Europe: Stocks selloff deepens as global growth worries intensify

SEP 2, 201512:01 AM

[LONDON] The plunge that led Europe's equities to their biggest monthly losses since 2011 is showing no signs of easing.

The Stoxx Europe 600 Index lost 2.8 per cent at 4:32 p.m. in London, and dropped as much as 3.3 per cent. The measure followed Asian stocks lower after a report showed China's official factory gauge dropped to a three-year low, while separate data signaled manufacturing in the euro area shrank more than initially forecast and output in the US expanded at the slowest pace since 2013. Miners again were the most hurt among European industry groups, sliding 5.7 per cent as commodities resumed their declines.

"There seems to be a bit of an industrial downturn going on in Asia," Dirk Thiels, head of investment management at KBC Asset Management, said by phone from Brussels. "People are still trying to assess what the impact of that will be on the rest of the world and it's not an easy one. You can't really call the bottom of the market at the moment. We are a bit worried."

The slide in commodity prices and rebound in the euro prompted Morgan Stanley to cut its forecasts for profit growth at European companies. The bank now projects earnings will be flat this year before rising 7 per cent next and 10 per cent in 2017.

FTSE 100 Slide Benchmark measures for UK, Spanish and Portuguese equities fell the most in western Europe on Tuesday, sliding more than 2.7 per cent. The DAX Index has lost 19 per cent from its record in April. Fourteen out of the 18 markets in the region have fallen more than 10 per cent from their highs.

The Stoxx 600 plunged 8.5 per cent in August amid growing concern that China's economy would falter, just as the Federal Reserve gets ready to increase interest rates. The equity measure ended little changed on Monday, while US stocks fell, amid low trading volume as the UK market was closed for a holiday.

The benchmark gauge for Europe's stocks ended Monday 12 per cent below the record it reached in April, sending its valuation to 15.6 times estimated profit, lower than US shares. A plunge in commodities sent miners and energy producers down the most in August, and stocks worldwide lost about US$5.7 trillion in value.

The market rout on Tuesday was again broad-based, with about 580 of the Stoxx 600's shares falling. Altice NV dropped 6.8 per cent after naming Michel Combes chief operating officer. Man Group Plc lost 7.2 per cent after a person familiar with the matter said Chinese authorities took the chairwoman of the hedge fund's Chinese unit into custody to assist with a probe into market volatility.

Elekta AB was among the few stocks that rose, jumping 7.9 per cent after the Swedish maker of medical devices forecast a return to growth in the second half of the year.

    
 

EU report calls for "consistency checks" on EU financial rules

SEP 2, 201512:13 AM

[LONDON] The European Union should conduct annual "coherence and consistency" checks on its financial rules from next year to avoid crimping the flow of funds to the economy, a European Parliament draft report says.

The report, prepared for the assembly's economic affairs committee and seen by Reuters on Tuesday, is the latest move by policymakers to review the impact of new banking rules rushed through since the 2007-09 financial crisis.

Banks have repeatedly called for a review, arguing that some rules have unintended consequences, such as squeezing liquidity in bond markets and making it overly expensive to lend to companies, arguments central bankers have largely rejected.

Burkhard Balz, the German centre-right lawmaker who authored the report, said a "thorough impact assessment of the financial services framework is necessary and that this should be regularly repeated."

The report includes a resolution for the European Parliament to adopt, calling for annual "coherence and consistency" checks on EU financial rules to see if they are proportionate in relation to small and medium-sized companies.

A more comprehensive "quantitative and qualitative assessment" of the cumulative impact of all the new and proposed EU rules should be conducted every five years, the resolution says.

Parliament carries clout as it has joint say with EU states on financial rulemaking in the EU.

The bloc's executive European Commission has already said it is willing to propose changes to rules made in haste.

EU financial services chief, Jonathan Hill, is considering whether some capital requirements for banks need easing as policymaker attention switches from dealing with the aftermath of the crisis to boosting growth.

Germany, France and Britain are calling for a rethink of planned new EU securities rules.

