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Economy

UPDATE 3-Portugal headed for recession this year, says central bank

* Portugal to enter recession in 2020 due to coronavirus

* Exports to drop between 12.1% and 19.1%

* Outbreak to have “potentially long-lasting effects” (Adds new government measures)

By Sergio Goncalves and Catarina Demony

LISBON, March 26 (Reuters) – Portugal will go into recession this year as the coronavirus hits private consumption and investment and exports collapse, the central bank said on Thursday.

Portugal has 3,544 confirmed cases of the coronavirus, with 60 reported deaths, far below other southern European countries such as Italy and Spain.

In its economic bulletin, the first data set showing the impact the virus is likely to have on the economy, the Bank of Portugal said gross domestic product would drop between 3.7% and 5.7% in 2020. Last year it grew 2.2%.

Private consumption is set to fall 2.8% to 4.8% and exports will decrease 12.1% to 19.1% this year, according to the bulletin. Private investment will drop between 10.8% and 14.9%.

The unemployment rate is set to increase to between 10.1% and 11.7% this year, compared with 6.6% in 2019.

“The outlook for the Portuguese economy deteriorated sharply and significantly as a result of the impact of the COVID-19 pandemic,” the Bank of Portugal said in a statement.

The outbreak will have “very significant and potentially long-lasting effects”, it said.

It said Portugal, which completed a strict EU bailout programme in 2014 in the wake of the 2008 global financial crisis, should return to economic growth over the next two years.

It projected growth of 0.7% to 1.4% in 2021 and 3.1% to 3.4% in 2022.

Portugal declared a state of emergency on March 18, which meant the closure of non-essential businesses, affecting thousands of jobs across the country.

The government also announced a 9.2 billion euro ($10 billion) package worth 4.3% of annual GDP to support workers and provide liquidity for affected companies.

On Thursday, the government announced a set of new measures to help companies and families, including a six-month suspension of the payment of loan instalments.

Those unemployed or in mandatory isolation are automatically eligible.

“This measure will provide very significant relief given the financial efforts made by companies and families,” said Economy Minister Pedro Siza Vieira.

Boosted by the exports sector, the tourism industry and private investment, the economy had been steadily growing since it exited its bailout programme in 2014.

On Wednesday, Portugal reported a budget surplus of 0.2% of gross domestic product in 2019 – its first in 45 years of democracy – after a deficit of 0.4% in 2018.

That day Finance Minister Mario Centeno said all scenarios pointed to a recession. (Reporting by Sergio Goncalves and Catarina Demony; Editing by Raissa Kasolowsky and Hugh Lawson)

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Economy

WRAPUP 2-TSX and Canadian dollar gain as economic aid encourages investors

 (Updates prices)
    * TSX gains 1.8% as Ottawa boosts stimulus
    * Canadian dollar rises 1% against the greenback
    * Loonie touches its strongest since March 17 at 1.4010
    * Canadian bond yields fall across the curve

    By Fergal Smith
    TORONTO, March 26 (Reuters) - Canada's main stock market
rallied for a third straight day and the loonie rose to a
nine-day high on Thursday as Ottawa tripled the size of a
mortgage securities buying program, with investors becoming more
impressed with the amount of economic aid.
    Canada said it was ready to buy C$150 billion of mortgage
securities, up from C$50 billion announced earlier this month,
to expand funding for lenders dealing with tighter credit
markets due to the economic impact of the coronavirus outbreak.
            
