Pioneer future still in balance as bidders jockey for position

According to people close to the matter, three bidders are still in the running to pick up Italian UniCredit's asset manager Pioneer, with Ameriprise Financial and Italy’s national post office vying for position and France's Amundi submitting the biggest bid yet.

Australia’s specialist investment banking and financial services group Macquarie put in the least attractive offer and now has little hope of winning, said the sources.

Other entities that took part in previous bidding rounds have criticised UniCredit for holding out for an unrealistic price of around $4 billion, but sources say there are other factors involved in the deal that balance that out.

The disposals come as Italy’s largest lender finds its capital well overstretched. The company are also on the brink of a potentially expensive legal battle over a rights issue, and the outcome of that could depend on how much cash it nets from Pioneer’s sale.

“We’ve seen in recent years that these kinds of asset gathering units are very attractive targets for financial institutions,” said Anthony Russell, Senior Vice President at Monex BMO Securities in an email to clients. “Investors are simply looking for better returns and asset managers are very good at doing this, leading to rapid growth. With the financial wealth of Italian households totalling around $4 trillion it makes the country very fertile ground.”

The sources went on to say that UniCredit would take its time deciding on a buyer and the media shouldn’t expect any more information until at least the middle of next month. A constitutional referendum is slated for early December which could also affect matters.

None of the financial institutions involved were available for comment on the deal.

Pioneer has been in the top ten of asset managers in Europe for years and currently has in the region of 230 billion euros under its scope.

Recent government data has revealed that only 29 percent of Italian wealth excluding property is invested with asset management firms making the country a below average investment nation compared to the rest of the financial bloc.

Greenback levels off while indexes hit new peaks

As U.S. Treasury yields finally stabilized leading to a mass sell-off of the dollar, increases in consumer staple stocks on Black Friday pushed the Dow Jones and S&P 500 to record peaks.

The stock market closes early today, 1pm ET so trading volumes are expected to be relatively low, but the Russell 2000 also hit a record intraday level.

There was a 0.8 percent jump for the S&P 500 as euro zone shares advanced. Black Friday traditionally ignites the U.S. holiday shopping season and the consumer discretionary sector also increased by 0.3 percent.

Crude prices were volatile as OPEC continues to discuss a potentially global production freeze, taking commodity prices down with it as European shares made four consecutive weeks of gains.

The gains in the major U.S. indexes have come following investor expectations that incoming President Donald J Trump will drop a significant number of regulations relating to financial industries like banking and insurance, but also the healthcare sector. He has also pledged to decrease taxes and bump infrastructure spending.

Since Trump’s surprise win, all three main indexes have seen stellar performance and hit record highs on multiple occasions.

“As America strides forward into their holiday season the stock market is still riding this wave of euphoria based on heightened investor sentiment,” says Anthony Russell, Senior Vice President at Monex BMO Securities. “Expectations and knee jerk investor reactions are great in the short term but we are advising clients to stay calm and wait this one out. We need to get some serious clarification on Mr Trump’s policies in the New Year, only then will we really know if this upswing is going to continue into 2017.”

At the moment, investors are most definitely betting that Trump will follow through on his pledges to keep inflation in check and to spur growth in the construction sector. Those bets are causing U.S. Treasury yields to soar and prices are being sent lower as a natural result.

Two year yields shot to a seven year peak of 1.1720 percent over the weekend as investors pondered the extent of the sell-off.  After a remarkable fortnight the dollar eventually settled down.

“It’s a funny situation for investors because there are many that still want in on this action but they need to be extremely wary of the next round of sell-offs which could be 30-35 basis points,” said TD Securities chief analyst Marty Goldstein.

Luxury car manufacturer will invest billions into clean tech

The R&D department of German multinational automotive company Daimler AG has announced  to the country’s media that it will invest at least $10 billion into electric vehicles in the next five years.

Due mainly to modern advances in battery technology, but also a host of diesel fume scandals, German motor firms are boosting their investments in the clean car market, feeling the operational range and cost margins for battery powered engines can now be profitable in the long-term.

Daimler is not the only company chancing their arm on the new developments in electric cars, which is allowing them to travel up to 50 percent farther. Volkswagen, Continental and Bosch are also investing significant seed money into the technology.

