WORLDWIDE: HEADLINES
UK consumer confidence slides as inflation and war worries mount – GfK
British consumer confidence sank to levels last seen in late 2020 this month due to worries about galloping inflation, higher interest rates and the war in Ukraine, a survey showed on Friday, 25th March 2022.
The GfK Consumer Confidence Index fell for the fourth month in a row to -31 from -26 in February, its lowest since November 2020, deep in the coronavirus pandemic.
Readings of -30 and below have presaged recession on four out of five occasions since the survey started in 1974.
The survey’s gauge of personal finances for the coming year slumped to a joint record low, matched only by July 2008 when the global financial crisis was reaching a climax.
“A wall of worry is confronting consumers this month and there is an unmistakable sense of crisis in our numbers,” Joe Staton, GfK’s client strategy director, said.
“Confidence in our personal financial situation and in the wider economy are severely depressed while the daily news of unimaginable suffering from a horrifying war in Europe and rising COVID numbers at home is adding to the bleak mood.”
Britain’s consumer price inflation rate is heading for 9% later this year, the government’s budget watchdog said this week, as it predicted living standards in 2022 would fall by the most since at least the 1950s.
The BoE has raised its benchmark Bank Rate three times since December and financial markets expect it to increase it again to 1.0% in May, even as the economy heads into a slowdown.
GfK’s measure of how willing people are to make big purchases tumbled by nine points to -24.
British retailers saw their sales fall this month as the cost-of-living squeeze tightened, a separate survey by the Confederation of British Industry showed on Thursday.
The survey of 2,000 people was conducted March 1st –14th.
Full coverage: REUTERS
Indian shares fall at the end of bumpy week
Indian shares slipped on Friday, 25th March 2022, at the end of a turbulent week as investors weighed swings in crude oil prices and fast-paced events in the Ukraine crisis.
The blue-chip NSE Nifty 50 index (.NSEI) lost 0.19% to 17,189.20, while the benchmark S&P BSE Sensex (.BSESN) fell 0.21% to 57,475.71 by 0503 GMT.
Both indexes are on track for weekly losses of about 0.6%, set to snap two straight weeks of gains. Reflective of the volatility, the indexes flitted between gains of 1% and losses of 1.6% for the week.
Russia’s invasion of Ukraine, which has entered its second month, has fueled a surge in commodity and crude prices, weighing on domestic sentiment and adding to fears of higher inflation.
The country imports more than 80% of its oil needs, and state-run fuel retailers have hiked petrol and diesel pump prices three times this week.
“One day there is some hope of resolution, so crude comes down, metal prices come down, next day again there is some issue and they go up again” said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services.
“If you look at Indian markets, for the last five days we have been stuck in a range,” Khemka added.
Consumer, information technology and pharmaceutical stocks declined on Friday, 25th March 2022.
The Nifty FMCG Index (.NIFTYFMCG) was down 0.90%, with Tata Consumer Products (TACN.NS) among the top Nifty 50 percentage losers.
The Nifty IT index (.NIFTYIT) and the Nifty Pharma Index (.NIPHARM) fell 0.2% and 0.3%, respectively, after ending more than 1% higher in the previous session.
Among other individual share moves, InterGlobe Aviation (INGL.NS), the parent of top airline IndiGo, gained 3.9% after J.P. Morgan upgraded its rating on the stock.
Full coverage: REUTERS
WORLDWIDE: FINANCE/BUSINESS
Chinese tech stocks drag Asian shares lower in messy trading
Asian shares skidded on Friday, 25th March 2022, dragged down by declines in Chinese tech stocks, while elsewhere trading was choppy amid hawkish U.S. monetary policy, shifts in Chinese economic policy, and ongoing ructions in commodity markets amid the war in Ukraine.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) dropped 0.47%, but after earlier gains was nonetheless up 0.5% on the week, while Japan’s Nikkei (.N225) was little changed, having closed the previous day at a nine-week high.
European futures pointed to a mixed open, with Euro STOXX futures last up 0.24%, and FTSE futures down 0.1%. S&P 500 future inched up 0.1%.
