BBC News - South Africa's Pravin Gordhan named third finance minister in week

Image copyrightReuters

Image captionPravin Gordhan served as South African finance minister from 2009 until last year

South African President Jacob Zuma has replaced newly appointed Finance Minister David van Rooyen with the more experienced Pravin Gordhan in a surprise Sunday night announcement.

On Wednesday, the president sacked previous Finance Minister Nhlanhla Nene in a move that sent the rand to record lows.

His replacement for less than a week, Mr van Rooyen, was a little-known MP.

The moves come amid widespread concern over South Africa's struggling economy.

Mr Gordhan was widely respected when he served as South Africa's finance minister from 2009 until 2014.

His re-appointment sent the currency up, recovering from just over 16 rand to the dollar to about 15 by Monday morning, according to currency site xe.com.

But the new finance minister has a hard job with unemployment currently above 25%, growth sluggish and credit rating agency Fitch recently downgrading South Africa to one notch above "junk" status.

Image copyrightGetty Images

Image captionThe sackings have increased pressure on South African President Jacob Zuma

The brief tenure of Mr van Rooyen and the uncertainty it caused may have damaged South Africa's reputation further, analysts say.

Mohammed Nalla, head of research at Nedbank Capital, said having a finance minister serve just a few days did not bode well.

"International investors are probably thinking: 'Why didn't the president make a much more considered decision in the first place?'" he said.

'Russian roulette'

The leader of the opposition Democratic Alliance, Mmusi Maimane, said: "This is reckless by President Zuma - he is playing Russian roulette with the South African economy."

A statement from Mr Zuma's office said he had "received many representations" to reconsider his decision to appoint Mr van Rooyen.

"As a democratic government, we emphasise the importance of listening to the people and to respond to their views," it added.

Fitch, which downgraded South Africa earlier this month, said on Thursday that Mr Nene's sacking "raised more negative than positive questions".

Image copyrightGetty Images

Image captionThe sacking of Finance Minister Nhlanhla Nene last week led to a sharp decline in the value of the rand

Mr Nene's reluctance to approve a plan to build several nuclear power stations at a cost of up to $100bn is thought to have contributed to his removal as finance minister.

Mr van Rooyen will take over from Mr Gordhan as minister of co-operative governance and traditional affairs.

Marches to call for Mr Zuma's removal as president are being planned for five cities in South Africa on Wednesday - a public holiday.

The US Federal Reserve is expected to raise interest rates on the same day in a move that could put economies in countries like South Africa under further pressure.

Former Health Minister Barbara Hogan on Friday called on Mr Zuma to resign. The highest-profile ANC member to oppose Mr Nene's removal, she said that the president had crossed a line and needed to be held to account.

Razia Khan, an analyst with Standard Chartered bank, said the week's turmoil was "perhaps the first instance since 2007 that Zuma has come under severe pressure within the party".

Reuters News - No cheer as China yuan hits four-and-a-half-year low, oil at seven-year low

A man walks past an electronic board showing Japan's Nikkei average (top of upper right screen) and the Japanese yen's exchange rate against against the U.S. dollar outside a brokerage in Tokyo, Japan, December 4, 2015.

REUTERS/TORU HANAI

World stocks were on the brink of a two-month low on Friday, as beaten-down oil prices and a slide in China's yuan to 4-1/2 year lows left markets in a somber mood.

Volatile oil markets and worries about China, the world's biggest commodities consumer, have pressured many markets ahead of a widely anticipated interest rate hike by the U.S. Federal Reserve next week.

MSCI's world stock index .MIWD00000PUS fell for a fifth straight day as emerging markets tumbled again and European shares .FTEU3 opened at a two-month low while the dollar steadied.

"We are in risk-off mode," said Piotr Matys, emerging market currency strategist at Rabobank in London.

"Another round of selling in commodities with oil prices at new lows has sent global stocks lower and emerging market commodity currencies are under pressure."

The Russian rouble RUB= tumbled 2 percent against the dollar, with focus on a meeting of the Russian central bank later on Friday.

Investors were also waiting for U.S. data which could cement expectations that the Fed is gearing up to hike rates for the first time in a decade next week.

U.S. retail sales, inflation and consumer sentiment data is due between 8.30 a.m ET and 10 a.m. ET.

European shares .FTEU3 fell 0.7 percent, declining for a fourth straight session, while MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS hit a two-month low and posted a weekly loss of just over 3 percent.

