Month: December 2014

Asian bourses broadly higher on US lead, oil price bounce

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Asian equities largely rose on a data-light Monday following a bounce in oil markets and a third consecutive winning session on Wall Street last Friday.

US stocks rose for a third session at the end of last week, with the S&P 500 tallying its second-best week in nearly two years, as energy stocks continued to rebound. The Dow Jones Industrial Average gained 0.2 percent while the tech-heavy Nasdaq closed up 0.4 percent. The S&P 500 added 0.5 percent to finish at 2,070.65 points, rising 3.4 percent for the week.

Oil also bounced higher on Friday as selling pressure from a six-month price rout eased for a second time this week on short-covering. US West Texas Intermediate crude futures ended the session up USD 2.41 at USD 56.52 a barrel while benchmark Brent hovered above USD 61.

However, not all analysts feel that oil prices are poised for a rebound. “Unless Saudi Arabia balances the market, prices could fall to USD 15-20 a barrel,” Mike Harrowell, director of Resources Research at BBY told CNBC. “The question is why are we stopping here at the moment and how long is it? We’d be a bit suspicious on [oil prices] finding a floor.”

In other energy news, the United Arab Emirates oil minister urged all of the world’s producers on Sunday not to raise their oil output next year, saying this would quickly stabilize prices.

Nikkei flat

Japan’s key Nikkei 225 index fell nearly 0.1 percent an hour into trade from its intra-day peak of 17,692 points, as dollar-yen remained little moved at 119.45.

Minimal movements in the currency stalled the rally in exporter stocks; Nintendo reversed opening gains to dip 0.2 percent while Suzuki Motor dropped 0.7 percent.

Heavyweight components traded mixed, capping gains on the index. Softbank made gains of 0.8 percent but clothing chain operator Fast Retailing fell 0.2 percent early Monday.

Oil refiner Idemitsu is reportedly in talks to buy Showa Shell for USD 4.1 billion to create the second biggest player in Japan’s gasoline market, according to Reuters. Shares of both firms elevated 3.4 and 25.7 percent, respectively.

ASX rises 1.1 percent

Australia’s benchmark S&P ASX 200 index climbed to a two-week high in early trade, while the Australian dollar saw marginal losses to trade at USD 0.8135 against the greenback, near multi-year lows.

Oil and gas producers opened up, with Santos and Oil Search zooming up 5.3 and 4.3 percent, respectively. Miners were also broadly higher as iron ore prices rebounded; Fortescue Metals and BHP Billiton climbed 2.3 and 2.2 percent each.

Meanwhile, Australian Prime Minister Tony Abbott, battling a slide in public support, reshuffled his cabinet on Sunday. Abbott is nearing the end of his first full year in office, hobbled by missteps and a souring economy that have dragged his approval ratings to historic lows.

Kospi gains 0.2 percent

The rally on Wall Street also delivered gains to South Korea’s Kospi index, which traded near its highest level since December 11, after briefly falling into negative territory early Monday.

Samsung Electronics announced plans to increase its full-year dividend by as much as 50 percent last Friday, in an attempt to appease investors piling pressure on the group to boost shareholder returns. Shares of the South Korean electronics giant erased opening gains to trade flat.

Other blue-chips traded mixed, limiting gains on the bourse; steelmaker Posco inched down 0.2 percent, while Hyundai Motor advanced 1.5 percent on news that cash reserves of the country’s second-largest conglomerate surged 7.4 percent to 124 trillion won at the end of September.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

What’s next after a wild week in the market

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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After a week of high-octane turbulence, stocks have a good chance of drifting higher in the week ahead, giving the year a bullish finale.

Stocks most often gain in the month of December, so many analysts expect the year to end on a high note, barring external jolts, like the one from Russia in the past week.

In the last 10 years, the S&P 500 has been higher 80 percent of the time in December, with the final two weeks particularly strong, providing an average gain of 1.6 percent.Catch-up buying by fund managers and other year-end buyers is expected to provide support for a market that has pivoted around the price of oil for the past several weeks. Pressure from falling oil prices eased in the last few sessions, as traders appeared to believe the worst was over for crude prices for now.

