Drop in the mining sector knocks European stocks on Friday.]]> |||
London - A leading European share index fell from a three-month high on Friday, hit by a drop in the mining sector after a slump in Chinese equities which was triggered by weak data and a regulatory crackdown.
However, anticipation of further stimulus measures from the European Central Bank next week helped to cushion the market.
The FTSEurofirst 300 was down 0.4 percent at 1,510.29 points by 09h29 GMT, dropping after posting its highest close since August on Thursday.
Mining stocks declined 1.9 percent, the top sectoral faller. China, the world's biggest consumer of metals, saw stocks slide over 5 percent after a fresh regulatory crackdown and deteriorating industrial profits data.
Anglo American was the biggest faller, down 6 percent after shutting down an Australian coal mine.
While there was some investor concern over a repeat of August, when China let its currency fall sharply and jolted equities globally, some said that this might be less likely if the yuan joined the IMF's reserve basket next week.
“Miners are suffering from China and a stronger US dollar outlook. There is clearly a risk that China will try and devalue the currency further, but there is less risk of that compared to earlier in the year,” said Ankit Gheedia, equity and derivative strategist at BNP Paribas.
“(However) Europe is still trading on the ECB next week, which is why the market is relatively resilient.”
Bets that the ECB will extend or increase its quantitative easing programme next week helped to spur the FTSEurofirst 300 to the three-month highs hit on Thursday.
The index was off its early lows on Friday, with the euro and euro zone bond yields remaining anchored by the speculation of further easing.
Among risers, KBC was up 2.9 percent, the FTSEurofirst 300's top gainer. The Belgian bank rose after disclosing new capital requirements from the ECB.
Altice rose and extended gains over the last two sessions to more than 10 percent after a Reuters report that it had won the right to show English Premier League soccer in France was confirmed shortly after the market close on Thursday.
British shares retreat on Friday as miners push the blue-chip FTSE 100 index into negative territory.]]> |||
London - British shares retreated on Friday as miners pushed the blue-chip FTSE 100 index into negative territory following weak Chinese industrial data which reignited concerns over China's economic slowdown.
The data showed that Chinese industrial profits fell 4.6 percent in October, declining for the fifth month in a row. Leading Chinese shares ended the session over 5 percent lower, also hit by a new regulatory crackdown.
The FTSE 350 mining index was the main sectoral decliner, falling 2.3 percent with Rio Tinto, BHP Billiton, Antofagasta and Glencore all down between 1.2 percent to 2.2 percent.
Miner Anglo American was the biggest faller, sliding 6.4 percent after it said that it would close its Drayton coal mine in Australia after a state panel recommended that the government should block an expansion of the mine.
The FTSE 100 index was down 0.4 percent at 6,365.65 points by 09h30 GMT, in line with European indexes.
“We are seeing lower volumes on the back of the fact that there will be still people off after Thanksgiving... so that will, likely, exacerbate some of the declines that we're seeing this morning,” said Brenda Kelly, head analyst at London Capital Group.
The negative Chinese data also sent oil prices lower, with budget airline carrier easyJet up 1.4 percent on the back of lower fuel costs.
Defence stocks Rolls-Royce and Babcock were also in positive territory, advancing 1.1 percent and 0.7 percent respectively with analysts citing global security concerns as pushing the shares higher.
“All this geopolitical tension is helping these defence stocks, and the fact that they are going to increase the anti-terrorist spend is aiding and abetting these moves upwards,” London Capital Group's Kelly said.
Among mid-caps, utility company Pennon Group rose 3 percent to touch six-month highs after reporting a 7 percent rise in first-half pretax profit.
Zambia’s kwacha gains as President Edgar Lungu pledges to reduce spending and support the struggling mining sector.]]> |||
Lusaka - Zambia's kwacha hit a two-month high on Friday as a rebound in copper prices and a pledge by President Edgar Lungu to cut spending and support the struggling mining sector soothed investors' concerns.
