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  • 2019/01/17
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The color of money

Surprised by the plethora of billion-dollar headlines seen recently on the pages of US newspapers and magazines, an American blogger recently posted that “we’ve never talked this much” about money. So... let’s talk about money. We all know it doesn’t grow on trees, so the French sometimes turn instead to the luck of the draw. 

The French lottery operator La Française des Jeux, soon to be privatised, reported record bets last year, even though the number of punters fell owing to the diminished success of draw games. French daily Le Figaro writes: “La Française des Jeux, Europe’s number-two European lottery and world number four, posted sales of €15.8 billion in 2018, up 4.4% year on year. Some €10.7 billion was paid out to punters, including 198 millionaires.  

Draw and scratch games remained the biggest earners for La Française des Jeux, but sports betting topped the €3 billion mark for the first time ever, up 21% on 2017. This resulted in part from the World Cup, won by the French squad in July, with over €300 million in bets, as well as from investments in digital technology, with electronic sports betting rising a full 60% for 2018 as a whole. “Instant” lottery games such as scratch games continue to be a major success, with growth of 3.2% and €7.69 billion in wagers. Draw games, including Loto, Euro Millions and Keno, fell 1.9% to €5.07 billion. Some 25 million punters were recorded in 2018, down from 26 million in 2017.” Understood! In other news, Le Figaro Economie focused this week on a study by the Fitch ratings agency on the world's main housing markets.

The study warns that a slowdown may well be in store as credit tightens after a long period of bounty. The journalist from Le Figaro explains why: “‘The rise in housing prices [is] under pressure,’ says the ratings agency in its yearly review of world markets focused on 24 countries, including major Asian and South American countries, the United States and Canada, and a large part of Europe.  

For most of the countries studied, Fitch expects a slowdown in the price increase. This is true for the United States, several European countries (including France) and Japan. Fitch is even forecasting a downturn in four countries: Sweden, South Korea, China and Australia. Prices ‘fell or stalled in 2018 in Melbourne, Stockholm, Sydney, Toronto and Vancouver following public intervention to limit purchases by foreigners [and] cautious macro-economic measures’, which restrict the granting of loans. Fitch also talks about markets being handcuffed by the trend of unaffordable housing.” Naturally, the situation is exacerbated by the prospect of less credit-friendly monetary policies (and in particular the interest-rate hikes planned by the European Central Bank by the end of 2019 or 2020) as well as ‘political uncertainties’ such as the consequences of a no-deal Brexit (UK MPs having massively rejected the current deal) and the coming to power of a far-right party in Brazil.  

Fitch expects the housing loan sector to remain healthy in the immediate future, with no increase in arrears in 2019 or 2020 in any of the countries studied. But it is less positive about what comes next. The situation could deteriorate in the ‘medium term’ owing to ‘a rise in interest rates, less emphatic fiscal stimulus in the United States and a growth slowdown in China, with global debt set to remain high’, warns Fitch.  

So, what does the stock market think? The financial daily Les Echos writes: “Rather than triggering a market collapse, the UK Parliament’s overwhelming rejection of Theresa May's Brexit deal was greeted with composure on both sides of the Channel.” We all know that investors abhor uncertainty. Yet between now and Brexit deadline of 29 March, the only certitude is that the UK will be shrouded in a dense mist. This fogginess is clouding political scenarios (general elections? another referendum?) and the economic outlook of the divorce form Europe. Is a new agreement in store? Will there simply be no deal? Or will the deadline be extended beyond March?

Les Echos continues: “The financial markets reacted with typically British phlegm to the Parliament’s resounding rejection of Theresa May’s deal. Having been something of an atonement for the sin of the 2016 referendum, pound sterling recovered against the euro, hitting a two-month high.”  

Money, the heart of the matter here, is under pressure from potential changes in political colour in Europe. Watch this space!  

Christian Moguérou

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