Another positive boost for stocks came from the Fed after its meeting Wednesday, when Fed Chair Janet Yellen boosted confidence that the economy is improving, while reassuring markets the central bank is not planning to move quickly to raise rates.

“There’s so much pain in the energy trade already, it may not be (a hurdle) anymore,” said Tobias Levkovich, chief US equities strategist at Citigroup.

Levkovich said the market’s surge in the past week was in part due to a massive short squeeze. “We think some of the rally stuff we’re getting is borrowing from next year,” he said.

In the coming week, trading will be compressed into 3 ½ days because of Thursday’s Christmas holiday and an early close Christmas Eve.

Read More: Blackrock’s Rosenberg: Stocks will beat bonds in 2015

The S&P 500 and Dow were more than 3 percent higher in the past week, after wild seesaw trading drove the Dow down a little more than 200 points in the first two days of the week , before soaring 735 points in the last three days of the week. Friday’s gain was muted with the Dow up 26 at 17,804, and the S&P 500 9 points higher at 2,070, five points below its all-time closing high.

Read More: Oil seeks bottom

Buffeted by the expirations of options and futures, stocks and oil traded violently in both directions. West Texas Intermediate oil futures for January closed at $57.81 per barrel, a decline of 2.2 percent for the week.

Crude’s January contract was taken off the board Friday afternoon, and February’s WTI contract traded higher, above $58 in late trading. While stock traders made bets based on oil bottoming, energy analysts say crude may have more selling ahead of it, particularly in late winter when demand drops.

Read More: US oil soars on short-covering

What to Watch

There is a batch of important data in the coming week, starting with existing home sales Monday, then the third look at third-quarter GDP, durable goods and personal consumption Tuesday, and weekly jobless claims on Wednesday.

“The consensus is GDP is up a few tenths, 4.2 percent with another upward revision,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi. “It’s really more important to see what’s going on with the fourth quarter. It almost feels like Fed officials need to see 3 percent GDP to inch closer to rate liftoff.”

For that reason, he is focused on Tuesday’s personal consumption and spending and the inflation gauge within that indicator. “Yellen said actual inflation isn’t that important. It’s the outlook. I don’t think the market buys that. The market is thinking there’s some kind of deflation out there. We want to see what the PCE/deflator, the core is going to do on Tuesday,” said Rupkey.

The Treasury curve continued its flattening move in the past week. The two-year note was yielding 0.638 late Friday, and the 10-year was at 2.16, up from the 2.10 it was at the week earlier.

“The best economy in the world has the highest yields. It’s bringing in some buying,” Rupkey said. “The yield curve runs mostly off of the expectations for Fed policy. It is still flattening since the Fed meeting Wednesday. The market seems to have the message that the Fed is going” (to hike rates).

The market generally expects the Fed to raise rates from zero for the first time after the first half of 2015.

Levkovich said the stock market should not run into problems when the Fed makes its initial hike next year, and he expects the S&P 500 to reach 2,200 by the end of 2015.

The decline in oil should be a net positive, he said. “My concern about energy is not about (lost) jobs,” he said. “My focus is mainly around the idea that if credit markets get disrupted enough by it, does it raise the cost of capital for everybody. … We don’t want a leaching out of higher capital costs to the rest of the community.”

“It’s a net positive in terms of the consumer and the public is getting a massive improvement,” he said. High-yield energy corporate debt continued to get hit hard this past week.

As for companies in the sector, they will feel the pinch from lower prices but other companies could as well, he said. Traders sought bargains in energy stocks this past week, pushing the S&P energy sector 9.2 percent higher.

“There will be ripple effects into other industrial companies that have greater energy exposure than even the managements know,” he said. “If we pulled back on rig activity globally then you’ll have fewer helicopter rides, fewer aerospace parts for those helicopters. … The industrial companies are not necessarily aware of how big their energy exposure is.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Russia says ruble undervalued, but skeptics say not yet

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Russia’s currency briefly surpassed the Ukrainian Hryvnia as the world`s worst performing currency year-to-date this week, but it isn’t clear whether the ruble is undervalued.

