China ramps up commodity exports as domestic glut grows

      

DEC 8, 20159:59 PM

[BEIJING] Chinese commodity producers struggling with excess output and hurt by sinking prices looked abroad at a record rate last month to find markets for products including aluminium, refined fuels and steel, data showed on Tuesday.

China's refineries shipped a record amount of fuel products, aluminium processors sold their second-highest tonnage of product and steelmakers increased exports by 22 per cent to 102 million tonnes in the January-November period, setting a new record, according to preliminary customs data.

The numbers will likely increase concerns that the world's No 2 economy is exporting its excess output onto a saturated global market, accelerating the rout in prices. "We think it's a longer term dynamic playing out: China exporting its surplus to the Western world," said Daniel Hynes, analyst at ANZ, referring to the 15 per cent surge in unwrought aluminium and product exports to 450,000 tonnes in November.

That's equal to June levels and the second highest after December 2014.

Analysts expect China's exports to remain firm as producers try to mitigate weak domestic markets, although the pace may slow as smelters curtail output due to low prices. Citigroup said some 1.6 million tonnes of annual capacity has closed since October.

Still, the data will likely raise tensions with the US industry, which has criticized China, the world's top producer, for flooding the global market with product, adding to bulging stockpiles and hurting prices.

Mid-sized producer Century Aluminum Co is considering launching a lawsuit against China's exports.

In the oil market, China sold a whoppping 4.1 million tonnes of refined products overseas last month after Beijing relaxed restrictions on export permits in the face of weak demand and elevated inventories.

That's a jump of 68 per cent year-on-year, surpassing 1 million barrels per day. Citigroup analysts said they expect diesel exports of 270,000 barrels per day.

Last month, the government allowed for the first time independent refiners, known as teapots, and state-run Sinochem to export refined fuel products just months after issuing them permits for the first time to import crude oil.

European and US steelmakers have criticised China's stricken steel industry for years for selling its unwanted rebar overseas as domestic demand wanes, although Beijing has denied it is deliberately dumping surplus output.

Concerns have also been raised about government rebates offered to steel makers who add alloy elements, allowing them to undercut competitors.

The final data will be released on Dec 21.

REUTERS

Euro-area economy grows 0.3% in third quarter on domestic demand

DEC 8, 20156:53 PM

[MADRID] Euro-area growth in the third quarter was bolstered by private consumption and government spending as exports suffered from a slowdown in global trade.

Gross domestic product in the 19-nation bloc rose 0.3 per cent in the three months through September after expanding 0.4 per cent in the prior quarter, the European Union's statistics office said Tuesday in Luxembourg, confirming a Nov 13 estimate.

The data come less than a week after the European Central Bank cut one of its main interest rates to a record low and expanded its asset-purchase program to at least $1.5 trillion euros (S$2.26 trillion) to shore up the region's muted economic recovery and bring inflation closer toward 2 per cent. While domestic spending is benefiting from lower oil prices, exports are damped by an economic slowdown in emerging markets.

"The recovery remains very much a consumption-driven story going into 2016, and the external side should turn from neutral to slightly positive next year," said Holger Schmieding, chief economist at Berenberg Bank in London. "We have a dent caused by emerging markets, but the risk has lessened over the last two months." Domestic Demand Government spending climbed 0.6 per cent in the third quarter from 0.3 per cent in the previous three months, and household consumption accelerated to 0.4 per cent from 0.3 per cent. Gross fixed capital formation was unchanged from the second quarter, when it rose a revised 0.1 per cent. Exports rose 0.2 per cent and imports increased 0.9 per cent. From a year ago, the 19-nation economy expanded 1.6 per cent, according to Eurostat.

The ECB presented fresh economic projections on Dec. 3 that were largely unchanged from September, even as ECB President Mario Draghi pointed to downside risks emanating from "heightened uncertainties regarding developments in the global economy as well as to broader geopolitical risks." The central bank kept its growth forecast for next year at 1.7 per cent, and revised a 2017 projection to 1.9 per cent from 1.8 per cent. The inflation outlook for 2016 was cut to 1 percent from 1.1 per cent, and lowered to 1.6 per cent from 1.7 per cent for the following year.