A statement by Daimler recently said, “In the next 10 years we want a range of different models that can handle the new electric technology, and for this we are happy to invest at least 9 billion euros over the next three to five years.”

The company says the cars operational range will be between 600 and 800 kilometres and four of the six new models will be branded as smart vehicles. Sources close to the company say it has moved into the electric market in an attempt to compete with the likes of Audi and Tesla, who are both building huge new factories in China, taking advantage of the substantial subsidies in the world’s biggest car market for environmentally friendly four wheelers.

“Regardless of their new electric car plans I don’t think there is any possibility Daimler will pull completely out of the diesel car market in America,” said Anthony Russell, Senior Vice President at Monex BMO Securities in a BBC interview on Tuesday.

“There had been reports that the company were going to stop sales of diesel, and its correct that diesel models account for only around two or three percent of their car sales in 2016, but there was a denial by Mercedes in De Spiegel that diesel would be dropped,” Russell added.

Similar to other car manufacturers, Daimler is conducting an internal probe into its diesel exhaust certification process by request of the U.S. Justice Department. The company said that the investigation was unrelated to their decreased focus on making diesel models.

ZTE stave off U.S. export restrictions until next year

After a U.S. Commerce Department ruling in March that placed some of the toughest ever restrictions on a foreign company, Chinese telecommunications hardware group ZTE Corp have announced on Thursday that they have won a further reprieve on export restrictions until February next year.

The U.S. hit ZTE with the restrictions after the company allegedly broke sanction rules regarding Iran, but has since issued various reprieves that have seen the company continue to do business on U.S. shores.

Some of the latest reprieves come after the Chinese firm appointed Mathew Bell as its new legal counsel and chief compliance officer for ZTE USA, the company’s U.S. subsidiary. Mr. Bell will now be responsible for global sanction rules and other export control laws.

Should the restrictions ever be permanently imposed on ZTE it would severely hamper their ability to reach a large part of their supply line. 75 percent of their parts currently come from U.S. component makers and software firms.

At the close of trading on the New York Stock Exchange ZTE shares were down nearly 2 percent and have suffered a 40 percent loss for 2016 in total due to uncertainty over the rulings.

“What ZTE really needs if they are going to fully recover stock prices is a complete and permanent removal of the restrictions,” said Anthony Russell, Senior Vice President at Monex BMO Securities in a Bloomberg interview. “The best they can hope for in those circumstances would be to get away with a small penalty fee for the firm and get back to business.”

Many observers were confident that if the Chinese network equipment and smartphone maker failed to get a quick ruling on the ban they would switch to non-U.S. sources, but the company have continued to source parts from companies like Qualcomm Inc leading analysts to believe ZTE will continue to work hard to get the restrictions permanently repealed.

European Commission will decide on BayernLB aid

Sources close to German lender BayernLB have said that the bank is in talks with the European Commission regarding capital strengthening, with the state of Bavaria backing the plan.

One of the sources mentioned that the European Central Bank is also keen to go ahead with the move in order to shore up Bavarian lending.

BayernLB were involved in a state aid investigation several years ago, and they will be hoping the latest negotiations with the EU can go ahead without another probe, and the sources said they want to wrap up an agreement before the end of the first quarter next year.

Neither the EU Commission nor the ECB were available for comment on the story, while a BayernLB representative said the nature of the talks were confidential but confirmed that the bank was seeking help from the state of Bavaria.

BayernLB were hobbled after the financial crisis of 2007-2009 as they were bound to pay back 6 billion euros of aid that the Bavarian local government had provided the lender. The payments needed to be completed by 2020 if the bank wanted regulatory approval for the funds.

“Bavaria are adamant that the bank requires further bolstering due to Austrian bank Hypo AlpeAdria, which was later nationalized, being involved in the original aid deal,” said Anthony Russell, Senior Vice President at Monex BMO Securities in a note to investors yesterday.

The EU is expected to make a decision in the next few months.

Japanese PM looks to strengthen U.S. ties with New York visit

Foreign minister Fumio Kishida has spelled out the purpose of his prime minister’s visit to New York on Friday, saying Shinzo Abe will meet with president-elect Donald Trump with a view to highlighting the importance of the two nation’s economic and political ties.

“When you meet with a new president it’s always important,” said Kishida. “The world economy is very fragile at the moment and we think this would be a good time to assert the importance of the relationship between our two nations. We have been allies for a very long time.”