The ruble weakened to 80 per US dollar on Tuesday despite the Central Bank of Russia’s effort to shore up the embattled currency with a 650 basis-point rate hike to 17 percent early that morning, briefly making it the world`s worst-performing currency.

Declining oil prices coupled with a series of Western sanctions on Russia over its activities in Ukraine have dogged the currency. The ruble is strongly correlated with the price of oil, Russia`s most important export, which accounted for 14 percent of gross domestic product in 2012, according to World Bank data. Brent crude oil has fallen from above $115 per barrel in mid-June to around USD 59.42 a barrel in Asian trade Friday.

Russia’s Finance Ministry said on Wednesday it was starting to sell its leftover foreign-currency stock and that it considered the ruble to be “extremely undervalued.” The ruble has since strengthened, with the dollar fetching around 61.60 rubles on Friday.

Undervalued?

But not everyone believes the decline is overdone.

“We are not convinced by the Russian finance ministry`s claim… on Wednesday morning that the ruble is `extremely undervalued.` After all, Russia has undergone an enormous deterioration in its terms of trade as a consequence of the slide in the price oil, which seems unlikely to unwind any time soon,” Capital Economics wrote in a note on Wednesday.

While Capital Economics notes the Finance Ministry`s claim was made when the ruble was above 70 per dollar and that it has since strengthened to around 60 per dollar, it believes Russian authorities “would continue to assert that the ruble was mispriced.”

“The devastating consequences that the current oil price will have on Russia`s economy and its financial system suggest calm may not be restored any time soon, keeping the ruble under pressure,” it said.

However, it does not rule out a further recovery in the ruble if oil prices rebound or if Russian authorities take further supportive measures.

Others also think Russia`s central bank isn`t offering the best call on the value of the ruble.

While oil is one of the main triggers of the ruble sell-off, it`s not solely responsible, Mizuho Bank said in a note on Wednesday, suggesting ruble weakness is justified.

“[The] sell-off is not solely from oil. Rather, [the ruble] tumble is exacerbated by, and predicated on, geo-politics as well as doubts about consequent ability and willingness to meet external debt,” it said.

“If [the] sanction impact worsens (acting via real or financial channels) or from a further and sharp tumble in oil prices, it could tip the [ruble] into a 1998-style crisis,” it added, referring to the financial crisis in Russia that saw the ruble plummet and the country default on its debt.

Not so fast

But some think the currency could be at a turning point.

It`s a very difficult time to jump into Russia given the tremendous correlations with oil prices, but if you think that oil is going to go sideways from here, you can buy, Tim Seymour, CIO at Triogem Asset Management told CNBC.

“I think the ruble will probably trade within a 55-60 band – that`s appropriate,” Seymour said. “Remember when we got near 75 and touched almost 80, that was implying Russia`s version of crude trading somewhere around $25 per barrel. If that`s where you think it`s going, that`s where the ruble will go. But I think the ruble should be 55 to 60 in a $65 Brent environment.” Investors typically monitor Brent crude oil to price Russia`s export blend.

Seymour believes that soft capital controls – roadblocks put in place by a government to restrict the flow of money out of or into its country- are likely, which will pressure the multinationals and the oil exporters who are selling in dollars to convert to rubles.

“To the extent that the central bank still has a lot of firepower, I think Russia is not going to default anytime soon,” he added. “Russia is probably better off than people think.”

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

View from the ground: China stabilizing, not slowing

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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China`s economy stabilized in the fourth quarter as the services sector strengthened and manufacturing sector picked up a bit of steam, according to the China Beige Book released on Thursday.

“While the rebound is certainly not an impressive one, sales, profits, and employment have all improved a bit,” said Leland Miller, president at the U.S. based China Beige Book (CBB) International.

“Conventional analysis will likely catch up with this development by early 2015,” he said.

The quarterly survey painted a more upbeat picture of the world`s no.2 economy compared with the latest economic indicators, which suggest weakening growth momentum.

