Wednesday, April 30, 2014
Tuesday, April 29, 2014
Friday, April 25, 2014
Credit ratings agency Standard & Poor's has cut Russia's rating to one notch above "junk" status.
Ukraine's crisis is a significant concern for many of Russia's foreign investors
The move comes as foreign investors continue to take money out of the country amid tensions over the situation in Ukraine.
S&P downgraded Russia's rating to 'BBB-' from 'BBB'.
Also on Friday, Russia's central bank raised its key interest rate from 7% to 7.5% as it sought to defend the value of the rouble.Capital flight
Announcing the downgrade, S&P said: "In our view, the tense geopolitical situation between Russia and Ukraine could see additional significant outflows of both foreign and domestic capital from the Russian economy."
The agency said this could "further undermine already weakening growth prospects".
It warned that further downgrades were possible if the West imposed tighter sanctions against Moscow.
Investors have been pulling money out of Russia since last year when the country's economy ran into trouble, but this process has intensified in recent weeks amid concerns over Ukraine.
In the first three months of this year, foreign investors have withdrawn $63.7bn (£37bn) from Russia, and economic growth has slowed significantly - it is expected to grow at no more than 0.5% during 2014.
Russian shares, which have traded lower this week, fell further following the downgrade, with the MICEX stock index slipping over 1.6% at one stage.
Russia's central bank said its rate rise was because of a higher inflation risk and the weakness of the rouble. The Russian currency has lost nearly 8% against the dollar this year.
The bank said its move would enable it to lower inflation to 6% by the end of 2014 and added it did not plan on cutting rates in coming months.
Russia's Economy Minister Alexei Ulyukayev dismissed S&P's move, saying that "partially, it is kind of a politically motivated decision".
However, analysts said other credit rating agencies were likely to follow suit.
"Russia is going backwards as reflected by developments in relations with Ukraine and the West," said Timothy Ash, analyst at Standard Bank.
He said the move was "bad for investment, bad for capital flows, and bad for broader political, economic reform and institutional reform".
Thursday, April 24, 2014
Tuesday, April 22, 2014
Japan's trade deficit quadrupled in March as export growth slowed and energy imports continued to rise.
Japan's energy imports rose after the 2011 earthquake and tsunami
A weak Japanese currency, which pushed up the cost of imports, also contributed to the widening gap.
The deficit rose to 1.45 trillion yen ($14bn; £8.4bn), up from 356.9bn yen during the same month a year ago.
Japan's energy imports have been rising after it shut all its nuclear reactors in the aftermath of the earthquake and tsunami in 2011.
According to the latest trade data, imports of Liquefied Petroleum Gas (LPG) rose more than 8% in March, compared to the same month last year. Meanwhile, imports of Liquefied Natural Gas (LNG) rose nearly 4%.
And Japan is having to pay more for those imports after a series of aggressive policy moves aimed at spurring economic growth - including a huge boost to the country's money supply - have weakened the yen sharply.
The Japanese currency fell nearly 10% against the US dollar between March 2013 and March this year.
The latest figures show that while LPG imports rose 8.1% in volume during March, the value of those imports rose more than 18%.
Similarly, the volume of LNG imports rose nearly 4%, while the value of those shipments jumped 14%.Sales tax impact?
Japan's overall imports rose 18.1% in March, compared to a year ago, while exports rose at an annual rate of 1.8%.
Some analysts suggested that Japan's recent sales tax hike also played a part in boosting imports during the month.
The rise in the sales tax - also known as consumption tax - came into effect on 1 April.
The sales tax has been increased to 8% from 5% and it will rise again, to 10%, in October 2015.
Analysts said the hike had seen increased demand among Japanese consumers in March, as they looked to buy goods ahead of prices rising once it had been implemented.
Marcel Thieliant, Japan economist at Capital Economics, said that looking ahead "consumers are likely to rein in spending in the wake of this month's consumption tax hike, which should reduce import demand".
There has also been growing speculation that Japan is looking to restart some of its nuclear reactors. If that happens, such a move is likely to help reduce its energy imports as well as its trade deficit.
"The trade shortfall is likely to narrow in the second quarter, which should provide some support to GDP growth even as domestic demand is set to plunge," Mr Thieliant said.
Thursday, April 17, 2014
Tuesday, April 15, 2014
China's demand for gold is set to rise by about 20% over the next few years, the World Gold Council has estimated, as the population becomes more wealthy.
China's demand for gold shows no sign of letting up
The council estimates private sector demand for gold in China will rise to at least 1,350 tonnes by 2017.
Chinese customers bought 1,132 tonnes of gold last year, in jewellery as well as gold bars and coins for investment.
The forecast comes as China becomes the world's largest gold-consuming nation since last year, overtaking India.
The World Gold Council says China is at the "centre of the global gold eco-system", as rapid urbanisation creates a rising middle class.
Albert Cheng, from the World Gold Council, said: "The cultural affinity for gold runs deep in China and when this is combined with an increasingly affluent population and a supportive government, there is significant room for the market to grow even further.
"Whilst China faces important challenges as it seeks to sustain economic growth and liberalise its financial system, growth in personal incomes and the public's pool of savings should support a medium term increase in the demand for gold, in both jewellery and investment."
According to the council, consumers bought a record amount of gold last year, with Asia's economic heavyweights China and India in the top two spots.
In Western markets demand for the precious metal remained strong, particularly in the US, where people bought a lot of gold jewellery as well as gold bars and coins.
Monday, April 14, 2014
(Reuters) - The World Trade Organization slightly raised its 2014 forecast for growth in global goods trade to 4.7 percent on Monday, saying it did not expect a return to the historical trend level of 5.3 percent until 2015.
"If GDP forecasts hold true, we expect a broad-based but modest upturn in the volume of world trade in 2014 and further consolidation of this growth in 2015," WTO Director General Roberto Azevedo told a news conference in Geneva.
Although the 2014 forecast represents a brighter picture than the 4.5 percent growth that the WTO expected at the time of its last forecast in September, it is still gloomier than its predictions a year ago because the European Union's economic recovery took longer to materialize than expected.
"EU demand has been weighing on world imports for the past couple of years but it's starting to turn around," said WTO economist Coleman Nee.
"We will be watching very closely to see if the recovery in the EU disappoints," Azevedo added.
Azevedo said it was unclear if trade had permanently stopped growing at twice the speed of gross domestic product, which had been the trend until the global economic crisis.
He said 80 percent of the protectionist policies implemented since 2008 were still in place but he hoped they would be removed as economic growth improved.
"It's not on the level - not even nearly close to the level - that we had after the 1929 crisis. But it's measurable and regrettable."
The WTO does not forecast trade in services, but said that the dollar value of global services exports grew 6 percent to $4.6 trillion in 2013, against two percent growth in 2012.
(Reporting by Tom Miles; editing by Stephanie Nebehay, John Stonestreet)
Friday, April 11, 2014
Russian President Vladimir Putin has warned European leaders that Ukraine's delays in paying for Russian gas have created a "critical situation".
Pipelines transiting Ukraine deliver Russian gas to several EU countries and there are fears that the current tensions could trigger gas shortages.
Pro-Russian separatists are holed up in official buildings in Donetsk and Luhansk, eastern Ukraine.
Meanwhile, a European human rights body has stripped Russia of voting rights.
The Parliamentary Assembly of the Council of Europe (PACE) monitors human rights in 47 member states, including Russia and Ukraine.
Protesting against Russia's annexation of Crimea last month, PACE suspended Russia's voting rights as well as Russian participation in election observer missions.
The Russian delegation had boycotted the meeting. Its leader, Alexei Pushkov, described the proceedings as a "farce.
Activists inside the Donetsk government building have proclaimed a "Donetsk Republic"
Russian state gas giant Gazprom says Ukraine's debt for supplies of Russian gas has risen above $2bn (£1.2bn; 1.4bn euros).
Gazprom said on Wednesday it could demand advance payments from Kiev for gas but President Putin said the company should hold off, pending talks with "our partners" - widely believed to mean the EU.
In a letter to European leaders, President Putin warned that the "critical" situation could affect deliveries of gas to Europe, his spokesman Dmitry Peskov said.
The letter released by the Kremlin says that if Ukraine does not settle its energy bill, Gazprom will be "compelled" to switch over to advance payment, and if those payments are not made, it "will completely or partially cease gas deliveries".
Mr Putin adds that Russia was "prepared to participate in the effort to stabilise and restore Ukraine's economy" but only on "equal terms" with the EU.
And he says that while Russia has been subsidising the Ukrainian economy with cheap gas, Europe has been exploiting its raw materials and worsening its trade deficit.
The US state department later said it condemned "Russia's efforts to use energy as a tool of coercion against Ukraine".
Spokeswoman Jen Psaki said the price Ukraine was being charged for its gas was "well above the average price paid by EU members".
Nearly a third of the EU's natural gas comes from Russia.
Previous Russian gas disputes with Ukraine have led to severe gas shortages in several EU countries. The EU says it has extra gas supplies and reverse-flow technology to deal with any such disruption now.
In Kiev, the authorities said Ukraine would not prosecute pro-Russian activists occupying official buildings in Donetsk and Luhansk if they surrendered their weapons.
