UPDATE 1-Russia may resume gas supply next week if Ukraine pays $2.2 bln -Gazprom

Fri Oct 31, 2014 6:33am EDT

* Russia, Ukraine reach deal on supplies in Brussels on Thursday

* Gazprom says to restart supplies within 48 hours from payment

* Dispute has threatened winter supplies to Europe (Adds more detail, Yatseniuk)

By Denis Pinchuk and Olesya Astakhova

MOSCOW, Oct 31 (Reuters) - Russia may restart gas supplies to Ukraine as soon as next week if Kiev pays $2.2 billion worth of debts and pre-payments, Alexei Miller, head of state gas monopoly Gazprom, said on Friday.

Moscow, Kiev and the European Union clinched a deal on Thursday that would resume supplies of Russian gas to Ukraine over the winter in return for payments funded in part by the Ukrainian government's Western backers.

Gazprom halted supplies to Ukraine in June amid a bitter dispute over debts and pricing between Moscow and the former Soviet republic that is now seeking to foster closer ties with the West rather than Russia.

Miller said Gazprom would restart supplies to Ukraine within two days after Kiev covers part of its debt for past gas deliveries and provides a pre-payment for supplies that would reach it in November.

"Everything depends on when Ukraine makes this payment. We understand this can happen by the end of next week," Miller told state TV broadcaster Rossiya 24 in an interview when asked about possible timing for resuming supplies.

Miller said Ukraine must provide $1.45 billion to cover for part of gas debt and pay $760 million up front for November before supplies resume. By the end of the year, Kiev must pay a total of $3.1 billion in debts for past deliveries, he added.

He said Kiev will need to pay another $760 million in advance to receive gas in December and that maximum daily supplies stood at 114 million cubic metres with a deal between the sides for monthly supplies of 2 billion cubic metres in both November and December.

The deal struck in Brussels on Thursday allows Kiev to use some resources under its existing accords with the EU and the International Monetary Fund to fund the pre-payment. Kiev says it has resources put aside to cover past debts to Gazprom.

Under the agreement, Ukraine would buy gas for the rest of this year at $378 per 1,000 cubic metres and at $365 in the first quarter of next year.

Russia says the price amounts to a $100 discount compared to previous agreements with Ukraine and Miller said on Friday he expected Russia's government to approve it formally on Saturday.

WINTER SUPPLIES

Kiev said on Friday documents signed in Brussels included the EU executive arm's guarantees of financial support to Ukraine should Russia renege on the agreed price, as well as the promise of support from Brussels for further increasing reverse gas flows to Ukraine from EU member states.

The EU depends on Russia for about one third of its gas needs and about half of that flows in transit via Ukraine. Gas spats between Moscow and Kiev in the past have disrupted those supplies and left parts of Europe shivering in winter.

Ties between Kiev and Moscow are now also badly strained over Russia's annexation of Crimea in March and the pro-Russian separatist rebellion that followed and is threatening to split Ukraine's eastern regions.

Kiev and the West blame Moscow for fanning the unrest and providing arms and troops to rebels in fighting that has killed more than 3,700 people since April. Moscow backs the separatists but denies being party to the armed conflict.

On Thursday, European officials assured that gas supplies to Europe would not be in danger this winter. Miller struck a more cautious tone, saying gas transit risks persisted and sought to put the blame on Ukraine for any future disruptions.

Ukraine's Prime Minister Arseny Yatseniuk is expected to speak at the country's gas transport monopoly Ukrtransgas later on Friday. (Additional reporting by Pavel Polityuk in Kiev, Writing by Gabriela Baczynska, Editing by David Evans)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

18.12 | 0 komentar | Read More

UPDATE 1-Russian central bank sharply raises key rate by 150 bps

Fri Oct 31, 2014 6:51am EDT

(Adds detail, comments from statement)

MOSCOW Oct 31 (Reuters) - Russia's central bank raised its main lending rate by 150 basis points at a board meeting on Friday, citing concerns about above-target inflation, weak oil prices and a toughening of Western sanctions.

The move brings the bank's main lending rate, the one-week minimum auction repo rate, to 9.5 percent, and brings the cumulative increase this year to 400 basis points.

The central bank has been under pressure to raise rates to defend the sliding rouble, which has shed around 20 percent against the dollar since mid-year as a result of falling oil prices and Western sanctions imposed over Russia's actions in Ukraine

The increase was above analysts' expectations, according to a Reuters poll this week which predicted a half-point increase.

"If external conditions improve, and a persistent trend for lowering inflation and inflation expectations emerges, the Bank of Russia will be ready to start to ease its monetary policy," the central bank said in a statement.

The bank said it is concerned about inflation, which is rising as a result of the weaker rouble and a ban on most Western food imports introduced in retaliation for sanctions.

The bank said that inflation reached 8.4 percent as of Oct. 27 and would remain above 8 percent until the end of the first quarter of 2015.

The bank also said it expected economic growth to be close to zero in the fourth quarter of this year and in the first quarter of next year.

The rouble briefly firmed after the bank's decision, trimming losses from earlier in the session, before falling back into negative territory. (Reporting by Alexander Winning and Jason Bush)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

18.12 | 0 komentar | Read More

EMERGING MARKETS-Emerging stocks lifted by Japan stimulus jolt

By Karin Strohecker

LONDON Fri Oct 31, 2014 6:31am EDT

LONDON Oct 31 (Reuters) - Emerging stocks were on track for their biggest weekly gains in six months on Friday, buoyed by Japan's surprise move to ramp up its stimulus programme and strong United States growth data.

The Russian rouble weakened ahead of a central bank meeting that could see either a significant rate rise or a move to a more freely floating currency.

MSCI's emerging equities index rose 0.8 percent on the day, bringing gains to 1.17 percent since the start of the year after Japan delivered a jolt to markets, admitting growth and inflation had not picked up as expected.

The MSCI Asia Pacific ex-Japan benchmark gained 0.9 percent on the day, driven by Chinese shares with the Shanghai composite chalking up the best weekly performance since February and India stocks powering to a record high on the second consecutive day.

"When we have one of the major central banks of the world implementing easing like that, it is helpful for risk sentiment in emerging markets," said Danske Bank Analyst Lars Christensen.

The Bank of Japan's move had made up for the more hawkish tone from the Federal Reserve earlier in the week, he added.

"Overall we are through this uncertainty we have seen two weeks ago," Christensen said.

The upbeat mood was supported by U.S. GDP data on Thursday showing a surge in third quarter economic growth and Ukraine, Russia and the EU clinching a deal that will see Moscow resume vital gas deliveries to its neighbour in return for payments funded in part by Kiev's Western creditors.

In Russia, where investors nervously awaited the outcome of a central bank meeting, the dollar-based RTS index traded flat while the rouble-denominated MICEX index powered up 1.2 percent with both were on track for large weekly gains after ending the previous seven days in the red.

Following a roller-coaster ride on Thursday, which saw the rouble gain as much as 5 percent, the currency weakened 1.5 percent against the dollar in early trading.

Russia's central bank, which has burnt at least $25 billion in reserves on heavy intervention this month, is expected to hike its key interest rate by 50 basis points to 8.5 percent, according to a Reuters poll.

Though markets are wary that the bank may have something else apart from an interest rate change in store, said RBS analyst Tatyana Orlova, referring to possible shifts in the foreign exchange parameters.

"The central bank has surprised the markets consistently since the start of the year," Orlova said. "The only thing that is guaranteed is extreme volatility."

Mexico's central bank is also meeting on Friday. Analysts forecast it to hold its benchmark interest rate steady amid expectations that a recent spike in inflation will fade next year.

For GRAPHIC on emerging market FX performance 2014, see link.reuters.com/jus35t

For GRAPHIC on MSCI emerging index performance 2014, see link.reuters.com/weh36s

For GRAPHIC on MSCI emerging Europe performance 2014, see link.reuters.com/jun28s

For GRAPHIC on MSCI frontier index performance 2014, see link.reuters.com/zyh97s

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see )

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

18.12 | 0 komentar | Read More

RPT-WRAPUP 1-Fed set to end one crisis chapter even as global risks rise

Wed Oct 29, 2014 7:00am EDT

(Repeats with no changes)

* Curtain draws on bond buying after mixed reviews

* Few other substantive changes expected in Fed statement

* Officials wary on global growth, but eye 2015 rate hike

By Howard Schneider

WASHINGTON, Oct 29 (Reuters) - The U.S. Federal Reserve on Wednesday is expected to shutter its bond-buying program, closing one controversial chapter in its crisis response even as it struggles to manage a full return to normal monetary policy.