YUAN LOWER AGAIN

China's yuan fell to its weakest in 4-1/2 years CNY=CFXS at 6.4564 per dollar and posted its longest weekly losing streak in a decade, dragging emerging Asian currencies lower, on concerns about its slowing economy and expectations of a U.S. rate hike next week.

Lower daily fixings for the currency by China's central bank have also raised questions about how far Beijing intends to let the currency depreciate.

"A U.S. rate hike would have a major impact on money flows out of emerging markets including Hong Kong and China," said Linus Yip, chief strategist at First Shanghai Securities.

"Also, if the yuan continues to depreciate, that's negative to stocks as well, because it means investors are not confident about China's economic restructuring."

Chinese shares closed lower .CSI300 ahead of a spate of economic data scheduled to be released on Saturday. ECONCN

China's economy is on track to post about 7 percent annual growth in 2015, an official at the country's top economic planner said at a briefing on Friday.

NEW LOW FOR OIL

Crude oil prices remained at levels not seen since early 2009 as output in the Middle East continued to rise despite an already huge global glut.

Brent crude futures LCOc1 were down 0.5 percent at $39.52 a barrel, not far off almost seven-year lows hit earlier in the session at $39.38 a barrel.

The sharp fall in oil prices since OPEC said last week it would keep production high has fueled expectations for lower inflation, helping push down European government bond yields.

The dollar index .DXY, which tracks the U.S. currency against a basket of six major rivals, edged down slightly. It was on track for a weekly loss of about 0.5 percent after investors trimmed dollar-long positions before the Fed meeting.

Fed fund futures place an 85 percent chance of the Fed raising rates at its Dec. 15-16 meeting. A recent Reuters poll also showed that all but one of 18 brokerages that deal directly with the Fed expect a rate increase.

The euro EUR= edged up about 0.2 percent to $1.0965, after comments from the European Central Bank's Ewald Nowotny this week raised doubts about the extent to which U.S. and European monetary policy will diverge.

Emerging market stocks .MSCIEF were down for an eighth day running and on course for their worst week since September.

South Africa's rand ZAR=D3 hit a new record low following the abrupt dismissal this week of respected Finance Minister Nhlanhla Nene.

(Additional reporting by Lisa Twaronite in Tokyo)

BBC News - Japan's economy avoids a technical recession

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Image captionRevised figures show Japan's economy expanded at an annualised 1% in the three months to September

Japan's economy avoided a technical recession in the three months to September, according to revised official numbers released on Tuesday.

Preliminary numbers released last month indicated the economy shrank at an annual pace of 0.8% during the period.

The preliminary figures meant it was Japan's second consecutive quarterly contraction, which constitutes a technical recession.

However, the new data suggests the economy grew at annual pace of 1%.

Japan, which is the world's third-biggest economy, has been in recession four times since the global financial crisis.

On a quarterly basis, the latest economic numbers show gross domestic product (GDP) for the three months to September grew 0.3% - instead of initial report which showed a contraction of 0.2%.

Analysts said Tuesday's numbers were stronger than expected.

"What's more, GDP only shrank by 0.1% quarter on quarter [in the three months to June] instead of the earlier reported 0.2%," said economist Marcel Thieliant of Capital Economics.

Mr Thielant said one reason for the revision was stronger business investment, which edged up by 0.6% instead of the preliminary reported 1.3% quarter on quarter fall.

BBC News - ECB moves to boost eurozone economy

The European Central Bank (ECB) has moved to bolster the eurozone economic recovery by cutting a key interest rate and extending its stimulus programme.

The overnight deposit rate was cut from -0.2% to -0.3%, to push banks to lend instead of parking money at the ECB.

The ECB also extended its monthly €60bn stimulus programme by six months to March 2017, but left its main interest rate on hold at a record low of 0.05%.

Many analysts were underwhelmed by the news and had forecast tougher measures.

ECB president Mario Draghi told a news conference that its bond-buying stimulus programme, or quantitative easing (QE), was working.

But an extension of QE was needed to tackle prolonged low inflation and get it back towards the ECB's 2% target, he said. QE would now run to at least March 2017, from

'Tinkering'

The cut in the interest rate on overnight bank deposits means that banks in effect pay more to the ECB for holding their reserves.

The policy is designed to make it more profitable for banks to offer loans to consumers and businesses, ensuring a free flow of money.

However, most analysts had been expecting the ECB to take more drastic action.

"Draghi has over promised and under delivered," said Patrick O'Donnell, investment manager at Aberdeen Asset Management.

