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The News that Shaped the Month #4

News Recap: Economics – by Daniel Koudijs Uncertainty is the key word of 2016’s rocky start. This month, market volatility reached heights as oil prices reached record lows. Some of the biggest January losses in decades were reported on stock markets all around the world. Especially China suffered. The Chinese government had intended to limit volatility by implementing “circuit breakers”: the forced suspension of trading once losses reach a threshold (a 15 minute pause at -5%, full closure at -7%). The effects were the opposite: volatility spiked and on the 7th it took all but 14 minutes before circuit breakers shut down the entire market. They were implemented on the 4th and suspended only 4 days later. The broader implication of the failed experiment is again more questioning of the ability of the Communist Party to control the economy. In turn, revised growth numbers for America showed no improvement, placing question marks on the FED’s ability to control their own economy. For some, all this uncertainty has become too much. Martin Taylor, a well-known and very well performing hedge fund manager decided to shut down his fund after 15 years. The reason why: growing dependence on China and India, combined with the obscurity of their data has made forecasting harder than ever. Welcome to the new year. China Economic Growth Rate Slows to 25-Year Low – by Antoine Steen A 6.9% economic growth rate may sound high, but it is China’s slowest growth rate in a quarter of a century. It presents a small but significant fall from last year’s figure of 7.3%. As one of the drivers of the global economy, China’s growth is a major concern for investors across the world. The IMF has said that it expects China’s growth rate to fall to 6.3% this year and 6% next year – short of Beijing’s official growth target of “about 7%”. That China’s growth rate should slow at some point is to be expected – exponential growth cannot last forever. But the central government has found managing this transition challenging. It says that it is seeking to move towards an economy led by consumption and services, rather than one driven by exports and investment. And there are encouraging signs official efforts to nurture a consumer economy are working – in 2014, spending on online commerce grew by 33.3%. ECB – by Yoeri Min The European Central Bank (ECB) is maintaining the key interest rates in the euro zone on the – as expected – current levels. Still, the ECB speculates on additional measures in March. The decision was made on Thursday 21st of January, after a policy meeting of the ECB. The refinancing interest rate, the most important rate, remains at 0,05 percent. This is the rate at which banks can borrow money. The rate was last reduced in September 2014. The deposit interest rate, the rate at which banks are allowed to store money at the ECB, remains at -0,3 percent. Consequently, banks pay for storing their capital at the ECB. By doing so, the ECB encourages banks to lend money to companies and individuals instead of storing it at the ECB. However, inflation could increase in the long term. News Recap: Politics – by Vlad Cristian Marin

Last month has seen the world trembling under the pressure of a dozen political events. To start with, Taiwan’s latest elections have resulted in an outright win of the pro-independence party DPP (Democratic Progressive Party) both for the presidency and for a majority in the parliament. Perhaps one of the most tolerant and progressive countries in Asia, Taiwan has elected its first female president, in an exercise of democracy, strongly supported by the people’s will. Also, the aboriginal community, which accounts for 2% of the total population, has won 7 seats in the legislative body, a minority of its kind being over-represented for the first time in history. Following the 14 July 2015 accord between several world powers and Iran, the Persian Gulf country has finally committed to abolishing its nuclear program and sanctions have been lifted. Thus, its access to international markets has been re enabled and trade has been immediately resumed. The Gulf country’s status change comes at a sensitive time in the region, since its tense relations with Saudi Arabia have recently escalated to a new high.

The 46th World Economic Forum, held between January 20 – 23 in Davos, Switzerland, has brought together world’s most influential business, political and cultural leaders. From prime ministers and presidents to world-class entrepreneurs and actors, they all have a common goal: plotting a better world through shaping global, regional and industry agendas. Among hundreds of talks, this year’s topics include: China, the migration crisis, oil prices, renewable energy, a Cyprus peace deal, Latin American economies, Brexit or gender equality. El Chapo Arrested: A Story Better Than an Action Movie – by Olga Kowalska The biggest drug lord and the head of the world’s most powerful drug-trafficking organization Sinaloa cartel, Joaquin Guzman Loera (known as El Chapo), was caught on 8th January 2016, half a year after his escape from a maximum-security prison. The escape in July 2015 was already his second one and it meant a huge embarrassment for the Mexican government. It is said that El Chapo’s own vanity contributed to finding and arresting him. Messages exchanged between Mexican actress Kate del Castillo and American actor Sean Penn, who interviewed El Chapo for an article published by Rolling Stones, helped the security forces track him down. Mexican President Enrique Peña Nieto claimed that the country speeds up its efforts to extradite the drug boss to U.S. If you thought that such stories happen only in the movies, here is a sad proof they don’t. Better Living Through Diplomacy? – by Artur Rymer On the 16th of January 2016, Yukiya Amano, Director General of International Atomic Energy Agency (IAEA), has announced that Iran has met the primary requirements of Joint Comprehensive Plan of Action (JCPOA), a deal brokered between the country and 5 + 1 group (China, France, Russia, UK, USA + Germany) in summer 2015. The Iran nuclear crisis has started in 2002, when information came to light that the country has facilities able to produce enriched uranium, necessary for production of nuclear weapons. Since then, UN and major global powers, worried of a possibility of a nuclear power in unstable Middle East, have consistently demanded that Iran reduces its nuclear programme and imposed strict sanctions, including an embargo on the country’s rich oil industry. According to JCPOA, Iran has to reduce its facilities so that they can enrich uranium to a level sufficient only for production of nuclear energy and not nuclear weapons as well as admit IAEA’s surveillors. The country’s compliance with the deal has resulted in lifting some of the strictest sanctions, allowing for resumed oil exports and access to the world’s financial markets and $100 billion worth of assets. The deal has been called a huge diplomatic success, however, some countries (e.g. Israel) point out that Iran can try to expand its nuclear programme in secret. Only the time will tell whether the deal is a proof that diplomacy is the key to solving international crises or if the world should take much a stricter stance on those who breach international law. Business Recap: Dancing on Ice? – Ioana Nicolau Economic turbulence seems to be spread out across the sky of many industries. However, Goldman Sachs, the M&A champion, constantly seems to overlook possible market crush. While oil prices are decreasing and China’s economy is losing speed, Goldman Sachs is taking another positive stance upon business deal-making over the next period. Contrary to this bright outlook, Unilever encountered lower pre-tax profit, despite its 4.1% sales growth in the last period of their previous fiscal year. The disappointing loss amounts for €7.2bn, representing a 6% year-on-year decline.   Problems arise not only due to market volatility, but also due to business ethics. This is the case of French car maker, Renault, which is expected to recall for inspection more than 15,000 vehicles with defects in the emissions-control system. However, better late than never was not the case for Volkswagen, which has been recently sued by the general attorney of New Mexico for the emissions fraud. Going further with regards to Business ethics, tech companies are the ones which seem to be having a really hard time. Giants such as Apple, Samsung and Sony are facing serious accusations of child labour. It is being speculated that minerals used in these firms’ productions have been mined by children. The companies were caught on the wrong foot for having ignored the need for basic checks on this issue. V&D bankruptcy – by Michael van Rhee