    On Wednesday, Canada almost doubled the value of an aid
package to C$52 billion to help people and businesses deal with
losses from the outbreak, while the Bank of Canada has cut its
key interest rate by a total of 100 basis points this month to
0.75%.             
    Some economists expect the central bank to cut rates to zero
and begin purchasing in large scale assets such as government
bonds.        
    "Fear over how long coronavirus containment measures could
last are starting to be offset by encouragement that fiscal and
monetary support measures are underway to support Canadians and
Canadian companies," said Colin Cieszynski, chief market
strategist at SIA Wealth Management.
    The Toronto Stock Exchange's S&P/TSX composite index
          ended up 1.8% at 13,371.17, its highest closing level
since March 13. The index has rebounded nearly 20% from Monday's
8-year low.
    The heavily-weighted financials group rallied 1.7%, while
industrials were up 3.3%.
    Wall Street also rallied as record weekly unemployment
benefit claims added to the case for more stimulus to combat the
economic impact of the coronavirus pandemic, while the U.S.
dollar        fell for a fourth straight day against a basket of
major currencies.             
    The Canadian dollar          was trading 1% higher at 1.4056
to the greenback, or 71.14 U.S. cents. The currency, which on
Wednesday notched its biggest gain in four years, touched its
strongest intraday level since March 17 at 1.4010.
    The price of oil, one of Canada's major exports,       
settled 7.7% lower at $22.60 a barrel as restrictions on travel
worldwide slashed fuel demand and the United States scrapped
plans to buy domestic oil for its emergency reserve.
            
    Canadian government bond yields fell across the curve in
sympathy with U.S. Treasuries. The 10-year             was down
5.2 basis points at 0.850%.

 (Reporting by Fergal Smith; editing by Nick Zieminski and
Alistair Bell)
  

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Economy

Lebanon aims to implement economic recovery plan by year-end -finance minister

LONDON/BEIRUT, March 27 (Reuters) – Lebanon kicked off formal debt restructuring talks on Friday with a pledge to implement an economic turnaround plan by year-end, but officials painted a glum picture of rapidly dwindling reserves and soaring inflation ahead.

“This government has a full agenda over the coming months to design and implement its comprehensive recovery plan, and conduct its public debt restructuring,” Finance Minister Ghazi Wazni said in a webcast presentation.

“Our aim is to finalise this ambitious turnaround agenda before year-end 2020.”

Lebanon, one of the most indebted countries in the world, suspended payments on all $31.3 billion of its international ‘eurobonds’ this month, declaring that it could no longer repay them.

Government officials also said they were aiming for a fair and equitable treatment of creditors. (Reporting by Tom Arnold in London and Eric Knecht in Beirut, editing by Kari Strohecker)

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Economy

World's biggest economies must take firm measures to combat coronavirus – Saudi king

DUBAI, March 26 (Reuters) – Saudi Arabia’s King Salman, addressing a virtual summit of G20 leaders, said the world’s biggest economies must take firm measures on several fronts to combat the coronavirus pandemic, state news agency SPA said on Thursday.

He reaffirmed full support for the World Health Organization’s coordination of efforts to fight the virus, adding “the G20 must assume the responsibility of reinforcing cooperation in financing research and development for therapeutics and a vaccine”.

“We must also strengthen the global preparedness to counter infectious diseases that may spread in the future,” he said. (Reporting by Yousef Saba and Alaa Swilam; Editing by Toby Chopra)

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Economy

UPDATE 2-German yields fall to 10-day low; Italy sells off as stimulus in focus

* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Updates prices)

By Yoruk Bahceli

LONDON, March 27 (Reuters) – German bond yields fell to 10-day lows and Italian yields rose on Friday as bond markets focused on monetary and fiscal solutions from the euro zone to address the economic fallout from the coronavirus outbreak.

EU leaders were unable to agree on Thursday on the scale and scope of their economic response to the coronavirus pandemic, giving themselves two more weeks to work out details in a dispute between the ailing south and fiscally conservative north.

Germany and the Netherlands blocked a call from Italy, Spain and France to issue joint debt. There was also disagreement on the timing of granting standby credit to governments via the European Stability Mechanism.

Germany’s 10-year bond yields fell to a 10-day low at -0.50%, before rising slightly to end the session at -0.48%, still down 11 basis points on the day.. Spanish and Portuguese yields fell similarly. .

German yields had risen to 10-month highs at -0.14% last week on expectations of fiscal stimulus.

They have come down since as Germany, one of the states where the ECB is thought to be approaching its self-imposed issuer limit, is expected to be one of the main beneficiaries of its removal.

“Even though there are expectations for fiscal policy, and that will have an effect on issuance, the ECB’s presence is the main driver,” said Mizuho strategist Peter McCallum.

In Italy 10-year bond yields were up 9 basis points to 1.33% . Data on Thursday showed that the number of new cases and deaths from coronavirus had risen in the country, dashing hopes for a retreat.

