Econ_May_26

The Economist

May 26th 2018

The world this week

The American Congress

passed a bill that exempts

medium-sized

banks

from the

most stringent rules intro-

duced after the financial crisis.

Only those bankswith at least

$250bn in assetswill nowbe

subject to strict federal over-

sight, up from$50bn previous-

ly. It was themost substantial

change yet to themaze of rules

brought in under the Dodd-

Frankact, which smaller banks

have long bemoaned as being

too cumbersome.

Fifth Third Bancorp

, a

medium-sized bankbased in

Cincinnati, offered to buy

Financial

, a smaller lender in

Chicago, in a transaction that

they valued at $4.7bn. The deal

sparked speculation that there

aremore bankingmergers in

the pipeline. Net profits in

America’s banking industry

rose by a healthy 28% in the

first quarter comparedwith

the same threemonths last

year, to $56bn.

Acourt dismissed charges

against

Barclays

in relation to

a loan it obtained fromQatar’s

investment company during

the financial crisis in order to

avoid a government bail-out.

Britain’s Serious FraudOffice

may yet try to reinstate the

charges against the bank.

Blowing hot and cold

StevenMnuchin, America’s

treasury secretary, said that

plans to levy tariffs on Chinese

goods had been put on hold

amid progress in talks over

trade

. China promised to

import more fromAmerica,

but also defended its contro-

versial industrial policies.

Donald Trump initially hailed

the outcome, only to declare

himself dissatisfied after politi-

cal allies accused himof capit-

ulating to China. One sticking-

point remains the penalties

imposed on

ZTE

, a Chinese

maker of telecoms equipment.

As America and China bar-

gained, newfronts in the trade

conflict opened up. Japan,

Russia and Turkey notified the

World Trade Organisation that

theywould follow the lead

taken by the

and India in

applying tariffs on American

steel

and

aluminium

in retali-

ation for the duties America

recently imposed on such

imports, unless those duties

are reversed. Mr Trump, mean-

while, signalled a newbattle

with Europe and Japan by

ordering the Commerce

Department to lookat impos-

ing tariffs on

imports of cars

on the ground of national

security, the same argument

that lies behind the levies on

steel and aluminium.

Rusal

, Russia’s biggest pro-

ducer of aluminium, warned

that unless the sanctions that

America has imposed on it are

lifted, international banks will

probably stop doing business

with it, affecting its production

ofmetal. The company also

said that its chief executive and

seven directorswould resign

as part of its effort to seek relief

from the sanctions.

At an emergencymeeting,

Turkey’s central bank raised

one of its key interest rates

from13.5% to16.5% as it tried to

halt another run on the

Turkish lira

, which had

plunged by 5% against the

dollar in a day. Its other rates

stayed the same. The currency

rallied after themove, but only

briefly. Concerns remain about

the political pressure on the

bank to lower interest rates.

The first female president

StaceyCunninghamwas

appointed as the 67th presi-

dent of the

NewYorkStock

Exchange

, the first woman to

hold the role in its 226-year

history.

The rally continued in

oil

markets

. Brent crude traded at

around $80 a barrel, the high-

est level in four years and up

by almost 50% froma year ago.

The latest spur to price rises

stems from the assumption

that American sanctions on

Iranmay curtail oil exports

from that country.

Therewasmore pain on Brit-

ain’s high streets, as

Marks &

Spencer

, a staunchlymid-

market clothing and food

retailer, announcedmore store

closures. The costs from its

retrenchment programme

have hurt profits; annual pre-

tax income fell by 62% to £67m

($89m) for the year ending

March 31st. By contrast,

Ocado

an online retailer, saw its share

price soar after

Kroger

, one of

America’s supermarket giants,

increased its stake in the com-

pany and said it would use

Ocado’s technology to roll out

“seamless” shopping, as it

takes on Amazon in the battle

for online grocery sales.

General Electric

strucka deal

tomerge its transport business

with

Wabtec

, whichmakes

braking systems, locomotives

and other apparatus for the rail

industry. Valued at $11.1bn, it is

’s biggest disposal of assets

yet under John Flannery, who

tookover as chief executive in

August and is restructuring the

group around its three core

businesses of aviation, health

care and energy.

Gold digger

Sony

upped its stake in

EMI

Music Publishing

to 90%,

giving it a catalogue ofmore

than 2m songs, including hits

from the classicMotown label,

Queen and Carole King, as

well as fromDonald Trump’s

biggest fan, KanyeWest.

Business

Market cap

tal

sat

Source: Thomson Reuters

£bn

Jan Feb Mar Apr May

2018

Ocado

Marks & Spencer

For other economic data and

news see Indicators section