Monday, 17 March 2014
Lippo, Caesars get green light to build casino on South Korean island
South Korea on Tuesday granted a preliminary casino license to a Lippo Ltd and Caesars Entertainment Corp venture to build a resort on Yeongjong island, as the government tries to court wealthy Chinese gamblers with an array of gambling options.
It is the first time that foreign capital has received a preliminary casino license.
Genting Singapore and Chinese property developer Landing International Development have announced plans for a $2.2 billion casino resort on the southern island of Jeju but have yet to secure a preliminary license.
The first phase of the project, located minutes away from Incheon International Airport about 50 kilometers west of Seoul, will include a foreigner-only casino and at least two hotels expected to be built by 2018, the country's Ministry of Culture, Sports and Tourism said in a statement.
The first phase will cost about 746.7 billion won ($700 million), the ministry said. The entire development will cost around 2.3 trillion won and will be built over a period of nine years, the companies said in a statement in December.
A local spokesman for LOCZ Korea, the joint venture set up by Hong Kong-based Lippo and Caesars, declined immediate comment.
Source: Reuters
Developers’ Bonds Decline Amid China Housing Bankruptcy
Stocks and bonds issued by some Chinese real estate companies extended a slump after the collapse of a developer stoked concern defaults are starting to mount as the economy slows and the government reins in lending.
The 8.75 percent notes due 2018 sold by Evergrande Real Estate Group Ltd., the nation’s fourth-largest developer by market value, fell 0.25 cents on the dollar today, sending the yield to 10.345 percent, the highest since the securities were sold in October last year, DBS Bank Ltd. prices show. The yield on Agile Propery Holdings Ltd.’s February 2017 notes jumped 20 basis points to 7.459 percent, the highest since they were sold last month, according to Australia & New Zealand Banking Group Ltd. prices.
Government officials familiar with the matter said yesterday that closely-held Zhejiang Xingrun Real Estate Co. doesn’t have enough cash to repay 3.5 billion yuan ($567 million) of debt. The housing market in the world’s second-biggest economy is cooling with the value of home sales falling 5 percent in the first two months of the year after local governments stepped up measures to curb rising prices. The 7.5 percent economic expansion targeted by China this year would be the slowest since 1990.
The collapse comes less than two weeks after Shanghai Chaori Solar Energy Science & Technology Co. became the first company in China to default on its onshore corporate bonds. Calls to the chairman’s office and financial department at Zhejiang Xingrun weren’t answered yesterday.
Speculative-grade Chinese debt has lost 1.1 percent in the four days through yesterday, the worst slide since Jan. 28, according to an index compiled by Bank of America Merrill Lynch. Sixty-nine of 106 securities in the measure are from real estate developers.
The Shanghai Property Index fell 0.6 percent, as half of its 24 members declined. The gauge has dropped 9.9 percent this year and touched a 17-month low on March 10.
The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. climbed for the first time in seven days yesterday, rising 0.8 percent to 97.16. The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., added 0.1 percent to $33.07.
“This is a far more serious situation than Chaori Solar’s default, as it hits right at the heart of China’s property boom,” Mark Bayley, a credit strategist at Aquasia Pty in Sydney, said in a report today. “The real danger now is that banks will considerably tighten liquidity afforded to the real estate and property development sectors.”
At least 10 Chinese cities stepped up measures to cool local property markets at the end of last year with Shenzhen, Shanghai and Guangzhou raising the minimum down payments for second homes to 70 percent from 60 percent.
New-home price growth slowed last month led by Beijing, Shenzhen, Shanghai and Guangzhou, the four cities the government defines as first tier, the National Bureau of Statistics said today. Prices in Beijing and Shenzhen each rose 0.2 percent in February from a month earlier while they added 0.4 percent in Shanghai, the smallest increase since November 2012, and gained 0.5 percent in Guangzhou. Prices advanced in 57 of the 70 cities the government tracks, versus 62 in January.
Chinese property shares slid to a 16-month low in February after Industrial Bank Co. suspended mezzanine financing for developers, adding to concern that smaller developers may default on their borrowings amid the government’s property curbs and an economic slowdown.
