Archives for August 2015

The outlook from Caixin and Markit, published on Friday, shows the index fell to 47.1 from 47.8 in July. The 50 mark separates expansion from contraction, and the last time the PMI was above 50 was February this year.

“The Caixin Flash China General Manufacturing PMI for August has fallen further from July’s two-year low, indicating that the economy is still in the process of bottoming out. But overall, the likelihood of a systemic risk remains under control and the structure of the economy is still improving,” Dr. He Fan, Chief Economist at Caixin Insight Group said in a statement.

READ MORE: China’s manufacturing index tumbles to 2-year low

Both output and new orders contracted at sharper rates this month. The gloomy data fuels fears of slowing growth in the world’s second-largest economy. The statistics come more than a week after Beijing’s surprise devaluation of its national currency, aimed at reviving its faltering exports.

The government needs to decide on fiscal and monetary policies to ensure macroeconomic stability and speed up the structural reform, according to He Fan. This will “lead the market to confidence and renew the vigor of the economy,” he added.

READ MORE: China stages biggest currency devaluation in 20 yrs to revive exports

Concerns over an economic slowdown have triggered a massive stock sell-off. China’s benchmark Shanghai Composite is off 32 percent over the past two months, dropping another 4.2 percent on Friday.

With the country’s real economy cooling, Beijing faces a difficult task reaching its stated aim of seven percent growth in 2015.

The Caixin China Report on General Manufacturing is based on about 90 percent of responses to surveys sent to more than 420 manufacturers. It is an overall measure of the health of China’s manufacturing sector.

Article source: http://www.rt.com/business/313009-china-manufacturing-slowdown-stocks/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

The report left it unclear whether the Fed will raise rates at the policy meeting on September 16-17, stoking anxiety about the health of the global economy.

“Most [officials – ed.] judged that the conditions for policy firming had not yet been achieved, but they noted that conditions were approaching that point,” said the minutes published Wednesday.

This can be interpreted that the Federal Reserve is considering a rate hike in September. However, the Fed has been saying that its rate decision depends on whether inflation will reach the goal of two percent after running below that for more than three years.

“Some participants expressed the view that the incoming information had not yet provided grounds for reasonable confidence that inflation would move back to two percent over the medium term,” said the minutes.

The uncertainty resulted in bad news for global markets. The worst performer was again the Chinese key Shanghai Composite index which closed down 3.42 percent. The Hang Seng fell 1.77 percent and the Nikkei 0.94 percent. German stocks continued their losses and are facing the worst month in more than three years. The FTSE dropped 0.49 percent as of 10:47am GMT, the lowest result since January.

The Fed’s ambiguity on top of cheap oil and struggling China has created additional problems for emerging economies.

READ MORE: Chinese stocks sink dragging Asian markets with them

“Asian shares tumbled, pressured by lower oil prices and a slowdown in China … (and) the latest Fed minutes raised concerns over the strength of the global economy, questioning whether rates will be raised next month,” David Papier at ETX Capital in London told Reuters.

Daisuke Uno, chief strategist at Sumitomo Mitsui Bank, shares that view. “Markets are nervous of risks and investors are pulling funds out of emerging economies and resource exporters,” he said.

Article source: http://www.rt.com/business/312923-global-markets-federal-reserve/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

The exchange rate between the tenge and US dollar changed from 185 to 255 after the policy shift. According to local media, people are queuing at banks and exchanges, most of which have stopped selling dollars.

“The decision was made to start a new economic policy from August 20 on the basis of inflation targeting and to cancel the currency corridor,” Prime Minister Karim Masimov said during a government teleconference on Thursday, citing a joint statement of the government and the National Bank. The market will determine a balanced exchange rate on the basis of supply and demand, with the National Bank intervening if stability is threatened, the minister added.

READ MORE: China stages biggest currency devaluation in 20 yrs to revive exports

The Kazakh government’s decision comes on the back of instability in the global economy. Kazakhstan is Central Asia’s biggest crude exporter, and is trying to manage sliding oil prices and weakening economic growth of its top trading partners China and Russia.

Last week China devalued the yuan and was changing the way it is fixed daily, causing turmoil in other emerging market currencies. Vietnams is a smaller trading partner of Kazakhstan and devalued its currency earlier this week.

READ MORE: Ruble down on cheap yuan

The Russian ruble has plunged to six-month lows this month, reacting to falling oil prices and the crisis in China. The second quarter contraction of Russian GDP was the worst in six years, according to official statistics.

Some analysts link Kazakhstan’s switch to a free float with a possible interest rate hike in US.

