Archives for April 2016

Exxon Mobil, the Texas-based oil and gas corporation, was downgraded this week from the perfect rating of AAA to AA+ by Standards Poors Ratings Services (SP) “due, in part, to low commodity prices, high reinvestment requirements, and large dividend payments”. 

READ MORE: SP downgrades Saudi Arabia over sliding oil prices

“The company’s debt level has more than doubled in recent years, reflecting high capital spending on major projects in a high commodity price environment and dividends and share repurchases that substantially exceeded internally generated cash flow,” said SP in a statement about the downgrade.

This is the first time Exxon has received a less-than perfect credit rating since the Great Depression, reports Forbes.com.

More importantly, the downgrade means there are now only two non-financial U.S. corporations left with an AAA credit rating, Microsoft and Johnson Johnson.

The Exxon downgrade means that the number of AAA-rated US non-financials has dropped from 60 in 1980 to just two today, Quartz notes.

In the latest episode of RT’s Keiser Report, financial guru Max Keiser said that the decrease in the number of U.S. corporations with perfect credit ratings is down to the “predator parasite” corporations “sucking all the equity” from smaller companies with AAA ratings.

Keiser said the Exxon downgrade heralded “the beginning of [a] collapse”.

“The degradation is very important because in a highly leveraged world, like we have today, the bedrock is on AAA rated paper for the collateral… It’s the beginning of [a] collapse,” he warned.

Article source: https://www.rt.com/business/341490-exxon-credit-downgrade-keiser/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Chinese investors may buy 1% of Australia for just $300mn

The deal worth $289 million (A$371 million) to purchase one percent of the country’s territory has been rejected twice in six months by authorities because of national interest.

The government decision has come weeks before federal elections.

The Chinese-based Dakang Australia and its local partner Australian Rural Capital aimed to buy properties belonging to S. Kidman Co. The Chinese would acquire an 80 percent stake with Rural Capital buying the rest.

Selling the land is a sensitive issue for Australia due to concerns that foreign investors are buying up properties to meet the growing food demand in Asia.

Australian Treasurer Scott Morrison expressed concerns that selling the Kidman properties in one big slab could make it hard for Australian bidders to compete.

“The form in which the Kidman portfolio has been offered as a single aggregated asset has rendered it difficult for Australian bidders to be able to make a competitive bid,” said Morrison.

S. Kidman’s spokesman said the company was “disappointed and confused” by the Treasurer’s decision.

The previous offer for S. Kidman by two Chinese companies wasn’t approved because the Anna Creek cattle station in South Australia is the location of a military weapons testing range.

Following earlier opposition from the authorities, the owners removed some questionable parts of the holding from the Daking deal.

S. Kidman Co controls 10 cattle stations covering more than 100,000 square kilometers of outback spread across Western Australia, the Northern Territory, Queensland and South Australia. The company, belonging to several generations of actress Nicole Kidman’ s family, produces grass-fed beef for export to Japan, Southeast Asia and the US.

Article source: https://www.rt.com/business/341379-australia-block-land-sale/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

For the first time since November, the Russian currency traded below 64 rubles to the US dollar. The ruble also gained on the euro, trading at 72.92.

The regulator’s decision didn’t come as a surprise for the market. Only six out of 40 economists polled by Bloomberg predicted a rate cut to 10.5 percent was possible. The last time the Central Bank of Russia lowered the rate was July 31 last year.

“The Board of Directors sees the positive processes of inflation slowing down and inflation expectations declining, as well as shifts in the economy which anticipate the beginning of its recovery growth. At the same time, inflation risks remain elevated,” said the statement from the central bank.

Russian regulator keeps key interest rate unchanged

The regulator also gave a signal of possible easing of monetary policy at a future meeting, if inflation risks subside. The board expects inflation to be at about five percent in April 2017 and reach the four percent target in late 2017. As of April 25, the annual consumer inflation rate was down to 7.3 percent.

The bank expects quarterly GDP growth in the second half of 2016 – early 2017. “Key macroeconomic indicators show higher resistance of the Russian economy to fluctuations in oil prices. The floating exchange rate partially sets off the negative impact of external shocks. The development of import substitution and expansion of non-commodity exports make a positive contribution to industrial production dynamics. Capacity utilization indicators have improved,” said the bank’s statement. 

Last week the Central Bank Governor Elvira Nabiullina urged to stay vigilant, despite inflation returning to 2013 levels. She said there’s a risk inflation could get stuck at six to seven percent, which is “totally unacceptable” for investment growth.