Read More China`s top five macro themes next year: HSBC

The flash HSBC (London Stock Exchange: HSBA-GB) China manufacturing purchasing managers` index (PMI) released this week slipped to 49.5 from a final reading of 50 in November, contracting for the first time in seven months. The 50-point level separates growth from contraction.

“People look at PMI as a microcosm of China because historically it has been a manufacturing economy. But what we`ve seen over the past two years, is that manufacturing has performed counter-cyclically to the broader economy more often than not,” he said

The private sector survey, which resembles the U.S. Federal Reserve`s Beige Book, is based on interviews with over 2,000 respondents, made up of business executives across sectors and regions in the mainland. The report, launched in 2011, uses methodology adapted from the Fed`s Beige Book, according to CBB.

Retail sales: a soft spot

While the services sector is faring well, retail sales weakened for the fourth straight quarter, according to the survey.

Read More China economic growth may slow to 7.1% in 2015: Central bank report

Retailers selling mostly to consumers performed better than those catering principally to business and government – a pattern observed most of the past year during the onset of the anti-corruption campaign.

“This complicates the rebalancing story, since rebalancing toward services is occurring but rebalancing toward consumption is not,” said Miller.

Does China need stimulus?

The biggest misconception around China is the need for stimulus, said Miller.

Read More China`s economy is slowing faster than you think: CFO

“There`s the idea that China needs to stimulate because it`s slowing down, but things are better underneath the surface than most people think,” he said.

While there is room to stimulate based on fact there`s disinflation in the economy, growth is modestly recovering and the labor market is holding up “much, much better” than people understand, he said.

Nevertheless, deflationary headwinds could prove too tempting an opening for Beijing to resist strong stimulus, Miller said.

“Our finding of no 2014 deflation will likely be challenged in 2015. There has been continuous disinflation since the first quarter of 2013, with sales prices, wages, and input costs still increasing, but more slowly,” he said.

Read More Asia central bankers on guard but feel safe from Russia currency crisis

“While outright deflation has not set in, the impact of the collapse of crude oil prices has yet to be felt. Deflationary concerns are now justified,” he added.

Stimulus won`t work

If monetary authorities attempt large scale stimulus, it may not work as intended, says Miller. The main result will likely be “out-of-control” prices for equities.

“Firms have not been interested in borrowing or spending on new projects for a year now. What they might be willing to do, if enough credit is made available, is jump into China`s suddenly frenzied stock market,” he said.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Asian stocks extend rally; Hang Seng at 1-week high

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Asian equities put up an upbeat performance on the final trading day of the week, following an inspiring US lead overnight.

Wall Street rallied on Thursday, with the blue-chip Dow climbing more than 400 points for the first time in three years, as investors applauded the Federal Reserve’s pledge that it would be patient in increasing interest rates. Positive data showing jobless claims fell by 6,000 to 289,000 last week – the lowest since early November – also encouraged sentiment.

The Dow Jones Industrial Average rallied 2.4 percent, while the S&P 500 surged 2.4 percent. The tech-heavy Nasdaq added 2.2 percent.

Oil back in focus

Meanwhile, global crude prices fell again on Thursday, a day after a short-covering rally, as traders placed new bets that the market would resume a six-month rout on worries about a supply glut.

Brent’s front-month contract closed down USD 1.91 at USD 59.27 a barrel, after hitting a session low at USD 59.17. US crude’s front-month contract settled down USD 2.36 at USD 54.11, after having fallen to USD 54.05 earlier.

Nikkei jumps 1.9%

Wall Street’s upbeat performance overnight allowed Japanese shares to attain a one-week high on Friday, after the Nikkei 225 enjoyed its best day in six-and-a-half weeks in the previous session, as dollar-yen continued its march up toward the 119 handle.

Meanwhile, traders await the Bank of Japan’s last policy decision for the year. The central bank is widely expected to keep monetary settings unchanged and offer a slightly brighter view of the economy on tentative signs of recovery from recession, Reuters quoted sources as saying.

