Tuesday, January 12, 2016

BOJ, PBOC in talks to resume bilateral FX swap line: sources

BOJ, PBOC in talks to resume bilateral FX swap line: sources

[TOKYO] The Bank of Japan and the People's Bank of China are negotiating on a resumption of a bilateral currency swap arrangement in case of a financial crisis, sources with knowledge of the matter told Reuters on Tuesday.
The behind-the-scenes negotiations come amid global financial turmoil stemming from a US interest rate increase, which led to a devaluation of China's yuan and the collapse in oil and commodity prices at the beginning of this year.
It was unclear which side has initiated the negotiations but the currency swap is seen aimed at providing a safety net for Japanese banks operating in China and Chinese businesses in need of the yen currency in case of a financial crisis.
The bilateral currency swap was originally launched in March 2002 as part of multilateral currency swap lines known as the Chiang Mai Initiative, which was established in response to the Asian financial crisis in the late 1990s.
The bilateral swap line has not been renewed since it expired in September 2013 due to a deterioration in the Sino-Japanese relationship over territorial disputes and Japan's wartime history.
REUTERS

UK economy likely picked up speed in Q4 2015: NIESR

UK economy likely picked up speed in Q4 2015: NIESR

[LONDON] Britain's economy probably expanded 0.6 per cent in the last three months of 2015, picking up from a mid-year slowdown and putting growth for the year close to its long-run trend, a think tank said on Tuesday.
The National Institute of Economic and Social Research's forecast was unchanged from last month's estimate of growth in the three months to November.
Gross domestic product grew 0.4 per cent in the third quarter, matching its lowest rate since late 2012, and down from a previous estimate of 0.5 per cent, according to official data.
A poor batch of industrial output data earlier on Tuesday added to doubts that Britain's economy will bounce back from its third quarter slowdown as strongly as hoped by some economists.
NIESR said Britain's economy likely expanded by around 2.2 per cent last year. While slowing sharply from 2014's 2.9 per cent growth, this would keep the economy growing close to its long-run potential rate. "The slowdown in the economy last year was largely due to a sharp moderation in growth of the construction sector and public spending, exacerbated by weaker net trade," Jack Meaning, NIESR research fellow, said. "There is little spare capacity in the economy, and we expect the output gap to continue to close in 2016."
REUTERS

China: Stocks close higher as central bank tries to stabilise yuan

China: Stocks close higher as central bank tries to stabilise yuan

[SHANGHAI] China stocks closed higher in choppy trade on Tuesday as the central bank tried to stabilise the yuan after allowing it to sharply depreciate in the first week of the year, sowing confusion in global financial markets over its policy direction.
Sentiment was also supported by reports that China's cabinet, the State Council, may take a more active more in financial regulation following a series of perceived misteps under the current regulatory regime.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 0.7 per cent to 3,215.71 points, while the Shanghai Composite Index gained 0.2 per cent to 3,022.86 points.
Among the most active stocks in Shanghai were CN Shipbuilding, up 3.0 per cent to 8.24 yuan; Shanxi Coal, down 3.5 per cent to 4.94 yuan and Nanjing Steel, down 6.3 per cent to 2.97 yuan.
In Shenzhen, Hebei Steel, down 2.2 per cent to 3.54 yuan; Myhome, down 5.8 per cent to 5.35 yuan and BOE Technology, up 0.4 per cent to 2.76 yuan were among the most actively traded.
Total turnover of A shares traded in Shanghai was 20.6 billion lots, while Shenzhen volume was 21.7 billion lots.
REUTERS

US: Wall St opens higher as oil steadies

US: Wall St opens higher as oil steadies

[NEW YORK] US stocks opened higher on Tuesday as crude oil prices edged off 12-year lows after flirting with $30 per barrel.
The Dow Jones industrial average was up 100.5 points, or 0.61 per cent, at 16,499.07. The S&P 500 gained 11.43 points, or 0.59 per cent, to 1,935.1 and the Nasdaq Composite index added 44.24 points, or 0.95 per cent, to 4,682.23.
REUTERS

