Archives for January 2016

Chinese president Xi Jinping, as well as Prime Minister Li Keqiang, delivered opening addresses at the official ceremony, which was also attended by high officials from other multilateral banks.

BRICS Bank AIIB to strengthen global financial system – Putin

“Asia’s financing needs for basic infrastructure are absolutely enormous,” President Xi said, adding that the bank is going to invest in high-quality, low-cost projects.

Premier Li Keqiang said that Asia needs investment in infrastructure and connectivity to remain the most dynamic region for global growth.

One of the main decisions made on Saturday was the selection of AIIB’s president. Jin Liqun, who has served as AIIB’s President-designate since September 1, 2015, was elected to that position.

“AIIB is now ready to join the family of multilateral financial institutions, investing in sustainable infrastructure for the improvement of lives across Asia,” Liqun said in his first statement as president. 

The AIIB was established as a new multilateral financial institution aimed at providing “financial support for infrastructure development and regional connectivity in Asia.” It was founded in October, 2014, and will have its headquarters in Beijing. Its goals are also to boost economic development in the region, create wealth, prove infrastructure, and promote regional cooperation and partnership.

AIIB and BRICS bank not rivals but complementary – economy minister

Luxembourg Finance Minister Pierre Gramegna sees the establishment of the bank as “further proof of the rebalancing of the world economy.”

The value of AIIB’s authorized capital amounts to $100 billion, with almost $30 billion invested by China. The bank, which unites 57 member states, expects to lend $10 billion to $15 billion a year for the first five years of its operations, beginning in the second quarter of 2016.

One more development bank with significant Chinese participation is the New Development Bank (NDB), also known as BRICS Development Bank, which was established last year. Russian officials believe that, despite the fact that the banks share similar goals, they will complement each other rather than compete.

“I think there is enough room for everybody. Our economy is so underinvested…So, the Asian bank, BRICS and other banks will have a field for investment,” Russian Minister of Economic Development Aleksey Ulyukayev said last summer.

Article source: https://www.rt.com/business/329208-china-aiib-development-bank/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

The move was announced ahead of the implementation of Iran’s historic nuclear deal with world powers, which is expected to happen over the weekend.

READ MORE: Western-imposed sanctions against Tehran to be lifted Saturday – Iranian FM

International sanctions relief will take effect after the International Atomic Energy Agency (IAEA) issues its final report verifying Iran’s compliance to the deal. “That should happen relatively soon, certainly in the coming days. That is when sanctions relief is initiated,” US Deputy National Security Adviser Ben Rhodes said Friday.

While the nuclear agreement lifts only part of Washington’s economic restrictions against Iran, with sanctions for Tehran’s alleged human rights violations remaining in place, the deal makes two exceptions to the trade embargo. Allowing Iran to buy US civilian passenger aircraft is one of the changes. The second exception mentions allowance to sell Iranian crafts, such as carpets and rugs, to the United States.

Key points of historic nuclear deal reached by Iran and 6 world powers

Authority to allow sales of some US products and services to Iran “in the national interest” was granted to US president by the Congress in 2010. Now Obama delegated that authority to the Secretary of State.

On Saturday, Iran also announced plans to buy over 100 civil aircraft from European manufacturer Airbus.

“We have taken the first step in agreeing with Airbus to buy 114 planes,” Iran’s Transport Minister Abbas Akhoondi was quoted as saying by Iranian Tasnim news agency.

Airbus said commercial talks with Tehran are only possible after the embargo is lifted.

Iran’s civil aviation fleet consists of some 250 aircraft with an average age of 20 years, according to Iran’s Minister of Roads and Urban Development Abbas Akhundi, as cited by Iran’s Press TV. Forty percent of those planes are grounded, the official said, adding that Iran needs to buy 500 commercial aircraft of various models at a cost of $50 billion.

READ MORE: 39 killed as airliner crashes near Tehran’s Mehrabad Airport (VIDEO)

Article source: https://www.rt.com/business/329193-us-sales-aircraft-iran/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

At its lowest Saturday, one bitcoin was worth $355.72.

The fall below $400 marks a difficult beginning to 2016 for the cryptocurrency, which earlier this week saw longtime advocate Mike Hearn withdraw his support.

