Japan's arrows - Recovery quivering
The world's third-largest economy just cannot get a break at the moment. Its GDP contracted by 0.4 per cent in the three months to 30 June, down from a revised 1.1 per cent expansion in the first quarter. The country had bounced back from a contraction in Q3 last year but weakened private consumption (down 0.8 per cent) and business spending (down 0.1 per cent) pushed the economy back into negative territory. This makes the next quarter incredibly important as two consecutive contractions are deemed a technical recession. Markets, however, rose slightly on the data, perhapson the view that prime minister Shinzo Abe will keep firing his reform arrows.
Oil slick
Traders bearish
Consumers of oil might be enjoying the commodity's low price at the moment but the fact West Texas Intermediate hit a six-year low of $42 (£27) is not yet enticing investors. Data from the Commodities and Futures Trading Commission, compiled by Bloomberg, showed institutional investors' net long positions slipped to 99,748 futures and options contracts. This is down from the 200,000 level which has held during much of this year. Fears about Chinese growth, strong US shale production and continued high levels of oil output are weighing on the price and it seems more and more investors believe this will continue.
M&A A-OK
Deals strong
The growth of businesses through deals is in rude health. Data from Dealogic shows the $3trn mark has now been passed for 2015 - the quickest the milestone has been reached since 2007. It was the Carlyle Group and GIC’s $8bn bid for Symantec Corp's Veritas data storage business announced on 11 August that helped it over the hurdle. And just as the numbers were released, there was another major deal in the US with Liberty Interactive, the owner of the QVC shopping channel, snapping up Zulily, the US online apparel retailer, for a cool $2.4bn. Healthcare leads the way with its $482.3bn so far this year, already ahead of its $430bn full year record set in 2014.
Markets shaken
Emerging hazard
Outflows from emerging markets hit $1trn in just the past 13 months, the Financial Times reported this week, marking another staging post in a volatile past few months. Fears about rate rises in the US and the strength of the dollar have been acting as headwinds for developing economies but recent weakness in the renminbi orchestrated earlier this month by the People's Bank of China has rattled investors further. Some market-watchers expect further falls in markets in spite of the fact capital outflows are nearly double that seen during the financial crisis. Read our story on page 9 for more on what fund managers are doing with their emerging markets exposure.
Shale support
Government backing
The prospects for the UK shale gas industry took a major step forward this week as its regulator, the Oil & Gas Authority, offered exploration licenses for 27 'blocks' covering some 2,700 square metres of land. More could be up for grabs. Exploration for the gas involves a process known as fracking, whereby water, sand and chemicals are pumped into shale rock, which opponents claim can contain water supplies. The industry rebuts this. The rub is that planning applications are dealt with by local councils. Whitehall has obviously taken this into account, with rules allowing it to step in if a local authority does not hear an application in 16 weeks.
Acropolis now
German backing
'Finally', we hear you say. Yes, the German parliament has backed the €86bn (£61bn) rescue of the Greek economy. The saga has been forefront of mind in markets of late, the drama heightened by the Mediterranean country's prime minister Alexis Tsipras holding a referendum on the proposals. Germany's chancellor Angela Merkel appeared to have faced some rebellion from her own party but the 454 votes in favour of the deal was a comfortable victory over the 113 against. There were, however, 18 abstentions and 46 members did not attend the vote. The bailout is a three-year programme so time will tell if the crisis has really been put to bed.
Giant trips
Oil fund hit
Norway's $870bn sovereign wealth fund suffered its first negative returns in three years after stocks and bonds dragged numbers down. The second quarter numbers turned red thanks to a loss of 2.2 per cent on bonds and 0.2 per cent on equities. The fund, which owns 1 per cent of all global shares, has been hit by market falls in China, which accounts for 3.2 per cent of the fund's equity investments. Trond Grande, deputy head of the fund, told the Financial Times the volatility in China was "something you will have to expect in the short term". He added the fund would take a long term perspective as volatility was "perhaps to be expected" when a market opened up to foreign investors.