Trump has been causing waves in the geopolitical community with various comments on trade that are contradictory to long standing policies. Tokyo will be looking to pin the incoming America leader down on exactly what their bilateral relations will look like in the future. Abe will fly on to an Asia-Pacific economic summit in Peru after his meeting with Trump in New York.

The U.S. has been an integral part of Japan’s national defence since the Second World War, but Trump made comments in his campaign to the effect that he thought Japan might adopt nuclear weapons in the future.

“We are the only country to have ever suffered a nuclear bombing, for that reason we will never possess nuclear arms, this is a principle of our country,” said Kishida.

The Japanese leadership have been concerned with many of Trump’s comments, not least that regarding nuclear armament, that have left the country wondering about the two nation’s security alliance.

“Some of the tension between the two countries might be down to the cost of keeping U.S. troops in Japan,” said Anthony Russell, Senior Vice President at Monex BMO Securities in a Bloomberg TV interview. “Trump feels that the Japanese government are not contributing enough. Japan insists they are going to strengthen their own forces so that there is less need for American troops.”

Ex-BOJ executive says central bank have rate cut limit

Hideo Hayakawa, a former executive at the Bank of Japan (BOJ) has said that the central bank cannot overstep a 0.5 percent interest rate limit as deepening rates further could seriously undermine the country’s already fragile economy.

“The danger is that if you cut rates deeper than 0.5 percent banks might start to charge their customers fees when depositing cash. This will only serve towards hoarding of cash on the part of Japanese households, that’s the last thing we want,” said Hayakawa, who retains a close relationship with several members of the BOJ board. “In this regard we must say there should be a limit, and it is around 0.5 percent.”

Years of huge asset purchasing has failed to stimulate the stagnant Japanese economy, so the central bank switched policies recently to concentrate on targeting interest rates rather than expansion of base money.

The goal is to keep the country’s benchmark 10-year yield around the zero percent mark, utilizing the BOJ’s new “yield curve control” strategy. At the same time, the BOJ are still charging banks a small fee for parking excess funds with them, in an effort to boost corporate spending and investment.

Previous to the BOJ’s switch in policy framework, Hayakawa was one of the few experts who predicted the move, so his latest comments carry a certain amount of weight in financial circles. He is now a senior analyst at private think tank Fujitsu Research Institute.

“The tools the BOJ has at its disposal under the current framework for easing are basically cutting its bond yield target or deepening rates,” said Anthony Russell, Senior Vice President at Monex BMO Securities. “According to Hayakawa and many other analysts there is only so far they can go down with the rates, any deeper than 0.5 percent and you start to drain funds out of the banking system. So they will be concentrating on manipulating the yield curve.”

Hayakawa also mentioned that the government would tone down their bond buying should inflation pick up and said there was certainly an upper limit on how much assets they could buy.

“The long-term target rate could be flexible depending on domestic inflation figures, so we have medium to long-term sustainability with this method,” Hayakawa said.

Japanese economic officials will be at an Asian-Pacific summit in Peru next week and the BOJ are expected to send a representative to liaise with several other central banking heads.

German banking giant looks to shed overseas units

As part of Deutsche Bank’s efforts to offload non-core operations in order to free up funds for rigid new banking regulations, Europe’s largest banking house is looking to sell its Polish wing, Deutsche Bank Polska, according to several inside sources close to the bank.

The Polish sale could be just the first of many overseas deals in the next two years, as CEO John Cryan continues to streamline the firm and boost the company’s base money.

Deutsche would not be the first foreign bank to exit Poland in recent years, as the government attempts to encourage Polish ownership of the nation’s financial institutions.

Two separate sources confirmed that the Polish unit of Deutsche was up for sale towards the end of last week. The public relations department at Deutsche did not answer phone calls or emails relating to the news.

Deutsche Bank Polska’s profits have taken a dip in the past 12 months as rock bottom interest rates and stronger competition from local banks resulted in reduced revenue. It currently sits as the nation’s 10th largest bank.

“I’m not sure how easy it’s going to be to find a buyer as most of Deutsche’s assets are held in Swiss franc and euro currency loans,” said Anthony Russell, Senior Vice President at Monex BMO Securities in an article for Reuters on Thursday. “Any potential buyer would need to take a close look at sector regulations to see if mortgages in those currencies can be bought with the unit. Certainly if you stripped away the mortgages from the operation, there wouldn’t be much left.”

