UCAS application numbers show 7.4% drop for UNITE Group

UNITE Group revealed UCAS student application numbers for 2012/13 yesterday, which confirmed a 7.4% drop in applications and met previously announced expectations of a 5-10% fall.

583,546 students applied for university places in 2011, compared with 540, 073 in 2012.

The student accommodation group said they do not expect the decline in applicants to translate in actual student numbers, and remained confident of achieving a rental growth of 3-4% for the year. The reduction in applications means that 2012/13 numbers are broadly in line with those of two years ago, for the 2010/11 academic year.

University places have continued to outride supply by approximately 32%, which means 156,000 students will fall short of a place. UNITE conducted research in December 2011 for 2012 applicants which showed 79% of students were willing to pay an increase on tuition fees for good academic reputation.

Whilst the number of UK applicants has decreased by 8.7%, non-EU students continue to see the appeal of UK universities, as figures show an increase of 13.7%. International students are a key customer segment for UNITE, and this continuing trend supports the Group’s business model and customer acquisition strategy.

UPP wins bidding battle, securing £230million deal with University

The University of Reading will see its entire on-campus accommodation run by a private student accommodation provider in a £230.1 million deal.

UPP will manage 4,321 rooms under a 125-year agreement in the largest single private residential investment into a UK university. This will consist of the operation of 2,623 rooms of existing accommodation, for the 2011/2012 term, followed by a further 898 rooms currently under construction. 650 new rooms will be developed to complete the project.

The company work with eleven other universities, yet this deal is unique in its time scale – usually such agreements operate between forty and fifty years.

Acting vice-chancellor of Reading, Professor Tony Downes, said he was “delighted” with the deal, and believes it will add to the “high quality experience at Reading.”

The majority of the funding will be provided by Aviva, the UK’s second-largest insurer, marking its first large scale investment into the Higher Education sector.

Sean O’Shea, chief executive of UPP, said: “This deal shows that the higher education sector is bucking the trend, and is an attractive opportunity for investors.”

Mr O’Shea said the deal represents investor confidence in the Higher Education market during such turbulent economic times.

The European Summit Explained

EU leaders met at the European Union summit last week to discuss how they could make progress and avoid Europe falling into a similar debt crisis in the future. Here’s a run down of what happened and what was said.

Some of the measures were simply put in place to put a stronger emphasis on existing fiscal rules that are currently being loosely followed. At present, there is a measure set in place that states if a country reaches a certain amount of debt, they are issued a fine. Yet so far, no countries have been fined.

On Friday leaders discussed a stronger enforcement on this rule, meaning “there will be automatic consequences” for countries who exceed the deficit limit of 3% gross domestic product.

This rule will be made possible through communication between the EU countries – if the European Council agrees that an EU country is breaching fiscal rules, the country could be forced to put a deposit into escrow.

Another fiscal rule outlined at Friday’s summit is that countries must pledge balanced budgets, and will be issued with automatic corrections if they breech the terms.

This would mean if a countries structural deficit breaches 0.5% of GDP they would face automatic consequences. A “debt-brake” puts a cap on public debt according to structural deficit, which means it is adjusted for the business cycle, taking economic boom and bust into account.

The details surrounding this rule are currently rather hazy; whilst Germany currently has a “debt-brake” implemented, it has not been decided what each country’s amount would be, and this must be decided by the EU’s high court.

What’s more, although Germany has a similar measure already in place, they did not manage to prevent it from exceeding the 3% deficit ceiling last year. It is hoped with tighter rules, countries will have to work alone in order to reach their targets, with no oversight from Brussels.

Whilst the general feeling amongst government leaders is that Friday’s plan was a step in the right direction, there are still problems that need ironing out.

John Lonsky, chief economist for Moody’s Analytics’ Capital Markets Research Group said: “There’s been progress, but this is not enough to constitute a satisfactory resolution.”

One of the measures was for eurozone states to provide up to 200billion euros in loans to the International Monetary Fund to help tackle the crisis, with 75% of the money coming from the 17 countries that use the euro.

Lending to the fund has been unpopular amongst IMF shareholders who are wary of sending large amounts of money to Europe.

It was agreed that the 500billion euro European Stability Mechanism bailout would go into action next year. It has been speculated that this would be combined with the 400billion euro European Financial Stability Facility currently in place, but governments have decided that the two will not run alongside each other.

