Japan's GDP figures for the first quarter are set to be the highlight for Asian markets on Wednesday, with expectations of annualised growth of 0.7%, the fastest rate in three quarters, leading to Tokyo stocks opening up 0.2%. China's weaker than expected economic data for April has resulted in slumps across Chinese financial assets, with April house prices also due on Wednesday. Although offshore investors have a new scheme to link Hong Kong with the mainland in order to access interest rate derivatives to help hedge their Chinese bond exposure, concerns about debt demand have cast extra doubt over the yuan's ability to gain reserve currency status.
Margherita Della Valle, the new CEO of Vodafone, has announced that the group will cut 11,000 job losses to simplify the company and improve its performance across its main markets. The cuts, which will be made over three years, represent Vodafone's biggest ever set of job losses. Vodafone's revenues are reportedly 2% lower than in 2018, while adjusted earnings are less than promising. Della Valle's mission to restructure the centralised business will focus on reducing roles at group level, which employs around 1,500 people at its London headquarters, as well as at local units across Europe, especially Germany, Spain and Italy. One of the challenges ahead includes an increasing number of private investors applying pressure on the group to execute its turnaround, including French tycoon Xavier Niel with 2.5% and US dealmaker Liberty Global with 5%.
China's yuan has weakened towards the 7-per-dollar threshold, its weakest this year, after weaker-than-expected economic data raised concerns about the country's growth prospects. Analysts predict that if it falls below 7, the currency could trigger retaliatory measures by US President Donald Trump, who has repeatedly accused Beijing of manipulating its currency. Some see a weaker yuan as a tool China could use to ease the effect of US tariffs and a slowing economy, but it also risks capital flight from the country.
A Chinese native has been charged by the US Department of Justice with stealing trade secrets from Apple, including information on autonomous vehicle technology. Weibao Wang, a former software engineer accused of stealing thousands of documents, is one of five individuals to be pursued as part of a government task force created to combat the theft of critical technology by foreign countries. Wang, who told investigators he had no plans to travel to China, immediately flew to Guangzhou upon being questioned by law enforcement officers who discovered a large volume of Apple data at his California home in 2018.
Beazley announced average premium-rate increases of around 10% for contract renewals in its Q1 update, boosting profits for the non-life insurer, despite ongoing debate over war exclusions for cyber crime. A $400m fundraising move in late 2022 strengthens the company's hand to allow it to take further advantage of the firm pricing environment. Gross premiums written rose by 12% year-on-year in the first quarter to $1.4bn, propping up expectations of a 15% increase in gross premiums written to $6.1bn ongoing. Beazley's reaching of the mid-teens growth rate aligns with management's guidance.
In the latest episode of the FT's "Behind the Money" podcast, Harriet Agnew and Katie Martin delve into the recent struggles of the London Stock Exchange (LSE) and its diminishing global influence. They explain how the Big Bang reforms of 1986, which transformed the City of London's financial markets, helped the LSE rise to prominence that was consolidated in the late 1990s after the exchange embraced technology and demutualised. But in the subsequent two decades, competition from rival exchanges, including the rapid growth of electronic trading, have put significant pressure on the LSE’s revenues. Meanwhile, Brexit has prompted companies to depart the LSE and take their listings and trading to the eurozone. Both Deutsche Boerse and Euronext are considered suitable alternatives for firms spurning London.
Uncertainty over the US debt ceiling is set to continue as traders brace for April inflation data for the eurozone, with European markets predicted to open lower. UBS Group AG is poised to release its financial statement detailing the $17bn hit it took from the takeover of Credit Suisse Group AG. Meanwhile, BlackRock is requesting its staff return to the office at least four days a week as pandemic restrictions are lifted globally. The recession in Japan has lifted as the country rebounds post-pandemic to offset global economic challenges, while Warren Buffett increased his influence in Capital One Financial Corp.