Recent history certainly doesn’t favour a Deutsche sale of the unit, as the nation’s watchdogs have so far insisted that foreign banks exiting the country keep hold of any obligations they hold that involve overseas currencies. Poland, like the UK, chose not to adopt the euro when it joined the E.U. in 2004. Foreign currency loans on Deutsche Polska’s portfolio currently total over $3 billion in euros and Swiss francs.

One local lender who might be interested in purchasing the unit is Alior bank, who recently purchased the Polish section of GE Money, who quickly exited the country after court proceedings involving alleged improper use of funds.

Other big players in the Polish financial community, such as state-owned entities, are likely to put in bids also. The government’s ruling party has been creating initiatives focused on putting more financial power in the hands of the local population.

Mining asset deal is off after sides fail to reach parity

Several sources close to the Apollo Global Management purchase of Anglo American’s Australian assets say the deal is now off following prolonged and unsuccessful negotiations.

The deal had been expected to go through by most analysts but complications related to a surge in the coking coal market this year put a spanner in the works.

According to those close to the matter, the Anglo American board decided to block the deal after taking a closer look at the $1.5 billion valuation for the Australian assets.

“What usually happens in these cases is that both parties agree on a mechanism to lock in any future price adjustments in the market,” said Anthony Russell, Senior Vice President at Monex BMO Securities.

“The Anglo board obviously feels that the original valuation is way off base and any price rise re-calculation won’t bring back the kind of returns that they had promised their shareholders. It’s a fairly surprising decision and not one a lot of analysts spotted,” Russell added.

Neither company answered email or phone enquiries into the collapse of the deal.

Mark Cutifani, chief executive of Anglo American, recently said that he had never witnessed such a hardly fought series of talks, and commented that both sides employed teams of veteran negotiators who were finding difficulty reaching common ground.

As Chinese coal stocks start to shrink, coking coal prices have jumped over 200 percent, although experts are in agreement that the current price range is totally unsustainable.

Due to the stellar performance of commodities in 2016, pressure on the Anglo American board to sell assets has subsided.

Buffett backed car manufacturer projecting 85 percent profit jump

Even though stellar growth of the environmentally friendly car market is easing somewhat this year, Warren Buffet-backed Chinese auto manufacturer BYD Co Ltd announced over the weekend that this year’s full year profit forecast was likely to jump as much as 85 percent.

Profits could be as high as $800 million in 2016 for the Shenzhen-based car maker who has invested heavily in the green car side of their operations recently. The forecast margins are between 78 and 85 percent profit gain.

In the first three quarters of this year BYD reported profit increases of around 87 percent year-on-year which fell in line with the companies expected rises which were between 82 and 92 percent.

“The BYD results so far this year are excellent but they could have been so much better,” said Anthony Russell, Senior Vice President at Monex BMO Securities.

“They had triple digit growth four quarters in a row until the green car market started to ease after government support fizzled out. So the targets are going to be quite unattainable now.”

The Chinese government set a target of 750,000 electric and plug-in hybrid car sales for 2016, and the total so far this year is around 290,000 according to car association official data reports, so the industry has some hard months ahead if they want to get close to their hoped for results.

Controversy over some firm’s handling of their subsidy payments also looks set to hamper attempts to reach target levels this year.

Abe advisor describes BOJ policies as “extremely beneficial”

A close economic advisor to Japanese Prime Minister Shinzo Abe has described the Bank of Japan (BOJ) negative interest rate policy as being “extremely beneficial” to the world’s third largest economy.

Yasutoshi Nishimura, a member of the House of Representatives in the Diet, told Reuters that the policy is currently keeping mortgage rates low and giving a boost to corporate debt issuance even if the strategy may be strangling bank earnings short term.

He said the plus points outweigh those negatives as summer spending, both private and corporate, will be boosted hugely. The comments by the influential politician are a hint that the BOJ might be considering dropping rates even further after its policy meeting towards the end of September.

“We need to avoid falling back into deflation,” Nishimura said in the interview. “It’s important to keep cash flowing through the system. The positives of the current strategy by the BOJ are far more important than the negatives. I don’t think we will see the BOJ reversing the current easing policy, it’s extremely beneficial to the Japanese economy on the whole.”

