Category Archives: Market

UK economy shows biggest drop in 40 years

London, Britain’s economy shrank by the most since 1979 in early 2020 as households slashed their spending, according to official data that included the first few days of the coronavirus lockdown.

 

Gross domestic product dropped by a quarterly 2.2% between January and March, the Office for National Statistics (ONS) said.

 

Prime Minister Boris Johnson will set out his plan to speed up the British economy’s recovery later on Tuesday when he will promise to fast-track 5 billion pounds ($6.13 billion) of infrastructure investment, according to Reuters.

 

Britain’s economy may have contracted by 20% in the first half of 2020, the Bank of England said earlier this month as the full effects of the lockdown hammered most sectors in the April-June period. The BoE has said the slump in the economy this year could be the worst in three centuries.

 

Tuesday’s figures – which build on previously released data for the first quarter – showed a surge in household saving as their spending collapsed by the largest amount, in cash terms, since records began in the 1950s.

 

“The lockdown of most businesses on March 23 meant that households were unable to spend even if they wanted to,” said Thomas Pugh, UK economist at Capital Economics, adding that it will take the economy until 2022 to regain its pre-crisis level.

 

The household savings ratio shot up to 8.6% in the first quarter from 6.6% at the end of 2019.

 

The ONS has previously estimated that Britain’s economy shrank by a record 20.4% in April from March but there have been some signs of recovery more recently.

 

The ONS also said Britain’s current account deficit widened by more than expected in the first three months of 2020.

 

The balance of payments deficit – a long-standing concern for investors because it leaves Britain reliant on foreign inflows of cash – grew to 21.1 billion pounds ($25.9 billion) in the first quarter, compared with a median forecast of 15.4 billion pounds in a Reuters poll of economists.

 

Stripping out volatile movements of gold and other precious metals, the current account deficit narrowed slightly, the ONS said.

 

Source: Bahrain News Agency

Boeing 737 MAX begins key certification test flights

Washington, A Boeing Co 737 MAX took off on Monday at 12:55 p.m. EDT (0955 PDT/1655 GMT) from a Seattle-area airport on the first day of certification flight testing with U.S. Federal Aviation Administration and company test pilots, a crucial moment in the planemaker’s worst-ever crisis.

 

Boeing Flight 701 departed King County International Airport, which is also known as Boeing Field, the FAA confirmed, saying it will conduct three days of tests. The plane is scheduled to land two hours later at Moses Lake airport, according to flight tracking website FlightAware, said AP.

 

The plane is then scheduled to depart Moses Lake soon afterward, arriving back in Seattle at 1:22 p.m. PDT. Boeing shares were up 10% at $186.86 on the news.

Reuters first reported the long-awaited certification test flights were set to start on Monday.

 

The FAA said on Monday the flights will “evaluate Boeing’s proposed changes to the automated flight control system on the 737 MAX” and “will include a wide array of flight maneuvers and emergency procedures to assess whether the changes meet FAA certification standards.”

 

The agency said it will take the time needed “to thoroughly review Boeing’s work. We will lift the grounding order only after we are satisfied that the aircraft meets certification standards.”

 

Boeing’s best-selling 737 MAX has been grounded since March 2019 after two fatal crashes killed 346 people. The U.S. Justice Department is investigating the airplane’s certification.

 

After the flights are completed, the FAA must still approve new pilot training procedures, among other reviews, and would not likely approve the plane’s ungrounding until September, sources said.

 

If that happens, the jet is on a path to resume U.S. service before year-end, though the process has been plagued by delays for more than a year.

 

Source: Bahrain News Agency

Way clear for German government to save Lufthansa after investor vote

Frankfurt, The German government will take a 20-per-cent stake in Germany’s top air carrier, Lufthansa, clearing the way for 9 billion euros (10 billion dollars) in state aid for the crisis-hit airline.

 

Shareholders approved the move on Thursday following a day of deliberations in which company executives asked for assistance to stay in business, after the coronavirus pandemic grounded the company, said dpa.

 

The move was approved with the backing of 98.04 per cent of the shareholders.

Lufthansa officials had warned that the company would face insolvency if the plans fell through.

“We have no more money,” said Karl-Ludwig Kley, head of the supervisory board, adding that insolvency proceedings would have come within days if shareholders did not back the deal.

 

Insolvency or protective shield proceedings are “not a threat, rather a real danger,” said Michael Niggemann, Lufthansa’s chief officer for corporate human resources and legal affairs, earlier on Thursday.

