France and Germany are in a worse shape than people thought

• Oscar Williams-Grut
 
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• 7h
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REUTERS/Charles PlatiauFrench President Francois Hollande.

It's flash PMI day in Europe, meaning we get a snapshot of growth in the Eurozone's two powerhouses — France and Germany.

Overall the picture is not good. Eurozone flash figures missed forecasts and both France and Germany disappointed.

France's composite growth beat forecasts but there was a big drop-off for the manufacturing sector. And Germany missed forecasts for both manufacturing and services, with a big drop-off on overall growth.

These are just preliminary readings for January, so could be revised upwards. But it's unlikely they'll see any significant improvement in the final figures.

Each PMI reading is given as a figure between 0 and 100 — anything above 50 signals growth, while below means contraction.

France is up first, here's what we've got:

• Manufacturing: 50 — well below economists forecasts of 51.3 and down from 51.4 in December;
• Services: 50.6 — above expectations of 50.2 and an acceleration from December's figure of 49.8;
• Overall economy: 50.5 — an acceleration from 50.1 last month.

While the overall picture is not bad, the huge collapse in manufacturing will be a worry to President Francois Hollande. The President this week declared a state of economic emergency, pledging to spend €2 billion (£1.5 billion, $2.1 billion) to tackle France's stubbornly high unemployment.

Here's how Germany did:

• Manufacturing: 52.1 — below forecasts of 53 and down from 53.2 in December;
• Services: 55.4 — below estimates of 55.6 and down from 56 in December;
• Overall economy: 54.5 — down from 55.5 in December.

Germany's figures are disappointing across the board, with a particularly big drop off in manufacturing. The country does a lot of trade with China, so the rocky start to the year for China's stock market and growth uncertainty there may have hit exports.

And here's the Eurozone as a whole:

• Manufacturing: 52.3, against a forecast of 53;
• Services: 53.6, versus an earlier estimate of 54.2;
•  Overall economy: 53.5, against a forecast of 54.2.

Chris Williamson, Markit's chief economist, says in the statement:

The cooling in the pace of growth in euro area business activity at the start of 2016 is a disappointment but not surprising given the uncertainty caused by the financial market volatility seen so far this year.

It would be wrong to get too worried. The survey data are consistent with GDP rising at a steady quarterly rate of 0.3-0.4% at the start of the year. Firms also appear to be looking to brighter times ahead, with business confidence improving, linked in turn to backlogs of work rising at the fastest rate since the spring of 2011.

Russian central bank meets with bank heads as ruble plunges

• AFP

• 20h
• 89

© AFP Vasily MaximovA woman walks past a board listing foreign currency rates against the Russian ruble in Moscow, on January 21, 2016

Moscow (AFP) - The Russian Central Bank summoned bank chiefs on Thursday evening after the ruble plummeted to new record lows against the dollar, as chief Elvira Nabiullina cancelled her trip to the World Economic Forum in Davos.

"The Bank of Russia held a working meeting with the leadership of banking associations and several banks regarding the conditions and prospects of banks' crediting of the economy in 2016," the central bank said in a statement.

Separately, a spokeswoman confirmed that Nabiullina had cancelled her plans to speak at Davos Friday.

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More: AFP

Oil is now rocketing

• Ben Moshinsky
 

• 8h
• 13,795
 
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This will give the panellists at the World Economic Forum something to talk about.

After a volatile week, in which oil sank below $28 (£19) a barrel, the commodity is rallying above $30 on Friday.

We got hints that sub-$30 oil wasn't in Saudi Arabia's plans. According to a report in the Financial Times, Khalid al-Falih, chairman of the state-owned oil company Saudi Aramco, said he expected a recovery in prices this year.

Meanwhile, other markets are recovering. The Nikkei 225 staged a stunning rally and was up just over 6% at one point, finishing at 16,965, up 5.9%, or 941 points, for the day.

As of noon GMT (7 a.m. ET), each of the major benchmarks, West Texas Intermediate and Brent crude, was up by more than 5%.

Here's WTI:

Investing

And here's Brent:

Investing

On Thursday, oil fell below $28 a barrel for the first time since September 2003, marking a 75% decline from July 2014.

The renewed slide corresponded with a report released by the International Energy Agency in which the group warned that the oil market could drown in oversupply in 2016.

NOW WATCH: The median sale price of a Manhattan apartment is now $1.15 million

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Margin calls on S'pore shares worsening, but little systemic risk seen

By

Kenneth Limkenlim@sph.com.sg@KennethLimBT

PHOTO: BLOOMBERG

JAN 22, 20165:50 AM

Singapore

MARGIN calls are surging as the stock market stumbles, but industry insiders see little systemic risk because investors and broking houses were already battening down the hatches before the latest pullback.