REUTERS

    
 

More than half of Canadians have less than $10K in emergency funds: Survey

The Canadian Press
10:10 AM, E.T. | September 1, 2015
Personal Finance

Tags: Bank of Montreal, Investment, Personal Finance,Savings

Follow this

TORONTO -- Canadians on average are socking away more money for potential financial emergencies than in the past, but a new survey has found that almost a quarter are still living paycheque to paycheque.
The survey, conducted by Pollara for the Bank of Montreal, found that Canadians on average have $41,694 in emergency savings, up from an average of $35,237 in 2014.
However, 24 per cent of respondents said they had hardly anything set aside and more than half (56 per cent), reported having less than $10,000 in available emergency funds.
Christine Canning, head of everyday banking at BMO, describes the ideal emergency savings fund as one that can replace three to six months of income.
Canning adds that an emergency fund represents more than just a cushion, saying it can provide peace of mind and help reduce the risk of increased debt if a financial emergency does come along.
The online survey polled 1,002 Canadians 18 years of age and older Aug. 17 and Aug. 18. The polling industry's professional body, the Marketing Research and Intelligence Association, says online surveys cannot be assigned a margin of error because they do not randomly sample the population.
By region, the survey found that those in Atlantic Canada had the lowest average amount of emergency funds set aside at $20,152, with only eight per cent having more than $50,000 available and 27 per cent with between $10,000 and $49,900.
B.C. residents had the most set aside, an average $70,364, with 21 per cent having $50,000 or more and 14 per cent between $10,000 and $49,900.
Elsewhere, the average amount set aside totalled $24,671 in Quebec, $41,088 in Ontario, $67,605 in Manitoba and Saskatchewan and $40,341 in Alberta.

What rout? This gold miner’s getting near record-high prices

Andrew Willis, Bloomberg News
10:35 AM, E.T. | September 1, 2015
Energy and Resources

Tags: Gold

Follow this

As the meltdown in metal prices batters miners around the world, Colombia’s biggest gold producer is broadening its search for acquisitions.
Mineros SA, based in Medellin, is getting a boost from gold prices that are approaching record highs in Colombian pesos. The currency has lost 16 percent against the U.S. dollar in the past three months and 37 percent in the past year, more than making up for gold’s 11 percent decline in U.S. dollars.
“It’s going to be a good year,” Andres Restrepo, who took over as chief executive officer in May, said Monday in an interview.
Mineros continues to hunt for new assets in Latin America and has extended its search to Canada and the U.S. as part of a goal to lift production from 183,296 ounces in 2014 to as much as 500,000 ounces by 2020. It bought a 90 percent stake in Hemco Nicaragua SA in March 2013 and has budgeted US$200 million for one or two more acquisitions, anywhere from Alaska to Patagonia.
“As long as we have healthy operations we will be safe to invest in new ones,” Restrepo said. Even so, finding existing mines or mature projects with significant expansion potential isn’t easy, he said.
Gold is trading at about US$1,140 an ounce, or about 3.5 million pesos. A year ago, the price was US$1,287, or 2.5 million pesos. After hedging, Mineros is getting about 3 million pesos an ounce from its Colombian mines, which is close to a record for the company, Restrepo said.
Output from both the Colombian and Nicaraguan operations is sold to refineries in Europe and the U.S.

Oil falls more than 4 percent on weak Chinese data

Reuters
10:50 AM, E.T. | September 1, 2015

Follow this

Oil prices fell sharply on Tuesday after official data showed China's manufacturing sector, one of the main engines powering the world's biggest energy consumer, contracted at its fastest pace in three years.
China's official Purchasing Managers' Index (PMI) dropped to 49.7 in August from 50.0 in July, reinforcing concerns over the world's second-largest economy.
The figures helped spur a retreat in oil prices after three days of hefty gains. Investors took profits after Brent and U.S. crude both soared more than 8 percent on Monday, traders said.
"It was primarily the China fear factor," Carsten Fritsch at Commerzbank in Frankfurt told the Reuters Global Oil Forum.
Benchmark Brent crude LCOc1 dropped $2.53 to a low of $51.62 a barrel. It was trading around $51.90 by 1330 GMT. On Monday, Brent climbed $4.10, or 8.2 percent, extending a rally from a 6-1/2-year low at just above $42 on Aug. 26.
U.S. crude CLc1 was down $2.10 at $47.10 a barrel. On Monday it settled up $3.98, or 8.8 percent.
Oil prices rallied from their lowest levels since the global financial crisis in what traders said was a bout of short-covering after more than three months of falls.
Figures from the Energy Information Administration (EIA) on Monday showed U.S. oil output peaked at just above 9.6 million barrels per day (bpd) in April before falling by more than 300,000 bpd over the following two months.
But the global market is still heavily oversupplied.
Oil producers in the Organization of the Petroleum Exporting Countries are pumping over 2 million bpd more than required, forecasters say, filling oil stockpiles worldwide.
A Reuters poll on Tuesday forecast Brent would average $62.30 a barrel in 2016, down $6.70 from projections a month earlier. [O/POLL]
Bank of America Merrill Lynch said it was lowering its 2016 and 2017 crude oil projections because balances looked soft and oil production costs were falling:
"Growth concerns around China, coupled with the expectation of increased Iranian output in 2016, have temporarily driven oil prices even lower than we anticipated," Merrill Lynch said.
Investors awaited U.S. data, including oil stocks, manufacturing and vehicle sales, due later on Tuesday.