 

The 9-billion-euro bailout negotiated between the Berlin government, Lufthansa and European Commission depended on whether shareholders voted in favour of the German state taking a 20-per-cent stake in the ailing company.

 

Valued at around 300 million euros, that stake is only a small part of the total package – but it has irked investors, who will see their own shares diluted as a result of the state intervention. Meanwhile, the government is set to pay 2.56 euros per share, around a quarter of the current stock market price.

 

Lufthansa has spiralled into crisis as a result of the catastrophic impact of the coronavirus pandemic on air travel – and the company still expects to have to pay out another billion euros or so to customers whose flights have been cancelled, according to Niggemann.

Lufthansa chief executive Carsten Spohr said this amount could be paid off within six weeks, provided the company gets the state aid that it is hoping for.

 

“We at Lufthansa understand our obligation to repay this 9 billion to the taxpayers as quickly as possible,” he said.

Niggemann had warned that no other financing options were “in sight,” which would have meant insolvency was the only other options had the deal not won approval. He warned investors that they risked losing their shares’ value “almost completely” if they blocked the deal.

 

The outcome of the online meeting largely came down to one man, Lufthansa’s biggest shareholder, Heinz Hermann Thiele.

He had been critical of the deal, but in an interview with the Frankfurter Allgemeine Zeitung on Wednesday he said he had decided to back it.

 

Due to a weak shareholder turnout for the online meeting, a two-thirds majority was needed in the vote, which would have been a tall order without Thiele’s backing. He holds a 15.5-per-cent stake.

 

The European Commission, which acts as the EU’s antitrust watchdog, gave its official approval to the multibillion-dollar bailout deal on Thursday.

 

The EU executive has, however, attached strings to the deal to limit the distortion of competition. Lufthansa will have to give up some of its take-off and landing slots at busy Frankfurt and Munich airports, where it is a dominant player.

 

“This gives competing carriers the chance to enter those markets,” EU Competition Commissioner Margrethe Vestager said in a press release.

 

But it is not without its critics.

“This is a spectacular case of a rich EU member state ignoring the EU treaties to the benefit of its national industry and the detriment of poorer countries,” Ryanair chief executive Michael O’Leary said in a statement before the decision was announced.

 

Parallel to these dealings, Lufthansa has been hammering out cost-savings deals with groups representing employees.

Cabin crew union UFO approved one on Thursday that will allow the company to cut 500 million euros in costs. The deal includes reduced hours for workers and an agreement to forgo pay increases.

 

Source: Bahrain News Agency

Arab Monetary Fund issues guidelines on impact of natural disasters on financial stability

Abu Dhabi,  The Arab Monetary Fund (AMF) has issued “General Guidelines for Central Banks to deal with the implications of natural disasters and climate changes on banking systems and financial stability”.

 

The move was the framework of its mandate to offer the support to its member states in the field of economic, financial and monetary reforms promoting financial stability in the Arab region,

 

The guiding principles include a set of recommendations related to the central bank policy to strengthen the system of natural disasters and climate change management.

 

The guiding principles confirm the importance for the central bank to adopt a comprehensive risk management policy that includes implications of climate change and natural disasters and how to deal with them.

 

In addition Central Banks to constitute an ad-hoc committee to manage natural disasters (or adding catastrophe management to the framework of the committee of crisis management) as well as defining its missions and responsibilities which include, among others, setting up recovery plans to address the effects of climate change and natural disasters, recover from their effects and return to work Normally.

 

Moreover, the guiding principles emphasise the need to set a charter of cooperation that organizes coordination and exchange of information between central banks and other entities such as environment and natural disasters related research centers.

 

This cooperation should be framed in a strategic partnership enabling the central bank to get from these entities and research centers their expectations about the possibility of getting or recurring natural disasters in all its forms to be better prepared by the central bank to oversee the policies that deal with the results of those disasters on the financial and economic systems.

 

The principles recommend also the importance for central banks to set a plan to ensure continuity of activities within its basic central systems such as the RTGS and SWIFT, systems of investment portfolio management, Debt issuances, foreign currency reserves, open market operations and keep it updated on a regular basis.

 

In addition, the plan should define and assess risks that payments systems may be exposed to during natural disasters, while taking the necessary measures to confront and deal with them, in a manner that preserves the operations and activities of the central bank and the banking sector to fulfill their domestic and international obligations.

 

On the other hand, the principles emphasise the necessity for the Central Bank to develop a set of instructions for the financial sector that organize the required measures and preparations, including the minimum required by the financial sector in relation to dealing with natural disasters.

