Tag Archives: Capital Economics

Stock Futures Point Higher Ahead of Numerous Earnings Reports

By IBTimes

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Richard Drew/AP

By Sreeja VN

U.S. stock futures point to a higher open Wednesday, ahead of the publication of new home sales data and quarterly earnings statements from major American companies, including Facebook, Ford, PepsiCo, Qualcomm, Visa and Boeing.

Futures on the Dow Jones industrial average (^DJI) were up 0.2 percent, while futures on the Standard & Poor’s 500 index (^GSPC) were up 0.3 percent and those on the Nasdaq 100 Index were up 0.9 percent.

Investors are expected to focus on new home sales data for June, to be released by the Commerce Department, at 10 a.m. Eastern time. Analysts expect new home sales — the annualized number of new single-family homes that were sold during the previous month — may probably increase to 485,000 in June from 476,000 in the previous month.

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New home sales had recorded a better-than-expected gain in May, helped by a pick-up in demand, while existing home sales data for June, which was released Monday, showed a decline. Analysts attributed the fall to a recent hike in mortgage interest rates and believe new home sales could still increase in June.

“With the NAHB current sales index still rising strongly, we have penciled in an increase in new sales from 476,000 in May to 485,000,” Paul Diggle, an economist with Capital Economics, wrote in a research note.

On the earnings front, a number of major companies, including Caterpillar (CAT), Eli Lilly & Co. (LLY), EMC Corp. (EMC), US Airways Group, (LCC), Ford (F), PepsiCo (PEP) and Boeing (BA), will announce quarterly earnings before market hours. Visa (V), Western Digital (WDC), Qualcomm (QCOM) and Facebook (FB) are to announce their earnings after markets close Wednesday.

Markit Economics’ flash Purchasing Managers’ Index, or PMI, for the manufacturing sector in the month of July, is scheduled to be released at 9 a.m. Eastern time. The index, which measures the activity level of purchasing managers in the manufacturing sector, is expected to show a reading of 52.5 in July, up from the 51.9 recorded in June. A reading below 50 indicates contraction.

European markets were trading higher Wednesday, as investor sentiments were buoyed after flash PMIs for the euro zone’s manufacturing and services sectors beat expectations. The 17-nation eurozone’s manufacturing PMI for July came in at 50.1 compared to 48.8 in the previous month. The services PMI registered a reading of 49.6 compared to 48.3 in June.

Germany’s manufacturing PMI came in at 50.3 in July, up from 48.6 in June while the nation’s services PMI was at 52.5 in July, up from 50.4 in June. Meanwhile, in neighboring France, while the …read more

Source: FULL ARTICLE at DailyFinance

China's Interest-Rate Reform: Starting Or Stalling?

By Gordon G. Chang, Contributor  On Friday, the People’s Bank of China announced it was eliminating the floor on lending rates.  Prior to the change, which was effective yesterday, banks could not charge less than 30% of the benchmark rate set by the PBOC, the nation’s central bank.  Reaction to the move has been—with justification—overwhelmingly positive. “Previously, people had thought the central bank would only gradually lower the floor on lending rates,” said Wang Jun of the China Centre for International Economic Exchanges to Reuters.  “Now they scrapped the floor once and for all.” Mark Williams of Capital Economics, calls the change “one of the biggest steps they could have taken.”  Williams is correct, but only in a symbolic sense.  In the first quarter of this year, only around 11% of loans were made below the benchmark rate.  Today, that number is much smaller.  Liquidity remains tight after the two spikes in interest rates last month, and in recent weeks no lender was providing funding at rates near the floor.  In short, this reform will have no practical effect on the cost of money in China in the near term. Nonetheless, this change, as analysts uniformly tell us, sends a signal about the plans of Premier Li Keqiang, the country’s new economic czar.  But what is that signal? Most analysts think the PBOC’s announcement signals a quick removal of the cap on rates paid by banks to depositors.  Banks now may not pay more than 10% above the benchmark rate of 3%.  Abolishing the deposit ceiling would be in line with a widely praised promise Li’s State Council made in March. Most observers expect a change soon.  Everyone, therefore, is waiting for the Communist Party’s Third Plenum, a meeting typically held in the fall of the first year after a Congress meets (the last Party Congress met in November).  The Party’s new leadership has traditionally unveiled economic blueprints at Third Plenums, so many anticipate the announcement of reforms in a few months.  Despite the near-universal optimism, there are three principal reasons why we probably will not see a liberalization of deposit rates this year—or maybe even in 2014.  First, state banks have enjoyed cheap funding due to the deposit ceiling and will fight any change that will squeeze their fat interest margins.  Premier Li comes into this fight at a disadvantage.  He is the only known reformer on the Politburo Standing Committee, the apex of political power in China.  “Conservatives,” who represent entrenched interests, hold at least four—and maybe five—of the seven seats on that all-powerful body.  They will undoubtedly block elimination or significant relaxation of the deposit-rate ceiling. Second, it will soon become obvious that this is the wrong time to remove the rate cap.   The liquidity crises of last month caused two waves of bank defaults and almost brought down China’s largest bank, the Industrial and Commercial Bank of China.  ICBC, as the behemoth is known, shut down a part of its ATM system last month to conserve cash, and it reportedly received …read more

