Weekly Market Outlook

The man who was once tipped to be the next German chancellor has given a gloomy assessment of the country’s banking sector, telling CNBC that he would hesitate to invest in European banks.

“I’m not a big optimist on European banking stocks,” Karl-Theodor Zu Guttenberg, the founder of New York-based Spitzberg Partners, told CNBC Monday.

Guttenberg was the former German economics and technology minister and was part of Angela Merkel’s Christian Democratic Union party (CDU) but left the government in 2011 after being engulfed by a plagiarism scandal. He explained that the recent saga surrounding Deutsche Bank could heap more difficulties on the German chancellor as she would not want to push through an unpopular bailout for the embattled bank but also would not want to sacrifice a “German symbol.”

The government has denied any public backstop for the bank which has been asked by the U.S. Department of Justice to pay a settlement of $14 billion. However, Guttenberg said that it would be highly likely that policymakers were making some sort of contingency plans in the background.

Johannes Simon | Getty Images

“She’d (Merkel) be extremely reckless to not prepare for plan B,” he told CNBC.

He said that the best-case scenario was for the proposed penalty to be negotiated down and for Deutsche to come up with a “viable strategy” for the future that meant that it wasn’t just “muddling through.”

He added that the worst case scenario for the bank would be a panic reaction by investors and clients in Germany and for the government to “step in too quickly.” He also questioned the amount of assets that Deutsche had available to sell if it needed to replenish capital reserves.

Jorg Eigendorf, head of communications and senior group director at Deutsche Bank, has previously told CNBC the bank has a “comfortable cushion” and there was “no reason to be worried.”

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Investments

Petra is one of the most popular places to visit on the planet. Take a look at almost any traveler’s bucket list and Petra will be on it. Why? Because it really is amazing. But guess what. There is so much more to Petra than the Treasury, the iconic façade featured in every travel book and brochure about Petra.

Petra deserves two days to be seen properly. Yes, many people visit Petra on a day trip, spending only a few hours here, but they are missing a lot. To really experience Petra you need more time here.

WHAT IS PETRA

Petra was the capital city of the Nabataeans from roughly 300 BC to 100 AD. The Romans took over in 100 AD, then several earthquakes destroyed much of the city and Petra was abandoned. For centuries, Petra was left untouched, until it was discovered by a Swiss explorer in 1812. Petra became one of the “New Seven Wonders of the World” in 2008 and since then has been making the bucket lists of travelers all over the world.

BEST THINGS TO SEE IN PETRA

Stretching out in a line from the town of Wadi Musa, visitors enter the park and then follow the trail into the Siq, the legendary canyon where tourists get their first views of the Treasury. Continue the walk past the Treasury, visiting the Royal Tombs and Roman ruins. Those with enough time and enough energy can continue onto the Monastery, another monument that rivals the Treasury in its splendor. There are numerous other side trips and interesting things to see in Petra, as well as rides on camels and donkeys if you so desire. Petra Map
BAB AS-SIQ

Every visitor’s journey starts at Bab As-Siq, the trail that runs from the ticket booth to the Siq. There are tombs and monuments to see along the way, such as the Obelisk Tomb.

SIQ

The Siq is a gorge that was formed when tectonic forces broke the mountain into two pieces. It is a delight to walk through, a snaking path with rock walls towering high above your head. It is almost suspenseful…around every bend you expect to get that famous view of the Treasury.

Siq Petra
THE TREASURY

This is it, the view that draws so many visitors to Petra. Completely carved out of the sandstone mountains, the Treasury was built as a tomb for the Nabataean King Aretas III. The Treasury is the highlight of Petra, but this is only really the start of a visit here. There is so much more to see.

Treasury View from Siq The Treasury Petra
STREET OF FACADES

From the Treasury, the journey continues. The path widens, taking visitors to a much more open area. Here are tombs and houses built into the sandstone mountains by the Nabataeans 2000 years ago.

This is the view from the hiking trail to the High Place of Sacrifice towards the end of the day.

Petra at Dusk is Beautiful
HIKE THROUGH PETRA

Not far past the Treasury, Mohammad took us “off-road” to unmarked hiking trails. The hiking trail is completely unmarked and almost impossible to follow if you didn’t know what to look for.