The separatists in the east - a mainly Russian-speaking region with close ties to Russia - are demanding referendums on self-rule. In Donetsk they have declared a "people's republic". Gunmen have been seen among the protesters in Luhansk.
Ukraine has accused Russia of stirring up the unrest, a claim Moscow denies.
Meanwhile, Nato has unveiled satellite images it says show some 40,000 Russian troops near the Ukrainian border in late March and early April, along with tanks, armoured vehicles, artillery and aircraft.
British Brigadier Gary Deakin, speaking at Nato military headquarters in Belgium, said it was a force that was "very capable, at high readiness, and... close to routes and lines of communication".
A Russian military officer said the images dated from August last year and denied there had been a build-up of troops along the border, Russia's Ria Novosti news agency reported.
Ukraine fears that the Russian separatist actions are a provocation similar to the protests that gripped Crimea days before Russian troops annexed the peninsula last month. Russia denies the claim.
President Putin said on Thursday his decision to annex Crimea was taken after secret opinion polls and had not been planned in advance.
Speaking to political supporters near Moscow, he said the first poll showed 80% of the Crimean population wanted to join Russia. He said he had not made any decision until it was "clear what the mood of the people was".
Russia, the US, Ukraine and the EU are to hold talks in Geneva next Thursday to try to resolve the impasse, EU diplomats have said.
They will be the first four-way talks since the crisis began.
Russian Foreign Minister Sergei Lavrov told US Secretary of State John Kerry by telephone on Wednesday that the meeting should focus on fostering dialogue among Ukrainians and not on bilateral relations among the participants.
In another development, the Kremlin announced that President Putin had sacked 14 generals. They were sacked from the emergencies ministry and prison service, as well as regional branches of the interior ministry and the Investigative Committee (Russia's equivalent of the FBI).
It was not immediately clear if the move was a routine step. Russia has some 800 generals in its army alone.
Thursday, April 10, 2014
Wednesday, April 9, 2014
(Reuters) - Global financial leaders will thrash out details of individual country pledges to boost growth and overhaul their economies at this week's meetings in Washington, a senior Australian official said on Tuesday.
Group of 20 countries promised at their last meeting in Sydney in February to lift global output by an extra 2 percent over five years, with individual action plans due later this year.
Although geopolitical risks stemming from the crisis in Ukraine were also on the table, growth would take center stage, Australia's G20 Finance Deputy Barry Sterland said in a telephone interview.
"To build momentum on those growth strategies is really a key goal for this meeting," he said. "A big focus of this meeting is going to be building on that growth ambition, discussing the sorts of measures that are needed to meet the Sydney growth goal."
Australia chairs the bloc of advanced and developing economies this year and has asked for firm plans to address gaps in each country's policy settings in the second half of 2014.
According to a document prepared for the G20 by European Union finance ministers, reform drafts so far have fallen short and more ambitious work is needed in areas including investment, employment and competition.
The International Monetary Fund forecast global growth at 3.6 percent this year while warning of geopolitical risks amid a tug of war between Russia and Western countries over Ukraine.
Russia, also a G20 member, has been hit with EU and U.S. sanctions over its annexation of Ukraine's Crimea region.
G20 officials have said they expect the group's communiqué, to be issued after Friday's meeting, will not specifically mention the crisis in Ukraine.
Sterland said there would be a discussion of the "full range" of geopolitical risks, but noted that Ukraine had already been an issue at the last G20 just six weeks earlier, and there was no plan for joint action against Russia.
"That sort of theme would not be on the agenda for this meeting," Sterland said.
Australia's Foreign Minister Julie Bishop has said it depends on G20 member countries whether Russia is invited to the G20 leaders' summit this year.
At Friday's meeting, emerging markets are again expected to raise concerns about spillover effects from central banks normalizing policy in advanced economies, a worry which featured prominently at the Sydney meetings.
The U.S. Federal Reserve is on track to wind up bond purchases by the end of this year as the U.S. economy recovers, although the European Central Bank is under pressure to do more to support growth.
The G20's February communiqué said that the timing of monetary policy withdrawal should be conditional on the outlook for price stability as well as growth - sounding a note of caution given the euro zone's extremely low inflation.
"Those comments in Sydney seem to remain appropriate. We are taking an approach to keep the communiqués relatively tight," Sterland said.
The ECB has so far resisted calls from the IMF to ease monetary policy further although it said last week it was ready to start asset purchases, also known as quantitative easing, if inflation proved persistently low.
A German government official said Germany planned to tell the IMF and G20 partners it sees no deflation tendencies in Europe, noting instead that low inflation came from lower energy prices and moderate wage hikes.