The Singapore stock market has been steadily losing altitude since hitting a seven-year high in April 2015, and at Thursday's close, the Straits Times Index is down at a four-year low of 2,532.70.

The tumble has been particularly acute in the first few weeks of the new year amid concerns about economic slowdown around the region, and that has affected the value of stock-based collateral.

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"We have issued more margin calls this month on average as a result of market volatility, but these continue to be limited to a very small percentage of our customers," OCBC Securities managing director Raymond Chee said. "Forced sales arising from an inability to meet margin calls affect an even smaller group of customers."

While margin calls in the final months of 2015 mostly affected smaller companies, blue chips are bearing the brunt of the current rout, one senior dealer said.

"The small caps already got decimated sometime back, in November and December," the dealer said. "This time around, it's more triggered by the blue chip stocks."

The inherent risk in collateral calls is that they can lead to forced sales and defaults if the borrower cannot put up the difference on time.

Forced sales can have knock-on effects. For example, shares of offshore and marine company Ezra Holdings fell 17 per cent on Wednesday on a rash of negative news, including the fact that an investment firm fully owned by chief executive Lionel Lee had been forced to sell 11.5 million shares for about S$913,341 a week earlier. Those shares had been pledged for a corporate loan for another company that is unrelated to Ezra, an Ezra spokesman had told BT.

"Margin calls and forced selling can lead to a vicious cycle downwards," a senior dealer said. "You have a margin call, and you're selling shares in a downward market. You sell your own stock, and you're pushing down the price, which affects the remainder of your positions."

The problem is slightly different for contra speculators, who do not need to put up collateral and seek to close out positions before the end of a settlement period. Instead of collateral calls, the bigger challenge for contra traders is trying to recover in the midst of a prolonged slump, and finding cash flow to cover losses.

"On the contra side, it's like trying to catch a falling knife," the senior dealer said.

But industry professionals said that the increase in margin calls and forced sales were largely manageable.

A key mitigation factor is the fact that the market has been struggling for a while, giving the market ample time and incentive to shore up their defences.

One trader noted that the lacklustre volumes over the past several months meant that many investors were not stretching their margin facilities to begin with. The list of acceptable collateral was also rather short.

"With the market going a certain direction for a long time, not a lot of stocks are included in the marginable list," the trader said. "Within the firms, the margin departments were quite cautious to begin with."

Said OCBC's Mr Chee: "We regularly stress-test the portfolios of all our customers with share financing accounts. Closely monitoring the composition of their shares helps us to proactively engage our customers to adjust their margin levels and re-balance their portfolios, if necessary. In this way, we minimise the risk that we and our remisiers face."

On the contra front, IG market strategist Bernard Aw said that contra trading has lost popularity since the penny stock crash of October 2013, so the impact from contra traders might be limited.

The senior dealer said that the market might stabilise closer to the Chinese New Year, which falls on Feb 8.

"Clients are taking margin calls more seriously, so they're taking proactive steps. Previously, they were just buying and holding, now we're seeing clients take more aggressive action, some are selling to pay up in full. When you have this kind of situation, the market will stabilise," the senior dealer said.

The one concern would be that when the market is ready for bargain hunting, investors might have cut back too much on capacity and recovery may take longer.

"The speculative fervour will be cut off," the senior dealer said. "When there's selling like this, people are naturally injured . . . you can't expect them to get up and running."

    
 

China money rates climb despite cbank injections as holiday cash binge begins

China's money rates spiked this week as banks hoarded cash in preparation for the long Lunar New Year festival, but traders believe the increase is largely seasonal and is being tempered by massive injections by the central bank. 

PHOTO: BLOOMBERG

JAN 22, 20162:43 PM

[SHANGHAI] China's money rates spiked this week as banks hoarded cash in preparation for the long Lunar New Year festival, but traders believe the increase is largely seasonal and is being tempered by massive injections by the central bank.

With the country's stock markets in turmoil and economic growth at 25-year lows, the central bank is more anxious than ever to avoid any cash crunch over the holiday, and has injected the most liquidity via open market operations since January 2014.

Central bank economist Ma Jun suggested in an interview on Thursday that the People's Bank of China (PBOC) might begin relying on direct injections into the money market to maintain holiday liquidity instead of cutting bank reserve requirement ratios (RRR), which would free up more money for banks to lend.

That will likely disappoint traders and stock investors who have been hoping for the sort of long-term system-wide cash injection and potential economic boost that an RRR cut would bring.

While the volume-weighted average rate of the benchmark interbank seven-day repurchase (repo) agreement, considered the best indicator of general liquidity in China, was steady for the week at 2.3245 per cent, most other benchmark money rates were up sharply, reflecting high demand for cash.

Some analysts said the rise may also indicate an increase in capital flowing out of the country, which is being closely watched by the government and central bank.

