Month: January 2015

Apple just a bit of a respite from currency concerns

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

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After investor sentiment took a large hit in the wake of disappointing results from multinationals, Apple’s breathtaking results should be a welcome relief to Wall Street.

The consumer-technology supplier beat on both the top and bottom lines in releasing results after Tuesday’s close, with its shares rising in extended-hours trading.

“It’s the first time Apple will sell more iPhones in China than in the US, but on balance the currency concerns we’ve dealt with today (Tuesday) probably won’t be as steeped into the Apple results,” Art Hogan, chief strategist at Wunderlich Securities, said.

“They have a bit of a currency offset because they make things in lots of different currencies and sell in different currencies. It’s not as though they are making things in dollars and selling in euros,” said Hogan, who adds the impact of the dollar’s strength has “an effect, but it’s not as marked as a strictly traditional US manufacturer, like Procter & Gamble and Coca-Cola.

Currency remains a large factor—along with energy and financials—as the fourth-quarter earnings season gets off to “a disappointing start,” Burt White, chief strategist at LPL Financial, wrote in emailed commentary.

The depreciation of the yen and euro versus the dollar creates a currency drag that will likely cost many U.S. based multinationals as much as 4 percent of their revenue, “despite currency hedging,” White said.

However, Nick Raich, CEO at The Earnings Scout, believes “some companies are using currency as an excuse for their bad numbers.”

While currency certainly impacts global trade, the overall impact on corporate bottom lines “tends to be overhyped,” Raich said.

More concerning is “the oil-price shock and the spillover effects it is going to have into other sectors as energy companies feel the direct pain,” Raich said.

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 shares mirror US losses; Fed meeting in focus

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

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Asian stock markets endured modest losses on Wednesday as a negative lead from Wall Street damped the previous session’s relief rally over the Greek elections.

US stocks were sold off on Tuesday on the back of weak economic data and disappointing corporate earnings, with the Dow Jones Industrial Average and Nasdaq Composite closing down nearly 2 percent each. Orders for business equipment fell 3.4 percent last month, highlighting the impact of the slowing global economy on US multinationals.

Attention was also on the US Federal Reserve ahead of its monetary policy announcement later in the day. No change is expected, but market players will watch for any change in wording, such as “considerable time,” that could hint at the timing of a rate hike.

“With the FOMC at the beginning of their first two-day meeting of 2015 today, the question now becomes when will we see a rate rise? If corporates continue to feel the strain of the ever-strengthening USD on rate-rise speculation -which will lead to lower job creation and slower wage growth (which is already suffering) – will this stay the hand of the Fed?” said Evan Lucas, market strategist at IG, in a note.

Nikkei 0.1% lower

Japan’s benchmark Nikkei index fell from Tuesday’s one-month high as the yen continued to strengthen against the greenback below the 118 handle.

Sony reversed earlier losses to rally 2 percent after the Nikkei business daily reported that the electronics giant is cutting a thousand jobs at its loss-making smartphone business. The cuts are apparently mostly in Europe and China and follow the thousand jobs Sony said it would slash in October.

Canon and Nintendo both skidded over 1 percent before reporting quarterly earnings later in the day.

China markets lower

China’s benchmark Shanghai Composite index fell 1 percent in early trade, extending losses after data on Tuesday showed December industrial profits falling an annual 8 percent.

Financials were among the biggest percentage losers, with insurers China Pacific and China Life down nearly 4 percent each while Minsheng Bank lost 2 percent.

In Hong Kong, the Hang Seng Index eased 0.3 percent, falling for a second straight session.

ASX down 0.2%

Australia’s S&P ASX 200 snapped a four-day winning streak but still remained in sight of Tuesday’s two-month closing high of 5,547 points. Meanwhile, the Australian dollar jumped nearly 1 percent to approach 80 US cents after fourth-quarter consumer price inflation rose 1.7 percent on year, a touch below expectations for an annual rise of 1.8 percent.

Engineering group Bradken plunged over 30 percent after announcing that a takeover deal with a private equity consortium collapsed.

