raise taxes to stabilize the economy after a third credit ratings agency downgraded its debt.

Firms have announced hiring freezes and possible job cuts, despite voters' hopes the economy would thrive outside the EU.

European countries are concerned about the impact of the uncertainty created by Britain's vote to leave on the 27 other EU member states. There is little idea of when, or even if, the country will formally declare it is quitting.

"The process for the United Kingdom to leave the European Union must start as soon as possible," French President Francois Hollande said. "I can't imagine any British government would not respect the choice of its own people."

European Commission President Jean-Claude Juncker sent a similar message as he prepared for talks with British Prime Minister David Cameron before an EU summit in Brussels, although he did not anticipate an immediate move.

"We cannot be embroiled in lasting uncertainty," Juncker said in a speech to the European Parliament, which he interrupted to ask British members of the assembly who campaigned to leave the EU why they were there.

Cameron, who called the referendum and tendered his resignation when it became clear he had failed to persuade Britain to stay in the EU, says he will leave it to his successor to formally declare the country's exit.

Arriving for the EU summit, he said: "I'll be explaining that Britain will be leaving the European Union but I want that process to be as constructive as possible, and I hope the outcome can be as constructive as possible.

Holding out hope of maintaining good relations with other European countries, he said Britain wanted "the closest possible relationship in terms of trade and cooperation and security. Because that is good for us and that is good for them."

His party says it aims to choose a new leader by early September. But those who campaigned for Britain's leave vote have made clear they hope to negotiate a new deal for the country with the EU before triggering the formal exit process. European leaders have said that is not an option.

"No notification, no negotiation," Juncker said.

No cherry-picking

After Cameron has addressed EU leaders on Tuesday evening, they will meet the next day to discuss Brexit without him.

Leave campaigners in Britain including Boris Johnson, a likely contender to replace Cameron, suggest the country can retain access to the European single market and curb immigration -- but those goals are mutually incompatible under EU rules.

German Chancellor Angela Merkel said Britain would not be able to "cherry-pick" parts of the EU, such as access to the single market, without accepting principles such as freedom of movement when it negotiates its exit from the bloc.

"I can only advise our British friends not to fool themselves ... in terms of the necessary decisions that need to be made in Britain," she told German parliament in Berlin.

Cameron will meet other European counterparts one-on-one before addressing them all at what promises to be a frosty dinner to discuss what has become known as Brexit.

EU lawmakers say they want him to trigger the exit process at the dinner, but an EU official said that was unrealistic given the political chaos in London, where both Cameron's party and opposition Labour lawmakers are deeply divided.

The ruling Conservative Party is split into pro- and anti-EU camps and Labour Party leader Jeremy Corbyn was facing a no confidence vote on Tuesday from parliamentarians who accuse him of lukewarm support for the EU.

The European Parliament jeered when Nigel Farage, the leader of Britain's euroskeptic UKIP party, said in a scathing speech that Europe had deceived its population and Britain would be its "best friend" if it agreed to extend a tariff-free trade deal.

But the vote has caused new friction in the EU at a time of crises over a mass influx of refugees, economic weakness and tensions on its borders with Russia.

Poland's foreign minister demanded Juncker and other leaders of the executive European Commission quit for not preserving the Union. The prime minister of Greece, enduring austerity measures in return for aid, said Europe must change direction.

Germany's financial market regulator delivered a double blow to London, saying it could not host the headquarters of a planned European stock exchange giant after Britain leaves the EU, and could not remain a center for trading in euros.

Fitch joined other credit ratings agencies in downgrading its sovereign debt on Monday, and Osborne said Britain faces tax rises and spending cuts.

"We are going to have to show the country and the world that the government can live within its means," Osborne, who campaigned to stay in the EU, told BBC radio.

Mayor seeks more autonomy for London

The 52-48 percent vote to leave has deepened multiple geographical as well as political and social divisions in the United Kingdom.

Sadiq Khan, the mayor of London, where a majority voted to stay and people fear job losses if the city loses its status as a global financial center, said access to Europe's market was key. "On behalf of all Londoners, I am demanding more autonomy for the capital - right now," he said.

Scotland, where people voted strongly to remain in Europe, is weighing a possible second referendum on leaving the United Kingdom given the vote to leave the EU.

Scottish leader Nicola Sturgeon denounced what she called a vacuum of leadership in London and said three months of political drift until a successor to Cameron is in place would further damage Britain's economy. She said she would meet EU leaders on Wednesday to discuss how Scotland could remain.

