Month: September 2015

Asian stocks turn negative on Fed uncertainty

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

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Asian stocks lost steam in choppy trade on Friday, mirroring the lackluster lead from Wall Street amid uncertainty over U.S monetary policy.

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 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 gains 0.5 percent

Japan’s Nikkei 225 turned positive in the afternoon trading session, as Bank of Japan governor Haruhiko Kuroda said he had a meeting with Prime Minister Shinzo Abe.

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.

But gains were limited as investors weighed data that showed consumer inflation fell for the first time since April 2013.

The core consumer prices dropped 0.1 percent in August, government data released before the market open showed, underscoring the need for policymakers to offer fresh fiscal and monetary support to bolster a fragile recovery.

“CPI data continues to show a weak acceleration, which suggests that the Japanese central bank may need to do more. That said, the Bank of Japan’s massive 80 trillion yen QQE program is showing signs of crowding out the Japanese Government Bond (JGB) markets,” IG’s Singapore-based market strategist Bernard Aw wrote in a note released early Friday.

“If the BOJ cannot increase its asset purchase program, it will have to explore other options, such as cutting the reserve requirement ratio, or expand its sovereign bond purchases to regional bonds,” Aw added.

Export-oriented stocks turned mixed, with Toyota Motor and Suzuki Motor changing course to edge up 0.3 percent each. However, worries over Volkswagen’s emissions cheating scandal continued to cast a cloud over the auto sector, with Mitsubishi Motors and Honda down 2.8 and 0.3 percent respectively.

Sharp plunged 5.2 percent after the Nikkei business daily reported the company is likely to book a 30 billion yen loss for the April-September half.

A near 3 percent tumble in the shares of industrial robot maker Fanuc also weighed on the bourse.

Mainland indices slump

China’s Shanghai Composite widened losses abruptly to nearly 2 percent by mid-day, with infrastructure and transport-related shares among the hardest-hit.

China Railway Group, China Railway Construction and Maanshan Iron and Steel Company tumbled more than 4 percent each. Airline stocks such as Air China receded 3.2 percent.

Among China’s other indexes, the benchmark CSI300 Index slumped 1.8 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 headed off to the lunch break with a loss of 0.5 percent.

ASX slips 0.2 percent

Australia’s S&P ASX 200 index pared gains by mid-morning trade, weighed down by a change in direction among the major lenders.

Commonwealth Bank of Australia tanked 1.1 percent, while National Australia Bank, Australia and New Zealand Banking and Westpac receded between 0.7 and 1 percent.

But gold producers held up; Evolution Mining and Newcrest Mining leaped 3.2 and 4.1 percent respectively, thanks to a firmer gold prices for the second straight session overnight.

Myer also outperformed the bourse with a rise of 9 percent, after Citi upgraded its call on the stock to ‘buy’ from ‘neutral.’ Harvey Norman and JB Hi-Fi advanced 0.5 and 0.8 percent respectively.

Kospi drops 0.6 percent

South Korea’s Kospi index surrendered early gains in early trade, touching its lowest level since September 15.

Losses in heavyweight components likely dragged down the bourse; Samsung Electronics and Posco fell nearly 2 percent each.

SK Telecom, which announced on Thursday plans for a share buyback worth 523 billion won (USD 438.21 million), recouped losses to rise 0.4 percent.

However, Hyundai Motor surged 2.9 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).

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.

The news also lifted shares of Hyundai Glovis which soared 5.6 percent.

On the domestic data front, South Korean consumers felt more upbeat about the economy in September, with confidence returning to levels just before the deadly outbreak of MERS in late May, according to the Bank of Korea’s composite consumer sentiment index (CCSI).

Rest of Asia

Taiwan’s weighted index edged down 0.2 percent amid choppy trade, tracking the downbeat sentiment region-wide and as investors weighed the central bank’s decision to lower its benchmark discount rate to 1.750 percent from 1.875 percent, citing the slowdown in global economic growth. 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 awaits industrial production data due at 1pm local time, which Moody’s said could continue to suggest the possibility of a technical recession and the need for monetary easing.

Industrial output is expected to fall 4.8 percent in August from a year earlier, a Reuters poll said, better than the 6.1 percent drop in the preceding month. However, on a month-on-month basis, output is forecast to have slipped 0.1 percent, down from the 1.0 percent rise in July.

Singapore’s economy grew 1.8 percent in the second quarter, slightly beating an earlier estimate of 1.7 percent but significantly down from the first quarter’s 2.8 percent expansion, on the back of a sluggish manufacturing sector. The advance estimate of Singapore’s gross domestic product (GDP) in the third quarter will be announced on October 14.

