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The German energy regulator announced on Tuesday the temporary suspension of the approval procedure for Nord Stream 2, the controversial gas pipeline between Russia and Germany, citing a legal obstacle. European gas prices reached 92€ on Friday, 12€ up from Monday (+15%). In early September, Gazprom, the Russian operator of the pipeline announced its completion, but has been waiting for the German approval of the project.

Inflation is rising globally, and also in former stable fiscal systems prices are soaring to new highs. For example, Germany recently reported its producer price index rising at its fastest pace since 70 years, at 18.4%. That poses even greater risks to countries like Turkey, which have been struggling to keep their economies humming for many years. This week, the Lira slid again and ended trading at 0.089 to the USD. This is driving up the costs for essentials as food, medicine or fuel and ordinary citizens are thus facing worse living conditions. The current situation is unsustainable for many, driving people to swap their savings into foreign reserves or leaving Turkey altogether. On the other hand, big corporations seem to be more stable, as there is widespread support from the government facilitating funding and costs can still be passed on to consumers. Nevertheless, it is again the broad population suffering the most from Erdoğan's expansive monetary policy.

On Wednesday, Rivian Automotive became the seventh-largest U.S. IPO (by offer size) in nearly 30 years and the company has influential supporters, namely Ford Motor Co. and Inc Amazon.com. The latter, holding a 20% stake in the carmaker, already concluded a contract for 100,000 electric delivery vehicles by 2030. What distinguishes Rivian from other EV producers like Tesla or Lucid is its focus on the niche of all-electric pickup trucks and SUVs. Investors believed in the concept, as the company was able to raise a total of $11.9 billion on its first day. Massive demand for Rivian’s shares pushed its market capitalization to $113 billion (Friday, November 19th 2021) which makes it more valuable than Ford or General Motors. Analysts in the sector are aware of Rivian’s chances of threatening market leaders, but also point out major obstacles like the cars’ price tag and competitors’ plans to launch similar vehicles.

We are proud to announce the new 2021/2022 ESCP Finance Society team: we have welcomed many talented and passionate members to the family and we can’t wait to bring new exciting content and events to the community 🏦

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With markets reaching record highs and short-term gains representative of the post-covid bull, Millennium Management, one of the world’s largest hedge funds, is changing its strategy. Israel Englander alongside its New York team has decided to return 15 billion to investors while at the same time raising billions in Private Equity. With this move, they are reducing their short-term asset base to focus on a more long-term one with exit periods at 5 years instead of exiting in full in one. With 57 billion assets under management, this decision will allow them to have 40 billion in long-term assets, reducing the danger of clients pulling out due to short-term poor performances and enabling them to take positions on less-liquid assets. Although Millennium has one of the industry’s top track records, only incurring a negative year once (2008) since 1990 and last year making 25.6 percent, a long-term asset base will additionally give them an extra selling point when attracting the most talented traders, keeping their competitive advantage.

On the 18th of October the Security and Exchange Commission approved the ProShares Bitcoin futures ETF, it was the first cryptocurrency-linked the United States financial markets.

After the announcement of the breakup of General Electric, it seems that many other giants of the industry have decided to follow suit. This week Toshiba, the Japanese industrial behemoth and Johnson, and Johnson, the world’s largest maker of health products by sales have also decided to split into separate units. This begs the question of whether the companies have finally realized that the focus of a company should not only be size but efficiency and is a new trend starting to form?

We are excited to invite you to the “Break Into Banking” conference of our partner AlumnEye on Wednesday 24 November at 5:30PM🔥

COP26 in Glasgow, the biggest climate change event after the 2015 Paris accord, has seen an increased participation by financial institution representatives. The purpose of the conference was, among others, to finalize the rules set in 2015 regarding the financing of the transition to net zero emission. Disappointment arose as the governments announced that they have failed to reach their target to raise US$100bn a year to spend helping poorer countries to cut their emissions. As a result, much more pressure was placed on the private sector to deliver good news. A group called the United Nations Glasgow Financial Alliance for Net Zero, made up of 450 banks, insurers, and asset managers, has announced its commitment to use US$130tn in assets to hit net zero emissions targets by 2050. Nonetheless, a few financial institutions that participated in COP26, were accused of greenwash as, despite their commitments for net zero carbon emission, they keep funding the expansion of fossil fuel plants.

The Pound sterling has fallen over 1% due to the decision taken by the Bank of England not to raise interest rates. This comes as a shock to the market, as governor Andrew Bailey indicated the need to act on the impending inflation expectations in mid-October. In response to a question regarding the market's expectations on the raising of interest rates, Bailey clarified the earlier statement, made in the middle of October, to have been a conditional one, saying that the inflation pressures are not affecting the medium-term inflation expectations. Bailey further went on to say that the bank is forecasting a 5% increase in the CPI in April 2022 and denies that the Bank of England is powerless against the causes of inflation. This news sunk the UK’s 10-year gilt treasury bond by 0.14% and the 2-year treasury bond by 0.21%.

