Aurelia Butler

SYDNEY (Reuters) – Asian shares started cautiously on Monday in a week that is certain to see interest rates rise in Europe and the United States, along with U.S. jobs and wage data that may influence how much further they still have to go.Earnings from a who’s who of tech giants will also test the mettle of Wall Street bulls, who are looking to propel the Nasdaq to its best January since 2001.Asia has been no slouch either as China’s swift reopening bolsters the economic outlook, with MSCI’s broadest index of Asia-Pacific shares outside Japan up 11% in January at a nine-month high. Early Monday, the index was up 0.1% as investors looked forward to China’s market resuming after the Lunar New Year holidays, while Japan’s Nikkei added 0.2%. S&P 500 futures and Nasdaq futures both eased 0.1%.Investors are confident the Federal Reserve will raise rates by 25 basis points on Wednesday, followed the day after by half-point hikes from the Bank of England and European Central Bank, and any deviation from that script would be a real shock.Just as important will be the guidance on future policy with analysts expecting a hawkish message of inflation is not yet beaten and more needs to be done.”With U.S. labor markets still tight, core inflation elevated, and financial conditions easing, Fed Chair Powell’s tone will be hawkish, stressing that a downshifting to a 25bp hike doesn’t mean a pause is coming,” said Bruce Kasman, chief economist at JPMorgan (NYSE:JPM), who expects another rise in March.”We also look for him to continue to push back against market pricing of rate cuts later this year.” There is a lot of pushing to do given futures currently have rates peaking at 5.0% in March, only to fall back to 4.5% by year end.EYEING APPLEYields on 10-year notes have fallen 31 basis points so far this month to 3.518%, essentially easing financial conditions even as the Fed seeks to tighten.That dovish outlook will also be tested by data on U.S. payrolls, the employment cost index and various ISM surveys.As for Wall Street’s recent rally, much will depend on earnings from Apple Inc (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL) Inc and Meta Platforms, among many others.”Apple will give a glimpse into the overall demand story for consumers globally and a snapshot of the China supply chain issues starting to slowly abate,” wrote analysts at Wedbush.”Based on our recent Asia supply chain checks we believe iPhone 14 Pro demand is holding up firmer than expected,” they added. “Apple will likely cut some costs around the edges, but we do not expect mass layoffs.” Market pricing of early Fed easing has been a burden for the dollar, which has lost 1.5% so far this month against a basket of major currencies.The euro is up 1.4% for January at $1.0870 and just off a nine-month top. The dollar has even lost 1% on the yen to 129.92 despite the Bank of Japan’s dogged defence of its uber-easy policies.The drop in the dollar and yields has been a boon for gold, which is up 5.6% for the month so far at $1,928 an ounce. [GOL/]China’s rapid reopening is seen as a windfall for commodities in general, supporting everything from copper to iron ore to oil prices. [O/R]Beijing reported Lunar New Year travel trips inside China surged 74% from last year, though that was still only half of pre-pandemic levels.Early Monday, Brent was up 79 cents at $87.45 a barrel, while U.S. crude rose 66 cents to $80.34. More