Germany fronted the approach of implementing a new pact that would give the changes a stronger legal force. This would make it easier for EU authorities such as the European Court of Justice and the European Commission, to enforce them.

But not all countries were too keen on this measure – the UK refused to back the change, which means up to 26 governments, including 17 euro countries, will form their own separate agreement.

This led one German daily paper, the Süddeutsche Zeitung, to believe the outcome posed as a victory for Chancellor Angela Merkel. The front page of their weekend paper read: “Merkel succeeds – Great Britain isolated.”

Charles Grant, director of the pro-EU Centre for European Reform said: “Britain is as isolated as it’s ever been in the 25 years I’ve been following the EU. If I had to put money on it now, I think Britain will leave the EU in the next 10 years.”

Now Friday’s summit is over, eurozone governments await the outcome of Standard and Poor’s review, which could pose potential downgrades for triple-A countries.

Japanese stocks fall as ECB fail to meet expectations

The European Union Summit is in full swing, and Mario Draghi has set some ground rules on how to move forward and avoid future debt build ups. Yet Japanese stocks have been left disappointed, as speculation of big bond-buying from Europe falls short…

Japanese stocks fell, and fingers of blame are pointing at the ECB for its apparent speculation of big bond-buying.

Nikkei 225’s Stock Average saw its biggest drop in two weeks, Sony Corp. lost 3.3percent and Mizuho Financial Group slid 1.9percent.

These are companies who are somewhat reliant on ECB bond buying, showing prime examples of how the problems in the eurozone are having a knock-on affect on the market.

Juichi Wako, a senior strategist at Nomura Holdings Inc. said: “The best scenario that the market had expected was for the ECB to decide to expand purchases of government bonds and then for the European Union to strengthen finance regulations.”

ECB expectations also disappointed ratings agency Standard and Poor’s, who saw their 500 index fall 2.1percent yesterday. They anticipated the ECB would expand its 207 billion-euro bond buying program.

Yet ECB president Mario Draghi said he was “surprised” markets thought the bank had been hinting at big bond buying.
In yesterdays speech, Mr Draghi put emphasis on a eurozone “fiscal compact” to restore bondholders confidence:

“What I believe our economic and monetary union needs is a new fiscal compact – a fundamental restatement of the fiscal rules together with the mutual fiscal commitments that euro area governments have made.”

The world is watching to see what happens at the final part of the European summit which is currently in motion. Leaders have already set some precautions to avoid such debt run ups in the future.

The plan includes the startup of a 500billion-euro rescue fund, on top of the 450billion already in place. Ultimately, Mr Draghi believes “the responsibility is with the leaders.”

Gold is the word in Japan as exports are at their biggest high in the last twenty years

People in Japan who bought gold twenty years ago have been cashing it in at record prices, resulting in a boom in Japan’s gold exports.

Shipments in the first ten months of the year reached 95.6 metric tonnes. Many countries have jumped on the gold band wagon; exports to Thailand have tripled, and those to Singapore doubled in the first ten months of last year. And the demand from Europe has almost doubled since the fourth quarter of 2008.

Kotaro Horita, a trader at Mitsubishi Materials said:“More and more people who bought gold and jewelry in the 1980’s and 1990’s are selling back what they purchased.”

The largest gold retailer in Japan, Tanaka Kikinzoku Kogyo K.K. reported a 40per cent increase in gold bought from individuals in the first nine months of the year. According to Horita, China and Southeast Asia have been showing particular interest in the metal, with a high increase in exports.

Precious metals such as gold are considered safe havens during times of global economic uncertainty, as they are a good hedge against inflation; which many experts predict will be coming in the years ahead.

Unlike other safe havens, such as the Swiss franc and the Japanese Yen, the price of gold can not be easily interfered with by any one entity. This could attribute to the jump in global gold investment from 33per cent to 468.

With the future of the euro in question, Central Banks have been turning to gold as a safe haven.
“Central banks are continuing to buy gold exchange-traded funds after concerns arose about the creditworthiness of euro- zone nations,” said Koichiro Kamei, managing director at Market Strategy Institute.

Marcus Grubb, managing director at World Gold Council, predicts the amount bought by Central Banks could reach 450tons this year; a big increase from last years purchases of 142 tons.