In line with markets expectation, Jerome Powell announced that the Fed will start tapering its $120bn monthly bond purchasing program in November. Specifically, the Fed will reduce by $10bn the treasury purchase and by $5bn the mortgage-backed securities.

After going public on Friday, Volvo’s share price soared to a level 23% above the initial floating. This creates a market capitalisation of USD23bn for the carmaker, which wants to only sell electric cars by 2030. However, Volvo’s CEO was aiming for a valuation of USD25bn, in line with analysts’ expectations.

Tesla has received an order of 100,000 vehicles, worth about $4.2 billion, from Hertz. The news was released by Bloomberg and led to a meteoric rise in the stock market on October 25, closing the day with a plus of 12.66%. The capitalization of the company closed for the first time in its history above $1 trillion at $1,025 per share, after touching a new all-time high during the day with $1,045 per share. Hertz Global Holdings is a multinational company that operates in the vehicle rental business in most of the world. After 2020, with operations almost completely paralyzed, the company found itself on the brink of bankruptcy. To compensate for losses incurred, it ventures to rent Tesla vehicles to people to boost the company's revenues.

China’s state media proclaimed that Evergrande met an overdue interest payment on Dollar bonds. The second biggest and highly indebted Chinese property developer thereby avoids defaulting on the US$83.5mn payment. This comes unexpectedly, as the 30 days grace period for the interest payment on US$2.03bn worth of bonds scheduled for September 23rd was coming to an end. Thereby, a spiral-down effect on other financial debt of Evergrande was averted. Thus, this positive surprise will lead creditors to withhold declaring default on other tranches of the more than US$300bn in liabilities for now. At the same time, Evergrande showed that it treats on- and off-shore debt holders equally.

In September 2019, Bitcoin miners in China accounted for about 76 percent of all global energy used for cryptocurrency mining. After the country's recent crackdown banning their use, however, the landscape has changed dramatically. In 2019, miners with IP addresses allocated in the United States used only 4.1% of the total energy. To date, they have grown and occupy a 35% slice. Many are concentrated in Texas due to the abundance of energy, especially renewable energy. Data from the Cambridge Center for Alternative Finance shows that Kazakhstan has also made a significant shift. Interestingly, the country has seen mining activity grow more than thirteen-fold, increasing its share from 1.4% in September 2019, to 18.1% in September 2021. This is mainly due to the fact that energy in Kazakhstan has a distinctly low cost. Also supporting this choice is the cold climate that allows production systems to cool down quickly.

One of the world’s leading producers of oil and gas, Saudi Arabia, has committed to cut carbon emissions to zero in the span of 40 years from now. The announcement was given by Prince Mohammed who, during the COP26 climate summit in Glasgow, promised investment amounting to US$187bn to meet the ambitious target. Additionally, the country representative said it would cut methane emission by 30% in this decade. Despite that, Saudi Arabia will maintain its central role as oil and gas producer, as well as keeping its status of largest crude oil exporter, activity which is not accounted for in the emission measurements. In line with the middle-east country, Russia, member of the expanded Opec+ group since 2016, also declared the net zero objective by 2060.

On Tuesday, the EU issued a “Green Bond” to finance sustainable projects and the transition to renewable energy in the member states. The issuance is part of the “Next Generation EU” plan, which aims at boosting the post-pandemic recovery while targeting social and environmental goals. With a 15 years maturity, the bond had a record demand, which amounted to over 135 billion euros, even though the EU Commission only offered 12 billions worth of the debt instrument. This data is evidence of the interest markets and investors have towards energy transition, an ambitious intention that will require trillions, but that will offer an important opportunity to have the financial goals aligned with the environmental ones. It is a sign of the times we live in, where sustainability (also from a social perspective) cannot be forgotten and, on the contrary, it must be taken into account in every business project.

The current year has seen a bonanza of proceeds from sales and public listing for tech investors, reaching the record amount of $582.5bn, the highest since 2000. This rise heralds huge gains for venture capital firms and their investors, which have increased by a reported 40% with respect to the last year. The hype and the favorable market have pushed valuation of private start-ups to record highs, up to the point that listing is being seen as the only worthwhile exit option for venture capital and private equity funds. To name some examples Coinbase, a cryptocurrency exchange, hit a market capitalization of $76bn on its first day of trading in April. The trend of recurring to public markets has resulted in the growing presence of companies with very low profits, and often immature for the big step.

Dear students,

Turkish President Erdogan has ordered a new round of dismissal at the Turkish Central Bank which causes the record low of the Turkish Lira this week. The three fired central bankers opposed a rate cut last month and the selling of the bank’s foreign currency reserves. Erdogan is an opponent of high interest rates and is aiming for high growth rates of the Turkish economy without consideration of the high inflation rates in Turkey. The president has gained unprecedented control over the central banks. He has already fired three central bank chiefs and several other officials since 2019. The Turkish Lira has suffered massive devaluation losing 59 per cent of its value against the dollar since 2018.