Despite the delay to a coordinated euro zone response to the crisis, the gap between Italy and Germany’s 10-year yields – a key gauge of credit risk on the former – is only up 30 basis points compared to late February, when the spread of the virus started to drive its bond market, at around 177 bps .

“This means absolutely no risk premia are being priced into account for the fallout from the virus,” said Richard McGuire, head of rates strategy at Rabobank.

Without the issuance of joint debt, Southern European governments will be liable for their own fiscal stimulus efforts, adding even more debt to the euro zone’s most indebted balance sheets, which has led some analysts to see the market as mispriced.

The ECB’s new programme has “the flexibility to deploy its firepower to up purchases to contain any spread widening, but it does nothing to address the structural root cause of fragmentation, which remains the lack of liability sharing,” Rabobank’s McGuire said.

While other states are accelerating their issuance plans, a rise in borrowing costs has halted Greek plans to tap bond markets again this year.

A key gauge of long-term euro zone inflation expectations rose above 0.90% for the first time in two weeks and was set to end the day at 0.95%. (Reporting by Yoruk Bahceli; Editing by Toby Chopra and Ken Ferris)

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Economy

S'pore working with 6 nations to ensure supply of essential goods

Singapore is working closely with six other nations to tackle disruptions to trade and supply chains that could impede the delivery of vital goods, including food and medicine.

Singapore and its partners in the initiative – Australia, Canada, Chile, New Zealand, Myanmar and Brunei – pledged that they will ensure trade lines for land, air and sea freight remain open.

They are also open to cooperation from other nations, said Singapore’s Trade and Industry Minister Chan Chun Sing in a Facebook post yesterday.

The initiative comes amid signs that the US$20 trillion (S$29 trillion) global trade sector is grinding to a halt in the wake of lockdowns, travel curbs, port quarantines and border controls imposed to contain the spread of the Covid-19 disease.

“We recognise that it is in our mutual interest to ensure that trade lines remain open,” the countries said in a joint statement issued by Singapore’s Ministry of Trade and Industry (MTI).

“We are committed to working with all like-minded countries to ensure that trade continues to flow unimpeded, and that critical infrastructure such as our air and seaports remains open to support the viability and integrity of supply chains globally.”

Though food is in plentiful supply across the world, logistical hurdles are making it harder to get products to where they are needed.

Four of the nations that inked the joint statement – Australia, Canada, New Zealand and Chile – are among the world’s top food exporters with shipments that include grains, pulses, meat, seafood and dairy.

While China’s extreme measures to stop the spread of the virus are now allowing its economy to slowly come back online, supply chains are disintegrating in other parts of the world and threatening the availability of essential products.

An MTI spokesman noted a sharp drop in airfreight capacity in the wake of flight cancellations and reduced connectivity.

Airfreight charges have correspondingly become volatile and have risen several times while some seaports have had restrictions imposed, including suspension of port operations.

There have also been disruptions to land transport because of enhanced border controls.

For instance, the production of medical equipment often involves supply chains that straddle multiple countries.

That means nations must ensure that components and raw materials can flow unimpeded and efficiently.

Mr Chan said: “Countries must band together and unite in this fight against the virus instead of making decisions that threaten global trade.

“As a country that prides itself on its openness and strong connectivity, Singapore is committed to bringing like-minded partners together to uphold trade and supply chain connectivity, and will continue to lead efforts in this area.”

Stockpiling and panic buying by consumers are also adding to supply strains.

Retailers from across the world have reported panic buying and hoarding of medications, putting at risk the supply of vital drugs to vulnerable patients.

In the United States, the stockpiling has prompted pharmaceutical boards in Idaho, Kentucky, Ohio, Nevada, Oklahoma, North Carolina and Texas to issue restrictions or guidelines on drug sales.

Food hoarding is also becoming commonplace.

Even some governments are moving to secure domestic food supplies.

For instance, Kazakhstan, one of the world’s biggest shippers of wheat flour, has banned exports of the product along with carrots, sugar and potatoes, among other products.

Serbia has stopped the flow of its sunflower oil and other goods, and Russia is leaving the door open to shipment bans.

Other nations are adding to their strategic food reserves.

