Crude at $45 may cut deficit

More documents

Recommendations

Info

international business 16 TUESDAY OMANDAILYOBSERVER l DECEMBER 13 l 2016 Oil surges after output cuts, strong dollar weighs A gas station attendant pumps fuel into a customer’s car at PetroChina’s petrol station in Beijing, China. — Reuters HONG KONG: Oil prices jumped to their highest levels in a year and a half on Monday after Opec and non-Opec producers agreed to cut oil output to ease a global glut, while the US dollar extended gains before a Federal Reserve meeting this week, at which a rate hike is widely expected. The agreement between Opec and a number of other oil producing nations was the first joint action since 2001, following more than two years of low prices that strained many government’s budgets and spurred unrest in countries from the Middle East to Latin America. Brent futures for February delivery rose 4.4 per cent to $56.72 per barrel, with US crude rising 4.8 per cent to $53.98 per barrel in Asian trade. The jump in oil prices comes in the wake of a renewed focus on inflation after data on Friday showed a rare spike in producer prices in China, prompting investors to worry that inflationary pressures are making a come back globally. “We have seen Opec and non-Opec producers agreeing, which is also boosting reflation expectation around the world,” said Chris Weston, an institutional dealer with IG Markets. The 10-year US Treasuries yield rose as high as 2.5 per cent in Asian trade, matching its 2015 peak. In another sign of the reflation trade, breakeven rates, the gap between yields of five-year US debt and a matching tenor in inflation-protected securities, were at two-month highs, indicating markets are expecting inflation to accelerate. European shares were expected to open higher following strong gains in the previous week which saw the STOXX 600 score its best week since January 2015. IG Markets expected Germany’s DAX and Britain’s FTSE to mark solid gains at the open. MSCI’s broadest index of Asia- Pacific shares outside Japan dropped 0.5 per cent after posting its biggest weekly rise in nearly three months last week. But energy plays in Hong Kong and Shanghai such as CNOOC and PetroChina were among the top gainers. Japan’s Nikkei ended up 0.8 per cent at its highest closing level since mid- December last year. Despite the bounce in some Asian stocks, broad investor sentiment remained cautious from a flows perspective with data showing a pick up in outflows from emerging markets and inflows toward US markets, according to Jefferies analysts. A preliminary survey from the University of Michigan on Friday showed US consumer sentiment index at its highest since January 2015, which may see the Fed strike a more confident tone on the US economic outlook at its final policy meeting of 2016 starting on Tuesday. Futures have virtually priced in a rate increase this week while the greenback gained fresh legs from the data. It was 0.2 per cent higher against the Japanese yen at 115.61. The euro changed hands at $1.0556. Analysts at BBH expect a rebound to 1.07 per dollar if the 1.05 level is not broken. Morgan Stanley economists expect six rate increases between now and end- 2018 and say that any dollar pause is an opportunity to add to long positions though some analysts adopted a more cautious stance. “The markets are expecting too much from the Fed and that is what latecomers to the dollar rally will be thinking,” said Cliff Tan, a markets strategist at Bank of Tokyo-Mitsubishi UFJ. Spot gold steadied at $1,157.76 per ounce after hitting its lowest levels since early February. — Reuters China should target 6.5 pc growth in 2017 SHANGHAI: China should set an economic growth target of around 6.5 per cent for 2017, although it is very likely that it will be able to exceed that level, the State Information Centre said on Monday. The State Information Centre is an official think-tank affiliated with the National Development and Reform Commission, a powerful economic planner. It suggested the growth target in an article carried in the China Securities Journal. Its recommendation comes as top leaders prepare to meet this month to map out an economic and reform agenda for 2017 during an annual Central Economic Work Conference. “In 2017, China’s economic operations will need to intensify efforts to alleviate deep-seated contradictions and structural problems,” the think-tank said, singling out the property market, social capital and regional financial risks as among its concerns. China’s economy grew 6.7 per cent in the third quarter from a year earlier and looks set to achieve the government’s full-year forecast of 6.5-7 per cent, buoyed by higher China’s