England might not have made it to the final, which saw France and Croatia square up and France victorious, but the real winner of the 2018 FIFA World Cup has been Russia. The nation has seen a major boost in tourism interest, from the UK in particular, during the monumental tournament, reports CheapOair.co.uk.

During the first week of the football tournament, CheapOair.co.uk saw a major uplift in its flight searches to the host nation as figures came in 232% higher than the average weekly search volume. This momentum continued the following week, 17-23 June 2018, as the average weekly number of searches Brits made had peaked at 227%.

Similarly, throughout the pre-event build-up the flight search windows between 11-17 March and 18-24 March 2018 saw a significant increase, as potential bookers were searching 182% and 160% higher than the average weekly search volume.

This goes to show that the football fixtures were not only a cause for celebration amongst football fans but also for the Russian economy, as businesses in its numerous host cities for the games have benefited from an influx in British tourists.

(Source: CheapOair)

Cristiano Ronaldo may be out of the World Cup, but he certainly is not out of the headlines. With each passing year the football and financial worlds have become ever more entwined and the recent excitement around Ronaldo wearing Juventus colours has resulted in colossal movement in the markets. Below Carlo Alberto De Casa, Chief Analyst at ActivTrades, discusses the prospects and impacts of Ronald’s moves on the markets.

Juventus is one of three Italian team teams to be publicly listed on the stock exchange but as the biggest club in Italy by some distance, both in stature and in finance, it’s not unsurprising a move for the five-time Ballon D’or winner has caused a seismic shock.

The Old Lady of Turin has won the last 7 Serie A title in a row but has been missing the Champions League from its collection since 1996. Having lost 5 finals in the biggest European competition for clubs between 1997 and 2017, this is seen as a move to undo this spell.

On Monday evening speculation began that Ronaldo could be on his way to Italy. Juventus were trading at about 66 cents per share then. In just 3 days of trading the value of the shares jumped to a peak of 0.81, a new 5-month-high. Given that the club has more than 1 bn shares, the total capitalization of Juventus jumped by around €150 million.

On Friday, Juventus shares jumped further to 0.90, adding another 90 million of market cap and reaching a 16-month high, on levels seen last time when Juventus reached the final of Champions League in 2017.

Only 34% of the club is listed on the stock exchange however, and another significant increase of the value of the club was reported by Exor, the holding of FCA (formerly known as car manufacturer FIAT), who control the remaining 63.7%. Exor now says it is seeing a theoretical increase of their assets by around €400 million.

It’s also thought that FIAT will play a crucial part in this deal, paying a part of Ronaldo’s salary and using him as a testimonial for their cars. The exponential jump in the volume of shares is also staggering with around 15 million of shares traded yesterday and over 38 million by Thursday.

Of course, it might all be a risky investment. With shares that could continue their rally but could also quickly turn in the opposite direction if the “affaire Ronaldo” is not going to become reality. The market movement however is certainly helping to shift the balance of the company even if we are not talking in real cash money.

But what does this all mean?

Juventus will be hoping to make a large amount of money from this operation and the markets also believe that this could be excellent from a financial point of view, despite its huge costs. Once you account for marketing, the receipts from shirt sales and ticket prices in the stadium (prices for tickets at the Juventus stadium just went up by around 25-30%) its clear to see how with a little help from the markets, a transfer of this magnitude can begin to pay for itself. Pundits often discuss how much clubs are paying for players – but often forget to discuss how much a club can claw back in return.

Juventus mught need upwards of €200m to complete a deal for Ronaldo over four years. They are willing to pay him €30 million a year but once taxes are factored in it could be higher at maybe €55million. A four-year contract including his transfer fee of €100 million could therefore take this to an astronomical amount. The questions is – how much will Juventus actually end up paying?

Figure 1: The Juventus share price since speculation began.

As the trading week gets under-way, once again it is the political world that has the attention of markets. Below David Jones, Chief Market Strategist at Capital.com, discusses his thoughts on this week’s markets.

The decision by the UK's Brexit Secretary David Davis to resign late on Sunday evening may have been expected to unsettle some - but that hasn't been the case so far. At mid-morning, the UK stock market was slightly higher and that Brexit-barometer - the pound - was trading at its best levels for almost a month. At first glance, this rise might seem somewhat illogical. But traders seem to be taking the weekend discussions and Davis's resignation as the sign that a soft Brexit could be on the cards - although the resignation does not exactly add much stability to Prime Minister May's government.

Politics is likely to be making the headlines for the rest of the week as US President Trump visits the UK. But it's another important week for the US markets as it is the start of earnings season. It kicks off on Tuesday with Pepsico but the main focus is likely to be Friday when the banks such as JP Morgan and Citigroup reveal how the last quarter was for their businesses. Expectations are running high that the last three months have been good ones - any misses here could well dent the near 105% recovery US stocks have enjoyed over the past three months.

In other markets, oil remains just below its recent three and a half year high. The last 12 months have seen the crude price rise by 70%, with little impact so far on the bigger economic picture. It does feel as if something needs to give here - $100 a barrel oil would surely start to slow down the world economy, but for now at least any dips in the price of crude just serve to fuel more buying.

(Source: Capital.com)

Ahead of the Russia 2018 World Cup semi-finals kick off tonight, Dun & Bradstreet have revealed that when it comes to economic risk ratings its clear who wins. Below are graphics ahead of the match tonight between France & Belgium, and tomorrow between England & Croatia.

