Gas supply shock would cut value of Europe's economy, ECB says

FRANKFURT - A negative shock from any gas supply disruption would eat into the value of goods and services produced in the euro zone, the European Central Bank said on Tuesday, worsening the impact of high energy prices on the bloc's growth.

Record energy prices in response to concern a Russian attack on Ukraine will lead to disruption of fuel exports to Europe have dented euro zone growth. Russia denies any plan to invade.

In an Economic Bulletin article on Tuesday, the ECB said it expected high energy prices would reduce euro zone economic output by around 0.2 percent this year, compared with baseline levels of GDP, with the biggest impact in the first quarter.

Over 90 percent of the gas used in the euro zone is imported, the ECB said, meaning negative economic impacts would be aggravated if the bloc loses some of its gas supply.

"The direct and indirect impact of a hypothetical 10 percent gas rationing shock on the corporate sector is estimated to reduce euro area gross value added by about 0.7 percent," the bank said.

The actual fall could even be greater as the modeling does not consider the effect of energy price changes, the ECB said.

Austria and Slovakia would take the biggest hit, the ECB said, while among industrial sectors, basic metals would likely suffer the most.

(Reporting by Balazs Koranyi; editing by Barbara Lewis)

-reuters-

IMF cuts euro zone growth forecasts, as Germany slows and Italy stalls

BRUSSELS - Euro zone economic growth is set to slow more than expected as the bloc's manufacturing crisis could spill over to the larger services sector under protracted global trade tensions, the International Monetary Fund said on Wednesday.

The IMF said the 19-country euro zone would grow by 1.2 percent this year, revising down its earlier estimates from April of 1.3 percent growth for the bloc. That is a significant slowdown compared to last year's 1.9 percent expansion.

The bloc's economy would grow by 1.4 percent in 2020 and 2021, the IMF said, cutting its previous estimate of 1.5 percent growth in both years.

The slowdown is mostly due to anaemic growth in Germany, the euro zone's largest economy, and stagnation in Italy, the third-biggest, the fund said, revising down its earlier forecasts for both countries.

Germany is now expected to grow by only 0.5 percent this year, slower than the 0.8 percent the IMF had predicted in April. That would be one-third of 2018 growth.

The IMF also cut its growth forecast for France, the bloc's second-largest economy, despite better-than-expected output estimates for the third quarter released last week. The country is now expected to grow by 1.2 percent this year, instead of the 1.3 percent previously forecast.

To counter the slowdown, the fund reiterated its call for a "synchronized fiscal response" by euro zone governments, in a clear message to Berlin to invest more.

It said the slowdown, so far mostly caused by the impact of global trade tensions on the bloc's export-driven industry, could spill over to services, the largest economic sector in the euro zone.

Britain's process to leave the European Union was also a cause of concern, with a no-deal Brexit causing vast negative effects on both Britain and the EU.

In the event of an orderly Brexit, which could occur by the end of January, the IMF confirmed its earlier estimates that Britain's economy would grow by 1.2% this year and 1.4 percent next. Growth was 1.4 percent in 2018.

Inflation in the bloc is expected by the IMF to be 1.2 percent this year, 1.4 percent next and 1.5 percent in 2021, short of the European Central Bank's target of a rate close but below 2 percent.

(Reporting by Francesco Guarascio @fraguarascio; Editing by Catherine Evans)

source: news.abs-cbn.com

Global Markets: Euro slips on Greece bailout, Italian vote concerns; stocks drift

SINGAPORE - The euro came under pressure on Tuesday after a media report that Greece may forego its next bailout payment if creditors cannot strike a debt relief deal, while Asian stocks were shackled by holidays in some regional markets and the United States and UK.

The common currency slid 0.2 percent to $1.1136 in its third session of declines after a German press report Athens may opt out of its next bailout payment.

Euro zone finance ministers failed to agree with the International Monetary Fund on Greek debt relief or to release new loans to Athens last week but did come close enough to aim to do both at their June meeting.

"The bailout payments are necessary to meet existing debt repayments due in July, so if Greece were to forgo this bailout payment the probability of a default would spike, reopening the discussion around a Grexit from the Euro-zone," said James Woods, global investment analyst at Rivkin in Sydney.