Kospi flat

South Korean stocks moved off a one-month high hit in the previous session, tracking declines in the rest of Asia and Wall Street. Among large-caps, Samsung Electronics and Shinhan Financial fell over 1 percent each.

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

This is why gold may rise: World Gold Trust Services

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

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While gold is often seen as a hedge against inflation, gold could still rise despite fears of deflation around the world, William Rhind, CEO of World Gold Trust Services, told CNBC on Tuesday.

That is because governments often respond to deflationary forces in the global economy by weakening their currency for competitive reasons, he said in a “Closing Bell” interview from the Inside ETFs conference in Hollywood, Florida.

“Currency weakness or debasement has typically been a good thing for gold,” he said.

Read More: Hedge funds snap up gold, but where’s it heading?

World Gold Trust Services is the sponsor of the largest gold exchange traded fund, the SPDR Gold Trust. The ETF saw units outstanding increase 3.4 percent week-over-week through Jan. 26, increasing its weekly inflows by 8.2 million units.

Gold prices have risen nearly 3 percent over the last year.

As for whether falling oil prices will prompt crude producers to liquidate gold reserves, Rhind said that has not been the case for Russia, the biggest buyer of gold from a central bank perspective.

“What we’ve seen is Russia coming into the market and buying even more gold” as a result of the oil shock, he said.

Rhind said he cannot be certain that other countries will react in the same way, but the positive reaction from Russia underscores the point that gold priced in nondollar currencies performed well last year. 

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

Why iron ore won’t rebound any time soon

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

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Economists may teach that low prices and declining demand encourage producers to decrease supply, but the iron ore industry appears to have skipped class that day.

“The combination of a further increase in global iron ore supply this year and only subdued demand growth suggests iron ore  prices will continue to drift lower,” said Caroline Bain, an analyst at Capital Economics, in a note Monday.

She forecasts iron ore prices at USD 60 a tonne by year-end, with risks to the downside. Iron ore touched a more than five-year low Monday of around USD 63.30 a tonne, although some forward contracts are already pricing it under USD 60.

Output has picked up over the past few years, encouraged by expectations China demand would continue to post strong growth and by low production costs in Australia and Brazil, she said.

She noted Rio Tinto  and BHP Billiton put their average production cost in Pilbara, where most of Australia`s iron-ore production is located, at around USD 25 a tonne, compared with 2010-13 average market prices at USD 145 a tonne. Even at current prices, these producers are still profitable, Bain noted. Australia is the world`s second-largest iron-ore producer after China.

Despite 2014`s around 50 percent decline in iron ore prices, the big four producers — Vale, Rio Tinto, BHP Billiton and Fortescue  – continue to expand production and other companies are also bringing projects on line this year, she said, forecasting Australian production will rise 6 percent this year, although that`s down from 2014`s 20 percent rise.

Don`t count on China

At the same time, despite China producers` higher costs and lower ore grades, production there isn`t likely to see much slowdown, especially as many steel plants have “vertically integrated” operations, owning mines nearby, Bain said. Closures on the mainland are likely to focus on less efficient operations, leading to a leaner and meaner industry there, she said.

“The multinational producers will be only partially successful in their bid to oust higher-cost producers globally and oversupply will continue to weigh on prices,” she said. At the same time, China`s iron ore usage will stagnate at best, hit by a combination of high inventories and lower demand to use the metal as part of financing deals, she said.

Goldman Sachs also expects iron ore producers won`t be able to count on China for growth, noting it`s become a mature market.

“The decade-long love affair between China and iron ore is cooling. Chinese steel consumption has increased to unsustainable levels and is bound to decline,” it said in a note Friday. “Significant overinvestment to date will ensure that the market is well supplied.”

It expects a “long war of attrition” will be needed to balance the market, cutting its long-term price forecast by 25 percent to USD 60 a tonne.

The oil effect

Falling oil prices are also set to weigh on iron ore prices, as they result in “substantial cost reductions”, and commodity prices are likely to fall to meet these new lower levels, Citigroup  said in a note Monday.

It`s also concerned about oil-fueled deflationary pressures affecting commodity demand.