“It’s a move to prepare for the Fed rate hike,” Tommy Ong, Managing Director for Treasury and Markets at DBS Bank Hong Kong, told Bloomberg. “In anticipation of higher US interest rates, some emerging-market countries are opting to let their currencies weaken to stimulate exports and avoid massive intervention.”

The Federal Reserve last month said it won’t increase the interest rate. However, Fed Chief Janet Yellen indicated the bank could move rates as early as September. The World Bank then warned that the US rate rise poses “tough challenges” for developing and emerging economies.

Article source: http://www.rt.com/business/312913-kazakhstan-tenge-dollar-drop/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

The company’s share price dropped 7 percent on Wednesday morning following the results.

“The first half of 2015 has been challenging for the group with weaker than expected results in Western Europe and market decline in Eastern Europe,” Carlsberg Group CEO Cees ‘t Hart said in a company statement Wednesday.

Even the strong Asian performance won’t be enough to offset the situation on the Western and Eastern European markets, according to the company.

Earnings before special items were 2.92 billion Danish kroner ($432 million), Carlsberg said, while analysts had estimated an average profit of 3.23 billion kroner.

READ MORE: ​Carlsberg net loss deepens 34%, hit by Russian beer market

The Russian beer market declined by 9 percent, according to the brewer, which is the biggest in Russia. Carlsberg’s Russian market share in Q2 was 36.1 percent compared to 38.4 percent in the first quarter of the year. Volumes have suffered from tougher regulation, higher taxes and weaker economy, the company said.

The Russian ruble, which had been the world’s best-performing currency at the beginning of 2015, plunged to a six-month low this month, following sliding oil prices and gloomy news from China.

“The macroeconomics in Russia are not good at this point in time,” Chief Financial Officer Joern P. Jensen told reporters. “We have to make sure we make all the changes necessary, but we have no radical plans,” such as closing more breweries, he added.

In January, Carlsberg closed two Russian breweries, which produced 15 percent of its beer in the country.

The world’s fourth-largest brewer, Carlsberg cut its full-year profit forecast, saying 2015 profits will be lower than previously expected.

Article source: http://www.rt.com/business/312813-carlsberg-profits-drop-russia/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

German Parliament approves 3rd Greek Bailout w/ 454 lawmakers voted yes, 113 voted No and 18 abstentions.

— Holger Zschaepitz (@Schuldensuehner) August 19, 2015

German Finance Minister Wolfgang Schauble warned MPs that it would be “irresponsible” to oppose the €86bn package.

Chancellor Angela Merkel’s centre-right conservative bloc has been divided over the deal.

Forty-six MPs did not attend the session, according to the BBC.

It is thought a significant proportion are conservatives, who stayed away to avoid defying Mrs. Merkel and voting no to the deal.

At a mock trial held on Tuesday, Merkel’s Christian Democrats (CDU) and their Bavarian sister party the CSU, 56 of the 311 conservative legislators said ‘no’ to the package with four abstaining, Deutsche Welle reports.

The last time Bundestag was deciding whether to start negotiations with Greece at all. Almost one out of five MPs – 60 MPs from the CDU – voted against the start of talks.

READ MORE: Berlin calls Greek bailout ‘insufficient’ as Athens struggles to reach consensus on terms

The German Ministry of Finance has always emphasized that it considers the IMF’s participation in the bailout essential. However, the IMF has postponed its decision until October, when a first test of Athens’ commitment to the deal will take place.

Merkel and Finance Minister Wolfgang Schauble called party parliamentarians to vote in favor of the bailout. Previously, Schauble had been more radical and suggested that Greece should temporarily leave the eurozone. But last month he told parliament that the third bailout was a last resort to settle the long-standing problem of Greece’s €320-billion foreign debt.

READ MORE: €86bn loan over 3 years: Eurogroup agrees to launch third bailout program for Greece

Lawmakers in Spain, Estonia and Austria ratified the deal on Tuesday. Later that day, ratings agency Fitch upgraded Greece’s Long-term foreign and local currency Issuer Default Ratings (IDRs) by one notch to ‘CCC’ from ‘CC’. However, the agency says that the risks of unsuccessful completion of the Greek bailout are still high.

Article source: http://www.rt.com/business/312808-german-parliament-greek-bailout/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

“As part of our long-term plan to build a more resilient economy, create jobs and deliver secure energy supplies, we continue to back our onshore oil and gas industry and the safe development of shale gas in the UK,” Energy Minister Lord Bourne said in a statement.

According to the Oil Gas Authority, the UK regulator, each of the 27 new shale gas exploration blocks is about 10 square kilometers, and a second group of 132 further blocks will be offered after a detailed environmental assessment. The regulator said it had received almost 100 applications from 47 companies. Leading British oil and gas explorer and developer IGas and France’s GDF Suez are among those who obtained a license.