“USD/JPY will be the pair to watch today, given the Bank of Japan (BoJ) meeting,” wrote IG market strategist Stan Shamu in a note. “There have also been reports doing the rounds that freshly re-elected Prime Minister Shinzo Abe is planning a significant stimulus package to the tune of around USD 30 billion, which should help the Nikkei to extend gains today.”

Sony underperformed the bourse, losing 2.6 percent early Friday, on reports that North Korea was behind a cyber attack on Sony Pictures which has resulted in the studio pulling all plans to release its comedy “The Interview.”

Mainland bourses up

China’s benchmark Shanghai Composite index opened up 0.5 percent on Friday while Hong Kong’s Hang Seng index hit a one-week high of 23,185 points at the open.

Gaming stocks remain in focus ahead of Chinese President Xi Jinping’s visit to the city this weekend. Melco Crown and Sands China gained 2.9 and 3.1 percent.

Carmaker BYD Co rebounded 12.4 percent, after tanking more than 45 percent in the previous session amid concerns that it’s losing market share to foreign rivals in China’s auto market.

Meanwhile, BAIC Motor, partly-owned by Germany’s Daimler, opened flat at HK dollar 8.90 in its trading debut.

ASX rallies 2.2%

Australia’s benchmark S&P ASX 200 extended a Fed-fueled rally from the previous session to touch a one-and-a-half-week high early Friday, as the commodity sector dismissed pressure from falling metals and oil prices.

Oil and gas producers opened up, with Woodside Petroleum and Origin Energy bolstering 2.7 and 1.9 percent each. Santos, which was in focus after announcing that it had secured a 3-year USD 816.60 million bank loan from ANZ Banking, notched up 2.4 percent.

Iron ore miners were broadly higher; BHP Billiton and Fortescue Metals climbed over 3 percent, respectively, while BC Iron reversed opening gains to tank 2 percent after announcing changes to its Iron Valley deal with Mineral Resources.

Meanwhile, the Australian dollar continued to trade below 82 US cents, near multi-year lows.

Kospi up 1.6%

South Korean shares traded higher in the morning session, with blue-chips leading the gains. Samsung Electronics charged 4 percent while Hyundai Motor doubled gains to 2.4 percent.

The country’s largest utility Kepco rose 5.2 percent despite news that the South Korean government is considering to cut electricity rates following the fall in energy prices.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Stocks cheer Fed; best 2 days of 2014 for Dow, S&P

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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U.S. stocks rallied on Thursday, with the Dow industrials climbing more than 400 points for the first time in three years, as investors applauded the Federal Reserve’s pledge that it would be patient in increasing interest rates.

“You’ve got people that have underperformed that don’t want to be left behind. I didn’t understand why falling oil is bad for the stock market so I think part is the reversal of that,” said James Paulson, chief investment strategist at Wells Capital Management.
“The reality is markets were hit with we’re not sure what’s happening and why, as oil has been acting as something akin to a global interest rate. The good news is the Fed is aware of what is going on, and they want to be friendly, so people are hopefully in better cheer,” said Jack Caffrey, equity portfolio manager at J.P. Morgan.
“Seasonally it’s a time of good flows into equities. If anything, seasonally the behavior over the last two weeks was an anomaly,” said Caffrey of the market’s recent slide.

The CBOE Volatility Index, a measure of investor uncertainty, fell nearly 14 percent to 16.81.

Thursday data had jobless claims falling by 6,000 to 289,000 last week, the lowest since early November. And, the Conference Board’s index of leading indicators advanced in November for a third consecutive month, signalling the U.S. economy is picking up steam heading into the new year.

Oracle rallied after the software marker reported fiscal second-quarter profit and sales that exceeded estimates; Hertz Global Holdings jumped after investor Carl Icahn reported hiking his stake in the car-rental company.

The Dow Jones Industrial Average rose 421.28 points, or 2.4 percent, to 17,778.15, with Microsoft and International Business Machines leading blue-chip gains that included all 30 components.

The S&P 500 advanced 48.34 points, or 2.4 percent, to 2,061.23, with technology leading gains and all 10 of its major sectors rising.

The Nasdaq added 104.08 points, or 2.2 percent, to 4,748.40.