The impact looked likely to spread far beyond Britain's borders although European shares rose after a heavy sell-off, partly due to hopes of a more co-ordinated central bank response to financial market losses. Sterling also rose and Wall Street opened higher as investors hunted for bargains.

European Central Bank President Mario Draghi said central banks around the world should aim to align monetary policies to mitigate "destabilizing spillovers" between economies.

Shares in European banks have come under particular pressure, especially those based in Britain, over doubts about future market access, and Italy, with high levels of bad loans.

Brexit creates huge political uncertainty and will put pressure on global growth, the International Monetary Fund (IMF)'s Deputy Managing Director Zhu Min said on Tuesday at the World Economic Forum in Tianjin in northern China.

Asian stocks rose and Chinese stocks, protected by capital controls, hit a three-week closing high. Chinese Premier Li Keqiang sought to reassure investors by saying the country would not allow "roller-coaster" rides in capital markets.

Dutch Prime Minister Mark Rutte said England had collapsed "politically, monetarily, constitutionally and economically".

US President Barack Obama told National Public Radio there had been some hysteria "as if somehow NATO's gone, the trans-Atlantic alliance is dissolving, and every country is rushing off to its own corner. That's not what's happening."

In view of the disarray in Britain, some people questioned whether Brexit would happen at all. Nordea bank analysts gave it a likelihood of 70 percent and a senior EU official involved in the process said he thought the country may find a way never to announce its formal departure to the bloc. (Additional reporting by Alastair Macdonald, Paul Taylor, Gabriela Baczynska, Phil Blenkinsop and Jan-Robert Bartunek in Brussels; Sudip Kar-Gupta and Guy Faulconbridge in London and Alistair Scrutton in Stockholm)

source: interaksyon.com

ANALYSIS | Can the EU survive Brexit?

BRUSSELS, Belgium -- Britain's vote to become the first country to leave the EU, as projected by national media, is a shattering blow that threatens the survival of the post-war European project, officials and analysts said.

The loss of one of its biggest members will at the very least force major changes on an embattled bloc already struggling to deal with growing populism, a migration crisis and economic woes.

In the long-run, "Brexit" may lead to other countries holding referendums, a far looser union, and possibly even the disintegration of a grouping set up 60 years ago to bring security and prosperity after World War II.

EU President Donald Tusk warned in the run-up to the vote that Brexit could lead to the "destruction of not only the EU but also of Western political civilization."

With Europe facing a resurgent Russia and the threat of terrorism, Tusk said "our enemies ... will open a bottle of champagne if the result of referendum is negative for us."

In a less doom-laden assessment, European Commission Chief Jean-Claude Juncker said last week that the EU was not "in danger of death" from a Brexit but that it would have to learn lessons.

'Very serious blow'

Chris Bickerton, a lecturer at Britain's Cambridge University and author of "The European Union: A Citizen's Guide," said it was a "very serious blow" but not terminal, given the "core role" of the EU in much of European political life.

But he added that it would probably drift towards a "looser, ad hoc" union.

"I don't think it would suddenly disappear but over the longer term, we might see it slowly decline and become something different," he told AFP.

The next steps for the EU would be difficult, he added.

"We are very much in uncharted territory," he said. "I don't think anyone really thought Brexit was really likely, certainly not when they were negotiating with Cameron, otherwise they would have done a very different deal."

In the immediate aftermath of the British vote, seven years of potentially bitter divorce negotiations between Brussels and London loom.

The remaining EU countries will likely be keen to move ahead. France and Germany, the main EU heavyweights, have already been working on a joint plan for the future.

But with Berlin and Paris at loggerheads over future integration of the eurozone, any plan is likely to be a modest affair that deals only with issues such as security and defense.

Even without Britain in the club, the drift away from "ever closer union" and federalism is likely to increase, with growing talk of a "two-speed Europe" that allows states opt-outs from key rules.

One major step could be making membership of the euro non-compulsory, which would help Poland, which appears to have no intention of joining the single currency but is officially meant to.

Domino effect?
The main fear in many European capitals is that either way, the result could trigger a domino effect of referendums in other countries.

French far-right leader Marine Le Pen on Tuesday urged all EU states to follow Britain's example, and eurosxeptics in the Netherlands, Denmark and Sweden have made similar calls for referendums.