By 07h50 GMT the kwacha had gained 6.62 percent to 10.17 per dollar, its firmest level since September 23.
On Thursday Lungu backtracked from an earlier warning that the state would nationalise mines, pledging government's support to private companies, while also announcing a raft of spending cuts in a bid to reduce a wide budget deficit.
“It is very encouraging to see that type of commitment from the president,” Africa strategist at Barclays Bank Ridle Markus said from Johannesburg.
Demand for the local currency also increased as mining houses looked to offload dollars.
“Momentum remains skewed towards kwacha appreciation. We could see the unit trade under 9.9 today,” the Zambian unit of South Africa's First National Bank (FNB) said in a note.
“We have seen an increase in dollar flows on the market over the last few days. We expect more of these flows today and will most likely see mines come into the market in a bid to sell at the higher levels,” analysts at FNB said.
The kwacha has fallen more than 40 percent against the dollar in 2015 as waning demand for commodities from top-consumer China put the skids on foreign exchange revenues of Africa's second biggest copper producer.
Hang Seng Index posts its worst weekly performance in two months as sliding mainland stocks trigger regional anxiety.]]> |||
Hong Kong - Hong Kong stocks slid on Friday, with the headline Hang Seng Index posting its worst weekly performance in two months as a tumble in mainland stocks triggered anxiety across the region.
The Hang Seng Index fell 1.9 percent, to 22,068.32. For the week, it was down 3 percent, the biggest weekly loss since late September.
The China Enterprises Index lost 2.5 percent, to 9,855.66 points.
Investors, already bracing for a likely US interest rate hike next month, took cues from a slump in the China market, which was triggered by fresh regulatory crackdowns and poor industrial profit data.
All main sectors were in negative territory, with energy and resource shares suffering the most.
The Hong Kong-listed shares of CITIC Securities tumbled 4.9 percent, after the Chinese brokerage said it was under investigation by China's stock regulators.
Hong Kong-traded shares of Haitong Securities were suspended from trading, as Reuters reported that the brokerage was also under regulatory probe.
Fresh regulatory crackdown and falling industrial profits weigh on Asian markets on Friday.]]> |||
Tokyo/Singapore - Chinese shares slumped on Friday, weighing on other Asian stock markets, as a fresh regulatory crackdown and falling industrial profits weighed on market sentiment.
European shares were set to follow suit, with financial spreadbetters expecting Britain's FTSE 100 to fall 0.3 percent, France's CAC40 to open down 0.4 percent, and Germany's DAX to start the day 0.1 percent lower.
US stock futures erased gains after earlier rising 0.3 percent to their highest level since November 9 following Thursday's Thanksgiving Day holiday.
Early selling intensified in China's stock markets in the afternoon, with the Shanghai Composite index and the CSI300 plunging 4.7 percent as of 06h23 GMT, on track for the biggest one-day drop in more than three months, and set for weekly declines of 4.6 percent and 5 percent, respectively.
That contributed to a drop of 0.9 percent in the broadest index of Asia-Pacific shares outside of Japan, bringing losses for the week to 1.1 percent.
Japan's Nikkei reversed earlier gains to close down 0.3 percent, but was on track to end the week flat.
China's securities regulator has urged domestic brokerages to cease financing clients' stocks purchases through swaps and other over-the-counter contracts, two sources with direct knowledge told Reuters, its latest move to reduce leveraged financing risk in its stock markets after a summer plunge.
“After rebounding over 20 percent from its bottom, you need fresh capital to maintain the upward momentum (in Chinese stocks), but recent government measures to deleverage have sparked fears,” said Zhou Lin, analyst at Huatai Securities.
“In addition, I don't see signs that the economy has bottomed out.”
Further weighing on sentiment was data on Friday showing that profits earned by Chinese industrial companies fell 4.6 percent in October, declining for the fifth consecutive month.
The Chinese yuan also came under pressure, weakening to its lowest level in almost three months as investors braced for a decision on Monday by the International Monetary Fund on whether to include the currency in its reserve basket.