Fed to lift rates in 2016 more than markets price in, Posen says

Fed to lift rates in 2016 more than markets price in, Posen says

[LONDON] The Federal Reserve will raise interest rates more this year than investors currently are pricing in, according to Peterson Institute for International Economics President Adam Posen, a former Bank of England policy maker.
"You should trust the Fed, not the markets," Posen told Tom Keene and Francine Lacqua on Bloomberg Television on Tuesday. "I think the market is under-pricing the likelihood of both a March rise and the number of rises in the year to come."
The US central bank last month raised rates for the first time since 2006 and said it expected the pace of future tightening to be gradual. Policy makers projected the benchmark interest rate would end 2016 at 1.375 per cent, implying four quarter-point increases in the target this year, based on the median from 17 officials. According to Fed funds futures, traders price in two hikes to 0.75 per cent-1 per cent during 2016.
With US unemployment falling, Fed Vice Chairman Stanley Fischer said last week that policy makers' forecasts predicting four interest-rate increases in 2016 were "in the ballpark," while San Francisco Fed President John Williams said a couple of days later that officials could raise borrowing costs more or less than four times this year. The Federal Open Market Committee is scheduled to meet next on Jan. 26-27.
The fact that Fischer and Williams both "talk about multiple hikes, for them to reverse that you would need a lot more bad news than we're seeing, and what you're seeing from the labor market isn't bad news," Posen said.
A key factor in the speed of interest rate rises will be productivity. As of December it had slumped, averaging just 0.5 per cent over the previous four quarters on a year-over-year measure.
"I'm much more worried about productivity now than I was a few years ago," Posen said. Weak productivity growth may boost the case for higher borrowing costs if it causes the economy to be unable to grow without creating inflationary pressures, he said.
"If you accept that we're going to have this domestic wage push, which is the assumption they're making, the fact of a productivity slowdown actually makes you more likely to want to raise rates," Posen said. "So if you're a productivity bear, you're a Fed hawk." Later, in an interview with Bloomberg Radio, Posen said he thinks the Fed will have to "stop ahead of their planned path" for increases because of an over-estimation of a pickup in inflation and a possibly slowing US economy.
BLOOMBERG

Syrian suicide bomber kills 10 in Istanbul's tourist heart

Syrian suicide bomber kills 10 in Istanbul's tourist heart

[ISTANBUL] Ten people, mostly foreigners, were killed on Tuesday when a Syrian suicide bomber blew himself up in Istanbul's busiest tourist district, in the latest deadly attack to hit the country.
Images showed several mutilated corpses lying on the ground close to the iconic Ottoman-era Blue Mosque in Sultanahmet, a district which is home to Istanbul's biggest concentration of historic monuments.
"I strongly condemn the terror attack which was carried out by a suicide bomber of Syrian origin," Turkish President Recep Tayyip Erdogan said in a speech in the capital Ankara.
Deputy Prime Minister Numan Kurtulmus said most of the dead were foreigners, but did not give details on their nationality. He identified the bomber as a Syrian national born in 1988.
Speaking in Berlin, Chancellor Angela Merkel said that German nationals were "probably" among the victims.
"We don't have all the information yet... but we fear that German citizens could be and probably are also among the victims and injured," she told reporters.
Shortly after the blast, Germany had warned its nationals to avoid tourist sites in Istanbul, a city of 14 million that has been hit several times by deadly attacks.
Turkey's Dogan news agency said nine Germans and two Peruvians were among the wounded.
Police and ambulances raced to the scene, throwing up a tight security cordon around the area as helicopters hovered overhead, and crowds of worried locals and tourists clamoured to find out what had happened, an AFP correspondent said.
The explosion took place at around 0820 GMT by the Obelisk of Theodosius, a monument from ancient Egypt which was re-erected by the Roman Emperor Theodosius and is one of the city's most eye-catching monuments.
It stands just outside the Blue Mosque.
Turkey has been on high alert after a series of attacks blamed on the Islamic State jihadist group including a double suicide bombing in October in Ankara that killed 103 people.
The explosion was powerful enough to be heard in adjacent neighbourhoods, witnesses told AFP. Police cordoned off the area to shocked passers-by and tourists and the nearby tram service has been halted.
"The explosion was so loud, the ground shook. There was a very heavy smell that burned my nose," a German tourist called Caroline told AFP.
"I started running away with my daughter. We went into a nearby building and stayed there for half an hour. It was really scary," she said.
"I heard a very loud blast, then came the screams," said a Turkish man who did not want to be identified.
"Then I saw a ball of fire, and started to run away. I saw about 10 people wounded, one of them was being helped by the tourists.
"I am 100 percent sure it wasn't just a bomb, but a suicide bomber," he added.
The authorities imposed a broadcast ban on reporting of the attack, prompting television channels to halt live broadcasting from the scene although factual commentaries continued.
Immediately after the blast, Prime Minister Ahmet Davutoglu convened an emergency security meeting with key ministers and officials, among them Interior Minister Efkan Ala and spy chief Hakan Fidan.
The Istanbul governor's office said an investigation was under way to identify the type of explosive used and any others involved in the attack.
"Investigations into the cause of the explosion, the type of explosion and perpetrator or perpetrators are under way," it said.
Turkey has been on alert since October 10 when two suicide bombers blew themselves up in a crowd of peace activists in Ankara in the bloodiest attack in the country's modern history.
That attack was blamed on IS jihadists, as were two other deadly bombings in the country's Kurdish-dominated southeast earlier in the year.
Turkish authorities have in recent weeks detained several suspected IS members, with officials saying they were planning attacks in Istanbul.
"The style of the attack, a suicide bomber and the attack, a group of tourists, suggests a jihadist attack," a Western diplomat told AFP.
"If this is the case, it's a sign that Daesh has decided to attack the Turkish state," he added, using an Arabic acronym for IS.
But Turkey is also waging an all-out assault on the outlawed Kurdistan Workers' Party (PKK) which has staged dozens of deadly attacks against members of the security forces in the southeast.
A Kurdish splinter group, the Freedom Falcons of Kurdistan (TAK), claimed a mortar attack on Istanbul's second international airport on December 23 which killed a female cleaner and damaged several planes.
Meanwhile, the banned ultra-left Revolutionary People's Liberation Party-Front (DHKP-C) has also staged a string of usually small-scale attacks in Istanbul over the last few months.
AFP

