Month: March 2015

Asian stocks turn higher, but Nikkei lags on strong yen

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

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Asian equities outside Japan traded higher early Thursday, taking cues from a strong rebound on Wall Street overnight as investors reacted to a dovish statement from the Federal Reserve.

Overnight, Wall Street closed sharply higher after the U.S. central bank suggested a less aggressive timeline for raising interest rates. The Dow Jones Industrial Average and S&P 500 closed up more than 1 percent, respectively, while the tech-heavy Nasdaq rose 0.9 percent.

Meanwhile, Singapore continues to monitor the health condition of former prime minister and founding father Lee Kuan Yew after an official statement from the Prime Minister’s Office said Wednesday that the 91-year-old’s condition has “deteriorated further” due to an infection. The benchmark Straits Times index closed down 0.2 percent in the previous session, while the Singapore dollar held near its lowest level since July 2010 to trade at 1.3779 per dollar.

Nikkei falls 0.8 percent

Japanese stocks declined in early trade, bucking the Fed-inspired rally in the US, as the yen strengthened above the 120 handle against the U.S. dollar. The Nikkei 225 first soared above the 19,000 milestone on March 13 and has clinched two 15-year closing highs over the past three sessions.

Among losers, exporter plays such as Sony and Nikon fell 2.6 and 1.5 percent after being stung by the stronger currency. Financials also traded lower, with Mitsubishi UFJ Financial Group losing 2.6 percent.

Sharp outperformed with a 2.2 percent gain after denying a report by the Nikkei Business Daily that it plans to cut jobs at home and abroad, as well as lower the pay scale for Japanese workers. The electronics maker added it is considering various options to restructure its business although no decisions have been made.

Shanghai Comp falls 0.4 percent

China’s Shanghai Composite retreated from Wednesday’s seven-year closing high of 3,577, seemingly on the back of profit-taking.

Everbright Bank, which have been rallying in the past few sessions after announcing a potential spin-off of its wealth management unit, tanked 2.1 percent. Among blue-chips, developers like Poly Real Estate and China Vanke opened down 1.2 and 1 percent each.

Chinese sports brand Li Ning bounced up 2.5 percent, brushing off news that it posted a loss for a third consecutive year. Meanwhile, the broader Hang Seng index rose 0.9 percent to a two-week high.

ASX jumps 1.6 percent

Australia’s S&P ASX 200 index widened gains in mid-morning trade.

All the big four lenders advanced more than 1 percent each, with Westpac leading the pack with a 1.9 percent rise. Gold-related counters got a boost from surging gold prices overnight; Newcrest Mining and Alacer Gold rallied 6.2 and 8.4 percent each.

Miners ignored a 3 percent slide in iron ore prices, with the market bellwether BHP Billiton up 1.7 percent. Fortescue Metals, which suffered steep losses for the past two days over a USD 2.5 billion high-yield bond issue, recouped over 2 percent.

Myer Holdings, the country’s top department store by sales, was the top laggard in early trade, slumping 9.5 percent after announcing a 23.1 percent fall in first-half net profit.

Meanwhile in New Zealand, data released early Thursday showed the economy grew by 0.8 percent on quarter in the October-December period and expanded 3.5 percent on-year, the highest reading since September 2007. As a result, the benchmark stock index notched up 0.3 percent.

Kospi rises 0.2 percent

South Korea’s Kospi index retreated from a near six-month high attained at the open as index heavyweights turned negative. Hyundai Motor slipped 0.3 percent, reversing a 2 percent gain, while Samsung Electronics dropped 1.3 percent to drift further away from record highs.

However, brokerages provided some upward support; Daewoo Securities and Hyundai Securities rallied more than 1 percent each.

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

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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

Fed won’t raise interest rates this year: Marc Faber

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

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Investors are awaiting a signal from the Federal Reserve on whether the central bank will raise interest rates, but “Dr. Doom” Marc Faber thinks the Fed will keep them waiting.

“In my view, the Fed will not increase interest rates this year,” the editor of the Gloom, Boom & Doom Report editor said Wednesday on CNBC’s “Squawk Box,” pointing to dollar strength and recent disappointing economic data. “The economy simply [is] not taking off, so I don’t see there will be an interest rate increase.”

