The rand gained against the US dollar, starting a risk-heavy week in firm territory after heavy losses last week, with investors waiting for the finance ministry's update on the budget and economic outlook to provide direction.]]> |||
Johannesburg - The rand gained against the dollar on Monday, starting a risk-heavy week in firm territory after heavy losses last week, with investors waiting for the finance ministry's update on the budget and economic outlook to provide direction.
The rand gained its way close to the psychologically key 11 area on Monday, but worries about South Africa's budget deficit capped rand bulls at 11.0180 per dollar.
Finance Minister Nhlanhla Nene is due to deliver his medium term budget statement on Wednesday and economists expect a wider budget deficit target for this year.
Concerns about a widening shortfall on the budget add to worries about a yawning gap on the current account.
Investors are also keenly awaiting an announcement about how the government plans to plug a funding gap in state-owned power utility Eskom.
The anticipated larger funding requirement is keeping bonds trading within recent ranges.
“We do not expect to see any change to the sizes of government auctions, but believe that the amount to be borrowed will be increased,” Standard Bank's fixed income strategists said in a market note.
South Africa's gross loan debt target increased by 0.9 percentage points in the last budget in February.
The Treasury is likely to borrow abroad to help fund part of any gap.
“We believe that the hints of possible intent to delay some expenditure items would be bond-market-positive.”
The yield on the 2026 benchmark bond nudged up half a basis point to 8.08 percent, trading within last week's levels.
This week investors will also be looking out for the central bank's business cycle indicator on Tuesday, a key gauge of the economic outlook, and will position for inflation data on Wednesday. - Reuters]]>
South African stocks treaded water ahead of a budget speech later in the week.]]> |||
Johannesburg - South African stocks treaded water on Monday ahead of a budget speech later in the week, even as investors continued to hammer Johannesburg-listed bullion producers such as AngloGold Ashanti.
South African Finance Minister Nhlanhla Nene will deliver his maiden budget speech on Wednesday in which he is expected to try to assuage concerns about South Africa's economy.
“Everyone is awaiting Wednesday's comments from the new finance minister and consumer inflation data to see if that gives any direction to the markets,” said Kyle Dutton, a stock broker at Mercato Financial Services.
September's inflation statistics are also scheduled for release on Wednesday.
Consumer inflation rose to 6.4 percent in August, faster than the 6.2 percent analysts had expected.
The central bank anticipates 2014 inflation at 6.2 percent.
The Top-40 index was down 0.6 percent to 42,479 while the All-share index lost 0.5 percent to 47,599.
Johannesburg's gold mining index dropped more than 3 percent with AngloGold losing nearly 4 percent to 109.35 rand.
The stock has lost more than 10 percent so far this year.
Gold Fields, South Africa's second-biggest gold producer, lost 3 percent to 41.20 rand even after saying it was on track to meet its full-year output forecast.
Auto parts maker Metair Investments rose more than 10 percent after giving a positive trading update.
Metair said it has embarked on catch-up plans to recover volumes lost during a strike earlier in the year, and that it has also secured several contracts related to its batteries.
Activity was relatively sluggish with 163 million shares traded, according to preliminary bourse data, compared to last year's daily average of 176 million shares.
Decliners outnumbered advancers 165 to 125. - Reuters]]>
Russian state-controlled diamond miner Alrosa said its third-quarter production decreased by 2 percent, year-on-year.]]> |||
Moscow - Russian state-controlled diamond miner Alrosa said on Monday its third-quarter production decreased by 2 percent, year-on-year, because of lower output at a mine in Russia's Far East.
Its third-quarter 2014 diamond production totalled 9.7 million carats, down from 9.9 million carats in the same period a year ago, the company said in a statement.
The company's rough diamond sales were up 8 percent for the first nine months of 2014 compared to the same period last year at 28.8 million carats or $3.7 billion (R41 billion). - Reuters]]>
Finance Minister Nhlanhla Nene's first medium-term budget is likely to contain revisions of the country's fiscal debt, growth, inflation and debt forecasts, as well as hints on potential tax changes, Investec said.]]> |||
Cape Town - Finance Minister Nhlanhla Nene's first medium-term budget is likely to contain revisions of the country's fiscal debt, growth, inflation and debt forecasts, as well as hints on potential tax changes, Investec said on Monday.
Investec economist Annabel Bishop predicted Nene would cut National Treasury's February forecast of year-on-year GDP growth of 2.7 percent to 1.5 percent.
She added this had been expected, but meant the minister had to guard against government's direct debt rising as Moody's rating agency had warned South Africa risked a further downgrade if it was allowed to escalate in an unsustainable manner.
