Thursday, 10 September 2015

Top Tweets Today: 10/09/2015

China's devaluation of the Yuan created panic amongst the market resulting in a selloff of many emerging market currencies. It is my belief that these economies are particularly weak at present and will be a thorn in the side of global equities.

I think a fair assessment could start by looking at BRICS, an economic trade agreement put in place by the world's leading economies namely Brazil, Russia, India, China and South Africa. These countries have all been driven by China's hungry demand for resources as it gears itself up to ascent to the top of the world economic stage. However the reliance from not only the members of BRICS but the world over on China to feed demand has fallen flat on on its face as the "Sleeping Giant" battles to contain financial contagion plaguing its economy.


Earlier today we heard that S&P has downgraded Brazilian debt to junk status as their economy continued to shrink. Russia is reeling from sanctions imposed on it from the US and EU over its involvement in Crimea. South Africa has been left scattering around for solutions in the mining sector as relations between business and labour widen beyond reach. The only nation within the bloc that might be considered stable is India because there percentage of trade with China as of their entire trade is a lot less than the other members yet the growth they putting out is not sufficient to get things going again.

 
Today OPEC celebrated its 55th year after it was formed on this day in 1960. Looking back to think of the implications of the move that has drastically changed the way we innovate within the automotive industry in terms of powering our transportation forward which accounts for much of the consumption of oil.

Although OPEC holds a sizable stake in the global oil supply it does possess the clout needed to shift the price to and fro when it feels that its produce is being threatened by alternative products or suppliers. The recent price war between them and the US shale gas producers has sunk oil prices to their lowest levels since the Financial Crisis of 2008 is one of the few cases where they've been seen to flex their muscles.

So it's not surprising to see that the production of US crude oil dropping off significantly as lower levels are forcing producers to shut down wells to contain mass cash leakages off their balance sheet.
It might seem like OPEC is winning the battle to push out these alternate producers but they too have problems of their own as member nations economy are beginning to suffer too. Most members of OPEC rely heavily on oil revenue to draw foreign currency into their trade accounts to fund excess imports of goods they don't produce within their own countries.

 Some of the countries in distress are Venezuela and Nigeria who have both called on OPEC to bring forward the annual meeting due to take place in December this year.

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