UK mortgage approvals rise in July to highest level since Feb 2014

British mortgage approvals rose in July to hit their highest level since February 2014, Bank of England data showed on Tuesday, adding to signs Britain's housing market is regaining momentum. 

PHOTO: BLOOMBERG

SEP 1, 20154:58 PM

[LONDON] British mortgage approvals rose in July to hit their highest level since February 2014, Bank of England data showed on Tuesday, adding to signs Britain's housing market is regaining momentum.

The BoE figures also showed lending to consumers continued to increase at a solid pace.

Mortgage approvals for house purchases numbered 68,764 in July, stronger than expected in a Reuters poll of economists, from 67,069 in June.

Tighter rules on mortgage lending took effect last year, requiring banks and building societies to make more rigorous checks on whether borrowers can afford their loans.

The number of approvals fell throughout most of 2014, cooling house price growth and easing concerns about a bubble in the housing market.

But Tuesday's figures add to signs the housing market is heating up again. Mortgage approvals have risen in five of the last seven months and the pace of price rises has picked up.

Net mortgage lending, which lags approvals, surged by 2.709 billion pounds in July, the biggest increase since July 2008.

The BoE said consumer credit grew by 1.173 billion pounds in July, down slightly from a 1.23 billion pound rise in June. But it was up 7.5 per cent on an annual basis - the biggest such increase since April 2006.

Despite only weak rises in wages for much of the past five years, Britain's economic recovery is still heavily reliant on spending by households.

The BoE said lending to non-financial businesses rose 734 million pounds, after a 5.48 billion pound dip in June.

REUTERS

    
 

Opec magazine op-ed that fuelled oil rally baffles insiders

An Opec publication written by the exporter group's public relations team helped oil prices jump and prompted speculation over a possible shift in output policy - to the bafflement of some Opec insiders. 

PHOTO: REUTERS

SEP 1, 201511:27 PM

[LONDON] An Opec publication written by the exporter group's public relations team helped oil prices jump and prompted speculation over a possible shift in output policy - to the bafflement of some Opec insiders.

The commentary on Monday in the Opec Bulletin, a magazine issued by Opec's Vienna headquarters, said downward pressure on prices due to higher production "remains a cause for concern"and Opec "stands ready to talk to all other producers".

While the 799-word article helped add another 8 per cent to oil's three-day surge, by Tuesday it seemed clear there was no sign of a significant shift in Opec policy or any indication of a fresh push to shore up markets, analysts and Opec insiders said.

A Gulf delegate said the Bulletin reflected genuine concern in the Organization of the Petroleum Exporting Countries about falling prices but it did not signal a policy shift or pending production cut.

"I see it as a message sent to the market that we are willing to talk to non-Opec, we are concerned about prices and we are not closing our eyes to what's going on."

Another Opec insider said: "I found it surprising,"referring to the jump in prices on Monday. "The Bulletin wasn't saying anything new." The Bulletin, a glossy magazine, is written by Opec's PR department based in Vienna and lists 12 editorial staff. It is reviewed by senior officials at the Opec secretariat before publication.

In the magazine, the following disclaimer appears under the heading "editorial policy": "The contents do not necessarily reflect the official views of Opec nor its member countries."

While the Bulletin has included similar commentaries on the market before - in April it criticised unidentified non-member countries for not cooperating in propping up prices - it does not tend to move oil prices.

Traders are wondering whether Opec and its de-facto leader Saudi Arabia will stick with the policy adopted in 2014 of defending market share, even after the slide in oil prices to their lowest in more than six years last month.

While Saudi Arabia has not commented publicly, some had seen the Bulletin as indicating a shift.

"Yesterday the market got somewhat excited by the editorial of the Opec Bulletin," said Olivier Jakob, oil analyst at Petromatrix. "This was read by some market participants as making a first overture for a change of policy." The excitement appeared to be fading on Tuesday as Brent oil traded down 6.5 per cent by 1507 GMT.

REUTERS

 

World's top oil trader Vitol sees price at US$40-US$60 to 2016

SEP 1, 201511:45 PM

[LONDON] Oil prices will remain at US$40 to US$60 a barrel into 2016 as rising crude supplies overwhelm demand, according to the world's largest independent oil trader.