This month saw the bankruptcy of Dutch department store Vroom & Dreesmann, better known as V&D. Originally from 1887, this chain has been part of the Dutch streetscape for well over a century. Did it come as a surprise? Not really, because V&D had been struggling for a much longer period of time already, starting well before 2015. Why? There are multiple reasons, but arguably the most important one is that V&D hasn’t done enough to continue to appeal to its potential customers. As a kind of ‘middle of the road’ department store, it excels at neither one thing or the other, and it has been surpassed by most other stores in just about everything they sell. Their main offering is still clothing, but nothing in their collection really stands out, giving you little reason to pay the place a visit for that alone. Then they sell cosmetics, for which you can go to a dozen of other stores already, and the same holds true for their books, CD’s, DVD’s… In fact, the only thing that was still profitable about V&D was its integrated restaurant chain, La Place, and even that’s mediocre at best. Should we feel sorry for V&D? Maybe for its employees, but certainly not for its policymakers. Seriously, give those guys a marketing textbook!

The Jigsaw of Matter – by Raffaele Di Carlo 2016 is apparently also going to be the year of scientific breakthroughs, as four new chemical elements have finally filled the seventh row of Mendeleev’s periodic table. Discovered by an international team of US, Japanese and Russian scientists, these new superheavy elements are quite different from the elements we are familiar with: absent in nature, they are artificially synthesized by slamming lighter nuclei together and following their radioactive decay; the half-life of these elements only lasts fractions of a second – before they break back into lighter elements – but the reaction that allows their creation may be of paramount importance for nuclear physicists in their study of the structural stability of the nucleum. The International Union of Pure and Applied Chemistry (IUPAC) is still divided on the matter of how to name the elements, which are currently designated by the functional names of 113, 115, 117 and 118, which are their atomic numbers and places on the table. Regardless of the name, the new discovery is certainly going to significantly boost the efforts on developing even further elements, which might – scientists argue – be more stable from 120 onwards. Whether these elements, once they acquire a tangible form, might be a base for new, impressive technologies, only time can tell. Month of Movie Awards – Magdalena Wiśniewska On the 10th of January the Golden Globes Awards were granted. There were two main interest points for online public. First of them was an extravagant speech of Ricky Gervais, which resembled more of a roast of Hollywood. Second was Tarantino’s unexpected blunder about his film’s composer’s, Ennio Morricone’s, awards’ history. The director, who is well known for being a walking encyclopedia of cinema, happened to forget that Morricone already obtained an Oscar, three Golden Globes and two Grammys and stated that it was his first serious individual award. Moreover, Leonardo DiCaprio has obtained the award for best performance by an actor in motion picture drama for the role of Hugh Glass in The Revenant. One month from now Oscars will follow. As the Globes are usually their good prediction, the whole internet is holding its breath if DiCaprio will finally, after five nominations, win an Oscar. Match-Fixing in Tennis – by Michel Mijlof Normally, if you hear ‘match-fixing’, you are thinking of football. But this time, it is not football but tennis. According to leaked documents of the ATP (Association of Tennis Professionals), which are in hands of the BBC, there is a huge chance that match-fixing took place in the most important tennis competitions in the last ten years. 50 of top players are suspected of losing games on purpose, among them Grand-Slam winners. Fraud might have taken place even at the Wimbledon tournament. The Tennis Integrity Unit (TIU) did some research about match-fixing in the past couple of years. They provided some results but they did nothing further with it, which, of course, is quite strange. It is understood that hundreds of thousands of pounds were gambled in suspicious games and a lot of these gambles were done in Russia, North Italy and Sicily. The BBC did not announce which players exactly are involved in these match-fixing scandals but they said that at least eight of them are participating in this year’s Australian Open tournament. These players are involved in games that were ‘fixed’ in 2003. The ATP is investigating this problem further and we will probably hear more about it soon!


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