Hearn, a former Google employee and Bitcoin developer, said in a blog post that the Bitcoin “experiment” had failed.

He cited capacity problems with the Bitcoin network, “rampant censorship” by some users, as well as “wildly unpredictable fees” in a list detailing why the cryptocurrency’s future looks uncertain.

“The fundamentals are broken and whatever happens to the price in the short term, the long term trend should probably be downwards. I will no longer be taking part in Bitcoin development and have sold all my coins,” Hearn wrote on Medium.com.

The author of the guide “Mastering Bitcoin,” Andreas M Antonopoulos, disagreed with Hearn’s gloomy prognosis, however.

I disagree with Mike Hearn’s analysis and concerns (see LTB show next week). I thank him for all his work and wish him all the best. Onwards

— AndreasMAntonopoulos (@aantonop) January 15, 2016

Best way to respond to all the drama in bitcoin is to focus. Buckle down, work, don’t get distracted. Engineering solves problems. Code On!

— AndreasMAntonopoulos (@aantonop) January 15, 2016

Bitcoin’s invention was an engineering solution to a governance problem. We can solve bitcoin’s governance challenges with more engineering

— AndreasMAntonopoulos (@aantonop) January 15, 2016

BitTorrent entrepreneur Bram Cohen was also critical of Hearn’s comments.

Reports that the Bitcoin digital exchange Cryptsy was compromised in a hack during summer 2014 have also dogged the virtual currency.

According to Cryptsy, approximately 13,000 Bitcoin and 300,000 litecoin were taken.

“A very interesting fact here, however, is that those Bitcoins have not moved once since this happened. This gives rise to the possibility they can be recovered.”

A bounty of 1,000 Bitcoin is being offered for information leading to the stolen coins.

Article source: https://www.rt.com/business/329175-bitcoin-drops-below-400-dollars/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

“This is three or four months ahead of what the market was thinking last year, so it just adds fuel to the fire,” Mitsubishi Corp oil risk manager Tony Nunan told Reuters.

“Lower oil prices have been a sentiment leader for the recent market selloff and will again be in focus with Iranian sanctions expected to be lifted next week,” Ric Spooner, a chief analyst at CMC Markets, said in a note on Friday, quoted by Bloomberg.

“How fast Iran can put oil back on the market will now be a key issue for oil markets, with many skeptical that it will be able to do this nearly as fast as it has forecast,” he added.

Iranian and US officials have confirmed that the central vessel of Iran’s Arak heavy water reactor has been filled with concrete following the removal of its core, bringing Iran closer to meeting the requirements for having international sanctions lifted.

Iranian oil would add to the glut that has made prices collapse since the middle of 2014.

“It is the wrong time for Iran to be returning to the oil market, both for the market and (probably) also for Iran. It would have been so much more ideal for Iran to return to the oil scene if prices were soaring at $100,” Phillip Futures said in a note, quoted by Reuters.

“In the very short term, another price drop cannot be excluded in particular after sanctions against Iran are being lifted,” Commerzbank analyst Carsten Fritch told Reuters Global Oil Forum.

“That means a drop toward $25 is quite possible, but not much lower than that,” he said.

The bank previously predicted $63 per barrel Brent in 2016, but downgraded it to $50, which is still $20 per barrel higher than the current price.

LISTEN MORE:

Article source: https://www.rt.com/business/329065-oil-prices-iran-return/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

The report estimates this year’s average exchange rate against the dollar at 68.2 rubles, and the price of Russian oil blend Urals at $40. Inflation is forecast to hit 8.5 percent with capital outflow reaching $50 billion.

Russia could cut oil exports by 6%

These figures are not official, but the newspaper claims it has a copy of the new outlook. An Economic Development Ministry spokesman confirmed the official update will be released this month.

“For the next two weeks the Prime Minister has planned a series of meetings on the social and economic situation as well as fiscal policy,” said Dmitry Medvedev’s press secretary Natalya Timakova.

Finance Minister Anton Siluanov has said the 2016 budget could rely on $40 per barrel for Urals oil, but warned it is necessary to prepare for $30. Deputy Finance Minister Maxim Oreshkin estimated that with an average annual oil price of $40 per barrel, the prospects for economic growth are “close to zero”. At present, the budget is still based on $50 oil.

