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Market News

August 19, 2019

Virgin Atlantic eyeing Guyana market

GEORGETOWN – The Guyana government says the United Kingdom based Virgin Atlantic Airline is interested in servicing the route and could possibly do so by next year.

Public Infrastructure Minister David Patterson has confirmed that he has held talks with a senior official of the airline.

“They were on a Skype call to myself and the Minister of Finance, on them coming here . . . . This was the Director of the airline with oversight for routes. He was going into a meeting and he would like to know what is Guyana’s position, saying he would like to put Guyana on their route for 2020,” Patterson said.

United States-based carriers Jet Blue and United Airlines have also expressed an interest in the Guyana market even as American Airlines is set to expand its service to Guyana from December.

While Virgin Atlantic has scheduled flights to Barbados and other Caribbean destinations, Guyana is not served by a direct airline service from any European country.

However, officials here say with the country expected to begin commercial oil exploration next year, Guyana could become an interest for several international airlines.

Article Published August 17, 2019 on nationnews.com

Cuba Reaches Tourism Goal Despite US Boycott

HAVANA, Cuba, Aug 16 (ACN) Cuba reached the three million international visitors on August 15, sixth days later than in 2018, informed the Ministry of Tourism.

This result is achieved in spite of the campaigns organized and directed by the Government of the United States to prevent the flow of tourists to our country.

It also demonstrates the confidence and recognition achieved by Cuban tourism as a destination that offers safety and quality to its visitors.

Canada remains the main market for tourism to the Island, followed by European markets; Russia stands out as the one with the highest growth rate, with development perspectives for the coming seasons.

Once again Cuba is ratified as a great Caribbean destination for its nature, heritage, culture, safety and hospitality of its people, reads the message

Article Published August 16, 2019 on thestkittsnevisobserver.com

Leaked UK memos warn of food, drug shortages in Brexit chaos

LONDON, United Kingdom (AP) — Secret British government documents have warned of serious disruptions across the country in the event that the UK leaves the European Union without a trade deal on October 31, according to a report.

The Sunday Times newspaper published what it said was what the British government expects in the case of a sudden, "no-deal" Brexit. Among the most serious: "significant" disruptions to the supply of drugs and medicine, a decrease in the availability of fresh food and even potential fresh water shortages due to possible interruptions of imported water treatment chemicals.

Although the grim scenarios reportedly outlined in the government documents have long been floated by academics and economists, they've been repeatedly dismissed as scaremongering by Brexit proponents.

British Prime Minister Boris Johnson has said he is ready to leave the EU regardless of whether he is able to renegotiate the Brexit deal struck with Brussels by his predecessor, Theresa May.

His own officials, however, have warned that with a no-deal Brexit, the sharing of law enforcement data and the health of Britain's crucial financial services industry could be in jeopardy after October 31.

The documents published by the Times also quote officials as warning that up to 85 per cent of all trucks wouldn't be ready for French customs at the critical English Channel crossing that day, causing lines that could stretch out for days. Some 75 per cent of all drugs coming into Britain arrive via that crossing, the memos warned, "making them particularly vulnerable to severe delays."

The officials foresee "critical elements" of the food supply chain being affected that would "reduce availability and choice and increase the price, which will affect vulnerable groups."

Britain's Cabinet Office didn't return a message seeking comment on the documents, but Michael Gove, the British minister in charge of no-deal preparations, insisted that the files represented a "worst case scenario."

Very "significant steps have been taken in the last 3 weeks to accelerate Brexit planning," he said in a message posted to Twitter.

But the documents, which are titled "planning assumptions," mention a "base scenario," not a "worst case" one. The Times quoted an unnamed Cabinet Office source as saying the memos were simply realistic assessments of what was most likely to happen.

The opposition Labour Party, which is trying to delay Brexit and organise a government of national unity, held up the report as another sign that no-deal must be avoided.

"It seems to me is what we've seen is a hard-headed assessment of reality, that sets out in really stark terms what a calamitous outcome of no-deal Brexit would mean for the United Kingdom," lawmaker Nick Thomas-Symonds told Sky News television. "The government is reckless in the way it's been pushing forward with no-deal planning in this way."

Article Published August 18, 2019 on jamaicaobserver.com

The bond market smells recession as global stress rises

Compared to the free-swinging and sometimes emotional stock market, the bond market is supposed to be the sober and measured one.

It’s getting more alarmed.