The Fed is likely to announce at the end of a two-day meeting that it will no longer add to its holdings of Treasury bonds and mortgage-backed securities, halting the final $15 billion in monthly purchases under a program that at its peak pumped $85 billion a month into the financial system.

An important symbolic step, the end of the purchases still leaves the Fed far from a normal posture. Its balance sheet has swollen to more than $4 trillion, interest rates remain at zero, and, if anything, recent events have increased the risk the U.S. central bank may need to keep propping up the economy for longer than had been expected just a few weeks ago.

The statement the Fed will issue at 2 p.m. (1800 GMT) will be read carefully for signs of how weak inflation, ebbing global growth and recent financial market volatility have influenced U.S. policymakers. There is no news conference scheduled after the meeting and no fresh economic forecasts from Fed officials.

"They are worried about the economy, the global one," and are likely to leave much of their language intact rather than signal progress towards a rate hike, Morgan Stanley analyst Vincent Reinhart wrote in a preview of the meeting.

Attention will focus on whether the Fed's statement continues to refer to "significant" slack in the U.S. labor market, and whether it retains language indicating rates will remain low for a "considerable time," as most economists expect.

Paul Edelstein, director of financial economics at IHS Global Insight, said the Fed may also need to acknowledge the inflation outlook is weakening.

"They have been kind of wrong about inflation lately," Edelstein said. "It would behoove them to do something - signal to markets they are not going to tolerate inflation and inflation expectations persistently below 2 percent."

Fed officials have largely stuck to forecasts that the U.S. economy will grow around 3 percent this year, with inflation poised to move gradually back to their 2 percent goal.

However, slower-than-expected global growth and falling oil prices have called that inflation outlook into question.

Investors have recently pushed their expectations for an initial rate hike back to late next year as a result, although a number of top Fed officials recently said they think the U.S. central bank is still on track to bump up borrowing costs in mid-2015.

The Fed's third round of bond buying closes to mixed reviews. Officials argue it helped hold down long-term interest rates, keeping borrowing costs cheaper for companies and households. Others maintain it did little more than prop up stock prices.

The end of the program won't immediately lead to a decline in the Fed's bloated balance sheet.

For now, it plans to continue reinvesting the proceeds of securities that mature, part of an effort to keep many aspects of its monetary accommodation in place. As it stands, officials do not plan to allow the Fed's balance sheet to decline until after interest rates begin to rise. (Reporting by Howard Schneider; Editing by Tim Ahmann and Paul Simao)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

18.12 | 0 komentar | Read More

RPT-Costly US nuclear arms revamp, tight cash call for tough choices

Wed Oct 29, 2014 7:00am EDT

(Repeats to additional subscribers with no changes to text)

By David Alexander

KINGS BAY, Ga. Oct 29 (Reuters) - Defense Secretary Chuck Hagel grabbed a ladder extending through the sleek black hull of the USS Tennessee at a Navy submarine base here and disappeared down the hatch for a close look at one of the Pentagon's most daunting budget issues.

Inside the vessel, 24 tubes for launching nuclear ballistic missiles sliced through the submarine's decks, with the crew's bunks and Spartan living quarters packed in around them.

The Tennessee and 13 other Ohio-class submarines are critical elements of the U.S. nuclear deterrent but the oldest has been in service for 33 years and the end of the fleet's useful life of 42 years is in sight.

"My last ship was older than I was," one submariner told Hagel.

Ageing poses the same challenge across the entire U.S. nuclear weapons complex. Warheads, bombs, submarines, missiles and bomber aircraft are all approaching the end of their service.

Over the next 30 years, Washington will have to overhaul or replace much of its nuclear arsenal, an effort experts say could cost as much as a trillion dollars.

The question is what is truly indispensable and how to pay for it.

The congressionally mandated National Defense Panel put it bluntly in a July review of the Pentagon's defense plans, saying the effort to build a new triad of nuclear bombers, missiles and submarines was "unaffordable" under present budget constraints.

With a 2011 legislation setting forth a decade of budget spending cuts in place, analysts say the White House will ultimately have to delay some systems, trim others or find more money. Most likely it will have to do all three.

"The bill is coming due, and it's a huge bill," said Frank Klotz, head of National Nuclear Security Administration, the Department of Energy agency that maintains the weapons.

He noted that many U.S. nuclear weapons systems were built in the Reagan era three decades ago and Washington has not invested heavily in them since then. But while the cost is huge, it is a fraction of the Pentagon's spending, he said, with the annual defense budget of about $500 billion translating into $15 trillion over three decades.

"The question we have to ask ourselves as a nation is: 'Is this something which we need to invest in?' Obviously the view of this administration is, it is," Klotz said in an interview.

With nuclear-armed Russia and China increasingly assertive on the world stage and other nations pursuing nuclear ambitions, Washington still needs an effective deterrent and President Barack Obama supports the modernization effort.

However, critics say the administration's programs are too ambitious, too expensive and out of sync with the president's aims to further reduce the size of the U.S. nuclear arsenal.

"The current plans would perpetuate a nuclear arsenal size and structure that clearly exceeds our deterrence requirements as defined by the president," said Daryl Kimball, head of the Arms Control Association advocacy group.

TOUGH CHOICES

Obama's National Security Council has begun a review looking at how to revamp nuclear forces without jeopardizing other national security priorities, officials and defense analysts said.

Its decisions, which could resolve some of the financial conflicts, will feed into the 2016 budget draft due to be presented around February next year. Analysts say it is one of Obama's last opportunities to influence U.S. nuclear arms policy, one of his top issues.

The submarine program highlights the challenges ahead.

During his visit to the USS Tennessee last July, Hagel reassured submariners the administration was committed to building a new group of ballistic missile submarines.

The Navy plans to spend $1.2 billion this year for initial research and development and hopes to begin building the new vessel in 2021. The problem is that by the mid-2020s it would be spending half its ship-building budget on a dozen submarines it hopes will never have to fire a missile, squeezing funding needed to expand its fleet elsewhere.

Admiral Jonathan Greenert, the chief of naval operations, and Navy Secretary Ray Mabus have urged Congress to take the project out of the Navy's shipbuilding budget and to fund it some other way.

Representative Randy Forbes, who heads the seapower panel of the House Armed Services Committee, has proposed paying for the submarine by a creating a sea-based deterrence fund in the Defense Department budget and giving the Pentagon more flexibility in moving money around.

But the plan does not provide new money and Forbes said Congress should ultimately provide some extra funds.

Former Pentagon comptroller Robert Hale, however, warned that with several major weapons purchases going to full production next decade, the United States would still face big challenges to fund the systems it wants.

"We're going to have to have overall debate over priorities," he told Reuters.

TOO BIG?

Arms control groups say nuclear overhaul plans simply need to be trimmed.

Kimball's Arms Control Association released a study last week titled "The Unaffordable Arsenal" detailing cost-cutting steps, many recommended by government oversight panels.

The Congressional Budget Office, for example, has said Washington could save about $40 billion over 30 years by delaying the new submarine program by three years and buying only eight instead of the planned 12.

Deferring the long-range bomber program until after 2023 could cut $32 billion in new spending over the decade, freeing up money for other priorities, like the F-35 Joint Strike Fighter and new KC-46A refueling tankers, the CBO said.

All in all, savings could reach some $70 billion over the next 10 years, according to the "Unaffordable Arsenal" report. That would be 20 percent less than the $355 billion spending the CBO has projected for the decade based on Pentagon plans.

Jon Wolfsthal, a former director of non-proliferation for Obama's National Security Council, said the administration needed to force the tradeoffs and compromises needed to put the nuclear arsenal overhaul on a more financially realistic path.

"Right now the services are saying these are all priorities, we have to have them all, we have to have them on these timelines ... because they've been given orders that say they must maintain a certain level of nuclear capability," he said.

With its interagency review, the National Security Council may be moving toward some sort of solution.

Assistant Secretary of Defense Andy Weber, the head of nuclear, chemical and biological defense programs, said some compromises, such as eliminating duplicate systems, should make it possible to maintain a nuclear triad over the long term.

For example, the government is investing heavily in the B61-12 gravity bomb as a refurbished weapon for the long-range bomber, so perhaps an air-launched cruise missile replacement will not be necessary, Weber told reporters last month.

"These are the kinds of questions that I think we're examining." (Editing by David Storey, Jason Szep and Tomasz Janowski)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

18.12 | 0 komentar | Read More

Italian bond yields dip as Europe signals budget approval

Wed Oct 29, 2014 7:00am EDT

* Investors relieved as 2015 budgets pass muster

* Strategists say Italy-Spain yield gap justified

* Auction, bank worries still weigh on Italy's bonds

* Volumes low ahead of landmark U.S. Fed announcement (Adds comments, updates prices)

By John Geddie

LONDON, Oct 29 (Reuters) - Italian government borrowing costs edged lower on Wednesday, spearheading a rally in low-rated euro zone bonds, after the European Commission gave a provisional thumbs-up to Rome's 2015 budget.