However, Woods cautioned against reading "too much into it" without more details or confirmation, adding that it is unlikely that Greece would opt out of the bailout payment at this stage.

A statement by European Central Bank President Mario Draghi reiterating the need for continued stimulus, and the prospect of early Italian elections also weighed on the euro.

MSCI's broadest index of Asia-Pacific shares outside Japan was flat early on Tuesday.

Japan's Nikkei slipped almost 0.1 percent.

China, Hong Kong and Taiwan markets are closed for holidays on Tuesday.

European blue-chip stocks fell 0.2 percent on Monday, with Italy's banking index sliding 3.4 percent, its biggest loss in nearly four months, after two lenders sought help to cover a capital shortfall.

Sterling retreated 0.2 percent to $1.281 after British Prime Minister Theresa May's lead over the opposition Labour Party dropped to 6 percentage points in the latest poll to show a tightening race since the Manchester bombing and a U-turn over social care plans.

The dollar inched back 0.1 percent to 111.15 yen in early trade.

The dollar index, which tracks the greenback against a basket of trade-weighted peers, advanced 0.2 percent.

In commodities, oil prices climbed in light trade but failed to make up last week's losses as concerns lingered about whether the extension of output cuts by OPEC and other producing countries will be enough to support prices.

US crude futures added 0.4 percent to $50 a barrel.

Gold was steady at $1,266.89 an ounce.

source: news.abs-cbn.com

European shares dip as concern over U.S. politics, Ubisoft weighs

LONDON - European shares fell on Wednesday amid a global pullback in stock markets as worries about political turmoil in the United States led investors to seek safety after a strong run sent regional benchmarks to record highs.

The pan-European STOXX 600 fell 0.3 percent, as major regional benchmarks tracked a global dip in stocks and the dollar as concerns over U.S. President Trump multiplied.

Euro zone blue chips and the bloc's broader index of stocks both dropped 0.6 percent.

Britain's FTSE 100 on the other hand hovered close to its record high hit on Tuesday, outperforming European peers as gains among miners supported it.

Despite their falls on Wednesday, European benchmarks remain near recent highs, having risen sharply as investors pile in to the region on the back of an economic recovery, robust company earnings and voters' rejection of populist parties in elections.

"Markets broke upwards with the disappearance of concerns around the French election. Quite a lot of fast money came in and markets are just pausing now to digest that," said Stephen Macklow-Smith, head of European equities at JP Morgan Asset Management.

Ubisoft Entertainment, the third-biggest global entertainment company, fell 6 percent after it cut its mid-term sales forecast, reporting results near the bottom end of its target range after the close on Tuesday.

Raiffeisen Bank was a bright spot on a negative banking sector, up 3.5 percent after its first-quarter profit jumped more than expected as write-downs shrank.

Lloyds Bank gained 1.9 percent after the British government sold its last remaining shares in the bank, marking the end of an era after one of the largest financial crisis bailouts.

But the Netherlands' largest domestic lender ABN Amro fell 3.2 percent after its results, with traders citing a lower net interest margin and capital ratio, though the headline net income beat expectations at 615 million euros.

Thyssenkrupp was the top European gainer, up 4 percent after Tata Steel agreed the terms of a deal to cut benefits for its British pension scheme, removing a major obstacle to the potential merger of its steel assets with the German steel maker.

Thyssenkrupp's labour boss said the pensions deal does not lessen workers' opposition to a possible merger, however.

Gold miner Fresnillo rose 2.8 percent as the price of the safe-haven asset rose to a two week high.

Tullow Oil gained 2 percent after JP Morgan reiterated its 'overweight' rating on the stock, saying the oil company had improved its funding position, and valuation had returned to more compelling territory.

Norwegian fertilizer maker Yara got a boost from broker Liberum raising it to 'buy' from 'sell', saying prices of urea, a key ingredient in fertilizers, are close to a trough with fewer capacity additions ahead. Trading in Oslo was closed for the day, however, and the market will reopen on Thursday.

European earnings continued to paint a bright picture for the region's equities, with earnings growth for the quarter seen at 19 percent, according to Thomson Reuters data.