In early trade, the benchmark Straits Times index declined 0.6 percent to hover near a one-month trough.

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

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

Flipkart founders debut on Forbes billionaire list

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

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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

Bill Gross to the Fed: ‘Get off zero, now!’

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

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Bill Gross wants the Federal Reserve to end its zero interest rate policy immediately.

In his monthly letter to clients, the widely followed bond fund manager at Janus Capital said the US central bank’s aversion to normalizing rates is having negative effects throughout the economy, but primarily to savers and investors.

“The developed world is beginning to run on empty because investments discounted at near zero over the intermediate future cannot provide cash flow or necessary capital gains to pay for past promises in an aging society,” wrote Gross, who manages the USD 1.4 billion Janus Global Unconstrained Bond Fund.

His latest screed against Fed policy comes six days after the Federal Open Market Committee voted once again to keep its key funds rate near zero. The rate has remained there since late 2008, a move meant to provide support to the economy during the Great Recession but kept there long since the accompanying financial crisis ended.

Read More: The Fed has to deal with its own zombie apocalypse

Gross cited a litany of losers under zero rates—pension funds, insurance companies and 401(k) investors, primarily—who will see lower returns ahead unless the Fed starts to normalize.

“Expecting 8-10 percent to pay for education, health care, retirement or simply taking an accustomed vacation, they won’t be doing much of it as long as short-term yields are at zero,” he wrote. “They are not so much in a pickle barrel as they are on a revolving spit, being slowly cooked alive while central bankers focus on their Taylor models and fight non-existent inflation.”

The Fed, though, isn’t fighting inflation, as in days of Former Chairman Paul Volcker, who famously engineered a spike higher in rates in the early 1980s to thwart it. Instead, the Fed is looking for a healthy level of inflation, a search that so far has been unsuccessful, prompting the FOMC to keep the zero-bound rate while disinflation persists and global growth remains a concern.

In Gross’ view, though, monetary policy has lost its bite.

While providing much-needed liquidity during the financial crisis and a 200 percent or so boost to major US stock market averages, economic growth has remained tepid and corporations remain reluctant to commit huge sums of capital to their core businesses.

“If companies can borrow close to zero, why wouldn’t they invest the proceeds in the real economy? The evidence of recent years is that they have not,” Gross said. “Instead they have plowed trillions into the financial economy as they buy back their own stock with a seemingly safe tax advantaged arbitrage.

“But more importantly, zero destroys existing business models such as life insurance company balance sheets and pension funds, which in turn are expected to use the proceeds to pay benefits for an aging boomer society.” Up until a month or so ago, the Fed had been expected to use this month’s meeting for a decidedly gradual liftoff from zero.

However, the environment for a 2015 move looks difficult now that the FOMC passed on September. Fed funds traders assign just a 35 percent chance to a December move and a 45 percent probability in January, with March 2016 now the most likely candidate at 60 percent.

Read More: Fed’s window for 2015 rate hike is closing quickly

Gross thinks the delay has been a mistake.

“Will 2 percent fed funds harm corporate America that has already termed out its debt? A little. Will stock and bond prices go down? Most certainly,” he said. “Near-term pain? Yes. Long-term gain? Almost certainly. Get off zero now!”

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

Xi defends economy, markets in key US address

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

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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

China flash PMI falls to a 6-1/2-year low in September

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

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The preliminary Caixin China manufacturing purchasing managers’ index (PMI) fell to a six-and-a-half-year low of 47.0 in September, below the 47.5 forecast in a Reuters poll.

This compares with a final reading of 47.3 in August, the lowest since March 2009. A print above 50 indicates an expansion in activity while one below points to a contraction.

The closely-watched gauge of nationwide manufacturing activity focuses on smaller and medium-sized companies, filling a niche that isn’t covered by the official data.

Wednesday’s data weighed on investor sentiment in Asia, with stock indices in Sydney and Seoul widening losses to more than 1 percent each in the morning trading session. China stocks, however, trimmed losses to 0.9 percent, from an over 1-percent decline at the open.

A recent run of disappointing data has raised concerns around the health of China’s economy, leading several banks and international institutions to pare growth forecasts for the country.

The Asian Development Bank on Tuesday cut its estimate for China’s growth to 6.8 percent for 2015, down from its previous forecast of 7.2 percent and below 2014’s 7.3 percent growth rate. It expects the growth rate of the world’s second largest economy will fall to 6.7 percent in 2016.

