FILE PHOTO: German Finance Minister Olaf Scholz attends a Reuters interview in Berlin, Germany, April 10, 2019. REUTERS/Hannibal Hanschke/File Photo
April 19, 2019
BERLIN (Reuters) – Finance Minister Olaf Scholz ruled out taking on new debt to stimulate Germany’s slowing economy and blamed anemic growth this year on external factors like unresolved trade disputes and the risk of Britain leaving the European Union without a deal.
In an interview with the BBC aired on Friday, the Social Democrat finance minister also dismissed fears that Europe’s largest economy could plunge into a recession after the government halved its 2019 growth forecast to 0.5 percent.
Chancellor Angela Merkel’s right-left coalition government is facing calls from EU partners and the International Monetary Fund to boost investment, while a conservative lawmaker has demanded a stimulus package to jump-start the economy.
“We just have softer growth, which is far away from a recession,” said Scholz. “And if you are really a globalized economy, if you are a big exporter and importer all the developments in the world economy will have an impact on the development of your country. And we know that there is a slowing of the world economy. And we know where this comes from. It is mostly political reasons.”
He added that trade disputes between the United States and both China and the EU, as well as Brexit uncertainties, were the main causes of the slowdown in Germany and not structural problems like weak investment.
Scholz’s decision to take on no new debt has drawn criticism from both Merkel’s conservatives and his center-left Social Democrats (SPD) as well as from business leaders who want lower corporate taxes.
“I very much agree with all those in Germany saying that we should not have extra debt,” said Scholz.
“It is a very good policy that we say that we have enough debt in Germany and that there should not be an increase and that we will stick to the rule of not further increasing the public debt.”
Scholz said approved tax relief for families to the tune of 10 billion euros ($11 billion) a year, higher spending on pensions and social welfare, and investments in digitalization, infrastructure and research and development should keep the economy humming.
Germany, whose economy has grown in each of the last nine years, has had a “debt brake” law in place since 2011 that forces the federal and state governments to virtually eliminate their structural budget deficits over five to 10 years.
(Reporting by Joseph Nasr; Editing by Douglas Busvine and Mark Potter)
FILE PHOTO: A worker cycles near a factory at the Keihin industrial zone in Kawasaki, Japan February 28, 2017. REUTERS/Issei Kato
April 19, 2019
TOKYO (Reuters) – Japan’s March factory output is forecast to have slipped for the first time in two months, a Reuters poll showed on Friday, though the central bank is expected to stand pat on policy as it bets on a gradual economic recovery despite rising risks to growth.
The poll of 17 economists predicted the Bank of Japan will retain its massive stimulus as well as the short-term interest rate target at minus 0.1 percent, while also maintaining its pledge to guide 10-year government bond yields around zero percent at its April 24-25 meeting.
The BOJ is facing a daunting task in its years-long efforts to help push up inflation toward its 2 percent goal, with a slowdown in global growth and trade making its task even more difficult.
Factories have been under strain in the past few months, and the poll forecast industrial production to have slipped 0.1 percent in March from the previous month after it rose 0.7 percent in February.
“Exports are weakening due to the global economic slowdown, which appears to have impacted on factory output,” said Yoshiki Shinke, chief economist at Dai-Ichi Life Research Institute.
“The economy is either at a temporarily lull or worsening slightly. But it requires more data to assess whether the economy contracted in the first quarter.”
The trade ministry will publish the factory output at 8:50 a.m. April 26, Japan time (2350 GMT April 25).
Data on the nation’s retail sector, due at the same time with the factory output numbers, is projected to show sales rising 0.8 percent last month from a year earlier, the poll found, accelerating from a 0.4 percent increase in February.
Recent gains in oil prices appear to have supported fuel retailers and demand from inbound tourists likely also boosted the overall retail sales, analysts said.
Yet the positive retail impulse would need to be sustained for some months to help boost inflation and overall consumption.
Indeed, the BOJ is expected to forecast next week that inflation will remain below its 2 percent target through the fiscal year that ends in March 2022, sources say.
The central bank is also seen sticking to its view that Japan’s economy will emerge from a soft patch and resume a moderate expansion in the second half of 2019.
“We forecast the BOJ won’t largely change its economic view, so the central bank will likely keep its current pace of stimulus policy,” said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.