For every share falling, more than four rose on the New York Stock Exchange, were 976 million shares traded. Composite volume approached 4.7 billion.

 The U.S. dollar gained against the currencies of major U.S. trading partners and the yield on the 10-year note used to figure mortgage rates and other consumer loans gained 7 basis points to 2.2068 percent.

After rising to $58.73 a barrel, West Texas Intermediate turned lower, losing $2.36, or 4.2 percent, to $54.11 a barrel. Gold futures for February delivery added 30 cents to $1,194.80 an ounce on the New York Mercantile Exchange.

American motorists are paying less than $2.50 a gallon at the pump for the first time in more than five years, with retail gasoline prices falling to an average $2.477 a gallon Wednesday night, according to the AAA.

U.S. stocks surged on Wednesday, with the Dow marking its best session of the year, as investors celebrated a rally in the energy sector and the Federal Reserve’s pledge to be patient in raising interest rates.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

How Russian crisis could be like 1998, but worse

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The fall of the Russian rouble portends rough seas ahead for multinational corporates. It is the kind of crisis that will separate the effective risk managers from the rest — rewarding those corporates that can manage through intense volatility, and punishing those that can’t.

Sanctions have cut off Russia’s access to foreign capital at the same time that falling oil prices (down almost half from their 2014 peak) make that access even more essential – so Russia can refinance its debt.

Read More The collapse of Russia in 3 charts

The rouble’s slide picked up speed at the end of November and intensified this week. Intended to mollify markets, Russia’s rate hike to 17 percent had the opposite effect, accelerating the run on the ruble. While the rate hike itself wasn’t particularly surprising – the central bank has been raising interest rates – its size, and its timing, did send the message “We’re in trouble.”

The downward spiral of the Russian rouble has exacerbated global currency volatility and it has a contagion effect. For example, the combination of a falling rouble and Japanese Prime Minister Shinzo Abe’s re-election will likely re-embolden Abe’s commitment to devalue the yen. The threat of a race-to-the-bottom, beggar-thy-neighbor currency war is very real.

The contagion also exposes continuous fundamental weaknesses in global markets. Structural weaknesses in the euro zone, for instance, portend further declines for the euro. According to Deutsche Bank, the euro should be heading to 1.16 to the US dollar based on the current trend in the price of oil and economic fundamentals in Europe – that is 6.5 percent lower than where the euro is today.

Read More Op-ed: Beware: Putin the wounded animal

A key move Russia could and should make to aid in stopping the ruble’s free fall is to work with the Ukrainian government to end the conflict there, so that the US and Europe would lift sanctions. If Russia doesn’t come to the table – and soon – then we will likely see a repeat of the 1998 collapse of Russia’s economy. This time, it would be worse. Russia’s 1998 default hit investors hard, and that memory is still fresh, so it will be far more difficult this time for Russia to entice foreign capital – no matter where the interest rate is set.

The rouble’s fall will hit hard the earnings of multinationals doing business in Russia. As an example of the losses that multinational corporations could face in Russia – and the uncertainty that still remains about the future of the rouble and the Russian economy – Apple halted all online sales in Russia on Tuesday. The company attempted to keep pace with the rouble’s fall, increasing prices by 25 percent in November, but gave up the effort this week as the rouble’s fall continued to erode the value of Apple’s sales.

Read More Cashin: This is not 1998 all over again

In talking with the CFO of a multinational company with 4 billion euros (USD4.93 billion) in revenue, his company lost at least 200 million euros as the ruble slid, but he was most worried about how much more they had lost that he didn’t yet know about. Because this CFO doesn’t have visibility into his rouble risk, he can’t manage expectations with his CEO and board around how the company should expect to be impacted by the ruble’s fall. “200 million euros – or worse” is not the kind of uncertain answer that a CEO or board wants to hear.

The implications of the rouble’s slide extend to other central banks as well. The rouble crisis has made Federal Reserve Chair Janet Yellen’s job more difficult. It’s still unclear what impact the rouble’s slide and its spreading contagion will have on a strengthening US economy.