Separately, Barclays also slashed its growth outlook on Tuesday for China to 6.6 percent and 6.0 percent for 2015 and 2016, from 6.8 and 6.6 previously.

The slowdown has also prompted market calls for bolder stimulus measures from Beijing and the country’s central bank. Economists are hoping for greater clarity about the economy and policy in the context of President Xi Jinping’s visit to the U.S.

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 widen losses after grim flash China PMI

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

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Asian equities mostly widened losses early Wednesday, after China’s flash Caixin purchasing managers’ index (PMI) fell to a six-and-ah-half-year low of 47.0 in September.

This is below the 47.5 forecast in a Reuters poll and compares with a final reading of 47.3 in August, the lowest since March 2009. A print above 50 indicates an expansion in activity while one below points to a contraction.

A negative handover from offshore markets also weighed on Asian bourses.

Major US averages crashed more than 1 percent overnight, with materials shares among the hardest-hit due to a sell-off in commodities on the back of lingering worries about a slower-growing China. Commodity prices hit two-week lows on Tuesday, with copper prices and industrial metals leading losses. US crude oil also settled down 1.8 percent at USD 45.83, a barrel.

News that Volkswagen would make a provision of USD 7.3 billion after allegations it cheated on vehicle emission tests sparked a global selloff in auto stocks. The Nasdaq Biotech Index also extended losses into a second day after US Democratic presidential candidate Hillary Clinton said she would propose a monthly cap of USD 250 on prescription drugs.

Across the pond, the pan-European STOXX 600 finished the day significantly lower, down 3.1 percent as autos tanked and weaker oil prices weighing on investor sentiment.

Mainland indices down

China’s Shanghai Composite index declined 1.2 percent, tracking the slide in regional equity markets, with blue chips leading the way.

Shares of brokerage houses gave up Tuesday’s advances, with Citic Securities and Founder Securities losing 1.9 percent each.

Among other indexes, the CSI300 Index and the smaller Shenzhen Composite sagged more than 1 percent each.

Taiex skids 1.5 percent

Taiwan’s weighted index dropped to a more than one-week low, a day before the central bank’s quarterly policy meeting.

ASX tanks 1.5 percent

Australia’s S&P ASX 200 index accelerated its pace of declines following the preliminary readings of China’s manufacturing industry.

The Australian dollar fell a quarter of a US cent to USD 0.7033 versus the greenback, its lowest level since September 11.

The fall in commodity prices put a chokehold on the heavyweight resources sector, with market bellwether BHP Billiton plummeting 3 percent and energy
producers like Santos falling 2.8 percent.

Gold-related counters similarly came under pressure as the price of the precious metal eased 1 percent on Tuesday. Evolution Mining was the biggest laggard
in the sector, down 6.7 percent, while Newcrest Mining declined 2.5 percent.

Financials also weighed on the bourse, as all four major lenders sank more than 1 percent each.

Kospi slumps 1.1 percent

South Korea’s Kospi index nosedived amid a broad-based slump.

The index’s top weighted stock Samsung Electronics tanked 1.4 percent, while Hyundai Motor tracked the downturn in global auto names, down 0.3 percent.

Logistics company Hyundai Glovis and automotive parts supplier Hyundai Mobis declined 1 and 1.4 percent respectively. Shares of Kia Motors erased a higher
open to lose 1.3 percent.

Markets in Japan remain shuttered for the Autumn Equinox holiday.

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

President Xi: China is a big ship hitting rough seas

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

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China’s President Xi Jinping has defended his government’s economic efforts and said reforms would continue regardless of slowing growth and stock market volatility, in an interview with the Wall Street Journal(WSJ).

“Like an arrow shot that cannot be brought back, we will forge ahead against all odds to meet our goals of reform,” Xi told the WSJ in a written interview ahead of his first official trip to the U.S., at which he will attend a summit with U.S. President Barack Obama.

In the interview, Xi said Beijing’s intervention to halt the country’s stock market slide over the past few months was necessary to “defuse systemic risks,” noting that it was similar to actions taken in “some mature foreign markets.”

Read More: Xi has chance to clarify China role on world stage

He likened the country’s economic slowdown to a big vessel hitting rough seas, saying that “any ship, however large, may occasionally get unstable sailing on the high sea.”

Xi also addressed the sensitive issue of cybertheft, telling the WSJ: “The Chinese government does not engage in theft of commercial secrets in any form, nor does it encourage or support Chinese companies to engage in such practices in any way,”

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

Volkswagen scandal: Germany’s reputation on the line

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

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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 pharma co rolls back TB drug price after 5000% hike

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

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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