Vivien Pertusot, Brussels-based analyst with the French Institute of International Relations, said the EU was likely to survive but be weakened.

"Institutions rarely die," he told AFP. "Maybe there will not be disintegration, but a loss of relevance. The EU will lose, bit by bit, its centrality for all the most political projects."

The danger for the EU is that even after it makes changes following the British referendum, it will still not be able to quell the forces of history tearing it apart.

"The EU is in a negative spiral," Janis Emmanouilidis, director of studies at Brussels-based think tank European Policy Centre, told AFP.

The question of what could replace the EU if it does collapse is even more vexed.

"It might sound as if yes, this story has ended, a new one has begun, but that's not easy. Especially after the experience of failure," said Emmanouilidis.

source: interaksyon.com

Wall Street Week Ahead: Short week, jobs data may bring back swings

NEW YORK - Wall Street may kick off the second half of the year with an uptick in volatility, thanks to the June jobs report and plenty of other market-moving data in a short trading week.

Financial markets will be closed on Friday for Independence Day. So Thursday will bring a blitz of numbers: the nonfarm payroll figures for June, the May trade deficit and the June index on the services sector from the Institute for Supply Management. On Wednesday, U.S. Federal Reserve Chair Janet Yellen is scheduled to speak on financial stability at an International Monetary Fund conference in Washington.

The elevated volatility would shake some traders out of a stupor. They have been limited in their betting by this market, which has been resilient but boring: The S&P 500 has not had a weekly swing of more than 2 percent since mid-April.

"It has been a very frustrating few months in the market for both long-term and short-term traders. It is very tough to outperform in this environment," said Sam Ginzburg, head of trading at First New York Securities in New York.

The S&P 500 has scored 22 record closing highs for the first half of 2014, feeding concerns about a technical pullback. Yet the CBOE Volatility Index, Wall Street's fear gauge, has hovered near multi-year lows, reflecting a market that seemed to grind higher no matter what was thrown at it.

"Markets will probably trade sideways or lower until the VIX gets to a higher level, where it can support some kind of (a meaningful) advance," said Donald Selkin, chief market strategist at National Securities in New York, which has about $3 billion in assets under management.

The VIX is trading around 11, or about half of its long-term average of about 20. While no one would want to relive the financial crisis when the VIX jumped to 89.53 on Oct. 24, 2008, a modest amount of volatility is welcome on Wall Street.

A higher VIX creates valuation imbalances that drive stock picks and boost trading volume, which has collapsed from more than 8 billion shares a day in 2007 to an average of about 5 billion now.

For long-term investors, though, Wall Street is wrapping up a good first half of the year. The S&P 500 has climbed 6.1 percent this year, following a jump of 30 percent in 2013.

A recent Reuters poll showed market participants expect the benchmark index to hit 2,000 for the first time before the year ends, which is a gain of about 8.2 percent from 2013.

If the market closed the year at current levels, it would mark the best three-year run for U.S. stocks since the 1997-1999 period.

source: interaksyon.com

Republicans unveil plan to avert US debt default, probably end standoff

WASHINGTON - Republicans in the House of Representatives on Thursday unveiled a plan that would avert a looming US default, in a sign that lawmakers may end a standoff that has rattled financial markets and thrown America's future creditworthiness into question.

Ahead of a meeting with President Barack Obama, it was unclear whether Republicans would be willing to end a government shutdown that took effect on October 1 without concessions that would undermine Obama's signature healthcare law, a stance that precipitated the crisis.

Still, the offer to raise the debt ceiling is a significant shift for Republicans, who had hoped to extract concessions on spending and health care. By extending the government's borrowing authority until possibly the middle or end of November, it would eliminate the near-term threat of a default that would hit everyone from retirees to bondholders.

"It's time for these negotiations and this conversation to begin," House Speaker John Boehner told reporters after presenting the plan to his fellow Republicans.

Obama has already said he is willing to consider a short-term debt ceiling increase as long as it is not tied to other concessions. Obama will take a look at the proposal, a White House official said. But the White House insisted that Republicans also must agree to end a government shutdown that took effect on October 1.

Many rank-and-file Republicans also appeared to be skeptical of the deal when Boehner presented it at a closed-door meeting on Thursday morning, aides said. Boehner's grip over his troops has been tenuous this year and many of the chamber's most conservative lawmakers have defied him repeatedly on other crucial votes.