Sources close to the central bank are sure the BOJ will make negative rates the focus of future quantitative easing as it transfers from a base money centred strategy.

In the midst of the BOJ’s huge asset-purchasing program which started at the beginning of 2016, the central bank stunned the financial world by pulling interest rates down to a negative figure, essentially meaning they are charging banks a fee for keeping funds in their vaults, about 0.1 percent.

“The comments from Nishimura could be seen as trying to give the thumbs up to a policy that was initially very unpopular with a lot of politicians when it was brought in,” said Anthony Russell, Senior Vice President at Monex BMO Securities in a phone interview on Wednesday.  “Abe will be happy to get some political back-up at this moment in his career, there’s no doubt of that.”

Reduced banking profits made the policy unpopular in the corporate world and many consumers feared private savings rates could also be dropped. However, BOJ Governor Haruhiko Kuroda promised that would not be the case, and Nishimura seemed to affirm this in the Reuters interview.

Immediate effects of the policy have been a drop in borrowing costs and reduced government bonds, leading to more people taking out cheaper loans for new homes.

Japanese capital expenditure rating finally falls

The fragility of the Japanese economy was yet again brought into the stark light of day as the government dropped its rating for capital expenditure for the first time in 11 months, while at the same time giving a rosier outlook on private consumption.

The Shinzo Abe administration held firm to its broad assessment of the world’s third largest economy in its September report, describing it as being in “a slow recovery with underlying issues”.

The Cabinet Office released the report to the public on Tuesday and the results are being scrutinized by the country’s media who are starting to turn on the current PM who’s “Abenomics” are failing to deliver the promised results.

Household spending, factory production and, most importantly, exports are all on a downslide according to a slew of economic reports recently, and the country’s central bank will hold a policy meeting at the end of next week to decide on the next course of action. The only bright spot was an increase in core machinery output.

Many observers are expecting the Bank of Japan (BOJ) to continue with its easing strategy as inflation slips beneath their 2 percent target and economic growth remains weak at best.

“We’ll see a full report of how the stimulus is affecting the economy near the end of this month,” said Anthony Russell, Senior Vice President at Monex BMO Securities in an email to clients. “The decrease in capex [capital expenditure] is not encouraging but it’s unclear how long that will go on for. If corporate profits can stay strong then the government can change their assessment moving into October.”

Last month capital expenditure was rated as showing “a pickup”, so September’s early data is a downgrade.

Meanwhile, private consumption was “very solid in general”, excellent news as it constitutes about 70 percent of the nation’s economy. It’s the first time the benchmark factor has been upgraded for over a year, as buyer sentiment has been stagnant.

Business sentiment and housing construction also merited a small upward revision in the government report.

British insurance giant close to Abbey Life deal

Deutsche Bank’s UK lending unit, Abbey Life, have announced they are in discussions with leading life insurance firm Phoenix Group Holdings regarding a possible sale of their British operations, according to sources that prefer to remain un-named.

The sources claim the talks are in the closing stages and the purchase will cost Phoenix over a billion dollars, assuming both boards green-light the agreement.

Deutsche purchased Abbey Life a decade ago for well over the asking price and the current valuation for the business is roughly a billion pounds, said the sources in a magazine article for Reuters. The embedded value is close to double that if past figures are to be taken seriously.

“Phoenix could be bursting onto the closed life acquisition scene with this deal,” said Anthony Russell, Senior Vice President at Monex BMO Securities in a note to investors. “The insurance sector is watching this one closely and if it proceeds we could see much more action in the UK.”

According to people close to the deal, Deutsche shunned offers from Admin Re and Legal & General last year in preference to entering into talks with Phoenix in 2016.

Phoenix and Deutsche Bank have both declined to answer emails and phone calls regarding the matter.

Earlier in the year Abbey Life was rocked by a scandal involving the treatment of long-term clients which is thought to be heading for compensation settlements and possibly hefty fines for the company.

Big insurers have come under increasing pressure from shareholders to settle their legacy books as new regulations and ultra-low interest rates hurt profits. Many players in the sector have resorted to putting their books up on the market.

Britain’s vote to leave the E.U. started the ball rolling on interest rate cuts and managers of closed life insurers have been one of the hardest hit in the financial landscape, with much reduced income.