Source: FULL ARTICLE at Forbes Latest

U.S. Trade Gap Narrows in February on Stronger Oil, Auto Exports

By The Associated Press

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Patrick Semansky/AP

By MARTIN CRUTSINGER

WASHINGTON — The U.S. trade deficit unexpectedly narrowed in February as exports climbed close to an all-time high and the volume of imported crude oil fell to the lowest level in 17 years.

The gap between exports and imports shrank to $43 billion in February, down 3.4 percent from January’s revised $44.5 billion, the Commerce Department said Friday. It was the smallest trade imbalance since December when the gap had declined to $38.1 billion, the lowest point in nearly three years.

Exports rose 0.8 percent to $186 billion, close to the record high set in December. Stronger exports of U.S. energy products and autos offset declines in sales of airplanes and farm equipment. Imports were flat at $228.9 billion with the volume of crude oil falling to the lowest point since March 1996.

The politically sensitive deficit with China shrank to $23.4 billion, the lowest point in 11 months. Exports to the European Union were down 0.9 percent in February, compared to January, reflecting continued economic weakness as that region struggles with a recession triggered by a debt crisis.

Through the first two months of this year, the U.S. deficit is running at an annual rate of $524.5 billion, down slightly from last year’s $539.5 billion imbalance.

Economists expect the deficit this year will narrow slightly, in part because of continued gains in U.S. energy exports. A narrower trade gap boosts growth because it means U.S. companies are earning more from overseas sales while U.S. consumers and businesses are spending less on foreign products.

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But Paul Dales, senior U.S. economist at Capital Economics, said that he was worried that expectations for exports to keep rising faster than imports may fall short given uncertain global conditions.

“We are concerned that subdued global demand will hold back export growth. And the rest of the data released this week makes us more concerned that the domestic economy is a bit weaker than we thought,” he said.

In a separate report Friday, the government said that the U.S. economy created just 88,000 jobs in March, the fewest in nine months.

The economy as measured by the gross domestic product grew at an annual rate of 0.4 percent in the October-December quarter. Economists believe economic growth strengthened in the January-March quarter to around 3 percent.

In addition to increases in U.S. energy exports, economists are also hopeful that exports of other products will rise this year as well, helped by stronger growth in some major export markets.

Taking a Harder Line on China

That forecast is based on an assumption that the European debt crisis will stabilize, helping boost exports to that region and that growth in Asia will rebound further. The outlook for Europe has been clouded in …read more

Source: FULL ARTICLE at DailyFinance

Employers Added 88,000 Jobs in March, Far Fewer Than Expected

By The Associated Press

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Steve Helber/AP

By Jason Lange

WASHINGTON — American employers hired at the slowest pace in nine months in March, a sign that Washington’s austerity drive could be stealing momentum from the economy.

The economy added just 88,000 jobs last month and the jobless rate ticked a tenth of a point lower to 7.6 percent largely due to people dropping out of the work force, Labor Department data showed on Friday.