The oil-production surplus means stockpiles will keep expanding for "the next few quarters" and excess inventories won't clear until 2017 at the earliest, Vitol Group BV Chief Executive Officer Ian Taylor said in an interview.

The forecast, if realized, would mean oil-producing countries and the energy industry would need to weather a longer downturn than occurred after the financial crisis of 2008-2009, when prices fell as low as US$36 a barrel, but recovered to almost US$80 within a year. Vitol handles more than five million barrels a day of crude and refined products - enough to cover the needs of Germany, France and Spain together.

"Oil prices will be stuck between US$40 and US$60 a barrel this year and in 2016," Mr Taylor said. "I don't see much reason to go higher and we can go lower" because the physical crude oil market is "quite weak" right now.

Brent crude, the global benchmark, dropped to a six-year low of US$42.23 a barrel on Aug 24, down from more than US$100 a barrel a year ago. While prices subsequently rebounded to trade at US$50.54 at 4:03 pm on the London-based ICE Futures Europe exchange Tuesday, they remain about 50 per cent lower than a year-earlier.

Crude plunged after the Organization of Petroleum Exporting Countries in November diverged from its traditional policy of adjusting supply to manage prices, announcing it would maintain output to defend its position in the market. After an almost 40 per cent drop in prices, the group ratified that decision in June. It is scheduled to meet again Dec 4.

Opec effectively began a price war against higher-cost producers including US shale operations, the North Sea and ultra-deep-water discoveries in Brazil and Angola. So far, however, "non-Opec production is proving more resilient than expected," Taylor said.

Daily oil production outside Opec will grow this year by 1.1 million barrels, compared with an expansion of 2.4 million in 2014, the International Energy Agency said Aug. 12. Non-Opec supply is set to contract by 200,000 barrels per day in 2016, the first drop since 2008, it said.

Mr Taylor, a 59-year-old trader-cum-executive who started his career at Royal Dutch Shell Plc in the late 1970s, said oil demand growth was the only bullish factor in the market. Global daily consumption will increase this year and next by about 1.5 million barrels and "we are not seeing any dramatic drop in demand in China," he said.

While the price slump has hurt oil producers, independent traders such as Vitol and its competitors Trafigura Beheer BV, Glencore Plc, Gunvor Group Ltd and Mercuria Energy Group Ltd are profiting from the increase in volatility. The Chicago Board Options Exchange Crude Oil Volatility Index, a measure of fluctuations in prices, averaged 44.28 so far this year, more than double the level in 2014.

These companies also benefit from a market structure called contango - where forward prices are higher than current costs. This allows traders to buy oil, store it in tanks and lock in a higher selling price for a later date using derivatives.

"Contango opportunities are emerging, particularly in products," Mr Taylor said. Onshore inventories are currently expanding at a rate of 1.5 million barrels a day, although the price incentive is not strong enough to store fuel offshore in tankers, he said.

The price difference between the front-month Brent contract and a year-forward has more than doubled since early July to $7.88 a barrel. The contango is deeper in some refined products, including fuel-oil, Mr Taylor said.

Vitol is betting that demand for oil storage will continue to grow. Varo Energy, partly owned by Vitol and private-equity fund Carlyle Group, announced Tuesday it has agreed to take full ownership of Rhytank AG, which operates oil tanks in Switzerland. Another Vitol-led venture said Aug 21 it would pay US$830 million for the 50 per cent it didn't already own in storage company VTTI BV from MISC Bhd, a shipping group owned by Malaysia's national oil company.

Vitol earned US$1.35 billion last year, the most since 2011, as the trader profited from price swings in the energy market and the widening contango. The company, formally based in Rotterdam, but with big operations in London, Geneva, Singapore and Houston, reported net income of US$837 million in 2013, its worst result in 10 years.

BLOOMBERG

    
 

Newest China flight disturbance: fighting pilots

SEP 1, 20156:43 PM

[BEIJING] After a series of flight disruptions by angry or unruly passengers, Chinese media on Tuesday revealed a new menace to air travel in the country: fighting pilots.

Two of them came to blows in the cockpit of a China United Airlines (CUA) flight in June, the official news agency Xinhua reported.

Few details - such as the route the budget airline was operating, or how many people were on board - were available.

The incident only came to light when it was mentioned in passing in a Civil Aviation Administration of China (CAAC) announcement of CUA's punishment - a 10 per cent cut in its flying hours and a ban on new routes, Xinhua said.

The airline sought to play down concerns, saying the pilots only had "some physical contact" due to a misunderstanding and denying it escalated into a fight, the report said.

But CUA said the pair had been grounded for six months, Xinhua added.