Eurozone backlash will not phase investors as Asia shines

The debt crisis in Europe provoked fears of contagion, as Asian companies prepared to face the backlash of the economic downfall in the eurozone.

But despite the turmoil, investors are not phased by the possibility of contagion. In fact, they are expecting credit-rating upgrades in Asian countries.

As fifteen eurozone countries face the threat of a downgrade by rating agency Standard and Poor’s, Indonesia and the Philippine’s are being seen as desirable economies for investors, with a possibility for an upgrade from the Philippine’s Ba2 status.

It’s not the first time Asian countries have withstood during times of economic instability; China was upgraded by Moody’s to Aa3 in 2008, after the collapse of the Lehman Brothers which caused a global economic crisis.

Agnes Belaisch at Threadneedle Asset Management in London said: “Further rating upgrades will reward those emerging countries that manage this new stress test successfully, as they did just a couple of years back.”

To put things into perspective, here are some comparisons between European and Asian countries:
When Greece’s debt problems were in full swing, the ratio of debt to gross domestic product was 143 at the back of 2010. France, an economy which is seen as one of Europe’s six triple A’s, was at 82 per cent. A far cry from 16 per cent, 26 per cent and 52 per cent seen in China, Indonesia and the Philippines.

There were also significant differences in the average basis point gains on credit-default swaps, with Asian countries seeing an average rise of 65 basis points to 163 points for 2011, as eurozone countries lifted to 305 from 122.

The graph shows how the credit-default swaps in some of the strongest Asian countries are continuing to fall, which suggests investors are not phased by the possibility of European backlash.

Whilst countries in the eurozone gained a mere 1.4per cent rate on average in the third quarter, Asia’s ten biggest economies excelled, tripling Europe’s rate, reaching an average of 5.2per cent.

Thomas Byrne, senior vice president at Moody’s Investors Service said: “If there’s continued good policy performance, macroeconomic stability in these countries and they weather this distress coming from the euro zone, in general that would be a credit-positive development.”

Whilst it is evident Asian countries are excelling in comparison with Europe, the eurozone continues to hinder other economies from becoming stronger. Andrew Coloqhoun from Fitch Ratings fears Asian countries could be at risk if Europe announce further cuts to global growth forecasts. However, the Financial Times reports he is confident there could be upgrades for both Indonesia and South Korea in the foreseeable future.

Threat of downgrade for six strongest European Economies

Ratings agency Standard and Poor’s has warned six of Europe’s biggest economies they may lose their cherished high credit ratings.

Standard and Poor’s outlined the reasons for its move: “by our belief that systemic stresses in the eurozone have risen in recent weeks to the extent that they now put downward pressure on the credit standing of the eurozone as a whole”.

France and Germany are amongst the fifteen eurozone countries which have been put on negative watch. They currently hold triple A credit ratings. The immaculate rating shows the borrower’s debts pose a minimal threat of defaulting. The implications of a downgrade can be unattractive to investors, who may wish to stay clear of countries at risk.

The move came just days before Friday’s EU summit, where it has been speculated there could be discussions on almost doubling the size of the euro’s rescue fund. This would mean the eurozone’s current bailout fund of 440 billion euro’s will still be in force when a further 550 billion euro’s become available in the middle of next year.

Standard and Poor’s warning had an impact on financial markets today, with a fall on the euro, trading 0.1 per cent at 1.34 dollars today. Government bond yields rocked today, with yields on French 10-year-bond yields a rising ten basis points to 3.21 per cent.

US Treasury bond yields stood out with a session high, rising four basis points, whilst German bunds saw a 2bp fall to 2.18 per cent.

Meanwhile, Italy benefits from an increase in trade, following a slide from an unaffordable 7 per cent that it was recently forced to pay, to 5.81 per cent on Rome’s 10-year-yields.

Investors eagerly await the outcome of Friday’s summit.

Global Fears over Europe’s debt crisis lead to liquidity

In an attempt to support the global financial system, The US Federal Reserve has slashed the cost of dollar liquidity on Wednesday, making short-term loans from the European Central Bank around half the amount lower in interest.

Along with other central banks, the co-ordinated move is aimed to avoid further calamities in the global financial system.

