After an about-face that included accepting nearly all of the demands by creditors rejected by voters in Greece’s July 5 referendum, Greek Prime Minister Alexis Tsipras now faces an uphill battle securing parliamentary approval. Today legislation was submitted that includes tax increases and cuts to pension entitlements, in accordance with the deal reached in Brussels on early Monday. If the bill fails to pass tomorrow, the nation will be thrown further into chaos, though early indications show opposition support that should secure the vote for Tsipras, despite defections from within his own Syriza coalition.
Iran reaches a nuclear deal. Tehran and Washington have reached a tentative agreement in Vienna that will provide United Nations inspectors with access to nuclear facilities, with some restrictions. Under the terms negotiated between Iran and six world powers, the Mid-East nation’s nuclear program will be channeled into nonmilitary sectors in exchange for a removal of economic sanctions. Leaders in Israel have indicated that they will lobby U.S. lawmakers to reject the proposal. Oil markets sold off overnight in anticipation of Iranian capacity possibly coming online.
U.K. consumer inflation flat. June headline consumer inflation for the U.K. registered at 0 percent according to new data released today by the Office for National Statistics, and producer prices contracted for the month on an annualized basis. Last week Bank of England governor Mark Carney voted to keep benchmark rates at historic lows, as inflationary concerns remain distant and growth comes under threat from external macro factors.
China’s Tsinghua Unigroup bids for Micron. Reports emerged today that Chinese state-controlled Tsinghua Unigroup is in discussions to attempt to acquire Boise, Idaho–based chipmaker Micron Technology in a deal that would be valued at roughly $23 billion, a nearly 20 percent premium to Micron’s closing share price on Monday. Chinese officials have already blessed the proposed merger but it will still face U.S. regulatory scrutiny.
Mobius to pull back from managing fund. Steadfast emerging-markets investor Mark Mobius is stepping down from the helm of his flagship fund, the £1.9 billion ($2.9 billion) Templeton Emerging-Markets Investment Trust. Carlos Hardenberg, senior vice president and managing director of Templeton Emerging Markets Group, will take over the fund, the largest global emerging-markets investment trust in the U.K., in October with Mobius, 78, playing a supporting role.
Puerto Rico holds debt summit with investors. In a meeting of creditors arranged by Citigroup on Monday, Melba Acosta, president of the Government Development Bank for Puerto Rico, asked for investors’ patience as that territory prepares and implements a plan for restructuring its $72 billion in outstanding debts. Other speakers included Anne Krueger, a former first deputy managing director of the International Monetary Fund.
Portfolio Perspective: Financial Asset Inflation Set to Spread to Real-World Prices — Kevin Doran, Brown Shipley
While today’s U.K. inflation numbers point towards a continued low inflationary environment, these figures must not be taken at face value. You don’t have to look very far to find evidence that contradicts today’s figures and to illustrate that there is an abundance of inflation. The primary example of this are asset prices, with frothy property and equity markets showing little sign of abating.
Looking forward, we must expect that asset-price inflation is likely to filter across to real-world inflation in the medium term. Nonetheless, markets are failing to price a continued rise and the associated risks appropriately, which is a mistake as I see inflation as the dog that hasn’t barked, yet. And when the bark comes, those in fixed income are likely to be particularly hard-hit.
Until the model used to compile our inflation figures capture real-world and asset-price inflation, the data will continue to paint an inaccurate picture. Taking investment decisions based upon our monthly figures as they are is like using a Bloomberg terminal with only half a screen.
Kevin Doran is the CIO at Brown Shipley in Manchester.