The poll also found Tokyo’s core consumer prices (CPI) index, which includes oil products but excludes fresh food prices, rose 1.1 percent in April from a year earlier, the same pace as in March.
Price gains in oil related products probably contributed to Tokyo’s core CPI, while falls in costs of electricity and city gas weighed on the index, analysts said.
The poll showed the jobless rate pushed up to 2.4 percent in March from 2.3 percent in February, and the jobs-to-applicants ratio improved to 1.64, which would be an over 40-year high, from 1.63 in February.
The government will publish Tokyo’s core CPI and jobs data at 8:30 a.m. on April 26 (2330 GMT on April 25).
(Reporting by Kaori Kaneko; Editing by Shri Navaratnam)
FILE PHOTO: A man rides an electric scooter past a wind turbine in Shanghai, China August 11, 2017. REUTERS/Aly Song
April 19, 2019
BEIJING (Reuters) – China on Friday said it would promote using energy generated by the wind to help power heating systems during the bitterly cold winters seen in many parts of the country.
That comes as the world’s No.2 economy pushes to reduce carbon emissions from coal-burning as part of its battle against pollution.
The National Energy Administration urged local authorities to set annual targets for generating heating using energy from wind farms over the period form 2019 to 2021. It also said they should build infrastructure to promote the use of wind power.
Local governments will be given less than two months to draw up plans and submit them to Beijing.
Wind power generators that participate in winter heating projects could receive tax reductions or subsidies, the NEA said in the statement.
The NEA also called for grid companies to work on removing technical barriers to reducing power wastage due to insufficient transmission capacity.
(Reporting by Muyu Xu and Dominique Patton; Editing by Joseph Radford)
FILE PHOTO: Workers work at a construction site in central Bangkok, Thailand, September 26, 2016. REUTERS/Athit Perawongmetha
April 19, 2019
BANGKOK (Reuters) – Thailand will introduce economic measures worth about 20 billion baht ($629.52 million) to spur its slowing economy, the finance minister said on Friday.
The measures will be aimed at boosting consumption, tourism and helping low-income earners, and will be submitted to cabinet within two weeks, Apisak Tantivorawong told reporters.
Thailand’s economic growth is expected to slow to about 3 percent in the first and second quarters of the year, Apisak said, cooling from 3.7 percent in the last quarter of 2018.
Official first-quarter gross domestic product (GDP) will be released on May 21.
Thailand’s trade-dependent economy has been affected by slowing global demand, while the country is waiting for the next government to be formed after a March 24 general election.
($1 = 31.7700 baht)
(Reporting by Kitiphong Thaichareon; Writing by Orathai Sriring; Editing by Kim Coghill)
FILE PHOTO: A view of the port of Bangkok, Thailand May 26, 2016. REUTERS/Jorge Silva
April 19, 2019
BANGKOK (Reuters) – Thailand’s customs-cleared annual exports in March may have fallen 3 percent, a Reuters poll showed, after increasing 5.91 percent in the previous month.
Imports in March likely dropped 2.95 percent from a year earlier, after contracting 10.03 percent in February, according to the median forecast of 10 analysts in the poll.
According to the poll, Thailand likely recorded a trade surplus of $1.28 billion in March, compared with a surplus of $4.03 billion in February.
The commerce ministry predicts export growth of 8 percent this year.
(Reporting by Satawasin Staporncharnchai; Editing by Shreejay Sinha)
Japanese Finance Minister Taro Aso holds a news conference after the G-20 Finance Ministers and Central Bank Governors’ meeting at the IMF and World Bank’s 2019 Annual Spring Meetings, in Washington, April 12, 2019. REUTERS/James Lawler Duggan
April 19, 2019
TOKYO (Reuters) – Japanese Finance Minister Taro Aso said on Friday there was no change in the government’s stance that it would go ahead with a planned sales tax hike in October, barring a big economic shock on the scale of the collapse of Lehman Brothers.
Aso made the comment a day after a close aide of Prime Minister Shinzo Abe told a TV program that the planned tax increase may be postponed depending on the results of the central bank’s next tankan business survey due out in July.
The tax hike to 10 percent from the current 8 percent would secure stable financial resources to pay for the bulging cost of social security for all generations, Aso told reporters after a cabinet meeting.
