Last week’s arrest of GPB Capital Holdings’ Chief Compliance Officer, Michael S. Cohn, left investors feeling their investments have crashed and is unlikely to ever come back. This comes after a year of bad news that included investigations by the FBI, SEC, FINRA and state agencies.
Many GPB Capital investors have filed lawsuits an attempt to recover losses. The central argument to most of the lawsuits is that most of the investors should never have been sold GPB Capital. This is because GPB Capital was supposed to be marketed to only accredited investors, meaning high net worth individuals, that could assume the risk. However, court documents show that it was sold to average “retail” investors that were oblivious to the risk of GPB Capital. It is further alleged that many financial advisors and broker dealers were motivated by the extremely high commissions.
According to Matthew Thibaut, Haselkorn & Thibaut, a law firm representing investors nationwide, “… none of this reflects positively on GPB, not the auditor withdrawal, not the pending litigation, not the ongoing state and federal investigations, and certainly not when a recently hired Chief Compliance Officer is charged with alleged wrongdoing including obstruction of justice.”
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Turning to the Stock Market
Investors are focused on the comments of US Secretary of Commerce Wilbur Ross, who said in an interview with Bloomberg over the weekend, that US companies will be issued licenses to work with Huawei “very shortly”. The statement was greeted by the market as a sign of progress in trade negotiations between China and the United States. Also, Ross expressed the hope that soon the United States will remove the threat of the increasing of the import duties on foreign cars, as the US administration is successfully negotiating with the EU, South Korea, and Japan on the automotive industry. USD is strengthening against GBP and JPY but has ambiguous dynamics against EUR.
During the day, the US September Factory Orders data will be published. The indicator is expected to decline for the second month in a row, this time by 0.5%. The implementation of forecasts may put pressure on USD.
Today, oil prices have risen significantly. Quotations are supported by several factors. On Friday, White House officials said that a limited deal between the PRC and the US could still be signed during November. On weekend, US Secretary of Commerce Wilbur Ross said that US companies will be licensed to work with Huawei. Today, Iranian officials said that the country is preparing new centrifuges to enrich uranium, which will be 50 times faster than before. This statement is driving tensions in the Middle East, which traditionally pushes oil prices up. Finally, according to the Baker Hughes report, the number of active rigs in the United States continues to decline and has decreased from 696 to 691 over the past week.
Eurozone
EUR is strengthening against GBP and JPY but has ambiguous dynamics against USD.
Investors are focused on the comments of US Secretary of Commerce Wilbur Ross and statistics on business activity. EUR strengthens after Ross said that the United States could remove the threat of higher export duties on foreign cars. Reaching a compromise on the import of European automobile concerns into the United States may remove some of the trade contradictions between Brussels and Washington, although it does not eliminate them. The issue of introducing mutual export tariffs due to subsidies by Boeing and Airbus will continue to threaten bilateral trade.
October Manufacturing PMI data in Germany and the EU were better than market expectations; however, both indicators did not leave the stagnation zone, demonstrating the pressure on the European economy made by world trade conflicts. Manufacturing PMI in Germany increased from 41.7 to 42.1 points, instead of the expected 41.9 points. EU Manufacturing PMI rose from 45.7 to 45.9 points, although investors did not expect the indicator to change.
United Kingdom
GBP is weakening against EUR and USD but moderately strengthened against JPY.
GBP is still under pressure from British political uncertainty. Key political parties are preparing for parliamentary elections but experts now believe that a future vote may not clarify Brexit’s fate, as the country is highly divided and neither side can get enough parliamentary seats. Against this background, positive data on business activity in the British construction sector are not able to support GBP. In October, the figure rose from 43.3 to 44.2 points but stayed in the stagnation zone.
Japan
JPY is weakening today against its main competitors – EUR, GBP, and USD.
Today is a day off in Japan, the exchange and banks are closed, and investor activity is significantly reduced. However, JPY is under pressure from the comments of US Secretary of Commerce Wilbur Ross, who hinted at the positive course of trade negotiations with China, as well as consultations on automobile exports with the EU, Japan, and South Korea. Against this background, investors are getting rid of JPY as a shelter asset.
Australia
AUD is strengthening against JPY and GBP but has ambiguous dynamics against USD and EUR.
The September retail sales data released today turned out to be poor. On a monthly basis, the indicator, contrary to expectations, slowed down growth from 0.4% to 0.2%. Tomorrow, investors are waiting for the decision of the Reserve Bank of Australia at the interest rate. It is expected that the Australian regulator will not go to the fourth rate reduction this year and leave it at the same level of 0.75%. In an accompanying statement, the RBA may hint at its further actions but it is unlikely that they will be active in the near future. Earlier, the head of the regulator, Philip Lowe, noted that three rate cuts already help the Australian economy and bring it closer to economic growth. Low interest rates support job growth and a general increase in household incomes.