 

In this context, the principles include also the need for the central bank and the financial sector to pay attention to developing stressful tests that include progressive severity hypotheses, including the potential impact of natural disasters and climate changes on the banking and insurance sectors.

 

Furthermore, the principles stress the importance of assessing and analyzing the potential “transition risks” resulting from the loss of investments in value as a result of combating climate change or shifting the priorities of consumers and investors to environmentally friendly products and technologies, with the call for including stress tests with hypotheses regarding the risks of transformation.

 

The principles also indicate the importance of assessing and analyzing the impact of the transition from carbon-intensive products / services to low-carbon products / services, and the impact of that on the respective sectors, and adopting policies to assess and address the negative impacts on sectors that may be affected by this transformation.

 

The principles also touch on many aspects of issues related to the consequences of natural disasters and climate changes such as tasks of managing financial stability in the central bank, and the responsibility to monitor and evaluate systemic risks arising from climate change, and assess its impact on a number of sectors such as individuals, companies, real estate, industry, trading.

 

The principles also call for the banking supervision department at the central bank, to assess the readiness plans and preparations of banks to face any potential climate event. The same applies to the Insurance Supervision Department regarding insurance companies, as well as the request of the external auditor to assess this readiness in his reports.

 

On this occasion, Dr. Abdulrahman Al Hamidy, Director General Chairman of the Board of the AMF expressed his pleasure for the issuance of “General Guidelines for Central Banks to deal with the implications of natural disasters and climate changes on banking system and financial stability”.

 

The issuance of these principles come to confirm that financial stability in the Arab countries is a must priority for Arab central banks and monetary authorities, while recognizing that financial stability is closely linked to economic and social stability in the countries.

 

Dr. Al Hamidy reiterated his warm wishes to protect our Arab countries and all countries of the world from natural disasters. (WAM)

 

To access the “General Guidelines for Central Banks to deal with the implications of natural disasters and climate changes on banking system and financial stability” Kindly visit AMF website on the following link:

https://www.amf.org.ae/en/papers/amf-climate-guidance-central-banks

 

Source: Bahrain News Agency

Stocks slide on Wall Street as new coronavirus cases surge

New York, Stocks are down sharply on Wall Street as data showing new coronavirus cases in the U.S. have climbed to the highest level in two months rattles investors’ optimism for a relatively quick economic turnaround, said AP

 

The S&P 500 was down 2.2% in afternoon trading Wednesday, giving back all of its gains for the week. The selling, which followed a skid in European stock indexes, accelerated around mid-morning on news that New York, New Jersey and Connecticut will require visitors from states with high infection rates to quarantine for 14 days.

 

While economic data is pointing to a recovery from the spring lockdowns that are being eased in the U.S. and other countries, the rise in new infections is stoking worries that the reopening of businesses may have to be curtailed again.

 

“We’ve created this optimistic trade over the last few weeks,” said J.J. Kinahan, chief strategist with TD Ameritrade. “Are we going to be able to get back to business as fast as it has been priced into equities?”

 

Technology companies, which have been leading the market higher as it bounced back from a plunge in March, accounted for the biggest slice of the market’s pullback. Financial, health care, communication services and industrial sector stocks also took heavy losses. Energy stocks were down the most as the price of oil dropped sharply.

 

Cruise lines, which would stand to suffer greatly if travel restrictions are extended, were among the biggest losers in the S&P 500. Norwegian Cruise Line, Carnival and Royal Caribbean Cruises were each down more than 10%. Hotel operators also were down sharply. Wynn Resorts and MGM Resorts International were each down more than 7%.

 

The Dow Jones Industrial Average was down 652 points, or 2.5%, to 25,504. The Nasdaq, which was coming off its second all-time high this week, was down 2%. The Russell 2000 index of small company stocks gave up 3.8%.

The market has been mostly in rally mode since April as investors focused on the prospects for an economic turnaround as broad areas of the economy reopened.

 

Recently, some encouraging economic reports have fueled optimism that the reopening of businesses in the U.S. and elsewhere could pull the economy out of a deep recession sooner rather than later.

 

But the recent surge in new infections is undercutting some of that optimism. Coronavirus hospitalizations and caseloads have hit new highs in over a half-dozen U.S. states. New cases nationwide are back near their peak level of two months ago.

 

While early hot spots like New York and New Jersey have seen cases steadily decrease, the virus has been hitting the south and west. Several states on Tuesday set single-day records, including Arizona, California, Mississippi, Nevada and Texas.