The one-day or overnight rate rose nine basis points (bps) on the week to 2.0275 per cent, while the 14-day repo surged 105 bps to 3.6988 per cent. The one-month repo was up 45 bps to 3.39 per cent.

But economists and traders said the mood was calm, with most market participants attributing the rise in rates mainly to normal seasonal cash demand ahead of the holiday.

"It is due to several factors which happened to occur at the same time," said a trader at a commercial bank in Shanghai.

"Money demand surged ahead of the Spring Festival, and it was also the time for tax payments. The decline of the forex position also weighed. But liquidity slightly eased today.

Though the rates are still high, the volume of money appeared to be more than earlier this week." "Overall if you look at China's balance of payments it still runs a surplus," said Liu Li-Gang, Chief Greater China Economist at ANZ Bank in Hong Kong.

"So I think we should not overplay the capital flight angle at this time. Seasonality is definitely a more important factor." Concerns about slowing growth in China and accelerating outflows have unnerved global markets, contributing to a sharp sell-off in the opening weeks of 2016.

The central bank injected a net 315 billion yuan into money markets through open market operations this week, the most since January 2014, and also added additional liquidity through its short term liquidity operations (SLO) tool.

REUTERS

    
 

Australia's ASX set to lead in blockchain for public companies

PHOTO: EPA

JAN 22, 20161:45 PM

[SYDNEY] Australian markets operator ASX Ltd on Friday said it has bought a minority stake in a US blockchain developer, positioning itself to become the first stock exchange in the world to use distributed ledger technology for public companies.

The A$14.9 million (S$14.9 million) investment in Digital Asset Holdings would help to cut costs, speed up transactions and make them more secure, ASX said in a statement, as it joined a slew of other financial firms that are buying into the technology originally developed for cryptocurrency bitcoin. "Distributed Ledger Technology could provide a once in a generation opportunity to reduce cost, time and complexity in the post-trade environment of Australia's equity market," ASX Managing Director and CEO Elmer Funke Kupper said in the statement.

"Moreover, it could stimulate greater innovation by ASX and other providers of services to issuers, investors and intermediaries." Distributed ledger or blockchain technology maintains a continuously growing list of transaction data which cannot be tampered with or revised. Proponents say its use could make it easier to keep track of information and reduce settlement times.

ASX bought a 5 per cent equity interest in New York-based Digital Asset. It will also fund an initial phase of development and acquire a warrant that will give it the right to purchase further equity and appoint a director to the board.

Nasdaq Inc, the exchange and clearing house operator where many global tech giants are listed, is testing the ground with blockchain technology on its market for private companies, Nasdaq Private Market. It completed its first transaction using the technology in December.

Other exchange operators, including Deutsche Boerse and London Stock Exchange have joined hands with financial services and tech heavyweights to build platforms and applications using the blockchain technology.

ASX will work with Digital Asset to design a new post-trade solution for the Australian equity market.

Digital Asset's post-trade solutions will meet the regulatory, operational and security standards that apply to Australia's financial markets, ASX added.

ASX shares rose in line with the broader market on Friday, closing up 1.3 per cent.

REUTER
S

New US visa rules on some travellers with Mideast ties

The United States on Thursday began enforcing new visa rules on some travellers who have visited or who have dual nationality with states considered seedbeds of terrorism. 

PHOTO: EPA

JAN 22, 20167:51 AM

[WASHINGTON] The United States on Thursday began enforcing new visa rules on some travellers who have visited or who have dual nationality with states considered seedbeds of terrorism.

The Department of Homeland Security said would-be US visitors who have been to Iran, Iraq, Sudan or Syria since March 2011 will now always have to apply for a visa.

This will be the case even if the traveller is from a country in the US visa waiver program - the 40 nations seen as friends of America whose citizens can visit freely.

In addition, citizens of visa waiver countries who hold dual Iranian, Iraqi, Sudanese or Syrian nationality will have to apply for a full visa before travelling to America.

The department said it had started to implement the new rules on Thursday, but there had already been reports of travellers falling afoul of the controversial regulations.

On Wednesday, the BBC reported that its journalist Rana Rahimpour, who has joint British and Iranian nationality, had been kept from boarding a US-bound flight.

The State Department refused to comment on specific cases.

"We will carry out the law that Congress passed and the president signed," a senior administration official told AFP, speaking on condition of anonymity.

"The Department of Homeland Security... is working closely with the Department of State and other partners to ensure that the new amendments... are appropriately implemented." Homeland Security said dual nationals and travellers who had visited the four targeted countries would still be eligible for visas if they apply for them properly.

But they will no longer be able to skip the visa process by registering with the Electronic System for Travel Authorizations (ESTA) like fellow waiver country citizens.

Members of allied forces who fought alongside US troops in Iraq will be exempted from the new rules, and aid workers and journalists may be exempted on a "case-by-case" basis.

AFP