Archives for April 2015

Reuters / Toby Melville

​Royal Dutch Shell, the UK’s largest oil company, only scraped in $3.2 billion profit in the first three months of 2015, a near 60 percent drop from $7.3 billion the oil behemoth earned during the same period last year.

The Anglo-Dutch company announced the massive earnings drop on Thursday, and said it was due to a plunge in oil prices and lower trading contributions. The drop was still smaller than expected.

“Our results reflect the strength of our integrated business activities, against a backdrop of lower oil prices,” CEO Ben van Beurde said in the statement.

READ MORE: Plunging prices force oil majors to cut billions in spending

Another aspect dragging down profits is its assets in the North Sea, where reserves are both diminishing and becoming more expensive to extract. The company said that it may need to further slash jobs and investment related to the North Sea assets. It has already cut 250 jobs from its Aberdeen offshore base.

Given these difficulties, Shell “is not a natural owner of assets in the North Sea,” CFO Simon Henry said in a video presentation on Thursday.

Shell’s revenue fell 40 percent to $65.71 billion in 2014.

The UK’s biggest oil company said despite the setback, it doesn’t plan to slow down its controversial development project in the Alaskan Arctic. Previously the company invested $4.5 billion in the shelf off the coast of Alaska, but never realized plans after several setbacks, including mechanical problems with drilling ships.

Oil prices have nearly halved to $65 per barrel compared to the sticker price of $115 a barrel in June last year. The plunge was triggered by weak global demand, a supply glut, and was exacerbated by OPEC’s decision in November to keep output at the status quo despite the massive losses in the oil industry.

The company is in talks to acquire BG plc for $70 billion, which Henry says will be “springboard” for future earnings. This would narrow the gap between global leader ExxonMobil, and would be one of the biggest deals of the sort in the last 10 years. Aside from this buy, the company plans to trim investment to $33 billion from $35 billion in 2015.

Shell is one of the world’s largest oil and gas companies with a capitalization estimated at $192 billion and revenues of $460 billion in 2014.

Article source: http://rt.com/business/254565-shell-first-quarter-profit-2015/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Russian Central Bank (RIA Novosti)

The banking regulator has cut the benchmark interest rate to 12.5 percent from 14 percent, saying inflation and risks to the ruble have subsided while economic growth is suffering.

The 150 basis point cut marks the third reduction in interest rates this year as the regulator said there are “persistent risks of considerable” economic cooling.

“Amid ruble appreciation and significant contraction in consumer demand in February-April 2015, monthly consumer price growth declines and annual inflation tends to stabilise,” the Central Bank of Russia (CBR) said in the statement Thursday.

The new rate comes into effect May 5, and the bank signaled it isn’t done slashing.

“As inflation risks abate further, the Bank of Russia will be ready to continue cutting the key rate,” the statement said.

READ MORE: Ruble ‘miracle’ pushes 2015 gains to 15%

Bank Governor Elvira Nabiullina has already cut the interest rate twice in 2015, by one percentage point in Marchand by two percentages points in January. Both have been efforts to backtrack on the 6.5 percent increaseto 17 percent on December 16, which was done in an attempt to put a plug on the hemorrhaging ruble.

#Russia‘s Central Bank keepin’ it interesting: slashes key rate to 12.5%. Seems like just yesterday it was hiking to 17%. #neveradullmoment

— Toni Waterman (@ToniWaterman) April 30, 2015

The ruble lost 1.2 percent against the dollar by 2:10pm Moscow, just 40 minutes after the announcment. The reaction wasn’t extreme because the ruble had been trading lower all morning in anticipation of the cut.

The ruble has responded well to the interest rate reductions, and in 2015 has gained more than 15 percent, making it the best performing currency this year. The rally is in part thanks to higher oil prices – Brent is over $65 per barrel- as well as a less turbulent situation in neighboring Ukraine and more attractive Russian bonds. On Thursday, one US dollar only bought 51 rubles, compared to December’s plunge when the greenback bought over 70 rubles.