Below you can also see a thorough table of all countries in the World Cup that accounts for FIFA rankings vs. their D&B Country Risk rating vs. the GDP per capita global ranking.

So if you clicked this article because you want to know how much the literal world cup trophy costs, it’s currently estimated at a total $10 million, or in fact more than two human figures cast in 18 carat gold, but that’s not what this is about.

For the consumers, the ticket prices alone are eye-watering. Standard category tickets for the knockout stage matches set fans back around £2,458 ($3,249), while the group stages will have cost £2,631 ($3,477) combined. All in all, that’s around 22% of the UK’s average annual salary. Plus, flights at anywhere between £600 ($793) and £1,500 ($1,983) depending on where you are in the world, insurance at £41 ($54), and hotels at around £987 ($1,305) and counting, the cost of the world cup is a small fortune for any individual fans attending the competition.

However, the true cost of the world cup extends far beyond what most can imagine. If you take into account the cost on the host nations, the funds handled by FIFA and national football associations, the money lost in advertising, operations, infrastructure and accommodating resources for businesses worldwide, from an economic perspective the overall break-even after losses and profits is highly questionable.

This year companies in the UK witnessed a blackout the morning after some of the England games; employees just didn’t turn up to work. The estimated loss figure for employees ‘pulling sickies’ reaches £500 million ($661 million) nationwide. After the England Vs Columbia game, millions of football fans were expected to call in sick, and they did. While each individual case may seem like nothing much, all together, a £500 million loss in a day is a big hit for the economy. Realistically, other football fanatic nations may have suffered a similar fate the day after their respective teams played.

But the real cost of the world cup extends much further still, and its biggest catalyst, hosting the 32-nation tournament, touches a sensitive socioeconomic nerve. While the surge of a national team in the tournament can bring a much-needed economic boost, £2.6 billion is expected to flood into the UK economy should England reach the final on July 15th, the true cost of the World Cup is always counted in billions and can cause significant issues for the host country.

The 2014 world cup in Brazil was forecast to positively impact economies anywhere between $3 billion to $14 billion. The positive economic impact of the 2010 world cup in South Africa was estimated at $5 billion; the 2006 world cup in Germany at $12 billion and the 2002 world cup in Japan & South Korea at $9 billion. The 2014 brazil world cup was due to add an estimated $30 billion to Brazil’s GDP between 2010 and 2014.

From TV rights fees to sponsorships and ticket sales, FIFA made $4.8 billion in revenue from the tournament in Brazil, with an expense of $2.2 billion, most of which comprised funding to teams and TV production costs. $100 million of the expense was the legacy payment given to Brazil. This did not however cover the costs of building and renovating 12 stadiums and developing the appropriate transport infrastructure needed to host the world cup. The overall cost of this has been estimated at around $15 billion, most of which was public funded.

On top of this further costs incurred due to overruns, legacy concerns and missed constructions deadlines. Some of the stadiums remained unfinished or untested prior to the launch of the 2014 event. In addition, many protests erupted throughout the country calling out the troublesome impact of the world cup on day to day living in Brazil, from the way public transport was handled to the way policing was affected.

The harsh truth is that many of those stadiums remain unfulfilled and unused now. Sure, they were put to good use during the world cup in 2014, but in 2018 these stand desolate, while basic social services are underfunded and lack the capital for development. Billions in capital that could have not been spent on the world cup. One of the 12 stadiums built is the Arena da Amazônia in Manaus. Situated in the middle of the jungle, without a proper top-flight football team, a 45,000-seat stadium is unnecessary. In order to build this stadium, some parts had to be transported by boat through the Amazonian jungle.

To add to the frustration of Brazilians that year, their world cup team suffered a crushing 7-1 defeat against the Germans in the semi-finals.

After being selected to host the 2018 world Cup back in 2010, Moscow has aimed for Russia to stand out as a global superpower and host the world cup in order to benefit from a big economic boost in the long term. The results of the latter are still to be seen, though in terms of media coverage and PR, Russia has been doing pretty well, with many global fans claiming that from a social and economic stand point, Russia is a far better nation than most believe it to be.

We’re currently just past the half way line in the 2018 Russia world cup and the cost is already mounting. The overall cost of Russia hosting the world cup is reported at $14.2 billion, making it the most expensive in history thus far. Russian media channels report that most of this cost consist of repairs and renovation to existing airports and transport systems as well as building 12 new stadiums, 11 new airport terminals, 12 new roads and three new metro stations in the run up to the competition. To support these, further infrastructure such as hospitals, power stations, and hotels were also injected with cash. Clearly, Russia thought it had better odds than Brazil when it came to the long-term economic advantages of hosting the world cup.

In terms of sponsorships, of 34 potential slots offered by FIFA for the 2018 world cup in Russia, 19 were filled, mostly by Russia themselves, and China (despite not even having a team in the tournament) and Qatar. KPMG currently estimates sponsorships have made FIFA over $1.6 billion. Statista has estimated around 1,000,000 foreign fans to attend the games from the first kick off to the final whistle, with a further 2 million domestic fans in the mix. FIFA says around 98% of tickets were sold, but this hasn’t always appeared to be the case in some matches.