Faber made his comments ahead of a scheduled Wednesday afternoon statement from the Federal Open Market Committee and a news conference by Chair Janet Yellen. Some investors expect the central bank will indicate it will begin hiking short-term interest rates from near zero.

Read More: The dollar may now be the market’s biggest enemy

Any move in the federal funds rate would be meaningless until it hits 3 percent, Faber said, referring to the interest charged when one bank lends to another. It’s currently near zero percent. The Fed is widely expected to raise rates in increments of a quarter of a percent.

Faber reiterated his opinion that the zero interest rate policies of central banks around the world have “grossly distorted financial markets and misallocated capital.”

European stocks will likely outperform US equities this year, Faber said, noting that the spread between yields on European stocks and sovereign bonds is far larger than it is between US securities.

He also likes Chinese stocks better than US equities, in part because he believes China’s government has more tools available to ease monetary policy.

Read More: What slowdown? Chinese firms most upbeat in a year

While he believes the economy is weaker than Chinese leaders suggest, he said Chinese stocks can move higher because they have underperformed foreign markets for roughly the last seven years.

The property market in China is also weakening, he said, and he expects capital previously allocated to real estate to flow into equities.

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 open mixed with eyes on Fed

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

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Asian shares posted a subdued open on Wednesday, tracking a mixed finish on Wall Street overnight as uncertainty over when the Federal Reserve will raise rates prevailed.

Overnight, US stocks were mostly lower as traders held off bets ahead of the Federal Open Market Committee’s (FOMC) statement that could shed light on the timing of an interest rate hike.

The FOMC’s two-day meeting kicked off Tuesday, with the highly anticipated post-meeting statement and press conference expected on Wednesday. Investors are monitoring whether or not the word “patient” remains in the text as an indication of when short-term interest rates might go up.

The Dow Jones Industrial Average and S&P 500 closed down 0.7 and 0.3 percent, respectively, while the tech-heavy Nasdaq inched up 0.2 percent.

Nikkei slips 0.2 percent

Japan’s Nikkei 225 index retreated from Tuesday’s fresh 15-year high as markets reacted to a smaller-than-expected increase in February’s export data. Japanese exports rose 2.4 percent last month due to a fall in shipments to China, according to data from the Ministry of Finance early Wednesday, a slowdown from a 17.0 percent on-year rise in January.

It was a mixed picture across the board, with index heavyweight Fanuc barely supporting the bourse. The industrial robot maker notched up 0.4 percent, buoyed by last week’s news that it considers bolstering shareholder returns, but gains were offset by a nearly 2 percent decline in Fast Retailing and Softbank.

Sony rallied more than 4 percent after revising its third-quarter profit on Tuesday. The electronics giant said its official operating profit for the third quarter was 182 billion yen (about USD 1.5 billion), up 2.2 percent from the estimate it reported last month.

Mainland indices up

China’s Shanghai Composite opened up 0.4 percent to a fresh seven-year high as a widening fall in February’s new home prices fueled hopes of further stimulus. Home prices eased 5.7 percent year-on-year last month, more than the 5.1 percent drop in January.

“The property market will have to [stop] being a drag in order [for China] to hit the 7 percent growth target this year. This will require further monetary accommodation,” ING analysts wrote in a note. “We remain of the view that the People’s Bank of China (PBoC) will deliver another 25-basis-point cut in policy interest rates in each of the last three quarters of 2015.”

Mainland developers were largely buoyant in early trade, with China Merchants Property and Poly Real Estate up more than 1 percent each.

Brokerages were on course for two straight days of gains; Huatai Securities, China’s largest stock brokerage, rose 4.6 percent, while Haitong Securities and Citic Securities rose over 1 percent each on news that authorities plan to allow brokerages and securities investment advisers to expand their wealth management business.

In Hong Kong, CK Hutchison Holdings leaped nearly 1 percent in its first day of trading. The new company is the product of a reshuffle in the property assets of Hong Kong tycoon Li Ka-shing and replaces the old Cheung Kong Holdings, which were suspended on March 10. Meanwhile, the broader Hang Seng index opened up 0.6 percent.

ASX sheds 0.2 percent

Australia’s S&P ASX 200 index halved losses in mid-morning trade, as some index heavyweights turned positive. Rio Tinto, which was previously hurt by iron ore prices hovering near multi-year lows, rebounded 0.5 percent, while all the big four lenders bounced back into the black.

However, a 6.7 percent slump in shares of Fortescue Metals continued to weigh on the resource-heavy bourse. The miner had scrapped a USD 2.5 billion high-yield bond issue announced on Tuesday.

Oil-related counters were also stung by declining commodity prices; Santos and Oil Search lost 1.5 and 0.5 percent, respectively. Meanwhile, Orica slumped 3.1 percent on news that its CEO Ian Smith will be stepping down.

Outperforming the bourse was the country’s biggest construction materials and building products group Boral, whose shares shot up 1.2 percent after announcing a share buyback program for up to 5 percent of the company’s issued capital.

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

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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

No move from BOJ despite tumbling inflation rate

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

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The Bank of Japan (BOJ) kept its massive monetary policy stimulus intact on Tuesday, as widely expected, but analysts are still calling for further action in the coming months on the back of a tumble in the consumer inflation rate.

The BOJ voted 8-1 to maintain its pledge of increasing base money at an annual pace of 80 trillion yen (USD 659 billion) via purchases of government bonds and risky assets.

The focus now shifts to BOJ governor Haruhiko Kuroda, who will hold a media briefing later in the day to explain the policy decision.

“The statement was virtually unchanged, which is somewhat surprising given that recent industrial production and export figures were strong,” Marcel Thieliant of Cpital Economics wrote in a note following the decision.

“The only adjustment was that the Board now expects inflation to remain around zero for the time being abstracting from the impact of last year`s sales tax hike. Last month, it predicted it would slow further,” he added.

The central bank is under pressure to meet its goal of reflating the economy, targeting the consumer inflation at 2 percent by early 2016.

Core consumer inflation – excluding the effects of the consumer tax hike – hovered at 0.2 percent in January after peaking at 1.5 percent last April, dragged down by a collapse in oil prices.

Policymakers surprised markets last October by expanding the quantitative easing program for the first time since it was launched in April 2013.

According to Izumi Devalier, Japan economist at HSBC, the BOJ is less concerned about the headline inflation figure than the impact it has on price expectations.

“Its not so much the decline in headline CPI that`s bothering or keeping the BOJ up at night. It`s whether private sector inflation expectations get dragged down with it,” said Devalier.

“And here I think the key issue is going to be household inflation; I do think that households will revise down their inflation expectations based on the decline in energy price. And that could lead the BOJ to ease as early as April,” she added.

Theliant also agreed policymakers will step up the pace of easing next month, as “headline inflation is set to plunge in April as last year`s hike falls out of the annual calculation,” he said.

“Our forecast remains that the Bank will step up the pace of easing from the current ¥80 trillion to ¥90 trillion per annum at its late-April meeting. As a result, we expect the yen to weaken towards 140 against the dollar by the end of the year, while the Nikkei should climb to 20,000,” he added.

Japan`s economy emerged from recession in the fourth quarter of 2014, logging an annualized growth of 1.5 percent, after contracting in both the second and third quarter as a hike in nationwide sales tax to 8 percent from 5 percent hit consumer spending.

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

Asia hinges on central bank actions this week

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

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Asian markets seesawed last week amid speculation over the timing of a Federal Reserve interest rate hike and as central banks in South Korea and Thailand announced surprise interest rate cuts.

In the week ahead, markets may face more volatility with a string of central bank actions on tap.

What will Fed do?

A mixed bag of economic data – ranging from stronger-than-expected nonfarm payrolls to weather-distorted retail sales figures for February – sent conflicting signals over when the U.S. central bank will begin raising rates. As the Fed`s policy committee convenes for its monthly two-day policy meeting on Tuesday, analysts expect the world`s most influential central bank to remove its “patient” promise, opening the door for a discussion about raising interest rates this year.

“We`ll see a language change in the Fed`s statement. It will drop the `patient` language and move on to a meeting-to-meeting notion as to when they might hike rates,” HSBC`s FX strategist Dominic Bunning told CNBC last Friday. “We are still looking for [the rate increase to be] September. We`ve seen some disappointing data, but that`s compared to relative expectations, which have been improving.”

Easing bandwagon: Japan, Indonesia to join next?

The week also brings monetary policy decisions from the Bank of Japan (BOJ) and Bank Indonesia (BI) on Tuesday.

While the BOJ is set to maintain its pace of quantitative easing, its Indonesian counterpart will likely opt for its second consecutive cut, reducing its key interest rate by 25-basis-point to 7.25 percent.

Last month, BI surprised markets by cutting rates for the first time in three years, taking advantage of an oil-induced slowdown in inflation to ease monetary policy so as to spur economic growth.

“Inflation continues to weaken on account of cheaper oil, while Indonesia`s external position remains strong thanks to continued capital inflows. BI is unlikely to be too concerned about the rupiah`s recent depreciation as it will boost the struggling export sector,” analysts from Moody`s Analytics wrote in a note.

As the BOJ`s 2 percent inflation target remains elusive, the central bank may be forced to increase its already massive stimulus package later in the year, experts say.

“The BOJ will likely increase the asset purchasing program in the second half of this year, particularly with low oil prices exerting a lot of disinflationary effect on the consumer price index which makes it harder for them to reach their target,” Stephen Sheung, head of investment strategy at SHK Private, said.

Data watch

On the economic data front, Asia`s calendar is fairly busy. The week begins with India`s wholesale price index (WPI) for February, which is seen falling to “nonexistent” levels as falling fuel and power costs offset higher food inflation, noted Moody`s Analytics. This leaves room for the Reserve Bank of India to cut interest rates once again to encourage investment and stimulate growth.

Singapore`s non-oil domestic exports for February are scheduled on Tuesday, while Japan releases trade data for the same month before Wednesday`s market open.

New Zealand, dubbed as last year`s “rockstar economy,” is seen growing 0.8 percent on-quarter in the October-December period, a tick higher than the 0.7 percent in the preceding quarter, bringing growth to 3.1 percent for all of 2014, according to Moody`s Analytics.

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

Oil collapse will hit the Gulf, but don’t panic

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

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The economies of Gulf oil exporting nations look increasingly strained, new forecasts show, but economists say there`s still no cause for alarm.

The fiscal balances of Gulf Cooperation Council (GCC) oil exporting nations will hit a deficit of 7.7 percent of gross domestic product (GDP) in 2015 following a 50 percent decline in Brent crude prices over the past twelve months, a report by the Institute of International Finance (IIF) released over the weekend said. That`s down from double-digit surpluses in recent years.

Saudi Arabia – the world`s largest producer – is set to post a current account deficit for the first time in a decade this year, the report said. Meanwhile the United Arab Emirates – the world`s eighth largest producer – will shift to a fiscal deficit of 4.3 percent of GDP, from a surplus of 6.7 percent last year.

Moody`s Investor Services expressed similar concerns in a recent report: “Large net oil-exporting countries such as Oman, Bahrain and Saudi Arabia will likely record the largest deterioration in both fiscal and external metrics this year, moving from large twin surpluses to twin deficits.”

Despite dire economic forecasts, experts remain positive about future prospects for the Gulf.

“For the short term, ample public foreign assets and low debt in GCC countries will mitigate the adverse impact of low oil prices on economic activity and allow public spending to continue growing, albeit at a lower pace than in recent years,” the IIF said.

The IIF doesn`t expect cheaper oil to spark government spending cuts, citing strong buffers. The region`s gross public external assets are estimated at about USD 2.2 trillion, while gross government debt is only around 13 percent of GDP.

Even in the worst-case scenario for Saudi Arabia, Moody`s envisions government reserves falling to USD 617 billion from USD 734 billion currently. “But even this reduction in buffers would still be more than sufficient to cover another large deficit in a further year of low oil prices,” Moody`s said.

The US dollar`s rally in recent sessions has had little impact on the currencies of Gulf countries, compared to other major oil-producing nations.

In the past 30 days, the US dollar index has gained over 6 percent while the Saudi Arabian riyal, U.A.E. dirham and Bahraini dinar are all flat. On the other hand, Russia`s ruble and the Nigerian naira have both lost 2 percent.

All GCC nations with the exception of Kuwait have their currencies pegged to the U.S. dollar, and despite oil`s slide, most central bank chiefs have repeatedly said they are in no hurry to change the dollar peg.

“The currencies of commodity-dependent economies typically come under depreciation pressures with falling commodity prices,” Moody`s said.

“However, the GCC countries` very large hard-currency reserves have so far allowed them to fend off nominal depreciation pressures stemming from oil price volatility, notwithstanding their currencies` peg to the U.S. dollar.”

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

Tokyo, Shanghai stocks hit fresh multi-year highs

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

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Asian stocks opened higher on Tuesday, with Tokyo and Shanghai markets clinching new multi-year highs, on the back of a positive US finish overnight and ahead of a flurry of central bank meetings.

Overnight, Wall Street rose more than 1 percent as investors cheered a pause in the US dollar’s rally and eyed renewed weakness in oil prices ahead of the outcome of the Federal Reserve’s two-day policy meeting on Wednesday.

Asia’s calendar

Monetary policy decisions from the Bank of Japan (BOJ) and Bank Indonesia (BI) are on tap Tuesday. The BOJ is set to maintain its pace of quantitative easing, while its Indonesian counterpart will likely hold rates steady after pulling off an unexpected easing move in February.

Last month, BI surprised markets by cutting rates for the first time in three years, taking advantage of an oil-induced slowdown in inflation to ease monetary policy in an attempt to spur economic growth.

Beyond Asia, the Federal Open Market Committee (FOMC) commences its two-day monthly meeting today. Markets will be watching whether the US central bank policy makers will eliminate the “patient” promise in its post-meeting statement, paving the way for an interest rate hike this year.

Nikkei jumps 0.8 percent

Japan’s Nikkei 225 index hit fresh 15-year highs of 19,428, while the yen traded little changed at 121.4 against the dollar, ahead of the BOJ’s policy decision due at 1200 SIN/HK.

Fanuc, which has been a key contributor to the index’s rally last week, resumed its upswing in early trade. Shares of the industrial robot maker rallied 2 percent after falling 0.6 percent in the previous session.

Among the blue-chips, Sony led gains with a rise of 2.7 percent, while Toshiba and Canon rallied 1.3 and 0.9 percent each.

Mainland indices

China’s Shanghai Composite scaled a fresh five-year high of 3,476 at the open as investors continued to place bets on further stimulus in the world’s second-largest economy.

The risk-on sentiment was ignited after Premier Li Keqiang said that Beijing has room and the tools to step in should growth falter and impact employment. The comments were made at the conclusion of the annual parliamentary session over the weekend.

Among the top gainers were brokerage firm Huatai Securities, junior lender Everbright Bank and developer Poly Real Estate. All three stocks opened up between 2.8 to 5 percent.

In Hong Kong, global luggage manufacturer and retailer Samsonite ticked up 0.4 percent on the back of a 5.8 percent increase in 2014 net profit, while the broader Hang Seng index inched up 0.3 percent.

ASX rises 1.1 percent

Australia’s S&P ASX 200 index widened gains amid a broad-based rally, with the market’s attention on BHP Billiton and Fortescue Metals. The former released details about the performance and quality of its South32 spin-off and shares of the global miner leaped 1 percent.

Fortescue Metals pared a more than 1 percent gain to lose 2.4 percent following news that it is launching a USD 2.5 billion bond offer.

Oil-related counters ignored news that U.S. crude oil prices hovered near six-year lows overnight; Oil Search and Woodside Petroleum climbed more than 1 percent, respectively, while Santos was one of the top gainers with a rise of 3.6 percent.

Meanwhile, minutes from the Reserve Bank of Australia’s (RBA) last policy meeting revealed that the central bank still sees the Australian dollar as “still above most estimates of fundamental value.” The Aussie dollar shed 0.2 percent to USD 0.7617, from USD 0.7640 per dollar.

Kospi gains 1 percent

An upbeat performance among exporters led South Korea’s Kospi index to a one-and-a-half-week high early Tuesday.

Hyundai Motor and Kia Motors bolstered 2 and 0.9 percent each, while LG Display rose 0.9 percent as the won remained near a 20-month low of 1,130 per dollar ahead of the Federal Reserve’s policy meeting.

Samsung Electronics, which starts won-yuan direct trade today, erased opening losses to notch up 1 percent.

Meanwhile, Singapore Airlines confirmed early Tuesday that it is in talks to take a stake in South Korean low-cost carrier Jeju Air. Shares of AK Holdings, the airline’s holding firm, soared 2.9 percent following the news.

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 mostly higher, but lower oil caps advances

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

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Asian shares were higher across the board early Monday, shrugging off a negative lead from Wall Street, but lower oil prices capped advances.

US stocks finished last week on the back foot as a week of mixed economic data, renewed US dollar strength and sharply lower oil prices made traders cautious ahead of next week’s Federal Reserve meeting. The Dow Jones Industrial Average closed down 0.8 percent, while the S&P 500 finished 0.6 percent lower. The tech-heavy Nasdaq lost 0.4 percent.

Nikkei adds 0.3 percent

Japan’s Nikkei 225 index scaled a new 15-year high of 19,349, but pulled back slightly by mid-morning. Industrial robot maker Fanuc extended last week’s rally with a rise of 0.4 percent, while other index heavyweights such as Fast Retailing bounced up 1 percent.

This helped to offset a slight retreat in dollar-yen, which led to a mixed picture among exporters. While Sharp and Sony lost 2.1 and 3.6 percent each, Nintendo and Nikon advanced 3.1 and 1.1 percent, respectively.

Meanwhile, the Bank of Japan commences its two-day monthly meeting on Monday.

Shanghai Comp up 0.9 percent

China’s Shanghai Composite notched up in early trade as markets digested comments by Premier Li Keqiang over the weekend. At the conclusion of the annual parliamentary session, the Chinese Premier sounded a warning on the economy and said that achieving the year’s 7 percent growth target could be challenging.

Among top gainers were Kangmei Pharmaceutical and Shanghai Fosun Pharmaceutical, which climbed more than 2 percent each. Blue-chip property stocks were also higher; Poly Real Estate and China Merchants Property gained 1.4 and 1.1 percent, respectively.

ASX falls 0.2 percent

Australia’s S&P ASX 200 index trimmed losses in mid-morning trade as financials turned positive, offsetting losses from the resources sector.

Oil-related majors were stung by declining oil prices. Oil Search slumped 3.8 percent, while Woodside Petroleum and Santos tanked more than 2 percent each.

The mining space, meanwhile, saw a mixed picture as iron ore dropped to $57.66 a tonne overnight. BHP Billiton eased 0.8 percent, while Fortescue Metals and Rio Tinto rose 2 and 0.2 percent, respectively. Copper miner Sandfire Resources retreated 1.8 percent after OZ Minerals offloaded its 19 percent stake in the miner last Friday.

Kospi flat

South Korea’s Kospi index remained little moved, while the won stayed near a 20-month low of 1,134 against the greenback.

Among index heavyweights, Hyundai Motor and Samsung Electronics notched up 2 and 1.2 percent each. But losses among the energy sector capped advances; S-Oil lost 3.9 percent and SK Innovation dropped 4.1 percent.

The week in Asia begins with India’s wholesale price index (WPI) for February, which is seen falling to “nonexistent” levels as falling fuel and power costs offset higher food inflation, noted Moody’s Analytics. This leaves room for the Reserve Bank of India to cut interest rates once again to encourage investment and stimulate growth.

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

Russian economy is ready to grow

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

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After a year of sanctions and a contraction, the Russian economy is ready for the upside. What it needs are economic reforms and international integration – not further sanctions and geopolitical isolation.

While the political impact of the opposition leader Boris Nemtsov’s killing has been limited in Russia, it has fueled demands for new sanctions against Moscow in the West. Meanwhile, Russian equity valuations suggest potential for a strong performance over the coming months.

Read More: Where in the world is Vladimir Putin?

Nevertheless, as long as sanctions prevail, the potential destabilization in the Russian economy and severe collateral damage in Europe will steadily increase.

The ailing post-sanctions economy

In pre-sanctions Russia, growth was expected to remain weak in 2014-2015 due to stagnant oil demand, while institutional weaknesses reflected a poor investment climate. In early 2014, markets projected growth of 1.7 percent for 2014 and 2.3 percent in 2015, with a deceleration of inflation to about 5 percent and a policy rate of 5 percent.

With sanctions in place, the Russian economy wound up contracting 3.5 percent in 2014. Even in a benign scenario, Moscow can only expect flat growth in 2015. With subdued oil prices and weak ruble, only exports are driving growth.

Despite the stalemate in Ukraine, the cease-fire may not last long. Brussels is not eager to extend further sanctions in the near term, nor will it readily remove them. Washington is a different story.

Read More: Russia’s economic crisis ‘will end Putin regime’

Preparing for the 2016 election, members of Congress have proposed far tougher actions, which range from declaring Russia in breach of its obligations under the nuclear treaty (INF) to ousting Moscow from the World Trade Organization.

What about medium-term expectations? In a benign scenario, Russian growth could climb to 1.5 percent by the late 2010s and stay there until the early 2020s. That is a far cry from Russia’s BRIC-style peak growth of almost 7 percent in the pre-crisis world.

In an attempt to control the currency and inflation, Russia’s central bank (CBR) raised the key rate from 5.50 percent at the start of the year to 17 percent after a huge 6.5-percent hike in December. The CBR also replaced its monetary head Ksenia Yudaeva with Dmitry Tulin. While the former can now focus on increasing flexibility in forecasting and strategy, the latter will ensure tougher enforcement in monetary policy.

After CBR cut rates to 15 percent, the ruble decreased to the low 60s against the dollar. As the central bank sees a weak ruble as a better option than high interest rates, it cut rates again Friday to 14 percent and said more rate cuts will follow.

Politically, sanctions unified Russia   

For months, Washington and Brussels have hoped that sanctions and the Ukraine crisis would quash President Putin’s popularity. In reality, the two have dramatically boosted his ratings.

Before the Ukraine crisis last October, diminished economic prospects caused Putin’s approval rating to plunge to 61 percent; the lowest since 2000. In March 2014, the sanctions and the annexation of Crimea galvanized public opinion behind Moscow. And when Washington introduced another round of sanctions in mid-2014, Putin’s support soared to a record of 87 percent.

Even after economic turmoil, financial crisis and international isolation, some 86 percent of Russians approve of Putin’s performance today. Yet, the West’s strategy relies on the idea that “Putin is the problem, Russia is with US.” In reality, Putin’s actions reflect the wishes of the majority of the Russian people – whether or not this is preferred in the West.

Recently, the Washington Post reported that, with more than 80 percent of Russians holding negative views of the United States, “Russia’s anti-us sentiment now is even worse than it was in Soviet Union.” If that’s the case, is it is surprising, really?

Read More: What is Putin playing at?

Assume that America would have a president whose approval rating would be close to 90 percent (rather than less than 50 percent). Then assume that a rival power would offer military partnership to Washington’s regional neighbors. Most likely, Americans would adopt negative views of their perceived adversary and align behind the incumbent president. Russians are not that different.

Currently, President Obama is considering the idea to send lethal weaponry to the Ukrainian military. It is probably safe to assume that if the White House opts for such arms transfers, the consequent anti-Western sentiment in Russia would broaden and deepen.

The right solution   

Setting aside the odd “regime change” dreams in the West, Russia has no longer time for delays either. President Putin needs a Ukraine deal to intensify structural economic reforms in Russia – not because of the West’s pressure but because of its own future.

In 2009, then-President Dmitry Medvedev launched a modernization program to decrease Russia’s reliance on oil and gas revenues and to create a more diversified economy driven by high technology and innovation. And yet, energy continues to account for most exports.

In the absence of adequate diversification, Russia will continue to suffer from commodity cycles, which are about to get worse, thanks to the us shale gas revolution and the plunge of oil prices.

With a Ukraine deal and a credible medium-term plan for modernization, President Putin can restore economic foundations for sustained growth. As the price of oil is likely to climb higher from the mid-50s today, the immediate reaction would be jubilation in the markets which are already hunting for discounted Russian equity relative to other emerging markets.

Over time, the sanctions approach will only further deepen the stagnation in Europe, nullify the effectiveness of the European Central Bank’s quantitative easing, impair the lingering recovery in the us and harden the sentiments in Russia – another major nuclear nation.And that’s the benign scenario.

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It’s all about the Fed, but watch for these flareups

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

Listen to the Article (6 Minutes)

The Federal Reserve in the coming week may finally signal it is on a course to raise interest rates for the first time in nine years.

Anticipation of a change in its more than 6 year old zero-rate policy has been sending ripples through financial markets, lifting the dollar and driving commodity prices lower. Stocks have swung wildly, with the Dow making four triple-digit moves in both directions in the past week.

The Fed meets Tuesday and Wednesday and is expected to remove the word “patient” from its statement, putting markets on notice that it is getting ready to consider a rate hike as early as June. Markets have shifted ahead of the central bank—with a strengthening dollar increasingly viewed as a negative factor for the stock market.