Some market watchers fears Beijing's commitment to market reforms and liberalisation may cool if the yuan is added to the reserve basket.
Spot yuan opened at 6.3928 per dollar and was changing hands at 6.3942, 46 pips weaker than the previous close and about 0.04 percent away from People's Bank of China's midpoint rate of 6.3915.
“It's uncertain if the Chinese government is keen to show the market influence in their rate setting or whether now that they know they have gained special drawing rights inclusion they are keen to weaken their overvalued currency knowing it will not jeopardise their case,” Angus Nicholson, market analyst at IG in Melbourne, wrote in a note.
The euro continued to falter, hovering near seven-month lows on expectations that the European Central Bank could announce further stimulus as early as next week.
Most in the market expect the ECB to expand its asset purchase programme and lower its deposit rate, the rate at which banks park excess funds with it, when it meets next Thursday.
Traders are now speculating that the ECB could cut rates more than the previous market consensus of a 0.10 percentage point reduction.
The euro's three-month overnight indexed swap (OIS) rate fell to a new low around minus 0.3133 percent, almost 18 basis points below the current fixing level of the Overnight Eonia rate.
With keeping money in the euro seen increasingly costly because of negative interest rates, the common currency was on the defensive in the foreign exchange market.
The euro traded at $1.0614, not far from Wednesday's seven-month low of $1.0565. It also stood near a seven-month low against the yen, last fetching 129.98 yen.
“You keep losing money by holding the euro. It is hard to see the euro rising. True, it is already heavily shorted but I expect the euro to fall towards parity with the dollar,” said a trader at a Japanese bank.
The euro's weakness helped the dollar hold near an 8-1/2-month peak.
The dollar index, which measures the performance of the US currency against a basket of major peers, was little changed at 99.814, after scaling 100.170 earlier in the week, the highest since March. It is up 0.3 percent for the week.
The yen slipped 0.1 percent to 122.45 per dollar, showing little response to a series of Japanese economic data including the jobless rate, which unexpectedly fell to a two-decade low of 3.1 percent.
Oil prices edged lower, with US stockpile data on Wednesday doing little to ease concerns about a supply glut.
US crude futures fell 1.4 percent to $42.45 a barrel as traders also unwound some of the buying they had made after Turkey shot down a Russian warplane earlier this week.
Brent futures edged down 0.4 percent to $45.30 a barrel, compared to their two-week high of $46.50 hit earlier this week.
Battered metal prices also rebounded as hedge funds covered their short positions for now.
Benchmark copper on the London Mental Exchange rose 1.9 percent on Thursday to $4,636.15 per tonne, recovering 4.3 percent from Monday's 6 1/2-year low of $4,443.50. They held steady at $4,634.50, on track for a weekly gain of 1.2 percent.
Zinc and Nickel also jumped sharply on Thursday, helped by expectations of output cuts in China.
Zimbabwe's gold output is expected to rise by 28% in 2016 - and the government will cut the royalty fee on bullion by 40%.]]> |||
Harare - Zimbabwe's gold output is expected to rise by 28 percent to 24 tons in 2016 from 18.7 tons this year and the government will cut the royalty fee on bullion by 40 percent, the finance minister said in a budget statement on Thursday.
Gold is the Southern African nation's second-largest mineral export after platinum but producers have been grappling with weak global prices and electricity shortages at home.
Patrick Chinamasa attributed next year's gold output, the highest since 1999, to the government's 2013 decision to give a central bank-owned company sole authority to buy gold and a ban on the export of unrefined bullion.
To encourage higher gold production, the government would from next January cut the royalty rate on gold to 3 percent, from 5 percent previously, Chinamasa said.
Chinamasa said the lower royalty rate would be based on increased production by gold mines.
“Since incremental production will only be accounted for by the end of the following year, mining houses that qualify will benefit from the scheme through a tax credit which will be used to pay future tax obligations,” he said.
