A Tough Week for Capital Markets

Last week was a tough week for Capital Markets. We saw a shift to safe heavens as investors reduced risk. The following are the main events which influenced equity markets last week:

Deutsche Bank

Shares in Deutsche Bank have fallen more than 50 per cent so far this year. Investors remain convinced the bank will need to raise new capital as the Department of Justice seeks a record $14bn to settle allegations of mis-selling mortgage securities.

The issuance of equity would dilute the shareholdings of existing investors. The problem is worsened because it is difficult to see what story Deutsche can sell to prospective investors. A report by German magazine Focus said Angela Merkel had ruled out state support ahead of 2017’s elections. The bank said on Monday a capital increase is “currently not on the agenda”

First US Presidential Debate

In the first of three debates that could shape the final six weeks of the race, the candidates sparred over topics from the economy and trade to race and national security. In a duel that

saw a disciplined Mrs Clinton confront an often rambling Mr Trump, one of her most effective blows was over his refusal to release his tax returns, which every presidential candidate has done since Richard Nixon.

Many analysts argued that Mrs Clinton had easily defeated her opponent by remaining controlled and demonstrating her knowledge without appearing too wonky. In one of her best-received lines, she said, “I think Donald just criticised me for preparing for this debate. And, yes, I did. And you know what else I prepared for? I prepared to be president. And I think that’s a good thing”.

Renzi sets December 4 for Pivotal Referendum

Matteo Renzi, Italy’s prime minister, has picked December 4 as the date for his high-stakes referendum on constitutional reform, giving himself and his centre-left Democratic party more than two months to seek support for the measures and secure his political future.

The constitutional reforms being sought by Mr Renzi are the most sweeping since the second world war, sharply diminishing the size and powers of the Senate in an attempt to streamline legislation in a country notorious for its institutional gridlock and succession of shortlived governments.

The reforms have been a cornerstone of Mr Renzi’s agenda since he took power in February 2014, on the grounds that only a shake-up of the Italian political system would allow for a true modernisation of the country.

Janet Yellen Says ‘No Fixed Timetable’ on U.S. Rate Increase

Federal Reserve Chairwoman Janet Yellen said there is “no fixed timetable” for raising U.S. interest rates as the economy continues its recovery.

Still, she made clear that rate increases are on the way, particularly since strong labor-market gains could push inflation above the central bank’s 2% target. “We expect to see solid job growth continue, but we do need, if things continue on their current course, to gradually remove the accommodation that is there.”

Bank of England’s Shafik Sees Further Easing Likely for UK

Bank of England Deputy Governor Minouche Shafik said more easing will probably be needed for the UK after the “sizable economic shock” of the Brexit vote.

After cutting their key interest rate for the first time in seven years in August, BOE policy makers led by Governor Mark Carney have said there’s a chance of another reduction as they assess the potential longer-term fallout from Britain’s decision to leave the European Union. While the BOE next meets to set policy on Nov. 3, the UK’s economic fortunes may also be determined by any fiscal stimulus announced by the government later that month.

Opec agrees on oil output cut at Algiers meeting

Some of the world’s biggest oil producers have agreed to cut production for the first time in eight years, sending crude prices higher by more than 6 per cent and sparking big gains for energy stocks.

After more than four hours of talks in Algeria on Wednesday Opec committed itself to reducing output to between 32.5m barrels a day and 33m b/d, according to ministers.