economic operations will need to intensify efforts to alleviate deep-seated contradictions and structural problems OFFICIAL State Information Centre government spending, a housing boom and record bank lending. However, growing debt and concerns about property bubbles have touched off an internal debate about whether China should tolerate slower growth in 2017 to allow more room for painful reforms aimed at reducing industrial overcapacity and indebtedness. The government has said growth of at least 6.5 per cent is needed each year through to 2020 to meet a previously stated goal of doubling gross domestic product and per capita income by then, from 2010 levels. — Reuters Honda ties up with ride-hailing service Grab Iran seals $17 bn Boeing deal, close to Airbus order PARIS/DUBAI: Iran signed a $16.6 billion deal for 80 Boeing passenger jets on Sunday and was said to be close to another for dozens of Airbus planes to complete what would be the biggest package of firm contracts with Western companies since Iran’s revolution in late 1970s. The deal between IranAir and US planemaker Boeing includes 50 narrowbody 737 MAX aircraft and 30 longhaul 777s, split equally between the 777-300ER, which is badly in need of an order boost, and the 406-seat 777-9, which is under development. An Iranian official said that IranAir was also at the “very final stage” of formalising a deal with Europe’s Airbus, which led Western companies back into Iran with a provisional agreement for 118 planes when Tehran emerged from global sanctions in January. The Airbus deal, which is expected to involve a first batch of 50-60 jets, should be completed in the next couple of days, the official said. Also closing in on a deal to renew Iran’s ageing fleet, kept going by smuggled or improvised parts after decades of sanctions, European turboprop maker ATR said it had received US approvals needed to finalise the sale of up to 40 aircraft. The Boeing contract, the biggest Iran-US deal so far, clears a major A Honda logo is seen on media day at the Paris auto show, in Paris. — Reuters SINGAPORE: Southeast Asian ridehailing service Grab disclosed on Monday that Japan’s Honda Motor Co had invested in the firm, as part of a $750 million funding announced previously, to collaborate on motorbikehailing services. This is the latest tie-up of its kind in the auto industry, where carmakers such as Volkswagen, Toyota Motor Corp and General Motors have also struck deals with ride-sharing firms to hedge against a shift in the vehicle market away from private ownership. Grab, the biggest rival to ridesharing service Uber Technologies Inc in Southeast Asia, said Honda had agreed to invest an undisclosed amount in the firm, and the two would form a technical hurdle toward implementing last year’s pact between Iran and world powers to reopen trade in return for curbs on Iran’s nuclear activities. However, political opposition could yet threaten a deal that would provide a welcome boost to Boeing’s order book after a year in which it has lagged behind rival Airbus. Congressional Republicans are trying to counter last year’s nuclear accord, with the US House of Representatives passing a bill last month seeking to partnership to develop the ride-sharing technology and related driver education programmes. The Honda investment is a part of the $750 million funding announced in September, said Ming Maa, President at Grab, which provides services such as taxi and motorbike-hailing, car-pooling, delivery and mobile payments. “We are in the planning stages on exactly what a full partnership will look like, and there are many different prongs of that. One prong would obviously include selling Honda motorbikes within the region,” Maa said. — Reuters Farhad Parvaresh (L), Chairman and Managing Director of IranAir, shakes the hand of Fletcher Barkdull (R), Boeing Regional Director, after signing an agreement in the capital Tehran on Sunday. — AFP restrict financial transactions by US banks in an effort to block the sale of Western passenger jets to Iran. The Iranian official said the Boeing deal was subject in part to further agreements on financing, but added that money from the deal would not pass through the US financial system. Financial sources said Boeing has a financing plan for 15 777-300ER jets, which are expected to be delivered from 2018, but the rest of the financing may still have to be negotiated. — Reuters BIZ BRIEF Demonstrator holds a placard during a protest against Brazil’s President Dilma Rousseff at Paulista Avenue in Sao Paulo. — Reuters Brazil bribery probe hits projects in other countries BRASILIA: Construction projects in at least six Latin American countries have been impacted by a