Hiking Petra Overlooking Petra Tombs on the hike Goats in Petra Petra Unique View Making Bread
THE ROYAL TOMBS
Here lies a series of facades carved from the sandstone mountain, the tombs of Nabataean royalty. Royal Tombs Petra This is the interior walls of the Urn Tomb, the most popular of the Royal Tombs.
Cave Walls of Petra
THE COLONNADED STREET
The Colonnaded Street is a reminder of the Romans who took control over Petra in 106 AD. Those Romans were masters at building, and their road still remains today, along with several columns lining the side of the road. Colonnaded Street
THE GREAT TEMPLE
This Nabataean Temple was built in 100 BC and is the largest freestanding building in Petra. Roman Ruins Petra
THE MONASTERY (AL-DEIR)

This you have to see. It is just as impressive as the Treasury. Good thing, because it requires quite a hike to get to it.

The hike to the Monastery has visitors climbing over 800 steps for a solid 20 minutes or more of hiking. It is an almost entirely uphill journey. Along the way visitors pass numerous stalls, worked by women, selling scarves, souvenirs, and jewelry.

Path to Monastery Monastery Petra
BEST VIEW IN PETRA
From the teashop there were signs pointing us towards the “Best View in Petra.” Best View in Petra

To get to the “Best View of Petra” required going on another short, uphill hike.  What do you think? Is this the best view of Petra?

Monastery Petra Best View
HIGH PLACE OF SACRIFICE
  High Place of Sacrifice Petra Dangerous View of Petra
PETRA AT SUNSET
Treasury Side View This is the last of the visitors, camels, and horse drawn carts before closing time. In front of Treasury Petra
  Looking Up at Petra Treasury
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Weekly Market Outlook

The pound risks turning from prop to pain for the U.K. economy as Brexit negotiations near.

Sterling tumbled the most last week since the vote to leave the European Union in June, as investors woke up to the fact that the U.K. government’s approach to Brexit may mean forgoing access to the single market. While the currency’s weakness has helped cushion the economy in the immediate aftermath of the referendum, the latest slide may carry more costs than advantages.

The drop caused companies to downgrade profit forecasts, threatened to fan inflation, and also hinted at a further fall from grace for what was once the global reserve currency. The flash crash last week was more redolent of a frontier currency than the world’s fourth-most traded, and only Sierra Leone’s leone and the Mozambique metical have dropped more than the pound since the June 23 referendum.

While a weaker currency can give exporters a boost, those advantages can disappear when the slide is as fast and disorderly as sterling suffered last week, according to Nomura Holdings Inc. The pound’s 16 percent tumble against the dollar since Brexit may be part of a fundamental shift in the state of the U.K. economy that monetary policy alone can’t tackle, former Bank of England policy maker Adam Posen said on Friday.

Economic Impact

“It’s a really a question of pace as much as a level,” said Bilal Hafeez, global head of foreign-exchange research at Nomura in London. “The key thing is the need for more stabilization, or less sharp moves. But if it continues at this pace it could have a negative feedback loop.”

The impact of the declining pound has been filtering through since the vote.Manufacturing has been supported by a weaker sterling, the exporter-heavy FTSE 100 index approached a record high, while import prices have jumped. As the plunge accelerated during the ruling Conservative Party’s conference last week, the wider fallout became apparent. Sports Direct International Plc announced losses on its currency hedge were forcing it to scrap the profit forecast issued just a month ago. Bond-market expectations for faster inflation soared.

The disruptive impact from a sudden currency depreciation may be so large that it exceeds the economic benefits that accrue from higher exports, according to Commerzbank. For consumers already noticing the higher cost of foreign travel, the risk is that a weaker currency results in price rises at home, while faster inflation may make it less likely that the Bank of England will be able to support a slowing economy via lower interest rates or more asset purchases – increasing the risk of stagflation.

“The events of the past week probably provide a window into the sort of volatile economic environment the U.K. will face over at least the next two-and-a-half years,” said Rob Wood, an economist at Bank of America Merrill Lynch in London. “That environment is unlikely going to be good for growth.”