(Reporting by Tetsushi Kajimoto; Editing by Chris Gallagher)
The Bank of New York Mellon Corp. building at 1 Wall St. is seen in New York’s financial district March 11, 2015. REUTERS/Brendan McDermid
April 19, 2019
WASHINGTON (Reuters) – U.S. banking regulators on Thursday proposed a rule that would allow custody banks to exclude deposits with central banks from a stringent capital requirement.
The relief, prescribed by a bank deregulation bill passed by Congress in May, would apply to Bank of New York Mellon, Northern Trust and State Street, as firms “predominantly engaged in custody, safekeeping, and asset servicing activities.”
When finalized, the rule would allow those banks to exclude such central bank deposits from the supplementary leverage ratio, which directs each bank to hold more capital against its assets.
(Reporting by Pete Schroeder; Editing by Paul Simao)
The flag of Puerto Rico flies outside the Capitol building in San Juan, Puerto Rico May 4, 2017. REUTERS/ Alvin Baez
April 19, 2019
SAN JUAN (Reuters) – A judge on Thursday ordered banks to comply with a request from Puerto Rico’s federally created financial oversight board to disclose customer information related to certain debt issued by the bankrupt U.S. commonwealth.
The ruling boosts a potential effort by the board to recover billions of dollars in payments made to bondholders should a federal court hearing Puerto Rico’s bankruptcy cases choose to invalidate disputed debt issued by the government and its agencies.
U.S. Magistrate Judge Judith Gail Dein’s order said “good cause exists” to grant the board’s motion, which seeks to compel banks to submit bondholder names and addresses along with Puerto Rico debt payments the bondholders received between 2013 and 2017.
The Bank of New York Mellon, Bank of America Corp, JP Morgan Chase Bank, and U.S. Bank objected to the board’s request last week, citing concerns over disclosing confidential customer information, as well as the cost and ability to produce a large amount of information by the April 19 deadline set by the board.
The judge ordered the banks and the board to submit a proposed confidentiality agreement by April 23 and set rolling deadlines of April 25, April 30 and May 8 for the banks to submit bondholder information. She rejected requests by the banks to be reimbursed for their costs and for indemnity for claims that could result from compliance with the order.
It was unclear whether the banks will appeal. Attorneys for the banks either declined to comment or could not immediately be reached.
The quest for bondholder information is related to an attempt by the board and some creditor groups in the bankruptcy to have the federal court void more than $6 billion of defaulted general obligation (GO) bonds sold in 2012 and 2014, as well as debt issued by Puerto Rico’s Public Buildings Authority and bonds sold for the island’s Employees Retirement System.
The board filed bankruptcy for the island in May 2017 to restructure about $120 billion of debt and pension obligations. But it did not seek to void the GO bonds on the basis they were issued in violation of debt limits in the Puerto Rico Constitution until January 2019, just months before the statute of limitations on bringing such actions runs out in early May.
U.S. District Court Judge Laura Taylor Swain is scheduled to take up the board’s motion to extend that deadline at an April 24 hearing.
(Reporting By Luis Valentin Ortiz in San Juan and Karen Pierog in Chicago; Editing by Matthew Lewis)
FILE PHOTO – Jose Munoz, chief performance officer at Nissan Motor Limited, responds to a question on the new Renault-Nissan-Mitsubishi Alliance venture capital fund during roundtable with journalists at the 2018 CES in Las Vegas, Nevada, U.S. January 9, 2018. REUTERS/Steve Marcus
April 19, 2019
(Reuters) – Hyundai Motor Co has named Jose Munoz – previously seen as an ally of Nissan Motor’s ousted chairman Carlos Ghosn and his potential successor as CEO – as global chief operating officer and head of operations in the Americas.
Munoz was cited as a “person of interest” in Nissan’s widening internal investigation into corporate governance following Ghosn’s arrest on suspicion of financial misconduct. Ghosn denies wrongdoing while Munoz has not commented publicly on the matter.
Munoz resigned from Nissan in January having been chief performance officer and head of the Japanese automaker’s China operations. He previously oversaw Nissan’s North American operations.
The appointment marks the latest management shake-up at Hyundai’s U.S. operations as the South Korean automaker pushes to rejuvenate sales in the world’s second-biggest auto market and grapples with a widening probe into its vehicle recalls.
Munoz will take over from William Lee, who has been in charge of Hyundai’s North America business since June. From May 1, he will effectively assume two newly created positions – Global Chief Operating Officer and Head of Hyundai Motor Americas Region.