The next meeting on the key rate decision will be on June 10. Opinions on future action by the regulator differ. Alfa Bank expects the rate to stay unchanged till the end of the year, while ING predicts a rate cut to nine percent is possible even this year, going down to 7.5 percent next year.

Article source: https://www.rt.com/business/341372-central-bank-russia-ruble/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Italian companies looking to do business in Crimea despite sanctions

Another round of talks is planned for June to discuss specific Italian inspired projects.

“In February, we offered to join efforts, deploying Italian investment and technology and our resources as well as investment opportunities,” the Russian ministry told Izvestia without disclosing details.

Aided by Italian investors Russia want so start production of gorgonzola and ricotta cheeses as well as poultry and livestock feed. There are also plans to build a trout farm and grow fruit and vegetables; the newspaper quotes an unknown source.

Italian agricultural producers have reportedly lost €900 million because of the Russian food embargo. The new projects are seen as a chance to export investment and technology instead of the banned products.

Italy wants to cooperate to improve the efficiency of Russian agriculture and expand its own opportunities for international partnership, according to Mr. Castiglione.

READ MORE: EU sanctions against Russia should be lifted ‘as soon as possible’ – regional Italian president

“We are interested in the cooperation to overcome the hard period we entered because of the sanctions,” said the minister.

Some projects supported by Italian investors are operated by Russian private companies, according to Russia’s trade representative in Rome Igor Karavaev.

The production of almond oil might be started by Italians in the Krasnodar region. Investors from Italy also plan to build a buffalo farm and a mozzarella production plant in Crimea, aiming to put €300 million into the enterprises. Earlier this month Italian businessmen voiced plans to build greenhouses and develop wine growing, livestock breeding and the processing of agricultural goods on the peninsula.

READ MORE: Italy and Hungary against automatic renewal of anti-Russian sanctions

Trade relations between Russia and Europe have significantly deteriorated since 2014, when Brussels accused Moscow of fueling the Ukrainian crisis and imposed several rounds of sanctions. The restrictions targeted Russia’s banking, energy and defense sectors. In response, Moscow imposed a food embargo targeting countries that joined anti-Russian sanctions.

Article source: https://www.rt.com/business/341357-italy-produce-food-russia/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Kiev blames ‘Russian aggression’ for Ukraine’s skyrocketing inflation

“Ukraine has lost more than 20 percent of its GDP as a result of Russian aggression. This comes along with the effective economic war that Russia initiated against us, blocking our exports and transit to Central Asia and China,” said Ukrainian Deputy Foreign Minister Vadym Pristayko at a UN Security Council meeting.

Pristayko was implying that Russia is violating the Budapest agreements of 1994, where the “signatories pledged not to exert economic pressure on Ukraine.”

However, Moscow considers its new trade relations as a response to unfriendly economic measures from Kiev.

Russia suspended the free trade treaty with Ukraine from the beginning of 2016, saying Kiev’s move to open its borders to the EU compromises Russian interests and economic security.

The Kremlin is concerned that without such a barrier, Ukraine could illegally supply embargoed European goods to Russia.

Trade war with Moscow reveals another unpleasant surprise for Kiev

The Kremlin banned food imports from Ukraine in response to the country joining anti-Russian sanctions, as well.

Moscow also changed transport rules for Ukrainian goods exported to Kazakhstan through Russia. Before sending goods through Russia, Ukraine is now obliged transit via Belarus in sealed containers.

The freight must have the GLONASS navigation system installed when the goods enter Russia. The tracking system is removed once the cargo leaves Russian territory.

First Deputy Prime Minister Igor Shuvalov says such restrictions were introduced so that Ukrainian goods marked for transit, didn’t appear on the shelves of Russian supermarkets.

Ukraine is now developing an alternative transit route to China through Georgia, Azerbaijan, Kazakhstan, using two ferries in the Black and Caspian Seas.

Article source: https://www.rt.com/business/341333-ukraine-russia-gdp-loss/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Russian stock market hits all-time high on rising crude, foreign investment

Brent crude, which is used as a basis for the price of the country’s main export Urals blend gained 22 percent this month, while the Russian ruble strengthened by only four percent against the US dollar.

The favorable exchange rate allows the government to gain from sales of dollar-denominated oil.