The conversion from euros to dollars had reached a record high since the collapse of the Lehman Brothers, and there has been a stigma attached to borrowing from the ECB. Wednesday’s move has shifted the Fed’s swap lines by half, from 100 to 50 basis points, and it is hoped this will encourage bidders.

The central banks’ recognised that liquidity may not solve all of Europe’s problems, such as a possibility of a “credit crunch”, but will be a progressive step forward. Since the European crisis has spread to other countries such as the US, they are acting to help ease the problems to come.

Emerging markets have also showed signs of an attempt to soften Europe’s financial blow, with China saying it would provide its first deposit cut in three years, so banks will pay a reserve of 20 per cent, rather than 21.5 per cent. Their main worry is the threat to economic growth.

Erik Nielson, chief economist at UniCredit outlined how the co-ordinated move will only help the surface issue: “You will buy some insurance against a big, ugly accident, which would be a big bank failure or multiple small failures. But it doesn’t solve the main problem.”

Tony Crescenzi, a strategist at Pimco, thinks Europe needs to take charge of its problems:

“The provision of liquidity is no substitute for other actions that Europe must take to solve its woes. The world continues to wait on European actions on fiscal rules, discipline and enforcement, as well as use of the balance sheet that matters most: The European Central Bank.”

So what else is the ECB considering to curb their crisis?

Many economists think they should up their bond buying programme, setting limits on government bond yields.

Whilst the government is not showing readiness for this move at the moment, the Financial Times suggests they will soon change their mind.

An action they will be partaking in is making sure politicians are meeting expectations in order to help solve the epidemic.

Public sector strikes following George Osborne’s announcement

There is unrest in the UK today as public sector unions join in a one-day national strike, following announcements made by George Osborne saying restraints on public sector pay will be extended for another two years.

Mr Osborne, Britain’s chancellor of the exchequer, attributed the changes to the turmoil in the eurozone having a damaging effect on the UK economy. He said: “Our challenge is even greater than we thought because the boom was bigger, the bust was even greater and the effects will last even longer”.

The Office for Budget Responsibility estimated a fall in economic growth from 1.7 to 0.9 per cent this year, and below half of the 2.5 per cent estimated for next year.

Whilst economic growth falls, the debt-to-GDP ratio is forecast to increase.

The OBR predicted the country would have to borrow thirty three billion pounds more than forecast. However, the Labour Party’s finance spokesman Ed Balls thinks Mr Osborne would have to borrow an additional one hundred and fifty eight billion.

He described Mr Osbourne’s borrowing as a “miracle cure”, and suggested the government should adopt Keynesian economics. This would mean intervention in the form of government spending and tax breaks in order to stimulate the economy.

Mr Osborne stated that Britain has faced higher inflation, and Keynsian thinking seeks to kurb that inflation.

But Mr Osborne is adamant a reduction in public sector pay increases by 1per cent is what the government needs to meet financial targets.

France defends credit-rating following Moody’s warning

France have been brought into the firing line this week as ratings agency Moody’s have given a warning it may change its ‘stable outlook’ on its credit rating to ‘negative’. This would mean it would be downgraded from its current ‘triple A’ status.

In response, French finance minister Francois Baroin said their current rates “correspond to financing conditions that are very favorable.” France aim to do everything in their power to not get downgraded.

In Moody’s weekly credit outlook note, Alexander Kockerbeck outlined the firms reasoning behind its recent warning:
“Elevated borrowing costs persisting for an extended period would amplify the fiscal challenges the French government faces amid a deteriorating growth outlook, with negative credit implications.”

France’s 10-year-bonds rose to 3.7 per cent last week. Whilst this doesn’t come near to the levels paid by Italy and Spain, the difference between French bonds and German Bunds reached a euro record high.

France are paying nearly twice as much as Germany for its long-term funding. Rising borrowing costs are what pushed countries such as Ireland and Portugal to seek bailouts.

Christophe Nijdam, a bank analyst at Alphavalue in Paris, thinks France is the weakest of the triple A’s. He said: “In my opinion, the only thing that can stop all of this lies in Germany.”

Another of Moody’s fears is weaker growth prospects in France. However, the French government remain confident they have 6 billion euros to fall back on, if they face lower growth next year.

Christophe Nijdam, a bank analyst at Alphavalue in Paris, thinks France is the weakest of the triple A’s. He said: