Month: September 2015

Asia stocks mixed after China data; Nikkei drops 1%

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

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Asian equity markets were mixed on Monday as investors digested key data from the world’s second-biggest economy. But volumes in the region were light with Hong Kong, Taiwan and South Korea shut for the Mid-Autumn Festival.

Chinese industrial profits declined 8.8 percent on year in August, worse than July’s 2.9 percent fall, the National Statistics Bureau announced at the market open. For the first eight months of the year, profits slid 1.9 percent as forty-two straight months of tanking producer prices erodes earnings growth.

The main economic reports investors are anticipating this week are China’s official September purchasing manufacturing managers’ index (PMI) and the final Caixin/Markit PMI, both due on Thursday. The data will be closely watched after Caixin’s preliminary reading for September touched a six-and-a-half-year low of 47, well below the key 50-level.

A mixed handover from Wall Street also dampened sentiment in Asia.

The Nasdaq Composite closed down 1 percent on Friday, pressured by decline of nearly 5 percent in the iShares Nasdaq Biotechnology ETF (IBB). Meanwhile, the S&P 500 ended flat and the Dow Jones Industrial Average closed up 100 points as investors continued to react to Federal Reserve Chair Janet Yellen’s Thursday comments that she personally anticipated an interest rate hike this year.

Shanghai down 1 percent

China’s benchmark Shanghai Composite index extended losses, hitting its lowest level in over a week, after closing down nearly 2 percent on Friday. Meanwhile, the Shenzhen Composite inched down 0.1 percent.

Banks were among the biggest losers, with ICBC, Bank of China and Bank of Communications down by more than 1 percent each.

Nikkei slips 1 percent

Japanese shares fell as much as 1.5 percent in early trade, losing ground after a near 2 percent rally on Friday.

Exporter shares were weighed down by a slightly stronger currency; the yen was 0.2 percent higher at around 120.3 per dollar. Sony led losses by nearly 4 percent while Fanuc and Honda both lost more than 2 percent each.

Suzuki Motor erased early gains to drop 1 percent after it announced plans on Saturday to sell its 1.5 percent stake in Volkswagen to Porsche. No price tag was revealed but Suzuki says it will post a USD 304 million special profit from the proceeds.

ASX up 1 percent

A rally in the banking sector underpinned gains in Australia’s benchmark S&P ASX 200 while the Australian dollar was also higher against the greenback.

Australia New Zealand Banking and Commonwealth Bank of Australia jumped 2 percent each while National Australia Bank and Westpac both climbed more than 1 percent.

Shares of M2 surged 23 percent following news before the start of trade that the telecommunications firms will merge with rival Vocus to create a AUSD3 billion company. Shares of the latter were flat in positive territory.

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

Fed, jobs could drop more rate clues in week ahead

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

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Strong or weak, September’s jobs report could sway the debate in the week ahead about when the Federal Reserve will hike rates, while markets also watch Washington to see if the budget battle is going to get any worse.

There is also a flock of Fed speakers making about a dozen appearances. That includes the core of the Fed: Fed Chair Janet Yellen, New York Fed President William Dudley and Fed Vice Chairman Stanley Fischer.

“I think the hawks will be important, but to get a nod from Dudley and Fischer that they’re ready [to hike rates], too, that’s the signal you need,” said John Canally, investment strategist at economist at LPL Financial. “They’re the center of gravity, along with Yellen.”

Yellen re-emphasized Thursday that the Fed could hike rates this year and said that she was personally in agreement with that. Those and other remarks helped clarify her comments from the week earlier when the Fed held off on a rate hike, and spooked the markets by highlighting its concerns about a slowing China.

Stocks bounced on Yellen’s comments but were mixed by the end of the day Friday, as biotechs sold off. For the week, the S&P 500 was down 1.4 percent at 1,931. Futures markets were still pricing in low odds for an October Fed rate hike, at less than 20 percent, while the odds for December were just below 50 percent, as of Friday, according to RBS.

“For years, we obsessed about how the Fed was going to hike rates and that’s going to be bad. And they had a chance to hike rates, they didn’t do it, and now that’s bad,” Canally said.

Markets will also be focused on Washington, where House Speaker John Boehner Friday announced his resignation as speaker and from Congress. Boehner was facing “turmoil” within the Republican Party over whether funding for Planned Parenthood should be tied to the federal budget. If the budget does not pass, the government would shut down as of Thursday.

“The government shutdown will be less likely, but what it does is it raises the prospect of a much harder deal because this is a three-month extension of the budget,” said Dan Clifton, head of policy research at Strategas. “You go into the fall and they have to raise the debt ceiling…. This is what the new house leadership is going to deal with, a conservative group of members that removed the speaker of the House.”

Clifton said the best scenario for markets would be if Boehner could get the debt ceiling issue resolved before he leaves at the end of this month.

“The record of market trading with government shutdowns, it’s not entirely clear that it is an unequivocal market negative. If people perceive that it puts pressure on the Republicans to get something done, both in the near term and more importantly in December, it will be a positive,” said Julian Emanuel, equity and derivatives strategist at UBS.

Important for markets, too, will be economic reports, especially the jobs data, expected to show creation of 203,000 jobs, up from 173,000 last month.

“I think if we get another print below 200,000, (the market) might look a lot like this week,” Canally said, adding that investors might think the Fed knows something negative about the economy. “That’s what this week was about. ‘The Fed knows something we don’t.’ “

Emanuel said Yellen managed to improve the message on the U.S. economy Thursday, so it’s important the jobs number does not miss expectations. “I think at this point, the market would not take that well,” he said.

Other data in the coming week includes personal consumption data Monday, with the PCE, the Fed’s preferred measure of inflation. ISM manufacturing data and vehicle sales are Thursday.

“The China spillover story is big next week,” said Canally. “For ISM, vehicle sales, even the jobs report, were people spooked by what happened in August: the first 10 percent (stock market) selloff in four years. Did that slow hiring?”

Traders will also stay hyperfocused on any economic or market news out of China, as well as the action in emerging markets, where currencies continued to weaken against the dollar in the past week. China does have PMI manufacturing data Wednesday.

As for the Fed speakers, Yellen makes opening remarks at a St. Louis Fed conference Wednesday, and Fischer speaks on monetary policy at a Boston Fed conference Friday. Dudley speaks Monday on monetary policy and again on Wednesday.
What to watch

Monday

5:15 a.m.: Fed Gov. Daniel Tarullo

8:30 a.m.: New York Fed President William Dudley; personal income

10 a.m.: Pending home sales

12:30 p.m.: Chicago Fed President Charles Evans

5 p.m.: San Francisco Fed President John Williams

Tuesday

Midnight deadline for Congress to approve budget

9 a.m.: S&P/Case-Shiller home prices

10 a.m.: Consumer confidence

Wednesday

8 a.m.: New York Fed’s Dudley on market liquidity

8:15 a.m.: ADP employment

9:45 a.m.: Chicago PMI

3 p.m.: Fed Chair Janet Yellen welcoming remarks at St. Louis Fed event

3:10 p.m.: St. Louis Fed President James Bullard at St. Louis Fed community banking event

8:15 p.m.: Fed Gov. Lael Brainard at St. Louis Fed event

Thursday

September vehicle sales

8:30 a.m.: Initial claims

9:45 a.m.: Manufacturing PMI

10 a.m.: ISM manufacturing; construction spending

2:30 p.m.: St. Francisco Fed’s Williams on outlook

Friday

8:30 a.m.: Employment; Boston Fed President Eric Rosengren at Boston Fed conference

9 a.m.: Minneapolis Fed President Narayan Kocherlakota

10 a.m.: Factory orders

11 a.m.: Cleveland Fed President Loretta Mester

1:30 p.m.: Fed Vice Chair Stanley Fischer on monetary policy at Boston Fed

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

Matthias Mueller named as new Volkswagen CEO

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

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Embattled German carmaker Volkswagen officially named Porsche boss Matthias Mueller its new CEO on Friday.

He replaces Martin Winterkorn, who stepped down this week following revelations of the auto giant’s manipulation of emission tests for its diesel cars. In a statement, Mueller said he wanted to gain back the trust the company has lost while implementing strict compliance standards.

The 62-year-old has been in the Volkswagen fold for years, working under the Audi brand from 1977 after studying information technology and toolmaking in his native Germany. At Audi, he headed up system analysis, product management and later the Lamborghini product line, before moving to Volkswagen’s Wolfsburg headquarters to lead VW’s projects department.

At Porsche, which he has led since 2010, Mueller is credited with helping deliver record revenue and profit, with deliveries jumping 17 percent in 2014 from a year earlier.

Mueller faces a tough job at the at the helm: Volkswagen will now try to navigate its way through civil suits and multi-national investigations over allegations it deliberately tricked regulators who were testing emissions levels on diesel vehicles issued between 2008 and 2015.

First brought to light by the US Environmental Protection Agency earlier this month, VW is said to have installed sophisticated software known as “defeat devices” that only turned on full emissions controls when it sensed official testing taking place, but otherwise emitted 10 to 40 times the legal amount while on the road.

Volkswagen estimates 11 million cars are affected worldwide.

Winterkorn, who resigned as Volkswagen’s CEO after a board meeting on September 23, said he was shocked by recent events, adding he was “stunned that misconduct on such a scale was possible in the Volkswagen Group,” according to a company statement.

The appointment of the new CEO ushers in a new leadership pairing, with former chief financial officer Hans Dieter Poetsch set to take on the VW’s chairman role in November. Volkswagen is still searching for his replacement.

Former chairman Ferdinand Piech resigned in April after losing a leadership battle with Winterkorn, who he all but publicly criticized the former chief exec for his performance at VW.

One other possible candidate for the top job is Herbert Diess, who was hired by Volkswagen to take over Winterkorn’s former positions as the head of VW’s passenger cars brand back in July.

The 56-year-old joined Volkswagen from BMW, where he last served as Chief Development Officer but also played roles in long-term and structural planning, plant management, purchasing and supplies over his 11 years at the company.

He studied automotive engineering in his native Munich, before going on to head the local university’s department of auto assembly, and in 1990 moved onto work at Robert-Bosch.

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

It’s carnage out there for emerging markets

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

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It’s been another week of bloodshed in emerging markets, with the Brazilian real, South African rand and Turkish lira all pummelled to record lows as China growth concerns and uncertainty about US rate hikes continue to bite.

Remarks by US Federal Reserve Chair Janet Yellen late Thursday suggesting the central bank could still raise rates this year sparked fresh selling on Friday, with the Malaysian ringgit and Indonesian rupiah falling to their lowest levels since the Asian financial crisis in 1998.

“EM currencies are being squeezed between concerns about the severity of China’s economic slowdown and increasing uncertainty regarding US monetary policy,” Nicholas Spiro, managing director at Spiro Sovereign Strategy, told CNBC.

“Country-specific vulnerabilities, notably in Brazil and Turkey, are also weighing on sentiment – indeed more so than external factors in the case of many EMs,” he said.

A rout in Brazil’s currency – what has shed almost 10 percent this month and almost 60 percent this year – against a backdrop of a political crisis and an economy mired in recession, has also soured sentiment towards other emerging markets.

Intervention

“In short, the world is not falling apart. Yet for EM, Brazil is vital,” analysts at Standard Bank said in a note. “Too big to fail but not big to save. IMF (International Monetary Fund),would you please step in and save us all?”

To stem the slide, Brazil’s central bank on Thursday warned it would use its foreign exchange reserves to defend the currency. These strong words bought some respite to the real, which bounced more than 5 percent and off a record low of about 4.248 per dollar hit earlier on Thursday.

Brazil isn’t the only country bank taking action to shore up a battered currency. Indonesia’s central bank on Friday said it will announce new steps to increase onshore supply of dollars – part of a move to support the rupiah, which has shed about 20 percent of its value this year.

“What happened yesterday was that we had a classic central bank warning from Brazil which is similar to rate hikes in Turkey in 2014 and a rate rise in Russia late last year amid a ruble crisis,” Piotr Matys, emerging market currency strategist at Rabobank, said.

“Speculators should be aware that there are tools out there that central banks can use to prop up their currencies, but nevertheless the outlook remains fragile, especially because of China.”

Emerging markets have fallen out favour with investors fast this year as global markets brace for the Fed to embark on monetary tightening for the first time in almost a decade and concerns about China’s economy grow.

China factor

But the drubbing has gathered pace this week– a move analysts attribute to the Fed highlighting global growth concerns at last week’s policy meeting and fresh signs of weakness in China, the world’s second biggest economy and long a key driver for growth in many emerging markets.

Data on Wednesday showed factory activity in China fell to a six-and-a-half-year low in September, sparking renewed selling in emerging market currencies.

The South African rand hit a record low of 14.0860 to the dollar on Thursday, and the Mexican peso fell to an all-time low of 17.3165 per dollar.

“The sell-off in emerging markets is quite concerning and the pace looks worrying,” said William Jackson, a senior emerging markets economist at Capital Economics, in London.

“From an economic perspective, weak currencies are bad for those countries with high inflation or foreign currency debt,” he said.

Countries that remain vulnerable include Brazil, South Africa and Turkey, analysts said. Brazil’s central bank on Thursday lifted its 2016 inflation forecast to 5.3 percent from 4.8 percent. A weak currency raises the cost of imports and, in turn, prices.

“It’s very difficult to point to a potential catalyst for a significant and sustainable improvement in sentiment towards EMs,” said Spiro at Spiro Sovereign Strategy.

“There are simply too many domestic and external risks undermining confidence,” he said.