Italy, like France, has been at loggerheads with Brussels over its push for greater fiscal flexibility in order to nurture fragile economic growth.

Strategists said the European Commission's announcement late on Tuesday that no euro zone states had submitted deficit plans that breached EU rules brought relief to investors.

"In an environment like this where we are lacking demand, there are more and more doubts about Germany's austerity-driven stance," said DZ Bank strategist Christian Lenk.

"The market appears more open to giving these countries some room to breath."

Ten-year Italian yields dropped 4 basis points to 2.50 percent, outpacing Spanish equivalents which dropped 1 bps to 2.15 percent.

But some remained uncertain as to whether Italy could close the yield gap further on Spain. The 10-year spread hit 40 bps this week - its highest since February 2012.

"I was in the camp of spreads going flat between Italy and Spain at the beginning of the year, but over recent months the data flow has really changed," said UniCredit rate strategist Luca Cazzulani, predicting the 10-year spread would remain between 30-40bps.

Spain's economy grew by 1.2 percent year-on-year in the second quarter, while Italy's contracted by 0.2 percent. Spanish third-quarter GDP data is due on Thursday with Italy's to follow in mid-November.

Diminishing prospects of a sovereign bond-buying programme from the European Central Bank have refocused investor attention on economic divergence in the euro zone, with bankers reporting a pick-up in relative value trading between member states.

In the near-term, a sale of five- and 10-year bonds from Italy on Thursday will likely stem any further fall in yields.

Investor appetite for Italian debt also remains tempered by questions over its banking sector after the country fared the worst in the ECB's stress tests.

Italy's Monte Paschi may seek to delay repaying hundreds of millions of euros in state aid to help shore up its balance sheet.

Elsewhere in the periphery, Greek 10-year yields fell 6 bps to 7.51 percent, while Portugal's were 2 bps lower at 3.35 percent.

In France, where there had also been concerns about its budget negotiations, 10-year yields fell 2 bps to 1.26 percent .

Strategists said the price action had been slightly exacerbated by low volumes with many investors sidelined ahead of a U.S. Federal Reserve policy decision later on Wednesday.

At the conclusion of its two-day meeting, the Fed is expected to announce the end of its bond-buying stimulus while restating its willingness to wait before hiking interest rates.

"In our view, any major tightening of monetary policy remains a story for the latter half of 2015," said Nick Gartside, CIO for fixed income at JPMorgan Asset Management.

"We think the Fed will remain keen to defuse any large scale market turmoil in the immediate term and will continue to focus on language that helps to stabilise the markets."

German 10-year bond yields - the benchmark for euro zone markets - were up 1 bps at 0.88 percent after another weak German auction of 10-year paper. (Editing by Alison Williams and Nigel Stephenson)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

18.12 | 0 komentar | Read More

UPDATE 1-Euro zone lending slows more gradually but no speedy upturn seen

Mon Oct 27, 2014 6:32am EDT

* Stronger-than-expected data show credit tightening easing

* Data show lending falls in euro zone periphery, up in core

* M3 money supply growth 2.5 pct in Sept

* ECB banking health check shows most problems repaired

* ECB hopes its stimulus, bank checks will support recovery (Recasts with more detail, analyst comment)

FRANKFURT, Oct 27 (Reuters) - Lending to euro zone households and companies contracted at a slower pace in September and money supply grew faster than expected, suggesting a cycle of tightening credit conditions in the bloc is gradually coming to an end.

Data released by the European Central Bank on Monday showed loans to the private sector fell by 1.2 percent in September from the same month a year earlier, after a contraction of 1.5 percent in August.

Euro zone M3 money supply - a more general measure of cash in the economy - grew at an annual pace of 2.5 percent, up from 2.1 percent in August. A Reuters poll had pointed to a reading of 2.2 percent.

The ECB published results on Sunday of its health check of the euro zone banking sector, an exercise its vice president said would help ensure the availability of credit, though he noted Europe still has a lack of demand.

"Today's figures are a mixed bag," ING economist Peter Vanden Houte said of the money supply data.

"While the data are somewhat better than expected, pointing to a bottoming out of the credit cycle, they still don't signal a strong credit recovery over the coming quarters."

ECB data showed that lending to companies in the euro zone periphery continued to fall in September, while banks in core countries kept lending more, highlighting divergences in credit conditions within the bloc.

Policymakers are desperate to revive the euro zone economy, which is barely growing and dogged by low inflation of 0.3 percent, far below the ECB's target of just below 2 percent.

ECB STIMULUS

The ECB, seeking ways to brighten the euro zone's economic picture, is considering buying corporate bonds and may decide on the matter as soon as December with a view to beginning purchases early next year, several sources familiar with the situation told Reuters last week.

However, ECB President Mario Draghi has stressed that the ECB alone cannot tackle the euro zone's woes, and urged crisis-hit countries to get their economies into shape with reforms.

He has also made a thinly veiled appeal for Germany to embark on a round of deficit-funded investment spending, adding his voice to that of other regional policymakers.

But with Germany wedded to strict budget discipline and other countries taking time to implement structural reforms, markets are looking to the ECB to do more.

Euro zone banks, especially in crisis-stricken countries, have tightened their purse strings in response to tougher capital requirements and the health check of the sector, while companies have held off investments, unsure of the future.

To solve the problem, the ECB has started offering banks four-year loans at ultra-cheap rates and has begun buying covered bonds. It also plans to buy asset-backed securities to ease the burden on banks' balance sheets and entice them to lend, but these measures will take time to gain traction.

Sunday's ECB health check results showed roughly one in five of the euro zone's top lenders failed the landmark exercise at the end of last year, though most have since repaired their finances.

"The ECB will now be fervently hoping that the results of its European bank stress tests that were released on Sunday lift confidence in the euro zone banking system and that this encourages banks to lend more, in tandem with the ECB's stimulus measures," said IHS Global Insight economist Howard Archer.

(Writing by Paul Carrel; Editing by Gareth Jones and John Stonestreet)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

18.12 | 0 komentar | Read More

UPDATE 1-Brazil's Rousseff re-elected by grateful working-class, country divided

Mon Oct 27, 2014 6:35am EDT

(Adds market reaction, details of congressional elections)

By Paulo Prada

SAO PAULO Oct 27 (Reuters) - Despite opposition from nearly half of Brazil's voters, leftist President Dilma Rousseff won re-election on Sunday and will have another four years to try to revive growth in a once-booming economy gone stagnant.

The 66-year-old Rousseff, who was a Marxist guerrilla in her youth, overcame growing dissatisfaction with the economy, poor public services and corruption to narrowly clinch a second term for herself and the fourth in a row for her Workers' Party.

After a bitter, unpredictable campaign that pitted poorer Brazilians grateful for government anti-poverty programs against those exasperated with a stalled economy, Rousseff must now seek to continue flagship social services even as she tweaks economic policies to restore growth.

Most investors are skeptical that Rousseff can turn around the slumping economy after four years of ineffective industrial policies. A Brazilian equity exchange traded fund listed in London fell around 10 percent on Monday before markets opened in Sao Paulo.

Still, Rousseff and aides consistently shrug off market pessimism as little more than tantrums by speculators. As her camp celebrated victory late on Sunday, longtime foreign policy advisor Marco Aurelio Garcia told reporters that investors should relax and "take tranquilizers."

Speaking to a relieved crowd of supporters in Brasilia, the capital, Rousseff acknowledged the close race and the call for change expressed by many voters.

"I know that I am being sent back to the presidency to make the big changes that Brazilian society demands," she said after winning the runoff election with 51.6 percent support.

Her slim, three-point margin over centrist candidate Aecio Neves came largely thanks to gains against inequality and poverty since the Workers' Party first came to power in 2003.

Using the fruits of a commodity-fueled economic boom in the last decade, Brazil's government expanded welfare programs that helped lift more than 40 million people from poverty despite the current economic woes.

The "Brazilian model" has been adopted by center-left parties across Latin America and Rousseff's victory, however narrow, is a blow for conservatives in the region.

It also means there will be no dramatic improvement in ties with the United States, hit in recent years by trade disputes and U.S. government spying programs that infuriated Rousseff.

About 40 percent of Brazil's 200 million people live in households earning less than $700 a month, and it was their overwhelming support that gave Rousseff victory on Sunday.