(Reporting by Helen Reid, Vikram Subhedar; Editing by Hugh Lawson)

source: news.abs-cbn.com

Wall Street rises on earnings despite oil price pressure

NEW YORK - Wall Street ended higher on Tuesday boosted by corporate earnings, while the dollar climbed to a more than one-week high on technical buying and political uncertainty in Europe.

Even so, US stocks pared earlier gains as oil dropped, pressured by growing gasoline stockpiles in the United States and evidence of a revival in US shale production.

 "US shale is coming back, and it's coming back strong," said Societe Generale oil analyst Michael Wittner.

Brent crude settled down 67 cents, or 1.2 percent, at $55.05 a barrel while US crude ended 84 cents, or 1.6 percent, lower at $52.17.

The weakness in oil dragged down US energy shares but this was countered by gains in big tech names that helped lift the Nasdaq to a record closing high. The Dow Jones Industrial Average also hit an intraday all-time high just after the market opened.

"The story is a pretty good one for stocks in terms of it looks like the economy is continuing to grow, I think corporate profits have been pretty good, certainly enough to support higher prices," said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.

The Dow Jones Industrial Average rose 37.87 points, or 0.19 percent, to end at 20,090.29, the S&P 500 gained 0.52 point, or 0.02 percent, to 2,293.08 and the Nasdaq Composite added 10.67 points, or 0.19 percent, to 5,674.22.

Fourth-quarter US earnings are estimated to have risen 8.2 percent, the best in nine quarters.

The dollar gained for a fifth straight session, climbing to a more than one-week high in part because of "buying by bargain-hunters looking to pick up the greenback following its worst start to the year in 30 years," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

The greenback posted its best one-day gain since mid-January, rising at the expense of the euro.

The euro fell 0.8 percent to $1.0665, its biggest fall since Dec. 15, before recovering to $1.0696.

The euro zone common currency struggled on renewed concern about Greece's debt problems and signs far-right candidate Marine Le Pen is gaining momentum before France's presidential election.

The political uncertainty weighed on French stocks, which slipped as election jitters dampened the country's sovereign bonds.

Even so, European shares still closed higher overall, with the pan-European STOXX 600 index rising 0.32 percent, helped by corporate results.

Investors also fled French government bonds. Though opinion polls suggested that Le Pen will not win the second round of the presidential election in May, such polls have been wrong before, Rabobank analysts said on Tuesday.

Le Pen has vowed to fight globalization and take France out of the euro zone.

The premium investors demand for buying French 10-year government bonds over German 10-year bonds rose to 78 basis points, the highest since November 2012 before easing back a bit. It was 50 basis points only two weeks ago.

US Treasury yields fell to their lowest in nearly three weeks, drifting past significant technical levels, as fixed-income investors worried that President Donald Trump's pro-growth policies could be hamstrung by his focus on other issues.

The US trade deficit also fell more than expected in December as exports rose to their highest in more than 1-1/2 years, outpacing an increase in imports. The dollar gained 4.4 percent against the currencies of the United States' main trading partners last year.

source: news.abs-cbn.com

ECB hints at stimulus but keeps markets guessing

FRANKFURT - The European Central Bank held interest rates at record lows and kept the door open to more stimulus on Thursday but gave few hints about its next move, disappointing markets that had priced in a decisively dovish tone.

ECB President Mario Draghi said the ECB will study policy options to ensure it can pursue its unprecedented money-printing program but did not hint at the anticipated extension of its asset purchases, maintaining the March end-date in an unexpectedly balanced message.

Facing anemic growth and inflation, the ECB is buying 1.74 trillion euros worth of bonds, holding rates deep in negative territory and giving banks free loans, hoping to end the bloc's nearly decade-long economic malaise with an infusion of cheap credit.

It has managed to prop up growth, but not enough, and even shaved some of its forecasts on Thursday, reinforcing market expectations that more monetary stimulus is just a matter of time.

"For the time being, the changes (in forecasts) are not substantial (enough) to warrant a decision to act," Draghi told a news conference, adding that an extension of the ECB's asset buys was not discussed.

The euro zone's central bank kept its deposit rate at -0.4 percent, charging banks for parking cash overnight, and held the main refinancing rate, which determines the cost of credit in the economy, unchanged at 0.00 percent.