Russia’s full-scale invasion of Ukraine has hurt the Mongolian economy, its prime minister has said, claiming financial damage including the loss of airline revenues and difficulty in importing necessary supplies from Russia. Almost a year on from the full-scale invasion of Ukraine and the subsequent imposition of wide-ranging sanctions by the US and its allies on Moscow, the landlocked democracy of just 3.3mn people sandwiched between Russia and China is still reeling from the impact. “Even though Mongolia is a democratic country it is also under pressure because of the sanctions imposed on Russia,” Luvsannamsrai Oyun-Erdene, the country’s 42-year-old prime minister, told the Financial Times in an interview. He added that the punitive measures amounted to “a double sanction on Mongolia even though it is not our fault”. The collateral damage ranges from complications in paying Russian companies on which Oyun-Erdene says Mongolia is “wholly dependent” for fuel, to the loss of revenues from airlines that once flew over the country. “The situation in Ukraine is not just a conflict between two countries,” the prime minister said. “It is having a negative and huge impact on the world economy and especially on small and landlocked countries including Mongolia . . . Economic sanctions have to be imposed based on extensive research because they’re having extensive impacts and negative influences on other countries.”Airlines that once operated Europe-Asia routes through Russian airspace also flew over Mongolian territory, for which they paid Ulan Bator valuable “navigation fees”. Those have dissipated as Russian airspace bans — implemented by Moscow in retaliation for EU measures targeting Russian planes — have forced many European airlines to fly either over the North Pole or take a more southerly route across Central Asia and Turkey. Mongolia’s prime minister Luvsannamsrai Oyun-Erdene: ‘The situation in Ukraine is not just a conflict between two countries’ © Lisi Niesner/Reuters“Because aeroplanes cannot go over Russia we are lacking our navigation revenues,” Oyun-Erdene said. “Second, we import our fuel from Russia and as [Russian energy] companies and banks are under sanctions, we are facing payment issues.” He added that war-related shortages in Russia for commodities such as diesel fuel, sunflower oil and mining equipment had led to “disruption of some products we use on a daily basis”.Oyun-Erdene has highlighted these issues during a flurry of diplomacy over recent months, including a trip to Germany in October and an August visit to Ulan Bator by UN secretary-general António Guterres.Wang Yi, China’s then foreign minister, also travelled to Mongolia late last year shortly after being promoted to the Chinese Communist party’s politburo.“We do believe that China, the EU and Germany have a great influence on [the Ukraine] situation,” Oyun-Erdene said. “In this context I paid an official visit to Germany and also we had discussions with our Chinese counterparts, in particular during Wang Yi’s visit to Mongolia.” Mirroring its dependence on Russia for critical supplies, Mongolia is equally reliant on Chinese demand for its coal, copper and other commodity exports. Coal and copper account for about 60 per cent of the country’s total exports, followed by gold and iron ores at 20 per cent. In late November Oyun-Erdene presided over the opening of a new cross-border rail link into China that his government hopes will increase pre-pandemic coal exports of about 30mn tonnes per annum to as much as 80mn annually.“Ninety per cent of Mongolia’s exports go to China and Mongolia is wholly dependent on Russia in terms of fuel. We’re also dependent on our two neighbours for food and other products,” the prime minister said. “But Mongolia is a parliamentary democracy and [our] people’s mindset and society is very different from those countries . . . Mongolia is landlocked, but we’re not mind-locked.”This democratic mindset can fuel popular pressure on Mongolian leaders that their counterparts in China and Russia rarely have to contend with. In early December large crowds, angry at the alleged theft of state-owned coal assets, threatened to storm government buildings in Ulan Bator. “The frustration and mass protests were a result of uneven wealth distribution that has taken place over the past 32 years,” Nyambaatar Khishigee, justice and home affairs minister, said in a separate interview with the FT, referring to the period since Mongolia’s transition to democracy in 1990.

Oyun-Erdene’s administration has since launched wide-ranging investigations into government officials and executives at state-owned natural resource and transportation companies. The government has arrested dozens of people for alleged bribery, abuse of power and “unjust enrichment”, including police seizure of 7.3bn tugriks ($2.1mn) from the home of a state railway executive.But the government is challenging protesters’ allegations that as much as 40tn tugriks worth of state coal reserves have been stolen since 1995 — compared with official earnings of 45.2tn tugriks from coal exports over that period. More

The Melbourne-headquartered miner said the shortage of supplies was due to transport disruptions from protests in Peru. Protesters have been blocking traffic in and out of the copper mine. Peru, the world’s second-largest copper producer, has been gripped by growing unrest following weeks of sometimes violent anti-government protests triggered by the ouster of the country’s former president last month.Glencore (OTC:GLNCY) suspended operations at its Antapaccay copper mine on Jan. 20 after protestors attacked the premises for a third time. A source at MMG had told Reuters production would continue as long as there was a stock of supplies, but MMG said on Monday that supplies were running low. The mine is expected to enter maintainance if the protests do not ease. More

The number of profit warnings from UK-listed companies rose 50 per cent in 2022 to a total of 305, as a combination of rising costs and falling consumer confidence hit British business.During the year, close to 18 per cent of the UK’s 1,193 listed businesses issued a profit warning, according to analysis by EY Parthenon, equal to the figure during the global financial crisis.Companies are expected to continue to be under pressure this year as the UK faces recession, high inflation and disruption from strikes.“2022 was a challenging year for UK companies with rising operational costs, changing consumer behaviour, and the cost of living crisis having an acute impact on consumer-facing sectors,” said Jo Robinson, EY-Parthenon partner.At the height of the pandemic in 2020, 35 per cent of listed UK businesses gave profit warnings.Increasing costs were cited as the biggest factor behind company difficulties last year.

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More than a third of UK-listed companies in consumer sectors issued a profit warning during the year. On Friday, Superdry became the latest retailer to warn over its profit forecast for the year, sending its shares down 17 per cent.But while consumer-facing sectors continued to be most affected, EY said that stress was “deepening” across all sectors.Half of the warnings issued in 2022 were because of rising costs — double 2021’s figure.

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The slowdown in the economy became apparent in the performance of many British companies in the last months of 2022.A quarter of the 83 profit warnings in the last three months of 2022 related to delayed or cancelled contracts, with another quarter blamed on weaker consumer confidence and two-fifths citing rising costs. In a sign that rising interest rates are already having an impact, about 11 per cent of profit warnings cited “credit tightening” as a factor, the highest proportion since the depths of the credit crunch at the start of 2009.Robinson said: “We are now seeing stress deepen and spread into other areas of the economy, such as industrial sectors, which saw the biggest rise in warnings in the fourth quarter. Cost pressures are passing through supply chains, business confidence is weak, and credit markets are tightening.”

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In the second half of 2022, 169 warnings were issued, the highest second-half total since 2015.FTSE-listed retailers issued the highest number of warnings in 2022 followed by companies in the travel and leisure sectors, then those in software and computer services; industrial support services; and personal care, drug and grocery stores.The research also shows that companies already in distress have tended to continue to struggle. In 2022, 31 listed companies issued their third consecutive profit warning in 12 months, EY said, compared with 23 in 2021.Of those warning for a third time in 2022, about 13 per cent have already gone through a restructuring process, 19 per cent have breached covenants, and a third had changed chief executive or chief financial officer. More

(Reuters) – Israeli electric vehicle (EV) startup City Transformer aims to launch production of its small urban CT-2 model in Western Europe by the end of 2024 and will soon launch a Series B funding round to raise $50 million, the company said on Monday.Chief Executive Asaf Formoza told Reuters the company, which has so far raised $20 million, has selected a factory in Western Europe where it will have initial annual production of 15,000 vehicles, but cannot disclose its location yet.The additional funds the startup is raising should help speed up series production, Formoza added.The CT-2, which is already approved for use in the European Union and Britain, has a range of 180 kilometers (112 miles) and is 1 meter (3.28 ft) wide in “city mode.” This makes it narrow enough for four of them to fit into a conventional car’s parking spot, Formoza said.But the EV’s wheel base expands to 1.4 meters for “performance mode,” which doubles its top speed to 90 kilometers (56 miles) per hour. The EV can fit two people sitting in tandem, or could be used for last-mile delivery or other businesses, the company said. The CT-2 weighs in at 450 kilograms (0.5 ton), or less than the battery in a Tesla (NASDAQ:TSLA) Model 3. “Is there a reason a person like you or me needs to maneuver in the city in a two-ton car and 600 kilograms of battery?” Formoza said. The CT-2 will cost 16,000 euros ($17,400) before taxes and Formoza said major carmakers have created space for startups like City Transformer by shifting away from smaller cars.”The B (small car) segment is vanishing because carmakers make more on SUVs, so there’s going to be a huge void that us and others will look to fill,” he said.City Transformer is lobbying the EU for subsidies for smaller EVs like the CT-2 that are currently available for larger models, Formoza added.($1 = 0.9203 euro) More

WASHINGTON/WILMINGTON, Del. (Reuters) -President Joe Biden and House of Representatives Speaker Kevin McCarthy will meet at the White House on Wednesday for talks in the standoff over the federal debt ceiling and prospect for a U.S. default.Hardline Republican lawmakers are withholding support for a measure that would let the country pay its debts until Democrats agree to spending cuts going forward.The White House has said raising the debt limit is non-negotiable, citing the risk to the U.S. economy from a default.Analysts are skeptical that the face-to-face talks between the Democratic president and Republican leader, confirmed by both sides on Sunday, will soon end a high-stakes crisis where members of both parties see opportunities to score political points before the U.S. Treasury runs out of money to pay its bills this summer.”The President will ask Speaker McCarthy if he intends to meet his Constitutional obligation to prevent a national default, as every other House and Senate leader in U.S. history has done,” a White House spokesperson who declined to be named said on Sunday. “He will underscore that the economic security of all Americans cannot be held hostage to force unpopular cuts on working families.”On Sunday, McCarthy said that Republicans will not allow a U.S. default and that cuts to Social Security and Medicare would be “off the table” in any debt ceiling negotiations.But he added that Republicans want to “strengthen” the costly retirement and health benefit programs for seniors – a statement that the White House called a euphemism for cuts.”I know the president said he didn’t want to have any discussions” on cuts, McCarthy said on CBS’ “Face the Nation” program. “I want to find a reasonable and a responsible way that we can lift the debt ceiling (and) take control of this runaway spending.”The U.S. Treasury this month activated extraordinary cash management measures to avoid breaching the $31.4 trillion limit on federal debt imposed by Congress. But without an increase by early June, the Treasury has said it may run short of cash to pay the government’s bills, risking the biggest threat of default since a 2011 standoff.”There will not be a default,” McCarthy said without elaborating. “But what is really irresponsible is what the Democrats are doing right now, saying you should just raise the limit.”Biden had previously pledged to hold the meeting with McCarthy as part of a series of engagements with the new Congress.On Sunday, the president’s spokesperson said the talks would cover “a range of issues” and were aimed at “strengthening his working relationship” with McCarthy, whose party is ramping up investigations into Biden since they took control of the House from Democrats following November’s midterm elections.Biden, who is contemplating seeking re-election in 2024, has been sharply critical of McCarthy’s Republican caucus. He characterized them as “fiscally demented” earlier this month, threatened to veto their legislation and accused them of trying to balloon the deficit, favoring billionaires, raising middle-class taxes and threatening popular benefit programs.McCarthy and other Republicans both in the House and Senatehave said they will not support an increase in the debt ceiling without budget cuts or spending reforms.The Republican threat to block efforts to raise the debt limit is unusual; such increases have been approved on a bipartisan basis in Congress for decades, with the exception of a 2011 vote that included spending cuts for several years ahead.UNDEFINED DEMANDSMcCarthy did not provide details on specific demands and ruled out an increase in the retirement age for Social Security and Medicare benefits.White House spokesman Andrew Bates said that McCarthy’s pledge to strengthen the programs would lead to cuts.”For years, congressional Republicans have advocated for slashing earned benefits using Washington code words like ‘strengthen,’ when their policies would privatize Medicare and Social Security, raise the retirement age, or cut benefits,” Bates said in a statement.The House speaker, who agreed to rules that make it easier for his party to oust him over policy disagreements, said he would focus on discretionary spending, which has increased dramatically in the past two years with infrastructure and semiconductor legislation passed with bipartisan support and a green-energy bill passed by Democrats.”I think everything, when you look at discretionary, is sitting there,” McCarthy said. “We shouldn’t just print more money, we should balance our budget. So I want to look at every single department. Where can we become more efficient, more effective and more accountable?”He said he also would look at defense spending to eliminate waste.Asked if he would support a short-term extension of the debt limit until September as some lawmakers have suggested to buy time to pass spending bills, McCarthy said: “I don’t want to sit and negotiate here. I’d rather sit down with the president and let’s have those discussions.” More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.It looks like a quiet start to the week in Asia on Monday, but don’t be fooled – it may be the calm before the storm. A raft of regional economic indicators including Japanese unemployment and PMIs from China, Australia and India, as well as U.S. non-farm payrolls and U.S., euro zone and UK interest rates decisions will surely provide fireworks later in the week.In that light, investors on Monday may opt to reduce exposure to the glut of event risk, especially with month-end approaching and given how far stocks have risen since the turn of the year.The MSCI Asia ex-Japan index is at a nine-month high and up more than 30% from the October low. It has risen in 11 of the last 13 weeks and is on course for a monthly gain of 11%. GRAPHIC-Global markets in 2023 https://fingfx.thomsonreuters.com/gfx/mkt/zjvqjerrgpx/Pasted%20image%201674813566094.png That’s comfortably outperforming the S&P 500, euro zone and UK stocks, Japan’s Nikkei 225 and the MSCI World index, so a little profit-taking may be on the cards.In India, Gautam Adani faces a critical day on Monday with his flagship company’s $2.5 billion share sale’s second day of bidding overshadowed by a $48 billion rout in the Indian billionaire’s stocks sparked by a U.S. short seller’s report.China reopens after the Lunar New Year holiday, so trading volumes in Asia will return to something resembling normal. Just in time for a potentially choppy 24-hour period over Wednesday and Thursday when the Federal Reserve, European Central Bank and Bank of England announce their latest policy decisions.The debate over U.S. recession or soft landing, and Fed “pivot” or “higher for longer” may acquire more clarity after Fed Chair Jerome Powell’s press conference on Wednesday. Right now, investors’ glasses are half full. GRAPHIC-World stocks add $4 trillion since start of year https://fingfx.thomsonreuters.com/gfx/mkt/znvnbzyjavl/Pasted%20image%201674844455175.png Wall Street’s “fear index” – the VIX volatility index – on Friday fell below 18.0 for the first time in over a year, and perhaps a little under the radar, U.S. bond market volatility is now its lowest since last June. On the Asian data front this week, Chinese purchasing managers indices will give the most up-to-date snapshot of how the region’s largest economy is emerging from zero-COVID restrictions, while Japanese unemployment and retail sales figures are out on Tuesday.There is a deluge of Japanese earnings reports this week, from corporate titans including SoftBank, Sony (NYSE:SONY), Sumitomo and financial institutions Mizuho, Daiwa and Mitsubishi UFJ (NYSE:MUFG). Three key developments that could provide more direction to markets on Monday:- New Zealand trade (December)- Germany GDP (Q4)- Euro zone sentiment indicators (January) More