China, the biggest rice grower and consumer, pledged to buy more than ever before from its domestic harvest, even though the government already holds massive stockpiles of rice and wheat, enough for one year of consumption.

“The decisions that are made today will have a lasting effect on the global economy when the situation stabilises,” said Mr Chan in his post.

“While the short-term challenges are real and severe, as responsible governments, we must continue to keep an eye on the future and what it will bring for our businesses and people after the virus has been defeated.”

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Economy

UPDATE 1-Mexican banks to offer deferred interest payments, principal on loans – finance minister

(Adds comments from finance minister, background)

MEXICO CITY, March 25 (Reuters) – Mexican banks will offer clients deals to defer interest payments and principal on loans, measures meant to ease some of the economic pain inflicted by the coronavirus pandemic, Mexico’s finance minister said on Wednesday.

“Additionally, we are calling on banks and the financial sector to maintain credit lines that may be needed at this current juncture,” Finance Minister Arturo Herrera said on Twitter.

The bank regulator, the CNBV, will give regulatory leeway to banks so they can focus on helping the Mexican people, the finance minister said.

Mexico’s economy, which was already in a mild recession, has been hit hard by the coronavirus outbreak and a steep drop in oil prices. (Reporting by Frank Jack Daniel; Writing by Anthony Esposito; Editing by Peter Cooney)

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Economy

GLOBAL MARKETS-Stocks rebound further as markets await $2 trillion U.S. stimulus boost

(Adds oil settlement prices, details)

* MSCI world index adds to biggest climb since 2008 crisis

* Wall Street also on track for back-to-back gains

* Gold retain most of advance after big jump

* Dollar slips as markets wait for U.S. stimulus package

* Graphic: World FX rates in 2020 tmsnrt.rs/2egbfVh

By Herbert Lash and Marc Jones

NEW YORK/LONDON, March 25 (Reuters) – The dollar slid and global equity markets marched higher on Wednesday, poised for a second day of gains on optimism $2 trillion in U.S. fiscal stimulus will dampen the economic shock the coronavirus pandemic already has started to inflict.

U.S. senators will vote Wednesday. Top aides to Republican President Donald Trump and senior Republican and Democrat senators agreed on the unprecedented bill after five days of marathon talks.

Hopes the bill, which is nearly half the $4.7 trillion the U.S. government spends annually, will ease an expected recession lifted world stock indexes for back-to-back gains for the first time since markets sold off a month ago.

Europe’s main markets in London, Frankfurt and Paris were struggling to stay positive after ripping 4%-5% higher and oil prices swung from 3% up to 3% down. Wall Street also teetered though it mostly remained more than 1% higher.

The Dow Jones Industrial Average soared more than 11% on Tuesday in its biggest single-day percentage gain since 1933 and the benchmark S&P 500 jumped 9.4% – its tenth best day on record out of 24,067 trading sessions since a daily data series started in 1927.

The stimulus package marks progress but the devil’s in the details, said Ron Temple, head of U.S. equity at Lazard Asset Management in New York. The legislation is not available to read to know how it will be executed or when money arrives at households and small businesses gain access to funding, he said.

“This is not the all-clear; it’s just material progress,” Temple said.

“Until we know we can go back to work safely, that we can go to restaurants and go to stores and engage with other humans in close proximity, I don’t think you can make an economic or a market call. It’s premature to be trying to call the bottom.”

The stimulus includes a $500 billion fund to help hard-hit industries and a comparable amount for direct payments of up to $3,000 apiece to millions of U.S. families.

It will also include $350 billion for small-business loans, $250 billion for expanded unemployment aid and at least $100 billion for hospitals and related health systems.

Countries that have locked down their populations to prevent the spread of the coronavirus need to use the time to find and attack the virus, the World Health Organization said.

As the United States works to screen thousands for the coronavirus, a new blood test offers the chance to find out who may have immunity – a potential game changer in the battle to contain infections and get the economy back on track.

Over 450,000 people have been infected globally and more than 20,000 have died, according to a Reuters tally.

Data on Wednesday pointed to a fast-slowing economy that analysts said signaled the United States already is in recession.

New orders for key U.S.-made capital goods fell sharply in February as demand for machinery and other products slumped, suggesting a deepening contraction in business investment.

