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Tanguy Le Saout is Head of Fixed income Europe, Pioneer Investments

BREXIT – Some Further Thoughts

Tanguy Le Saout

Tanguy Le Saout

The vote last week by the population of the United Kingdom to leave the European Union was a genuine shock. Although the opinion polls predicted a close outcome, the bookmakers and the market had discounted a “REMAIN” win and priced accordingly. Much has already been written about the effects of this result, but we suspect that many of the consequences (both political and economic) are, as yet, unforecastable. Therefore, we will limit ourselves to a few comments this weekend, as the shock of the event continues to reverberate globally.

  • The result was more of a “Bear Stearns” moment than a “Lehmans” moment. By this, we mean that markets knew a “LEAVE” vote was a possibility – it was a “known unknown”. Central banks had already been making plans for the fall-out from a “LEAVE” vote through the provision of abundant liquidity to the banking system. That was why markets functioned so well on the day of the result – volatility was high but liquidity was available.
  • The most immediate effect will be on growth. Forecasts suggest that the referendum campaign, the result and the uncertainty that will be a fact of life over the next couple of years could knock between 1.5%-2% off U.K. growth in 2016/2017. Estimates for the E.U. are for a loss of output of about 0.5%. Worse case scenarios could even be looking at a recession in the U.K. in early 2017.
  • Based on that outlook for growth, the second significant effect is on central banks’ monetary policy stances. The Bank of England and then ECB are likely to become even more accommodative. We think the Bank of England will prefer to increase its asset purchase programme first and then potentially cut rates. The ECB is likely to further increase its Quantitative Easing programme and extend its lifespan. It is also unlikely that we will see any further rate hike from the U.S. Federal Reserve in the near-term.
  • With the economic growth outlook deteriorating and monetary policy remaining accommodative, pressure on bond yields is likely to remain to the downside in the near-term. Although we may have fundamental concerns about the long-term valuations of fixed income markets, the near-term picture suggests that bond yields will remain lower for longer.
  • In the past, economic fundamentals usually dictated the level of bond yields. Since the global financial crisis of 2008, central banks have been driving bond yields, with their (sometimes extraordinary) monetary policy actions. Now, we may face a period where politics will be the major market force. The political uncertainty is not just in the U.K., but also in places like Spain, Italy, France, Netherlands and Germany, all of whom will go to the polls in either national elections or referenda in the next 18 months. The U.K. result could possibly encourage anti-E.U. sentiment and the rise of far-right parties.
  • How the E.U. now reacts will shape its future. It may well be that the “BREXIT” result is a wake-up call to E.U. politicians and push them towards making the decisions that they should have made over the last decade, such as a fiscal union, deposit insurance and a proper banking union. On the other hand, the E.U. may decide to do what it has always done in times of crisis and agree to closer co-operation but not make any significant changes. The former would be the silver lining on a dark cloud, the latter would surely lead to further political and market uncertainty.
  • Finally, we think the immediate outlook for Euro investment grade fixed income markets warrants caution, and defensive positioning. Market participants are unlikely to be in a “risk-taking” mode over the coming months and we could experience bouts of “risk-off” sentiment. With pressure on growth, monetary policy remaining accommodative, and increased political risk, bond yields are likely to remain low.

Banks Purchases of Sovereign Bonds – Why the ECB is Worried

A recent report from Standard & Poor’s noted that far from reducing their holdings of sovereign bonds, banks across Europe have actually been investing more heavily in government bonds, exacerbating the loop between the health of a country’s banking system and the health of the government itself. Despite plans to try and reduce banks’ exposure to domestic sovereign debt in the aftermath of the global financial crisis of 2008, banks’ holdings of their own state’s debt doubled in that period. Western European banks holdings of their own government’s debt has risen from a low of €355bn in September 2008 to €791bn today, whilst Southern European banks holdings have increased from €272bn to €722bn. Much of this can be attributed to regulatory reasons – banks are encouraged to hold liquid assets like sovereign bonds and sovereign debt is classified as “risk-free”, meaning no capital has to be held against it. The ECB’s offer of cheap funding to banks through its Long-Term Refinancing Operations (LTRO’s) also saw banks borrow funds from the central bank and invest in sovereign bonds – the so-called “carry trade”. Recently, Germany floated proposals to introduce rules capping the amount of sovereign bonds that could be held by banks, but unsurprisingly it was shot down by southern European states. Given the figures above, it isn’t hard to see why.

Spanish Election Results – NingunCambio!!