Unruly passenger behaviour regularly makes headlines in Chinese media as air travel booms, with unfamiliar or drunken travellers even sometimes trying to open doors in mid-flight.

The industry also scores poorly for customer satisfaction, with constant flight delays - airspace is controlled by the military - topping the list of complaints.

In January Chinese police detained 25 angry passengers who opened aircraft emergency exit doors before take-off after their flight was delayed by snow.

The previous month, a budget flight from Thailand to China was forced to return to Bangkok after a Chinese passenger threw hot water at a cabin attendant.

CUA has had a string of safety incidents this year, including three in June and July that "seriously violated regulations", Xinhua cited the CAAC as saying.

In one of the country's most high-profile air accidents to be blamed on human error, the pilot of a Henan Airlines flight that crashed in 2010, killing 44 people, was jailed for three years for trying to land when he could not properly see the runway.

AFP

  
 

US: Stocks sink as China worries mount: S&P -1.9%

US stocks opened sharply lower on Tuesday as poor factory data from China sparked another round of global selloffs. 

PHOTO: BLOOMBERG

SEP 1, 20159:42 PM

[NEW YORK] US stocks opened sharply lower on Tuesday as poor factory data from China sparked another round of global selloffs.

Five minutes into trade, the Dow Jones Industrial Average was down 1.94 per cent, while the S&P 500 lost 1.92 per cent and the Nasdaq Composite gave up 1.96 per cent.

AFP

Indonesia to keep ban on nickel ore exports: govt officials

Indonesia will keep its export ban on nickel ore, contrary to recent media reports suggesting the country may relax curbs to prop up its slowing economy, senior government officials said. 

PHOTO: BLOOMBERG

SEP 1, 20158:45 PM

[JAKARTA] Indonesia will keep its export ban on nickel ore, contrary to recent media reports suggesting the country may relax curbs to prop up its slowing economy, senior government officials said.

Indonesia banned exports of unprocessed metal ores in early 2014 to force firms to develop smelters that would add value to the country's resources and create jobs. But the curbs cost the country billions of dollars in lost revenue last year.

While there are signs the government is trying to bring more money back into resources, the Chief Economics Minister Darmin Nasution warned against speculation that the country would relax its nickel ore export ban.

Indonesia will seek consistency in its mining policies, he said on Tuesday, a view echoed by Mining Minister Sudirman Said.

"What we're doing is looking for incentive to boost economic activities in nickel and bauxite business. How to help smelter projects run smoothly and finish, as per our target," Mr Said said, adding there was no easing of the nickel ore export ban.

On Monday, Bisnis Indonesia newspaper reported that the country may relax export rules for both bauxite and nickel, quoting Director of Coal at the Energy Ministry, Adhi Wibowo.

Mr Wibowo could not be reached for a comment on Tuesday.

The government has previously said it was looking to push back a 2017 deadline banning copper concentrates exports and could ease its ban on bauxite exports.

But according to Coal and Minerals Director General Bambang Gatot, there is no plan to provide an exception to the ban on unprocessed nickel or bauxite exports.

Indonesia is evaluating domestic smelter construction that it hopes to complete this month, he said.

"We'll see the results of the evaluation first."

Economic growth in Indonesia is at a six-year trough, with the rupiah at a 17-year low, as the country struggles with weaker commodity prices and souring investor sentiment.

Before the ore ban, Indonesia was the world's top exporter of nickel ore and biggest supplier to China. Restarting nickel exports could erode the market share of other producers, such as in the Philippines, that stepped in to fill the supply gap.

Leading nickel miners in Indonesia include Vale Indonesia and PT Aneka Tambang.

If exports were allowed now, nickel producers would not earn much as global nickel prices are near multi-year lows, said Susantyo, chairman at the Indonesian Nickel Association.

"Rumours of easing bans often come up but if there is a relaxation, it would mean the government is not consistent." REUTERS

    
 

Indonesia to offer 21 oil and gas blocks in 2016: energy ministry official

Indonesia will offer 21 oil and gas blocks, including 13 conventional ones, in 2016, an energy ministry official said on Tuesday. 

PHOTO: AFP

SEP 1, 20154:44 PM

[JAKARTA] Indonesia will offer 21 oil and gas blocks, including 13 conventional ones, in 2016, an energy ministry official said on Tuesday.

"Next year we expect the number of oil and gas blocks on offer to increase, because of the presence of the national exploration team that is preparing for these new blocks," Oil and Gas Director General Wiratmaja Puja told parliament, noting that the government planned to offer 11 oil and gas blocks this year.

These blocks will be offered through regular tenders and joint study mechanisms, Mr Puja added.

REUTERS