Still, investors seemed to be heartened by the development. US stocks rallied strongly with major indexes climbing more than 1 percent.

The Treasury Department says it will be unable to pay all of its bills if Congress does not raise the $16.7 trillion debt ceiling by October 17. Republicans say the Obama administration would be able to keep up with its bond payments at the expense of other obligations if that deadline was missed. Treasury Secretary Jack Lew said that's not possible.

"It would be chaos," he told the Senate Finance Committee.

The Republican plan would postpone that day of reckoning by six weeks, which would give them more time to seek spending cuts, a repeal of a medical-device tax, or other measures they say are needed to keep the national debt at a manageable level.

Democrats have called for a debt-ceiling hike that would extend government borrowing authority for more than a year.

The House could vote on the measures as early as Thursday afternoon, though timing remained unclear. House leaders canceled a planned recess and said they would remain in Washington next week to keep working on the problem.

With the October 17 deadline a week away, Obama is scheduled to meet with House Republican leaders on Thursday afternoon. He is also due to meet separately with Senate Democrats and Senate Republicans.

The plan would do nothing to resolve Republican objections to Obama's healthcare reform bill, known as the Affordable Care Act, which prompted the October 1 shutdown.

Hundreds of thousands of federal employees have been out of work since then and individual businesses, from arms makers to motels, have begun to lay off workers as well.

The Labor Department said on Thursday that 15,000 private-sector workers have filed for unemployment benefits due to the shutdown.

House Republicans have passed bills that would reopen portions of the government and otherwise ease the pain of the shutdown, but they still hope to tie a full restoration of government funding to conditions that would undercut "Obamacare," as it is popularly known. (Additional reporting by Jason Lange, Thomas Ferraro, Steve Holland and Roberta Rampton)

source: interaksyon.com

Warning On Foreign Currency Trading

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) and Securities and Exchange Commission (SEC) have issued a joint warning against illegal schemes proliferating in today’s financial markets.
These shady activities, according to the BSP and SEC, include schemes involving “foreign currency trading” transactions.
“Any solicitation to engage in foreign currency trading and to commit funds for this purpose should be considered with extreme care and caution,” the government agencies said in an advisory.
The advisory listed the following precautions that an interested investor should consider before placing his or her funds with any foreign currency trading company:
* Stay away from opportunities that sound too good to be true. Get-rich-quick schemes tend to be fraudulent.
* Avoid any company that guarantees large profits or promises little or no financial risk.
– In many cases, claims of large profits or minimal risks tend to be false. Normally, the higher the promised return, the higher the risks involved.
– Be suspicious of companies that downplay risks or state that written disclosure statements are only “routine formalities imposed by the government.”
* Do not trade on margin unless you understand what it means.
– Certain foreign exchange transactions can make you responsible for losses that greatly exceed any amount you deposited.
– Do not trade on margin unless you are also prepared to accept losses that exceed the margin amounts you paid.
– In case of doubt, consult with reputable investment advisers/consultants and/or financial planners.
* Be cautious of sending or transferring cash on the Internet, by mail or otherwise. Be especially alert to the dangers of trading online. While it can be very easy to transfer funds online, it will often be impossible to get refunds.
* Be wary of companies that offer currency trading online but do not provide information about their company (e.g. office address or other information identifying their nationality, contact numbers and other relevant data) on their website. Be aware that if you transfer funds to those foreign/offshore firms, it may be very difficult or impossible to recover your funds.
* Do not deal with individuals or companies who refuse to give you their background.
– Try to conduct a background check of the persons running or promoting the company. Do not rely on the representations or promises of the company’s employees.
– If you are unsure about the legitimacy and authenticity of the individual or company with whom you are dealing, the best thing to do is to avoid transacting and dealing with them.
* Always keep or retain a copy of the contracts/agreements and other document/s or any receipt/s issued by these foreign currency exchange companies.
– This is especially useful in an event involving legal action. A printout of the page of the website alone may not always be acceptable or sufficient as evidence of the transaction.
* Contact the regulatory agencies.
– Please bear in mind that the mere issuance by the SEC of a certificate of incorporation to a corporation does not include a permit or license to engage in activities which require a secondary license.
– Always inquire as to whether or not the company had been authorized or licensed to undertake the abovementioned activities. Verification can be made with the proper government agencies such as the BSP and the SEC.

source: mb.com.ph