Spain went to the polls again on Sunday June 26th for the second time in 6 months to try and elect a government. The last national elections in December 2015 saw no party (or combination of parties) able to form a government, so after 6 months of negotiations and talks, it was time to do it all over again. And just like in the U.K. referendum on E.U. membership, the opinion polls got it wrong again. Caretaker Prime Minister Mariano Rajoy’s People’s Party actually increased their numbers of seats from 123 to 137, but still not enough to form a majority government. The PSOE socialists lost 5 seats and fell to 85 seats. The big loser was the anti-establishment Podemos party, which had been predicted to overtake the Socialists and win 93 seats, but actually only ended up with 71 seats, the same as last December. That puts Rajoy and the People’s Party in the driving seat to form a government, but their natural partner, the pro-market Ciudadanos party lost 8 seats and is left with 32 seats, leaving both parties 7 seats short of a majority. In one sense, the good news is that, unlike the U.K., the Spanish electorate have not voted for any radical solution – the bad news is that we could be in for another period of protracted political negotiations. The result is not as bad as markets feared – there had been talk of the formation of a coalition between the two far-left parties Podemos and IU (called UnidosPodemos) who could have joined with the PSOE socialists to form a left-wing government. Whilst not a result the markets would have chosen, at least it is not the result that markets feared. Spanish bonds can probably tighten in spread terms against Germany, but that tightening may be limited by the lack of political clarity.

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U.S. inauguration turns poet Amanda Gorman into best seller



U.S. inauguration turns poet Amanda Gorman into best seller 1

WASHINGTON (Thomson Reuters Foundation) – The president’s poet woke up a superstar on Thursday, after a powerful reading at the U.S. inauguration catapulted 22-year-old Amanda Gorman to the top of Amazon’s best-seller list.

Hours after Gorman’s electric performance at the swearing-in of President Joe Biden and Vice President Kamala Harris, her two books – neither out yet – topped’s sales list.

“I AM ON THE FLOOR MY BOOKS ARE #1 & #2 ON AMAZON AFTER 1 DAY!” Gorman, a Los Angeles resident, wrote on Twitter.

Gorman’s debut poetry collection ‘The Hill We Climb’ won top spot in the online retail giant’s sale charts, closely followed by her upcoming ‘Change Sings: A Children’s Anthem’.

While poetry’s popularity is on the up, it remains a niche market and the overnight adulation clearly caught Gorman short.

“Thank you so much to everyone for supporting me and my words. As Yeats put it: ‘For words alone are certain good: Sing, then’.”

Gorman, the youngest poet in U.S. history to mark the transition of presidential power, offered a hopeful vision for a deeply divided country in Wednesday’s rendition.

“Being American is more than a pride we inherit. It’s the past we step into and how we repair it,” Gorman said on the steps of the U.S. Capitol two weeks after a mob laid siege and following a year of global protests for racial justice.

“We will not march back to what was. We move to what shall be, a country that is bruised, but whole. Benevolent, but bold. Fierce and free.”

The performance stirred instant acclaim, with praise from across the country and political spectrum, from the Republican-backing Lincoln Project to former President Barack Obama.

“Wasn’t @TheAmandaGorman’s poem just stunning? She’s promised to run for president in 2036 and I for one can’t wait,” tweeted former presidential candidate Hillary Clinton.

A graduate of Harvard University, Gorman says she overcame a speech impediment in her youth and became the first U.S. National Youth Poet Laureate in 2017.

She has now joined the ranks of august inaugural poets such as Robert Frost and Maya Angelou.

Her social media reach boomed, with her tens of thousands of followers ballooning into a Twitter fan base of a million-plus.

“I have never been prouder to see another young woman rise! Brava Brava, @TheAmandaGorman! Maya Angelou is cheering—and so am I,” tweeted TV host Oprah Winfrey.

Gorman’s books are both due out in September.

Third on Amazon’s best selling list was another picture book linked to politics and projecting hope: ‘Ambitious Girl’ by Vice-President Kamala Harris’ niece, Meena Harris.

(Reporting by Umberto Bacchi @UmbertoBacchi, Editing by Lyndsay Griffiths. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit

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Why brands harnessing the power of digital are winning in this evolving business landscape



Why brands harnessing the power of digital are winning in this evolving business landscape 2

By Justin Pike, Founder and Chairman, MYPINPAD

Delivery of intuitive, secure, personalised, and frictionless user experiences has long been table stakes in digital commerce, well before the era of COVID-19. As businesses harness the revolutionary power of digital technologies, they have pursued large-scale change to adapt to evolving consumer preferences (some more successfully than others, but that’s a blog for another day). Digital transformation is a term we hear repeatedly, and it looks different for each organisation, but essentially, it’s about utilising technology and data to digitise, automate, innovate and improve processes and the customer experience across the entire business.

As I said, this was already well underway but then came 2020 and no industry escaped the disruption of the coronavirus outbreak, which has had an indelible impact on businesses performance, operations, and revenue. Regardless of whether the impact of COVID has been very positive or very challenging, it has forced organisations globally to re-evaluate and re-orient strategies to adapt.

As lockdowns and pandemic-related restrictions continue to change daily life, this raises the question of how we can balance a dramatic shift to digital and the benefits it brings, while ensuring business continuity and innovation both during and post-COVID, and protecting everyone against fraud?