Russia’s 2016 fiscal plan was based on the government getting 3,165 rubles ($48.61) for each barrel of crude it sells. In January, the price tumbled to 2,245 ($34.48). The current recovery in oil prices helps the government bridge the budget gap.

“The ruble lagged oil on its way down, and now it’s lagging on the rebound,” Konstantin Artemov, a money manager at Raiffeisen Asset Management in Moscow told Bloomberg, adding that the equilibrium price was about 3,000 rubles ($46.07) a barrel.

Russia won’t be able to keep its target budget deficit at three percent of gross domestic product this year, according to First Deputy Finance Minister Tatiana Nesterenko. The share of earnings from energy exports in the state budget shrank to almost a third in the first quarter. Several years ago it amounted to more than 50 percent.

Hedge funds betting on Russian ruble

READ MORE: Russian economy to return to growth by year-end – Finance Minister

Russian bonds gained this week with the yield on 10-year securities falling three basis points to 9.22 percent. The country’s debt also declined in April.

Central bank officials are planning to meet on Friday, with the regulator expected to take steps to stop the Russian currency from strengthening.

“At the moment, it’s hard to believe in sustainable appetite for the ruble below 65,” said Evgeny Koshelev, an analyst at SocGen’s Rosbank unit in Moscow told Bloomberg. The aftereffects produced by a stronger ruble may bring an increase in imports and demand for cash and an inflow of speculative capital, according to the analyst.

Article source: https://www.rt.com/business/341236-oil-rise-ruble-decline/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Japanese economy contracts on falling consumer demand

The unexpected move sent the Japanese currency up and stocks down. The yen rose nearly two percent against the US dollar on Thursday, with one dollar worth 109.33 yen. The Nikkei 225 index fell 3.6 percent to close trading at 16,666.05 points.

Contagion spread to other Asian markets with China’s Shanghai Composite slipping 0.5 percent and South Korea’s Kospi index closing 0.7 percent lower.

“This shows that too much expectation of further easing had been priced in and the BOJ has surprised the market by taking no action,” market analyst of CMC Markets Margaret Yang told the BBC.

“It is probable that the central bank is temporarily running out of tools to stimulate the economy, or they need more time to observe and assess the impact of negative interest rates,” she added.

The bank’s decision came in the wake of data that showed consumer prices plunging in March at the fastest pace in three years, and household spending falling at the fastest pace in a year.

Japan escapes recession, growth weaker than forecast

Japan has been trying for years to revive its struggling economy. In a desperate move to encourage lending the BOJ introduced negative rates in January, but that failed to provide a much needed boost to the economy. It shrank 0.3 percent in the last quarter of 2015, and economists warn further GDP data will also be weak.

Wages in Japan haven’t grown more than one percent in any year since 1997, and actually shrank in the last four years when adjusted for inflation.

Prime Minister Shinzo Abe has been trying to reboot the country’s economy since he took power in 2012 and introduced a three-stage policy known as ‘Abenomics’. However, economists often raise doubts about the policy, saying it is not working.

Article source: https://www.rt.com/business/341230-japan-economy-stimulus-yen/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Athens expects deal with creditors by next month

“I am convinced that there is still work to be done by the ministers of finance who have to avoid a situation of renewed uncertainty for Greece,” Tusk said after a phone call on Wednesday with Greece’s Prime Minister Alexis Tsipras.

According to Tusk, eurozone finance officials need to resume talks and agree within days on the reforms needed in order to avoid renewed uncertainty over Greece’s ability to finance itself.

“We need a specific date for the new Eurogroup meeting in the not too distant future,” said Tusk, adding, “I’m talking not about weeks, but about days.”

Without a deal on new austerity measures, which would release a long-delayed rescue loan installment, Greece faces a default on €3.5 billion in debt payments that come due in July.

In the past weeks Athens and its international creditors have been struggling to decide on the reforms and cutbacks the country must agree to as part of its ongoing €86 billion bailout program.

Last week’s special ministerial meeting has been called off by Eurogroup head Jeroen Dijsselbloem who said it was too early for any deals without talks on further debt measures. “Debt is a discussion we’ve not had before,” he said.

Greece accuses IMF of stalling bailout review

Prime Minister Alexis Tsipras insists the Greek economy is just one step away from recovery but needs debt relief, not further austerity.

However, creditors demand a Greek commitment to budget savings, centered on overhauling pensions and income tax, worth about €5.4 billion, or three percent of Greece’s GDP.