Now, she pledges to deepen social benefits while working to revive an economy that fell into recession in the first half of this year.

She has already promised to replace her finance minister, part of a pledge to rethink economic policies that she has so far been known to all but manage herself.

"Such a tight result reduces her capacity to radicalize policies," said Alberto Bernal, a Miami-based economist with Bulltick Capital Markets. "Pretty much half of the country is against what she has been doing."

Rousseff's victory came just a year after massive street protests swept Brazil because many advances of the past decade had stalled.

The slowing economy, rising prices and anger over a lack of investment in public services prompted many to ask whether the Workers' Party had exhausted its ability to improve the lives of people in a country still plagued by vast gaps between rich and poor.

FEAR OF THE UNKNOWN

But Neves, a senator and former state governor who enjoys support among the upper-middle and wealthy classes, failed to convince a majority of Brazilians that he had enough new ideas to pull Rousseff from power.

It didn't help that many poor Brazilians associate his centrist Brazilian Social Democracy Party with a less inclusive past, a perception that the Rousseff camp deftly exploited.

"Even if things are getting worse, many voters prefer to stick with what they know than take a risk on the unknown," said Fernando Abrucio, a political science professor at the Getulio Vargas Foundation, a business school in Sao Paulo.

A second Rousseff term will not be easy, especially as a slowing economy strains a government model accustomed to high tax revenues to finance social programs and subsidized credit for companies and consumers.

Brazil's economy, after growing by as much as 7.5 percent the year before she took office, is on track to grow less than 1 percent this year. Prior efforts to gun growth, largely through tax breaks and other subsidies for select industries, have largely fallen flat.

Meanwhile, inflation, long a problem in a country with a history of runaway price increases, is now hovering above the government's tolerance ceiling of 6.5 percent.

And while unemployment is near record lows, economists don't expect it to remain so for long as plunging investment, slower growth and further uncertainty prompt employers to cut back.

To correct the course, economists say Rousseff must pursue long-pending tax and labor reforms in order to increase productivity and engage further with the global marketplace.

"Without improving efficiency and making Brazil a more productive part of the global economy, the country will just keep muddling along," said Marcio Garcia, an economist at the Pontifical Catholic University in Rio de Janeiro.

Rousseff will also face gridlock in a Congress increasingly weary of the ruling party, which lost seats in this election along with its most important ally. Leading lawmakers promise to make hay over a snowballing corruption scandal at the state-run oil company known as Petrobras.

Brazilian media in recent weeks have been abuzz with leaked testimony by a former company executive relating alleged kickbacks by contractors to Workers' Party coffers.

One news magazine reported that another key suspect told prosecutors that Rousseff was aware of the scheme, an accusation that she has vehemently denied.

"She will face resistance on a number of fronts," said Carlos Melo, a political scientist at Insper, a Sao Paulo business school. "This is a victory in spite of all the problems - not an affirmation of a job well done." (Additional reporting by Anthony Boadle, Jeferson Ribeiro and Walter Brandimarte; Editing by Todd Benson, Kieran Murray and W Simon)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

18.12 | 0 komentar | Read More

EMERGING MARKETS-Brazil markets set to plunge on Rousseff re-election

By Asher Levine and Walter Brandimarte

SAO PAULO/RIO DE JANEIRO Mon Oct 27, 2014 6:39am EDT

SAO PAULO/RIO DE JANEIRO Oct 27 (Reuters) - Brazil's financial markets are set to plunge on Monday following the victory of President Dilma Rousseff over pro-business challenger Aecio Neves in Sunday's presidential election.

The sell-off may be contained in the next few days, however, if Rousseff signals she will tweak economic policy to boost Brazil's flagging economy, as hinted in a conciliatory first speech she gave after re-elected on Sunday.

After the closest, most divisive campaign since Brazil returned to democracy three decades ago, Rousseff won 51.6 percent of votes in a runoff against Neves, who won 48.4 percent support.

The tight and fast-changing election campaign had sent Brazil's financial markets on a wild ride with big gains whenever Rousseff lost ground in polls and drops whenever her odds looked stronger.

Rousseff's economic policies have been roundly criticized by investors for tipping Brazil into a recession while damaging state-run companies such as oil producer Petrobras and lender Banco do Brasil along the way.

Many investors placed their hopes on a Neves victory, seeing him as ready and able to rescue the private sector from what they see as the heavy and unpredictable hand of Rousseff's leftist government.

With the election now decided, Monday's open is expected to show a sharp selloff in both the Bovespa stock index and real, especially after both asset classes gained on Friday on mounting perception that Neves would eke out a win.

Long-dated contracts for interest-rate futures are also expected to sell off, driving yields paid on those instruments sharply higher. Those yields had fallen sharply recently on bets that mainstream fiscal and monetary policy in a Neves' government would make room for lower interest rates in the future.

The real has weakened 4.72 percent against the dollar this year, though has been supported by a central bank currency swap program in what many traders see as a managed trading band.

"The central bank is likely going to increase intervention to avoid what they likely see as overshooting of the real, but regardless it should be a large move of maybe up to 3 percent or so," wrote Citi analyst Dirk Willer.

The Bovespa index, which erased nearly all of its gains for the year last week, is also set to post a sharp loss.

The London-listed Brazil MSCI i-shares ETF hit seven-month lows on Monday, albeit in thin turnover. Earlier in the day, the Tokyo-listed Ibovespa exchange traded fund (ETF) dropped almost 7 percent reflecting investors' disappointment at the result.

Frankfurt-traded depositary receipts of Petrobras dropped 16.45 percent.

Any staunching of the losses in future sessions will most likely come on bargain-hunting and signals of more market-friendly policies from the Rousseff administration, analysts said. (Additional reporting by XX)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

18.12 | 0 komentar | Read More

Uruguay votes for new president; marijuana reform hangs in balance

By Malena Castaldi

MONTEVIDEO Sun Oct 26, 2014 2:00am EDT

MONTEVIDEO Oct 26 (Reuters) - Uruguayans vote on Sunday in a presidential election with the ruling leftist party trying to fend off a young center-right challenger who promises to undo a pioneering marijuana law.

Outgoing President Jose Mujica, a 79-year-old former guerrilla, is seeking to hand power back to his predecessor Tabare Vazquez.

Between them, Mujica and the 74-year-old Vazquez have delivered a decade of strong economic growth while Mujica legalized abortion, gay marriage and the production, distribution and sale of marijuana.

Six months ago, the left-wing Broad Front ruling coalition looked a comfortable favorite to win the presidency for a third five-year term for its blend of pro-market economic policies and social welfare measures.

But after an unexpected win in the National Party's primaries, Luis Lacalle Pou, 41, has climbed steadily in polls, tapping into a simmering discontent felt by many Uruguayans toward the far-reaching liberal reforms.

Opinion polls show Vazquez winning 43-46 percent of votes to 31-33 percent for his younger rival. But that would leave Vazquez short of the 50 percent he needs for a first-round victory and facing Lacalle Pou in a nerve-wracking runoff in late November.

Polls show them polling neck-and-neck in the expected second round.

"I don't want the Broad Front anymore," said 85-year-old pensioner Azur Blanco. "They squandered money on the poor, giving them the fish instead of the fishing rod. I also don't agree with the laws on abortion, marijuana or gay marriage."

Lacalle Pou told Reuters on Wednesday he would try to repeal the state-regulated production and sale of weed if he won.

Lacalle Pou's supporters say the surfing enthusiast brings a fresh face to Uruguayan politics with his broad smile and a preference for an open collar over tie. His campaign has rolled out slickly produced campaign ads in the style of Latino pop videos and courted social media.

While financial markets deem the Broad Front's economic policies to be sound, some analysts say Lacalle Pou is more likely to rein in an above-target fiscal deficit and an inflation rate almost in double digits.

But on the streets of the laid-back capital, Montevideo, the Broad Front can still count on strong support a decade after it cruised to power for the first time.

Uruguay's $55 billion economy has grown an average 5.7 percent annually since 2005. The government forecasts lower growth of 3 percent this year, although that is still better than neighboring giants Argentina and Brazil.

The number of Uruguayans living in poverty has fallen sharply to 11 percent from more than a third in 2006. Vazquez has said that if he wins, his government will remain focused on improving conditions for the most vulnerable.

"I vote for continuity, with Tabare, who is a politician with experience, a centrist who does not forget the poor and managed to lift up the country when we were doing badly," said salesman Amilcar Paz, 48.

Uruguay's constitution does not allow a president two consecutive terms in office.

Polling stations open at 8 a.m. (1000 GMT) and close at 7.30 p.m. Exit polls will be released at 8.30 p.m. and partial results are expected by 10 p.m.

