Goldman sees post-Brexit UK recession; cuts EU, U.S. growth views

According to Goldman Sachs’ economists Jan Hatzius and Sven Jari Stehn, the British economy would enter into a mild recession by early 2017 based on the outcome of last week’s decision to exit the European Union.

The ‘Brexit’ referendum, announced on 23 June 2016, would cut the country’s GDP by a total of 2.75% in the next 18 months.

Separately, according to Goldman Sachs, Eurozone’s GDP would average 1.25% vs. 1.5% before the Brexit vote, over the next two years.

For the U.S. economy, the bank expects GDP growth in the second half of 2016 to come in at 2% vs. previous forecast of 2.25%.

Goldman attributed the changes in GDP forecasts primarily to principle risks arising out the Brexit vote:

  • Terms of trade would most likely deteriorate as companies would scale back their investments due to the uncertainty created by the outcome
  • Financial conditions would tighten due to exchange rate fluctuations and weakness in risk assets like stocks and junk bonds

Source: Reuters

Goldman Sachs probed by U.S. investigators over 1MDB

U.S. investigators are trying to assess whether Goldman Sachs violated the Bank Secrecy Act, in relation to the 1MDB scandal as it had helped the Malaysian state-owned firm raise $3bn in debt on which the firm missed an interest payment.

It appears that half of the proceeds from the sale, which were transferred by Goldman Sachs to a Swiss bank account controlled by 1MDB, disappeared with some ending up in the Malaysian prime minister’s bank account.

The investigators believe that Goldman Sachs may have had grounds to believe that the money was not used for its intended purpose and has not been accused of wrongdoing.

Sources: Reuters

Goldman Sachs said to have conducted lay-offs at its investment banking unit

According to sources, Goldman Sachs Group Inc. conducted lay-offs at its investment banking division in the last few weeks.

As part of the job cuts, the bank eliminated dozens of managing directors, executive directors and vice presidents across the mergers, debt and equity capital markets unit in cities including London, New York and Hong Kong.

These cuts were termed to be in addition to the bank’s annual 5% percent planned layoffs of employees deemed underperformers.

Source: Bloomberg