Business Live: Stocks rebound, oil loses as Trump plays down Iran attack

U.S. President Donald Trump delivers a statement about Iran flanked by U.S. Secretary of Defense Mark Esper, Vice President Mike Pence and military leaders in the Grand Foyer at the White House in Washington, U.S., January 8, 2020.

U.S. President Donald Trump delivers a statement about Iran flanked by U.S. Secretary of Defense Mark Esper, Vice President Mike Pence and military leaders in the Grand Foyer at the White House in Washington, U.S., January 8, 2020.   | Photo Credit: Reuters

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Updates from the world of economy, markets, and finance

Stocks have witnessed a rebound today after US President Donald Trump on Wednesday played down tensions with Iran. Oil has dropped as supply concerns wane.

 

2:00 PM

Oil steadies a day after Iranian missile strike knocks prices

Oil prices steadied on Thursday a day after tumbling on concerns raised by an Iranian missile strike on Iraqi bases hosting U.S. forces.

Brent crude futures were down 5 cents at $65.40 a barrel by 0728 GMT after a 4.1% fall on Wednesday.

They are now lower than they were ahead of the Jan. 3 killing of Iranian military commander Qassem Soleimani in a U.S. drone attack in Iraq, which prompted the Iranian response.

West Texas Intermediate futures were up 1 cent to $59.63 a barrel after falling nearly 5% a day earlier.

“An 8% range in the last 24 hours has probably cleaned up all the short-term positioning, long or short, and left market participants a bit breathless,” said Jeffrey Halley, senior market analyst at OANDA.

J.P. Morgan analysts maintained their forecast for Brent to average $64.50 a barrel this year.

“The impact on oil prices will depend on (the) extent of supply disruption versus available spare capacity, global oil inventories and reaction to oil price from U.S. producers,” the bank said in a commodities research note.

Top oil producers led by Saudi Arabia have agreed to reduce output by as much as 2.1 million barrels per day through the first quarter of 2020. Reuters

 

1:30 PM

China opens up oil and gas exploration, production to foreign firms

China will for the first time allow foreign companies to explore for and produce oil and gas in the country, opening up the industry to firms other than state-run energy giants as Beijing looks to boost domestic energy supplies.

The long-awaited opening comes alongside Beijing's reshuffle in the so-called “midstream” pipeline business, but experts say the policy relaxation may not draw immediate interest from international drillers due to overall poor asset quality of China's hydrocarbon resources.

From May 1, 2020, foreign firms registered in China with net assets no lower than 300 million yuan ($43 million) will be allowed to take part in oil and gas exploration and production, the Ministry of Natural Resources said at a media conference.

The change will also apply to domestic companies that meet the same asset criteria.

“China is accelerating the sector reform due to growing energy security concerns,” said Zhu Kunfeng, Beijing-based analyst with IHS Markit, “Vitalising the industry by diversifying the participants, including foreign and private investors, is the focus of that reform.”

China now imports 70% of crude oil it refines and nearly half its natural gas consumption, and state firms face an uphill battle boosting reserves and production outside China amid growing geopolitical risks.

Previously, international companies could enter the industry only via joint-ventures or through cooperation with Chinese firms, mainly state-owned majors such as China National Petroleum Company (CNPC), China Petrochemical Corp (Sinopec) or their listed vehicles. Reuters

 

12:45 PM

PM meets economists, experts at Niti Aayog

Prime Minister Narendra Modi is meeting economists and experts at the Niti Aayog to discuss the state of economy and steps to be taken to revive growth which is estimated to drop to 5% during the current fiscal.

Among others, the meeting is being attended by Home Minister Amit Shah and other cabinet ministers, besides Niti Aayog Vice Chairman Rajiv Kumar, CEO Amitabh Kant and other senior officials of the think-tank.

Bibek Debroy, chairman of the Economic Advisory Council to the Prime Minister, too is present at the high-level meeting which began Thursday morning here.

The meeting assumes significance as the government is in the process of formulating Budget proposals for 2020-21 the focus of which is likely to be on accelerating economic growth which is estimated to slip to an 11-year low of 5% during 2019-20.

The Prime Minister on Monday interacted with top business tycoons to discuss the issues facing the economy and measures needed to boost growth and create jobs.

Finance Minister Nirmala Sitharaman will be presenting her second Union Budget on February 1. PTI

 

12:00 PM

India needs 6.3% labour productivity growth to attain 8% hike in GDP: Ind-Ra

India Ratings and Research on Thursday said that the country will have to increase its labour productivity growth to 6.3% to attain 8% economic growth.

The labour productivity growth in FY19 was 5.2%.

“India will have to raise its labour productivity growth to 6.3% to achieve 8% GDP growth. And to attain nine per cent growth, labour productivity growth will have to be raised to 7.3%,” India Ratings and Research (Ind-Ra) said in a statement.

This is 40.4% higher than the level attained in FY19, it said.

Given the growth slowdown, this looks unlikely in the near term, but is not an insurmountable task, according to Ind-Ra.

“Such levels of labour productivity growth have been achieved in the past...India’s labour productivity growth, like other nations, came under pressure in the aftermath of the 2008 global financial crisis, especially during FY11-FY15,” it said.

However, it recovered thereafter and grew at 5.8% during FY16-FY19, it added.

The challenge on the productivity front for India is two-fold, it said. “First, how to raise the overall labour productivity to a level that delivers the required GDP growth rate, and secondly how to lift the labour productivity in the lagging sectors so that growth is more evenly balanced and sustainable over the medium- to long-term.”

Sectors such as manufacturing, electricity, gas, water supply, transport, storage and communications “contributed significantly to the overall labour productivity during FY00-FY16”.