The Central Bank has indicated that the ruble has gained enough, and is taking active steps such as tinkering with the REPO rate to keep it stable. Higher interest rates make it more expensive for businesses to take out loans, which can stymie economic growth.

Lower lending rates could in theory further spike inflation, which reached 16.9 percent in March. The Bank has to perform a balancing act between keeping the ruble strong and inflation low. The Bank hopes to quell inflation to less than 8 percent by April of 2016, and four percent in 2017.

GDP in Russia is forecast to contract in 2015 after only expanding 0.6 percent in 2014. The Economy Ministry forecasts a 2.8 percent decline, whereas the Central Bank sees a worst case scenario of a loss of four percent.

The next Central Bank meeting will be held on June 15.

Article source: http://rt.com/business/254465-russia-key-rate-cut/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Reuters / How Hwee Yong / Pool

China intends to ramp up trade with Russia to $100 billion in 2015, the Chinese Ambassador to Russia Li Hui has said. The $4.7 billion increase from last year cements the countries commitment to boosting cooperation in finance and energy.

“We intend to increase bilateral trade to $100 billion this year,” Hui said at a news conference in Moscow Wednesday, as quoted by TASS. In 2014, trade between the two countries was worth $95.3 billion.

Russia and China are planning to have a trade turnover of $200 billion by 2020.

The ambassador said that using more national currencies will also help expand trade. Already, settlements between the two countries in yuan have increased by more than 800 percent.

READ MORE: Russia, China agree on more trade currency swaps to bypass dollar

READ MORE: Putin, Xi Jinping sign mega gas deal on second gas supply route

The Power of Siberia will deliver 38 billion cubic meters (bcm) of gas to China over 30 years, and once it’s complete, will be the world’s largest pipeline. Russian President Putin and Chinese Vice Premier Zhang Gaol broke ground on the project in September. Gas is set to start pumping from the Chayanda and Kovykta gas fields in the republics of Yakutia and Irkutsk to the Chinese border town of Blagoveshchensk in 2019.

In November, China and Russia signed a memorandum of understanding to build the second Altai pipeline that would deliver 30 bcm of Russian gas to Western China.

Another major point of interest between the two countries is cooperation in developing the Russian Far East. Several Chinese companies have expressed interest in infrastructure projects in the sparsely populated but resource rich territory.

Cross border cooperation and intern regional affairs also remain important, Hui said.

Article source: http://rt.com/business/254073-china-russia-trade-2015/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Russian President Vladimir Putin (RIA Novosti / Alexei Druzhinin)

Russian economy has passed the toughest part and a collapse isn’t expected, as its strengthened fundamentals won’t undermine the country’s stability, said President Vladimir Putin.

“The fundamentals of the Russian economy have strengthened and the stability cannot be destroyed completely,” Putin said Tuesday at the All-Russian Popular Front media conference in St. Petersburg. He added that overcoming the difficulties of 2014 was one of the greatest achievements in recent years.

Speaking about the events the Russian economy faced at the end of last year, such as the oil crisis, Western sanctions and a steep fall in ruble exchange rate, Putin said they were certain complexities that he wouldn’t even call a crisis. However, they left a mark in the country’s economic outlook.

“This does not mean that everything will start flourishing instantly. Maybe we’ll even feel the aftershock of the end of last year,” Putin said. “However, it’s already clear that there is no collapse and none is expected,” he added.

READ MORE: ‘Worst is over’ – Putin on Russian economy

The Russian economy lost $160 billion from $500 billion it normally received from oil revenues, because the price of oil halved, Putin recalled comparing the damage with $130 billion in loans companies had to pay in 2014, and $60 billion this year. He said that most of the $60 billion in loans have already been repaid and “the peak of payments is passed.” He also noted that the fall in the oil price has its limits. “The price has dropped from $100 to $50. But it cannot go down from $50 to zero.”