SNB says negative inflation rate is part of adjustment process

SNB says negative inflation rate is part of adjustment process

[ZURICH] Switzerland's negative inflation rate helps the economy to stand up to its rivals, according to Swiss National Bank board member Andrea Maechler.
Declining consumer prices are a "necessary part of the adjustment process to allow the Swiss economy to stay competitive," Maechler said on Tuesday at a conference in Lausanne that was hosted by newspaper Le Temps.
Prices slumped 1.1 per cent in 2015, the most since 1950. The SNB predicts they will fall an average of 0.5 per cent this year before rising 0.3 per cent in 2017. Maechler, who joined the central bank's board in July, confirmed that forecast on Tuesday.
The negative inflation rate is one of the fallouts of the SNB's unexpected move a year ago to abandoned its franc cap. That decision also proved a blow to Swiss exporters. While their situation remains difficult, they may benefit from a pickup in global growth, according to Maechler.
BLOOMBERG

UK industrial output plunges most in almost three years

UK industrial output plunges most in almost three years

[LONDON] UK industrial production fell the most in almost three years in November as warmer-than-usual weather reduced energy demand.
Output dropped 0.7 per cent from the previous month, with electricity, gas and steam dropping 2.1 per cent, the Office for National Statistics said in London on Tuesday. Economists had forecast no growth on the month.
The data highlight the uncertain nature of UK growth, which remains dependent on domestic demand and services. After stagnating in October and falling in November, industrial production will have to rise 0.5 per cent to avoid a contraction in the fourth quarter.
Manufacturing also delivered a lower-than-forecast performance in November, with output dropping 0.4 per cent on the month. On an annual basis, factory output fell 1.2 per cent, a fifth consecutive decline.
 
The data follow other reports of weakness in the manufacturing sector. A survey published by Markit this month showed growth cooled in December, suggesting it made little contribution to the economy in the fourth quarter.
According to manufacturers' organization EEF, companies are feeling increasingly pressured by issues such as the strength of the pound. It said on Monday that only 56 per cent of manufacturers say the UK is a competitive location, compared with 70 per cent a year ago.
Bank of England officials will probably keep their key interest rate at a record-low 0.5 per cent this week. Minutes of the meeting released Thursday may reveal their thinking on the fall in oil prices and worries about China's economy.
BLOOMBERG

ECB's Bonnici warns on impact of oil on inflation

ECB's Bonnici warns on impact of oil on inflation

[PARIS] The European Central Bank must continuously evaluate the effect of its money printing programme, a policy setter said on Tuesday, adding that while the falling price of oil lifted buying power, it hurt price growth.
"The oil price fall has some positive impacts through raising the purchasing power of euro zone households and this reinforces the asset purchase programme," Josef Bonnici, the governor of the Central Bank of Malta said.
"There is also an impact on inflation, not in the desired direction, so there is some degree of offsetting between these factors," said Mr Bonnici, who also sits on the ECB's Governing Council.
REUTERS

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