In Asia, the biggest tumbles were in Hong Kong, where tech stocks (.HSTECH) shed 2.5% as U.S. and Hong Kong dual-listed names took a hit from renewed fears that a row over audit records will force them to delist in the United States.
Index heavyweight Alibaba (9988.HK), for example, lost 5.9%.
Australian stocks (.AXJO) edged higher with miners to the fore, but Chinese blue chips (.CSI300) fell 1.23%, as the benefits of last week’s political intervention began to wane.
“In terms of Asia we have seen asset prices stabilise a little bit this week following last week’s statement from the Chinese vice premier. This may not be sustainable unless we see additional easing and have better visibility on the regulatory front,” said Carlos Casanova, senior Asia economist at UBP.
“Though what we are starting to see is a little more caution from global investors when it comes to the U.S. economy, and what that means for Asia,” he added.
Last week, Chinese vice premier Liu He said Beijing would roll out support for the Chinese economy, sending Chinese and Hong Kong stocks higher initially.
Investors were also watching Japan, where the central bank refrained from stepping into the market to buy Japanese government bonds (JGB) on Friday, 25th March 2022, morning even as its yield target came under pressure.
The yield on 10-year JGBs rose to 0.24% on Friday, 25th March 2022, morning, exceeding the level at which the Bank of Japan had offered to buy an unlimited amount of JGBs at 0.25% on Feb. 10, part of a policy to maintain interest rates at their current ultra-low levels.
Japanese bond yields are being pulled higher by U.S. Treasury yields, which have risen along with expectations for a more aggressive pace of rate hikes by the U.S. Federal Reserve.
U.S. 10 year notes last yielded 2.3667% just off Tuesday’s, 22nd March 2022, 22-month high of 2.417%.
Chicago Fed President Charles Evans was the latest U.S. policymaker to sound more hawkish, saying on Thursday, 24th March 2022, the Fed needs to raise interest rates “in a timely fashion” this year and in 2023 to curb high inflation before it is embedded in U.S. psychology and becomes even harder to get rid of.
The divergence between U.S. and Japanese monetary policy has weighed on the yen, though the BOJ’s failure to intervene meant the dollar lost 0.7% on the Japanese currency to 121.5 yen per dollar.
The dollar’s moves against other currencies have been less dramatic, however, with the U.S. currency’s index measure against six peers slightly softer at a little at 98.488.
Overnight the three main U.S. stock indexes each rallied more than 1%, as investors snapped up beaten-down shares of chipmakers and big growth names and supported by a fall in oil prices.
Oil continued to slide a little on Friday, 25th March 2022, as the United States and allies considered releasing more oil from storage to cool markets. Brent crude falling 0.21% to $118.78 per barrel and U.S. crude down 0.3% to $112 a barrel, but prices were still very high by historic standards.
Spot gold remained elevated at $1,957 an ounce, steady on the day. GOL
Full coverage: REUTERS
Oil edges lower as supply crunch fears ease, trading costs rise
Oil prices inched lower on Friday, 25th March 2022, as supply concerns eased as countries in the European Union remained split on imposing an oil embargo on Russia while the United States and allies considered releasing more oil from storage to cool markets.
Brent crude futures fell 46 cents, or 0.4%, to $118.57 a barrel at 0529 GMT, after sliding 2.1% in the previous session.
U.S. West Texas Intermediate (WTI) crude futures fell 47 cents, or 0.4%, to $111.87 per barrel, having dropped 2.3% in the previous session.
Both contracts were headed for their first weekly gains in three weeks, with Brent on track for a 10% jump and WTI on course for a 7% rise amid broader fears of a supply crunch as the EU mulled a boycott of Russian oil earlier in the week.
OPEC sources said that officials believe a possible European Union ban on oil from its partner Russia would hurt consumers and that the group has conveyed its concerns to Brussels.
While the United States and Britain have targeted Russian oil, such an action poses a challenge for the EU, which relies on Russia for 40% of its gas.