After two years of the pandemic, public debt around the world is presenting its bill. The United States, by far the world’s largest economy, has now piled up 28.4 trillion dollars in debt, which is around 130% of its GDP. Last week, markets were shaken by the hypothesis that the US Senate could not find an agreement between the parties to increase the debt ceiling, as estimates pointed out that the American government would have failed to meet some payments after October 18, resulting in the first-ever default for the union. However, last week, Republicans agreed to vote for a short-term debt ceiling extension of 480 billion dollars, which should allow the US Government to borrow until December 3, the Treasury said. Markets loved the news, since the agreement avoided a potential turmoil that would have not benefited anyone.

In September, the American economy only added 194,000 new jobs, which is 174,000 jobs less than the month before. Surprisingly, the unemployment rate declined from 5.2% to 4.5% because too many people were exiting the workforce. This is partially due to an unusual amount of jobseekers giving up their search. Consequently, the situation of a “shortage economy“ in for example America is exacerbating businesses’ struggle to find personnel. But also the public sector is lacking childcare workers, which therefore forces parents to stay at home and hence prevents them from starting a new job. Higher wages and an increased average of hours worked are further signs of a tight labor market. By and large, the September unemployment figures show that companies are still eager to hire but don’t find enough workers willing to be hired.

On Friday, the OECD announced that more than 130 countries have signed up to a global corporate tax reform to eliminate tax havens. The deal comprises a 15 percent minimum corporate tax rate. For years, large corporations like Apple and Amazon were able to shift sales and minimize their tax burden to less than 1%. Countries such as Ireland had reformed their tax code to become a tax haven, and as a result had experienced an economic boom. In order to accommodate tax havens such as Ireland, the tax rate was therefore set at a minimum of only 15%, while many member states had demanded a higher tax rate.

Traditional automaker giants, both in Europe and the US, are investing heavily in new production plans that involve electric vehicles. In particular, Ford announced new plants and battery factories, investing more than 11 billion dollars and employing more than 10,000 people. They told the press that they will transition from imported batteries to an American supply chain that will prevent shipping delays and shortages. Furthermore, Ford is partnering with recycling companies to ensure that the battery production increase would not harm the environment. Investors are appreciating Ford’s moves, as witnessed by the stock push of more than 10% in the last month. Traditional automakers might have joined the EV party later, constrained by the less agile nature of their established corporations, but they now engaged with all the firepower at their disposal, making the market increasingly competitive.

The San Francisco-based start-up, Allbirds, an ethical shoemaker that has recently announced the launch of a first “sustainable IPO”, has allegedly failed to adhere to some of the ESG commitments it made before the offering. Particularly, the number of references plummeted from 65 to 33 in an update of their prospectus. The company, which has seen its customer base growing among Silicon Valley workers, was the first to introduce the concept of “SPO” (Sustainable Public Offering), by achieving a value of $1bn in its recent private funding round in September 2020.However, the last developments questioned the genuineness of the focus on sustainability of Allbirds, culminating in a class action lawsuit.

Due to a shortage of drivers and truck drivers, multiple problems are arising in the supply chain for essential goods in England. Besides the reductions in food deliveries to supermarkets and restaurants, petrol stations have reportedly been affected as well. Large groups such as Esso and BP have had to close numerous service areas despite government assurances, causing queues of miles and protests from citizens. It is estimated that the UK is short of around 100,000 drivers. The situation has worsened in recent years due to both the pandemic and Brexit, which has forced many workers to return home. The government has announced a plan to issue temporary visas for 5,000 foreign truck drivers, but business leaders have warned that the measure is a short-term fix and won't solve the underlying issue.

The People’s Bank of China announced on Friday that all transactions with cryptocurrencies are illegal, banning digital tokens like Bitcoin. China’s central bank argued that crypto transactions would facilitate illegal financing activities and seriously endanger the security and the safety of people’s assets. These measures have heavy effects since China is the world’s largest crypto market. The price of Bitcoin fell by more than $2,000 in the wake of the Chinese announcement. Officially, trading of crypto currencies is forbidden in China since 2019 but Friday’s announcement is one of the clearest signals that the country plans to shut down the crypto market. Due to its low energy costs and cheap computer hardware, China has become the main hub of cryptocurrencies, accounting for 75% of the world’s bitcoin energy use.

Dear Students,  📣 The ESCP Finance Society is delighted to announce that our recruiting session is now open.  We are recruiting students attending all the programmes across all ESCP Campuses!  "The Society aims to help ESCP students to break into the Finance Industry, organizing dedicated networking events, and providing useful materials to support the application and interview process."    📆 Deadline: October 8th at 22:59:59 (GMT+1) 📆   Divisions Recruiting: - Events and Sponsorships - M&A - Markets

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The ESCP Finance Society is the oldest and largest student-run Association active in the finance field of ESCP Business School.

The mission of the ESCP Finance Society is to help ESCP students to break into the Finance Industry, organising dedicated networking events and providing useful materials to support the application and interview process.

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