“The Situation in Venezuela…..”

The Situation in Venezuela

Venezuela which is an oil rich country is going through a crisis. On Sunday Nicolas Maduro has cast his ballot to elect a new, all-powerful “Constituent Assembly” and promises to end his country’s crisis by rewriting the constitution. The vote had been fiercely opposed by months of deadly street protests and has also been criticized internationally.   Venezuelans are also suffering food shortages and street violence has been escalating.  According to Venezuela’s opposition Maduro is trying to cling to power by getting around the parliament controlled by its lawmakers.   Maduro has led Venezuela since the death of Hugo Chavez in 2013. The Venezuelan leader has blamed the mounting unrest against him and his policies on the United States and the Venezuelan opposition.  The crisis has brought soldiers in the streets and forced Venezuelans to stockpile food and water.  The political situation in Venezuela seems too much for investors.  The government’s $3 billion of bonds due in 2022 fell to a 15 month low on Tuesday pushing the yield up to 39 percent.

EU

The growth in consumer prices have remained at 1.3 percent which is still below the central bank’s goal of 2 percent. While this confirms the prediction by Mario Draghi that inflation will remain near the June levels in the coming months it reinforces his assessment that despite better economic growth there is not as yet a self-sustained upward trend.  So far the Governing Council of the ECB and Mario Draghi did not engage in any formal discussion about what will happen to quantitative-easing program after end of December.  The next meeting is scheduled for the 7 September.  Business and consumer confidence in the region unexpectedly improved this month and core inflation accelerated to 1.2 percent.  Unemployment fell to 9.1 percent in June which is the lowest since early 2009. The IHS Markit final composite Purchasing Manager’s Index for the euro zone was 55.7 in July while in June it was 56.3.  It has stayed above the 50 mark that divides growth from contraction since mid-2013.  Activity in Germany’s services sector slowed to a 10-month low, while France’s private sector grew more slowly in July than in the previous month.  Germany’s economy lags other European Area Peers. The bloc’s economy expanded 0.6 percent in the second quarter, while that of Spain and France 0.9 percent and 0.5 percent respectively.  Germany and Italy will publish figures on 15 August and 16 August respectively.

United Kingdom

According to IHS Markit Britain’s economy has moved into a phase of “steady but sluggish” growth and is at risk of a further slowdown. Markit has published its Purchasing Manager Index and said that the UK is on a track for 0.3 percent expansion this quarter, matching the previous three quarters.  According to the PMI, services grew slightly to 53.8 from a four-month low of 53.4 in June.  This is higher than the 50 mark dividing expansion from contraction.  Furthermore according to Markit, input costs remained strong in July due to higher food prices, energy bills and salaries.  Although UK consumer-price inflation cooled in June it remains at 2.6 percent above the Bank of England’s 2 percent target. On Thursday the Bank of England kept interest rates at a record low at 0.25 percent and in view that Brexit is weighing on the economy, it has cut its forecasts for growth and wages.  According to Governor Mark Carney, due to the uncertainty about Brexit in particular lower investment by companies, meant that the economy could not grow as fast as before without pushing up inflation.  In this regard, a small improvement in growth could bring forward a rate hike.  The bank expects the economy to grow by 1.7 percent this year, lowering it from May’s forecast of 1.9 percent.

The Latest White House Shake up

John Kelly joined President Donald Trump as chief of staff and was sworn in on Monday morning. Meanwhile Anthony Scaramucci was removed from his new job as White House communications director.  The timing of his removal whether at the hand of Trump or at the insistence of Kelly, is a strong signal to the rest of the administration that the president’s new chief of staff has broad authority to impose discipline.

Oil

Libya shipped about 865,000 barrels a day of crude in July according to data compiled by Bloomberg which is an increase of 11 percent from June. Libya together with Nigeria was not bound by the OPEC restrictions that helped to limit the supply.  In this regard, the pace of Libya’s sales is critical for the oil market. Data from Bloomberg shows that total output from OPEC countries in July rose 210,000 barrels a day from June to reach 32.87 million barrels a day with Libya leading the gains.  A recovery in the price of oil has failed to materialize since January when the OPEC countries and other allies such as Russia agreed to restrict output by about 1.8 million barrels a day.

The Impact of Apple on the Dow Jones

The Dow Jones Industrial Average reached the 22,000 mark for the first time as the price of Apple surged after its quarterly Iphone sales. The company sold just more than 41 million iPhones in the quarter which is a 1.6 percent increase from a year earlier.  Shares this year have climbed about 30 percent.

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