The sectors that lagged are construction, agriculture and mining. PTI

 

11:00 AM

China's Dec consumer inflation still high, not seen hindering PBOC easing

China's consumer inflation steadied while factory-gate prices fell at a slower pace in December, giving Beijing room to stay the course on monetary easing as economic growth cools.

Some investors have worried that consumer inflation, hovering near eight-year highs, could make China's central bank more cautious about further stimulus.

China's consumer prices in December rose 4.5% from a year earlier, National Bureau of Statistics (NBS) data showed on Thursday, unchanged from November's pace, but lower than analysts' forecast of 4.7%. The gains were again fuelled by a surge in pork prices as African swine fever ravaged the country's hog herds.

However, core inflation - which excludes food and energy prices - stayed largely subdued.

Analysts expect consumer inflation may stay elevated for sometime due to higher food prices during the Lunar New Year and as global oil costs spike amid recent geopolitical tensions.

China plans to keep its inflation target at around 3% in 2020, unchanged from last year, Reuters reported citing sources, confounding speculation it might raise the bar to give it room for extra economic stimulus.

“CPI will not be a constraint on monetary policy. The policy easing will continue at a pace set by the central government,” said Gao Ming, analyst with China Merchants Securities.

On Jan. 1, the People's Bank of China announced it was cutting the amount of cash that all banks must hold as reserves, the eighth time since early 2018 to free up more funds to shore up the slowing economy. Reuters

 

10:15 AM

Indian inflation probably breached central bank target in December

Rising vegetable prices probably pushed Indian retail inflation to its highest in more than five years in December, exceeding the Reserve Bank of India's medium-term target of 4% for a third straight month, a Reuters poll of economists predicted.

The median forecast in the Jan. 3-8 Reuters poll of nearly 50 economists predicted India's annual consumer inflation rose to 6.20% in December from November's 5.54%.

Over 60% of respondents expected retail inflation, due for release on Jan. 13, to breach the upper band of the RBI's buffer range of 2% to 6%, with the highest forecast for 7.01%.

Last month, onion prices - an important food in Indian households - soared tenfold, contributing to a surge in food inflation that has picked up steadily since March.

“The single biggest factor for this increase in headline inflation is onions. While there is some sort of increase in other food prices as well, we don't see that to be extremely alarming,” said Aastha Gudwani, India economist at BofA Global Research.

But core inflation, which excludes volatile components like food and energy, has declining, highlighting weak underlying demand.

Therefore, many economists do not expect the rise in consumer price inflation to prompt any policy move by the central bank at its next meeting, in February.

“I don't think a hike is something the RBI would be looking at right now, because they also need to see what is happening to growth - that is a big concern right now,” said Sakshi Gupta, senior India economist at HDFC Bank. Reuters

 

10:00 AM

Gold inches up as investors still wary of U.S.-Iran conflict risk

Gold prices edged higher on Thursday as investors preferred to stay put with safe-haven assets even though the chances of an escalation in U.S.-Iran conflict waned after the two sides softened their stance. Spot gold was up 0.3% at $1,560.36 per ounce by 0300 GMT. Prices hit their highest since March 2013 at $1,610.90 on Wednesday. U.S. gold futures were flat at $1,560.50.

President Donald Trump said on Wednesday the United States did not necessarily have to respond militarily to Iran's attack on U.S. troops in Iraq, while Iranian Foreign Minister Mohammad Javad Zarif said the strikes “concluded” Tehran's response to the killing of commander Qassem Soleimani.

“The subsequent rhetoric seems to suggest that they (Iran) are not going to follow on, similarly Trump signalled that there is no immediate intent to respond militarily, so there is a degree of relief in markets,” said Ilya Spivak, a senior currency strategist at DailyFx. “We did not see an immediate escalation, although it would not be accurate to say that it cannot happen for sure, there is that risk.” Gold, considered a safe investment in times of political and economic uncertainty, had risen as much as 2.4% on Wednesday and surpassed the key $1,600 level after Iran's retaliatory attacks. Reuters

 

9:45 AM

World Bank trims 2020 growth forecast amid slow recovery for trade, investment

The World Bank on Wednesday trimmed its global growth forecasts slightly for 2019 and 2020 due to a slower-than-expected recovery in trade and investment despite cooler trade tensions between the United States and China.

The multilateral development bank said 2019 marked the weakest economic expansion since the global financial crisis a decade ago, and 2020, while a slight improvement, remained vulnerable to uncertainties over trade and geopolitical tensions.

In its latest Global Economic Prospects report, the World Bank shaved 0.2 percentage point off of growth for both years, with the 2019 global economic growth forecast at 2.4% and 2020 at 2.5%.

Advanced economies and emerging markets and developing economies also show divergent prospects in the World Bank forecasts. Growth in the United States, the euro area and Japan is expected to decline slightly to 1.4% in 2020 from 1.6% in 2019 -- a markdown of 0.1 percentage point for both years -- due to continued softness in manufacturing and the lingering negative effects of U.S. tariffs and retaliatory measures.

But emerging market economies are expected to see a pickup in growth to 4.3% in 2020 from 4.1% in 2019, although these are both a half percentage point lower than forecasts made in June. Reuters

 

9:30 AM
Sensex and Nifty open strong

Both the Sensex and the Nifty are up over 1% as the day begins:

Business Live: Stocks rebound, oil loses as Trump plays down Iran attack
 

 

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Printable version | Jan 19, 2020 4:12:33 AM | https://www.thehindu.com/business/business-live-9-jan-2020/article30520740.ece

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