The European Union (EU) has given final approval for a sweeping package of cryptocurrency rules, providing a global lead in regulating the sector. The rules, known as Markets in Crypto Assets (MiCA), aim to improve transparency and combat money laundering, and cover stablecoins, public digital tokens and bitcoin-related services like trading platforms and digital wallets but not bitcoin itself. Companies issuing crypto assets and trading them will have to reveal information on the risks, costs and charges that consumers face, while also disclosing how much energy they use, over concerns that bitcoin mining has increased the digital currency's carbon footprint.
Chinese investors have become net sellers of Tencent Holdings shares this quarter, with HKD 3.5bn ($447m) shed, according to Bloomberg data. The selling has coincided with a 10% drop in the Tencent stock since the end of March. Experts suggest that the turn might indicate concerns over China's economic future, which saw mainland investors buy up shares during a slump in the second half of 2020.
Euro zone inflation rose to 7% in April and is expected to remain high amid increasing wage pressures, driven by rapidly rising services costs and energy prices. The European Central Bank has already raised interest rates by 375 basis points since last July to address the issue. A further increase may now occur in order tackling expectations of higher wages in 2022 and preventing inflation from becoming entrenched in the economy.
Home Depot's Q1 earnings came in weaker than expected, with a 2.3% decline in sales growth for products not including lumber. Same-store sales fell 4.5%, with CEO Ted Decker acknowledging that speculation over whether customers are reverting to pre-pandemic spending patterns was a problem for retailers. Consumer patterns may not "end or how quickly it goes" and Home Depot may have to give back growth it picked up during the pandemic, he said. The government's most recent retail sales report also showed "volatile" numbers as many large, mature retailers weighed up uncertainty over spending and growth patterns in the coming year. Meanwhile, falling rates and a weaker dollar helped emerging-market bonds and Treasuries over high-yield bonds, with SocGen recommending the abandonment of high-yield bonds completely to shift to emerging market bonds and Treasuries. However, Andy Brenner, head of international fixed income at NatAlliance, is positive on high-yield bonds as they've transformed in composition over the last decade, including companies like Ford and Kraft-Heinz.
European stocks fell on Wednesday, with investors spooked by policymakers in Washington failing to agree on a deal to increase the US’ spending limit. US futures were holding gains, with S&P 500 and Nasdaq 100 contracts tracking up 0.2% and 0.1% respectively prior to the New York open. However, Jefferies’ Mohit Kumar warned that markets will start to price in debt ceiling concerns toward mid-June. Treasury Secretary Janet Yellen has warned the US could default on its debt as early as next month if lawmakers fail to reach a compromise. The dollar index was up 0.3% on Tuesday’s close and bond yields edged higher as uncertainty grew over the US situation.
Talk show operator Xiaoguo and comedian Li Haoshi have been fined $2m for "grave insults" to China's People's Liberation Army after Li's performance last weekend, in which he joked about a Xi Jinping military slogan. In a statement, Beijing’s Municipal Cultural and Tourism Bureau said the fine will be made up of a payment of CNY13.4m ($1.9m) and "confiscate another CNY1.33m of what it called “illegal gains,” though it didn’t elaborate". Xiaoguo has pledged to overhaul its shows and its content.
Stellantis, a major car manufacturer with brands including Vauxhall, Peugeot and Citroen, has warned it may close British factories unless the UK government renegotiates its Brexit agreement with the European Union. The carmaker has committed to making electric vehicles in the UK, but says it is impossible to source enough components locally to meet new rules requiring 45% of component value to originate from the UK or EU. The regulations are required to avoid a ten percent export tariff on EVs. The company warned manufacturing would become “unsustainable” if it could not secure competitive prices, potentially resulting in factory closures.
Experts have suggested that it would be challenging to find businesses that could meet the 45% local component requirements. The production of a battery alone typically represents 40% of an EV’s value. Sir Keir Starmer, leader of the opposition Labour Party, has described the threat as an “existential crisis” for the UK car industry, warning of “800,000 jobs” at risk. The head of the Society of Motor Manufacturers and Traders, Mike Hawes, has called for greater investment in battery production in the UK.