“A lot would have to go right (or at least improve) in China and U.S. monetary policy for this to happen, to say nothing about the underlying country-specific woes in EMs which are the real concern.”

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

US-China agree to not conduct cybertheft of IP: White House

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

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The US and China have agreed that neither government would support or conduct cyber-enabled theft of intellectual property, the White House said Friday.

The Obama administration said that both countries are committed to finding appropriate norms of state behavior in cyberspace within the international community.

In a separate Friday statement released ahead of a joint press conference, US President Barack Obama and Chinese President Xi Jinping outlined their common vision for a global climate change agreement, and outlined new steps they will take to deliver on pledges made last year to slash their greenhouse gas emissions.

Those included confirmation by Xi that China will launch a national carbon cap-and-trade system in 2017 to help contain the country’s emissions, which will build on seven regional pilot markets already operation in China. Such systems put limits on carbon emissions and open up markets for companies to buy and sell the right to produce emissions.

The joint presidential statement was a highlight of a state visit to Washington by Xi. It built on a bilateral announcement on climate change last November, when the United States pledged to reduce its greenhouse gas emissions 26 to 28 percent below 2005 levels by 2025, while China agreed to cap its rising emissions by at least 2030.

The statement aimed to show “the determination of both countries to act decisively to achieve the goals set last year.”

China is already the world’s largest carbon emitter, but its status as a developing country has meant it is under no obligation to promise carbon cuts, a situation that has irked US politicians and other industrialized nations.

For Obama, securing a new global agreement on climate change that erases some of the divisions between industrialized and emerging economies is a key priority. The deal with China strengthens his hand ahead of a global summit on climate change in Paris in December.

China’s proposed cap-and-trade system would create the world’s biggest carbon market. Democratic lawmakers tried to pass legislation to create such a system in the United States but it failed to win enough votes in a divided Senate in 2010.

China also announced on Friday that it would channel 20 billion RMB ($3.1 billion) to help developing countries combat and adapt to climate change, a significant financial pledge from an emerging economy.

For its part, Washington reaffirmed a pledge it made last year to channel $3 billion into a UN-backed Green Climate Fund. But Congressional wrangling over the federal budget threatens to delay the implementation of the pledge.

The two countries also agreed on the need for an “enhanced transparency system” in a United Nations climate agreement to ensure trust and confidence in the framework to be agreed in Paris in December.

They also said a new global climate deal should require countries to “ramp up” their national emission reduction commitments periodically.

Beyond climate issues, major topics of recent discussion concerning the bilateral relationship include economic reform and military-to-military cooperation.

The primary areas of contention in the relationship, however, are geopolitical concerns — including China’s island-building in the South China Sea, and the US military presence in the region — and cybersecurity issues.

There had been some suggestion that the two presidents could announce an agreement to not hack each other’s critical infrastructure during peacetime, but experts told CNBC that the real problem for the US is China’s corporate cybertheft.

The Obama administration had hinted at sanctions against China for those cyber-espionage activities before Xi’s visit, but none were announced. Beijing, for its part, has denied any such digital offensives.

In officially welcoming Xi to the White House, Obama reflected on “a history of friendship and cooperation” between the two countries,” and welcomed the rise of a peaceful and prosperous China.

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

US final Q2 gross domestic product 3.9% vs 3.7% expected

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

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The US economy expanded more than previously estimated in the second quarter on stronger consumer spending and construction, the second upward revision in a row.

The Commerce Department said on Friday gross domestic product rose at a 3.9 percent annual pace in the April-June quarter, up from the 3.7 percent pace reported last month.

The rise, which beat expectations in a Reuters poll for the third reading of Q2 economic growth to be unchanged at 3.7 percent, was driven by growth in consumer spending, mainly on services like health care and transport.

Consumer spending, which accounts for more than two thirds of US economic activity, was revised up to a 3.6 percent growth pace from the 3.1 percent rate reported in August, helped by cheap gasoline prices and relatively higher house prices boosting household wealth.

Revised construction spending data helped to push up the headline figure, with non-residential fixed investment expanding 4.1 percent in the quarter.

The revisions to second-quarter growth also reflected a smaller accumulation of inventories than earlier estimated, with inventories contributing just 0.02 percentage point to growth rather than adding 0.22 percentage point.

After-tax corporate profits were also stronger in the second quarter than previously thought. Profits after tax with inventory valuation and capital consumption adjustments showed a 2.6 percent rebound from a slump in late 2014 and early 2015, instead of the 1.3 percent increase reported last month.

The data supports the case that the US economy may be gaining enough strength to withstand an increase in benchmark interest rates from record low levels.