major Brazilian corruption scandal that saw companies pay bribes for contracts, a regional investigation showed on Sunday. Progress in “Operation Car Wash” — a massive probe into embezzlement and bribery at the Brazilian state oil firm Petrobras — led the Brazilian Development Bank (BNDES) to suspend the disbursement of $3.6 billion for 16 projects in Argentina, Venezuela, Dominican Republic, Cuba, Honduras and Guatemala, according to a report by the Latin American press consortium Diarios America (GDA) published in Brazil’s O Globo newspaper. Grants were awarded between 2003 and 2015 under the governments of left-wing presidents Luiz Inacio Lula da Silva and Dilma Rousseff. In Venezuela, which received $3.1 billion for six construction projects, the expansion of the Caracas metro is now compromised. In the Dominican Republic, which received $2.5 billion, the completion of road works and the construction of a thermoelectric plant are at stake. Projects in the African countries of Angola, Ghana and Mozambique are also under review. The GDA report said the projects were all under the charge of Brazil’s largest construction companies now embroiled in Operation Car Wash: Odebrecht, Andrade Gutierrez Camargo Correa, Queiroz Galvao and OAS. The investigation indicated that seven countries — Argentina, Chile, Costa Rica, Guatemala, Panama, Peru and Uruguay — requested information from Brazilian prosecutors in order to investigate contracts under suspension. — AFP Maduro orders 100-unit bill out of circulation CARACAS: Venezuelan President Nicolas Maduro on Sunday signed an emergency decree ordering the country’s largest banknote, the 100 bolivar bill, taken out of circulation to thwart “mafias” he accused of hoarding cash in Colombia. The announcement came as the government of Venezuela — a country in the midst of an economic crisis and crippled with the world’s highest inflation — prepares to issue new banknotes and coins in values up to 200 times the highest denomination currently available. The 100 bolivar bill is worth fewer than three cents of a dollar at current market rates. One bill can barely cover the cost of a piece of candy, while a stack of 50 notes is needed to buy a hamburger. “In accordance with my constitutional powers and through this emergency economic decree, I have decided to take the 100 bolivar bill out of circulation in the next 72 hours,” the president said on Sunday on his TV show “Contact with Maduro.” Maduro said the move was necessary after a Venezuelan investigation found that billions of bolivars, in bills of 100, were stashed away by international mafias, mainly in Colombian cities but also in Brazil. He said the national banks were “accomplices in this plot,” seeking to “destabilise” the economy and led by an NGO “contracted by the US Department of Treasury.” He did not elaborate. Maduro ordered “all land, air and sea possibilities closed immediately so that they do not return those notes that were taken.” “You can stay outside with your scam,” Maduro said, calling for the “maximum penalty” against the criminals. — AFP Shopping bags of German retail chain Kaiser’s Tengelmann seen standing in front of a Kaiser’s supermarket in Berlin. Germany’s largest supermarket group Edeka and rival Rewe on last Friday agreed a deal to take over the loss-making Kaiser’s chain, potentially ending years of uncertainty over the future of the group. The two companies will send a purchase contract to the German Economy Ministry, which needs to approve the deal. — AFP UK home sales solid, prices to rise in 2017 LONDON: Buoyant property sales in England and Wales in November show that the housing market has steadied after Britain’s decision to leave the European Union and asking prices for homes look set to rise by 2 per cent next year, property data firm Rightmove said. Sales agreed were up by 5.2 per cent last month compared with November 2015, Rightmove said. “There was a bout of jitters with the unexpected referendum result, albeit now seemingly short-lived, but more may arrive after Article 50 is invoked,” Miles Shipside, Rightmove Director and Housing Market Analyst, said. British Prime Minister Theresa May has said she will trigger the start of formal Brexit negotiations with the EU before the end of March, based on Article 50 of the bloc’s treaty. “For the time being any nervousness is being over-ridden by high demand for the short supply of suitable homes for sale in the lower and middle market in many parts of the country,” Shipside said. Sales were up in all regions except London in November. The capital’s central area was expected to remain weak with prices falling by a further 5 per cent in 2017 while outer London was expected to match this year’s roughly 3 per cent price rise. A Reuters poll of economists, estate agents and brokers conducted last week showed house prices across the country were likely to climb 2.0 per cent next year, half the pace expected before the Brexit vote. — Reuters