“Falling prices increase the real cost of debt repayments and could see increased defaults. This not only affects direct commodity demand, but also drives lower inventories and threatens commodity financing trade,” it said, noting that falling commodity prices also leave companies with little incentive to build up inventories.

In a note earlier this month, the bank cut its 2015 iron ore price forecast to USD 58 a tonne from USD 65.

-By CNBC.Com`s Leslie Shaffer; Follow her on Twitter @LeslieShaffer1

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

Elevated expectations for Apple ahead of earnings

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

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Earnings season gathers steam this week, with Apple among the 142 S&P 500 companies slated to release fourth-quarter results.

Fourth-quarter earnings are expected to grow 3.4 percent over the same period a year ago, according to Thomson Reuters.

“So far, and in line with normal trends, more companies are surprising on the upside than on the downside,” David Kelly, chief global strategist at JP Morgan Funds, wrote in emailed commentary.

“However, analyst expectations have been marked down relentlessly over the past few months due to the impact of a higher dollar and cheaper oil,” Kelly said.

Of the 95 S&P 500 companies that reported fourth-quarter earnings as of Monday morning, 71.6 percent beat estimates, 9.5 percent met expectations and 18.9 percent missed, according to David Aurelio, a research analyst at Thomson Reuters.

Typically, or since 1994, 63 percent of companies beat estimates, 16 percent match and 21 percent miss, he noted.

The energy and financial sectors are among those disappointing.

“Last week, regional banks reported some decent earnings and revenue figures that were much better than their larger peers; however, financial sector results continue to drag down the overall numbers among the early reporting fourth-quarter 2014 companies,” said Nick Raich, chief executive officer at the Earnings Scout.

While weighing heavily on the energy sector, the lower cost of fuel proved beneficial to many industrial companies and carriers in particular, with Delta Air Lines last week reporting fourth-quarter results that beat both top and bottom-line estimates. Southwest Airlines also beat profit estimates, with the carrier standing to gain “more than most competitors from lower fuel costs given its lack of hedges,” Aurelio and his colleague Greg Harrison said.

Apple reports after the close on Tuesday, with profits from the consumer-technology supplier forecast to be 25 percent higher than a year earlier, said Bill Stone, chief investment strategist at PNC Asset Management Group.

“Analysts expect Apple to report earnings above the consensus due to a strong holiday season with increased handset volumes and higher average selling prices,” Aurelio and Harrison wrote.

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

S&P downgrades Russia’s sovereign credit rating

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

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Standard & Poor’s on Monday downgraded Russia’s sovereign credit rating to below investment grade, as the country’s economy continues to weaken.

S&P slashed Russia’s sovereign credit rating to BB+ from BBB- and said the outlook is negative, reflecting its view that Russia’s monetary policy flexibility could diminish further.

This is the first time in more than 10 years that Russian sovereign debt has been rated below investment grade, in what some call “junk” territory.

Read More: Ruble hit as Obama slams Russia ‘bullying’

The US dollar rose more than 5 percent against the ruble after the news broke.

It could not only harm Russia’s image among investors, but also push up its borrowing costs, as many mainstream investment and pension funds have rules preventing them from buying anything not classed as investment grade.

The ratings agency said Russia’s financial system is weakening and therefore limiting the Central Bank of Russia’s (CBR’s) ability to transmit monetary policy.

It sees the CBR facing “increasingly difficult monetary policy decisions while also trying to support sustainable GDP growth.”

S&P said it could cut the rating again if “external and fiscal buffers deteriorate over the next 12 months” faster than it expects.

–Reuters contributed to this report.

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 at fresh highs on positive US lead

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

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Asian shares hit fresh highs early Tuesday, buoyed by a relatively inspiring handover from Wall Street overnight.

US stocks finished modestly higher on Monday as investors mulled results from Greek elections and winter weather on the East Coast. The Nasdaq Composite and S&P 500 added 0.3 percent each, while the Dow Jones Industrial Average finished little changed.

Meanwhile, the Federal Reserve kicks off its monthly policy meeting later on Tuesday.