Voters also elect lawmakers on Sunday. Neither the Broad Front nor the National Party are likely to win a majority in Congress, meaning the next president will face a tougher time than Mujica in passing laws. (Additional reporting by Esteban Farat; Writing by Sarah Marsh; Editing by Richard Lough and Kieran Murray)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

18.12 | 0 komentar | Read More

Saudi SABIC's CEO says oil price decline is temporary

RIYADH Sun Oct 26, 2014 3:46am EDT

RIYADH Oct 26 (Reuters) - The recent decline in global oil prices will prove temporary even if it lasts a year or so, since population growth will ultimately bring higher consumption and prices, the chief executive of Saudi Basic Industries Corp said on Sunday.

Mohamed al-Mady was speaking to reporters after the company, one of the world's largest petrochemicals groups and the Gulf's largest listed company, reported a 4.5 percent drop in third-quarter net income, missing analysts' forecasts.

It blamed sluggish third-quarter sales, which edged down to 48.71 billion riyals ($12.99 billion) from 48.80 billion riyals a year earlier.

Oil prices had an impact on SABIC's earnings through the prices of raw materials and final products, Mady said, adding that the impact was not predictable because oil prices were subject to economic and political factors.

He said China was a big, growing market for SABIC but there were changes in consumption there. The company still aims to grow its business in China and is looking for investments there, he said.

SABIC's Safco 5 fertiliser project and its Kemya synthetic rubber project, a venture with Exxon Mobil Corp, are on track, Mady said. Both projects are in the process of being established. (Reporting by Marwa Rashad; Writing by Andrew Torchia)

18.12 | 0 komentar | Read More

Senior Japan official calls for Abe to delay sales-tax hike

By Yoshifumi Takemoto

TOKYO Sun Oct 26, 2014 4:36am EDT

TOKYO Oct 26 (Reuters) - A top Japanese government official said Prime Minister Shinzo Abe should delay a planned sales-tax increase, the strongest sign yet that economic weakness is causing concern among those close to the premier ahead of the difficult tax decision.

"I think it should be delayed" by a year and a half to April 2017, the prominent official told a small group of people in a recent conversation on condition of anonymity. He expressed concern that raising the national sales tax too soon after a damaging April hike could derail an economic recovery.

Powerful interests like the Finance Ministry, the Bank of Japan and major corporations want Abe to raise the tax as planned next year to keep Japan's promise to reduce the biggest debt burden in the industrial world. But the economic and political environment is making it harder for Abe to make unpopular policy choices.

Recovery in the world's third-biggest economy is struggling, Abe's popularity has taken a hit with two Cabinet ministers resigning in political scandals, the U.S. Treasury Department is pushing Tokyo not to go too fast on budget-balancing and Abe's party faces tough regional elections next April.

An 18-month delay in the tax hike would be in line with recommendations from Etsuro Honda, a University of Shizuoka professor and a prominent outside architect of Abe's policies to revive growth and banish deflation.

"There's a great danger from the next sales tax hike given the current situation where the positive effects of 'Abenomics' and the negative impact of April's sales tax hike are offsetting each other," Honda told reporters on Wednesday after meeting a group of more than 40 ruling party lawmakers who are growing wary about the next tax hike.

Abe raised the sales tax to 8 percent from 5 percent in April, the first of a planned two-stage increase that is the boldest attempt in nearly two decades to curb public debt that is well over twice the size of the economy.

That hike walloped personal spending, knocking the economy for an unexpectedly deep 7.1 percent annualised contraction in the second quarter, the worst fall since the global financial crisis in early 2009.

Abe has said he is "neutral" over his December decision whether to proceed with the plan to raise the tax to 10 percent in October 2015 - doubling the tax rate over just 18 months. He has stressed the need for both fiscal reform and continued recovery.

The prime minister this month told the Financial Times that while it is necessary to raise the tax for the benefit of future generations, it would be "meaningless" if this inflicted too much damage on the country's economy. This was largely a repetition of Abe's position.

The two-step tax increase was decided by major parties and written into law before Abe came to power in 2012, but it requires the prime minister to certify that the economy is strong enough to withstand a further hike.

"What country has ever raised tax by 2 percentage points just a year and a half after a tax hike?" the senior official said. "The logic that (the government must proceed) because the law was already decided doesn't hold up."

Respondents in a Reuters poll last week largely expect Abe to proceed with the tax hike as scheduled, though not all think it's a good idea. "Given the prospects of a slower global growth, it would be difficult for the prime minister to risk another tax-hike slump on the economy," said economist Stefan Grosse at NORD/LB.

Abe's government last week cut its economic assessment for a second straight month and lowered its assessment of industrial output for the first time in five months as weak consumption following April's tax hike causes companies to cut production.

The BOJ's closely watched tankan survey this month showed that sentiment in the services sector worsened in the third quarter as the economy struggled to shake off the tax hike.

And as the recovery falters, Abe finds himself in an unaccustomed political pinch.

His government's approval rating has slumped to 53 percent, still solid for a Japanese leader, but down 9 points in less than a month, according to an opinion poll on Sunday in the Yomiuri newspaper, Japan's largest.

The survey found 71 percent against raising the sales tax on schedule, versus 26 percent in favour.

Proponents of the tax hike - including BOJ Governor Haruhiko Kuroda, whose central bank buys some 70 percent of new Japanese government bond issuance - fear that a delay could shake investor confidence in Japan's fiscal reform, causing a dangerous spike in Japanese government bond (JGB) yields.

But Tokyo University economist Shin-ichi Fukuda said, "As long as the BOJ is buying large amounts of JGBs, a short-term rise in yields isn't a big concern." The 10-year JGB yields less than 0.5 percent. (Additional reporting by Izumi Nakagawa; Writing by William Mallard; Editing by Neil Fullick)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

18.12 | 0 komentar | Read More

RPT-Ukraine oligarch put on the spot as rebels nibble at his empire

Sat Oct 25, 2014 3:00am EDT

(Repeats story)

* Separatists use Akhmetov factory to repair combat vehicles

* 57 armoured vehicles, 19 cannons in their registry

* Balancing act as oligarch awaits outcome of crisis

* Billionaire's business interests hit by conflict

By Gabriela Baczynska

DONETSK, Ukraine, Oct 24 (Reuters) - The clanging of repairs to tanks and heavy armoured vehicles rings out from a factory in eastern Ukraine that is owned by the country's richest man but was taken over by pro-Russian rebels.

Rinat Akhmetov's Corum company says it has nothing to do with the current work at the factory, where captured army vehicles are re-marked and men fix tank tracks, clean cannons and apply extra layers of armour.

The steel and energy multi-billionaire is, as always, saying little but showing signs of positioning himself for all possible outcomes to the separatist conflict in which several thousand people have been killed and Western sanctions slapped on Russia.

With a parliamentary election taking place in Ukraine on Sunday and parts of his business empire threatened as the rebels toy with the idea of nationalisation, it is a delicate balancing act.

When the separatists first occupied public buildings in Donetsk, the 48-year-old businessman, whose fortune from metals, energy, banks and communications has a net worth put by the Forbes magazine at $11.7 billion, remained silent.

Many then said that Akhmetov - ever the prudent businessman - was cautiously weighing the shifting sands in a volatile situation that had caught him and others by surprise.

After fighting flared between the rebels and Ukrainian troops and Russian involvement on the rebel side grew, Akhmetov, a former close confidant of the pro-Russian president ousted by protests in Kiev, came out in favour of a united Ukraine.

He has stuck to that public position since and statements by System Capital Management, which manages his global empire, focus on his commitment to looking after his more than 300,000-member workforce and paying taxes to the state.

But a statement last week by the top separatist leader Alexander Zakharchenko, who suggested nationalising some enterprises in the Donetsk region, must be sounding alarm bells.

The heavy-machine factory may be the only part of the Akhmetov empire directly controlled by the separatists. But much of his other business sits on rebel-held territory, including several industrial plants, a huge steel rolling mill, a handful of coal mines, banking and communications assets and prestige structures like the space-age Euro-2012 Donbass Arena football stadium.

He has moved some of his business operations into government-controlled territory, while some others go on working as best they can on rebel-held land.

"Akhmetov has one single strategy and that is to survive - to survive and preserve even if it is only a part (of his empire)," said Volodymyr Fesenko of the Penta political research institute in Kiev.

SEPARATISTS' STRONGHOLD

Donetsk, an industrial hub with a pre-war population of about one million, is now the main stronghold of the rebels fighting to split east Ukraine from Kiev and tie it to Russia.