The US Federal Reserve last week held off on hiking rates, but Fed Chair Janet Yellen kept the door open to an increase this year in a speech on Thursday night, as long as inflation remains stable and growth is strong enough to boost employment.

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

European stocks surge; Volkswagen scandal, Fed in focus

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

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European stocks opened sharply higher on Friday as concerns over the health of the global economy dimmed slightly after US Federal Reserve Chair Janet Yellen suggested the central bank is still on course to raise interest rates this year.

The pan-European STOXX 600 was 2.9 percent higher at the open.

London’s FTSE 100 was up over 2.3 percent, the German DAX rose 2.6 percent and the French CAC saw a 3 percent pop.

Further clarity on the direction of US monetary policy prompted Asian stocks to lose steam overnight, continuing a lackluster lead from Wall Street Thursday.

In a speech on Thursday, Yellen said that an interest-rate hike “sometime later this year” would likely be appropriate, though the decision hinges on economic data. She was speaking at the University of Massachusetts.

Autos, Miners surge

Volkswagen shares were up around 1.7 percent ahead of a decision on the company’s next chief executive which is expected to be announced at the embattled carmaker’s supervisory board meeting on Friday. Former chief executive Martin Winterkorn resigned on Wednesday following the scandal surrounding the emissions of its diesel cars. VW is accused of using software to change its diesel engines’ performance under US test conditions.

The auto sector was one of the top performers on Friday in Europe. German carmaker BMW saw shares up around 4.8 percent after its shares were hammered Thursday following a report in magazine Auto Bild that the company could also be involved in emissions manipulation. The publication later backtracked on its claim and BMW denied any wrongdoing. Renault, Daimler and Fiat Chrysler were all sharply higher.

Mining stocks rebounded on Friday after coming under pressure Thursday as the oil price continued to remain weak. London-listed Glencore was up over 4.5 percent with the likes of Anglo American and Antofagasta deep in positive territory.

There were just a handful of stocks in the red with power generator supplier Aggreko down 2.7 percent after HSBC slashed its price target for the company’s shares.

Shares in Germany’s Deutsche Bank were up 1.9 percent despite the company being ordered to face a U.S. government lawsuit that is seeking to recoup more than USD 190 million over alleged tax fraud.

Adidas shares were up 3.3 percent after the sportswear maker got a boost from better-than-expected sales from Nike in the three months to August 31.

In other news, at least 717 pilgrims from around the world were killed on Thursday in a stampede outside the Muslim holy city of Mecca, Saudi authorities said. The latest disaster is one of several to occur during the annual hajj pilgrimage over the last 25 years, prompting questions about whether the Saudi Arabian authorities can cope with the number of pilgrims converging there.

There are no major data or earnings released Friday.

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 mostly falls, but hopes for BOJ easing lifts Nikkei

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

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Asian stocks were mostly lower amid choppy trade on Friday, tracking the lackluster lead from Wall Street as uncertainty over the outlook of US monetary policy sapped investor confidence.

In a speech that occurred after the market close, Federal Reserve chair Janet Yellen said that an interest-rate hike “sometime later this year” would likely be appropriate, though the decision hinges on economic data. Yellen was speaking at the University of Massachusetts on Thursday.

The greenback jumped against a basket of currencies after the speech. The euro fell about 0.5 percent to USD 1.1174 from around USD 1.1230 while dollar-yen rose to around 120.27, from around 120.00 before Yellen’s remarks.

“Our view for a December rate hike has not changed,” Cynthia Jane Kalasopatan of Singapore’s Mizuho Bank wrote in a note. “Overall, we acknowledge that some caution prevail amid China’s wobbles and a strong [greenback] but U.S. data releases continue to point to a broad recovery picture. With no major data releases or events, Fed’s policy outlook may be the key driver in markets today.”

The Dow Jones Industrial Average closed down 0.5 percent, with Caterpillar down 6.3 percent on news that the firm will cut up to 5,000 jobs by end-2016 and lowered guidance. The S&P 500 eased 0.3 percent while the tech-heavy Nasdaq Composite more than halved losses in the afternoon trading session to finish 0.4 percent lower.

Nikkei rises 1.8%

Japan’s Nikkei 225 index swung up in the final hour of trading to close up nearly 2 percent, recouping almost two-thirds of Thursday’s steep 2.8 percent slump.

Market watchers who spoke to CNBC attributed the late-day rally to speculation that the Bank of Japan (BOJ) will be stepping up its easing at the October policy meeting. BOJ Governor Haruhiko Kuroda met Japanese Prime Minister Shinzo Abe on Friday following mixed inflation data released before the market open.