Other companies, including Nissan, have expressed concerns regarding local content regulations. Last year, Nissan and Tesla both warned of the increased costs they may face as a result of rules that will require them to relocate factories or double down on supply chain and procurement strategies to avoid punitive export tariffs.
Greenpeace has said that the UK relies too heavily on lithium battery manufacturing and argued that the move away from the low-carbon market would result in greater global reliance on a small handful of multimillion-dollar mining companies, “where the human and environmental costs are generally high”.
Most Gulf stock markets rose despite concerns over the U.S. government's debt-ceiling negotiations. In Saudi Arabia, the benchmark index gained 0.6%, whereas the Qatari index outperformed the region to finish 2% higher. Emirati markets rose, with Dubai rising 1.6% after four sessions of losses and Abu Dhabi rising 0.5%. In Egypt, the blue-chip index declined, with international investors continuing to be sellers due to global concerns and a declining risk appetite.
The International Monetary Fund’s (IMF) First Deputy Managing Director, Gita Gopinath, has warned of significant risks that inflation will remain high or increase further in many emerging markets, and urged central banks to keep monetary policies tight. Gopinath highlighted that price pressures seem entrenched in many economies and upside inflation risks are significant. She noted that insufficient monetary tightening now may necessitate more painful actions down the road, and that fiscal restraint could support central banks’ fight against inflation. Gopinath also warned of heightened risks to emerging markets from monetary policy tightening in advanced economies, and underscored the need for emerging market authorities to continue to strengthen their monetary, fiscal, and financial policy frameworks.
Oil prices steadied on 15 May after an unexpected rise in US crude inventories caused demand concerns. Brent crude futures increased by 2 cents to reach $74.42 a barrel, while US crude West Texas Intermediate fell 5 cents to $70.81 per barrel. The International Energy Agency has predicted that in 2018, demand will exceed supply by 2 million barrels per day during H2, with China responsible for 60% of the predicted oil demand growth in 2023. US crude stockpiles, however, rose by 3.6 million barrels in the week ending 12 May, adding to concerns about US growth.
Stéphane Boujnah has been reappointed as Euronext's CEO for another four years. Boujnah, formerly of Santander and Deutsche Bank, joined Euronext in 2015 and has overseen takeovers of various European exchanges, including the Dublin stock exchange, Borsa Italiana, and the Oslo stock exchange. He has promised to boost the group's growth with acquisitions in sectors such as forex, data, power and funds distribution but declined to mention any specific firms. Analysist Ian White said Euronext needed to strike a deal this year to show growth, with the exchange's shares performing badly against its peers over the past 15 to 16 months.
The International Monetary Fund (IMF) has approved a $3bn, three-year extended credit facility for Ghana to help resolve its worst economic crisis in a generation. The deal has been approved by the IMF’s executive board following staff-level approval in December 2021. Although viewed as an important step, sources warn that the Ghanaian authorities will face long negotiations with creditors. The country is in discussions with both official sector and private creditors to restructure its debt. Roughly $5.4bn of debt to official creditors has been earmarked for restructuring, as well as $14.6bn of debt to private, overseas creditors.
Brazil's ministers see room for rate cuts as central bank keeps cautious stance
Reuters
23-05-17 15:40
Brazilian finance and planning ministers support a potential kick-off for monetary easing, although central bank Governor Roberto Campos Neto maintains caution in relation to potential risks of rising inflation. Finance Minister Fernando Haddad is supportive of monetary easing but does not question the central bank's authority to set rates. Planning Minister Simone Tebet pointed to the expected impact on the favourable conditions for lowering interest rates in August, depending on whether a proposed new fiscal framework is approved by Congress. Brazil's next monetary policy meeting is scheduled for 20-21 June.