Analysts polled by Reuters had expected a gain of 200,000.

The slower pace of growth in payrolls marks a steep reversal of the recent trend in which the labor market appeared to be stepping up its pace of recovery. It also comes after Washington increased taxes in January and just as across-the-board federal budget cuts began in March.

“When you get to numbers below 100,000, you have to start worrying,” Paul Dales, an economist at Capital Economics in London, said before the data was released.

The slowdown in job growth could make policymakers at the Federal Reserve more confident about continuing a bond-buying stimulus program. Discussion at the central bank has been growing over whether to dial back the purchases, perhaps as soon as this summer.

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Analysts have noted that the federal spending cuts have only just begun and will be a more substantial drag on the economy between April and June, when many government workers begin taking days off work without pay.

Government payrolls fell only 7,000 in March, reversing the 14,000-job gain from February.

Fed Chairman Ben Bernanke, who has said the labor market must show sustained improvement before monetary stimulus is eased, has voiced concern about the spending cuts.

The jobless rate fell as the labor force shrank by 496,000 people. The unemployment rate is derived from a survey of households which is separate from the survey of employer payrolls. The household survey actually showed employment fell by 206,000 in March.

The drop in the labor force sent the share of the population that is either employed or looking for work to 63.3 percent, its lowest since 1979.

Reporting by Jason Lange; editing by Andre Grenon.

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Source: FULL ARTICLE at DailyFinance

Japan central bank revamps policy to boost economy

Japan is making a sweeping shift in its monetary policy, aiming to spur inflation and get the world’s third-largest economy out of a long, debilitating slump.

Bowing to demands from Prime Minister Shinzo Abe for more aggressive monetary easing, the Bank of Japan announced Thursday a policy overhaul intended to double the money supply and achieve a 2 percent inflation target at the “earliest possible time, with a time horizon of about two years.”

BOJ governor Haruhiko Kuroda described the scale of monetary stimulus as “large beyond reason,” but said the inflation target would remain out of reach if the central bank stuck to incremental steps.

“We’ll adjust without hesitation if need be, while monitoring economic and price conditions,” he said.

The BOJ is joining the U.S. Federal Reserve and other major central banks in soaking the economy in money in hopes of getting corporations and consumers to begin spending more in a virtuous cycle that would put growth back on track after two decades of malaise.

The central bank said it intended to “drastically change the expectations of markets and economic entities.”

Financial markets, which had feared Kuroda might not live up to expectation for bold steps, reacted with relief. The Japanese yen, which was trading at about 92.8 yen per U.S. dollar, dropped to about 95.5 yen per dollar after the announcement. The benchmark Nikkei 225 stock index rebounded from negative territory to close 2.2 percent higher.

“By committing today to meet a 2 percent inflation target in two years, Gov. Kuroda can justifiably claim to have set the Bank of Japan on a new path,” said Mark Williams of Capital Economics.

“But while markets have welcomed the announcement, the credibility of this pledge is soon likely to be called into question,” he said in a commentary.

Kuroda has pledged to do what he must to meet the inflation target within two years. Thursday’s decision after a two-day policy meeting makes that central bank policy. Signaling a consensus behind Kuroda, most items agreed upon received unanimous support from the nine-member board.

The policy shift is a coup for Abe, whose Liberal Democratic Party needs to make headway in reviving the economy before an upper house parliamentary election in …read more

Source: FULL ARTICLE at Fox World News

Oil prices ease back after day of strong gains

The price of oil eased back Wednesday after a strong day of gains propelled by U.S. economic data suggesting a sustained recovery in the world’s largest economy.

Benchmark oil for May delivery fell 35 cents at late afternoon Bangkok time to $95.99 per barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1.53 to finish at a five-week high of $96.34 a barrel on the Nymex on Tuesday.

The U.S. Commerce Department said Tuesday that orders for factory-produced durable goods rose more than expected in February. Home prices also rose in January, according to the Standard & Poor’s/Case-Shiller 20-city price index. That helped push up energy prices.