“It was quite an interesting inflation report today. Core consumer prices dropped 0.1 percent in August, turning negative for the first time since April 2013 but consumer inflation excluding food and energy costs were slightly ahead of expectations. So even though we saw some inflationary pressure, the BOJ is likely to step up its QQE program in its October meeting,” IG market analyst Angus Nicholson told CNBC by phone.

“But with the BOJ buying all Japanese government bonds, what else can they do to create further monetary stimulus? They may have to explore other options such as state bond issuance or lowering the reserve requirement ratio,” he added.

Meanwhile, Prime Minister Abe said early Friday that he had set out three new goals for “Abenomics” and will target a 20 percent increase in gross domestic product (GDP).

“The Japanese recovery is flagging and authorities are concerned that they are losing momentum and they are trying to restore confidence in the medium term despite the near-term performance,” Steven Englander, global head of G10 FX Strategy at Citibank, told CNBC.

Export-oriented stocks recovered their footing late Friday, with carmakers such as Toyota Motor and Suzuki Motor changing course to power up 1.3 and 2 percent respectively.

Among decliners, Sharp plunged 5.8 percent after the Nikkei business daily reported the company is likely to book a 30 billion yen loss for the April-September half. A 1.3 percent tumble in the shares of industrial robot maker Fanuc also weighed on the bourse.

Mainland indices fall

China’s Shanghai Composite ended down 1.6 percent, with infrastructure and transport-related shares among the hardest-hit, amid falling trading volumes.

According to Reuters, weekly volumes have fallen nearly 80 percent from their July peak and averages remain on a downward trajectory.

Maanshan Iron and Steel Company tumbled 5.6 percent, while China Railway Group and China Railway Construction declined 3.5 and 2.9 percent respectively. Airline stocks such as China Eastern Airlines, China Southern Airlines and Air China receded more than 3 percent each.

Among other indexes, the benchmark CSI300 Index slumped 1.6 percent. Small-caps suffered bigger losses, with the Shenzhen Composite and start-up board ChiNext losing over 3 and 4 percent respectively.

In Hong Kong, the Hang Seng index pared losses to edge up 0.4 percent.

ASX drops 0.6%

Australia’s S&P ASX 200 index surrendered early gains after financial and energy counters slid deeper into the red.

Commonwealth Bank of Australia tanked 1.5 percent, while National Australia Bank, Australia and New Zealand Banking and Westpac receded between 1.2 and 1.4 percent.

Jitters in the oil markets ignited ‘risk off’ sentiment for energy names; Oil Search and Santos closed down more than 3 percent each, while Origin Energy lost 2.4 percent.

But gold producers held up, with Evolution Mining and Newcrest Mining leaping 3 and 4.1 percent respectively, thanks to firmer gold prices for the second straight session overnight.

Myer also outperformed the bourse with a rise of 8.4 percent, after Citi upgraded its call on the stock to ‘buy’ from ‘neutral.’

Kospi dips 0.2%

South Korea’s Kospi index finished near its lowest level since September 15, as foreign investors offloaded shares for the fifth consecutive session.

Heavyweight components ended the day on a dismal note; Samsung Electronics and Posco closed down more than 1 percent each.

But Hyundai Motor shares helped to offset losses by surging 2.5 percent on the back of news that its vice chairman and heir-apparent Chung Eui-sun bought shares worth about 500 billion won (USD 420 million). Hyundai Glovis and Hyundai Heavy Industries also soared 7.3 and 2.6 percent respectively.

Chung, 44, the only son of Hyundai Motor’s chairman Chung Mong-koo, now holds about 1.4 percent of Hyundai Motor after buying 3.16 million shares from Hyundai Heavy Industries, reported Reuters citing a regulatory filing. “It could be taken as Chung Eui-sun’s step in earnest toward succession of the ownership structure,”Park Ju-gun, head of research firm CEO Score, told the newswire.

Among gainers, SK Telecom which announced on Thursday plans for a share buyback worth 523 billion won (USD 438.21 million), recouped losses to tick up 0.2 percent.

Rest of Asia

Taiwan’s weighted index ticked up 0.1 percent after weaving in and out of negative territory all day, as investors weighed the central bank’s decision to lower its benchmark discount rate to 1.750 percent from 1.875 percent on Thursday

This marks the Central Bank of the Republic of China’s (CBC) first rate cut since 2009, sending the local currency to a six-year low of 33.285 versus the U.S. dollar in the previous session.

Meanwhile, the central bank guided the overnight interbank rate lower on Friday, lowering it to 0.30 percent from 0.32 percent a day earlier.