perspective business OMANDAILYOBSERVER 17 TUESDAY l DECEMBER 13 l 2016 * INTEREST RATE Fed turns to Trump with rate hike nearly in the bag THE Federal Reserve inaugurates the Trump era this week with a near-certain interest rate increase and new economic forecasts providing a first glimpse into whether the US election has reshaped the central bank’s growth and inflation outlook. Fed fund futures show a 97 per cent probability that the Fed will lift rates by a quarter of a percentage point at the end of its two-day policy meeting on Wednesday, according to the CME Group. All 120 economists in a Reuters poll expect a rate hike in the wake of a string of solid US economic reports. More telling will be whether the stock market rally and jump in bond yields triggered by Trump’s November 8 victory will push the Fed to an inflection point of its own and a higher projected pace of rate increases for 2017 and beyond. The Republican businessman is inheriting a good economy, one that grew by 3.2 per cent in the third quarter, the fastest pace in two years. There are, however, concerns that his plan to reduce taxes, cut regulation and increase infrastructure spending could not just boost the economy but also fuel higher inflation. Since first published in 2012, the Fed’s quarterly “dot plot” of projected interest rates has generally moved in one direction — down — and any postelection change will show whether policymakers expect Trump’s policies to shake things up. As of September, Fed officials’ median projection was for two rate increases A view shows the Federal Reserve building in Washington. — Reuters next year and a long run “neutral” level of 2.6 per cent. A rate increase this week would be the first since last December and only the second since the 2007-2009 financial crisis. “Their path is going to move up faster and a little sooner,” said Steve Rick, chief economist for CUNA Mutual Group. He said the economy was running at its potential, and that was the Fed’s cue to “exit stage right” and steadily move rates to normal. Fed officials have long hoped that other government policies would take the place of monetary engineering, which some believe may have lost its effectiveness in lifting economic growth. They have warned in recent weeks that any new government spending should specifically be designed to boost productivity in an economy that is already near full employment and facing a high public debt burden. The Fed’s new forecasts will indicate if policymakers feel that the monetaryto-fiscal handover is on the horizon, or need more time for the Trump administration’s plans to become more detailed and move through Congress. Fed Chair Janet Yellen is scheduled to hold a press conference at 2:30 pm (1930 GMT) on Wednesday to elaborate on the economic outlook and policy statement. She’ll have a broad set of issues to cover since her last press conference in September — from the Federal Open Market Committee meeting itself, to the likelihood she will be replaced in early 2018 and the risks she foresees from the Trump agenda. Trump repeatedly attacked Yellen during the election campaign, accusing her of holding down rates to help his Democratic rival. Since the election, he has expressed his disapproval of corporate America, criticising Boeing, and took credit for a deal to keep hundreds of jobs at an Indiana plant from being moved to Mexico. The president-elect also will be under scrutiny after this week’s Fed meeting for clues about how he plans to handle his relationship with the central bank. “There is a real risk that he could be openly critical of the decision to raise rates next week,” Paul Ashworth, an economist with Capital Economics, said in a note last week. That could upset markets and raise serious issues about whether Trump intends to leave the Fed alone or try to influence its decisions. Top US elected officials, in particular the president, typically avoid criticising the Fed’s shortterm rate decisions, emphasising instead the need for monetary policy to be set independently. “If he remains silent after the announcement to raise interest rates next Wednesday, then we can begin to assume that it will be business as usual for the Fed,” Ashworth wrote. WATCHING THE MARKETS: Trump’s plan to cut taxes and regulation and funnel fresh billions into capital projects must pass Congress, and it may be well after that before any new programmes meaningfully effect economic