Good morning! Here’s what you need to know in markets on Tuesday.
Negative interest rates are a “seeping poison” for the business models of many of the world’s most important financial institutions. In a new note from Citi Research, analysts Willem Buiter and Ebrahim Rahbari argue that institutions across the insurance, pensions, and banking sector are being threatened by the persistently low and negative rates.
China’s 7-year debt boom is one of the biggest and fastest in history. The Chinese debt boom since 2008 “ranks in the 98th percentile of debt buildups in modern history,” according to a note from Andrew Tilton and Jonathan Sequiera at Goldman Sachs, published on Monday.
The pound’s fall if Britain votes to leave the EU will be catastrophic, according to George Soros. Soros, the billionaire who earned fame by betting against the pound in 1992, said that a British vote on Thursday to leave the European Union would trigger a bigger and more disruptive sterling devaluation than the fall on Black Wednesday.
People are starting to lose faith in the Fed’s confidence. The U.S. Federal Reserve’s dwindling confidence in its own outlook and resulting confusion among investors are creating a policy problem that may require chief Janet Yellen to lay out her own views more forcefully.
Brexit is a distraction from the ‘main event’. In a note to clients Monday, Societe Generale’s head of quantitative strategy Andrew Lapthorne said there were much worse issues in the economy than Thursday’s Brexit vote and other political events.
Oil is slipping. Oil prices in early Asian trade after a strong two-day rally that was fed by easing concerns Britain would leave the European Union after a referendum this week, allowing market participants to focus on supply issues. At around 6:50 a.m. BST (1:50 a.m. ET) WTI crude is 0.6% lower to $49.66, while Brent crude is 0.69% off to $50.30.
Prosecutors are investigating the former CEO of Volkswagen. The prosecutor’s office near VW’s Wolfsburg headquarters said on Monday that the probe centered on “sufficient real signs” that VW could have had a reason to disclose the financial consequences of its emissions scandal.
Europe’s policy towards Russia is starting to crack. Officials in Germany have begun to express concern that ties with Russia could suffer irreparable damage.
British retailer Sports Direct and US-based Modell’s are in talks to buy as many as 200 stores of bankrupt retailer Sports Authority, according to the Wall Street Journal.
An armed man opened fire inside Venezuela’s central bank, wounding two people before he was shot dead.