Donald Trump took aim at the Dodd-Frank reforms of financial services, which were drawn up in response to the 2008 crisis. He told the Treasury to review the extent to which financial regulations contradict the “core principles” of the new administration, a broad edict that will revisit a host of measures disliked by the banking industry. He also ordered a review of the “fiduciary rule”, which is due to come into effect this spring and requires anyone giving investment advice to act in the “best interest” of their client.
The blame game
America’s trade deficit, another of Mr Trump’s bugbears, rose to $502bn last year, the highest since 2012. A strong dollar hampered American exports. Mr Trump has blamed the deficit on currency manipulation by other countries, although the shortfall from trading goods with China and Germany fell to $347bn and $65bn respectively, and stayed steady with Japan at $69bn. The trade deficit with Mexico was slightly higher at $63bn.
China’s reserves of foreign exchange dropped to under $3trn in January, the lowest level in nearly six years. The People’s Bank of China has been selling dollars to prop up a weakening yuan, which fell by 6.6% against the greenback last year, the most in decades. See article.
Market jitters about the future of the euro zone helped push the spread on yields of French, Greek and Italian bonds over that of German bunds to recent highs. The politics of the currency bloc have started to preoccupy investors again, given concerns about the ability of Greece to pay its debt and the possibility of snap elections in Italy. In France the rise of Marine Le Pen, a right-winger who has threatened to pull the country out of the euro if she wins the presidential election, has coincided with the implosion of the centre-right’s campaign.
Meanwhile, Mario Draghi said now was not the time to start tapering the European Central Bank’s stimulus programme. The ECB’s president was responding to criticism about the policy in Germany, where his critics link a recent rise in inflation to the bank’s ultra-low interest rates.
The Turkish lira had another wobbly week, falling by 1.6% against the dollar in a day, after the Turkish president criticised the central bank for not lowering interest rates, which he described as a “means of exploitation”. The feud between Recep Tayyip Erdogan and the central bank has knocked confidence in the bank’s independence, though the president had seemed to be warming to the idea of raising rates to help the struggling lira.
Having embarked on a round of new investments to augment its assets, BP said it needed the price of a barrel of oil to rise to $60 by the end of the year in order for it to break even (Brent crude has not traded at $60 since mid-2015). The oil company reported a headline loss of almost $1bn for last year. It booked a further $7.1bn in charges related to the Deepwater Horizon disaster, which happened in 2010, bringing its total pre-tax bill for the catastrophe to $62.6bn.
Rio Tinto’s underlying profit rose by 12% to $5.1bn last year. The mining group was boosted by a rebound in commodity prices: the price of iron ore, its biggest business, rallied by 80% in 2016. Recovering some of its previous swank after years of cost-cutting, Rio increased the size of its dividend and announced a $500m share buy-back.
A federal court blocked the $48bn merger of Anthem and Cigna, two giant health insurers, on antitrust grounds. It is the second big merger in the industry to fall foul of the courts recently (Aetna’s acquisition of Humana has also been rejected), rolling back the wave of consolidation prompted by Obamacare.
General Motors reported solid earnings for 2016. The world’s third-largest carmaker profited from surging revenue in its North American market, boosted by cheaper petrol prices that made pickup trucks and SUVs more economical for consumers. But it recorded another loss in Europe, which it blamed on Brexit. GM said the referendum in Britain to leave the EU had cost it $300m, mostly because of the currency turmoil that followed the vote; without Brexit it would have broken even in Europe.
Uber hired a former engineer at NASA, Mark Moore, to help develop its flying-taxi division, aptly named Elevate. Mr Moore had previously spent 30 years at the space agency working on advanced aircraft design. His decision to fly the NASA nest is not that surprising given that he contributed to Uber’s policy paper on automated flying vehicles, published last October. It won’t be easy for the ride-hailing firm to put taxis in the sky. The biggest current challenge is sufficient battery power before it can really take off.