Putin hopes it will be possible to stabilize the situation in the short-term, and develop it further. He said that the most important thing is not the oil price but the strengthening of the Russian economy’s fundamental principles that won’t create instability.

Talking about the domestic economy, Putin said that the manufacturing levels are still lower than expected and the wage rises outpaced the growth in productivity.

“I expected production to continue growing, but, unfortunately, this failed. Still, it must be achieved,” he said.

However, the overall domestic economy has greatly strengthened during the recent decade. GDP grew by 15 times in nominal terms, and pensions and salaries have grown 20 times, the president said, adding that the real income of the population has also grown many times.

Putin also outlined the basic goals the country’s economy should achieve in the near future.

“The primary task for today is to increase in economic sovereignty and the development of our economy as high-tech and high-performing. I am sure that we can do it.”

Article source: http://rt.com/business/253809-putin-russian-economic-success/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Greek Prime Minister Alexis Tsipras (Reuters / Alkis Konstantinidis)

Prime Minister Alexis Tsipras has said Greece expects to reach an interim agreement on a bailout deal with the EU which will provide cash-strapped Athens with funds before its next IMF payment is due.

“I think that by the 9th of May we will have an agreement,” that will unlock some bailout funds, Tsipras said in a marathon interview with Star TV that aired late Monday evening.

Greece hopes to secure some sort of extension so Athens can pay €750 million ($815.5 million) to the IMF due on May 12. Before that, about €203 million is due on May 1st. However, the PM made it clear that he values keeping Greece running over paying back creditors.

“Our priority is our responsibility towards society, it is [paying] pensions and salaries,” the Prime Minister said.

Greece has openly discussed the possibility of defaulting on its credit, but most analysts believe this is a scare tactic, and that Greece does indeed want to find a way to unlock more money in bailouts from the EU.

READ MORE: On the #Gredge: Greece and EU finance ministers fail to reach deal in Riga

Greece has several payments due in the next few months. The full schedule is below.

On any given day, the amount of these payments slightly changes. They are denominated in Special Drawing Rights (SDRs), an artificial currency created by the IMF that the institution uses to give out extra funds. Its exchange rate is pegged to a US dollar–denominated value of a currency basket comprised of the greenback, the euro, the Japanese yen and the British pound.

The Prime Minister dispelled the rumor of holding early elections to replace his government, but didn’t rule out holding a referendum on the issue.

“If I end up having an agreement that puts me outside the limits [of my mandate], I will have no other resort,” he said. “The people will decide — obviously without elections, I want to make that clear.”

Deadlocked

Since the Syriza party won elections in January on the promise to renegotiate the country’s €316 billion debt, it has made little progress with its EU creditors.

EU ministers have not had very kind words for either Tsipras or Finance Minister Yanis Varoufakis, who was reportedly mocked at last Friday’s Riga talks, where the two sides were supposed to have settled on a framework agreement for the new terms of Greece’s loan.

On Monday it was reported that Financial Relations Minister Euclid Tsakalotos will take the lead in negotiations with EU ministers. Like Varoufakis, he has an academic background and held a position at the University of Athens.

Tsipras defended Varoufakis in the interview, even though he came back from talks in Riga empty handed, and was sidelined from negotiations Monday. Tsipras insisted that Varoufakis was still the point person on negotiations.

Greece made a €448 million payment to the IMF on April 9, on schedule.

The bailout will help Greece’s struggling economy live through several debt repayments due over the course of the next two months.

Article source: http://rt.com/business/253733-debt-deal-may-9/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Reuters / Jason Lee

Apple Inc. sold more iPhones in China than in the US for the first time ever, while revenue from the US remains ahead of China, for now.

China projected to become the company’s largest single market in the near future.

First quarter sales of iPhones in China skyrocketed, boosting revenue in the region to $16.8 billion, a 71 percent increase, Apple’s report published Monday said. China swept past Europe’s $12.2 billion revenue, and was still shy of overtaking the Americas $21.3 billion revenue.