forecasts. But policymakers also watch the markets closely. It may be hard for the Fed to stick with its ultra-slow pace of rate hikes if a major tax overhaul and fiscal spending plan are unleashed. TD Securities analysts said that fiscal policy at this point in the economic recovery could prompt “an inflationary demand shock” that adds nearly a per- Fed fund futures show a 97 per cent probability that the Fed will lift rates by a quarter of a percentage point at the end of its two-day policy meeting on Wednesday. centage point to economic growth, but spurs the Fed to raise rates much quicker than expected — by nearly an extra percentage point per year. That scenario of a central bank caught behind the curve and forced to act faster is one that Yellen and other policymakers have said they hope to avoid out of fear it could prompt a recession. Fed officials in recent days have acknowledged the Trump agenda may cause them to switch gears, though it is not clear how soon. “At this juncture, it is premature to reach firm conclusions,” New York Fed President William Dudley said last week. But, since Trump won the election, Dudley added, “the stock market has firmed, bond yields have risen and the dollar has appreciated... Market participants now anticipate that fiscal policy will turn more expansionary and that the (FOMC) will likely respond by tightening monetary policy a bit more quickly than previously anticipated.” — Reuters * HARD BREXIT Banks want to be subject to EU laws for five years Large banks in Britain want the UK government to allow their industry to remain subject to EU laws for up to five years after Brexit, a move likely to enrage euro sceptics who want to break away from the bloc’s legal system as soon as possible. The banks are also pressing the government to allow the European Court of Justice to rule on decisions related to their businesses during that period, according to a document reviewed by media. The document was drawn up by law firms on behalf of banks lobbying the government for a departure in stages from the EU. It has the support of major banks, has been shared with the Treasury and is the most detailed request yet by Britain’s financial industry for a transitional period to give it longer to adapt to Brexit, bankers said. Banks in Canary Wharf financial district are seen from the top of the ArcelorMittal Orbit in east London. — Reuters “The report has been received as a fairly serious piece of work. It focuses on process. “Transitional arrangements are likely change and the sooner they wake up and accept it the better.” the legal underpinning of a transitional essential,” the document says. “This is The document was drawn up by arrangement,” according to one banker If no transition deal is important in order to avoid potential three of Britain’s biggest law firms — at a large international firm. “It’s a damage to the “real economy” that is Linklaters, Freshfields and Clifford agreed, there is a risk that heavyweight legal piece of work.” reliant upon uninterrupted access to Chance — and says it is “intended to The British government is currently some banks may not be financial services.” provide technical support to those divided on whether to support demands able to move parts of their The demands for special treatment developing a negotiating position for for transitional arrangements — and if for an industry scorned by Britons the UK.” so, in what form — reflecting diverging operations out of Britain since the financial crisis may put it on All the law firms declined to views about the best way to leave the or set up new British a collision course with swaths of the comment. Financial services firms face EU and concerns about a backlash from subsidiaries in time. public and politicians who voted for some of the biggest challenges of all those who campaigned and voted for Brexit because they wanted Britain to sectors responding to the vote to leave Brexit. While some Treasury officials are backing the move, the Brexit Minister withdrawal period that will begin when the government invokes Article 50 of regain control of its law. OPPOSITION Hardline supporters of Brexit are the EU because large areas of their businesses are governed by passporting rules, which allow them to operate David Davis and Prime Minister the EU’s Lisbon Treaty. opposed to any transitional arrangement across Europe. Theresa May are yet to commit publicly to supporting any deal. The Treasury said in a statement Finance Minister Philip Hammond is closely listening to the financial sector’s views. The Department for Exiting the European Union referred Reuters to the Treasury for comment. The document warns of the potential shock to the British