The new forecast also cuts industrial production from 0.6 percent growth to a decline of 0.4 percent.

Real wages will fall by 3.5 percent, the income of the population will go down by 4 percent and unemployment will rise to 6.3 percent.

The recession will not be as severe as in 2015 (3.7-3.8 percent), but Russia needs a rebound in oil prices to avoid another wave of spending cuts, a fall in wages and income of the population and another drop in consumer demand that could result in a longer and deeper recession, said analyst Evgeny Nadorshin.

Brent crude and US benchmark WTI fell below $30 per barrel on Friday.

Article source: https://www.rt.com/business/329045-russia-recession-gdp-oil/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

The report estimates this year’s average exchange rate against the dollar at 68.2 rubles, and the price of Russian oil blend Urals at $40. Inflation is forecast to hit 8.5 percent with capital outflow reaching $50 billion.

Russia could cut oil exports by 6%

These figures are not official, but the newspaper claims it has a copy of the new outlook. An Economic Development Ministry spokesman confirmed the official update will be released this month.

“For the next two weeks the Prime Minister has planned a series of meetings on the social and economic situation as well as fiscal policy,” said Dmitry Medvedev’s press secretary Natalya Timakova.

Finance Minister Anton Siluanov has said the 2016 budget could rely on $40 per barrel for Urals oil, but warned it is necessary to prepare for $30. Deputy Finance Minister Maxim Oreshkin estimated that with an average annual oil price of $40 per barrel, the prospects for economic growth are “close to zero”. At present, the budget is still based on $50 oil.

The new forecast also cuts industrial production from 0.6 percent growth to a decline of 0.4 percent.

Real wages will fall by 3.5 percent, the income of the population will go down by 4 percent and unemployment will rise to 6.3 percent.

The recession will not be as severe as in 2015 (3.7-3.8 percent), but Russia needs a rebound in oil prices to avoid another wave of spending cuts, a fall in wages and income of the population and another drop in consumer demand that could result in a longer and deeper recession, said analyst Evgeny Nadorshin.

Brent crude and US benchmark WTI fell below $30 per barrel on Friday.

Article source: https://www.rt.com/business/329045-russia-recession-gdp-oil/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Russia’s federal budget for 2016 relies on an average annual oil price of $50, which almost corresponds to the last year average price – $51.4 per barrel.

Cheap crude threatens to deplete Russian reserves

According to business daily Vedomosti, Russia’s First Deputy Prime Minister Igor Shuvalov has instructed the ministries to work on different scenarios, both bearish and bullish.

The most recent collapse in energy prices from November means the Russian budget will lose 300 billion rubles (about $4 billion) in oil revenue in the first two months of 2016, according to the newspaper’s ministerial source.

The updated macroeconomic forecast will be presented by Economic Development Minister Aleksey Ulyukaev later this month. In the meantime, the government has decided to cut spending by 10 percent.

The current Central Bank shock scenario assumes oil prices of $35 per barrel as well as projected 2-3 percent GDP contraction and seven percent inflation. But the country’s leading bank Sberbank has already begun to make a $25 stress test.

“We had a $30 scenario. But now it’s irrelevant. In our business plan, it was the worst-case scenario, which became real at the beginning of the year,” Sberbank CEO Herman Gref told the Interfax news agency.

READ MORE: Crude price swings and Russian economy in 2016

Some analysts say there’s a certain way to cut expenses – to cut military costs.“The country in such a position cannot spend four percent of GDP on defense,” said economist Vladimir Nazarov.

Article source: https://www.rt.com/business/328728-russia-oil-prices-budget/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

JPMorgan downgrades all but one emerging economy

“Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small,” said the bank’s credit team in a note sent to clients, quoted by the Telegraph.

According to RBS analysts, the markets are showing the same stress alerts as seen before the 2008 crisis.

Andrew Roberts, the bank’s credit chief, says that “China has set off a major correction and it is going to snowball.” China “has very high debt levels (as a percentage of GDP) given they are still emerging” and crucially they have accumulated this debt incredibly fast, he said.

He predicts European and Wall Street markets to drop from 10 to 20 percent this year. London’s FTSE100 was predicted to plummet even lower.