Once the world cup is over, it’s difficult to say whether Russia’s massive investment, the biggest yet, will reap long lasting benefits from hosting the competition. But if Brazil is to be an example, probably the worst of many, then Russia is arguably set to lose from the deal, at least financially. Although the injection of cash means they will have a few more hospitals and better airports in the long term, from a future football perspective the stadiums that were purposely built for the world cup will likely not bring much revenue back for Russia in years to come, leaving the expenditure as a substantial one-off outlay, albeit it for a very rich country.

At least high hopes still remain for the Russian football team in the 2018 world cup, as they face Croatia this Saturday in the quarter finals. If they win, maybe things will look a little brighter.

Sources: 

https://www.vanquis.co.uk/the-cost-of-the-world-cup-2018

http://www.cityam.com/288622/cost-football-coming-home-england-fans

http://theconversation.com/hard-evidence-what-is-the-world-cup-worth-27401

http://uk.businessinsider.com/fifa-brazil-world-cup-revenue-2015-3

http://www.businessinsider.com/brazil-world-cup-stadiums-2014-6?IR=T

https://www.theguardian.com/world/2013/jun/18/brazil-protests-erupt-huge-scale

https://www.bbc.co.uk/sport/football/30642071

https://www.cambridge-news.co.uk/news/uk-world-news/people-sickies-work-world-cup-14864331

https://www.fool.com/slideshow/games-cost-russia-14-billion-9-wild-world-cup-money-stats

https://www.forbes.com/sites/jamesrodgerseurope/2018/07/02/world-cup-2018-wins-for-russia-on-and-off-the-field/2/#7cab1dfb1e3b

https://uk.reuters.com/article/uk-soccer-worldcup-col-eng-penalty/this-time-england-left-nothing-to-chance-in-shoot-out-idUKKBN1JU1T6

https://www.bbc.co.uk/news/business-44711254

Today Rebecca O’Keeffe, Head of Investment at interactive investor, reports on the latest market updates, with expert insight into import/exports markets and investment.

“Equity markets are under significant pressure in early trading as the global trade war is expected to come into clearer focus this month.  In Europe, various leaders face acute political pressures of their own, with Angela Merkel struggling over immigration concerns and Theresa May facing another perilous month of Brexit negotiations.  Previously, investors have used significant market falls as a chance to buy the dips, however, with all these headwinds, it is difficult to view current market weakness as a buying opportunity.

“After spending weeks not fully pricing in the downside risks, as investors hoped that there would be a last-minute reprieve rather than a global trade war, investors are waking up to the potential reality of a trade war and what that means for the wider markets. Falling Chinese exports will subdue the commodity markets, individual tariffs will markedly affect sectors and their wider supply chain, and the prospect of a downward spiral is very real.

“After largely surviving the pressure during the first half of the year with markets broadly unchanged, investors may find that the second half of the year, including the unpredictable summer months, may prove even more volatile than usual, delivering some opportunities, but increasing the threats for investors.”

Refugee crisis, political turbulences, economic struggles brought on by austerity and Brexit. Katina Hristova explores the crisis that the European Union has found itself in.

"The fragility of the EU is increasing. The cracks are growing in size”, warns EU Commission Chief Jean-Claude Juncker. With Italy’s Government crisis finally being resolved and the country’s shocking rejection of NGO migrant rescue boats, it has been easy to detract from the political earthquake that the third largest EU economy experienced and the quick impact that it had on the Euro. But Europe’s problems go deeper than Italy’s political turbulences. A month ago, Spain, the fourth biggest Eurozone economy, was faced with a very similar crisis and even though the country now has a new leader, analysts believe that the Spanish instability is not over yet. With the shockwaves of both countries’ political uncertainty being felt on Eurozone markets, on top of migration pitting southern Europe against the north and as the UK marches on towards Brexit whilst Trump abandons the Iran Nuclear Deal, which could mean the end of the transatlantic alliance between the US and Europe, is the EU in serious trouble?

Why is it so serious?

Billionaire Investor George Soros is one of those people that can sense when social change is needed and when the current cultural and political processes are about to collapse. A month ago, in a speech at the European Council on Foreign Relations, Soros claimed that: “for the past decade, everything that could go wrong has gone wrong”, believing that the European Union is already in the midst of an ‘existential crisis’. The post-2008 policy of economic austerity, or reducing a country’s deficits at any cost, created a conflict between Germany and Greece and worsened the relationship between wealthy and struggling EU nations, creating two classes – debtors and creditors. Greece and other debtor nations had sluggish economies and high unemployment rates, struggling to meet the conditions their creditors set, which resulted in resentment on both sides toward the European Union. Back in 2012, the European countries that struggled with immense debt, malfunctioning banks and constant budget deficits and needed help from other member countries were Portugal, Ireland, Greece and Spain. In order to help them the creditors countries set conditions that the debtors were expected to meet, but struggled to do so. And as Soros points out: “This created a relationship that was neither voluntary nor equal – the very opposite of the credo on which the EU was based”.

Although Italy finally has a government, after nearly three months without one, the financial markets are apprehensive about what to expect next, considering the country’s €2.1 trillion debt and inflexible labour market. On 29 May, fearing the political crisis in the country, the Euro EURUSD, +0.6570%  slid to a six-month low, whilst European stocks ended sharply lower, with Italy’s FTSE MIB I945, +1.43%  ending 2.7% lower, building on the previous week’s sharp losses. Bill Adams, senior international economist at PNC believes that: “The situation serves as a reminder that political risk in the Euro area hasn’t gone away. Italy is not on an irrevocable road to anything at this point,” he said. “I think what is most likely is another election later this year, and what we’ve learned is that outcomes of elections are very unpredictable.”