Against the backdrop of steady, if slow, economic growth in the euro area, policy makers agreed last week on additional stimulus including an extension of quantitative easing by six months until at least March 2017, a broadening of asset eligibility to local and regional debt, and a cut in the deposit rate to minus 0.3 per cent. While Draghi assured observers that the measures were "adequate" and Vice President Vitor Constancio said governors agreed on "exactly what the Executive Board proposed," financial markets sent the euro soaring and stocks and bonds tumbling in a sign that more ambitious action was expected.

BLOOMBERG

US temporarily lifts Myanmar shipping restrictions

DEC 8, 20158:13 PM

[YANGON] The United States has temporarily eased restrictions on trade through Myanmar's ports, a post-election move welcomed on Tuesday by business leaders in the economically booming Southeast Asian nation.

The policy shift comes after Myanmar held landmark polls last month swept by the pro-democracy opposition party of Aung San Suu Kyi and will make it easier for US companies to deal directly with the country's crucial ports and airports.

Washington lifted most trade sanctions against Myanmar after decades of brutal junta rule gave way to a quasi-civilian reformist government in 2011.

However, dozens of junta-era cronies and their sprawling business interests remain on a Washington embargo.

That has made it difficult for businesses to trade with Myanmar because many key export and import points are run by still-blacklisted firms, including Yangon's busiest port terminal, which handles around half the country's freight.

But in a statement released on Monday, the United States Treasury announced a temporary six-month lifting of those restrictions.

"This is a good opportunity for the country because we lived in a closed system for 50 years, without good access to international trade," Thet Thet Khine, of the Union of Myanmar Federation of Chambers of Commerce and Industry, told AFP.

"The more open a country is to foreign trading, the more it will develop," added the businesswoman, who will also enter parliament next year as an MP for Suu Kyi's party.

The main Yangon port terminal is run by Asia World, one of the country's largest conglomerates which is owned by Steven Law. A leaked US diplomatic cable from 2007 described him as a "top crony" to the former regime's generals and the son of a drug lord, accusations he denies. He and Asia World remain on Washington's blacklist.

In a letter to the Treasury department in July, The Clearing House Association and the Bankers Association of Finance and Trade said the ongoing sanction listings could have the unintended effect of a "de facto trade embargo" on Myanmar.

Asia World is one of the country's richest firms, having benefited from years of juicy contracts under the junta and has a vast network of interests across the fast-changing nation.

The firm declined to comment on Tuesday.

A US embassy spokesman in Yangon said the temporary easing was a "technical fix" to ensure that exports to and from Myanmar continued.

"This is not a 'reward' for the recent election and does not represent a change in US-Burma sanctions policy," the spokesman said, adding that targeted bans against certain individuals and companies remained in place.

AF
P

British household spending highest since 2007, still below pre-crisis levels

DEC 8, 201511:50 PM

[LONDON] British weekly household spending rose in 2014 to its highest since before the global financial downturn but remained below pre-crisis level, official data showed on Tuesday.

Households spent on average 531.30 pounds (S$1,121) per week last year, which was 1.4 per cent more than in 2013, adjusted for inflation.

The Office for National Statistics said average household spending was still below a peak of 538.70 pounds in 2007, but had recovered from a 10-year low of 507.40 pounds in 2012.

Households spent a fifth of their income on average in 2014 on housing, bills and home improvements at 158.30 pounds a week - although that understates the true cost, since it does not include rent funded by welfare payments and also covers households which own their home outright.

Transport was the second-biggest category at 14 per cent of household spending, partly due to an increase in purchases of new and second hand cars.

Consumers have been the main driver of Britain's economic recovery and are expected to underpin growth this year, as Britons benefit from a higher wages, zero inflation and record low interest rates.