Moscow has sided with the separatists but denies it is a party to the conflict. Moscow dismisses charges by Kiev and the West that it has sent in troops and weapons to support the rebels despite growing evidence to the contrary.

Donetsk has seen prolonged fighting, including fierce artillery battles on its outskirts, despite a Sept. 5 ceasefire agreed between the Kiev government and the rebels.

That ensures plenty of work for the workers in Akhmetov's Donetskgormash heavy machine factory, turned into military repair workshop by the rebels in August. Corum said it had paused operations due to fighting before the factory was seized.

"Currently, the Corum company does not control the production facility in Donetsk and, accordingly, has nothing to do with actions undertaken there," it said in a statement.

The people now in charge declined to be named, saying their role was too sensitive. On the factory floor, workers covered with dark green paint two white stripes on some combat vehicles, a field marking often used by Ukrainian government forces.

They said a lack of spare parts was their main headache, forcing them to bring in even badly damaged and burned-out vehicles they call their "donors" in the hope of recovering something useful.

"Sometimes we get one and the same vehicle three or four times. That especially tends to happen after intense battles at the airport," said one man who oversees the work, referring to prolonged fighting at Donetsk city airport despite the truce.

"So we fix them again and off they go," he said.

His work register, printed on several pieces of paper, lists 57 armoured vehicles of various types and another 19 cannons that have gone through the plant since mid-August.

Many of the workers were employed at the factory before the conflict began, the people running the plant said. They said the workers now receive only food rations.

BALANCING ACT

Akhmetov's background as a powerful mogul who emerged victorious from vicious power struggles and a carve-up of assets in the industrial east in the 1990s, as well as his long friendship with the now disgraced, Moscow-allied Ukrainian leader Viktor Yanukovich, mean many question his integrity.

Akhmetov was one of the last people whom Yanukovich saw before fleeing to Russia last February. Insiders say the tycoon then advised Yanukovich to resign as president, though he refused and fled across the border.

Despite coming out for a united Ukraine he has not done as much for the government cause as, say, fellow-oligarch, banking tycoon Igor Kolomoisky, who has funded volunteer forces to fight the separatists.

Akhmetov did try unsuccessfully to negotiate between Kiev and the separatists early on and, when this failed, he organised a public show of condemnation of the separatists' action in his factories.

He also sent workers from his Metinvest group to support government patrols in the port-city of Mariupol.

Now the leadership of the separatists' self-proclaimed Donetsk People's Republic (DNR) wants Akhmetov to register his business operating on the territory they control and start paying taxes to their budget, rather than the Ukrainian one. That would help their quest to separate from Kiev.

Asked whether SCM would register anew, a spokesman, Jock Mendoza-Wilson, said: "We have continued to pay salaries to our employees and to help create stability and to protect jobs and communities. As regards taxes, SCM operates exclusively within the legal framework and the laws of Ukraine. This includes the payment of taxes to both the local and national budgets."

The turmoil has affected Akhmetov's assets, forcing the closure of mines and heavy-industry facilities, damaging property hit by shelling and undermining the wider chain of economic ties in the region.

His Metinvest,, Ukraine's largest steelmaker, said in August it was not accepting new orders as the crisis forced it to cut output.

The company's first-half revenue fell 8 percent year on year to $6.02 billion and the chief financial officer said Metinvest would lose several hundred million dollars of income in the second half because of the conflict.

Many low-ranking rebels in Donetsk are scornful of the magnate whom they see as a traitor for not providing them with the help they had sought.

The separatist leadership, however, has taken a more nuanced approach and avoided voicing strong accusations against him in public in a bid not to antagonise the billionaire.

When an aggressive crowd in May rallied outside Akhmetov's Donetsk residence hidden by a solid beige fence, a heavily armed separatists' militia called Oplot prevented the protesters from entering the premises.

But Zakharchenko, the DNR's current "prime minister" as well as head of Oplot, has also threatened with a stick as he is looking for a deal with Akhmetov. He said last week his men have taken three industrial facilities under their "temporary management", including two sites owned by Akhmetov.

Akhmetov bankrolled Yanukovich's campaign when the latter ran successfully for president in 2010 and - with an eye still to keeping onside with local support in the east - he is visibly supporting the Opposition Bloc of Yanukovich's former Fuel Minister Yury Boiko in Sunday's election.

But, ever the survivor, commentators say he is also likely to be funding several other parties and candidates in individual constituencies to "spread his bets" for the future and ensure he has lines of communication with the pro-Western leadership expected to emerge from Sunday's election.

"His tactics are various. But the elements of these tactics are aimed at getting his people into parliament to try to reach an accommodation with (Ukrainian President) Petro Poroshenko and (Prime Minister) Arseny Yatseniuk," Fesenko of Penta said. (Additional reporting by Pavel Polityuk in Kiev, Writing by Gabriela Baczynska and Richard Balmforth, Editing by Timothy Heritage and Philippa Fletcher)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

18.12 | 0 komentar | Read More

Head of UK's Labour party in Scotland quits

LONDON Sat Oct 25, 2014 3:07am EDT

LONDON Oct 25 (Reuters) - The head of Britain's opposition Labour party in Scotland has quit, unsettling the party in one of its heartlands ahead of national elections in May next year.

Johann Lamont said in a newspaper interview that she was standing down with immediate effect, little more than a month after a referendum in Scotland when Labour and Britain's other national parties defeated a push for independence.

The Daily Record said Lamont was unhappy about internal criticism of her and she hit out at the party in London, under leader Ed Miliband, for not allowing the Scottish wing of the party more autonomy.

Some Labour officials in Westminster "do not understand the politics they are facing," she told the newspaper, calling them "dinosaurs."

"I am standing down so that the debate our country demands can take place," Lamont said.

She was named leader of the Labour party in Scotland in 2011. Her decision to quit follows the resignation of Alex Salmond as leader of the Scottish National Party, which runs Scotland's devolved government, shortly after the Sept. 18 independence referendum.

Labour has traditionally dominated Scottish politics and won 41 of Scotland's 59 seats in Britain's parliament in the last national election in 2010.

The hopes of Labour leader Ed Miliband of becoming prime minister at the next election in May depend in part on the party's ability to see off the challenge in Scotland from the SNP.

(Writing by William Schomberg, editing by William Hardy)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

18.12 | 0 komentar | Read More

Gulf states will have to cut spending as oil price dips -Kuwait's finance minister

By Martin Dokoupil and Ahmed Hagagy

KUWAIT Sat Oct 25, 2014 6:11am EDT

KUWAIT Oct 25 (Reuters) - Gulf Arab oil exporters face inevitable spending cuts as weak oil prices cloud their economic outlook, Kuwaiti Finance Minister Anas al-Saleh said on Saturday.

"We must undertake comprehensive economic reforms including the reform of imbalances in public finances," Saleh told a meeting of Gulf Arab finance ministers, central bank governors and the International Monetary Fund in Kuwait.

"This must be undertaken through strengthening of efforts to diversify away from oil and decrease dependence on oil revenue, which is now inevitable," he said.

Oil prices have tumbled to four-year lows of below $83 per barrel this month, exposing swollen state budgets in the six-member Gulf Cooperation Council (GCC) that also includes Saudi Arabia, the United Arab Emirates, Qatar, Oman and Bahrain.

After years of breakneck government spending rises, the GCC budgets now require a much higher average oil price to break even. The recent drop, if sustained, could erode the large fiscal surpluses enjoyed for years.

This is a particular threat to small oil exporters such as Oman, which the IMF expects to tip into a budget deficit of 1.8 percent of gross domestic product in 2016, and Bahrain, which could tumble deeper into the red with a 5.7 percent gap already next year.

Even oil giant Saudi Arabia may run a budget shortfall of 1.3 percent of gross domestic product (GDP) in 2017, which would be its first since the global financial crisis slashed its crude export revenue in 2009.

The Gulf states have mostly accumulated vast reserves over the oil-boom years that enable them to keep spending up even if oil prices stay weaker over a longer period. Very low levels of public debt should also give them the comfort of a relatively easy access to the debt markets if needed.

Kuwait has already revealed plans to slash costly subsidies on diesel, kerosene and jet fuel with electricity and water costs also under scrutiny. Less oil wealthy Oman has said it was considering cutting subsidies on petrol.