Bonds sounded their loudest warning bell yet of recession on Wednesday, when the yield on the 10-year Treasury briefly fell below the two-year yield. Such a thing is rare: Investors usually demand more in interest for tying up their money in longer-term debt. When yields get ‘inverted’, market watchers say a recession may be a year or two away.

An inverted yield curve has historically been a reliable, though not perfect, predictor of recession. Each of the last five recessions was preceded by the two- and 10-year Treasury yields inverting, according to Raymond James, taking an average of about 22 months for recession to hit. The last inversion of this part of the yield curve began in December 2005, two years before the Great Recession tore through the global economy.

This latest inversion is the result of a steep slide in long-term yields as worries mount that President Donald Trump’s trade war may derail the economy. Discouraging economic data from Germany and China, two of the world’s largest economies, also unnerved investors on Wednesday.

The temporary flip in yields sent stocks sliding, and the S&P 500 was down as much as 2.7 per cent in the afternoon. The bond market has been much more pessimistic about the health of the economy in recent months than the stock market, which set a record high just last month.

If all the talk about yield curves sounds familiar, it should. Other parts of the curve have already inverted, beginning late last year. But each time, some market watchers cautioned not to make too much of it.

In December, for example, the yield on the five-year Treasury dropped below the two- and three-year Treasury yields. It wasn’t a big deal at the time because academics and economists pay much more attention to the relationship between three-month yields and 10-year yields.

When the three-month yield rose above the 10-year yield earlier this year, it drew more attention. But traders said the inversion would need to last a while to confirm the warning signal, and they pointed out that the widely followed gap between the two-year yield and the 10-year yield was still positive.

CONCERN ABOUT PULLBACK

Now, that tripwire has been crossed too, and the three-month Treasury yield remains above the 10-year yield.

One of the biggest concerns is that all the uncertainty around the United States-China trade war – where the world’s hopes of a resolution can rise and fall with a single tweet or statement – may cause businesses and shoppers to wait things out and rein in their spending. Such a pullback could hurt corporate profits and start a vicious cycle, where companies cut back on hiring, leading to further cutbacks in spending and more damage for the economy.

The concerns have sent the 30-year Treasury yield sinking, and it touched a record low on Wednesday. But it remains above shorter-term yields, which means not all of the yield curve is inverted and offers a bit of solace. The 30-year yield sat at 2.04 per cent Wednesday afternoon, above the 1.58 per cent 10-year yield and the 1.56 per cent two-year yield.

Some market watchers also say the yield curve may be less reliable an indicator this time because of technical factors that are distorting yields. Bonds in Europe and elsewhere have even lower yields than US bonds and are negative in many cases. That’s sending buyers from abroad into the US bond market, putting extra pressure downward on US yields.

The US Federal Reserve is also holding more than US$2 trillion in Treasury securities, which it amassed to pull the economy out of the 2008 financial crisis and keep longer-term interest rates low.

Broader measures of the US economy, meanwhile, are not pointing to an imminent downturn. The job market, consumer spending and consumer confidence all remain solid to strong.

“The only thing that’s flashing red or yellow right now is the yield curve,” said Jay Bryson, global economist at Wells Fargo.

Eric Winograd, senior economist at AllianceBernstein, said he expects growth to slow to an annual rate of about 1.5 per cent in the second half of this year, down from a 2.5 per cent pace in the first six months, but to avoid a recession.

Some investors believe an inverted yield curve is just a reflection of market worries that the economy is weakening and that the Federal Reserve needs to cut short-term interest rates. Others, though, say an inverted curve can help cause a recession itself by making lending less profitable for banks and cutting off growth opportunities for companies.

“For this reason, investors must not dismiss the current behavior in the fixed income market,” Natixis economist Joseph LaVorgna wrote in a research note.

Either way, some market watchers cautioned investors not to take the inversion as a panic signal and sell everything.

If someone’s first reaction to falling stock prices is to sell their stocks, they likely had too much of their portfolio in stocks to begin with. Drops like this are typical for stocks, and they’re the price investors have had to pay for better long-term returns than bonds historically.

“A lot of investors may look at this morning’s inversion and consider it an exit sign,” Mike Loewengart, vice-president of investment strategy at ETrade Financial.

“Regardless of where the yield curve and market may take us, it’s critical for investors to stay the course and focus on maintaining a diversified portfolio aligned to their long-term goals.”

Article Published August 16, 2019 on jamaica-gleaner.com