Average weekly after-tax income improved in 2014, to reach its highest since 2008 at 653 pounds, the ONS said. And the rise in disposable income accelerated last year, growing by 4.6 per cent, up from a 0.5 per cent rise in 2013.

Most economists expect the Bank of England to raise interest rates in the second quarter of 2016, and there are some concerns that could curb household spending after years of ultra-cheap borrowing costs.

REUTER
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US House to avoid govt shutdown with short-term spending measure: McCarthy

DEC 9, 201512:20 AM

[WASHINGTON] US House Republican leaders on Tuesday said they will seek to pass a short-term spending measure in order to avoid a shutdown of the federal government while negotiations continue over a larger spending bill.

US House of Representatives Speaker Paul Ryan told reporters that spending bill negotiations are continuing as lawmakers seek the "best agreement we can possibly get."

REUTERS

US challenges China's tax exemptions for aircraft at WTO

DEC 8, 201510:59 PM

[WASHINGTON] The United States on Tuesday launched a challenge to Chinese tax exemptions for some locally produced aircraft, saying they discriminated against imported products.

The request for consultations with China at the World Trade Organization over a value-added tax of 17 per cent on imported planes is the first step in a process that could lead to trade sanctions.

The US Trade Representative said the tax was generally imposed on planes under 25 metric tonnes coming from overseas, while locally made planes such as state planemaker Commercial Aircraft Corp of China's (COMAC) ARJ21 jet were exempt. "China's discriminatory, unfair tax policy is harmful to American workers and American businesses of all sizes in the critical aviation industry, from parts suppliers to manufacturers of small and medium-sized aircraft," US Trade Representative Michael Froman said in a statement.

China had also failed to publish the tax exemptions, in an apparent breach of WTO transparency commitments, USTR said.

China is keen to develop a successful commercial aircraft to rival those of Boeing and Airbus. The ARJ21, China's first locally built regional jet, is designed to compete against Brazil's Embraer SA and Canada's Bombardier Inc.

REUTER
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Japan to cut corporate tax rate to 29.74% in two stages: sources

DEC 8, 20155:47 PM

[TOKYO] Japan's government is set to cut the corporate tax to 29.97 per cent in the 2016 fiscal year that begins in April and further trim it in coming years in a bid to spur business investment and growth, government and ruling party sources told Reuters.

At present, Japan's corporate tax rate is 32.11 per cent.

The government initially planned to reduce the rate to below 30 per cent in fiscal 2017 after cutting it to 31.33 per cent in fiscal 2016. But plans to have a rate below 30 per cent were brought forward to help Japanese firms be more competitive.

The revised plan, contained in a draft of the ruling bloc's annual tax code revision reviewed by Reuters, would further cut the effective corporate tax rate to 29.74 per cent in fiscal 2018, the sources said on condition of anonymity because the plan has not been finalised.

The plan is set to be approved on Thursday by Prime Minister Shinzo Abe's Liberal Democratic Party and coalition partner Komeito.

The premier hopes the tax cut will encourage companies to spend some of their cash piles for investment on plants and equipment.

To fund the planned two-stage corporate tax cut, the government would expand taxes imposed based on firms based on measures such as capital and payroll size, the sources said, confirming reports by domestic media. Such taxes are levied not only on profitable companies but also loss-making ones.

The government will abolish tax breaks on capital expenditures at the end of March 2017, the sources added.

REUTER
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LeBron James just signed the biggest endorsement deal in Nike history

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Jason Miller/Getty

Nike has signed LeBron James to a lifetime deal, ESPN's Darren Rovell reports.

The contract is the largest single-athlete deal in Nike's 44-year history. It also marks the first time that Nike has officially given a lifetime deal.

James, who is 30 and entering a new phase of his career, signed a seven-year, $90 million contract with Nike before he was drafted by the Cleveland Cavaliers in 2003. In 2010, James re-signed with Nike and reportedly earned as much as $30 million annually.

According to Rovell, LeBron's new deal "easily surpasses" the 10-year, $300 million deal Kevin Durant signed with Nike in 2014.