In the aftermath of a crisis, people tend to scrutinize the effectiveness (or lack thereof) of risk-management controls that corporates had in place. Currency risk is just one of many risks (though likely the largest financial risk) a corporate must manage, of course, but analysts and investors often interpret the lack of a modern currency risk-management program as a lack of effective risk management in other areas as well.

Read More Have investors beaten up Russia too much?

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Stocks rally on oil turn as Fed vows rate patience

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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US stocks surged on Wednesday, with the Dow marking its best session of the year, as investors celebrated a rally in the energy sector and the Federal Reserve’s pledge to be patient in raising interest rates.

Stocks rose after the Federal Reserve retained the phrase “considerable time” in its policy statement, and also introduced another word, “patient,” as the central bank readies to raise interest rates next year.

The subtle change in wording could be a “compromise between keeping it in there and pulling it out completely, or that’s my reading of the tea leaves,” said Tom Kersting, principal and fixed income investment strategist for Edward Jones.

“The Fed will continue to be supportive of the economy, which is ultimately good for equity markets, at least in the short term. Longer term, equities are driven by earnings growth, and an economy that continues to improve will help earnings growth,” Kersting said.

Addressing a televised news conference, Fed Chair Janet Yellen said the new language was not a change in policy, and that a rate increase was unlikely for the next several meetings.

“The equity markets are celebrating this as less hawkish than anticipated,” said Art Hogan, chief market strategist at Wunderlich Securities.

“If we walked in today concerned about anything other than the price of a barrel of oil and Russia imploding, it was a more hawkish Fed statement, and that didn’t happen,” Hogan added.

“It’s hard to separate what’s going on with the Fed and what’s going on globally, the issues with energy and the Russian currency crisis. The information that the Fed provided today doesn’t really change much. It sounds like they are still thinking sometime in the middle of next year,” RogerBayston, senior vice president of Franklin Templeton’s fixed-income group.

Energy producers led Wall Street gains, and the price of oil turned higher.

“West Texas has stabilized a bit here. Maybe that’s enough to stop the precipitous decline in oil shares, as that sector was completely washed out,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott.

FedEx dropped after the shipper’ posted disappointing second-quarter earnings; competitor United Parcel Service also fell.

The cost of living declined in November as energy prices fell, with the Labor Department’s consumer price index falling 0.3 percent, the largest drop since 2008. Low inflation gives the Fed more reign to take its time in increasing rates.

The core rate, which excludes food and energy, climbed at a slower pace than last month.

After a 320-point jump, the Dow Jones Industrial Average rose 288 points, or 1.7 percent, to 17,356.87, with Chevron leading gains that included all 30 components.

The S&P 500 added 40.15 points, or 2 percent, to 2,012.89, with energy pacing gains among its 10 major sectors, all of which advanced.

“It’s too soon to say whether this is a dead cat bounce or whether it’ll go lower, as nothing has changed. It may just be a pause, and the energy sector is in an oversold rebound,” said Luschini.

The Nasdaq gained 96.48 points, or 2.1 percent, to 4,644.31.

For every share falling, nearly seven rose on the New York Stock Exchange, where a billion shares traded. Composite volume cleared 4.9 billion.

The CBOE Volatility Index, a measure of investor uncertainty, fell nearly 18 percent to 19.44.

On the New York Mercantile Exchange, West Texas Intermediate for January delivery closed 54 cents higher at $56.47 a barrel. Gold futures for February added 20 cents to $1,194.50 an ounce.

Russia repeated that it would maintain its crude production in 2015, echoing OPEC’s approach of trying to maintain market share.

Russia on Wednesday again attempted to halt a rout in the ruble, which climbed after the Finance Ministry said it had purchased the currency, with the nation veering towards recession as oil prices fall and the ruble tanks, and the US readying new sanctions over the Ukraine conflict.

The US dollar gained against the currencies of major U.S. trading partners; the yield on the 10-year Treasury note used to figure mortgage rates and other consumer loans rose 8 basis points to 2.1384 percent.

