BP makes largest oil and gas discovery in 25 years

BP has made a large oil and gas discovery in Brazil's Santos basin. This is the largest discovery since Shah Deniz in the Caspian in 1999.

Turkish lira weakness prompts fall in EM currencies

The Turkish lira has lost 40% of its value over the last year.  With national elections approaching, the central bank prompted the overnight offshore swap rate above 1300pc to defend the lira.

Turkish banks and corporates have become overstretched on short-term lending, having exploited dollar liquidity to push the country's external liabilities $234bn. Of this, about $150bn is short-term debt required repayment or refinancing within 12 months.

Turkey's reserve cover, the ratio of short term debt to net reserves, is now around 500%, the weakest amongst emerging market countries, according to Capital Economics.

One possible response from banks is to shrink their balance sheets and sell off foreign currency assets. This could trigger a credit crunch.  CDS on Turkey have spiked 150bp to 454.

Despite the situation being contained in Turkey, traders have responded by trading out of Argentine peso, Brazilian real and South African rand as well.

Arg Peso Crisis As Pres Macri Invokes Austerity as Leliq Rate Rises to 60%, Brazil Struggling

Argentina has announced sweeping reforms to kill the budget deficit in the wake of the peso crisis and to create conditions to enable a $50bn funding opportunity from the IMF. 2018 has seen the peso slide to 50% of its value against the dollar. The raising of USD interest rates has made it harder for certain countries, Argentina included, to pay its dollar-denominated debts. Argentina's central bank  (BCRA - Banco Central de la Republica Argentina) also raised its benchmark Leliq rate to 60% at the end of August to stablise the currency. With the Turkish lira down 44% against the dollar talk of an emerging market contagion is worrying investors. The Brazilian real is the third-worst performing EM currency down 20% against the dollar.

BTG Pactual Builds up Commodities Presence

BTG Pactual, the Brazilian investment bank, headquartered in Sao Paolo, has set up two commodities businesses, BTG Pactual Commodities and BTG Pactual Commodities Holdings:

• Run by Ricardo Leiman, former CEO of Noble Group.  Good luck Ricardo in building out this new business.  (this begs the question who is the current CEO of Noble Group - this is Yusuf Alireza).
• Shon Loth, a metals warehousing expert, has also been brought in from Noble. Well done Shon, hope you can leverage your warehousing experience effectively at BTG.

Many of the staff are ex-Noble. BTG have apparently spent $300m to build up the business.

Could this be a great time to enter the business? In the wake of heavier regulation, several institutions have pulled back from commodities and revenues in the first half have fallen 25% in 1H 2013 at the top biggest banks. It's been 10 years since the Federal Reserve allowed banks to get involved in this business.

BTG Pactual is controlled by billionaire Andre Esteves, who joined BTG as an IT intern having studied mathematics at the University of Rio and traded through the period of Brazil's hyperinflation. Well done Mr Esteves for creating such a force to be reckoned with in the global banking industry.

Governors of Central Banks II

Brazil: Alexandre Tombini, has a PhD in Economics from University of Illinois, and Bachelors in Economics from the University of Brasilia. He is the head of the Banco Central do Brasil. The bank controls the economy via adjusting the SELIC rate (overnight borrowing rate), the SE standing for Sistema Especial.

Russia: The Russian Central Bank is led by Elvira Nabiullina who studied at Moscow State University. Its primary responsibility is to protect the stability of the Russian Ruble. It part-owns the Russian commercial bank Sberbank.

India: Raghuram Rajan (appointed in August 2013, for a three year term). BSc, IIT Delhi, Electrical Engineering, PhD in management from MIT in 1991. He has published a book called "Fault Lines" which won the Goldman Sachs Business Book of the Year Award in 2010. He was the former Director of Research at the IMF. While at the IMF he published a paper entitled: "Has Financial Development made the World Riskier?"

UK: Mark Carney, also Chairman of the Financial Stability Board (FSB), has a PhD in Economics from Nuffield College, Oxford and was formerly Governor of the Bank of Canada.

China: (People's Bank of China), Zhou Xiaochuan, since 2002. His wife, Li Ling, is a senior member of China's Ministry of Commerce. He has introduced reforms to recruit "sea turtles" (overseas Chinese with experience of real capitalist markets).