“(Munoz’s) focus will be to deliver profitable growth and to improve overall performance of Hyundai Motor,” the company said in a statement issued on Thursday in the United States.
He will be based in California and report to “top leadership” in Seoul, Hyundai said.
The appointment marks the latest foreign executive to be brought in to an automaker dominated by South Korean lifers, under group heir-apparent and Executive Vice Chairman Euisun Chung.
Munoz, 53, joined Nissan in 2004 in Europe and led its expansion in North America after the global financial crisis. Since then, Nissan has raised its market share in the United States and posted record sales.
Hyundai was an outperformer during the 2009 global economic downturn but has seen its market share slip in recent years, hit by its delayed response to growing sport utility vehicle demand.
The automaker has been recovering slowly, with its U.S. sales rising 2 percent in January-March period from a year prior.
(Reporting by Hyunjoo Jin in SEOUL and Sanjana Shivdas in BENGALURU; Editing by Christopher Cushing)
FILE PHOTO – A chart is displayed behind a trader on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York, U.S., March 26, 2019. REUTERS/Lucas Jackson
April 19, 2019
By Chuck Mikolajczak
NEW YORK (Reuters) – Next week will go a long way in determining whether investors should be concerned about the dawning of an earnings recession or whether back-to-back quarters of negative growth can be avoided in what is the heaviest week for profit reporting by U.S. companies.
A wide swath of S&P 500 sectors are scheduled to report next week, with 155 companies representing over $9 trillion in market capitalization in the queue, more than 35 percent of the total for the index.
Heavy hitters Facebook and Amazon are due to report as well as a dozen Dow components such as United Technologies, Coca-Cola, Microsoft and Exxon Mobil.
“The focus is going to continue to be on earnings and what the message is and so far the message hasn’t been that great,” said Ken Polcari, managing principal at Butcher Joseph Asset Management in New York.
“If they continue to be what they are, these kind of lackluster reports, the market is going to get exhausted and it is going to back off. It is going to be an important week just for direction.”
Refinitiv data shows analysts expect the first year-over-year earnings decline since 2016. As of Thursday morning, they see profits declining 1.7%.
Rapidly sliding expectations for second-quarter profit growth have sparked concerns about an earnings recession. Right now estimates are for growth of 2.1% in the second quarter, down from the 6.5% increase at the start of the year and 9.2% on Oct 1.
“That is the big question hanging over this thing, is this really an earnings recession?” said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh.
Forrest said that while some companies have been able to hold the line on earnings due to their ability to control costs, investors would rather see earnings growing on consumer strength.
Refinitiv data show 77 S&P 500 companies have reported, with 77.9% topping expectations, compared to the 65% beat rate since 1994 and the 76% over the past four quarters.
But in a recent note to clients, Morgan Stanley U.S. equity strategist Michael Wilson said that while companies are likely to beat “the significantly lowered bar” for the first quarter, they believe it won’t be the trough for the year.
Wilson noted with the S&P 500 now near the top of their valuation range with a forward price-to-earnings ratio of 16.8, there is not much upside remaining without a resurgence in growth that the market currently anticipates.
(Graphic: S&P forward PE ratio – https://tmsnrt.rs/2VPXmOV)
That return to growth has also been cast into doubt by the less than enthusiastic picture being painted by corporate outlooks. The current ratio of negative to positive preannouncements stands at 2.7, well above the 1.5 average over the past four quarters but in line with the long-term average dating to 1997.
And while that number is elevated over the past year, some view last year’s results as being positively affected by tax reform and at a level that is unsustainable this year.
“It is just a return to the normal, what we are used to seeing, in this quarter,” said Lindsey Bell, investment strategist at CFRA Research in New York.
Should results next week push earnings season further towards an earnings recession, that may still not derail the market, which was able to recover from the last one in 2016 that was fueled in part by worries about a China slowdown.
“Even if we were to get an earnings recession, to me that is not the end of the world, because comparisons are so strong from the year before and we’ve been through earnings recessions before and recovered,” said David Joy, chief market strategist at Ameriprise Financial in Boston.
“We came out of that once we all got comfortable with the idea China’s economy was growing once again and we are sort of in a similar situation this time around
(Reporting by Chuck Mikolajczak; Editing by Alden Bentley and Cynthia Osterman)