In July Chinamasa cut royalties levied on small-scale gold producers to 1 percent from 3 percent. Large mines, which accounted for 63 percent of gold deliveries this year, had also asked the minister to reduce their royalty rate and electricity tariffs.
South Africa’s rand is softer in early trade on Friday, with American markets closed for Thanksgiving.]]> |||
Johannesburg - South Africa's rand weakened on Friday in thin trade with US markets closed for Thanksgiving Day holiday, while stocks were set to edge lower along with emerging market peers.
The JSE securities exchange's Top 40 futures index was down 0.28 percent, indicating the index would open 133 points lower.
By 06h45 GMT the rand had weakened 0.13 percent to 14.3100 per dollar, a fresh one week low, extending the previous session's losses when the unit retreated more than one percent as emerging market currencies globally took a hit.
With little local data due in the session, combined with the lack of liquidity, traders expected the currency to drift weaker.
“It is fair to say that the US holiday would have contributed to thinner than normal liquidity and exaggerated moves,” currency strategist at RMB John Cairns said in a market note.
“Even if we get some gains today, the rand will be going into next week at worrying weak levels.”
Government bonds were also weaker, with benchmark issue due in 2026 adding 2.5 basis points to 8.54 percent.
Th euro is heading for its biggest monthly loss since March versus the greenback.]]> |||
Sydney - The euro is set for its longest stretch of weekly declines versus the yen since the common currency’s creation in 1999 as anticipation builds that the European Central Bank will surprise some investors with the size of its stimulus next week.
The 19-nation currency is also headed for its biggest monthly loss since March versus the greenback, notching up declines against all but the Danish krone among 16 major peers. Reports on Friday are forecast to show industrial confidence in the region deteriorated in November, while annual price pressures in Spain remained negative. Australia’s dollar is poised to end a series of weekly gains as swaps signal increasing odds that the Reserve Bank will lower benchmark rates in the first quarter of 2016.
“If there’s anyone who has the market’s firm belief that they can over-deliver, it’s always going to be Mario Draghi,” Chris Weston, chief market strategist in Melbourne at IG, said of the ECB president. “The reason we haven’t started seeing traders looking to fade the euro with any great conviction is there’s a genuine belief that he’s guided the market to an extent and can come out and do more.”
The euro fetched 130.11 yen as of 12.27pm in Tokyo, set to complete a seven-week slide of 4.8 percent.
Europe’s common currency was at $1.0610, down 0.3 percent this week and 3.6 percent since October 30. It slid to $1.0566 on Wednesday, the lowest since April. US financial markets were shut on Thursday for Thanksgiving.
ECB policy makers will meet on December 3. Australia & New Zealand Banking Group estimates that movements in swap rates since the last meeting indicate that markets need Draghi to deliver at least a 14 basis point cut to the deposit rate along with an expansion of its quantitative easing programme. The deposit rate is currently at minus 0.2 percent.
Australia’s dollar held a two-day decline as swap prices indicated there’s a 36 percent chance the Reserve Bank will lower its key rate by March-end. The probability was about 31 percent on November 23.
The Aussie was little changed at 72.23 US cents, set for a 0.2 percent drop this week.
“Prices are finding it hard to move higher or lower on the unchanging fundamentals,” says Phillip Futures.]]> |||
Tokyo - Oil prices traded below $43 in Asia on Friday as US markets took a break for Thanksgiving and Russia ruled out a military strike against Turkey for shooting down one of its warplanes.
At around 03h15 GMT, US benchmark West Texas Intermediate for delivery in January was 52 cents lower at $42.52 and Brent crude was up one cent to $45.47 in volatile trade that saw the contract swing between positive and negative territory for most of the morning.
Before US markets went on holiday, the US Department of Energy released data showing the country's commercial crude supplies in the week to November 20 rose at a slower pace, giving a bit of relief from a supply glut.
Reports that Russia is not taking military action against Turkey for the shooting down of one of its fighter jets on the Syrian border also eased fears that the tense situation in the region could escalate and disrupt oil supplies.