“While the description of the domestic economy didn’t contain any new information or forecasts, the contrast with the description in the June statement underscored the deterioration that occurred in the second quarter. We blame an adverse export shock emanating principally from the US and China,” ING Financial Markets’ head of research Asia, Tim Condon, wrote in a note.

Elsewhere in the region, Singapore’s industrial production fell 7.0 percent in August from a year earlier, wider than the 5.0 percent drop forecast in a Reuters poll and below July’s 6.1 percent decline. On a month-on-month basis, output plunged 3.7 percent, significantly below the 0.2 percent dip that Reuters estimated and worse than 1.0 percent rise in July.

The benchmark Straits Times index declined 0.5 percent to hover near a one-month trough.

Meanwhile, markets in India and the Philippines are closed for public holidays.

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Abenomics 2.0: PM aims 20% rise in GDP, updates goals

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

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Japanese Prime Minister Shinzo Abe is refocusing his attention back on the economy with an ambitious gross domestic product (GDP) target and three fresh “arrows” in what is being dubbed by some as “Abenomics 2.0”, but is this another case of over-promising and under-delivering?

Abe, who won a rare second term in the otherwise revolving door world of Japanese politics as the head of the ruling Liberal Democratic Party earlier this month, pledged on Thursday to raise GDP by nearly a quarter to 600 trillion yen ($5 trillion). He also unveiled three new goals for Abenomics : strong economic growth, assistance for child rearing to lift low birth rates, and social security measures to increase nursing facilities for the aged.

Abenomics is the term widely used to describe Abe’s approach to reflate the economy, which was originally based on three pillars: monetary easing, fiscal expansion and structural reforms.

Abe’s announcement comes as the economy continues to struggle with sluggish domestic demand and falling inflation. Japan’s main inflation gauge – the core consumer price index (CPI) – dipped 0.1 percent on year in August – slipping further away from the Bank of Japan’s 2 percent inflation target. It was the first year-on-year decline since April 2013, when the Bank of Japan launched its unprecedented asset-buying program.

The economy contracted in the three months through June and earlier this month, Standard & Poor’s cut Japan’s credit rating to AA- from A+.

“Very few people will take the 600 trillion yen GDP goal very seriously. It’s just politician’s talk. In an overall shrinking society, this is clearly not achievable,” Martin Schulz, a senior research fellow at Fujitsu Research Institute told CNBC.

Japan is grappling dual demographic headwinds of a rapidly ageing population and declining birth rates, posing a major challenge for the world’s third largest economy. The country’s native population fell by 271,058 to 126.16 million in 2014, the biggest drop on record and the sixth straight year of decline, according to the internal affairs ministry.

Nevertheless, Schulz gave a thumbs up to Abe’s new arrows, which he regards as more realistic goals that will make a difference to Japanese society.

“While they may not sparkle investors’ imaginations by most standards, they are realistic in terms of what’s needed, and are more future-oriented compared with previously outlined structural reforms goals around energy, agriculture and trade,” he said.

A lack of enthusiasm among investors was reflected in the performance of the benchmark Nikkei 225 index, which opened down 2.7 percent on Friday, before paring some losses to trade 0.3 percent lower.

“There was not necessarily anything original in this announcement,” said Masaki Kuwahara and Tomo Kinoshita, economists at Nomura.

“Support for child rearing and social security are both important policies, but their elevation into the second and third arrows comes somewhat out of the blue. It looks as though the government may have attempted to come up with policies to boost its flagging rating in addition to giving fresh impetus to initiatives that have gone slightly sideways, for example social advances for women, one of the flagship policies for Abenomics,” they said.

While most agree, Abe’s new policy framework is no game-changer, Jesper Koll, CEO of exchange traded funds provider WisdomTree, believes the Prime Minister may be laying the groundwork for further measures to support the floundering economy.

“He’s acknowledging that the domestic economy has been weaker than expected, and not blaming external conditions. That’s very important,” Koll told CNBC.

Koll expects Abe’s plan of action will proceed as follows. “The Prime Minister is heading to New York next week, where he will likely make several public speeches on the economy. Then we are likely to get a reshuffle of the cabinet,” he said.

Following this, the Bank of Japan is scheduled to hold a monetary policy meeting on October 30, when an expansion of stimulus could be announced. If the central bank holds fire in October, an announcement in November is still a possibility, Koll said.

Simultaneously, Japanese parliament will likely announce a supplementary budget to bolster the economy, he said.

“We’ll see a ‘one dream, one team’ approach involving the Bank of Japan, ministry of finance and cabinet office.”