Spain on the other hand has made huge progress since being on ‘EU life support’ when ‘its banks were sinking and ratings agencies valued its debt at a notch above junk, on a par with Azerbaijan’. Since receiving help, the country’s economy has been growing, unemployment is not as high and its credit rating has been restored. However, with the Catalonia separatism, and the parties, Podemos and Ciudadanos who have emerged to challenge the old duopoly between the Popular Party (PP) and the Socialists, the political uncertainty in the country is set to continue.

Greece has been in a permanent state of crisis for a decade now, with its current debt of 180% of its gross domestic product (in comparison, Italy's is 133%). In less than two months, on 20 August, the country is due to exit its intensive care administered by the European Central Bank and International Monetary Fund. The EU will then have to come up with a new debt relief offer on the $280 billion Greece still owes – which could be challenging, as the ‘creditors’ are not in a charitable mood.

In contrast, Poland and Hungary are financially stable, however, both countries seem to be in opposition to the EU with regards to immigration, the independence of the judiciary, ‘democratic values’ and freedom of the press. Both governments have dismissed EU plans to share the burden that the Mediterranean region carries in terms of migrants arriving into these countries. In addition to this, Hungary’s Prime Minister is promoting an ‘illiberal’ alternative to European consensus, whilst Poland has sided with the US and against its European partners on a range of subjects, including the Iran sanctions and Russian gas pipelines.

And of course, let’s not forget the EU’s list of unsolved issues – the main one being Brexit. With nine months until its deadline, the terms of Britain’s exit from the EU are nowhere near finalised.

Make the EU an association that countries want to join again

Today, young people across the continent see the European Union as the enemy, whilst populist politicians have exploited these resentments, creating anti-European parties and movements.

Since its establishment, the EU, an association that was founded to offer freedom, security and justice without internal borders, has survived many turbulences. Although the current crisis is based on a number of deep-rooted problems, odds are that these challenges will be overcome. To save the EU, Soros believes that it needs to reinvent itself via a ‘genuinely grassroots effort’ which allows member countries more choice than is currently afforded.

"Instead of a multi-speed Europe, the goal should be a 'multi-track Europe' that allows member states a wider variety of choices. This would have a far-reaching beneficial effect."

And even though he isn’t offering a proposition for a bill that someone needs to draft and pass as soon as possible, he has opened a conversation - a conversation about moving away from the EU’s unsustainable structure. “The idea of Europe as an open society continues to inspire me”, says Soros. And in order to survive, it will have to reinvent itself.

According to many reports, Italy’s ongoing political failure has potential to bring the Eurozone crashing down, which in turn could cause mass impact across the globe’s economy, both short term and long term.

In a recent turnoff events, both parties Five Star Movement and Lega Nord have been committed to the Italian government following a period of limbo since the March general election. Italy currently represents almost a fifth in the Eurozone economy and is feared as “too big to be saved.” Giuseppe Conte has been appointed the interim PM.

Below Finance Monthly has collected Your Thoughts in this financial debacle, summarising some points of expertise form top reputable sources across Europe.

Daniele Fraiette, Senior Economist, Dun & Bradstreet:

Italy’s new prime minister, Giuseppe Conte, will need to try and strike a balance between reassuring European partners about Italy’s permanence in the eurozone, and the 5SM’s and NL’s overt intolerance towards European Union rules on budgets and immigration.

In the weeks before the resolution of the crisis, Italian bond yields rose to levels only seen at the peak of the debt crisis in 2012, dragging yields on other peripheral euro-zone economies’ debt higher. The spread between Italy’s 10-year government bonds and Germany’s equivalent-maturity bonds also soared, passing the 330 basis point mark. The political vacuum seems now to have been filled; however, the spread remains at levels which signal significant market concerns around the country. The end of the ECB’s bond-buying is an additional factor of concern as they could prompt a significant increase in Italy’s borrowing costs.

Italy’s overall macroeconomic environment has improved remarkably over the past years: real GDP grew by 1.5% in 2017 and looks set to expand further in the 2018-19 period, the current account surplus currently stands at around 3% of GDP and its debt service cost has dropped to below 4% of GDP, down from above 6% before the introduction for the single currency. However, at 132% of GDP, Italy’s stock of public debt is huge, and the ongoing political turmoil poses a threat to the country’s stability. Indeed, should the political crisis morph into a sovereign debt crisis, debt costs would soar and debt service become unsustainable.

If Italy defaulted on its debt (which is not Dun & Bradstreet’s baseline scenario given Italy’s strong domestic investor base), the survival of the eurozone would be irreparably compromised. There is also a risk that concerns over a possible referendum on the euro, repeatedly contemplated by the 5SM and the NL but eventually scrapped from their election manifestos, could trigger a flight of deposits from Italian banks, many of which remain saddled with high levels of non-performing loans.

Although the darkest hour of Italy’s politics seems to be over, tensions between the Italian government and the EU, as well as within the government itself, are highly likely to persist; political uncertainty will likely remain elevated in the quarters ahead and the risk of early elections constantly looming.

Roberto Sparano, Globalaw:

After the longest political crisis in Italian history, a new cabinet of ministers was appointed on Saturday. Technically, the new government needs the confidence vote of both chambers of the Italian parliament, but it seems likely that the vote will go in favour of the odd alliance between the 5stars movement and the Lega.