According to the agreement reached last summer, Greece had to achieve a primary budget surplus of 3.5 percent of gross domestic product (GDP) by 2018.

The European Commission insists on three percent of GDP while the International Monetary Fund is demanding 4.5 percent.

Athens blames the IMF for the delay in evaluating the bailout program as the fund has been constantly disputing the effectiveness of Prime Minister Tsipras’ proposals for additional budget savings and has a pessimistic view of the country’s economy.

Article source: https://www.rt.com/business/341140-greece-imf-bailout-europe/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Russia benefits from crude production freeze talks despite failure to reach deal

The North Sea crude benchmark Brent surpassed $47 per barrel, its highest price since November last year, while US WTI reached $45.18 per barrel.

The recent surge in prices has shown that even without a production freeze, the oil price has still room to grow.

Since the beginning of the year the US dollar, which is used in global oil transactions, has weakened five percent against major currencies.

Another reason for the oil price to rise is data from the American Petroleum Institute, showing an unexpected 1.1 million barrels reduction in US crude oil stocks last week. The US supply usually grows along with demand in summer, and this could cut the glut even further.

“There was definitely a bit of a turning point when we had the initial sell-off after the producer meeting. That got reversed and went on to show that (a production freeze) was a fairly small part of what had been supporting the price and really, it’s the supply outlook for the US coupled with the dollar that is really driving returns,” CMC Markets strategist Jasper Lawler told Reuters.

Canada’s oil industry to see biggest investment drop in 70 yrs

Saudi Arabia and Kuwait aren’t expected to restart the joint Khajfi oilfield that produced 280,000 to 300,000 barrels per day before it was closed over environmental problems in October 2014, which is also a good sign for crude.

Increasing demand from China is another factor for bolstering prices. In March, the country’s crude imports rose 22 percent year-on-year reaching 7.7 million barrels per day.

Analysts say the Chinese oil imports are likely to stay high in the coming months. “We attribute this increase to strong demand from independent teapot refineries and attractive margins for certain light products, notably gasoline, which fuelled refiners’ appetite for processing crude,” according to BMI research, quoted by The Wall Street Journal.

Yet, Commerzbank analysts have seen “worrying parallels to 2015”, when oil prices grew until May before collapsing to 2003 lows.

Article source: https://www.rt.com/business/341137-oil-prices-us-dollar/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Russia China to invest $15bn in high-speed rail link from Moscow to Kazan

“We may consider a trilateral partnership. We have a joint venture with the Russian Sinara group and excellent relations with China in the area of train production. We have also provided both countries with our Velaro technology,” Siemens Russia and CIS chief Dietrich Meller told Russian business daily Vedomosti.

According to Meller, the three sides are discussing cooperation though no concrete talks have been held on contract with Siemens.

READ MORE: Siemens Russian Railways ready to tackle international projects

The German company is ready to offer an enhanced version of its high-speed Sapsan trains.

“The second generation Sapsan train is an absolutely new model of 2016,” Meller said, giving as an example the difference between mobile phones of 2000 and the latest smartphones. Siemens’ Sapsan trains currently operate on the Moscow to St. Petersburg line.

In December, the Vice President of Russian Railways (RZD) Aleksandr Misharin said Germany’s Initiative Group wanted to provide up to ‎€2 billion to finance the Moscow-Kazan high-speed railway.

The new link is planned as part of a network of high-speed lines to be built by the time Russia hosts the football World Cup in 2018.

German consortium offers ‎€2bn to invest in high-speed Russian railways

Beijing has already expressed an interest in funding the ambitious project, saying it will put up $6 billion. China considers the Moscow-Kazan project not only as an investment, but also as a way to boost communication and trade with Russia and Europe.

The joint Russia-China investment in the railway is about $15 billion.

The total cost of the 770-kilometer track which will stretch through seven regions of Russia, is estimated at $21.4 billion. The current journey time from Moscow to Kazan of 12 hours will be reduced to three and a half. The trains will be able to reach speeds of 400 kilometers per hour.

READ MORE: China offers to build 1st high-speed rail link to Russia

Siemens is the largest engineering company in Europe, and specializes in manufacturing and maintenance of electronics, power engineering equipment, transportation, light engineering as well as communications services. Headquartered in Berlin and Munich the concern employs over 400,000 people.

Article source: https://www.rt.com/business/341125-siemens-russia-railway-cooperation/?utm_source=rss&utm_medium=rss&utm_campaign=RSS