"Everyone was expecting Draghi to be the white knight for Europe once again and he hasn't really showed up. Today's measures amount to tinkering around the edges." He added: "Markets won't be particularly impressed."

The main stock markets in Germany and France, which had been rising, turned negative soon after the ECB's announcement. Frankfurt's Dax was down 2.5%, while France's Cac index was 1.96% lower.

Ahead of the announcement, the euro had been weakening. However, when the measures fell short of expectations the euro surged against the dollar, rising more than two cents to above $1.08.

Oil effect

The ECB is tackling low inflation, currently 0.1% and a potential obstacle to stronger growth.

Mr Draghi told the news conference that eurozone inflation for 2016 is expected to reach 1% rather than the 1.1% previously forecast. For 2017, inflation is set to reach 1.6%, down from the previous prediction of 1.7%.

Inflation in the eurozone has been below zero - that is, prices were falling - as recently as September. This has been because of falls in international energy prices, particularly crude oil.

But "core inflation", which strips out volatile food and energy prices, is also low, hovering persistently around 1%.

The latest figure, for November, was down on the previous month.

---

Analysis: Andrew Walker, economics correspondent

The ECB has "under-delivered" to quote one economist. It's quite a widely shared view.

Perhaps the most telling verdict is from the currency markets. The euro is now stronger. Why? Because the stronger medicine that was expected would have tended to drive down interest rates in eurozone markets even further making it more lucrative to buy assets in other currencies instead.

Two things have disappointed the markets. They were looking for a commitment to increase the amount the ECB and national central banks spend each month on QE.

Instead, Mr Draghi said it would go on longer but at the same monthly rate. And the markets expected a bigger cut in the interest rate on banks' deposits at the ECB. It's already below zero which means the banks are being charged to park excess funds at the central bank.

A bigger cut would have given them an even bigger incentive to lend more rather than sit on idle cash.

Reuters News - Fed's Yellen says'looking forward' to day of first rate rise in decade

Federal Reserve Chair Janet Yellen said on Wednesday she was "looking forward" to a U.S. interest rate rise that will be seen as a testament to the economy's recovery from recession.

Fed policymakers are widely seen raising interest rates for the first time in almost a decade at their next meeting on Dec. 15-16, but they continue to parse data and trends carefully given the uneven nature of the U.S. recovery.

In her remarks to the Economic Club of Washington, Yellen expressed confidence in the U.S. economy, saying job growth through October suggested the labor market was healing even if not yet at full strength.

Yellen also reaffirmed her view that the drag on U.S. economic growth and inflation from weakness in the global economy and falling commodity prices would moderate next year. U.S. consumer spending was "particularly solid", she noted.

"When the Committee begins to normalize the stance of policy, doing so will be a testament ... to how far our economy has come," she said, referring to the Fed's policy-setting committee. "In that sense, it is a day that I expect we all are looking forward to."

Investors are already betting the Fed will lift its benchmark federal funds rate this month from the zero to 0.25 percent range where it has been held since 2008. Economists also see a strong chance of a December rate rise.

The U.S. dollar strengthened on Wednesday and stocks fell on Wall Street, after Yellen's comments.

"I was a little surprised she sounded as hawkish as she did given we're two days away from the non-farm payrolls report and a couple of weeks away from the Fed FOMC meeting," said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

Yellen also is due to testify on the economic outlook before a joint Congressional committee on Thursday.

RELATED COVERAGE

• › Yellen signals readiness for Fed rate increase

"Yellen gave a fairly positive assessment of the economy that would be consistent with the Fed raising rates at their December meeting," said Vassili Serebriakov, currency strategist at BNP Paribas in New York.

As in previous speeches and public appearances, Yellen said the timing of the first U.S. rate increase in nearly a decade was not as important as the path of subsequent rises which policymakers expect will be gradual. Waiting too long to raise rates could deal an accidental blow to the economy, she warned.

"An abrupt tightening would risk disrupting financial markets and perhaps even inadvertently push the economy into recession," she said.

Responding to a question after her speech, she said the Fed would weigh incoming data to set the pace of hikes and that policymakers do not expect a mechanical path of rate moves. The Fed schedules policy reviews eight times a year and in the past it has often raised rates at successive meetings.

"This may turn out to be a very different cycle than past cycles," she said.

BEIGE BOOK SEES ONGOING EXPANSION

In its Beige Book report of anecdotal information on business activity collected from contacts nationwide, published on Wednesday, the Fed said U.S. economic activity continued to expand at a modest pace in most regions from early-October through mid-November.