But analysts say it is too soon to forget about the debt crisis in Europe. The latest crisis point was Cyprus, which teetered on the brink of bankruptcy and collapse of its financial system until a deal was reached early Monday to provide some 10 billion euros ($12.9 billion) from international lenders. The deal, however, requires Cyprus to slash its oversized banking sector and inflict hefty losses on large depositors in troubled banks.

“The events in Cyprus have provided another very visible — albeit extreme — illustration of the financial problems and uncertainties in Europe which are holding back the global recovery,” said analysts at Capital Economics in a market commentary. “Indeed, even though the Cypriot economy itself is tiny, the ramifications could still be felt worldwide, both in economic activity and in financial market volatility.”

Brent crude, used to price many kinds of oil imported by U.S. refineries, fell 15 cents to $109.21 a barrel on the ICE Futures exchange in London.

In other energy futures trading on the Nymex:

— Wholesale gasoline rose 0.2 cent to $3.104 a gallon.

— Heating oil rose 0.2 cent to $2.8840 a gallon.

— Natural gas advanced by 1.5 cents to $4.006 per 1,000 cubic feet.

…read more
Source: FULL ARTICLE at Fox World News

Oil rises ahead of US industrial production data

Oil prices rose Friday ahead of the release of U.S. industrial production and manufacturing figures that analysts expect to show an improving economy.

Benchmark oil for April delivery was up 29 cents to $93.32 per barrel at midday Bangkok time in electronic trading on the New York Mercantile Exchange. The contract fell 51 cents to close at $93.03 per barrel on the Nymex on Thursday.

Traders expect to see improvement in U.S. industrial production for February when the Federal Reserve releases the details later Friday. Analysts at Capital Economics said in a market commentary that they expect a month-on-month increase of 0.6 percent.

“February’s employment and hours worked data suggest that manufacturing output also increased,” the analysts said, “so we wouldn’t be surprised to see something of a rebound in February.”

Additionally, they said they don’t expect to see significant inflation when the Labor Department releases its figures, also due Friday.

Both indicators bode well for U.S. growth, which could also boost both energy consumption and energy prices.

Oil rose slightly Thursday as U.S. employment data supported the market, offsetting news about ample crude supplies and worries about the eurozone economy. Weekly U.S. jobless claims fell by a greater-than-anticipated 10,000 to 332,000, helping to sustain hopes over the U.S. labor market.

Brent crude, used to price many kinds of oil imported by U.S. refineries, was up 52 cents to $109.48 a barrel on the ICE Futures exchange in London.

In other energy futures trading on the Nymex:

— Wholesale gasoline rose 0.1 cent to $3.131 a gallon.

— Heating oil rose 0.8 cent to $3.022 a gallon.

— Natural gas rose 1.8 cents to $3.83 per 1,000 cubic feet.

…read more
Source: FULL ARTICLE at Fox World News

Oil down on growing crude supplies

Oil prices were slightly lower Thursday as reports of a moderately improving U.S. economy, which suggests increased fuel consumption, were neutralized by growing crude supplies.

Benchmark oil for April delivery was down 12 cents to $90.31 a barrel at midday Bangkok time in electronic trading on the New York Mercantile Exchange. The contract fell 39 cents to close at $90.43 per barrel on the Nymex on Wednesday.

The death on Tuesday of President Hugo Chavez of Venezuela, which sits on the world’s second-largest oil reserves, has had little immediate effect on the price of oil so far.

Chavez oversaw a decline in oil production during his 14 years as the leader of Venezuela. Traders are anxious to see if the new government invites foreign investment in Venezuela‘s oil industry and is able to boost output.

“Over the longer term, changes in policy towards the energy sector might eventually allow Venezuela‘s oil production to return to the much higher levels seen in the late 1990s,” Julian Jessop of Capital Economics wrote in an email commentary.

A report from the Federal Reserve issued Wednesday showed the U.S. economy strengthened across much of the country. The Fed’s Beige Book report showed that auto sales, more hiring and the ongoing housing recovery helped the U.S. economy grow in the first two months of the year.