Phoenix made it clear in their own announcement that the company will continue to seek out future opportunities to “take strides in the UK life insurance sector.” Chief executive Clive Bannister said that the firm was “actively searching for new acquisitions to become more competitive in the market.”

In the summer,  Phoenix purchased French firm AXA's UK financial unit in a deal thought to be worth upwards of $500 million, encompassing all their pensions and investment business in Britain.

U.S. is land of opportunity for Canadian energy companies

Last year’s nosedive in the Canadian dollar made it very probable that American investors would pile funds north of the border in search of assets and acquisitions at low prices. But the actual activity seen, especially in the energy sector, is entirely opposite to what analysts forecast, as Canadian companies look to the U.S. for expansion.

Good examples would be pipeline heavyweights Enbridge and TransCanada who are happy to pay over 25 percent premiums compared to three years ago acquiring American firms with deals totalling nearly $60 billion just in the last six months.

Earlier in the year, Canadian power firms Emera and Fortis invested $20 billion purchasing utility companies to the south.

Anthony Russell, Senior Vice President at Monex BMO Securities says the reasons for the current trend are convoluted but a big factor may be the difficulties Canadian companies are having getting building done in their own territory.

“Over the last few years regulatory complications have made it harder for Canadian firms to get their building work cleared. Even though the loonie [Canadian dollar] is so low, they are still seeking expansion in the U.S. market, obviously it’s worth paying the premiums and bad exchange rate for.”

Meanwhile, in Canadian M&A’s, last week saw the biggest ever merger in the country’s energy sector when U.S. company Spectra Energy, a gas pipeline specialist, announced they were selling the company to Calgary –based energy delivery firm Enbridge for almost $40 billion.

Enbridge were attracted by Spectra’s oil units as well as their already impressive gas facilities, and the agreement will help diversify Enbridge’s portfolio. Many energy firms are looking to move more into the gas business as North America starts to take a step back from coal-fired electricity generation methods.

It’s a welcome move for Enbridge, who have had serious issues with their Northern Gateway project over the last few years as regulators have held up building work.

Canadian farming companies agree to form $40 billion titan

In a deal that is sure to come under the regulators microscope as detailed in a recent report by financial house Monex BMO Securities, two agricultural powerhouses Potash Corp of Saskatchewan and Calgary-based Agrium Inc. have agreed a potential tie-up that would create one of the biggest fertilizer and farming retailing entities in North America, worth around $40 billion.

A spokesman for Potash said in a statement that the combined firm would be one of the largest natural resource providers in the country and the biggest crop nutrient company on the globe. Potash is currently a world leader in the crop nutrient sector by capacity.

The two companies previously announced they had entered into discussions at the end of last month and the merger would be the latest in a line of tie-ups in the sector which include giants of the seed industry like Monsanto and Bayer, and Syngenta and ChemChina.

Even in the face of those massive mergers, the Potash - Agrium combination would create a conglomerate that will dominate the North American fertilizer landscape, controlling around 30 percent of all nitrogen and phosphate production on the continent.

The deal comes in the wake of a tough few years for the agricultural sector as prices plummeted in response to lowered demand and an inventory glut. Wheat and corn prices are at an 8-year low, causing farmers to think twice about boosting production and purchasing fertilizers and similar products.

Details of the deal are still hazy, however anonymous sources close to the discussions have said Agrium shareholders will receive 2.24 common shares for each of their own and Potash shareholders will get 0.4.

Shares for Potash were increased a small amount on Friday afternoon trading at $17.04. Agrium shares went untraded and stayed at $95.22. The split for the new company will be slightly in favour of Potash, whose shareholders will own 53 percent, with Agrium shareholders owning the remainder. The deal is expected to be finalized in the middle of next year.

On a proforma basis, the companies said the new entity would have had a net revenue of over $20 billion last year and they will expect yearly operating synergies of half a million dollars moving forward after the tie-up.

Agrium’s current CEO Chuck Magro will keep his position as the new company’s leader. Potash chief executive Jochen Tilk will be the chairman of the board.

Crude keeps rising amid tropical storm

After a storm threatened refining in the Gulf Coast region then moved on to the East Coast of the U.S. last week, crude prices jumped nearly 2 percent on Wednesday according to United States industry reports, which showed a significant drawdown in crude inventories.