SportsOneSource reports that James has had his own signature shoe line with Nike since his rookie season, and sales of his shoe were the highest among active players at $340 million per year, according to Forbes.

As Fortune's Daniel Roberts notes, James' deal with Nike is the latest in a series of successful business ventures. Last week, he landed a $15.8 million investment from Time Warner Cable in his media company.

Rovell also noted that Nike and James discussed possibly breaking out James' brand separately from the Nike basketball umbrella, but ultimately decided against it.

NOW WATCH: TONY ROBBINS: How to gain the 'absolute certainty' that makes LeBron James so confident

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Boston College warns students to avoid Chipotle after a 'veritable epidemic' sickens athletes

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Chipotle Mexican Grill Facebook

Chipotle's E. coli problem may have spread to Boston.

Reports on Monday from SB Nation's Boston College blog andlocal Boston news stationsindicate that a number of students on campus have fallen ill after having eaten at a Chipotle near campus.

In a statement to Business Insider, a Boston College official said:

Boston College has confirmed that several BC students and student-athletes, including members of the BC men's basketball team, have reported to BC Health Services complaining of gastrointestinal symptoms. The common factor among the students is that they had all eaten at the Chipotle restaurant in Cleveland Circle.

The Massachusetts Department of Public Health has been notified, and is working to determine if there is a link to the ongoing national outbreak of e-coli.

The Food and Drug Administration has issued information regarding this outbreak, which can be found on the FDA website.

Students who are experiencing these gastrointestinal symptoms are encouraged to seek medical care either at BC Health Services or from their own physician.

In after-hours trade, shares of Chipotle were down as much as 5%.

BC Interruption's Eric Hoffses earlier reported that a BC basketball coach said eight players on the team were confirmed to have E. coli. An email from a BC athletics official obtained byMichael Sullivan, sports editor of a Boston College student newspaper, told student athletes:

Dr. Nary just called and put out an immediate warning for all athletes:

DO NOT EAT AT CHIPOLTE'S!!!!![sic] He has a veritable epidemic up at Health Services right now and the men's basketball team is right up there in numbers.

PLEASE INFORM YOU R [sic] COACHES!

MyFoxBoston.com additionally reported that a university-wide email was later sent, noting that a number of students had come to Health Services with illnesses after having eaten at Chipotle.

Chipotle spokesman Chris Arnold told Business Insider in a statement:

The safety and well being of our customers is always our highest priority, so our restaurant at Cleveland Circle in Boston is temporarily closed while we work with local health officials to investigate a number of illnesses among Boston College students. We do not have any evidence to suggest that this incident is related to the previous E. coli incident. There are no confirmed cases of E. coli connected to Chipotle in Massachusetts.

This video from NECN's Michael Rosenfield shows the Cleveland Circle location being cleaned by workers:

These reports add to what has been a torrent of bad news for Chipotle over the last month or so.

On Friday after the market closed, Chipotle disclosed that sales in the fourth quarter are on track to fall between 8% and 11%. On Monday, Chipotle shares fell about 1.5% following the news. In the last three months, shares of the company are off more than 20%.

Earlier on Friday, the CDC released an update on the recent E. coli outbreak, which began in Oregon and Washington state, and which was initially tied to a number of Chipotle restaurants.

According to the CDC's latest update, 52 people in nine states have come down with E. coli, with 47 of these patients having reported eating at Chipotle in the week before their illness started.

Prior to the CDC's update, Chipotle had put out a release detailing the steps it was taking on food safety following the E. coli outbreak, with the company saying that there had been no evidence of exposures to the bacteria after November 7.

It appears like this news out of Boston, however, could increase this total.

SEE ALSO: Chipotle warns that its sales are tanking

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One of the world's biggest miners is about to cut two-thirds of its workforce

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REUTERS/Dado RuvicIt has not been a good week for some mining giants.

Anglo American, the FTSE-listed commodities giant, is in serious trouble and is set to cut around 85,000 jobs, roughly two-thirds of its staff, the company confirmed at an investor day on Tuesday. 