Also Wednesday, the U.S. Energy Information Administration said in its weekly report that U.S. oil supplies grew last week by 3.8 million barrels, or 0.4 percent, more than three times the increase that analysts expected. The nation’s supply of crude is 10.3 percent above year-ago levels. And at more than 7 million barrels a day, U.S. oil production is at the highest level since the late 1990s.

Brent crude, used to price many kinds of oil imported by U.S. refineries, fell 15 cents to $110.91 a barrel on the ICE Futures exchange in London.

In other energy futures trading on the Nymex:

— Wholesale gasoline dropped 1 cent to $3.114 a gallon.

— Heating oil fell 1.2 cent to $2.964 a gallon.

— Natural gas rose 1.5 cents to $3.485 …read more
Source: FULL ARTICLE at Fox World News

BOE predicts inflation will worsen

The Bank of England says its forecast for inflation has risen since its November report and predicted the rate may hit 3 percent by summer — but it will tolerate the increase in an attempt to boost the economy.

Bank of England Gov. Mervyn King says inflation would be above the 2 percent target for another two years, but that there is cause for optimism and that recovery is in sight. He told reporters Wednesday the bank would look past inflation figures to support growth and employment.

King says the bulk of the economy grew at a steady rate of 1.2 percent in 2012.

Vicky Redwood, the chief UK economist at Capital Economics says the bank is adopting the flexible approach to inflation that incoming governor Mark Carney recently advocated.

…read more
Source: FULL ARTICLE at Fox World News

Oil extends gains after OPEC lifts demand forecast

The price of oil rose slightly Wednesday, adding to gains a day after OPEC upgraded its forecast for global crude demand.

Benchmark oil for March delivery was up 8 cents to $97.59 per barrel at late afternoon Bangkok time in electronic trading on the New York Mercantile Exchange. The contract rose 48 cents to finish at $97.51 per barrel on the Nymex on Tuesday after OPEC raised its 2013 forecast for global oil demand to 89.7 million barrels. That’s 80,000 barrels more than its previous forecast a month ago.

The Vienna-based organization comprising many of the world’s key oil exporters cited “some signs of recovery in the global economy and colder weather at the start of this year.”

Traders were looking to the U.S. later in the day for the release of January retail sales figures to help gauge U.S. economic growth.

Retail sales rose in December as consumers spent more on autos, furniture and clothing. But consumer spending, which accounts for about 70 percent of U.S. economic activity, could slow as a result of higher payroll taxes that took effect under the deal cut by Washington lawmakers at the end of last year to avoid the so-called fiscal cliff.

“January’s retail sales report is eagerly anticipated as it will provide the first real guide to how the payroll tax hike affected spending,” Paul Dales of Capital Economics wrote in a market commentary.

Brent crude, used to price international varieties of oil, fell 12 cents to $118.54 a barrel on the ICE Futures exchange in London.

In other energy futures trading on the Nymex:

— Wholesale gasoline rose 1 cent to $3.06 a gallon.

— Natural gas rose 1.4 cents to $3.244 per 1,000 cubic feet.

— Heating oil rose 0.5 cent to $3.241 a gallon.

…read more
Source: FULL ARTICLE at Fox World News

Oil steady ahead of the release of US indicators

Oil prices were nearly flat Wednesday as a recent rally cooled off ahead of the release of more U.S. economic indicators and the conclusion of a meeting of Federal Reserve policymakers.

Benchmark oil for March delivery was down 1 cent to $97.56 a barrel at midday Bangkok time in electronic trading on the New York Mercantile Exchange. The contract rose $1.13, or 1.2 percent, to close at $97.57 on Tuesday after being pushed higher by a report about rising U.S. home prices. Energy prices can rise when investors feel good about the economy, since it’s needed to power manufacturing and other economic activity.

But traders became slightly more cautious ahead of the release of other U.S. economic indicators, including economic growth on Wednesday and weekly jobless claims Thursday. In addition, the Federal Reserve will conclude a two-day meeting later Wednesday with the release of a statement that investors will study for clues about the outlook for the economy and interest rates.