Nikkei rallies 1.4%

Japan’s key Nikkei 225 index hit a four-week high in early trade, supported by a softer yen trading at 118.5 against the US dollar.

Among blue-chip majors, Sony tacked on nearly 2 percent, while Canon and Toyota Motor piled on 1.2 percent, respectively.

Shares of the country’s second largest bank by market capital Sumitomo Mitsui Financial Group was up 2 percent ahead of third quarter earnings data.

ASX adds 0.6%

Australia’s benchmark S&P ASX 200 index edged up to an over two-month high following an extended weekend, while the Australian dollar traded at $0.7920 to the dollar – near Monday’s six-year low.

The big four lenders led advances, as investors turned to equities that will ride out ongoing volatility, noted IG’s market strategist Evan Lucas. Commonwealth Bank of Australia notched up 1.3 percent, while National Australia Bank and ANZ Banking added nearly 1 percent, each.

However, weakness in iron ore prices, which fell to their lowest in over five years overnight, weighed on mining shares, capping gains on the bourse. Fortescue Metal slumped nearly 6 percent, while BHP BIlliton and Rio Tinto fell 1.6 and 0.6 percent, respectively.

Mainland indices down

China’s benchmark Shanghai Composite index edged down 0.3 percent, while Hong Kong’s Hang Seng index opened down 0.2 percent.

Kospi rises 0.4%

South Korean shares clinched a one-month high as traders brushed off below-view earnings releases. Despite fourth-quarter earnings missing market expectations, LG Chem jumped 5.4 percent and Samsung SDI trade flat.

Energy-related counters enjoyed a rare reprieve on bargain hunting; Kepco rallied more than 2 percent, while S-Oil piled on 4.2 percent.

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

Euro, dollar to hit parity by 2016: Economist

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

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The euro dropped lower on Friday in the wake of the European Central Bank announcing fresh stimulus measures, hitting 11-year lows against the dollar.

Forces including a strengthening United States economy will push the euro to parity with the dollar by the end of next year as euro zone countries look to break through a period of sluggish growth, an economist said on Friday.

“The problems in Europe are not going away, just in the near-term. You have the US doing better, and Europe continuously being behind. That will continue to put downward pressure on the euro for quite some time,” Torsten Slok, chief international economist at Deutsche Bank, told CNBC’s “Closing Bell.”

The euro lingered around USD 1.12 against the dollar on Friday afternoon. The currency will slip even more, possibly below the dollar, providing a short-term boost to the US economy, said Jack McIntyre, portfolio manager at Brandywine Global, told “Closing Bell.”

Read More: Currency expert: Euro going ‘well below parity’

McIntyre argued that the ECB’s move will push capital from Europe to the United States. Among other effects, it will make U.S. Treasury yields more appealing than those on comparable German bonds, which sit remarkably low in one of the euro zone’s most stable areas.

‘Ultimately, that’s going to be a net positive for the US economy because I think it’s going to flow through and have a positive impact on housing at some point in 2015,” McIntyre said.

Read More: Currency war: Who will be the casualties?

McIntyre added that a weaker dollar has helped the US recover in recent years in the Federal Reserve’s low-interest rate environment. But in the long term, as the dollar continues to strengthen, low interest rates and strong currencies “don’t work,” he said. 

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

Jack Ma: Alibaba is ‘still just a baby’

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

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Jack Ma, the founder and executive chairman of China’s online market place Alibaba, believes his company is still in the very early stages of reaching its full potential.

Speaking at a seminar hosted by broadcaster Charlie Rose at the World Economic Forum in Davos, Ma gave a wide-ranging interview, detailing his past, present and where he sees the company in the next 15 years.

“Compared to 15 years ago, we are big. But compared to 15 years later, we are still a baby,” he said at the event. His vision was for Alibaba to go truly global and act like an electronic world trade organization and serve 2 billion consumers and help 10 million small businesses outside China.

He added that he wanted to aid European and U.S. companies sell more goods to Chinese consumers and link all global nations, giving the example that Norwegian firms would be able to sell their wares to Argentina.