“Should the Medium Term Budget Policy Statement deliver higher net debt ratio projections, or fiscal slippage with the fiscal deficit projected to reach 3.0 percent of GDP after 2016/17, then SA could receive a further credit rating downgrade, which would then cause the rand to weaken closer to our down case.”
But Bishop said communication from Treasury ahead of Wednesday's medium-term budget had signalled a commitment to fiscal efforts to avoid this scenario.
Bishop said as the 2014/15 financial year reached its halfway mark, government spending was slightly higher than budgeted compared to 2013/14, and revenue collection somewhat lower.
It was therefore expected that Nene could give some information on potential future tax changes. - Sapa]]>
Will inflation slow quickly enough to keep South Africa’s central bank from raising interest rates next month?]]> |||
Johannesburg - Will inflation slow quickly enough to keep South Africa’s central bank from raising interest rates next month?
Bond traders are betting yes, sending yields on benchmark government securities due December 2026 down 24 basis points in the past month, the sixth-biggest decline among 24 emerging markets tracked by Bloomberg indexes.
Investor inflation expectations are also falling amid a decline in oil, with the difference in yield between five-year fixed-rate debt and similar-maturity index-linked bonds falling almost a half percentage point since reaching a two-month high in July.
Yet consumer-price growth probably was 6.1 percent last month, higher than policy makers’ 3 percent to 6 percent band, according to the median estimate in a survey of economists by Bloomberg before the report in two days.
That would be the sixth straight month above target, and with the rand down 12 percent over the past year, central bank Governor-designate Lesetja Kganyago may act to combat what he has said is the currency’s role in the “sustained rise in inflation since mid-2013.”
“Another interest-rate increase is not a given,” Jana van Deventer, an economist at ETM Analytics in Johannesburg, said by phone on October 17.
“If we don’t have pressures from global markets to raise interest rates, it could provide room for the South African Reserve Bank to keep rates relatively low for longer.”
The central bank raised its benchmark repurchase rate by 75 basis points to 5.75 percent this year as a weak rand fuelled consumer prices even as the economy is set to expand at the slowest pace since the 2009 recession.
The next interest-rate announcement is on November 20.
One-year interest-rate swaps fell six basis points since the last decision on September 18, when the central bank left rates unchanged.
South African interest rates are negative once inflation is taken into account, a situation that isn’t desirable over the longer term, Reserve Bank Deputy Governor Daniel Mminele said on October 9.
“If they want to normalise rates, the sooner the better,” Abri du Plessis, who helps manage 4.5 billion rand at Gryphon Asset Management in Cape Town, said by phone on October 17.
But with the expected positive effect from oil and fuel prices on inflation “it may be that they will wait and see and postpone further rate hikes,” he said.
The currency strengthened 0.3 percent to 11.0427 per dollar at 2:31 pm in Johannesburg.
The price of gasoline, which contributes 5.7 percentage points to the inflation basket, has decreased 5 percent since reaching a record high in April.
Brent, the most-used oil in South Africa, declined 25 percent since June 24.
Inflation in the next few months will depend on whether the oil price stays at current levels and drags down domestic pump costs, Elna Moolman, an economist at Macquarie, said by phone from Johannesburg on October 17.
A drop in fuel prices “helps inflation to slow quickly,” she said.
“Our official view is still that they will raise rate by 25 basis points, but I think the probability of an interest rate hike is fast decreasing.” - Bloomberg News]]>
US stocks were mixed on Monday, as the S&P 500 and Nasdaq advanced, but the Dow fell as quarterly results from IBM disappointed.]]> |||
New York - US stocks were mixed on Monday, as the S&P 500 and Nasdaq advanced, but the Dow fell as quarterly results from IBM disappointed.
IBM shares slumped 6.9 percent to $168.56 (R1,857) as the biggest drag on both the Dow and S&P 500 after the company's third-quarter earnings fell well short of Wall Street expectations.
IBM had earlier said it would pay Globalfoundries $1.5 billion in cash over the next three years to take its loss-making semiconductor unit.
IBM's weakness produced an outsized drop in the Dow Jones Industrial Average, accounting for over 80 points, about half, of the decline in the price-weighted index.
In contrast, IBM curbed the gain on the market capitalisation-weighted S&P 500 by about 7 percent.
“IBM is in a transition and will need to continue to be in transition to catch up. They are nonexistent in mobile and weak in the cloud and just paid somebody to take their semiconductor business, it's a company in transition,” said Art Hogan, chief market strategist at Wunderlich Securities in New York.
“We can look at earnings misses as they should be viewed, which is company specific.”