“London is vulnerable to a negative shock. All these people who are ‘long’ oil and mining companies thinking that the dividends are safe are going to discover that they’re not at all safe,” said Roberts.

READ MORE: UN sees moderate global growth for 2016-2017 due to major ‘headwinds’

“We are moving in a short-term $26 target and once reached down to $16. Our forecasts are for this to occur through 2016, but the risk is it occurs in Q1 as global oil demand drops off according to IEA forecasts and the world runs out of ships to store it in,” he said.

This follows a bearish outlook for this year from Roberts’ team, issued late last year.

At the time Roberts said there are “a number of bad headwinds affecting the world right now, which will worsen in 2016.”

Article source: https://www.rt.com/business/328607-rbs-2016-markets-oil/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

A number of factors have combined to put pressure on global crude prices. Oil is dipping to decade-low levels amid overproduction and bad economic news from China, where poor prospects for manufacturing suggest that the leading oil-consuming country will not need as much crude as producers hoped.

Suicide rate in Canada’s Alberta up 30% amid oil industry layoffs

US stockpiles rose by 2 million barrels last week, according to a Bloomberg survey released before the Energy Information Administration report on Wednesday.

Additionally, US crude oil exports have restarted last week for the first time in four decades after Washington lifted the 40-year ban.

Iran is expected to launch its own oil benchmark in March as soon as international sanctions blocking exports are lifted.

“When you have a supply overhang, there’s going to be continued downward pressure on prices,” Ric Spooner, a chief analyst at CMC Markets in Sydney told Bloomberg.

“Investors are looking toward a difficult few months for oil, especially with Iran set to boost exports. We are likely to see production cuts at these prices, but they may take some months to come through.”

Saudi Arabia, the leading country in OPEC, is regarded by many as the main plotter of the crude price collapse. According to Russia’s Energy Minister Aleksandr Novak, Saudi Arabia has destabilized the crude market by increasing its oil output to the tune of 1.5 million barrels a day.

Cheap crude threatens to deplete Russian reserves

Tuesday also saw the Russian ruble falling to its lowest exchange rate against major currencies since 2014. The Russian currency traded at over 77 rubles against the US dollar at the opening of trade on the Moscow Stock Exchange. The ruble also fell to 83 against the euro, its lowest level in over a year.

Morgan Stanley has warned that a rapid appreciation of the US dollar may send Brent crude as low as $20 a barrel.

Article source: https://www.rt.com/business/328595-brent-crude-oil-falling/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

The country’s central bank set the yuan-dollar exchange rate at 6.5626 on Monday, which is lower than Friday’s 6.5636.

China halts stocks 2nd time this week after 7 percent plunge rattles global markets

The Shenzhen Stock Exchange Composite Index fall was even steeper at 6.6 percent.

Chinese stocks have dragged down other Asian markets. Hong Kong’s Hang Seng and Japan’s Nikkei closed 2.76 and 0.39 percent down, respectively.

In the first week of 2016, China’s central bank depreciated the yuan against the dollar by more than 1.5 percent. It is the biggest drop in the yuan exchange rate since August 2015, when the devaluation of the Chinese currency strongly affected global stock markets.

Key Russian indices are deep in the red on Monday, as well. The dollar-denominated RTS Index was down 4.36 percent, while the ruble-traded MICEX was losing 3.32 percent as of 2:00pm MSK.

European stocks advanced on Monday after their worst week since 2011. As of 10:40am GMT, London’s FTSE 100 was up 0.18 percent, while France’s CAC 40 rose 0.66 percent and the German DAX was 0.76 percent in the green.

READ MORE:Tough times ahead for Asian economies

“The market reaction to what’s been happening in China has been hugely overdone,” Peter Dixon, Commerzbank AG’s global equities economist in London told Bloomberg.

“The uncertainty hasn’t dissipated – it only takes one or two things to go wrong and we’re back to where we started – but investors are finally looking at things with a clearer head,” he said. 

Last week, Bank of America Merrill Lynch predicted the Shanghai Composite will plummet by nearly 30 percent in 2016.

Article source: https://www.rt.com/business/328498-china-markets-shanghai-asia-russia/?utm_source=rss&utm_medium=rss&utm_campaign=RSS