The American Petroleum Institute said that inventories are down by over 12 million barrels in the past seven days following a levelling off in the market on Tuesday. That result was well short of expectations, with most specialists projecting an increase in stock by several thousand barrels.

There was a rise of 70 cents for benchmark Brent crude at $48.64 in afternoon trading. U.S. light crude made a move of 80 cents to $46.24 compared with a 68 cent rise in the morning session.

Due to the shale oil boom of the past two years, United States crude inventories have been at record highs. However, Hurricane Hermine severely hampered imports and led to a large chunk of lost crude output in the U.S.

Twelve percent of Gulf of Mexico production was halted until the storm passed, according to a government press release.

“We are still looking at a fairly bearish crude market,” says Anthony Russell, Senior Vice President at Monex BMO Securities. “The API report is a singular ray of hope on the downward trend so the large oil draw was fleeting.”

Crude prices were also given a lift by encouraging figures from one of the United States biggest trading partners, China, which upped their imports by 25% last month leaving them with their biggest stock of crude in decades. Much of the increase in orders is down to a rush by refiners to take advantage of low prices before import quotas terminate at the end of the year.

In an OPEC meeting which ended last Tuesday, Saudi Arabia agreed with some non-OPEC nations, notably Russia, to stabilize the crude market, leading to oil climbing to a weekly high. Those highs didn’t last, however, as many producer nations are still deliberating over whether to join the agreement. There will be an extension of the talks in an informal summit at the end of this month in Algeria.

Considering global markets are now fully supplied, most observers are predicting crude prices to drop before that meeting.

“We believe that crude has peaked now and the only way is down after this. All indicators show the price range limit has been reached,” Commerzbank crude analyst Carsten Fritsch said.

Indian software firm says US clients are keeping purse strings tight

The shares for one of India’s top software companies have plummeted almost 7 percent this month as they stated that some of their most important clients in the U.S. are keeping discretionary spending at an absolute minimum.

Tata Consultancy Services Ltd (TCS) hit a half year low as the company reported that according to their own data, as of the end of last month, spending from their top ten financial services clients in America has been “incredibly cautious” and in many cases they have been holding off on any new purchases.

A spokesman for the firm said late last night that the recent lack of orders has “significantly affected the company’s forward momentum.”

Anthony Russell, Senior Vice President at Monex BMO Securities, who are focused on the software market, commented, “The U.S. is an absolutely massive market for India’s software industry, a field that is worth around $200 billion annually. The next biggest territory for them is Europe, a very distant second. This is a setback for TCS but we are confident they can shake it off.”

TCS will take a severe hit not just from lower revenue but also the exchange rate fluctuations, which are not favouring the rupee at the moment.

Compared to the first quarter’s growth of 4 percent, TCS achieved only 1.5 percent revenue growth for the second quarter.

Some brokerage firms are slashing estimates for the Indian software giant by around 3 percent citing downward risks and other challenges.

Traders await Euro bank decision amid gains in stocks

European stocks were bumped a little higher as they followed in the footsteps of the Asian markets which were standing at 12 month peaks due to better-than-projected trade figures from China, the world’s second largest economy.

Many interested observers will now be looking keenly at any announcement by the European Central Bank (ECB) regarding forthcoming monetary stimulus, and Frankfurt are under moderate pressure to kick start a flagging European economy.

The Chinese trade figures, which featured their first annual gain in imports for two years, were a ray of hope in a fairly mixed bag of reports, and some analysts say there is a chance ECB President Mario Draghi will announce that the bank will continue their 90 billion euro per month asset purchasing scheme.

Most experts expect the central bank rates to stay as they are however, with 80 percent of a recent Reuter’s survey expecting no change.

The euro is already trading at a fortnightly high of $1.1278 as of Wednesday, and further easing by the ECB is unlikely to weaken the currency further. Should the central bank decide to change rates it would fuel rumors that further stimulus will be added.

“We are not really looking for the same tired strategy of expansion of the quantitative easing or rate cuts,” said Anthony Russell, Senior Vice President at Monex BMO Securities in an email to clients. “A weaker euro is only going to be achieved by coming up with something a bit more innovative. A new package completely.”

“The markets are already familiar with expansion of the current method, and we have learnt that it doesn’t work. We haven’t seen inflation hit target levels,” Russell added.