and European economy from a loss of critical financial services if banks do not secure a If no transition deal is agreed, there is a risk that some banks may not be able to move parts of their operations out of Britain or set up new British subsidiaries in time, the document says, running the risk that the banks may have to halt their EU business activities abruptly. It would normally take banks as long as three years to relocate operations, according to the document, but due to the large number of firms seeking to do this simultaneously regulators may be worrying it could become permanent as final trading terms can take years to agree. Richard Tice, Co-chairman of the Leave Means Leave campaign, which is pushing for a so-called “hard Brexit”, where Britain leaves the EU’s single market in order to impose controls on immigration, said the banks are exaggerating the potential disruption. “This is a nonsense. It is just the banks, frankly, not dealing with the Finance accounts for about 10 per cent of Britain’s economy, a larger share than in other big economies, highlighting its importance as the government embarks on talks that may determine if it remains a leading global financial centre for years to come. The document argues that Britain must secure an agreement with Brussels — around the time of triggering Article 50 — for a period of delay following the two-year exit process for it to have any transition phase beyond the two-year flooded with requests, slowing down the issue,” he said. “The country voted for impact. — Reuters * NO BAILOUT Italy’s BMPS to go with private sector-led rescue CÉLINE CORNU Italy’s troubled Monte dei Paschi di Siena (BMPS) bank on Sunday announced it would go ahead with plans to seek a private sectorled rescue, narrowly avoiding the need for a government bailout. The world’s oldest bank’s woes have raised concerns over the euro zone’s third-largest economy, particularly in the aftermath of prime minister Matteo Renzi’s resignation after a crushing referendum defeat. The bank’s prospects appeared somewhat less alarming on Sunday however, after Italian President Sergio Mattarella asked Renzi’s ally Paolo Gentiloni to form a new government. BMPS’s stock tumbled on Friday over reports that the European Central Bank had denied it more time to raise the cash it needed to The logo of Italian bank the Monte Dei avoid being wound down, Paschi di Siena in Rome, is seen in this image. — AFP triggering speculation it would be forced to seek a government bailout. The bank — seen as the weak link in Italy’s economy — had asked to be given until January 20 to avoid collapse. The request was reportedly refused, with the ECB’s board believed to have ruled that two weeks of extra time would be of little use in turning around the historic bank. In a statement published on Sunday after a board meeting in Milan, BMPS said it had “decided to go ahead” with plans to seek a market-led rescue by December 31. The bank had initially announced its plan to seek a private sector-led rescue in July. The bank, whose stock has fallen more than 80 per cent this year, plans the sale of 27.6 billion euros ($29 billion) in non-performing loans. It also aims for a capital injection of up to five billion euros. BMPS has already collected more than a billion euros by converting bonds into shares — but it still has four billion more to go before it is in the clear. According to reports in the Italian press, up to two billion euros could be raised by allowing private investors to convert bonds into shares. Though it remains unclear whether the bank’s plan will actually work, BMPS appeared on Sunday to have avoided the worst-case scenario. Italian media reports say the Qatar Investment Authority — the Gulf nation’s state-owned holding company — may be willing to contribute another billion euros. “Qatar is ready and willing to contribute the sum that was mentioned,” a source close to the BMPS board reportedly said. BMPS’s prospects appeared more favourable on Sunday, particularly after Gentiloni was named prime minister. — AFP
Page 1 and 2: TUESDAY | DECEMBER 13, 2016 | RABEE
Page 3 and 4: insideoman oman OMANDAILYOBSERVER 3
Page 5 and 6: QATAR EMBASSY MARKS NATIONAL DAY om
Page 7 and 8: IN BRIEF China fighter jet claim
Page 9 and 10: analysis OMANDAILYOBSERVER 9 TUESDA
Page 11 and 12: CONFUSION: For voters, the outcome
Page 15: omaninternational business OMANDAIL
Page 19 and 20: classifieds Situation Vacant Situat
Page 23 and 24: football sport OMANDAILYOBSERVER 23
Page 25 and 26: @climatechange Arafat’s UN speech
Page 27 and 28: @environment Nasa launches Relay 1

Crude at $45 may cut deficit

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?