Punitive measures against Russia were imposed since its invasion of Ukraine last month, which Moscow calls a “special operation”.
With global stockpiles at their lowest since 2014, analysts said the market remains vulnerable to any supply shock.
“You’re continuing to erode inventories. That implies, on current settings, the market continues to be tight,” said National Australia Bank commodities analyst Baden Moore.
Supply concerns also heightened after the Caspian Pipeline Consortium (CPC) terminal on Russia’s Black Sea coast stopped exports on Wednesday after being damaged by a major storm.
Kazazkstan said on Thursday, 24th March 2022, it expects the CPC to resume shipping crude within a month, but added it may reroute some oil towards tankers on the Caspian Sea and pipelines going to Russia’s Samara and to China.
Reflecting the market’s volatility, the Intercontinental Exchange raised margins for Brent futures by 19% for the May contract as of Friday, marking the third rise this year and making it more expensive to trade.
Future margin rates are hiked when markets are volatile, forcing traders to increase the deposit they hold at the exchange for each contract to prove they can deliver on their obligations.
Helping ease prices, the United States and its allies were discussing a possible further coordinated release of oil from storage, U.S. energy secretary Jennifer Granholm said on Thursday, 24th March 2022.
Separately, the United States was set to unveil a deal on Friday, 25th March 2022, to supply Europe with more U.S. liquefied natural gas (LNG) for this year and next, sources familiar with the matter told Reuters.
Full coverage: REUTERS
BOJ’s Kuroda repeats view weak yen benefits Japan’s economy
Bank of Japan Governor Haruhiko Kuroda on Friday, 25th March 2022, reiterated his view that a weak yen benefits the economy as a whole, brushing aside concern the currency’s slide to multi-year lows could do more harm than good to the resource-poor, import-reliant country.
Due to structural changes in Japan’s economy, the benefit from a weak yen comes more through an increase in the value of profits companies earn overseas, rather than a rise in export volume, Kuroda said.
“There’s no change now to my view a weak yen is generally positive for Japan’s economy,” he told parliament.
The yen was headed for its worst week in two years, pummeled by Japan’s rising import costs and ultra-low low interest rates. It fell to a fresh multi-year low of 121.84 to the dollar on Friday, 25th March 2022.
Kuroda said the recent rise in import prices was driven mostly by global commodity inflation, rather than the weak yen.
While consumer prices may accelerate to around the BOJ’s 2% target from April, the central bank is in no rush to withdraw stimulus as any increase in inflation must be accompanied by steady rises in wages, jobs and corporate profits, Kuroda said.
“Cost-push inflation that is not accompanied by wage hikes will hurt Japan’s economy,” by weighing on households’ real income and profits of import-reliant firms, he said.
“As such, it won’t lead to sustained achievement of our price target. That’s why the BOJ will continue to maintain powerful monetary easing,” Kuroda said.
Speaking at the same parliament session, Finance Minister Shunichi Suzuki said the government will continue to keep a close eye on currency moves, including recent yen declines, and their impact on the economy.
“Exchange-rate stability is important, and sharp volatility is undesirable,” Suzuki said, repeating his verbal warning against excessive yen declines.
Kuroda also said it was desirable for currency rates to move stably reflecting economic fundamentals.
Such warnings, however, will likely have little effect in reversing a weak-yen trend driven by a hawish Fed, analysts say.
“The more you do it, the less impact it tends to have,” Jeffrey Halley, senior market analyst of Asia Pacific at OANDA, said of the policymakers’ jawboning.
Some market players see the yen’s decline as a sign of the erosion of the currency’s status as a safe-haven.
Recent data showed Japan recorded its second largest current account deficit on record in January as a jump in oil import costs offset gains in investment income, highlighting the economy’s vulnerability to commodity swings.
“Up till now, Japan was able to stably issue huge amount of government bonds at low interest rates due to households’ massive financial savings and the country’s current account surplus,” finance minister Suzuki said.
“There’s no guarantee such market conditions will continue when we look at how energy price moves led to Japan running a current account deficit.”
Full coverage: REUTERS