The company also announced on Tuesday that it has been forced to undertake what it calls a "radical" restructuring of its business to try to weather the commodity crash.

Anglo has unveiled a whole raft of changes to its business, and it isn't lying when it says they'll be radical.

The news of the changes came just one hour after another mining giant announced it was being forced into action to fight the commodity slump. The British-Australian firm Rio Tinto revealed that it needed to cut capital expenditure over the coming years.

For Anglo American, there are so many changes and cost cuts being put in place that it's pretty hard to keep up, but these are the most important:

• The world's largest platinum miner will undertake a programme to dump roughly 60% of its total assets. In 2014, the company reported having total assets of around £44 billion ($66 billion), so the consolidation could remove as much as £26.7 billion ($40 billion) from Anglo's balance sheet.
• 85,000 of the the roughly 135,000 staff under Anglo's control will lose their jobs in the coming years. A company spokesperson said of the job cuts: "Bear in mind that these include assets that we will sell, so the 85,000 jobs don't [all] disappear as many will be employed by new owners of those mines that we sell."
• Anglo won't pay shareholders a dividend in 2015 or 2016, something that had been widely predicted. In November, an analyst note from HSBC quoted by the Financial Times suggested that Anglo could save around £730 million ($1.1 billion) by suspending its dividend.
• It will cut costs by £2.5 billion ($3.7 billion) by the end of 2017. The cuts will come in three chunks; £1.1 billion ($1.6 billion) this year, £730 million ($1.1 billion) in 2016, and a final £670 million ($1 billion) in 2017.
• Anglo will dispose of certain parts of its business, including its phosphate and niobium mining operations, hoping to raise around £2.7 billion ($4 billion).
• The company's six businesses will be consolidated into just three: De Beers, the diamond mining arm; Industrial Metals; and Bulk Commodities.
• De Beers' and Anglo American's London office will merge in 2017.

Anglo American was already restructuring, but it says the new changes are part of a plan "to transform the company's competitive position and create a more resilient business to deliver sustainable shareholder returns."

Speaking about the changes, the company's CEO, Mark Cutifani, said: "While we have continued to deliver our business restructuring and performance objectives across the board, the severity of commodity price deterioration requires bolder action. We will set out the detail of the future portfolio in February."

REUTERS/Siphiwe SibekoMiners at the end of their shift at the Anglo Platinum's Khuseleka shaft 1 mine in Rustenburg, northwest of Johannesburg, in 2013.

Essentially, Anglo is acknowledging that it is struggling to cope with the monumental slump in commodity prices. It is well known that the price of pretty much every commodity has tanked over the past few years. Bloomberg's all commodities index is down more than 50% since 2011, and as recently as last week iron ore hit its lowest level in 10 years.

Anglo's results reflect how much it is struggling right now. It recently reported that earnings were down 36% for the six months to June, compared with the same period in 2014. It was also forced to slash production for several of its commodities in October.

Investors are worried

Unsurprisingly, investors in Anglo are pretty worried about the company almost completely restructuring itself virtually overnight, and shares are tanking. The company's stock hit an all-time low on Monday afternoon, but things have gotten even worse Tuesday morning. Shares fell by more than 9% in early trade, and while they have recovered a bit, losses are still around 5.5% so far.

Investing.comAnglo American's shares plunged on the news that it was undertaking a "radical" restructuring.

Things may be bad for Anglo American, but at least it's not alone. The miner has become just one of a series of big commodity firms to take dramatic action to try to stave off the effects of the crash.

Earlier Tuesday, Rio Tinto announced plans to cut capital expenditure by more than 10% to $5 billion in 2016, while in November, the platinum producer Lonmin sold off billions of shares at a penny each to try to hold off total financial collapse.

Both companies followed on from the huge troubles Glencore has been facing. At one point in September, the company's shares lost nearly 50% over the course of a couple of days, and boss Ivan Glasenberg told reporters he was preparing for "Armageddon."