Andrew Burkly, head of institutional portfolio strategy at Oppenheimer Asset Management, said stocks could continue to see selling pressure into the Fed meeting. “I think maybe there’s a continuation of this,” he said of Friday’s downdraft. The S&P 500 was down 0.9 percent for the week to 2,053, and the Dow was off 0.6 percent at 17,749.

Burkly said oil prices could also be a key to the coming week. “Oil is going back to test its low,” he said. “We’re either going to hold it or break it next week … if it breaks to a new low, you have to take it as a negative for the (stock) market.”

He said investors would then reassess the impact on earnings of oil and energy companies, and those names could see selling pressure. West Texas Intermediate futures for April fell more than 9 percent to settle at USD 44.84 per barrel, just 39 cents above January’s closing low.

Read More: Oil plunges on bloated US supply

Some analysts are targeting an area around USD 40 as a floor for WTI, but others say if the oversupply issues continue to grow, the bottom could be much lower.

The dollar move and oil’s decline have created a level of anxiety in markets for what they could potentially mean for the Fed. Under the central bank’s dual mandate, it is expected to seek full employment and stable prices, but inflation has been stubbornly low. More disappointing data on the inflation front came in the producer price index Friday, which surprisingly declined in February.

“(Fed Chair Janet) Yellen has gone to great lengths to say they don’t need to see inflation at 2 percent, but they do need to see a firming in core inflation,” said Diane Swonk, chief economist at Mesirow Financial. “They have to be sure when they raise rates, they don’t have to go back again. They are going to move very glacially.”

At the same time, job growth has been strong, with February’s 295,000 nonfarm payrolls reaffirming a trend of strong hiring.

“They shifted from worrying about just the labor markets to inflation,” Swonk said.

Read More: This Fed economic indicator looks pretty awful

Markets, in the meantime, have had outsized responses to economic data, reacting to how the Fed might view it. After the February jobs report, the stock market sold off on concerns the central bank would move quicker to raise rates, but the decline in February retail sales Thursday soothed markets, and helped spark a rally on the view the sluggish economy will force the Fed to move slowly.

Swonk said the Fed will certainly consider the rising dollar. “This is another deflationary effect. At the end of the day, they’ve got to step back and say, it’s not helping them get where they want to go. They could acknowledge there are foreign risks, as they already did,” she said.

Swonk expects the central bank to move slowly and carefully to “normalize” rates. “At the end of the day, it’s a lot of discretion because it’s unchartered waters we’re in. We’re talking about normalizing policy with a USD 4.5 trillion balance sheet and a global economy that’s still too cold,” she said.

One of the factors ruffling markets is that the Fed is alone as it heads into a tightening regime, while other central banks—like the European Central Bank—are moving to ease. The ECB’s bond-buying program has sent European sovereign rates sharply lower, and the euro to a 12-year low.

Read More: Global markdown: Why money is on sale

As for the Treasury market, rates moved lower in the past week, tugged in part by the decline in Europe. “We’re narrowing in on a Fed hike, or at least the paving of the way to a Fed hike. That’s a good dollar story, and a curve-flattening story,” said David Ader, chief Treasury strategist at CRT Capital. Analysts expect the yield curve to flatten, with short-end rates rising more due to their sensitivity to rising rates.

“Between now and then, without a lot of critical information, we’re trading the removal of the ‘patient’ language which means maybe they can go as early as June, and for the moment, the market is OK with it,” Ader said. The 10-year was yielding 2.11 late Friday, and he expects it to trade in that area and to 1.95 on the low side.

While markets have been gyrating ahead of the Fed meeting, a number of stock analysts expect the market to see just a shallow selloff.

Read More: Short, sharp shocks: Why markets should brace for more

“I think the overall decline will be relatively modest still,” said Burkly. “You want to buy dips as we get closer to 2,000 on the S&P. That would be a 5 percent decline, not much in the bigger scheme of things. I think it would “

Burkly said the S&P should hold above the high 1,900s/2,000 level. “I think the uptrend remains as the economic data gets better. Earnings season will surprise on the upside. That should help the market,” he said. Burkly said if oil could stabilize that would stave off further declines in energy-related shares and earnings.

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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