 

On Tuesday, Federal health officials told Congress to brace for a second wave of coronavirus infections in the fall and winter of this year.

 

“There’s the possibility of shutdowns, but probably more realistically delays in reopening,” Kinahan said. “This puts doubt on how comfortable people will be getting on a plane or staying in hotels.”

 

Analysts are warning that, despite recent market rallies, there is little reassurance infections won’t keep spreading, given the growing numbers in some parts of the U.S., Brazil and Asia.

 

Source: Bahrain News Agency

Dubai leads global FDI destinations in readiness and resilience

Abu Dhabi,   Dubai has maintained its leading position among the top three global FDI destinations during the first five months of the year, according to Financial Times fDi Markets data.

 

This came despite the decline in greenfield foreign direct investment, FDI, globally at the beginning of 2020 due to the challenges posed by the COVID-19 pandemic,

 

“Dubai ranked second globally in greenfield FDI capital flows and third globally in the number of FDI projects. The Dubai FDI Monitor preliminary data for this period recorded 155 newly announced FDI projects with more than AED10 billion of expected capital,” said Fahad Al Gergawi, Chief Executive Officer, Dubai Investment Development Agency, and President of the World Association for Investment Promotion Agencies, WAIPA.

 

“Today, Dubai is at the forefront of global FDI destinations that are ready and resilient thanks to the wise policy measures adopted by the UAE leadership to combat the COVID-19 pandemic, as well as Dubai’s strategic advantages that enhance opportunities for growth, partnership and innovation for leading global businesses and startups” he added during an interview with CNBC on Dubai’s performance in attracting foreign direct investment, FDI, during the COVID-19 pandemic.

 

“One of the key positive indicators which represent a global vote of confidence from investors is the sustained FDI flows into Dubai-based startups, which exceeded AED700 million during the same period. Dubai is the only city in the MENA region featured among the top 20 most popular destinations for venture capital investments according to fDi Markets’ Global Venture Capital FDI Ranking 2020 report,” he added.

 

Commenting on the state of FDI during the COVID-19 pandemic, Al Gergawi highlighted the importance of extending support to current investors as part of Aftercare programmes.

 

“At Dubai FDI, we have maintained ongoing communication with Dubai investors, and provided the latest updates, data and analysis along with our support services to help investors overcome the challenges posed by the COVID-19 crisis,” said Al Gergawi.

 

“We are working closely with investors to support the realisation of announced FDI projects, which witnessed delays due to the pandemic. Some of the FDI projects already in the pipeline will be realised this year depending on both the sector and public health measures,” he added.

 

Speaking about the efforts to attract FDI in the current circumstances, Al Gergawi revealed that Dubai FDI has launched a series of Virtual Investment Promotion Missions in cooperation with investment promotion partners around the world, relevant Dubai Government departments and Free Zones in Dubai, to support the growth and expansion of FDI into Healthcare, Logistics, e-Commerce, Digital Economy and new sectors such as food and AgriTech which are seeing increasing interest from global investors.

 

Al Gergawi pointed out that Dubai ranked seventh globally in the ‘fDi Aerospace Cities of the Future 2020/2021’ report issued recently by the Financial Times’ fDi Markets, and ranked second in FDI performance in the sector, which is a testimony to the diverse and attractive investment opportunities offered by Dubai.

 

Commenting on the long-term impact of the pandemic on FDI, Al Gergawi stated that the shift in global business expansion decisions will be manifested through the investor’s strategic choices.

 

“Global investors are facing a new nexus of efficiency, resilience and economic impact,” said Al Gergawi. “As President of the World Association for Investment Promotion Agencies, WAIPA, we are working closely with all stakeholders including leading global investors, international organisations and FDI experts to enhance the ‘Impact FDI’ ecosystem and facilitate the contribution of FDI projects to sustainable development,” he further said.

 

Source: Bahrain News Agency

Stocks move higher on Wall Street, following gains overseas

New York, Stocks headed higher in midday trading on Wall Street Tuesday, adding to the market’s gains from a day earlier, as investors focused on the prospects for an economic recovery as more businesses reopen after being shut down due to the coronavirus pandemic.

 

The S&P 500 was up 1% and on pace for its third straight monthly gain. The rally follows solid gains in Europe, where indexes marched higher after some encouraging economic data. Bond yields rose slightly, another sign that investors were regaining confidence in the economy, said AP.