In the closing moments of his BBC TV commentary for the 1966 FIFA World Cup Final, Kenneth Wolstenholme said "They think it's all over," but in reality it was not! This is, more or less, what is happening now. Most Italians are happy that it is over and we are back to normal, however, in realty this is only the beginning.

Local elections are scheduled for the 10^th of June, and both the Lega and M5S will campaign on different and opposite barricades. Campaigns can easily turn ugly in Italy, and the first objective of the new government will be to survive these next few weeks without any major clash between the two parties.

In fact, the new local elections will be the first referendum against Europe and the Eurozone.

As Italians, we always have difficulty owning up to our responsibilities, that is the way we are, and we have become experts in the art of shifting the blame onto others. Germany has, for many reasons, been the perfect target since the end of WWII.

The notion of external control was actually one of the factors that convinced Italian lawmakers and politicians to join the European Union in the first place. This is because, if anything goes wrong, or is hard to swallow and unpopular, the blame falls on the EU as an external body- and obviously the Germans!

This may be a hopeless situation... but it is not serious, like in the 1965 movie directed by Reinhardt.

I do not think that the Eurosceptic have been strengthened from the last Italian elections. The truth is that most people are not ashamed to feel anti-EU (given that the EU has served as a punching ball and a symbolic cradle-of-all-evil over the past decades). Two non-traditional political movements are only going to cash in on this feeling.

Italy’s political climate will have a consequential effect on the Eurozone and the European Union. I am convinced that the Lega is aware that we cannot leave the EU or the Euro (I cannot speak for the M5S since I do not think they have any policy or line at all), but they are also aware that the other Euro partners cannot afford Italy’s break from the Euro or the EU.

The current anti-European feeling will undoubtedly be used as a bargaining chip for other purposes, for example, to stop immigration or, even better, to accelerate the process of moving immigrants from Italy. If Germany and the EU play this the hard way it could be fun to watch, although, as an Italian, it will be painful. On the flip side, it could be the perfect opportunity to change the EU, although, while Lega and M5S are calling for a new and stronger Europe, nobody knows (including Lega and M5S) what a “stronger Europe” really means.  My idea of a stronger Europe … I fear it is exactly the opposite of the idea of the Lega.

The situation is unpredictable, some of the measures that form part of the “Contract” between Lega and M5S could have a beneficial impact on our economy, although the Italian debt will skyrocket and in the long term, this would have a devastating effect.

The real problem will be the Italian State rating and the Italian bank rating. If the new government leads to a downgrading, the ECB will not be allowed to acquire our State bonds. Due to this, quantative easing measures will cease to help our growth, and the banks will collapse.

Italian economics are already not brilliant (that is lawyerlish for awful). We are the slowest growing European member, our private sector has never driven, and our banks … well our banks are declining.

We are already a supermarket for foreign corporations; Chinese, Indian, USA and other European companies have already acquired most of the jewels of the crown in terms of brand know-how, and excellence. Despite this, if anything goes wrong, we will become a discount or outlet!

On the other hand, our history shows that Italy always manages to survive, after all, on April 25^th each year we celebrate the victory against nazi-fascism in WWII.

Giuliano Noci, Professor of Strategy and Marketing, Politecnico di Milano School of Management:

Following a week of political uncertainty in Italy, international financial markets are recovering well. Analysts expect that the announcement of a new government and the unlikelihood of fresh elections indicate that no further disruption will occur.

However, the root causes of how Italy landed in this particular political situation – where the young Five Star movement and Matteo Salvini’s League won more than half the votes in parliament – must not be ignored.

Both parties – although internationally scorned for Eurosceptic views – were able to gain the support of the Italian population, playing on both their emotions and feelings of insecurity. Both delivered well-designed storytelling campaigns via social media rather than mainstream media – a technique neglected by other parties.

The population’s insecurity has two main manifestations. Firstly, the feeling that the EU did not do enough to help Italy during the mass immigration of refugees of Syrian war. Secondly, the sense that the EU is failing Italy in important economic areas. Five Star promised a basic income for the unemployed whilst they train and upskill, and the League pledged to reduce the burden of fiscal taxation on companies by introducing a flat tax system.

So, are the parties reaching the core of Italy’s problems and setting out the right solutions? This is a question which deserves careful consideration. In my opinion, the parties were wrong to use aggressive tactics to fuel the debate about whether to remain in the EU. However, they were very right to suggest that the European Union must significantly change the rules of the game. We are seeing problems not only in Italy, but in Greece, Spain and perhaps even France in the imminent future.

These are signs that the Eurozone is not working, which is most likely because the Euro project is incomplete. Although we have a unique currency, there is no unique system for managing the risk of banks or the unbalanced, heterogenous economic systems of each country.

In the long run, a lack of reforms will create a bigger problem for the Eurogroup than Italy’s political situation. Change must come from within the EU following this situation and discussions of structural reforms in the banking sectors, as well as a safety net fund, must begin.

If no change occurs, the 2019 EU elections are likely to be just as complex as Italy’s.

Stephen Jones, Chief Investment Officer, Kames Capital:

Following Macron’s victory, the eurozone was the ‘good news’ story of 2017 as the area’s economy burst into life and global investors returned in droves. This year has seen economic momentum collapse sharply and, perhaps more than coincidentally, populist pressures have brought the fault lines back to the fore. For the moment this is an Italian issue but these pressures exist in most eurozone nations.