American depositary receipts of SouFun Holdings Ltd. (SFUN), China’s biggest real-estate information website, slipped 0.4 percent to $82.80 yesteday, extending a seven-day decline to 15 percent. E-House China Holdings Ltd. (EJ), based in Shanghai, sank 2.6 percent to $14.08.
Source: BloombergNews
Pegatron expanding China capacity to manufacture iPhone 6: report
"Taiwan's Pegatron Corp, which assembles Apple Inc's iPhone and iPad, is opening up new factory space and recruiting workers in China to meet orders to manufacture the new iPhone 6, Commercial Times reported.
Production would begin in the second quarter, the newspaper said on Tuesday, citing sources which it did not identify. It did not give a timeline for when the phone would arrive in stores.
The report also did not specify the number of units that would be manufactured at the facility in Kunshan, on the outskirts of Shanghai, or how many workers would be recruited.
In addition to Pegatron, fellow Taiwanese contract assembler Hon Hai Precision Industry Co Ltd would be the other primary manufacturer of the new phone, Commercial Times said.
Pegatron chief financial officer and spokesman Charles Lin had no comment on the report. Calls to Hon Hai seeking comment went unanswered".
Source: Reuters
WSJ: Taper Talk Slammed Strong Emerging Nations Most
The Wall Street Journal reports,"new research argues emerging-market nations hit hardest in the run up to the Federal Reserve’s decision to cut back its bond buying were those whose financial houses were in the best order, relatively speaking—a finding contrary to much recent conventional wisdom".
The paper published Monday, by the National Bureau of Economic Research argues this group of relatively strong emerging-market nations took the hit because their relatively good economic and financial health was what made them attractive destinations for international capital inflows in the first place. The research was written by Joshua Aizenman of the University of Southern California, Michael Hutchinson of theUniversity of California, Santa Cruz, and Mahir Binici of the Central Bank of Turkey.
The paper considered a tumultuous period for emerging-market economies. Late last spring, Federal Reserve officials began hinting at coming cutbacks to what was then an $85 billion per month bond-buying program aimed at spurring stronger economic growth. With the U.S. recovery improving, Fed officials indicated they would soon start scaling back, or “tapering,” the bond purchases.
The NBER paper says that, "in a study of a 27 emerging-market countries, the authors said nations they considered to be the best economic and financial performers got the biggest walloping. The authors argue the hardest hit countries have been punished, in a sense, for having been such an attractive place to invest during times of ample liquidity".
The authors took stock of a wide range of Fed communications on the subject of cutting back on bond buying, and noted then-Fed Chairman Ben Bernanke was the decisive voice when it came to guidance about tapering Fed Stimulus.
Mr. Bernanke’s tapering comments “hit hardest the countries typically associated with strong international positions – countries running current account surpluses, having high reserves and low debt,” the authors wrote. “A possible interpretation is that fragile economies were less exposed to financial flows in search of higher yields during the earlier [bond buying] years; thereby they were expected to be less exposed to the immediate impact of the tapering news.”
Mr. Bernanke’s comments signaling a higher likelihood of tapering were associated with large drops in stock prices and increases in the cost of insurance on government bonds in the stronger countries, while having an “insignificant impact” on the weaker countries, the authors wrote.
“The exchange rate depreciated in both groups following tapering news from Chairman Bernanke, yet the depreciations of the stronger group were three times as large as the weaker group.”
Nations the authors grouped in the “robust” group of emerging nations included Peru, Venezuela, Israel, Korea, Malaysia and the Phillipines based on their current account balances, international reserves and external debt relative to GDP. The “fragile” group was topped by Turkey, South Africa, Argentina, Brazil and Chile.
Is your company ready for the Internet of Things?
"Intelligent cars that drive and park themselves. Retail systems that watch where shoppers linger. Home thermostats that detect the owner’s arrival and turn up the heat. In some ways, the future is already here: each of these applications is already up and running, a part of the Internet of Things. What’s changing quickly is the universality of them, the integration and communication among systems like these to create a new paradigm of pervasive computing".