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Ben Bernanke to PIMCO

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Reuters/Shaun Curry/PoolBritain's Prime Minister Gordon Brown ( L) greets U.S. Federal Reserve Bank Chairman Ben Bernanke at 10 Downing Street in London January 13, 2009.

Former Federal Reserve chairman Ben Bernanke is taking on a new role at the helm of a new advisory board at PIMCO.

According to a press release on Monday, the new Global Advisory Board will also be made up of Gordon Brown, former UK prime minister, and Jean-Claude Trichet, former president of the European Central Bank.

"The Board members will contribute their insights to the firm on global economic, political, and strategic developments and their relevance for financial markets," the press release said. 

Bernanke took over as Fed chair from Alan Greenspan in 2006, and served until 2014. He became a senior adviser to PIMCO in April, and became an adviser to the hedge fund Citadel in the same month.

Last year, PIMCO was rattled by the sudden departure of co-founder and bond-market guru Bill Gross, who left the firm to join Janus Capital. 

Here's PIMCO's release:

PIMCO, a leading global investment management firm, has retained five world-renowned experts on economic and political issues to form a PIMCO Global Advisory Board. The Board members will contribute their insights to the firm on global economic, political, and strategic developments and their relevance for financial markets. The members of the Board are Ben Bernanke (who will serve as chairman), Gordon Brown, Ng Kok Song, Anne-Marie Slaughter and Jean-Claude Trichet.

The Board will meet several times a year at PIMCO’s Newport Beach office as well as at other PIMCO offices around the world. The members will also attend the firm’s annual Secular Forum in May of each year, where PIMCO’s investment professionals discuss the economic outlook and its implications for markets over the next three to five years. Together, the Board members will contribute their economic, geopolitical, and market expertise and insights to the firm’s investment process.

The Global Advisory Board members:

• Ben Bernanke , former Federal Reserve Chairman and scholar at the Brookings Institution.
• Gordon Brown , former U.K Prime Minister and former Chancellor of the Exchequer.
• Ng Kok Song, former Chief Investment Officer of the Government of Singapore Investment Corporation (GIC).
• Anne-Marie Slaughter , President and CEO of New America, Bert G. Kerstetter '66 University Professor Emerita of Politics and International Affairs at Princeton University, and former Director of Policy Planning for the U.S. State Department.
• Jean-Claude Trichet, former President of the European Central Bank and present chairman of the European group of the Trilateral Commission.

“The Global Advisory Board is an unrivalled team of macroeconomic thinkers and former policymakers, whose insights into the intersection of policy and financial markets will be a valuable input to our investment process,” said Dan Ivascyn, PIMCO’s Group Chief Investment Officer.

“Sharing insights on how global macroeconomic and geopolitical policy affects markets and investments is an important part of the value we bring to investors as stewards of their assets, so our clients will benefit greatly from the experience and insight the Global Advisory Board will provide to us,” said Douglas Hodge, PIMCO’s Chief Executive Officer.

Dr. Bernanke, Chair of the PIMCO Global Advisory Board and senior advisor to the firm, said: “I am honored to chair a Board of individuals I hold in the highest esteem. We are all excited by the opportunity to provide PIMCO’s strong team of investment professionals with our collective view on how global economic, political, and strategic developments will affect markets and PIMCO’s clients.”

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British manufacturing is looking absolutely dreadful right now

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REUTERS/Matthew Horwood

British manufacturing is looking pretty dreadful right now.

According to the Office for National Statistics, manufacturing production slipped by 0.4% in October, leaving it down 0.1% year-on-year.

Industrial production (the broader group that manufacturing makes up a part of) did better, rising 0.1% from September — that's up by 1.7% year-on-year.

Analysts were expecting a manufacturing to be flat month-on-month, and up 0.1% year-on-year. Industrial production was expected to be flat from September too, but up 1.3% year-on-year.

Manufacturers' group EEF released a dreary prediction on Monday, forecasting a recession for British manufacturing this year (with a 0.1% decline in output), followed by a forecast of meagre growth next year (at just 0.8%).

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