Recent rises in oil prices have been the result of an improving global economy, and positive manufacturing reports from the U.S. and China. But significant gains could be capped by demand constraints and ample supply, analysts said.

“The fundamentals are also likely to deteriorate again later in the year,” said analysts at Capital Economics in a report. “Over the longer term, booming energy supply from both conventional and new sources will also add to the downward pressure on prices.”

Brent crude, used to price international varieties of oil, rose 1 cents to $114.37 a barrel on the ICE Futures exchange in London.

In other energy futures trading on Nymex:

— Wholesale gasoline fell 1 cent to $2.966 per gallon.

— Natural gas rose 3.4 cents to $3.292 per 1,000 cubic feet.

— Heating oil rose 0.6 cent to $3.104 a gallon.

Source: FULL ARTICLE at Fox World News

UK public sector borrowing higher than expected

U.K. public sector borrowing was higher than expected in December, another setback in the government‘s plans to reduce its deficit.

The Office for National Statistics said Tuesday that net public sector borrowing was 15.4 billion pounds in December, compared with 14.8 billion pounds a year earlier and 200 million pounds above the market consensus.

It was the sixth consecutive month in which borrowing was above previous-year levels.

Martin Beck, an analyst at Capital Economics, says borrowing for the fiscal year ending in March would be about 7 percent higher than the previous year if the trend continues.

Source: FULL ARTICLE at Fox World News

China's growth rebounds to 7.9 percent

China‘s economy rebounded in the final quarter of 2012 but optimism was tempered by warnings the shaky recovery could be vulnerable to a possible downturn in global trade.

Economic growth rose to 7.9 percent in the three months ending in December as a recovery from China‘s deepest slowdown since the 2008 global crisis took hold, data showed Friday. That was up from the previous quarter’s 7.4 percent rate and raised total growth for the year to 7.8 percent — China‘s weakest annual performance since the 1990s.

Forecasters expect China‘s growth to rise to 8 percent or above in 2013 but say the recovery still could be vulnerable to a downturn in trade or if the communist government fails to keep investment rising.

“We see growth rising above 8 percent in the first half of 2013,” said Mark Williams of Capital Economics. “I don’t think China is an economy in need of further stimulus at this point.”

This week, the World Bank cut its growth forecast for China this year from 8.6 percent to a still-rapid 8.4 percent.

Chinese growth could suffer a setback if its high investment rates slacken or global trade weakens, the bank said. It said a 5 percent decline in investment could knock 1.4 percentage point off this year’s economic growth and 6 percent off imports.

The economic slowdown was due largely to government controls imposed to cool a real estate boom and surging inflation fueled by Beijing‘s massive stimulus in response to the 2008 crisis. The decline worsened as global demand for Chinese exports dropped unexpectedly, raising the risk of job losses and unrest.

The recovery comes as new Communist Party leaders under General Secretary Xi Jinping take power in a once-a-decade political transition that began in October.

Stronger quarterly growth was widely expected after earlier data showed retail sales, factory output and other indicators rising.

In December, retail sales growth accelerated to 15.2 percent compared with a year earlier, up from the previous month’s 14.9 percent, the National Bureau of Statistics reported. Factory output growth rose to 10.3 percent over a year earlier from November’s 10.1 percent.

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National Bureau of Statistics of China (in Chinese): www.stats.gov.cn

Source: FULL ARTICLE at Fox World News

UK manufacturing output contracts

British manufacturing has contracted in November, fueling concern that the country’s economy could be headed back into recession.

The Office of National Statistics says manufacturing output fell by 0.3 percent between October and November — compared with analysts’ expectations of an increase of 0.5 percent.

Britain’s economy has only just emerged from a double-dip recession after it recorded a 1 percent growth for the third quarter of 2012. However, Vicky Redwood, chief UK economist at Capital Economics said in a statement Friday that November’s figures “provided yet more evidence that the economy probably contracted in the fourth quarter of last year.”

The data comes only a day after the Bank of England left its key rate at 0.5 percent and its stimulus program in place, reflecting concern about the economy.

Source: FULL ARTICLE at Fox World News