On Tuesday, US stocks fell for a sixth session in seven, after another day of gyrations as equities tracked the price of oil and pondered the impact of lower energy costs and Russia’s economic troubles on policy decisions by the Federal Reserve.

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Asian markets rally on Fed, recovery in oil

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Asian equities rose on Thursday, as investors took heart from a turn in oil prices and an inspiring performance on Wall Street overnight after the Federal Reserve said it was confident on the US economy.

Overnight, US stocks surged, with the blue-chip Dow marking its best session of the year following a rally in the energy sector and the Federal Reserve’s decision to be patient in raising interest rates. The Dow Jones Industrial Average rose 1.7 percent, while the S&P 500 added 2 percent, with energy pacing gains among its 10 major sectors. The Nasdaq gained 2.1 percent.

On Wednesday, Fed Chair Janet Yellen said in her last news conference of 2014 that the Fed is unlikely to start its rate hike process for “at least the next couple of meetings.”

Another positive boost for markets comes in the form of a recovery in oil prices, after US data showed falling crude inventories. WTI crude closed higher at USD 56.47 per barrel after surging to a session high of USD 58.98. Front-month Brent was last up USD 1 to USD 61 a barrel shortly on Wednesday.

Mainland bourses mixed

Chinese stocks opened modestly lower on Thursday following the release of weak new home prices for the month of November, but quickly rebounded 0.1 percent after that. The benchmark Shanghai Composite index finished near a one-week session high on Wednesday, chalking up a two-day winning streak.

China’s home prices posted a third consecutive annual drop in November, fueling speculation that the government will need to undertake further measures to avert a sharp slowdown in the economy.

In Hong Kong, the key Hang Seng index rallied 1 percent, shrugging off the bearish sentiment that has taken the bourse to the lowest levels since October 3 in the previous sessions.

Gaming stocks are in focus ahead of Chinese President Xi Jinping first official visit in five years to Macau this weekend. Sands China plunged 1.5 percent at the open while Galaxy Entertainment rose 1.4 percent.

Nikkei jumps 2.4 percent

Japan’s benchmark Nikkei 225 got a fillip from a weaker currency at Thursday’s open, as dollar-yen marched towards the 119 handle.

As a result, blue-chips majors like Toyota Motor, Toshiba and Sony made gains of 1.6 to 3.6 percent.

Meanwhile, the Bank of Japan kicks off its two-day monthly meeting today and will release its last policy decision for the year on Friday. The central bank is widely expected to keep monetary settings unchanged and offer a slightly brighter view of the economy on tentative signs of recovery from recession, Reuters quoted sources as saying.

ASX surges 1.4 percent

Australia’s S&P ASX 200 index doubled gains an hour into trade to hit a one-week high, on the back of rallying commodity plays.

Oil and gas producers got a boost from an uptick in energy prices; Santos climbed 6.5 percent while Oil Search bolstered 4.7 percent. Resource miners Rio Tinto and BHP Billiton advanced nearly 3 percent, respectively, while Fortescue Metals raked in a 6.6 percent gain.

Gold stocks were also higher early Thursday, with Newcrest Mining rising over 4 percent, as spot gold touched positive territory after the Fed’s statement.

Meanwhile, the Australian dollar moved off multi-year lows to trade at 8,129 to the dollar, seemingly unaffected by the deceleration in China’s new home prices.

Kospi up 0.3 percent

South Korean shares trimmed gains early Thursday, losing momentum as blue-chips turned mixed an hour into trade. Posco reversed a 1.4 percent opening gain to creep down 0.2 percent while Samsung Electronics added 0.4 percent. Hyundai Motor plunged 2 percent.

Shinsegae and E-Mart appeared unaffected by sharp decreases in their November operating profits. Shares of the retailers traded 0.5 and 1.1 percent higher each.

Cheil Industries, which is the holding company of Samsung, opened up nearly 100 percent to 104,000 won, compared to its issue price of 53,000 won, in its market debut on Thursday. The IPO is said to be the third biggest ever in South Korea and shares were over-subscribed 195 times.

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Why Fed will do nothing: Dennis Gartman

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow