Friday, January 29, 2016

BBC News - Japan adopts negative interest rate in surprise move

Image copyrightEPA
In a surprise move, the Bank of Japan has introduced a negative interest rate.
The benchmark rate of -0.1% means that commercial banks will be charged by the central bank for some deposits.
It is designed to encourage them to use their reserves to lend to businesses in an attempt to counter Japan's economic stagnation.
The charge does not directly apply to ordinary customers' accounts.
The country is desperate to increase spending and investment.


One of the side effects of a moribund economy is falling prices - something that can send an economy into a downward spiral as customers hold off spending in the hope prices will fall yet lower.
Japan has been desperate to boost consumer spending for years. At one point it even issued shopping vouchers to stimulate demand.
The eurozone has negative interest rates, but this is a first for the third-largest economy.
It is a move that has been on the cards for Japan's stagnating economy for well over 10 years.
The decision to go negative came after a narrow 5-4 vote at the Bank of Japan's first meeting of the year on Friday.
"The BoJ will cut interest rates further into negative territory if judged as necessary," the Bank of Japan (BoJ) said, adding it would continue as long as needed to achieve an inflation target of 2%.
Some analysts have cast doubt over how effective the rate cut will be.

Analysis: Andrew Walker, economics correspondent

The Bank of Japan is imposing a negative interest rate on accounts it holds for commercial banks. It will start to charge them for looking after their cash. The European Central Bank and a few others are already doing it. But the Bank of Japan's negative rate is going to bite very gradually. The amount affected will build up over time. The move does not directly affect savers. They don't have accounts at the central bank. But certainly their banks could decide to pass on the cost they in turn will face as the impact of the negative rate accumulates. So perhaps in time savers will in effect be paying to keep their money at the bank. So they would have more of an incentive to spend.

In a press conference, the BoJ's governor Haruhiko Kuroda said the weakening growth rate of the global economy was the main factor behind the move: "Japan's economy continues to recover moderately and the underlying price trend is improving steadily... further falls in oil prices, uncertainty over emerging economies, including China, and global market instability could hurt business confidence and delay the eradication of people's deflationary mindset."
Earlier in the day, fresh economic data had again highlighted concerns over economic growth. The December core inflation rate was shown to be at 0.1% - far below the central bank's target.
Asian shares jumped and the yen fell across the board in reaction to the announcement. Japanese banks though saw their shares drop on the news as lenders are likely to see their margins squeezed even more.
Japanese portImage copyrightAFP
Image captionJapan's export driven economy has been struggling in recent years

Mariko Oi, BBC News: 'Kuroda bazooka'

The decision to implement a negative interest rate has been dubbed "Kuroda bazooka" after the governor of the Bank of Japan.
Haruhiko Kuroda is well known for making surprise moves that shock investors. Only a few weeks ago, Mr Kuroda told the parliamentary budget committee that he would not introduce more stimulus for the economy.
So today's announcement caused the stock market to jump while the yen fell sharply against major currencies.
The option of lowering the cost of borrowing below zero has been on the cards for Japan's central bank since the early 2000s and it was the first in the world to consider it.
But when it comes to implementing the policy, Denmark, Sweden and Switzerland were first, followed by the European Central Bank which had to do everything it could to keep the EU economy afloat after the eurozone economic crisis.

Last resort

There are doubts, however, over how well the new policy will work.
"Negative interest rates are one of the last instruments in the BoJ's tool box," Martin Schulz of the Fujitsu Institute in Tokyo told the BBC. "But their impact is unlikely to be strong."
Mr Schulz cautioned that in the eurozone, negative interest rates are being used to tackle a financial crisis, whereas Japan is in a protracted slow growth environment.
"In Japan, credit didn't expand not because banks were unwilling to lend but because businesses didn't see the investment perspective to borrow. Even with negative interest rates, this situation will not change."
"Businesses don't need money - they need investment opportunities. And that can only be achieved by structural reforms, not by monetary policy," he said.
The decision comes in addition to the BoJ's massive asset-buying programme, which over the past years has failed to boost growth.
Bill Blain, of Mint Partners, said monetary authorities' moves to ever-cheaper money since the financial crisis that began in 2008 have distorted global markets - and investors were uneasy: "Investors are worried that the only place we've seen any inflation has been in financial assets, things like stocks, property and bonds. And as a result everyone is suddenly worried they are sitting on nightmares."

Wednesday, January 27, 2016

BBC News - EU needs us more than we need it, says Vote Leave

Campaign workers blow up balloons advertising the Vote Leave campaignImage copyright
Image captionVote Leave questions whether the single market has been good for British trade
The European Union needs the UK more than the UK needs it, according to the Vote Leave Campaign.
"We are the fifth largest economy in the world. We will be able to have a decent deal with the EU", said John Moynihan, speaking on BBC Radio 4's Today programme.
"The EU needs a trade deal with us more than we need a trade deal with them".
His comments follow yesterday's remarks by a leading pro-EU voice that leaving the market would be a "huge risk".
Speaking on the same programme, the chair of Britain Stronger in Europe, Lord Rose, said full access to Europe's single market was vital for UK businesses and jobs.

'Fear, uncertainty and doubt'

But today Mr Moynihan said: "The other side are trying to create FUD - fear, uncertainty and doubt - they're trying to say, oh, it's terribly dangerous, a leap into the unknown to leave. Nothing will happen. As Stuart Rose himself has said, the day we vote to leave the EU nothing at all will happen.
"At the end of it we will have a relationship with the EU, it's highly unlikely that it will be the sort of disastrous relationship that they claim".
Asked how a trading relationship of the UK outside the EU would look he said: "Everybody agrees there would be a free trade deal with the European Union, they cannot afford not to have a free trade deal with us. They export far more to us than we export to them.
"The French export huge amounts of food to us. The French farmers would riot if they thought we were going to enter into a trade war".


But Lord Rose told the BBC that campaigns to leave the EU had not explained how the benefits of the EU single market would be replaced.
"Those who want Britain to leave Europe cannot guarantee that Britain will retain full access to Europe's single market. They are putting the benefits at risk. Their proposed deal, whereby Britain would somehow retain access to the single market without obeying any of the rules, is a fantasy."
The prime minister, who wants the UK to stay within a reformed European Union, is pushing to renegotiate Britain's terms of membership ahead of an in/out referendum, which must be held by the end of 2017.
If agreement with other EU leaders is reached next month, a vote could potentially be held as early as June.

David Cameron's four main aims for renegotiation

EU flag and Union JackImage copyright
  • Economic governance: Securing an explicit recognition that the euro is not the only currency of the European Union, to ensure countries outside the eurozone are not disadvantaged. The UK wants safeguards that it will not have to contribute to eurozone bailouts
  • Competitiveness: Setting a target for the reduction of the "burden" of excessive regulation and extending the single market
  • Immigration: Restricting access to in-work and out-of-work benefits to EU migrants. Specifically, ministers want to stop those coming to the UK from claiming certain benefits until they have been resident for four years
  • Sovereignty: Allowing Britain to opt out from further political integration. Giving greater powers to national parliaments to block EU legislation

Tuesday, January 26, 2016

BBC News - ECB's Draghi rejects criticism over inflation pledge

Mario DraghiImage copyright

European Central Bank President Mario Draghi has fought back against critics, insisting the bank's policies will help to raise inflation.
"Meeting our objective is about credibility. If a central bank sets an objective, it can't just move the goalposts when it misses it," he said in a speech in Germany.
Eurozone inflation is currently 0.2%, way below the ECB's target of near 2%.
But Mr Draghi insisted that the central bank would meet its obligations.
"Confidence comes from every party fulfilling its mandate. And that's what the ECB will do," he said.
Mr Draghi rejected criticism of the ECB's €60bn-a-month stimulus programme, saying that no one had discussed the risks of doing nothing.
"What would that mean for our price stability mandate, and therefore for growth and jobs, and eventually, for the future of our monetary union?," he asked.
Mr Draghi also rejected criticism that the bank's low interest rates could lead to higher house prices because of cheap loans.
"Though low interest rates can encourage risk-taking, there are no warning signs of serious financial instability," he said.
The speech comes just days after Mr Draghi said the bank would "review and possibly reconsider" monetary policy at its next meeting in March.
Analysts interpreted the speech, where he said that there would be "no limits" to action to reinflate the eurozone, as an indication the bank was willing to ease policy further.
His comments come after the ECB decided to keep the bank's main borrowing rate unchanged at 0.05% earlier this month.

Monday, January 25, 2016

Bloomberg News - Bonus Gains Expected by More Than 33% of London Finance Staff

More than a third of London’s finance staff expect a higher bonus for 2015 than the previous year, a recruitment company said, even as lenders from Barclays Plc to Deutsche Bank AG struggle to boost revenue.
Almost two-thirds of employees in the City, London’s financial district, expect to receive a bonus for last year, according to London-based recruitment firm Astbury Marsden, which surveyed more than 1,000 employees across firms including banks, investment managers, building societies and trade exchanges. Senior executives, including managing directors and partners, predict bonuses amounting to about 61 percent of their salary, or about 100,000 pounds ($143,000) on average, the company said in a statement.
Europe’s biggest investment banks, already grappling with new capital rules from regulators, face increased pressure on revenue as a selloff in crude oil deepens and amid China’s economic slowdown. Brevan Howard Asset Management, one of Europe’s biggest hedge funds, had a second straight decline at its main macro fund in 2015, a person familiar said earlier this month.
“With investment bankers predicting a rise to their bonus payments this season, the current state of the market suggests that such positivity may be unjustified,” Adam Jackson, managing director of Astbury Marsden, said in the statement. “Top level management are particularly bullish, but this optimism is being severely tested.”
At Barclays, the bonus pool for 2015 may be cut by at least 10 percent from the previous year as Britain’s second-largest lender eliminates jobs at its investment bank, a person with knowledge of the matter said last week.

Friday, January 22, 2016

BBC News - Asian markets rally as oil prices rebound

Tokyo stock marketImage copyrightGetty Images
Markets in Asia have rallied, picking up on a rebound in oil prices and a strong lead from the US and Europe.
The recovery comes after a sharp sell-off earlier in the week.
Hints from European Central Bank on Thursday that it might consider more monetary easing helped lift investors' confidence.
In Japan, the Nikkei 225 jumped 5.9% to close at 16,958.53, after hitting at 15-month low the previous day.
Markets in China also managed to recover some of the past days' heavy losses.
The mainland benchmark Shanghai Composite gained 0.8% to 2,901.32 points, while Hong Kong's Hang Seng rose 2.2% to 18,950.19 points.
Markets were encouraged by a recovery in oil prices, which had hit 12-year lows earlier in the week.
Brent crude was up 98 cents at $30.23 a barrel, while US crude was 85 cents higher at $30.38 a barrel.
North Sea Brent Crude

Commodity shares profit

In Australia, the S&P ASX 200 closed by 1.1% higher, at 4,916.00 points.
Among the market's standout performers were several of the big oil and commodity companies, buoyed by a rise in the oil price.
BHP Billiton and Rio Tinto were 7.5% and 3.4% up respectively, while Santos climbed 11%.
Stocks of winemaker Treasury Wine Estates also stood out, jumping as much as 17.5% to a record high after the company provided strong full-year profits guidance in a market update.
GrapesImage copyrightAFP
Image captionTreasury Wine seems on track for a good year
In South Korea, the benchmark Kospi index followed the region's trend, closing the day 2.1% higher at 1,879.40 points.

Draghi reassures markets

On Thursday, shares in Europe and the US closed higher, helped by comments from European Central Bank (ECB) president Mario Draghi.
After the ECB had kept eurozone rates on hold, Mr Draghi hinted that the bank might take more action to try to stimulate the eurozone economy later this year.
He said the bank would "review and possibly reconsider" monetary policy at its next meeting in March.
Mr Draghi also said eurozone rates would "stay at present or lower levels for an extended period" and there would be "no limits" to action to reflate the eurozone.

Thursday, January 21, 2016

BBC News - European markets stabilise after falls

London stock brokers (file photo)Image copyrightAFP
European markets have opened slightly higher, a day after global turmoil saw billions wiped off the value of shares.
After falling 3.5% on Wednesday, London's benchmark FTSE 100 share index was up 0.5% in the first few minutes of trading.
Earlier, stocks in Asia had fallen further, with Japan's leading share index closing down by more than 2%.
Investors remain worried over the continuing slide in oil prices and slowing growth in China.
On Wednesday, global stock markets suffered hefty losses and London's FTSE 100 entered a "bear market", having fallen 20% from its record high in April last year.
But in the first few minutes of trade on Thursday, the FTSE 100 was up 31.78 points at 5,705.36.

Oil market

Oil prices remained weak on Thursday, having hit their lowest levels since 2003 in the previous session.
A brief rally in crude prices quickly ran out of steam, and after climbing back above the $28-a-barrel mark, Brent crude fell back to $27.79.
US crude was trading at $28.23 a barrel, having fallen below $27 on Wednesday.
Crude oil prices have been falling since mid 2014, but oil-producing countries have maintained output despite the decline, contributing to the excess supplies on the market.
Earlier in the week, the International Energy Agency warned that oil markets could "drown in oversupply" in 2016.

'Good shape'

In Asia, Japan's Nikkei 225 share index closed down 2.4%, while China's Shanghai Composite ended the day down 3.2%.
On Wednesday, US shares had also been hit, with the Dow Jones closing 1.6% lower after a volatile trading day.
However, Patrick Thomson from JP Morgan Asset Management told the BBC that investors should not panic.
"If you look at the US economy particularly, that is actually in pretty good shape," he said.
"You look at all of the data coming out recently, clearly growth is a little muted and corporate earnings are somewhat lower than expected due to energy prices and the strong dollar, but underlying fundamentals, particularly the US consumer, is in very good shape."

