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Market Round Up: China warms up cold Turkey, Restaurants starved by buybacks, Euro is all Greek to me

by | 1 Aug, 2018

 

1. China warms up cold Turkey

ICBC, the Industrial and Commercial Bank of China, has been given the go-ahead to refinance a massive $2.7 billion loan to complete two mega projects in Turkey, thus bailing out the Turkish banking system that was struggling to obtain funds from international markets.

The projects are the Yavuz Sultan Selim bridge, a third bridge across the Bosphorus, and the North Marmara highway. The deal represents an important milestone in terms of strategic cooperation between China and Turkey, especially at a time when Turkey’s relation with the U.S. took another hit.

The new tension is based around the repatriation of an American pastor accused of being complicit in the 2016 coup attempt. Trump and vice president Mike Pence issued threats that Turkey would face sanctions if he wasn’t released while Turkey, conversely, demanded the return of their religious leader Fethullah Gulen to face similar charges at home. In other words a priest for a priest. But more disconcerting to Turkey is the risk that Trump may block the delivery of its F-35 jets . All this tension has done little to temper the Lira’s continual fall.

 

2. Restaurants starved by buybacks

According to a recent report published by the Roosevelt Institute and National Employment Law Project (NELP), publicly traded companies in the restaurant, retail and food manufacturing industries could have paid their staff thousands of dollars more if they had used the money spent on stock buybacks instead.

The report states that “stock buybacks greatly benefit corporate executives (who hold stock-based compensation) and market speculators, but they leave companies with fewer resources available to invest in workers and future growth”. The report gave the example of McDonald’s which spent more than $21 billion on buybacks between 2015-17, which could have been used to raise workers pay by almost $4,000 each. Starbucks likewise spent more than $5 billion on buybacks, which could have boosted its workers’ wages by about $7,000. It reports that the retail industry overall spent nearly 80 percent of its profits on stock buybacks between 2015 and 2017.

Until the Reagan administration, stock buyback was an illegal activity because it was always believed companies could manipulate their own stock prices. Now, the report is seeking a review. “Policy reforms to curb the use of buybacks is a crucial step toward reducing the growing pay disparities between workers and executives and addressing increasing economic and racial inequality”, it notes.

 

3. Euro is all Greek to me

The Euro was under fresh selling pressures yesterday after the IMF released a report providing a rather gloomy assessment of the Greek economy, just weeks before the country’s bailout programmes are set to end. While commending the Greek government for eliminating its fiscal and current account imbalances and restoring growth, the fund noted that risks are still skewed to the downside for Greek economic growth and that long-term stability of its public debt remains in question. It stated that the country’s banks may need more capital.

Related:  Tax Reforms Drive Global Indices Higher & Greece Set to Return to Capital Markets

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ALL RIGHTS RESERVED © INVSTR LTD. 2018

Risk Disclosure:
Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.
Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.
Brokerage services are provided by the following:
US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth LLC, a regulated member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. For more information, including disclaimers, risk and transaction fees click here.
India account traded securities are provided by SIC Stocks & Services PVT Ltd. SIC does not make any personal recommendations to buy, sell or otherwise deal in investments. Investors make their own investment decisions. The services and securities provided by SIC may not be suitable for all customers and, if you have any doubts, you should seek advice from an independent financial adviser. For more information and disclaimers, click here.

 

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