Equity markets have weakened on these changes but Italian worries have largely reinforced a trend already in place. Elevated ratings, and analysts offering a very rosy earnings outlook, left markets vulnerable to poor news and a variety of geo-political developments have emerged to offer that challenge; fat profits were there to be taken.

These risk markets setbacks have, however, taken the steam out of rising short rate and long yield forecasts and will probably succeed in ensuring that quantitative easing is continued in Europe for longer than might otherwise have been the case. When the dust settles, this should underpin equity markets, allowing progress to be made afresh and from safer levels; the positive earnings outlook offered by analysts have good real-world support.

However, to be clear, this supposes that Italy stops short of turning a drama into a crisis. Those of us of a certain vintage know well enough that Italian politics are not to be trusted.

Jordan Hiscott, Chief Trader, ayondo markets:

I was recently asked If I thought the current situation in Italy, in regard to potentially leaving the EU, was a black swan event. My response was no; a grey swan would be a much more suitable adjective to describe Italy in its current state. The ultimate definition of this would be a risk event that can be anticipated to a certain degree but still considered unlikely. A black swan being an event that is not anticipated in the slightest.

Italy has the third largest economy in the Eurozone and this political turmoil, of once again populist vote, threatens the unity of the bloc. But the situation is further exacerbated by the perilous state of Italian banks. Indeed, this is nothing new and they have been in the poor shape for a while, and the only surprising part to me is that the market hasn’t been paying attention to this, until now.

The culmination of the situation is we now have a perfect storm. Another type of a coalition government has been formed and the cynic in me looks at Italian politics on a historical basis and questions if this is this indeed the end of an unstable ruling government or in the colloquial sense, papering over the cracks? This is coupled with a worsening financial situation for the nation’s major banks. The move on Italian two-year treasury yields last week was nothing short of astounding, with the range and volatility more akin to a cryptocurrency than of a bond from a first world country.

The Italian stock market is now almost completely unchanged on a five-day basis, given it was down over 7% at once stage last week.  In addition, to confirm this, EURUSD has moved from a low of 1.1520 last week to 1.1750. The next move will be key, but from my perspective I’m finding it hard to feel positive, even from a mean reversion perspective, for the pair, given the length and weighted negative implications surrounding Italy at present.

April LaRusse, ‎Fixed Income Product Specialist, Insight Investment:

In contrast to the European sovereign crisis, Italy is now an idiosyncratic story. Across Europe, the previous crisis hit countries such as Spain, Greece and Portugal are all on an improving path, reaping the rewards of structural reforms implemented after the crisis. In Italy, pension reforms were certainly a positive step, but the country failed to undertake the deeper changes needed to sustainably raise potential growth.

The two key parties are proposing a range of expansionary fiscal measures, cutting both income and corporate taxes and proposing a minimum citizens income of €780 per month. Although more controversial measures, such as asking the European Central Bank (ECB) to write off up to €250bn of Italian debt, have been dropped, investors will be well aware that these were considered serious policy proposals by elements of the new government.

Debt/GDP will start to rise once again and credit rating agencies are likely to start to downgrade Italian debt, in contrast to the rest of Europe where credit ratings are improving. This leaves us cautious on Italian spreads, especially in an environment where we believe the ECB will be winding down its quantitative easing purchases.

David Jones, Chief Market Strategist, Capital.com:

There is a familiar feel to the catalyst behind the increased levels of volatility that traders and investors have seen across all markets, leaving some wondering if we are going to have another Eurozone crisis along the lines of that involving Greece from 2016. At this stage that does seem like an overly-pessimistic view, but it’s not hard to understand why safe-haven buying is the order of the day.

An oft-repeated phrase from past Eurozone crises was “kicking the can down the road”, referring to deferring that country’s debt obligations. This time around it feels as if the political can, rather than the financial one is being kicked into the long grass - and this is what is spooking markets. One of the main worries for traders is another election in a few months could result in a populist government that wants to renegotiate Italy’s debt with the EU. This is running at around 130% of the country’s GDP - the second highest level after, you guessed it, Greece.

The obviously immediate casualty was the euro. It had hit a three-year high against the US dollar as recently as February this year. Since then it’s dropped back by around 8% to its lowest level since last July. There is a double-whammy behind traders’ decisions to sell euros. Clearly any uncertainty about Italy’s debt repayments and the country's commitment to the single currency doesn’t inspire confidence - plus this year already we have seen a resurgence in popularity for the US dollar after its slide in 2017 was the worst performance for more than a decade. It can always be argued that the market reaction is overdone - but whilst Italy’s political future remains uncertain, it’s a brave trader who calls the bottom of this slide.

European stock markets have also been hit. The Italian market is the obvious biggest casualty and is now down by 13% in just one month - but the German and UK markets are also lower as investors adopt the familiar “risk-off” approach at the slightest whiff of a possible euro crisis. Many world stock markets already had some fragility when it comes to investor sentiment after the sharp falls seen in February and an ever-increasing oil price - it is difficult to see these recent losses being made back quickly.

While some sort of “dead cat bounce” can’t be ruled out in the days ahead, as long as this political can-kicking continues, then investors are likely to remain cautious about taking on risk - so it could be a summer of European-inspired volatility across all asset types.