Traders preferring slightly riskier investments like emerging markets and stocks may be rubbing their hands together though. If the U.S. Federal Reserve decides to keep their rates unchanged due to the generally murky looking economic waters there could be interesting opportunities in those areas.

There has still not been any clear sign of how the Fed is going to proceed, but recent history has shown they are in favor of very small, incremental rate hikes. Investors are not expecting anything groundbreaking in the next announcement.

London’s FTSE 100 was slightly up in the early trading along with most other euro zone markets with banking stocks leading the gains, while Asia-Pacific shares climbed 0.2 percent, slightly lower than the Wednesday crest.

Reverse in fortunes as Toshiba Announces profits

Following a damaging accounting scandal that resulted in Toshiba Corp posting nearly $7 billion in losses last year, the company announced they expected to deliver a profit for 2016.

Similar to an estimate announcement earlier in the year, the Japanese multinational titan predicted approx. $800 million in operating profits for this financial year.

The scandal, which the company announced it was investigating last May, resulted in the immediate resignation of the CEO Hisao Tanaka and was called "the most damaging event for our brand in the company's 140-year history." Thousands of other employees lost their jobs and the company had to sell off large chunks of its business.

The multinational conglomerate, founded in 1938, is looking to streamline its operations and will focus more heavily on the nuclear and social sectors, and electronic chips.

David Knightley, Head of Institutional Equities, Trading and Research at Monex BMO Securities  commented on the move by the company in an email to clients. “The chip market fluctuates more than the average area and the nuclear sector is far from stable after what happened at Fukushima. We expect Toshiba will look to increase its capital base to offset these factors. Having said that, the company is now making money again and this is the most important sign for investors.”

The company has struggled to raise capital through the usual methods since September 2015 when it was placed on a Tokyo Stock Exchange watch list after questionable internal controls were cited.

Toshiba CFO Masayoshi Hirata said in a press statement, “Capital gains will come in time. We will wait patiently for more favourable conditions.”

Onlookers have commented that Toshiba will need to look for other ways to develop growth after it was forced to offload its medical equipment operations to Chinese appliance company Midea Group Ltd.

A severe downturn is also expected in Toshibas memory chip operations following declining global smartphone and tablet demand which could result in a drop from about 105 billion yen last year to around 20 billion this financial term.

Tokyo ease expectations, Brexit looms

Amid continued rumours the BOJ may inject a hefty stimulus boost soon, the Japanese currency dropped on Wednesday as investors sold it on the currency markets.

A prominent academic close to the Bank of Japan chief fuelled the rumours and said the stimulus could arrive as early as July.

Governor Kuroda himself said the bank would be swift to back up the negative rates they introduced in January, which had no major effect on the yen or financial reports, by taking further easing measures in an economy which “still has large downward risks.”

Last month the BOJ also threatened to inject stimulus but held off on the move resulting in a greenback rise of half a percent to 108.98 yen translating to an impressive recovery from its year and a half low of 105.59 yen at the start of May.

After several threats of government intervention to halt the trend by Finance Minister Aso, traders have responded by taking their positive bets off the yen.

Many financial specialists think Japan will be unlikely to take action until it hosts a G-7 summit at the end of May, regardless of the meteoric rise of their currency by more than 11 percent already this year.

Anthony Russell, Senior Vice President at MonexBMO Securities said “Tokyo is wary to intervene right now; it’s just testing the waters and waiting for some reaction from home and abroad. The government is still in a bit of a spot with the yen/greenback being stuck around a nervy range of about 104 to 109.”

Meanwhile, in Europe, all eyes will be on the Bank of England as it announces the results of its policy meeting on what has been dubbed “super Thursday”. Investors will be holding their breath for the quarterly inflation data when Governor Mark Carney holds a press meeting. It’s expected the report will be fairly soft considering the Brexit debate is still in the balance.

Latest polls indicate the vote on British membership in the E.U. could still go either way and the pound is currently looking defensive, down 0.3 percent at $1.4434 GBP not far from a fortnightly low.

The Norwegian economy has seemingly evened off as the nation’s currency gained a tiny amount after the central Bank rate decision this morning. It’s predicted by those in the know they will keep rates unchanged.

There is a 50% chance the Norges will bring on more rate cuts, which would see a drop for the crown.