The benchmark S&P 500 is still nearly $8 trillion below its mid-February high, and investors expect more sharp swings. Wall Street’s fear gauge eased overnight but was on the rise again ahead of Wednesday’s open.

MSCI’s gauge of stocks across the globe surged 2.65% and emerging market stocks rose 4.32%.

The pan-European STOXX 600 index rose 0.96%.

The Dow Jones Industrial Average rose 661.9 points, or 3.2%, to 21,366.81. The S&P 500 gained 35.76 points, or 1.46%, to 2,483.09 and the Nasdaq Composite added 34.47 points, or 0.46%, to 7,452.33.

In the currency markets, the dollar slipped for a third straight session as a scramble for liquidity was soothed by the super-sized U.S. stimulus plan, though it was starting to look a little stronger again.

The dollar index fell 0.216%, with the euro up 0.44% to $1.0834. The Japanese yen weakened 0.24% versus the greenback at 111.51 per dollar.

The risk-sensitive Australian dollar jumped over the 60-U.S. cent mark for the first time in a week.

Bond markets were also calmer. Benchmark U.S. Treasuries were yielding 0.7987% while in Europe Germany’s 10-year yield edged a basis point higher to -0.296%, tailed by other higher-rated government debt.,

European Central Bank chief Christine Lagarde asked euro zone finance ministers during a videoconference on Tuesday to seriously consider a one-off joint debt issue of “coronabonds”, officials told Reuters.

In metals markets, gold changed hands at $1,608.78 an ounce , retaining most of Tuesday’s gains of almost 5%, its biggest jump since 2008.

U.S. crude prices rose slightly, bolstered by progress on a massive pending U.S. economic stimulus package.

Brent crude gained 24 cents to settle at $27.39 a barrel. U.S. crude futures rose 48 cents to settle at $24.49 a barrel.

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Economy

CEE MARKETS-Stocks jump on U.S. stimulus, but virus crisis not over

    By Anita Komuves
    BUDAPEST, March 25 (Reuters) - Central European stock
markets rose, led by Prague, and regional currencies gained on
Wednesday as the United States agreed on $2 trillion economic
stimulus bill, lifting market sentiment around the world. 
    The stimulus package includes a large increase in
unemployment insurance and hundreds of billions of dollars to
aid companies harmed by the coronavirus.
    "It is too early to open the champagne bottles, the plateau
of the pandemic is well ahead of us," CIB bank said in a note.
"And we will only be able to assess the damage to the real
economy later." 
    Central European governments have also announced a series of
emergency measures recently to counter the economic blow from
lockdowns, production halts and disruption to business activity
and supply chains.
    The Czech, the Polish and the Romanian central banks have
cut their benchmark rates. The National Bank of Hungary left
interest rates unchanged on Tuesday, as expected, and announced
further steps to boost liquidity. It introduced a new fixed-rate
collateralised loan instrument with unlimited liquidity.

    The first tender of the new instrument will be held later on
Wednesday. 
    "This tool will be able to stabilize not only lending, but
also the government securities market ... and this is what we
have seen today," Deputy Governor Marton Nagy said, referring to
a drop in yields, especially at the long end of the yield curve
on Tuesday.
    Five- and 10-year government bond yields dropped in Hungary
by more than 50 basis points on Tuesday before the NBH's
announcements, anticipating the measures, analysts say. 
    Yields on the 10-year Hungarian bonds were up by 20 basis
points on Wednesday, an FI trader in Budapest said. 
    "The market is disappointed because what the NBH announced
is not proper QE, contrary to what is happening in neighboring
countries," he said.
    The Hungarian forint gained 0.57% on Wednesday and
was trading at 352.50 to the euro after slipping the day before
as a reaction to the NBH's measures.
    Elsewhere, the Czech crown was also up, gaining
0.5% and trading at 27.557 to the euro. The zloty
gained 0.66% and was trading at 4.576. The Romanian leu
 was stable. 
    The Czech Republic holds a bond auction on Wednesday with
results due after 1100GMT.
    "Today's bonds auction will be a first test of where demand
currently is," Komercni Banka trader Dalimil Vyskovsky said in a
note. 
    "The finance ministry is offering a set of three bonds ...
as the issuer seems to be trying to offer investors a wider
range of instruments to test where demand will be strongest."
    Czech bond yields were dipping on Wednesday after a drop
yesterday, correcting from a spike in the past few days.
    Regional stock indexes were up, with Prague's equities
jumping more than 7% by 0857 GMT. Budapest and Bucharest
 were up by 3% and Warsaw's stocks gained nearly
3%.          