Sales in China were spurred by the Chinese New Year, which fell in the middle of the first quarter.

“Everything you look at in China was extremely good,” CEO Tim Cook said on Monday after the numbers were released. “I’ve never seen as many people coming into the middle class as they are in China and that’s where the bulk of our sales are going.”

Sales of the Apple’s flagship iPhone product in ‘Greater China’ – which includes mainland China, Hong Kong, and Taiwan – have already surpassed both Europe and the US.

READ MORE: Apple most valuable US company ever worth $700bn

CEO Tim Cook predicated in 2013 that China would one day become the gadget maker’s biggest market, the same year the company partnered with China Mobile, the country and world’s largest cell phone carrier. Apple has 21 official stores in the country another 19 are due to open next year.

At present, Greater China makes up 29 percent of the tech giant’s sales, and the Americas claim 37 percent.

Worldwide, the Cupertino, California company sold 61.2 million iPhones between January and March, making it the second best quarter in company history. Sales of iPhones soared 40 percent up from the same time period last year, but still didn’t match the previous quarter which was on fire with the release of the iPhone 6 and the Christmas holiday season. Sales of Mac computer products increased 31 percent in the same quarter.

Apple’s popular new iPhone 6 and 6 Plus helped the company outperform its main rival, South Korea’s Samsung in global smartphone sales.

However, while phones were hot, other devices were not. The company’s sales of iPads were sluggish, selling only 12.6 million devices, down 23 percent from a year ago.

Analysts mostly agree with Cook’s hypothesis that China will overtake the lucrative US market, but a question remains when Chinese revenues will completely surpass the US.

It could come as soon as next year in the company’s fiscal second quarter, Ben Bajarin of Creative Strategies told the Financial Times.“It is absolutely within sight,” Bajarin told the FT. “What they are doing in China is unprecedented.”

Sales in the coming quarter will likely be on the back of the new Apple Watch- which already has over one million pre-orders in the US.

Article source: http://rt.com/business/253705-china-becomes-apples-biggest-market/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

A man carries a television which he recovered from the rubbles of his house after an earthquake in Bhaktapur, Nepal April 27, 2015 (Reuters / Adnan Abidi)

The total economic cost of the destruction from Nepal’s earthquake and aftershocks is most likely to total between $1-10 billion, with the second most probable scenario showing damage may reach $100 billion.

The country’s GDP stood at $19.29 billion in 2013.

“Estimated economic losses may exceed the GDP of Nepal,” the United States Geological Survey wrote on its website.

Economic damage is most likely (34-percent chance) to be between $1-10 billion, but there is a 29-percent chance it will reach $10-100 billion, and a 13- percent likelihood it could top $100 billion, the survey said.

The 7.9 earthquake struck near the capital of Katmandu around noon local time on Saturday, leveling homes and buildings, triggering avalanches, splitting roads down the middle, destroying telephone lines, and other infrastructure. It was the worst seismic activity to hit the country in 81 years.

FOLLOW RT’s LIVE UPDATES on the Nepal earthquake

It goes without saying that the human cost of the tragedy is the most devastating statistic- over 4,200 people have lost their lives at the time of publication, and the numbers continue to rise as the recovery mission continues.

READ MORE: Shocking moment: Avalanche ripping through Everest camp captured by climbers (VIDEO)

Nepal, one of the world’s poorest and least developed countries, will not recover from the disaster quickly, which will take a toll on its infrastructure, tourism, and overall economic picture.

“With the death toll and casualty estimates from the Nepal earthquake rising rapidly, the economic impact on the nation is severe,” Rajiv Biswas, chief economist at Asia-Pacific at IHS, wrote in a note, MSNBC reported.

The country’s GDP accelerated to 5.2 percent in Fiscal Year 2014, according to the Asian Development Bank.