Economic growth in the GCC region is expected at around 4.5 percent on average in 2014, 2015 but downward risks were elevated mainly because of weaker oil prices, Saleh also said. (Writing by Martin Dokoupil; Editing by Ruth Pitchford)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

18.12 | 0 komentar | Read More

GLOBAL MARKETS-Stress tests, Ebola cool stocks after best week of year

Fri Oct 24, 2014 5:16am EDT

  * Stocks dip but head for best week of the year      * Risk sentiment hit by first Ebola case in NY      * U.S. and euro zone economic data positive      * Oil on track for first weekly gain in five weeks        By Marc Jones      LONDON, Oct 24 (Reuters) - World stocks dipped on Friday, as  European bank stress test results due at the weekend and New  York City's first case of Ebola prompted investors to lock in  profits after the best week for shares in well over a year.      A doctor who treated Ebola patients in West Africa became  the first person to test positive for the virus in America's  largest city, raising fresh fears about its spread.          Europe's main bourses in London, Frankfurt   and Paris all opened 0.5 percent in the red and U.S.  stock futures were down as investors moved to safe-haven  assets such as the yen and U.S. and European government bonds.      "It's down to a combination of profit taking and a bit of  uncertainty about the weekend's stress test results," said David  Madden, a market analyst at IG index.          "We have already seen a spike up in Greek government bond  yields recently so the euro zone crisis has not gone away, and  after this week we are back on a 9,000 level for the DAX so  people are happy to take a bit of money off the table."       The euro also slipped on caution about the banking  tests. It hit $1.2638, having fallen for much of the week after  European Central Bank insiders told Reuters the ECB was drawing  up plans for a corporate bond purchase programme.          Follow an intense, year-long review, the euro zone's 130  biggest banks received the ECB's final verdict on their finances  on Thursday, with official results to be published on Sunday.         Juergen Fitschen, co-chief executive of Deutsche Bank and  president of the BdB association of German banks, offered a hint  on Thursday, saying the results probably gave his country's  banks a clean bill of health. Ireland's permanent tsb is  so far the only failure that has been exposed.                   BEST WEEK OF YEAR      The Ebola fears saw S&P 500 mini futures fall as much  as 0.7 percent, slipping from two-week highs hit on Thursday on  budding optimism from corporate earnings and the global economy.      With 177 of the S&P 500 companies having posted  third-quarter results, 69.5 percent have beaten expectations,  better than the 67 percent beat rate over the past four  quarters, and higher than the 20-year average of 63 percent,  Thomson Reuters data showed.      MSCI's All-World index which spans bourses in 45 countries,  is up over 2.6 percent for the week, its strongest performance  since July last year. Gains in Europe were slightly  less but still the best this year.      There was also focus on Russia and Ukraine, with Russia  facing a rating review from Standard & Poor's later and  elections taking place in Ukraine on Sunday.      The rouble was at a new record low and stocks were in the  red ahead of the S&P review, which could Russia's credit rating  cut to 'junk'. Moscow will be hoping its solid finances prevent  a second downgrade from a major rating agency in as many weeks.      "I would assume that it is too early to revisit the ratings.  But this is my personal opinion. The rating agencies work  according to their methodologies," influential former Russian  finance minister and outspoken policy critic, Alexei Kudrin,  told Reuters at an event in London this week.      Meanwhile more political stability in Ukraine could aid the  European economy, which has suffered from the fall in trade with  Russia on tit-for-tat sanctions between the West and Moscow.      "I suspect one often overlooked reason for the market's  rebound since the middle of this week was signs of easing  tensions between Russia and Ukraine," said Soichiro Monji, chief  strategist at Daiwa SB Investments.      President Petro Poroshenko's bloc holds a big lead ahead of  Sunday's poll in Ukraine, but populist Oleh Lyashko's Radical  party could also make a strong showing.       If so, Poroshenko may have the awkward task of seeking  support from a politician who has been sharply critical of his  peace plan and contacts with Russian President Vladimir Putin.         An election that pro-Russian separatists will hold early  next month must also be navigated.      Commodities have also enjoyed a small rebound this week  following a wretched recent run on fears about slowing global  growth and oversupply in individual markets.      Brent oil was slightly softer at $86 a barrel on Friday as  risk appetite took a hit from the news of Ebola in New York but  it was set for its first gain in five weeks. Copper was heading  for only its second rise in nine weeks.      Oil markets had risen sharply on news that crude supplies to  the market from Saudi Arabia, the world's top oil exporter, fell  to 9.36 million barrels per day (bpd) in September, down 328,000  bpd from August, according to an industry source.        (Editing by Catherine Evans)  

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

18.12 | 0 komentar | Read More

Stagnating euro zone seeks to persuade Germany to shift

By Francesco Guarascio and Robin Emmott

BRUSSELS Fri Oct 24, 2014 5:55am EDT

BRUSSELS Oct 24 (Reuters) - Euro zone leaders sought on Friday to bridge stark differences over how to avoid economic stagnation and deflation in the bloc, with Germany facing fresh calls to soften its budget rigour and spend more.

With a U.S.-style bond-buying plan by the European Central Bank off the table for now, the bloc has few options, leaving other euro zone leaders to tread a careful line between the opposing growth and austerity camps.

"It's very important to find a balance between growth and stability," Finland's Prime Minister Alex Stubb said as he arrived at the second day of an EU summit at which ECB President Mario Draghi will address leaders.

After the euro zone's revival came to a halt in the second quarter, France and Italy want to shift course away from the spending cuts that marked the bloc's response to 2009-2012 crisis, but Germany says debt discipline must continue.

The euro zone's poor performance is becoming a wider concern, with the United States and the International Monetary Fund worrying that the bloc that makes up a fifth of the world economy is a drag on global prosperity.

The debate is complicated by EU rules that seek to keep country's public finances in order and Germany's promise to balance its books next year for the first time since 1969.

The European Union's top economic official renewed the charge against Berlin, saying that without investment the future was bleak for Europe's biggest economy, even if it is stronger than most.

"All euro area countries have shortages in potential growth, including Germany," said Jyrki Katainen, the European Commissioner who will become the bloc's growth tsar from November, tasked with bringing down near record unemployment and sinking investment.

"Germany's potential growth is currently 1.5 (percent). This is far too low," he told reporters.

GRAND BARGAIN?

Diplomats say the euro zone may be moving towards a bargain where France and Italy, the second and third biggest euro zone economies, make new commitments to reform in return for more spending room in their budgets.

Italian Prime Minister Matteo Renzi is proposing tax cuts to get households spending again, as his country is suffering its third recession since 2008.

Jeroen Dijsselbloem, who chairs the meetings of euro zone finance ministers, said that reforms were key.

"Paris and in Rome are quite ambitious in terms of reforms and modernising their societies, the government and the economy," Dijsselbloem said. "I think that's crucial."

The European Commission, which acts as a budget policeman for the euro zone, has until next Wednesday to reject any 2015 budgets with France's in the spotlight.

Even if it does so, changes made by Paris and Rome are likely to be small, officials say.

"We need to look at each case separately, keeping in view the Stability and Growth Pact rules and the need to maintain a responsible fiscal policy," said Lithuanian President Dalia Grybauskaite, whose country joins the euro zone next year.

"Austerity needs to be in place, and in parallel we need to invest," she said.

Such declarations on budget discipline could provide cover for the ECB to do more to fend off the deflation that would make it even harder for the euro zone to bring down its debts.

Many investors want to see the ECB launch a U.S.-style sovereign-bond buying programme that could act as a proxy for a government stimulus. But Draghi faces resistance from some, notably Germany, because the euro zone is banned from directly financing governments. (Additional reporting by Paul Taylor and Philip Blenkinsop. Editing by Mike Peacock)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

18.12 | 0 komentar | Read More

Cementos Portland approaches Blackstone over debt refinancing-source

MADRID Fri Oct 24, 2014 6:42am EDT

MADRID Oct 24 (Reuters) - Spanish cement company Cementos Portland Valderrivas majority owned by FCC, has approached Blackstone over the refinancing of 345 million euros ($436.36 million) of debt, a source close to the matter said on Friday.

Cementos Portland's debt was granted by the U.S. fund's investment vehicle GSO in 2012 to acquire U.S. affiliate Giant Cement and is due in 2018, when it will be possible to convert it into shares.

The refinancing of Cementos Portland is one strand of a complex tangle of debt centring on the builder and service provider FCC, which is planning a 1 billion euro capital hike to pay down its own massive debt pile.

Cementos Portland, 79 percent-owned by FCC, declined to comment.

FCC and Cementos Portland, like all Spanish builders, amassed huge amounts of debt during Spain's construction boom but were then stuck with tumbling profits and loans they could not pay after the bubble burst in 2008.

FCC's capital hike was cleared last week after the builder's main shareholder, a vehicle controlled by Spanish businesswoman Esther Koplowitz, reached an accord to refinance 1 billion euros of its own debt.