E-commerce will hopefully be forgotten about in 15 years’ time, he said, believing that consumers will start to look it as an everyday object like electricity.

Ma told audience members about his vision on how digitization is transforming the way people buy, sell and communicate. He highlighted that he had once been turned down for a job in KFC and stated that he had returned to the economic forum to inspire the next generation of business leaders. He also spoke of his love of the movie Forrest Gump and Tai Chi.

Read more: Alibaba spent $161M fighting fakes, bans 90M items

Running through the statistics, he said that 100 million shoppers visiting the site every day and he has helped to create, both directly and indirectly, 14 million jobs for China.

He added that he started with a team of 18 which has now grown into a workforce of 30,000.

The company’s historic initial public offering took place last year, and ranks as the world’s biggest at $25 billion, according to Reuters. Ma said that he was proud that investors had made a lot of money.

Responding to accusations about his relationship with the Chinese government, he said that the relationship was “interesting” but said that he believes that companies should respect their officials but not “marry them.”

He said that he had a responsibility to talk to them and had previously explained how many jobs that Alibaba had created in the Chinese economy.

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

Why Saudi succession isn’t a big deal for oil

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

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News that Saudi King Abdullah bin Abdulaziz Al Saud passed away sent oil prices sharply higher on Friday, but analysts dismissed the move as a knee-jerk reaction, noting the recent trend remains intact.

“It`s not an extraordinary move in oil prices, given the recent volatility and turmoil in the oil markets,” said Michael Levi, senior fellow for energy and the environment at the Council on Foreign Relations (CFR). “Oil prices have dropped 60 percent over the past six months – compared to that,[today`s move]is not earth shattering,” he said.

Nymex WTI crude oil futures rose as much as 2.5 percent to USD 47.76 after the news broke but trended back down to USD 47.25 by mid-day in Asia. Brent crude also rose over 2.5 percent to a high of USD 49.80 shortly after opening and was recently trading at USD 49.55.

“It`s just the markets pricing in any potential uncertainty over the succession. Prices will settle back down: current levels may hold for a couple of weeks, or whenever the new king comes out and confirms the current policy will be continued,” said Phillip Futuresinvestment analyst Daniel Ang.

Uncertainty tends to fuel speculation, which in turn drives up prices, according to Takayuki Nogami, senior economist at government-run Japan Oil, Gas and Metals National Corporation (JOGMEC). He believes prices will trend back down once the markets digest the news; the fundamentals of the oil markets – over-supply in a slowing global economy – won`t change, he said.

“[And] the succession in Saudi Arabia itself will be about continuity – in Saudi Arabia, the king makes policy decisions in consensus with other royal family members,” he said.

Saudi Arabia led OPEC`s decision to maintain its production levels on November, triggering a further collapse in oil prices. Oil prices have plunged more than 50 percent since mid-2014, with Brent at USD 48.52 a barrel at Thursday`s close, and Nymex crude at USD 46.31.

Still, the real succession is unclear, according to CFR`s Levy. Salman is 79 and no one has any good visibility on how the handover of power to the next generation is going to play out, he said. Salman on Friday appointed his half-brother Muqrin as his crown prince and heir.

Bigger, non-Saudi risks lurking

Analysts remain divided on where prices are headed.

“Oil prices are bottoming out and are headed upwards,” according to Phillip Futures` Ang. He pointed out that crude futures have stayed below USD 50 for almost two weeks and sees that as a sign that prices are consolidating. He expects prices to recover to around USD 60 to USD 70 towards the middle of the year.

However, JOGMEC`s Nogami doesn`t see any upside yet and expects oil to stay below USD 50 a barrel, in the USD 40 range, for a while. Price catalysts will come from outside Saudi Arabia, he said.

For now, “it doesn`t look like other Organization of the Petroleum Exporting Countries will go their own way (and against Saudi Arabia) and reduce production because most of them need the revenues,” he said.

“The oil markets show no sign of settling down,” said CFR`s Levi, citing a laundry list of “medium-sized” potential risks in Nigeria, Venezuela, and Russia.

“Iran, and the nuclear issue, always remains a question mark” too, he added.

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