The Fed said consumer spending increased in nearly all districts. Manufacturing activity remained mixed, the Fed added, with exports continuing to fall as a result of the strong U.S. dollar, low commodity prices and weak global demand.

BY JASON LANGE AND HOWARD SCHNEIDER

BBC News - Australian economy picks up pace on exports

Image copyrightAFP

Image captionExports gave a big boost the economic growth in the third quarter

Australia's economy grew more than expected, picking up pace in the second half of the year as exports rose.

The economy grew 2.5% in the three months to September from a year ago, compared with 1.9% in the previous quarter and above forecasts of 2.4%.

It grew 0.9% from the previous quarter, also beating expectations of 0.8%.

Despite a slowdown in its biggest trading partner, China, and falling commodity prices, exports rose, giving the economy a boost.

Exports jumped 4.6% in the quarter, adding one percentage point to gross domestic product (GDP) growth.

This was during a period when the Australian dollar dropped 9% on record low interest rates in the country as the central bank tried to boost economic activity.

The Australian dollar surged to its highest level in almost seven weeks to $0.7345 after the growth figures were released.

Record low rates

Just a day earlier, the Reserve Bank of Australia had left its key interest rate unchanged at a record low of 2%, and also provided an upbeat view of the economy.

But Paul Dales, chief Australia economist at research firm Capital Economics said that the strong performance in exports is unlikely to be sustained.

"With overseas demand soft, we are not convinced that net trade can completely fill the hole [from declining mining investment ahead]," he said in a note.

"This is the main reason why we doubt that economic growth will accelerate significantly next year."

Australia's economy has been seeing moderate growth in recent years after investment in the mining sector - which had been a key driver for growth over a decade - peaked.

Resource companies in the country are in the midst of scaling back operations and cutting production costs to cope with slumping commodity prices.

In reaction to the growth figures, Sydney's benchmark S&P/ASX 200 closed down 0.2% to 5,258.30 points on Wednesday.

Bloomberg News - Reserve Bank of Australia Holds Rates at Record-Low 2%

Australia’s central bank extended its interest-rate pause for a seventh month as the labor market remains resilient and the economy expands steadily despite a plunge in mining investment.

Reserve Bank of Australia Governor Glenn Stevens and his board kept the cash rate at a record-low 2 percent Tuesday, as forecast by all 29 economists. The decision follows an improvement in consumer confidence and a jump in employment in October, suggesting there was no immediate need to add further stimulus.

“While GDP growth has been somewhat below longer-term averages for some time, business surveys suggest a gradual improvement in conditions in non-mining sectors over the past year,” he said in a statement after the meeting in Perth. “This has been accompanied by stronger growth in employment and a steady rate of unemployment.”

Policy makers reduced borrowing costs by 2.75 percentage points since late 2011 to bolster industries outside mining, which is about half way through the unwinding of an investment boom. While housing construction has surged in the low-rate environment,  other firms have proved more reluctant to spend, and policy makers reiterated that low inflation gave them scope to ease if needed to support growth.

The Australian dollar was slightly higher and trading at 72.66 U.S. cents at 3:02 p.m. in Sydney from 72.56 cents before the rate announcement.

Net Exports

Data released earlier showed net exports contributed 1.5 percentage points to economic growth in the third quarter, encouraging some economists to lift their forecasts for gross domestic product data due Wednesday. GDP is forecast to have expanded 0.8 percent last quarter and grown 2.4 percent from a year earlier.

“The board again judged that the prospects for an improvement in economic conditions had firmed a little over recent months and that leaving the cash rate unchanged was appropriate,” Stevens said. “Low interest rates are acting to support borrowing and spending.”

Credit data released Monday showed lending to businesses rose 6.6 percent in October from a year earlier, the biggest gain in six-and-a-half years. The RBA maintains that the economy is traveling pretty well given the scale of the drop in mining investment, with the unemployment rate stabilizing at a little under 6 percent.

Since the RBA’s November meeting, the Australian currency has been steady while prices of the country’s largest export, iron ore, have fallen. The most-active iron ore futures in Singapore Monday sank below $40 a metric ton for the first time on concern that the economic slowdown in China will cut demand as supplies from the largest miners climb.

“The Australian economy is actually performing as well as we could hope in the middle of a structural economic slowdown in China,” said Jasmin Argyrou, Aberdeen Asset Management’s senior investment manager. “Low inflation does not provide reason to ease at this time but gives the RBA flexibility to respond should an unexpected shock occur.”

by Michael Heath