Damage from Saturday’s earthquake and Sunday’s strong aftershock may severely set back the small Himalayan nation’s economic progress, which had been making small strides in the past year.

The country has been slowly moving away from an agriculture-based model which now accounts for a third of Nepal’s economy, whereas before it was a more dominant 70 percent.

Remittances still make up a considerable portion of the country’s GDP – in 2013 nearly 29 percent of the economy depended on money being sent in from elsewhere, according to the World Bank.

Major natural resources are quartz, water, timber, copper, hydropower, and iron ore are underdeveloped.

Tourism, which contributes about 5 percent to GDP, will be largely affected. The country attracts about 1 million foreigners annually, ranging from mountaineers scaling the icy peaks to tourists who want to visit the World Heritage sites.

READ MORE: 90 Britons missing as Nepal earthquake death toll rises

Many of the service industries related to tourism- such as construction, restaurants, real estate, and hotels – will likely suffer from the disaster.

A number of Nepal’s iconic UNESCO World Heritage sites and landmarks, including the Dharahara Tower built for a queen, have been destroyed.

“In the short term, Nepal is going to see its tourism fall to near zero levels,” travel industry analyst Henry Harteveldt told International Business Times. “The devastation appears to be so widespread and extensive, it’s understandable.”

Article source: http://rt.com/business/253429-nepal-economic-loss-cost/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

A man carries a television which he recovered from the rubbles of his house after an earthquake in Bhaktapur, Nepal April 27, 2015 (Reuters / Adnan Abidi)

The total economic cost of the destruction from Nepal’s earthquake and aftershocks could total between $1-10 billion, up to 50 percent of the country’s $19.29 billion GDP.

“Estimated economic losses may exceed the GDP of Nepal,” the United States Geological Survey wrote on its website.

The 7.9 earthquake struck near the capital of Katmandu around noon local time on Saturday, leveling homes and buildings, triggering avalanches, splitting roads down the middle, destroying telephone lines, and other infrastructure. It was the worst seismic activity to hit the country in 81 years.

FOLLOW RT’s LIVE UPDATES on the Nepal earthquake

It goes without saying that the human cost of the tragedy is the most devastating statistic- over 4,200 people have lost their lives at the time of publication, and the numbers continue to rise as the recovery mission continues.

READ MORE: Shocking moment: Avalanche ripping through Everest camp captured by climbers (VIDEO)

Nepal, one of the world’s poorest and least developed countries, will not recover from the disaster quickly, which will take a toll on its infrastructure, tourism, and overall economic picture.

“With the death toll and casualty estimates from the Nepal earthquake rising rapidly, the economic impact on the nation is severe,” Rajiv Biswas, chief economist at Asia-Pacific at IHS, wrote in a note, MSNBC reported.

The country’s GDP accelerated to 5.2 percent in Fiscal Year 2014, according to the Asian Development Bank.

Damage from Saturday’s earthquake and Sunday’s strong aftershock may severely set back the small Himalayan nation’s economic progress, which had been making small strides in the past year.

The country has been slowly moving away from an agriculture-based model which now accounts for a third of Nepal’s economy, whereas before it was a more dominant 70 percent.

Remittances still make up a considerable portion of the country’s GDP – in 2013 nearly 29 percent of the economy depended on money being sent in from elsewhere, according to the World Bank.

Major natural resources are quartz, water, timber, copper, hydropower, and iron ore are underdeveloped.

Tourism, which contributes about 5 percent to GDP, will be largely affected. The country attracts about 1 million foreigners annually, ranging from mountaineers scaling the icy peaks to tourists who want to visit the World Heritage sites.

READ MORE: 90 Britons missing as Nepal earthquake death toll rises

Many of the service industries related to tourism- such as construction, restaurants, real estate, and hotels – will likely suffer from the disaster.

A number of Nepal’s iconic UNESCO World Heritage sites and landmarks, including the Dharahara Tower built for a queen, have been destroyed.