In addition to a significant role in the country’s economy, the onshore oil and gas industry will play a key part in providing secure and reliable energy to UK homes and businesses, according to the UK energy ministry. Lord Bourne specified that investment in shale in Britain could be as much as £33 billion and support 64,000 jobs.

READ MORE: ‘Fast-track fracking’: Tories to rule on shale gas drilling without councils’ consent

The government’s offer of exploration blocks sparked protests from environmental groups and residents; concerned that fracking for shale gas could contaminate groundwater supplies and cause earthquakes.

Despite the opposition, the UK government has been strongly pushing ahead with plans to exploit reserves of shale gas in the country to reduce dependence on energy imports and generate additional tax revenue. Britain’s Conservative Prime Minister David Cameron has promised to go “all out for shale” in response to rising energy prices and unemployment in the country.

“This is the starting gun to the fight for the future of our countryside,” Greenpeace activist Daisy Sands told the Financial Times. “Hundreds of battles will spring up to defend our rural landscapes from the pollution, noise and drilling rigs that come with fracking,” she added.

Shale gas hydraulic fracturing, or fracking, was stopped in Britain in 2011 after it was connected to a number of minor earthquakes in the north of England. Some European countries like France and Germany have already banned the practice due to environmental concerns.

Article source: http://www.rt.com/business/312756-uk-shale-fracking-licenses/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

The area approved for drilling in the Chukchi Sea is estimated to contain about 15 billion barrels of oil, while the Arctic is thought to have more than 20 percent of the world’s undiscovered oil and gas resources. Shell says drilling in the area could become a “game changer” for US domestic production.

READ MORE: White House green lights Shell drilling in Arctic

“Activities conducted offshore of Alaska are being held to the highest safety, environmental protection, and emergency response standards,” said Brian Salerno, director of The Bureau of Safety and Environmental Enforcement (BSEE) which has approved the drilling.

While BSEE says its inspectors are present at the drilling rigs day and night to ensure safety, environmental groups strongly oppose Arctic offshore drilling. They claim that industrial activity will harm polar bears, Pacific walrus, ice seals and threaten whales which already suffer from global warming. The oil companies have not demonstrated they can clean up a spill in water choked by ice, the activists say, referring to the 2010 Deepwater Horizon oil spill disaster.

“Granting Shell the permit to drill in the Arctic was the wrong decision, and this fight is far from over,” said Sierra Club executive director Michael Brune, according to USA Today. “The people will continue to call on President Obama to protect the Arctic and our environment.”

READ MORE: Greenpeace bridge danglers and ‘kayaktivists’ delay Shell icebreaker in Portland

Shell had previously been allowed to begin drilling only the top sections of two wells in the Chukchi Sea, 8,000 feet below the ocean floor. With its last exploratory well drilled in 1991, the company obtained the leases in the Chukchi Sea in 2008. It has already spent some $7 billion on exploration there.

The energy major hopes to drill two exploratory wells during this year’s short open-water season as work has to stop in late September. Shell has two drilling vessels and about 28 support vessels in the Chukchi Sea. The company has just repaired an icebreaker which carries emergency well-plugging equipment.

President Obama is going to visit Alaska later this month, to speak at a conference on the Arctic and tour areas threatened by climate change.

Article source: http://www.rt.com/business/312720-shell-drilling-arctic-approval/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

“New loans of up to €86 billion will be made available over the next three years to Greece,” the Commission said in a statement.

The International Monetary Fund (IMF) will consider joining the program in October, depending on the results of Greek pension reform.

Recapitalization of Greek banks is also scheduled for autumn, eurogroup President Jeroen Dijsselbloem said, announcing the results of the meeting. He assured that bank deposits will be secured, including from any bail-in. 

The first tranche of €26 billion may be released next week already, to be determined at a new meeting on August 18 by the European Stability Mechanism board.

Around half of this sum is to be used to pay back the ECB and IMF, while the rest will be put toward recapitalizing the country’s banks.

“The message of today’s Eurogroup is loud and clear: on this basis, Greece is and will irreversibly remain a member of the Euro area,” Jean-Claude Juncker, European Commission president, said in a statement.

The Commission’s vice-president for the Euro and Social Dialogue, Valdis Dombrovskis, added that Friday’s agreement “will lift the uncertainty that has hung over the country and the euro area for too long… We are ready to support Greece with all our instruments – from technical assistance to financial support.”