"Which companies will provide the hardware, software and services that make these scenarios extensive and real? If the past is an indicator, they may not be the same companies providing them today. We see pervasive computing as a major architectural shift. As in previous shifts, we expect to see the leaderboard reshuffled. The winners in pervasive computing will develop high-value, repeatable solutions at the intersection of mobility, analytics and cloud computing, creating new sources of value from the explosion of data that surrounds us.
All of this activity will generate tremendous opportunity across many industries. Direct investment in hardware, software and solutions could top $70 billion by 2017, and the related opportunities are much greater—perhaps as much as $1.4 trillion (see Figure 1). Google’s purchase of Nest for $3.2 billion in January 2014 indicates some of the enthusiasm for connected products and services that appeal to customers".
"Which companies will provide the hardware, software and services that make these scenarios extensive and real? If the past is an indicator, they may not be the same companies providing them today. We see pervasive computing as a major architectural shift. As in previous shifts, we expect to see the leaderboard reshuffled. The winners in pervasive computing will develop high-value, repeatable solutions at the intersection of mobility, analytics and cloud computing, creating new sources of value from the explosion of data that surrounds us.
All of this activity will generate tremendous opportunity across many industries. Direct investment in hardware, software and solutions could top $70 billion by 2017, and the related opportunities are much greater—perhaps as much as $1.4 trillion (see Figure 1). Google’s purchase of Nest for $3.2 billion in January 2014 indicates some of the enthusiasm for connected products and services that appeal to customers".
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Some industries are already using pervasive computing at scale. Utilities are investing significantly in smart grids, smart meters and smart thermostats, encouraged by regulators and enabled by established standards. In healthcare, on the other hand, privacy concerns and industry fragmentation create barriers to unlocking new value from pervasive computing solutions.
As with other architectural shifts, we expect the first comprehensive solutions to be designed for specific industries. That focus will allow developers and designers to work within a limited construct of requirements to solve the complex problems of association and management across multiple layers and thousands of devices. Many components already exist, but the cost and complexity of integrating them into a complete solution remains expensive. Companies that can create affordable, end-to-end offerings will make it easier for others to invest in the next wave of computing. Over time, we’ll see platforms emerge within sectors, followed by cross-industry solutions.
As these platforms emerge, the companies creating pervasive computing solutions will need to overcome several hurdles. At the infrastructure and database layers, they will need to learn how to manage the interaction of millions of sensors and find ways to cost-effectively collect and analyze the huge volumes of unstructured data they produce. In development, new platforms geared specifically for machine-to-machine applications, like Salesforce1 and GE’s Predix, are just beginning to scale up.
Source: Bain & Company
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Le Monde,Venezuela : l'opposition délogée de la Plaza Altamira de Caracas
"L'armée vénézuélienne a pris d'assaut, dimanche 16 mars, une place de Caracas devenue depuis six semaines un bastion des manifestants hostiles au gouvernement socialiste du président Nicolas Maduro.
Les soldats de la garde nationale ont tiré des cartouches de gaz lacrymogènes et aspergé au canon à eau plusieurs centaines de contestataires, qui ont répliqué en jetant des pierres et des cocktails incendiaires. Ils ont finalement dû abandonner la plaza Altamira, théâtre d'affrontements quotidiens depuis des jours.
Certains militaires juchés sur des motos ont encerclé des manifestants et procédé à des interpellations. Les soldats ont également démoli des barricades dressées par les opposants, conformément au souhait du chef de l'Etat de « nettoyer » cette place située dans la partie la plus opulente de la capitale, dans l'est de la ville.
« Nous allons libérer les espaces envahis par les manifestants », avait lancé le successeur d'Hugo Chavez peu avant l'opération des forces de l'ordre, lors d'un meeting qui se tenait dans un autre secteur de Caracas.
Des chefs de l'opposition, relayés par les étudiants, exhortent depuis le début du mois de février les Vénézuéliens à manifester dans les rues leur mécontentement contre le gouvernement, à dénoncer l'insécurité, les pénuries ou encore la présence de conseillers cubains au sein de l'armée. Dimanche, plusieurs milliers de personnes ont ainsi marché jusqu'à la base aérienne de Carlota.
