World Markets Live - September 8
We’ll be updating you throughout the day with essential breaking news, data alerts, earnings reports and all the major market movements.
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Is South Korea's economy heading downhill? Fathom Consulting's Laura Eaton says the country was identified as a star performer four decades ago.Its stellar performance was a consequence of the Korean government's drive to promote export-led growth. It escaped the 'middle-income trap', which has ensnared so many, close to a decade ago. It provided perhaps the most successful model of all time for emerging markets to follow.But, now the process of rapid industrialisation has run its course, the economy has begun to slow. And the current response of ultra-loose monetary policy is doing more harm than good in South Korea, as across the developed world.Eaton says productivity growth has stagnated and real wage growth is negative.Ultimately, for its economy to return to a higher trend rate of growth, South Korea will need to shift to a new growth model, a feat that has eluded Japan these 25 years. It would mean focusing on promoting 'fair competition', stepping up existing corporate restructuring plans, and moving away from ultra-low interest rates, in order to tackle weak productivity. -
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Equifax revealed it has suffered a massive data breach affecting over 140 million customer records. The scale of this breach, equivalent to at least one member of every family in the U.S., is what makes this release notable, according to Carl Leonard, principal security analyst at Forcepoint.Consumer trust in organisations is eroded by data breaches of this magnitude. People should also keep a close eye on activity on bank accounts and credit cards, and consider identity theft management services.This is an important lesson for credit reporting agencies and data aggregators. The depth and personal nature of the data obtained and stored by such organisations can be incredibly powerful in the wrong hands – the hands of cybercriminals and those with ill intent.Once GDPR legislation comes into force in May 2018, any breach impacting any European resident’s PII (as this breach does) will need to be reported within 72 hours, or companies can face fines of up to 10 million Euros or two per cent of global turnover, whichever is higher. These potential financial impacts will certainly drive international businesses to examine their security incident response and reporting processes very closely, as a breach such as Equifax which was announced six weeks after discovery would have a different outcome in a years’ time.Shares in the company have fallen sharply as a result of the data breach.
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The ECB caused big movements in markets this week, will the Swiss National bank set off any fireworks next week?It's not likely, according to Jordan Rochester, FX specialist at Nomura.It is still far too early to expect a change in SNB policy stance in our view. Even a change of tone would be a surprise as the outlook would change significantly if that SNB move led to renewed Swiss franc strength. The message ringing loud and clear in recent SNB policymaker remarks and shown clearly in the data is that the outlook relies on a much weaker CHF for inflation to return to healthier levels. It’s not just inflation that is a concern, growth has recently disappointed versus what surveys would have implied giving the SNB yet another reason not to signal any hawkish policy shift. We remain long EUR/CHF and expect to see 1.20 over the next year.
The market reaction to the SNB meeting in June was muted and we expect the same again next week. The move higher in EUR/CHF since the SNB meeting has mostly come from external factors such as market speculation about tapering from the ECB. But other factors such as geopolitical concerns on the Korean peninsula have offset CHF’s depreciation of late. If and when these concerns abate the Swiss franc should continue to underperform as it remains largely overvalued on several metrics (Figures 1 and 2). If geopolitical concerns abate, we would expect global risk appetite and rates to head higher and lift EUR/CHF with them.The dollar is down more than 1 percent against the Swiss franc over the past seven days.
The euro has also fallen against the Swiss currency, but to a smaller degree.
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