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Yellen nudges markets slightly on rates

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

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Fed Chair Janet Yellen may have slightly recalibrated expectations for a rate rise, by saying she personally anticipates a hike this year.

Yellen spoke after the market close Thursday in a much awaited speech that traders had hoped would clarify the central bank’s position on rate hikes, after last week’s FOMC meeting and a week of volatile markets. Stock traders covered shorts ahead of the 5 pm ET speech, expecting Yellen might give the market a boost.

The Fed chair said it would likely be appropriate to raise rates from near zero “sometime later this year,” though the decision would continue to rely on economic data. In her comments last week, she had not identified herself as part of the group favoring rate hikes this year, but she had made a similar comment during the summer.

“It’s called the ‘Yellen Fed’ for a reason, and she’s owning it. I think it was consistent with her press conference, which was slightly more hawkish than what we saw in the [Fed] statement,” said Diane Swonk, chief economist at Mesirow Financial. “I think it underscores where she stands which clearly wasn’t as waffling as the statement.”

Read More: Fed blowing its chance to raise rates: Economist

Yellen did not take questions after the speech, as planned. There was some temporary concern for the Fed chair after she fumbled over the last part of her speech and said she felt lightheaded. Yellen received medical attention, and central bank officials said she was fine and continuing with her schedule.

The Fed spooked markets last week when it held off lifting rates for the first time in nine years, citing concerns that international and financial developments could hurt the US economy. That reference to China’s slowdown and the fact the Fed lowered its own economic and inflation forecasts sent a very dovish message. Yellen re-emphasized Thursday that the Fed sees the lack of inflation as transitory.

“I think it’s fairly hawkish. She seemed committed to raising rates this year. I think net-net, I think it’s a concerted effort to signal a hike remains on the table,” said Eric Stein, co-director of global fixed income at Eaton Vance Management. “To the extent the market takes this as the Fed getting back on track the market could take it as more constructive.”

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He said given the reaction last week when the message was dovish but confusing, getting back on track for a rate hike will help the market.

Since the Fed meeting, commodities like copper and oil have sold off sharply, while gold rose about 3 percent. The S&P 500 was down 2.8 percent in the week since the meeting.

“I didn’t see the comments as being all that substantial. Yellen went out of her way to associate herself with other members that they see a rate hike this year. When she mentioned ‘transitory factors,’ that’s a real puff phrase. Nobody’s going to know what that means two weeks from now, two months from now,” said Mark Newton, chief technical analyst/partner at Greywolf Execution Partners

Newton noted that the fed funds futures did not move initially on the comments. The odds for a December rate hike were still at 41 percent, and October was at 18 percent just after 5 p.m., he said. Stock futures were initially mixed to slightly higher, and the dollar edged higher. Treasury yields were steady.

After her 5 p.m. ET speech became public, the dollar moved slightly higher but Treasury yields were steady, including the 2-year note, which is most sensitive to Fed rate talk.

Read More: Markets want ‘normal,’ Fed didn’t deliver: Strategist

Stocks closed lower Thursday but well off the lows of the day, as traders covered shorts into the close, ahead of Yellen’s speech. The Dow was down 78 to 16,201. The S&P 500 was down 6 at 1,932, but it had traded as low as 1,908. Newton said stocks recovered losses into the close because traders were concerned about being too short the market ahead of Yellen.

Newton said investors pay way too much attention to the Fed. “This is the most widely discussed Fed hike. Dissected to death,” he said. Newton noted that he does not think the central bank will hike rates this year unless the stock market calms down.

Treasury yields Thursday were lower on the day ahead of her speech. The 10-year was at 2.12 percent.

West Texas Intermediate crude oil futures closed up 43 cents at $44.91 per barrel, their first gain in three days. They are down about 4 percent since the Fed meeting last week. Copper firmed slightly Thursday, but it is still down 6 percent from the level it was at a week ago.

Friday’s data includes the third look at second-quarter GDP, expected to show growth at 3.7 percent when it’s released at 8:30 a.m. ET. Consumer sentiment is also expected at 10 a.m.

“I think University of Michigan sentiment could be more interesting than GDP. We already know we had a really good second quarter,” said Tom Simons, chief money market economist at Jefferies.

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“Consumer sentiment, kind of pivoting off the GDP, is much more interesting on what’s going on in the third quarter. The August numbers were not good at all. You have competing forces. On one hand, lower gas prices may keep consumers feeling pretty good. On the other hand, lower stock prices make people feel pretty poor.”

BlackBerry and Finish Line report earnings.

Traders concerned about China will be watching for headlines from Chinese President Xi Jinping, who is in Washington for a state visit.

Pope Francis will be in New York.

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