            CEE        SNAPSHOT    AT                         
            MARKETS               0957 CET            
                       CURRENCIE                              
                       S                              
                       Latest     Previous  Daily     Change
                       bid        close     change    in 2020
 Czech                   27.5570   27.6950    +0.50%    -7.71%
 crown                                                
 Hungary                352.5000  354.5000    +0.57%    -6.06%
 forint                                               
 Polish                   4.5761    4.6065    +0.66%    -6.99%
 zloty                                                
 Romanian                 4.8390    4.8445    +0.11%    -1.05%
 leu                                                  
 Croatian                 7.6090    7.6115    +0.03%    -2.15%
 kuna                                                 
 Serbian                117.4900  117.5450    +0.05%    +0.07%
 dinar                                                
 Note:      calculated from                 1800 CET          
 daily                                                
 change                                               
                                                              
                       Latest     Previous  Daily     Change
                                  close     change    in 2020
 Prague                   851.78  794.7400    +7.18%   -23.65%
 Budapest               33758.50  32614.56    +3.51%   -26.74%
 Warsaw                  1494.06   1451.02    +2.97%   -30.51%
 Bucharest               7719.84   7472.17    +3.31%   -22.63%
 Ljubljana                739.98    706.27    +4.77%   -20.08%
 Zagreb                  1437.84   1403.99    +2.41%   -28.73%
 Belgrade   <.BELEX15     623.04    616.31    +1.09%   -22.28%
            >                                         
 Sofia                    432.07    418.88    +3.15%   -23.95%
                                                              
                       Yield      Yield     Spread    Daily
                       (bid)      change    vs Bund   change
                                                      in
 Czech                                                spread
 Republic                                             
   2-year   <CZ2YT=RR     1.3210    0.0870   +192bps     +5bps
            >                                         
   5-year   <CZ5YT=RR     1.5120    0.0700   +199bps     +4bps
            >                                         
   10-year  <CZ10YT=R     1.5530   -0.0010   +185bps     -3bps
            R>                                        
 Poland                                                       
   2-year   <PL2YT=RR     0.9650    0.0320   +157bps     +0bps
            >                                         
   5-year   <PL5YT=RR     1.4220    0.0820   +190bps     +5bps
            >                                         
   10-year  <PL10YT=R     1.9420    0.1450   +224bps    +12bps
            R>                                        
            FORWARD                                           
                       3x6        6x9       9x12      3M
                                                      interban
                                                      k
 Czech Rep          <       0.69      0.40      0.35      1.76
            PRIBOR=>                                  
 Hungary            <       0.45      0.42      0.33      0.55
            BUBOR=>                                   
 Poland             <       0.55      0.42      0.44      1.17
            WIBOR=>                                   
 Note: FRA  are for ask prices                                
 quotes                                               
 ***************************************************          
 ***********                                          
 

 (Additional reporting by Jason Hovet in Prague and Alan
Charlish in Warsaw; editing by Larry King)
  
 
 

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Economy

China sovereign CDS ease to near three week low

LONDON, March 25 (Reuters) – The cost of insuring debt issued by China slipped to a near three-week low on Wednesday, while Italian CDS also eased.

Five-year credit default swaps for China reached 52 basis points, down 11 bps from Tuesday’s close, data from IHS Markit showed.

Signs are emerging of business in China starting to return to normal, while the number of new coronavirus cases on the mainland totalled 47 on Tuesday, down from 78 a day earlier.

Italy’s CDS edged down 2 bps to 179 bps, IHS Markit data showed.

The Markit iTraxx Europe crossover CDS index, which measures the cost of insuring exposure to a basket of sub-investment grade European companies, dropped to 545 bps from Tuesday’s close of 603 bps. (Reporting by Tom Arnold, editing by Maiya Keidan)

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