Digital is an essential survival tool, and even more so in a COVID world

No one could have predicted the dramatic digital pivot that has taken place over this year. Indeed, within weeks of the COVID outbreak cash usage in the UK dropped by around 50%. Digital solutions including delivery applications, contactless payments, mobile commerce, online and mobile banking have become essential components of a touchless customer experience in the era of social distancing. It’s no longer just about an enhanced and superior customer experience, it’s also about health, safety and survival.

In store, businesses have benefited from contactless payments enabling faster throughput and reduced need for consumers to touch payment terminals (therefore requiring greater cleaning, which degrades the hardware much faster). Mastercard reported a 40% increase in contactless payments – including tap-to-pay and mobile pay – during the first quarter of the year as the global pandemic worsened. Digital has also become an essential sales channel for many B2C brands. Where brick and mortar stores have been required to close, digital commerce enables continuity of customer relationships and revenue. This channel also provides brands with rich customer data, which can be used to enhance and personalise the customer experience and typically results in greater levels of engagement and uplifts in revenue.

Industry forecasts estimate that worldwide spending on the technologies and services enabling digital transformation will reach GBP 1.8 trillion in 2023 – a clear indication that the process represents a long-term investment and a global commitment to digital-first strategy. The key point here is that digital brings significant benefits, and regardless of COVID, is here to stay.

The challenges that rapid digital transformation brings to businesses

Justin Pike

Justin Pike

Regardless of whether businesses are operating in developed or less-developed economies, these times of crisis have levelled the playing field in the sense that all businesses are facing similar issues. Access to products and supplies, maintaining customer relationships, accelerating sales for some and declining sales for others, health and hygiene are just a few of the unique challenges brought about by COVID.

Many businesses in physical environments have had to swiftly implement changes to significantly reduce safety risks for staff and customers, such as contactless payments, mobile ordering and delivery options. But with these changes come a host of other benefits of digitisation, such as faster transactions, and reduced human error at the point-of-sale.

The reliance on technology, however, can also expose organisations and consumers to certain vulnerabilities. In particular, the risks of fraud and cybercrime have dramatically increased since the onset of the pandemic as scammers have taken advantage of digital technologies to target both businesses and individuals.

As a McKinsey report illustrates, new levels of sophistication in the activities of fraudsters have placed more pressure on companies that have been previously slow to go digital, bringing “into sharp relief how vulnerable companies really are”, and damaging the financial health of small and large businesses. In fact, the Bottomline 2020 Business Payments Barometer reveals that only one in 10 small businesses across the UK report recovering more than 50% of losses due to fraud.

But take these stats with a grain of salt. While it is important to be aware of the risks and challenges this new business landscape brings, it’s equally as important to have a lens firmly across your own business, industry and audience, and to identify the changes you can make internally to mitigate risk as well as improve your customer experience. Where can you make some quick wins? Do you have the right skillsets internally to achieve what you need to achieve? What technology is out there that will enable your business goals? There are tech companies like MYPINPAD that are making huge strides in software development, which will transform businesses globally.

A digital world post-COVID

Almost a year in, the line between business success and failure remains fragile. However, an ongoing transition towards greater digitisation will be the difference between survival and the alternative.

There is a wide range of initiatives businesses can implement to weather this storm. If we look at the space MYPINPAD operates within, secure digital consumer authentication is crucial to the ongoing success and security of not only financial products but also identification and verification across a range of different industry verticals. Shifting the authentication of consumers securely onto mobile devices enables businesses to completely reshape their customer experiences. By bringing together a more seamless, frictionless customer experience, accessibility, privacy, security and access to consumer data, businesses are able to drive digital transformation across day-to-day activities.

Against this backdrop, software with stronger security standards continue to play an ever more vital role in supporting society, protecting consumers and businesses from the increase in risks that rapid digitisation brings. Already, merchants can deploy PIN on Mobile technology from companies like MYPINPAD, onto their smart devices to speed up the digitisation process many are now tackling.

Essentially, opening up universal payments and authentication methods that feel familiar, for both online and face-to-face transactions, will be key to opening up a world of possibilities when it comes to redefining how businesses engage with consumers.

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Brexit responsible for food supply problems in Northern Ireland, Ireland says



Brexit responsible for food supply problems in Northern Ireland, Ireland says 3

LONDON (Reuters) – Food supply problems in Northern Ireland are due to Brexit because there are now a certain amount of checks on goods going between Britain and Northern Ireland, Irish Foreign Minister Simon Coveney said.

British ministers have sought to play down the disruption of Brexit in recent days.

“The supermarket shelves were full before Christmas and there are some issues now in terms of supply chains and so that’s clearly a Brexit issue,” Coveney told ITV.

The Northern Irish protocol means there are “a certain amount of checks on goods coming from GB into Northern Ireland and that involves some disruption,” he said.

(Reporting by Guy Faulconbridge; Editing by Tom Hogue)

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