 

Technology sector stocks, which led the way higher as the market rebounded the past three months from a 34% plunge, helped power the latest gains. Banks, health care stocks and companies that rely on consumer spending were among the big gainers. Real estate and utilities stocks fell.

 

Encouraging economic data, including retail sales and hiring, have helped stoke optimism among investors that the reopening of businesses in the U.S. and other countries will pull the economy out of its recession relatively quickly.

 

The market has continued to climb, despite bouts of volatility, even as a rise in new coronavirus cases in the U.S. and other countries clouds the prospects for an economic recovery.

 

Investors have grown confident that the Federal Reserve and Congress are prepared to continue providing a historic amount of support to the market and economy, said Sam Stovall, chief investment strategist at CFRA.

 

“All of the negative news has basically been built into share prices,” Stovall said. “If we are to stumble, then the Fed and Congress are likely to step in to put a fiscal and monetary floor underneath the economy and the markets. And now, with the likelihood that the economy will not be shutting down entirely should we end up with a second wave, the market is basically saying it’s ‘onward and upward.’”

 

The Dow Jones Industrial Average was up 230 points, or 0.9%, to 26,259. The Nasdaq composite, which is heavily weighted with technology stocks, gained 1.4%. The index has only fallen twice so far in June. Small company stocks were also notching solid gains. The Russell 2000 index was up 0.7%.

 

The yield on the 10-year Treasury note rose to 0.72% from 0.70% late Monday. It tends to move with investors’ expectations for the economy and inflation.

 

The World Health Organization said over the weekend that the pandemic is still in its ascendancy. The U.S., which is seeing rapid increases in cases across the South and West, has the most infections and deaths by far in the world, with 2.3 million cases and over 120,000 confirmed virus-related deaths, according to a tally by Johns Hopkins University.

 

Still, investors have been placing more weight on economic data releases that suggest economies that have reopened are making strides to emerge from a deep recession.

 

On Tuesday, the Commerce Department said sales of new U.S. homes jumped 16.6% in May to an annual rate of 676,000, exceeding Wall Street’s forecasts. Several homebuilders rose. Century Communities was up 1.8%.

Further updates on the U.S. economy are expected toward the end of this week, when the government will issue data on consumer spending, weekly unemployment aid applications and durable goods orders.

 

European shares advanced after a measure of economic activity in the eurozone, the purchasing managers’ index, rose significantly in June from the month before. The index was just shy of the level that indicates the economy is growing again after a devastating plunge in the spring.

 

France’s CAC 40 gained 1.4%, while Germany’s DAX rallied 2.1%. Britain’s FTSE 100 rose 1.2%.

 

Asian markets overcame some early turbulence caused by reported comments by White House trade adviser Peter Navarro suggesting the U.S. trade deal with China was in trouble. President Donald Trump later said the agreement was still on.

 

Benchmark U.S. crude oil was up 0.1% to $40.77 a barrel. Brent crude, the international standard, was up 0.5% to $43.28 per barrel.

 

Source: Bahrain News Agency

US was largest destination for South Korean investment in 2019

Seoul, The United States continued to remain the largest destination for South Korea’s overseas financial investment last year, accounting for nearly one-third of the country’s financial investment overseas, central bank data showed Tuesday.

 

As of end-2019, the country’s financial investment in the United States came to US$413.1 billion, up $63.1 billion from a year earlier, according to preliminary data from the Bank of Korea (BOK), South Korean News Agency (Yonhap) reported.

 

The increase marks the sharpest rise among all countries and regions, with South Korean financial investment in China, the second-largest single destination for overseas investment, rising $5.3 billion to $141.8 billion over the cited period.

 

Seoul’s financial investment in Japan came to $48.1 billion as of end-December, up $7.8 billion from a year before.

 

Its investment in Europe added $41.7 billion to $248.1 billion over the cited period, with investment in Southeast Asian countries gaining $9.6 billion to $168.5 billion.

 

South Korea’s overall international financial assets came to $1,290.9 billion as of the end of last year, $148.3 billion more than a year earlier. The amount does not include reserve funds.

 

The U.S. also topped the list of the largest financial investor in South Korea, with its financial assets here amounting to $317.8 billion as of end-2019, up $17.8 billion from a year earlier, according to the BOK.

 

China’s financial assets in South Korea gained $300 million to $67.7 billion over the cited period, with those of Japan adding $2.5 billion to $92.6 billion.

 

Financial assets held here by EU member nations came to $306.3 billion, up $22.2 billion from end-2018.

 

Source: Bahrain News Agency