Mais le meeting organisé en soutien à Nicolas Maduro a également mobilisé des milliers de partisans du gouvernement.
En dépit des troubles, le chef de l'Etat ne semble pas menacé par un« printemps vénézuélien ».
Les forces armées restent fidèles au président, le nombre des manifestants est bien moindre qu'il y a dix ans lors d'une vague de contestation contre Hugo Chavez, et les chefs de l'opposition sont eux-mêmes divisés sur le bien-fondé de cette stratégie de confrontation dans la rue, qui a fait une trentaine de morts dans le pays depuis six semaines"
Source: Le Monde
Le Monde: A quoi ressemblerait une Crimée russe ?
"Sans surprise, le vote organisé dimanche 16 mars en Crimée s'est soldé par un large plébiscite à 96,6 % d'une demande de rattachement de la péninsule à la Russie. Soixante ans après avoir été cédée par Nikita Khrouchtchev à l'Ukraine, la Crimée a demandé lundi 17 mars son retour sous l'autorité de Moscou".
La requête a été formulée officiellement lundi par le Parlement de Crimée, et sera examinée vendredi 21 mars par la Douma à Moscou. Son vice-président, Sergueï Neverov, cité par l'agence Interfax, a promis une adoption dans un « très proche avenir ». Le transfert d'autorité de la péninsule ne va toutefois pas se faire sans difficulté.
Sera-t-elle un oblast comme Novgorod ou Kaliningrad ? Un kraïs, une autre entité administrative ? Une République, avec un Parlement, une Constitution et un président, comme la Tchétchénie ou l'Ingouchie ?
Nul ne sait encore quel pourrait être le statut juridique d'une Crimée russe. La Fédération de Russie comporte en effet différentes strates administratives, plus ou moins autonomes. La définition du statut juridique de la Crimée sera probablement abordée vendredi lors de l'examen par la Douma de la demande de rattachement de la péninsule à la Fédération de Russie.
Hormis Moscou, aucune capitale n'a reconnu le vote de dimanche. Les Etats-Unis et les pays européens ont tous condamné le référendum comme « illégal », « contraire à la Constitution ukrainienne et aux lois internationales » et se dirigeaient vers l'annonce de sanctions ciblées contre des dirigeants russes et ukrainiens prorusses.
Pour autant, il est difficile d'imaginer comment l'Europe et les Etats-Unis pourront s'opposer dans les faits à l'arrimage de la Crimée à Moscou.
Si la Douma entérine vendredi l'annexion de la Crimée, l'Union européenne (UE) envisage de débloquer un troisième train de sanctions, jugées plus dommageables pour la Russie car portant sur les relations économiques et commerciales, mais plusieurs responsables mettent en garde contre les risques de telles sanctions économiques, de nombreux pays européens dépendant très largement des livraisons de gaz russe.
Un boycott du prochain G8 prévu à Sotchi est également étudié. Moscou de son côté table sur la fin à terme des sanctions, comme ce fut le cas après la guerre de Géorgie en 2008, lui permettant de maintenir la Crimée dans ses frontières.
Les Tatars (environ 260 000 habitants, 12 % de la population de Crimée) sont les opposants les plus résolus au retour de la Crimée en Russie.
Victime de la collectivisation sous Staline, déportée en Asie centrale pendant la seconde guerre mondiale, cette communauté d'origine turco-mongole, installée en Crimée depuis le XIIIe siècle, a dû attendre 1989 avant de pouvoir retourner dans la péninsule.
Beaucoup n'ont toujours pas récupéré les terres qui leur appartenaient et craignent pour leur avenir sous l'autorité de Moscou.
Le dirigeant prorusse de Crimée, Sergueï Aksionov, a pourtant essayé de rassurer la minorité. Mardi, le Parlement a adopté une résolution sur la protection des droits des Tatars, leur garantissant une représentation dans les futures autorités et un statut de langue officielle.
Mais le message envoyé par le Parlement de Crimée ne convainc pas les Tatars, dont certains ont vu leur maison taguée d'une croix et qui craignent pour leur sécurité. Ce qui explique pourquoi un grand nombre d'entre eux sont tentés par l'exil.
Quant aux Ukrainiens de Crimée (environ 25 % de la population), un passeport russe leur sera proposé.
Avant la tenue du référendum, plusieurs institutions russes ont rivalisé de propositions financières. Un parlementaire russe a indiqué que les autorités étaient prêtes à soutenir la Crimée à hauteur de plus de 700 millions d'euros. Et lundi, Sergueï Aksionov assurait avoir obtenu une assistance de 295 millions d'euros de la part de la Fédération de Russie.
Des analystes chiffrent à 20 milliards d'euros le coût de l'intégration à moyen terme.
Source: Le Monde
Ukraine's Crisis, Menaces and Deeds, The Carrot and The Stick.
It is clear by Ukraine's events menaces and deeds, who is playing with a carrot and who would play with a stick.
"As U.S. and European officials began imposing sanctions in their face-off with Russia over Ukraine, Vladimir Putin’s $160 billion in oil and natural gas exports may be his most potent weapon to limit punitive measures.
The U.S. and its European allies have few levers to deter Putin even as they warn Russia not to annex Crimea after a referendum in Ukraine’s southern region yesterday. The European Union today imposed travel-visa bans and assets freezes on 21 individuals and President Barack Obama issued an executive order naming seven Russians for sanctions.
Russia, the world’s largest oil producer, exported $160 billion worth of crude, fuels and gas-based industrial feedstocks to Europe and the U.S. in 2012. While shutting the spigot on Russian energy exports would starve the Moscow government of essential flows of foreign cash, the price may be too high for European consumers and it may not alter Putin’s plans, said Jeff Sahadeo, director of Carleton University’s Institute of European, Russian and Eurasian Studies".
Source: Bloomberg
US rejects criticism of 'toothless' sanctions following Crimea referendum
The US and the European Union retaliated over the Crimea referendum by targeting sanctions against Russian and Ukrainian officials on Monday, a move widely greeted with scepticism as "toothless".
The White House imposed sanctions against 11 named individuals: seven senior Russian politicians and officials and four Crimea-based separatist leaders accused of undermining the "democratic processes and institutions in Ukraine".
But the US pointedly avoided targeting the Russian president, Vladimir Putin, or key figures in his inner circle.
The EU imposed sanctions on 21 individuals but did not immediately disclose the names. There are divisions within Europe over how to respond to Russia, and this is reflected in the fact that action is being taken against less than two dozen from an original proposed list of 120.
The sanctions came on the eve of an address to the Russian parliament by President Vladimir Putin on the next moves for Crimea.On Monday night, Putin posted a decree recognising Crimea as a sovereign state on the Kremlin's website in what appeared to be a first step toward integrating Crimea as a part of the Russian Federation.
The White House insisted the sanctions were "by far and away the most comprehensive sanctions since the end of the cold war", and rejected criticism that they were too limited in scope or would be easily circumvented by asset transfers.
"We think they will be effective," one senior administration official told reporters in Washington. But the kind of sanctions that might bite, such as hitting Russian oligarchs or even their companies, particularly energy firms, were pointedly absent.
The sanctions came on the eve of an address to the Russian parliament by Putin on the next moves for Crimea. He could take steps to formalise the incorporation of Crimea into Russia.
Moscow treated the sanctions with derision. The Russian deputy prime minister, Dmitry Rogozin, who faces sanctions on the US list, was dismissive, tweeting that the move drawn up by Obama must have been the work of a "prankster".
The Russian market was equally dismissive, with the rouble doing well on the day. Markets rose elsewhere in Europe, judging that the prospect of trade battles was receding.
Source: theguardian
U.S. Stock Indexes Snapshot for March 17, 2014.
"The June NASDAQ 100 closed higher due to short covering on Monday as it consolidates some of last week's decline. Today's high-range close sets the stage for a steady to higher opening when Tuesday's night session begins trading. Stochastics and the RSI are neutral to bearish signaling that additional weakness is possible near-term. If June extends last week's decline, the reaction low crossing at 3591.50 is the next downside target. Closes above the 10-day moving average crossing at 3685.32 would temper the near-term bearish outlook. First resistance is the 10-day moving average crossing at 3685.32. Second resistance is March's high crossing at 3733.25. First support is the reaction low crossing at 3591.50. Second support is February's low crossing at 3408.00.
The June S&P 500 posted a key reversal up on Tuesday as it consolidated some of the decline off this month's high. The high-range close sets the stage for a steady to higher opening when Tuesday'snight session begins trading. Stochastics and the RSI are neutral to bearish signaling that sideways to lower prices are possible near-term. If June extends last week's decline, the 38% retracement level of the February-March rally crossing at 1819.76 is the next downside target. Closes above the 10-day moving average crossing at 1858.38 would confirm that a low has been posted. First resistance is the 10-day moving average crossing at 1858.38. Second resistance is March's high crossing at 1877.20. First support is the 38% retracement level of the February-March rally crossing at 1819.76. Second support is the 50% retracement level of the February-March rally crossing at 1801.81.
The Dow closed sharply higher on Monday as it consolidates some of last week's decline. The high-range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are neutral to bearish signaling that sideways to lower prices are possible near-term. If the Dow extends last week's decline, the reaction low crossing at 16,071.25 is the next downside target. Closes above last Thursday's high crossing at 16,405.07 would temper the near-term bearish outlook. First resistance is last Thursday's high crossing at 16,405.07. Second resistance is March's high crossing at 16,505.70. First support is last Friday's low crossing at 16,059.63. Second support is the reaction low crossing at 16,006.59".
Source:INO.com
Billionaire Fridman’s L1 Buys RWE Unit for $7.1 Billion
L1 Energy, the investment vehicle of Russia’s fourth-richest man Mikhail Fridman, agreed to buy RWE AG (RWE)’s Dea oil and gas unit, gaining assets in the U.K., Germany and the North Sea.
The sale values Dea at about 5.1 billion euros ($7.1 billion), including debt, Germany’s largest power generator said in a statement yesterday. The deal is the first for LetterOne, the group set up by Fridman, 49, and co-investor German Khan last year to invest part of $14 billion they gained from selling a stake in the Moscow-based TNK-BP oil venture.
The agreement helps Fridman and Khan move their energy investment abroad as RWE, which reported its first full-year loss since the foundation of the Federal Republic of Germany in 1949, looks to raise cash from asset sales.
Germany’s slumping power prices led to billions of euros in writedowns for RWE, which like other European utilities, is selling assets to reduce debt. RWE’s closest rival EON SE (EOAN) has sold about 20 billion euros of assets.
The sale concludes a quest to sell energy assets that took more than two years. An earlier plan to sell Dea assets in Egypt stalled amid the political turmoil that followed the ouster of former president Hosni Mubarak, people familiar with the matter said at the time.
RWE had sought to raise as much as 5 billion euros from selling Dea, a person familiar with the matter said last year.
Fridman, a Russian citizen with a fortune estimated by Bloomberg at $14.5 billion, ranking him at No. 65 globally, pooled more than $29 billion of assets in Luxembourg-based LetterOne last year, including his investments in Russian carrier VimpelCom Ltd. and Turkey’s biggest mobile-phone operator Turkcell Iletisim Hizmetleri AS. (TCELL)
The Russian billionaire co-founded one of Russia’s biggest private consortiums, Alfa Group, in 1989. Rising from scalping theater tickets as a student, Fridman led Alfa’s growth into an empire that now spans banks in at least four countries, asset management, an insurance company, and food retail.
After a decade of jointly developing Russian oil producer TNK-BP with the U.K.’s BP, Fridman, Khan and other partners sold the company to state-run OAO Rosneft (ROSN) in a $55 billion deal. The purchase made Rosneft the world’s largest traded oil producer by volume.
Rosneft CEO Igor Sechin, who formerly served as deputy prime minister in Vladimir Putin’s cabinet, is among a list of Russians that may face European Union and U.S. sanctions, Germany’s Bild newspaper reported March 14, citing people in Washington and Brussels it didn’t identify.
Source: BloombergView
Oil declines
West Texas Intermediate and Brent crudes declined on speculation that Crimea’s vote to leave Ukraineand join Russia is unlikely to disrupt oil shipments.
WTI fell as much as 1.2 percent, while Brent tumbled 1.7 percent. The U.S. and the European Union warned Russia not to annex Crimea after the referendum and imposed sanctions against the world’s biggest energy-producing country. Brent, which is used to price more than half of the world’s crude and, unlike WTI, can be exported, is often more sensitive to changes in the global supply-and-demand balance.
Source: Bloomberg
U.S. Home-builder confidence ticks up in March,although builders are pessimistic about sales trends
A gauge of confidence among home builders ticked up in March, but remained close to the lowest level since May and signaled that builders, generally, are pessimistic about sales trends, according to data released Monday. The National Association of Home Builders/Wells Fargo housing-market index rose one point to 47 this month. "Builders continued to be affected by poor weather and difficulties in finding lots and labor," said Kevin Kelly, NAHB's chairman. March is the second consecutive month that the index has been below a key reading of 50 (readings under 50 signal that builders, generally, are pessimistic). Economists polled by MarketWatch had expected March's reading to climb to 50 after plunging in February to 46. The builder-confidence gauge hit a recent peak of 58 in August, which was the highest level since 2005.
Source: Marketwatch
Source: Marketwatch
White House sanctions Russian, Ukraine officials
The White House on Monday announced the names of Russian and Ukrainian officials it has sanctioned. There are seven Russian government officials, as well as two Crimea-based separatist leaders and former Ukraine President Viktor Yanukovych and his presidential chief of staff. The sanctions block interests and property that is in the U.S., including assets. The European Union earlier Monday adopted sanctions against 13 Russian officials and eight Crimean officials Monday in response to Sunday's referendum over Crimea.
Source: Marketwatch
Source: Marketwatch
U.S. Industrial production bounces back in February
Industrial production in February grew at the fastest monthly rate in six months, bouncing back after a weather-addled start to the year.
The Federal Reserve said Monday that industrial production grew 0.6% in February, topping the MarketWatch-compiled economist consensus for 0.2% growth.
In addition, January’s decline was revised to a 0.2% fall from an initially reported 0.3% drop, though there were changes to November and December’s numbers as well.
“U.S. industrial production rebounded nicely in February, doubling our already above-consensus call, and doing so without the help of a further rise in utilities output,” said Avery Shenfield of CIBC World Markets.
The gain in February came as manufacturing output grew 0.8% and as mining output grew 0.3%, while utilities output eased 0.2% after a 3.8% surge in January. Capacity utilization rose to 78.8% from 78.5%.
Compared to a year ago, production was up 2.8%.
The data reinforces the notion that the unusually severe winter weather was the factor knocking economic output earlier in the year. For instance, automotive production leapt 4.6% after a 5.1% nosedive in January.
Separately, the New York Fed reported that the Empire State’s general conditions indexrose to 5.6 in March from 4.5 in February.
Source: Marketwatch
WSJ: Market Unfazed by Crimea Vote, China Currency Reforms
The Wall Street Journal reports, "two historic event in two significant emerging markets and investors … yawn. There hasn’t been much reaction in markets to the news that Crimeans voted overwhelmingly to secede from Ukraine and rejoin Russia – despite Western nations’ complaints that the referendum was illegal. Meanwhile, China widened the trading band for the yuan, to which investors responded by driving the China currency lower but without doing anything of note in other markets.
There is perhaps relief among investors that the Crimean vote wasn’t closer – even though it almost certainly translates into annexation by Russia. It means there is little the West can do about it and so diminishes the prospect of a wider regional conflict. And in China’s case, the government had done such a solid job subtly signalling the policy change by moving to drive the yuan lower in preparation for it that the market dutifully took the message about what to do with it once the band was wider. It will be interesting to see if downward pressure now becomes a bigger problem for Chinese authorities than the upward pressure that was entrenched in the yuan’s trading pattern for so long. (MC)
UKRAINE: More than 96% of Crimeans voted to break away from Ukraine and rejoin Russia. The European Union and the U.S. called the referendum illegal and cautioned Russia against annexing Crimea. Meanwhile, there are signs that ethnically-Russian eastern Ukraine might be looking to break away as well.
There is little anyone can do to stop Russia from annexing Crimea. Such a measure would be popular both in Russia and in Crimea, and whatever the western leaders say, they are unlikely to be very forceful in preventing it. There is little, if any, upside, while the risks would be of a serious European crisis if anything more than cosmetic sanctions– like visa restrictions on a handful of Russian plutocrats – are imposed.
Yuan Weakens as PBOC Doubles Trading Band
The Wall Street Journal reports,"the Chinese yuan fell to its lowest level in 10 months Monday after the country allowed its currency to trade more freely, hitting levels that sparked rapidly accumulating losses for investors who made billions of dollars in leveraged bets that the currency would keep appreciating".
The currency fell 0.5% to 6.1781 per dollar Monday, one of its biggest slides in a decade and on the first day of trading where it is allowed to trade in a 2% range. Losses on the offshore yuan accelerated as it hit a 10-month low of 6.1688 against the U.S. dollar, with a higher number meaning a lower yuan. The People's Bank of China, the country's central bank, widened the trading band from 1% a day on Saturday.
The sudden move lower is heightening concern over financial derivative products turning sour. Traders and analysts say banks are asking clients that have taken out such trades to boost their collateral and are getting inquiries from companies' about restructuring these leveraged bets.
The value of these derivative products come from complex calculations using the current exchange rate, volatility and time remaining on the options contracts. The bets were based on the assumption the yuan would stay on its steady path upward after rising 2.9% last year. But the yuan has dropped 2% this year, accompanied by wider price swings, meaning the contracts are worth less and for some are turning into losses.
Geoff Kendrick, head of Asian currencies and rates at Morgan Stanley estimates the current outstanding notional value-the total value of a leveraged position's assets-of one particular popular bet called the target redemption-forward products are at approximately $150 billion.
He says companies poured into these contracts between December and February when after the yuan had appreciated strongly. Now he estimates that owners of the contracts, many of which run for 24-months, are facing total mark-to-market losses of approximately $2.3 billion. If the currency was to weaken the maximum amount allowed in the daily 2% trading band, then losses would more than double to $5.5 billion.
WSJ: Business Finds New Reason for Optimism
The Wall Street Journal reports,"worries over the upheaval in Crimea are rising, along with fears of an economic slowdown in China. But another drag on optimism—business uncertainty—is heading the other way.
The reason is twofold: Years of gyrating policy in Washington are giving way to comparative calm. And companies are becoming more nimble, using real-time data to maintain a close watch on their operations to adjust quickly to a volatile world.
On the first front, one gauge of the nervousness—the Economic Policy Uncertainty Index—has dropped to levels not seen since the earliest days of the 2007-2009 recession".
"Overall, policy uncertainty has dropped down to normal levels, and this is a key factor helping to restart growth in the U.S. and Europe," said Nicholas Bloom, an economist at Stanford University, and a creator of the uncertainty index.
On the second front, reams of data have supplanted instinct in driving decisions on everything from hiring and supply chains to shipment orders and routing.
Data allows businesses to "sync up supply and demand as never before," said Paul Ballew, chief data and analytic officer at Dun & Bradstreet. Market research decades ago involved considerable "trial and error," Mr. Ballew said. "Now there is far more science in it."
Companies want data—either in-house or secured from outside analytics firms—to enable "better demand estimates, a better ability to target market opportunities and a better ability to segment markets," he said.
Anheuser-Busch recently conducted a massive data-analysis project to tease out for the first time the sales tactics of its most successful beer sellers among roughly 40,000 U.S. retailers.
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