“In the short term, Nepal is going to see its tourism fall to near zero levels,” travel industry analyst Henry Harteveldt told International Business Times. “The devastation appears to be so widespread and extensive, it’s understandable.”

Article source: http://rt.com/business/253429-nepal-economic-loss-cost/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

RIA Novosti / Vitaliy Bezrukih

British students will study the global crisis of 2007-2008, market failures and tricky monetary policies like quantitative easing for the first time as part of their new economics A-level syllabus to be taught in schools and colleges from September.

The Pearson’s Edexcel exam board will pay special attention to covering the global economic crisis of 2007-2008 in its course. Students will be able to analyze factors that contributed to the crisis, including moral hazards, speculation and market bubbles.

“We know that students and teachers are eager to study the biggest financial crisis to take place in our lifetimes, and it is so important that tomorrow’s business leaders understand and debate these key economic events,” said Mark Anderson, Pearson’s Edexcel exam board’s managing director.

“[The financial crisis – Ed.] is a sad but perfect case study that shows students the workings of the financial sector and how interrelated global markets are,” said Elisabeth Ring, subject specialists for economics at OCR, as quoted by The Telegraph.

READ MORE: 5 simple facts about US ‘easy money’

The new course will give pupils an opportunity to compare the crash and the measures taken by governments with the Great Depression of the 1930s.

They will also have discussions about the best policies to be applied in dealing with a financial crisis, including the measure of quantitative easing introduced by Bank of England to boost the amount of cash in the British financial system.

Pearson’s new syllabus will let students learn more about legendary economic theorists such as Karl Marx, Friedrich Hayek and Adam Smith, and new theories, as well as how psychological, emotional and social factors contribute to people’s economic decisions.

Article source: http://rt.com/business/253425-uk-students-economic-science/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Beijing, China (Reuters / Jason Lee)

China may see several mergers of state-owned companies this year which could ultimately cut down the number to 40 from the current 112, according to the Chinese state media.

“The State-owned Assets Supervision and Administration Commission (SASAC) has issued an internal document to promote the process,” the Chinese Xinhua news agency reported Monday, citing a source that estimated the total number of State-owned enterprises (SOEs) controlled by the government would be slashed more than half to 40.

The source said the Chinese government wants to focus more on quality, not quantity.

At present, the Chinese government owns 112 conglomerates which themselves control more than 150,000 companies. The market capitalization of 277 of these public firms combined is 10 trillion yuan ($1.6 trillion) on the Shanghai or Shenzhen stock exchanges, according to the business daily Economic Information Daily.

Reform of China’s state companies is needed to make them profitable.

READ MORE: China’s GDP growth at slowest pace in 6 years

In 2014, the state sector, excluding Hong Kong, posted a record loss of 102.6 billion yuan (about $16.5 billion dollars) as the cost of raw materials increased.The only year that was worse was 1998.

The consolidation will first take place in the commercial sector, but industries like banks and transport are likely to remain under state control.

“Resources will be increasingly concentrated on large enterprises to avoid cut-throat competition, like what CSR Corp Ltd and China CNR Corp Ltd did when competing against each other for projects overseas,” the newspaper said, as Reuters reported.

The two largest Chinese state-owned train makers CSR Corp and China CNR Corp merged to create a $26 billion new mega-company to compete in overseas markets

China’s biggest oil majors China Petroleum and Chemical Corporation and PetroChina Company, the country’s biggest oil producer, are reportedly in merger talks, which would, like the train deal, make the newly formed energy company more competitive internationally, competing with the likes of Exxon Mobil and BP. On the news of the merger, stock in both Chinese companies advanced 10 percent reaching the daily limit of the Shanghai Stock exchange on Monday.

The overhaul may also be related to the world’s second largest economy’s recent stall in growth. In the first quarter of 2014, China’s GDP grew at its slowest rate in six years.

Article source: http://rt.com/business/253329-china-state-company-cut/?utm_source=rss&utm_medium=rss&utm_campaign=RSS