At 10:48 am, the Dow Jones industrial average fell 35.5 points, or 0.22 percent, to 16,344.91, the S&P 500 gained 6.96 points, or 0.37 percent, to 1,893.72 and the Nasdaq Composite added 27.95 points, or 0.66 percent, to 4,286.39.
Earnings season will ramp up significantly this week, with nearly 130 S&P 500 companies scheduled to report, include Apple, up 1.8 percent to $99.43, after the close Monday.
According to Thomson Reuters data through Friday, of 81 companies in the S&P 500 that have reported quarterly earnings, 64 percent beat analyst expectations, slightly above the 63 percent average since 1994 but below the 67 percent rate for the past four quarters.
Third-quarter earnings are expected to grow 6.9 percent from a year ago, on revenue growth of 3.8 percent.
The largest percentage gainer on the S&P 500 was Tesoro, which rose 7.8 percent, while the largest percentage decliner was IBM.
The largest percentage gainer on the Nasdaq 100 was Netflix, which rose 3.1 percent, while the largest percentage decliner was NetApp, down 2.4 percent.
Advancing issues outnumbered declining ones on the NYSE by 1,988 to 954, for a 2.08-to-1 ratio on the upside; on the Nasdaq, 1,667 issues rose and 792 fell for a 2.10-to-1 ratio favoring advancers.
The benchmark S&P 500 index was posting 2 new 52-week highs and 2 new lows; the Nasdaq Composite was recording 11 new highs and 18 new lows. - Reuters]]>
Spanish construction giant Ferrovial offered 687 million euros (R10 billion) to buy Australian firm Transfield Services.]]> |||
Madrid - Spanish construction giant Ferrovial offered 687 million euros (R10 billion) to buy Australian firm Transfield Services, which rejected the bid as poor value, the companies said on Monday.
But Transfield held open the door for further possible negotiations.
It was the latest move in Ferrovial's overseas expansion after it struck a deal last week to buy three British airports, a promising sign for Spain's battered construction sector.
Ferrovial submitted “an indicative, non-binding proposal” to buy 100 percent of Transfield Services at 1.95 Australian dollars per share, it said in a statement.
It called that a “compelling proposition” for shareholders which offered a “substantial premium” on Transfield's average recent share price.
Transfield said in a statement that the offer, worth the equivalent of 686 million euros, undervalued its shares, however.
“The board believes that shareholders interests are best served by conducting exploratory discussions with Ferrovial to determine whether a proposal which would deliver better value to shareholders, can be put forward,” it said.
Ferrovial said it “reserves the right to withdraw the proposal at any time”.
Transfield Services runs maintenance and construction operations across various industries in 10 countries.
Ferrovial, specialising in infrastructure and construction, holds a 25-percent stake in London's Heathrow airport.
It has been looking overseas for opportunities to expand after Spain was stricken by the crash of its domestic construction sector in 2008.
Last week Ferrovial teamed up with another Australian firm, Macquarie, to buy airports in Aberdeen, Glasgow and Southampton for 1.3 billion euros.
That deal is subject to approval by European regulators and is expected to be sealed by January 2015, the statement said.
Ferrovial is also one of three companies that have had bids accepted to take a stake in Spain's state airport operator Aena.
The government hopes to make billions of euros out of that major privatisation. - Sapa-AFP]]>
An investment group led by Macquarie Infrastructure and Real Assets will buy the Louisiana power company Cleco for $3.4 billion (R37 billion).]]> |||
Pineville - An investment group led by Macquarie Infrastructure and Real Assets will buy the Louisiana power company Cleco for $3.4 billion (R37 billion).
The group will pay $55.37 in cash for each share of Cleco, which owns the regulated electric utility Cleco Power.
That amounts to a 15 percent premium on the stock's closing price of $48.27 on Friday, the last trading day before the deal was announced.
The buyer group includes British Columbia Investment Management.
The deal, expected to close in the second half of next year, is valued at about $4.7 billion when $1.3 billion in debt is included.
Cleco, based in Pineville, Louisiana, will continue to operate as an independent company under local management.
The company also said there will be no change in utility rates or employment levels.
The company generates and sells electricity mostly in Louisiana, where it has about 284,000 customers.
Cleco also supplies wholesale power in Mississippi.
Cleco's stock has climbed 3.5 percent so far this year, a slightly better gain than the 2 percent growth registered by the Standard & Poor's 500 index. - Sapa-AP]]>
A tentative agreement between the Ukrainian and Russian presidents has raised hopes of ending a dispute.]]> |||
Moscow/Kiev - A tentative agreement between the Ukrainian and Russian presidents has raised hopes of ending a dispute in which Moscow has halted natural gas supplies to Kiev, but several obstacles still have be overcome.