World’s Worst

Sterling, 2016’s worst performer among 32 major currencies tracked by Bloomberg, has plunged as the potential has become more real for a so-called hard Brexit that would see the U.K. settling for restricted access to the EU’s single market — the largest in the world — in return for the government retaking control of immigration.

With the exact meaning of Brexit still unclear, traders are expecting more volatility. Prime Minister Theresa May has pledged to trigger Article 50 of the Lisbon Treaty, the formal step needed to leave the bloc, by the end of March 2017. That would start two years of formal discussions on an exit.

Sterling slid 1.4 percent to $1.2434 on Friday after touching a 31-year low of $1.1841, according to composite prices compiled by Bloomberg of contributions from dealers. The drop of 4.2 percent in the week was the most since that ending June 24, when the Brexit vote results were published. The pound also had it worst week since 2009 versus the euro.

Investors alarmed by the possibility of tougher immigration curbs that could make it costlier to produce goods and secure talent are also fretting about the country’s record current-account deficit, which needs to be funded by a constant flow of foreign cash.

While a weaker currency may boost exports in the short term, “on the other side you have a negative wealth effect because you are giving away your exports for much less and you have to pay more for your imports,” said Ulrich Leuchtmann, head of currency strategy at Commerzbank in Frankfurt. “At some point this wealth effect is dominating and the net effect on the real economy is a negative one.”

With a friendly divorce between the U.K. and its EU partners looking more remote, HSBC Holdings Plc, Europe’s largest bank, said the pound’s slide is far from finished and predicts a slide to $1.10 by the end of 2017.

Sterling “has gone from a cyclical to a political and structural currency,” David Bloom, global head of currency strategy at HSBC in London, said in a report to clients. “The structure and politics are conducive to a currency that needs to fall to a level that causes balance” and that is “still a lot lower than where it is today,” he wrote.

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Weekly Market Outlook

Inflation in the euro area should return to the European Central Bank’s target by early 2019 at the latest, ECB President Mario Draghi said.

“Our inflation rate will pick up during the course of 2017, and then will continue moving in 2018 toward the objective which is close but below 2 percent,” Draghi said on Saturday at a press conference during the annual meeting of the International Monetary Fund in Washington. “This is predicated on maintaining the extraordinary support of our monetary policy.”

While the Frankfurt-based ECB hasn’t met its own definition of its mandate on inflation since early 2013, an unprecedented wave of stimulus measures during Draghi’s tenure including the current asset-purchase pace of 80 billion euros per month ($90 billion) has helped keep the currency bloc away from outright deflation. Draghi’s comments imply that fresh staff forecasts due in December — which build-in the impact of current stimulus — will show a 2019 inflation rate in line with the goal.

Achieving that target would mark the end of Draghi’s fight against the euro area’s stubbornly low inflation after more than six years. The ECB has deployed negative rates, asset purchases and cheap long-term loans to banks to rein in inflation.

Action Ready

The December round of staff forecasts may serve as the basis for a decision on whether the ECB intends to continue its quantitative easing program at the current rate beyond the end date in March 2017, whether the program will be wound down gradually after that, or if it could be stopped completely. That said, Draghi underlined that the ECB is ready to act if the path of inflation disappoints.

“The Governing Council continues to monitor closely the possible presence of second round effects produced by the fact that inflation has been so low for such a long time and could get ingrained in wage negotiations,” Draghi said. “We have no firm evidence of anything like that at this point in time but we continue monitoring the situation.”

The next few months of the ECB’s existing stimulus program are likely to be characterized by the debate over how the central bank will adapt it to potential scarcity of assets in some market segments. In September, Draghi tasked technical committees of the central bank to examine options to ensure the current program can be maintained at the full rate.

Implementation Focus

“We are completely focused on implementation,” Draghi said in Washington. He took the opportunity to remind euro-area governments that the ECB policies give time for economic reforms to be undertaken. Draghi presented a list of measures that countries with fiscal space — such as Germany — could do to boost productivity, including investment in education, technology and infrastructure.

While Draghi was moderately upbeat about the outlook for the euro area, he warned that the full impact of the U.K.’s decision to leave the euro area may not have fully unfolded.

“The event is very significant; to think it won’t have any consequences is perhaps asking for too much,” he said.

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