Tertius Bonnin, Investment Analyst, EQ Investors:

This had been a slow moving car crash in which the signs have been there for all to see; populist parties were the clear winners of the March election (nearly three months ago) and the two largest parties, the Five Star Movement and the Northern League, had been negotiating a framework for co-governance since. Surprisingly, a number of market participants had expressed that they didn’t anticipate the “change” in attitude of the two famously Eurosceptic parties towards the euro. It should be noted that Italy isn’t new to political uncertainty, with Italian voters seeing 62 governments since 1946.

The Italian President’s veto of the proposed finance minister, Paolo Savona, and the subsequent increase in the probability of another election caused a kneejerk reaction in the markets on Monday. These moves spilled into the Tuesday session as the Monday was a bank holiday in the US and UK. Trading volumes on the Monday were therefore relatively thin in comparison. Tuesday saw huge spikes in key barometers of relative risk such as the Italian-German government bond spread (difference in yield) and the Italian two year bond yield. Global banking stocks, considered most sensitive to a change in economic activity, also sold off. Despite the so called PIGS (Portugal, Italy, Greece and Spain) taking significant knocks, investors in relatively safe government bonds (German bunds, UK gilts and US treasuries) benefited from a “flight to safety” whereby panicked investors moved capital into less risky assets.

There had briefly been calls by the Five Star Movement’s leader to impeach President Mattarella. Under Article 90 of the Italian constitution, parliament may demand the president to step down after securing a simple majority. Italy’s constitutional court would theoretically then decide whether or not to impeach Mr Mattarella. Given the president had not violated any Italian laws, this route appeared relatively futile. On this impasse, the populist coalition appeared to have collapsed and the market took a collective sigh of relief as the Italian President moved to appoint ex-IMF director Carlo Cottarelli to run a short-term technocratic administration until the next set of elections. It should be noted that the Five Star Movement, the Northern League and Berlusconi’s party all said they would have vetoed this.

It is likely this development fed into the Northern League’s decision to call for fresh elections at a political rally, having seen an uplift of circa 8% in opinion polling. Investors once again panicked that the risk of future elections had the potential to not only reinforce the populist parties’ positions in both parliamentary chambers, but become a de facto referendum on Italy’s euro membership. After 2017 being relatively benign year for political risk, investors had been caught asleep at the wheel in terms of pricing in uncertainty in the political sphere.

By Friday the situation had turned around once again after the Italian President provided more time for the Five Star and Northern League parties to form a government; the former designate Prime Minister Giuseppe Conte was sworn into office while the key Finance Minister role went to a seemingly more pro-European, Giovanni Tria, who headed the Economy Faculty at Rome’s Tor Vergata University. Paolo Savona, the former candidate vetoed for this position will now serve as Minister for European Affairs in a sign that the new administration’s focus will be on fiscal expansion plans and rolling back reforms, rather than investor angst around fresh elections and euro membership. This rollercoaster ride in political uncertainty has been tracked by the spike in yield of the supposedly risk-free Italian government bond.

We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!

IBM announced a new technology called a crypto anchor verifier; which will allow consumers and businesses to track single object across supply chains. Forbes writer Michael del Castillo explains how this tech could disrupt different industries.

In light of Donald Trump’s dramatic withdrawal from the Iran Nuclear Deal, Katina Hristova examines how the pullout can affect the global economy.

As with anything that he isn’t fond of, US President Donald Trump hasn’t been hiding his feelings towards the Joint Comprehensive Plan of Action between Iran and the five permanent members of The United Nations Security Council plus Germany. Pulling the US out of the agreement on the nuclear programme of Iran, which was signed during Obama's time in office, is something that Trump has been threatening to do since his 2016 election campaign. And he’s only gone and done it. Earlier this month, he announced America’s immediate withdrawal, saying that the US will reimpose sweeping sanctions on Iran’s oil sector and that “Any nation that helps Iran in its quest for nuclear weapons could also be strongly sanctioned by the United States”. And as if this isn’t alarming enough, President Trump has also said that the US will require companies to ‘wind down’ existing contracts with Iran, which currently ranks second in the world in natural gas reserves and fourth in proven crude oil reserve, in either 90 days or 180 days. This would hinder new contracts with Iran, as well as any business operations in the country.

Since Washington’s announcement, signatories of the Iran Nuclear Deal, still committed to the agreement, have embarked on a diplomatic marathon to keep the deal alive. On 25 May, Iran, France, Britain, Germany, China and Russia met in Vienna in a bid to save the agreement.

So how will this hurt the global economy?

Deals worth billions of dollars signed by international companies with Iran are currently hanging by a thread. The main concern on a global scale is that the US’ decision threatens to cut off a proportion of the world’s crude oil supply, which has already resulted in an increase in oil prices, with crude topping $70 a barrel for the first time in four years.

Additionally, European companies like Airbus, Total, Renault and Siemens could face fines if they continue doing business with Iran. Royal Dutch Shell, who is investing in the Iranian energy sector, is potentially one of the biggest companies to be affected by Trump’s withdrawal which could put billions of dollars’ worth of trade in jeopardy. As The Guardian points out: “In December 2016, Royal Dutch Shell signed a provisional agreement to develop the Iranian oil and gas fields in South Azadegan, Yadavaran and Kish. While drilling is still a long way off, sanctions are likely to put any preparations already being made on ice.”

French company Total, who’s involved in developing the South Pars field, the world’s largest gas field in Iran, is in a similar situation.

Airbus and Boeing, two of the key players in the international aviation industry, have signed contracts worth $39 billion to sell aircraft to Iran. As The Guardian reports, the most significant deal is an agreement by IranAir to buy 100 aircraft from Airbus.