Movement on the gas row was the only sign of progress at talks between Vladimir Putin and Petro Poroshenko on Friday which failed to resolve differences over fighting in eastern Ukraine and a deep crisis in relations.
The two sides, whose energy ministers will meet in Brussels on Tuesday, still differ over how to calculate Kiev's huge gas debt and the schedule for payments and there are doubts about Ukraine's ability to pay.
“The devil is in the details. I don't think that Russian gas will be delivered soon to Ukraine,” a Russian government source close to gas talks told Reuters.
European Energy Commissioner Guenther Oettinger, who will mediate Tuesday's meeting between Ukraine's Yuri Prodan and Russia's Alexander Novak, was also expected to hold talks in Kiev on Monday to work out what Ukraine called a “common position”.
“There are quite a number of details. We are just continuing with our discussions on a bilateral basis today,” Marlene Holzner, a European Commission spokeswoman, said.
She said they were discussing the price, the number of payments Kiev should make and how much gas Ukraine will get from Russia over the winter period.
Ending the gas row is complicated by the deterioration in relations between Moscow and Kiev since a Ukrainian president sympathetic to Russia was overthrown in February, Russia annexed Crimea in March and pro-Russian separatists rose up in April in east Ukraine in a conflict that has killed over 3,700 people.
Moscow cut off gas supplies to Ukraine in June after failing to secure a deal on the unpaid bills and price, and pressure has been mounting on the former Soviet republic's leaders to reach an agreement before winter sets in.
European leaders fear there will also be disruptions in supplies of Russian gas to the rest of Europe via Ukraine, but say ending the gas dispute could help build trust overall.
“The German government considers a durable solution between Ukraine and Russia as a clear sign for de-escalation and a commitment for such a de-escalation,” said Georg Streiter, a spokesman for German Chancellor Angela Merkel.
Poroshenko, who met Putin in Milan on Friday, said they had reached a preliminary agreement on a price until March 31.
The interim price would be $385 per 1,000 cubic metres - much higher than the average amount of some $350 (R3,868) that the Russian gas exporter Gazprom charges European companies but $100 less than Russia had demanded.
The EU wants to avoid a repeat of disputes in 2006 and 2009 in which its gas flows were disrupted - it gets a third of its gas supplies from Russia, half of that via Ukraine.
Despite halting Ukraine's supplies, Russia has continued the flow via Ukraine to the rest of Europe, though Putin has said there could be disruptions in winter because Ukraine could siphon off gas from the pipeline system.
Putin said on Friday Ukraine's debt for Russian gas supplies stood at $4.5 billion, considerably less than the $5.3 billion previously demanded by Gazprom.
A spokesman for the company said the decrease in debt was due to a recalculation of the second quarter price to $385 per 1,000 cubic metres from $485.
Kiev had balked at the $5.3 billion figure and said the price used to calculate the arrears should be $268.5 - the cost of gas in the first quarter.
Ukraine has also been unwilling to make any pre-payments for Russian gas.
The Russian energy ministry said on Friday Ukraine had agreed to make a first debt payment of $1.45 billion by the end of this month and another $1.65 billion by the end of the year.
Ukraine is likely to buy up to 5 billion cubic metres of Russian gas this winter, but state coffers have been drained by the conflict in the east, despite a shaky ceasefire.
Kiev faces a $3.5 billion funding shortfall for this year and next but the International Monetary Fund has said the government should be able to cover most of it with planned debt issues and an expected $900 million in further donor support.
“This time all sides appear to be in agreement. But it remains unclear where Ukraine would get the money for either the back payment for the gas delivered or the prepayment for future gas. Ukraine does not have the means to pay, and no one has yet offered the country a loan to finance this gas,” analysts at Sberbank CIB said. - Reuters]]>
China plans to grow its sports sector into a 5-trillion-yuan (R9 trillion) industry by 2025.]]> |||
Beijing - China plans to grow its sports sector into a 5-trillion-yuan (R9 trillion) industry by 2025 to boost employment and domestic consumption in its “new” economy, the government said on Monday.
Under a sweeping reform plan, China aims to boost domestic consumption to replace exports and heavy investment as the traditional drivers of growth in the world's second-largest economy.
Private investment will be encouraged, new sports facilities will be built and the government will support the sector by increasingly buying its services, the cabinet, known as the state council, said in a statement.
Companies that need funding and are sufficiently healthy will also be encouraged to sell corporate bills or bonds, with business tax cut to 15 percent for those identified as high-tech sports firms.
After 30 years of double-digit economic expansion that lifted millions of Chinese out of poverty but also polluted its air, soil and waterways, China wants to move to a “new” economy from an “old” one, to create slower but higher-quality growth. - Reuters]]>