The loss-making cement manufacturer, which has a net debt of 1.29 billion euros, said in July it also intended to renegotiate a syndicated loan of 965 million euros contracted with a group of lender that includes U.S. fund Apollo. (1 US dollar = 0.7906 euro) (Reporting by Robert Hetz, writing by Paul Day; Editing by Julien Toyer and Susan Thomas)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

18.12 | 0 komentar | Read More

Upbeat business surveys encourage investors out of Bund refuge

Thu Oct 23, 2014 6:48am EDT

* Euro zone PMIs beat expectations

* German bund yields reverse early falls

* Upcoming bank stress tests keep investors cautious (Updates prices, adds quote)

By John Geddie

LONDON, Oct 23 (Reuters) - German government bond yields edged higher on Thursday after an unexpected uptick in euro zone business surveys staved off fears the bloc could be headed for a triple-dip recession.

Markit, which publishes the survey, said the positive reading for the euro zone manufacturing sector points to an expansion in gross domestic product in the current quarter.

"There's been a string of bad news so this is one thing at least to give a little bit of a fillip to the market and show that it's not all bad news, not all one way," said Orlando Green, European fixed income strategist at Credit Agricole CIB.

German 10-year yields rose 1 basis point to 0.87 percent at 1030 GMT, having been as low as 0.84 percent in early trading.

The purchasing manager data showed a strong rebound in German manufacturing, but French business activity slid in October to an eight-month low.

This economic divergence is at the heart of a rift in Brussels where France and Italy are pushing for more fiscal leeway while Germany is keen to keep members' finances in check.

The European Commission is discussing changes with Italy and France to their 2015 draft budgets to avoid having to send back the plans, which break European Union rules, EU officials said on Wednesday.

Investors were also comforted by the fact that China's vast factory sector grew a shade faster in October, though analysts said the figure did not point to a fourth-quarter turnaround for the world's second-largest economy.

U.S. manufacturing PMIs are due at 1345 GMT. Data showing a mild rebound in U.S. consumer prices on Wednesday reduced bets the Federal Reserve will push back eventual interest rate hikes.

European bond markets have been buoyed by a report that the European Central Bank is considering buying corporate bonds as its next stimulus measure -- a move many see as a prelude to sovereign bond purchases.

Analysts at Unicredit said the latest euro zone data could give the ECB pause as it decides what next steps to take to support the economy.

"Thanks to these better-than-expected preliminary PMI readings, we believe that the ECB will continue with its wait-and-see mode to assess the impact on the real economy of its recent measures," the analysts said in a note.

Traders say volumes remain low as investors wait on the sidelines for the results of the ECB's bank stress tests, due on Sunday.

Shares in Italian banks Monte dei Paschi and Banca Carige were hit on Thursday after Bloomberg reported that both banks were likely to need additional capital.

Pimco's global banking specialist, Philippe Bodereau, told Reuters that he expects 18 banks will be seen to have failed the stress tests.

Italian and Spanish yields were steady at 2.52 and 2.21 percent respectively.

Greek bond yields, which have whipsawed on concerns about political stability and the government's plan for an early exit from Greece's bailout, rose 7 bps to 7.48 percent. (Additional reporting by Michael Urquhart; Editing by Catherine Evans)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

18.12 | 0 komentar | Read More

Tesco CEO says not currently working on a rights issue

LONDON Thu Oct 23, 2014 5:22am EDT

LONDON Oct 23 (Reuters) - Tesco Chief Executive Dave Lewis said the group was not working on a rights issue, although he could not rule one out, as a profit slump in the first half ramped up the pressures on the business.

Cost savings and asset disposals were likely to come before any call on shareholders, he said.

"We think that there is significant opportunities for us to extract value from the business that we have, either from the self help I talked around in terms of costs or dare I say it when we review the portfolio against whatever strategy we decide," Lewis told analysts.

"We will go there first. We are not working on a rights issue today," he said, adding that they would keep all options open, with the caveat that he could never rule anything out.

With trading deteriorating at Tesco and net debt growing, some analysts had speculated the group should consider asking its shareholders for cash to provide the financial firepower to fight back against its rivals.

18.12 | 0 komentar | Read More

New Issue- Minera prices 100 mln sfr 2019 bond

Thu Oct 23, 2014 6:04am EDT

Oct 23(Reuters) -Following are terms and conditions

of a bond priced on Thursday.

Borrower Minera y Metalurgica del Boleo, S.A.P.I. de C.V

Guarantor Korea Resources Corporation

Issue Amount 100 million Swiss francs

Maturity Date November 12, 2019

Coupon 0.75 pct

Issue price 100.646

Reoffer price 100.171

Spread 50 basis points

Underlying govt bond Over Mid-swaps

Payment Date November 12, 2014

Lead Manager(s) UBS & BNP Paribas

Ratings A1 (Moody's) & A+ (S&P)

Denoms (K) 5

Governing Law Standalone under Swiss law

Negative Pledge Yes

Cross Default Yes

ISIN CH0254281642

For ratings information, double click on

For all bonds data, double click on

For Top international bonds news

For news about this issuer, double click on the issuer RIC,

where assigned, and hit the newskey (F9 on Reuters terminals)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

18.12 | 0 komentar | Read More

Kerry says status quo between Israel, Palestinians "unsustainable"

BERLIN Wed Oct 22, 2014 6:17am EDT

BERLIN Oct 22 (Reuters) - U.S. Secretary of State John Kerry said on Wednesday that current relations between Israel and Palestine were "unsustainable" and that the United States was conscious of the urgency of the situation.

"The current situation, the status quo, is unsustainable," he said at a joint news conference with German Foreign Minister Frank-Walter Steinmeier in Berlin.

He added that it was necessary to find a way to negotiate and said the U.S. would continue with these efforts: "Obviously we understand the urgency of it," he said. (Reporting by Noah Barkin and Michelle Martin)

18.12 | 0 komentar | Read More

Peripheral bond yields fall further on hopes for ECB action

Wed Oct 22, 2014 6:12am EDT

(Adds stress tests news, updates prices)

By Michael Urquhart

LONDON Oct 22 (Reuters) - Yields on lower-rated euro zone government bonds retreated further on Wednesday from highs hit last week as the possibility of European Central Bank purchases of corporate bonds brought riskier assets back into favour.

A mid-morning report that at least 11 banks would fail ECB stress test put pressure on some government bond markets, including Italy and Austria, but they quickly bounced back.

The ECB is considering buying corporate bonds and may decide as soon as December with a view to begin purchases early next year, several sources familiar with the situation told Reuters.

The news on Tuesday had helped peripheral euro zone debt close the yield gap against benchmark German government bonds, a move that continued on Wednesday morning.

"The news of bond buying had quite a beneficial effect on the non-German bond markets, for good reason, so spread narrowing was quite substantial and today there is still some after-effect of that," said KBC strategist Piet Lammens.

The yield on the 10-year German Bund fell by 1 basis point to 0.86 percent at 0913 GMT, while Greek yields , which rose above 9 percent last week, dropped by 49 basis points to 7.33 percent.

Italian and Austrian yields bumped up from their day's lows after Spanish news agency Efe reported that banks from six European countries are set to fail a region-wide financial health check this weekend. Even though no Spanish banks were named in the report, the country's bond yields also inched up in step with its peripheral proxy Italy.

But by 1000 GMT, Italian and Spanish bonds had headed back towards day's lows and were both down 3 bps at 2.50 and 2.20 pct respectively, while Austrian equivalents were 1bps lower at 1.09 pct.

The results of the Asset Quality Review are due to be unveiled on Sunday.

"The market is pricing in some nervousness around the AQR because as we get closer to the release of the results there is mounting speculation on both sides, positive and negative," said Patrick Jacq, rate strategist at BNP Paribas.

The major piece of data out on Wednesday is U.S. consumer inflation due at 1230 GMT, where a surprise to the downside could push back expectations for a tightening of monetary policy by the Federal Reserve and give bond markets another boost.

"If you have a surprise there, especially on the downside ... this could also push us lower in terms of euro yield," said Alessandro Tentori, global head of rates strategy at Citi.

Also on Wednesday, bids on Germany's 30-year bond auction came up short of the 2 billion euro target, leaving it technically uncovered. This came as no surprise to analysts who predicted it would be a tough sell given yields remain close to an all-time low below 1.60 percent hit last week.

Germany's benchmark 30-year bond was 1 bps lower on the day at 1.75 percent after the auction.

"At the moment core bonds are on the defensive, but they are very resilient," said KBC's Lammens. "On days when people favour equities and there is a risk-on then you'll see some weakness in the bond market, but not major." (Editing by Mark Heinrich)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

18.12 | 0 komentar | Read More