In accordance with the agreement, Greece must achieve a medium-term budget surplus of 3.5% of GDP in 2018. The eurogroup obligated Athens to move from a deficit of 0.25% this year to a surplus of 0.5% in 2016, and 1.75% in 2017, in order to reach the target level in 2018.

The eurozone hopes the aims can be achieved via large-scale reforms of the pension scheme and the labor market. It is also hoped that changes to the tax system will increase tax revenues.

The six hour meeting was preceded by the endorsement of the loan conditions by the Greek parliament.

The deal, which includes tax rises and spending cuts in exchange for free loans, was met with much opposition within the Greek parliament. Key ruling Syriza party members, including former Finance Minister Yanis Varoufakis, voted against the bill, while some of his allies abstained.

READ MORE: Greek parliament approves draft 3rd bailout after marathon overnight session

The German Bundestag could vote on the Greek bailout as soon as Tuesday, following the eurozone’s approval. However, Bild newspaper reported this week that Chancellor Angela Merkel’s government considers the agreement insufficient.

Greece is due to make a €3.2 billion repayment to the European Central Bank on August 20.

Article source: http://www.rt.com/business/312490-eurogroup-bailout-greece-agree/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

The banks include Goldman Sachs, Bank of America, Citi, Barclays, BNP Paribas, HSBC, JPMorgan, RBS and UBS. They are accused of tampering with currency interbank rates on the $5.3 trillion-a-day foreign exchange market.

The completion of the settlement was announced in an open court Thursday, legal firm Hausfeld, representing investors, said in a statement.

READ MORE: Five banks to pay record $5.7bn fines over key rates manipulation – US regulator

The banks have also agreed to cooperate with the investors in litigation of the remaining banks accused, according to lawyers. They include Standard Chartered Plc, Societe Generale SA, Bank of Tokyo-Mitsubishi UFJ Ltd., RBC Capital Markets, Deutsche Bank AG, Credit Suisse Group AG and Morgan Stanley.

“As a result of lengthy, hard-fought negotiations, we have obtained historic recoveries on behalf of US investors. Apart from the monetary component, each defendant has agreed to provide substantial cooperation, which will assist investors in their continued litigation against the non-settling defendants,” said Michael D. Hausfeld, chairman of Hausfeld.

The plaintiffs previously announced $808.5 million settlements with four banks, according to Reuters. Swiss UBS was the first bank  to plead guilty and pay a $545 million fine for the manipulation, earlier in May.

READ MORE: ‘Guilty’: Ex-UBS Citigroup trader jailed 14yrs for key rate manipulation

Bank traders allegedly exchanged information on customers and their plans via online chats and instant messaging, giving false signals to other players and aiming at extra profits for themselves. Traders used chat rooms with names such as ‘The Cartel’, ‘The Bandits’ Club’ and ‘The Mafia’ to communicate with each other. They manipulated prices through tactics such as ‘front running’, ‘banging the close’ and ‘painting the screen’, according to the plaintiffs.

Article source: http://www.rt.com/business/312454-banks-fine-settlement-investors/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Parliament was supposed to vote on the bailout on Wednesday. However, Parliamentary President Zoe Konstantopoulou, known for her distaste of Prime Minister Alexis Tsipras’ July agreement with the troika of creditors, has done everything possible to filibuster the procedure.

Meanwhile, the deadline on the agreement is looming. On Friday, eurozone ministers are meeting to discuss whether to approve the deal, or grant Athens a bridging loan to live through the €3.2 billion debt repayment to the European Central Bank (ECB), due on August 20, and win time to overhaul the deal.

German newspaper Bild, referring to Germany’s Finance Ministry, says that Berlin is uncertain about the role of the IMF, debt sustainability and privatization plans.

“Some very important measures are still not yet implemented and are not specified,” Bild reports.

READ MORE: Germany made €100bn profit on Greek crisis – study

Berlin has challenged Greece’s ability to sustain its €320 billion foreign debt, while the country is expected to return to growth no sooner than 2017. Germany is also worried that the launch of a €50 billion privatization fund has been delayed.

The role of the IMF in the deal is ambiguous, according to Berlin.

“Does IMF fully subscribe to the conditionality in the program, that is the link between reforms and planned credit disbursements?” FT quotes Bild as saying.

READ MORE: ‘Grexit’ better option for Athens’ debt relief- German finance minister

This is not the first time when the EU’s biggest economy has raised concerns over the Greek deal. German Finance Minister Wolfgang Schauble said that it’s an option for Greece to temporarily leave the eurozone in order to put things straight.

DETAILS TO FOLLOW

Article source: http://www.rt.com/business/312415-greek-parliament-approval-bailout/?utm_source=rss&utm_medium=rss&utm_campaign=RSS