Wednesday, January 20, 2016

Reuters News - Oil slump rocks European stocks to lowest level in over a year

European shares slid to their lowest since October 2014 on Wednesday following losses in U.S and Asian stock markets as the relentless slump in oil prices continued to drag on risk assets.
The FTSEurofirst 300 .FTEU3 fell 3.3 percent, set for its biggest single session loss of an already turbulent 2016 and breaking through the December 2014 low which had been its recent trough.
Germany's DAX .GDAXI, France's CAC .FCHI and Britain's FTSE .FTSE were all down around 3 percent and also set for their biggest fall of the year so far.
U.S. crude wallowed at its lowest since 2003 after the world's energy watchdog warned the market could "drown in oversupply". U.S. futures CLc1 shed 3.6 percent to $27.43 while Brent crude LCOc1 lost 3.1 percent to $27.87 a barrel.
Copper also slipped. Basic resources .SXPP and energy sector .SXEP were the sectors that fell most steeply in Europe, down 4.8 and 3.8 percent respectively.
Oil shares in Europe are down 13 percent already this year, also at their lowest levels since 2003. That has been a major weight on the FTSEurofirst 300, which is down more than 10 percent in 2016, which investors see as "correction" territory.
"I am quite pessimistic about the equity markets for the next two to three months. I do not see a 2008-style scenario, but I do see a bear market coming," said Andreas Clenow, hedge fund trader and principal at ACIES Asset Management, suggesting a further 10 percent fall to come.
Wall Street had seen its early gains on Tuesday erased by the tumble in U.S. crude. U.S. stock futures ESc1 were down 2.1 percent on Wednesday, indicating a weak start.
Risk aversion boosted appetite for the yen, a traditional safe-haven, which rose more than 1 percent against the dollar JPY= to its highest level in a year, while sterling hit its lowest since early 2014 GBPJPY=.
Demand for German Bunds, another safe-haven asset, was also high, and the 10-year Bund yield fell to its lowest level in more than eight months ahead of a European Central Bank policy meeting on Thursday.
While the dollar fell against the yen, it was strong against emerging markets, compounding the misery for many countries already suffering from low oil prices.
Top emerging market shares .MSCIEF fell 2.9 percent to a 6-1/2 year low, while EM currencies were crushed. Russia's rouble RUBUTSTN=MCX teetered on the brink of a record low of 80.10 to the dollar.
"This is a different kind of dollar strength altogether ... this is quite clearly being driven by declining risk appetite, higher market volatility and lower commodity prices," said Aroop Chatterjee, a director of research at Barclays in London.
"In this new world emerging markets are the ones that bear the brunt of the dollar strength."
In Asia, stocks surrendered all of Tuesday's rare gains with MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS falling 3 percent on the day and hitting its lowest since October 2011.
The Hong Kong stock market's benchmark index .HSI posted its single biggest daily fall since early August, while Japan's Nikkei .N225 closed down 3.7 percent. It is now 20 percent below last year's peak, meeting the technical definition of a bear market.
Chinese markets fared only marginally better amid mounting talk that more stimulus may be on the way, possibly before the Lunar New Year holidays in early February. A report in the government-backed China Securities Journal said Beijing had the policy space for further easing to support the economy.
The CSI300 index .CSI300 fell 1.5 percent, after rallying more than 3 percent on Tuesday. The Shanghai Composite Index .SSEC eased 1 percent.
China's central bank meanwhile revealed late on Tuesday that it would inject more than 600 billion yuan ($91.22 billion) into the banking system to help ease a liquidity squeeze expected before the long Lunar New Year celebrations.
Such a move is usual before the holidays, however, and stopped well short of an actual cut in bank reserve ratios.

(Additional reporting by Sudip Kar-Gupta and Marc Jones in London, Wayne Cole in Sydney and Saikat Chatterjee in Hong Kong; Editing by Catherine Evans)

Tuesday, January 19, 2016

BBC News - Hollande says France in state of economic emergency

Image copyrig
htPresident Francois Hollande has set out a €2bn (£1.5bn) job creation plan in an attempt to lift France out of what he called a state of "economic emergency".
President Francois Hollande head shot
Under a two-year scheme, firms with fewer than 250 staff will get subsidies if they take on a young or unemployed person for six months or more.
In addition, about 500,000 vocational training schemes will be created.
France's unemployment rate is 10.6%, against a European Union average of 9.8% and 4.2% in Germany.
Mr Hollande said money for the plan would come from savings in other areas of public spending.
"These €2bn will be financed without any new taxes of any kind," said President Hollande, who announced the details during an annual speech to business leaders.
"Our country has been faced with structural unemployment for two to three decades and this requires that creating jobs becomes our one and only fight."
France was facing an "uncertain economic climate and persistent unemployment" and there was an "economic and social emergency", he said.


The president said recently that the country's social emergency, caused by unemployment, was as serious as the emergency caused by terrorism.
He called on his audience to help "build the economic and social model for tomorrow".
The president also addressed the issue of labour market flexibility.
"Regarding the rules for hiring and laying off, we need to guarantee stability and predictability to both employers and employees. There is room for simplification," he said.
"The goal is also more security for the company to hire, to adapt its workforce when economic circumstances require, but also more security for the employee in the face of change and mobility".
However, the BBC's Paris correspondent Hugh Schofield said there was widespread scepticism that the plan would have any lasting impact.
"Despite regular announcements of plans, pacts and promises, the number of those out of work continues to rise in France.
"With a little over a year until the presidential election in which he hopes to stand for a second term, President Hollande desperately needs good news on the jobs front. But given the huge gap so far between his words and his achievements, there is little expectation that this new plan will bear fruit in time", our correspondent said.