Moscow on Thursday said retaliatory measures will focus on using its leverage to tighten the screws on Turkey's economy, including the halting joint economic projects, restricting financial and trade transactions and changing customs duties.
With the global crude supplies still outpacing demand, traders are waiting for a meeting of the Opec cartel of oil producing nations next month to see if it will slash high output levels.
Traders will also be monitoring a December meeting of US central bank, where policymakers are expected to lift interest rates for the first time in almost a decade. A hike would likely boost the dollar, making dollar-priced oil more expensive, denting demand.
“Prices are finding it hard to move higher or lower on the unchanging fundamentals (of supply and demand),” Phillip Futures said in a market commentary.
Emerging markets face another wave of ratings downgrades next year, with the Africa/Middle East region potentially given a 'negative outlook'.]]> |||
London - Emerging markets face another wave of ratings downgrades next year, with Brazil at risk of a cut to junk and the Africa/Middle East region potentially given a 'negative outlook', Fitch Ratings' top sovereign analyst said in an interview.
Depressed commodity prices combined with mediocre global growth and the approach of the first US interest rate rise in almost a decade are posing a threat to the ratings of developing countries, James McCormack, Fitch's head of sovereigns, told Reuters.
The agency has cut the ratings of 12 commodity exporting emerging economies already this year, and 14 countries, including big names such as Brazil, Russia, South Africa and Nigeria are currently on downgrade warnings - or negative outlooks in rating agency parlance. Next year looks likely to be a similar story.
“I think that is a pattern we are going to continue to see into next year,” McCormack said.
“The Middle East and Africa is the region that will see the most downgrades. We have never had this region on negative outlook (where more than 20 percent of sovereigns have negative outlooks), but it is something we could do.”
For investors, one of the most pressing issues is that many of the big emerging markets are now teetering on the cusp of junk status after roughly a decade of investment grade benefits.
Fitch is the only one of the big three rating agencies that classes Russia as investment grade. All eyes are also on it to see if it follow S&P and cuts Brazil, also at the lowest investment rating BBB-, to junk.
Such a move could wipe over $20 billion off the value of Brazilian bonds, JPMorgan has predicted.
“Brazil looks to be the most vulnerable (to losing investment grade),” McCormack said, citing the country's lack of fiscal consolidation as the biggest cause for concern.
“We will look at it again in early 2016. When things are deteriorating we need to look more frequently. It has only been a couple of months [since the last downgrade in October] but so far we haven't really seen any improvement.”
Ranked a notch higher at BBB, South Africa, which is seeing growth sapped by the commodity slump, inflation and electricity problems, is suffering “a slow and steady deterioration” in its finances.
“In some respects Russia looks the least vulnerable,” to losing investment grade, McCormack said, adding its response to the low oil prices has been better than AA Saudi Arabia's “rather modest” cuts to its budget.
Expectations that the dollar will continue to rise as U.S. interest rates start going up, is an issue for emerging market ratings.
“If you look historically there is no relationship between the average emerging market rating and the Fed funds future rate but there is a very close relationship between the dollar and the EM average rating,” McCormack said.
For Europe, the biggest risk for 2016 was that fiscal consolidation fatigue would set in, rather than the rising tensions over the flood of Syrian refugees. A British vote to leave the European Union was another potential risk.
Meanwhile, Portugal, which has just ousted its government, could see its current 'positive' outlook pushed back to stable if “fiscal consolidation starts going in the opposite direction”, McCormack warned.
He said it was too early to say what an exit from the EU would mean for Britain's relationship with Europe and its AA+ rating. Among the various exit scenarios, only if Scotland were then to break away from the UK was there hard analysis.
“When we looked at the impact of an independent Scotland on the UK rating last year in advance of the referendum, we saw debt-to-GDP would have gone up 10 percent,” McCormack said, adding that Scottish secession would immediately have a negative impact on the UK rating.