A spokesman from Airbus said that jobs would not be affected. “Our [order] backlog stands at more than 7,100 aircraft, this translates into some nine years of production at current rates. We’re carefully analysing the announcement and will be evaluating next steps consistent with our internal policies and in full compliance with sanctions and export control regulations. This will take some time”. Rolls Royce is also expected to be indirectly affected if Airbus loses its IranAir order, as the company is the key engines provider to many of those aircraft models.

Another European company that will be hurt by the sanctions announcement is French Renault and PSA, who owns Peugeot, Citroën and Vauxhall. When sanctions were lifted back in 2016, Renault signed a joint venture agreement with the Industrial Development & Renovation Organization of Iran (IDRO) and local vehicle importer Parto Negin Naseh, worth $778 million, to make up to 150,000 cars in Iran every year. This is one of the largest non-oil deals in Iran since sanctions on the country were lifted. Last year, local firm Iran Khodro also signed a deal with the trucks division of Mercedes-Benz, with car production scheduled for this year.

Iranian firm HiWEB has been working alongside Vodafone to modernise the country’s internet infrastructure, but it looks like the partnership will have to be reconsidered.

The consequences

The White House and President Trump appear aware of the danger that a rise in oil prices on an international level pose to the economic growth of the Trump era, however, they also seem ready to embrace the economic and geopolitical challenges that are to follow. Although the consequences of US’ Iran Deal pullout are not perfectly clear in the short term, they will undoubtedly become more visible as sanctions take effect. The deal has its flaws, however, completely withdrawing from it and threatening the US’ closest allies can only compound those issues and create new ones. It is hard to predict what will unfold from here and where Trump’s strategy will take us. The one thing that is certain though is that the world doesn’t need more hostility.

Berkshire Hathaway CEO Warren Buffett speaks to CNBC's Becky Quick about what he thinks about the state of the markets today.

You may think cash has come to an end, or maybe you’re on the other side of the fence, where cash is king. However, a balance is to be struck. Below WeSwap CEO Jared Jesner explains why travellers will also need cash, despite a predominantly digital economy.

Trailing closely behind Sweden and Canada, the United Kingdom is the world’s third most cashless society. According to UK Finance, cash will be used for a mere 21% of all payments by 2026. Increasingly, countries around the world are making definite moves towards a futuristic economy based on fully digital transactions for goods and services, with cash often portrayed as obsolete. In Sweden, 80% of all transactions are made by cards via the mobile payment app, Swish.

According to a report in Reuters citing the Bank for International Settlements, the study found that the use of cash is actually rising in both developed and emerging markets. “Some of the breathless commentary gives the impression that cash in the form of traditional notes and coins is going out of fashion fast,” said Hyun Song Shin, BIS economic adviser and head of research “despite all the technological improvements in payments in recent years, the use of good old-fashioned cash is still rising in most, though not all, advanced and emerging market economies.” Furthermore, the Bank for International Settlements found that in recent years, the amount of cash in circulation has increased to 9% of GDP in 2016 from 7% of GDP back in 2000. That said, the same study stated that debit and credit card payments represented 25% of GDP in 2016, up from 13% in 2000.

Cash’s resiliency comes at a time when the odds are seemingly stacked against its historically ubiquitous presence, with the critical mass of consumers owning more credit and debit cards today than ever before, using them for smaller transactions than in years past. Moreover, thanks to new technologies, consumers are able to use contactless payments via their mobile devices to pay for things in record numbers. These now societal norms have led to predictions that cash is dying as the world moves to digital payments. WeSwap asserts this prediction as flawed.

Jared Jesner, CEO of WeSwap, founded his company on the notion that cash remains indispensable across the majority of countries around the world: travelers will inevitably need to access hard currency beyond UK borders, and the method with which to do so, should be fair and transparent. As the key driver of a uniquely positioned digital banking revolution sweeping the nation, Jesner demystifies the notion that cash is moving closer towards extinction, instead recognizing its unwavering importance to society in 2018.

In just three years since launching its core product, WeSwap has rapidly risen to become the world’s largest peer-to-peer currency conversion platform, also enabling users to buy-back excess currency and receive cash delivered straight to their door. Its promise to streamline the travel budgeting process, empowers tourists and business travelers to make the most of their money abroad, with users loading funds onto the WeSwap card and swapping currency directly with each other at the interbank rate with no hidden fees. The service is unique and currently used by over 400,000 UK travelers, all of which appreciate and use the notes in their wallets, coins in their purses and contactless pings of their MasterCards.

CEO of WeSwap Jared Jesner states: “Our nation loves to travel and although we are moving closer towards becoming a cashless society within our own borders, when we go abroad this all changes.”

Jesner is optimistic about the enormous potential to change the landscape of payments, having founded WeSwap to make currency exchange cheap and fair for ordinary people: “I’m incredulous to the fact that we still 'buy' money when we should just be swapping with each other.”

With Futurologists long predicting cash will one day become obsolete, contextualised by the advent of blockchain technology, mobile money and similar innovations, a transition towards a more cashless society is inevitable, but not to the extent where notes are no-more. For all the convenience that digital payments offer, many remain reluctant to fully part with their notes and coins. WeSwap believes that an emotive and security-based connection – similar to our attachment with photographs, films, books and other things of tangible value – secure the role of hard-currency in our lives, inevitably.