In the biggest clue about its next step, Draghi said the ECB had asked internal committees to look at various options to ensure the smooth running of asset buys. He had used similar language at the October 2015 meeting, which was followed by an easing package six weeks later.

This time the changes may be just technical but they are necessary preparatory work for any serious policy easing as the ECB is running out of assets to buy due to its self-imposed limits.

"This was a clear hint that the ECB will announce technical changes to its quantitative easing purchases at the October meeting, which is a prerequisite to any extension of QE beyond March 2017," ING economist Carsten Brzeski said.

Euro zone bond yields rose, the euro hit a two-week high and stocks extended losses after Draghi said the extension of asset buys was not discussed.

"The disappointment is clearly there in the market, but the ECB did keep the door open to more stimulus," said Kim Liu, senior fixed income strategist at ABN AMRO.

After 18 consecutive months of buying government bonds to pump up the economy and raise inflation, the ECB's holdings hit a landmark 1 trillion euros last week -- yet prices are seen rising a mere 0.2 percent this year, well below its target of just under 2 percent.

EASING STILL COMING
Draghi also took pains to reassure markets that he would not hesitate to ease policy if the inflation outlook warranted it.

"I would say there is no question about, as I think I've said at other times, the will to act, the capacity to act and the ability to do so," Draghi said. "If warranted, we will act by using all the instruments available within our mandate."

Prolonging the purchases is controversial because it risks further distorting market prices and even that the stock of eligible bonds will run out. The ECB has already had to stop purchases in Estonia and found no bonds to buy in Luxembourg last month.

That has led to increasing speculation that it will have to adapt the rules of its asset purchase program to provide even more stimulus, probably before year-end.

The choice is then between tweaking purchase rules or going for a bigger redesign although markets expect the bank to come up with a compromise.

"There was nothing in or between the lines which made us change our mind on what's coming: We expect the ECB to announce the extension of the asset purchase program by at least six months in December," Nordea said.

The easiest options could include buying bonds yielding less than the bank's -0.4 percent deposit rate, extending the maturity range of eligible bonds to 30 years from 20 years and buying an even bigger portion of certain bond issues.

Bigger changes could involve the purchase of new types of assets, such as bank bonds, non-performing loans, or in the extreme case, stocks.

Still, each of these changes would generate concern or even outright opposition from hawks and the growing camp of moderates on the Governing Council, who worry about the unintended negative effects of the ECB's extraordinary stimulus.

The ECB slightly upgraded its euro zone growth forecast to 1.7 percent from 1.6 percent this year, but downgraded it to 1.6 percent from 1.7 percent for both 2017 and 2018. Its forecast for a modest takeoff in inflation to 1.2 percent next year and 1.6 percent in 2018 were barely changed.

Draghi had his usual stern words for the structural reform efforts of the region's governments, saying they needed to be "substantially stepped up" to raise productivity, improve the business environment, and boost infrastructure.

"Fiscal policies should also support the economic recovery," he said, repeating a message given by central bankers at the annual Jackson Hole gathering this year but which has prompted little response so far in Europe.

source: www.abs-cbnnews.com

Global stocks, dollar rebound but China smashed again

LONDON - Volatile global markets got some respite from the latest blood-letting on Tuesday as bargain hunters nudged up Asian and European stocks, though China, at the center of the rout, was smashed again.

The dollar and oil prices saw their first rises in five days and some of the positions in safe-haven bonds and currencies such as the yen and the euro were also cut as investors nervously dipped their toes back in the still choppy waters.

China's main equity markets had seen another huge 8 percent drop overnight and Japan's Nikkei had slumped 4 percent, but the rest of Asia had been calmer overall.

Europe also started on a firmer footing after Monday's global beating had wiped around 450 billion euros ($520.70 billion) off the value of its leading stock markets.

The pan-European FTSEurofirst 300 index clawed back 1.7 percent of the more than 5 percent it had lost as London, Paris and Frankfurt bounced 1.5-1.7 percent.

"We are seeing signs of relief with European stocks opening higher despite China extending its losses," said Piotr Matys, an emerging markets expert at Rabobank in London.

"We are trying to decouple but I think it's too early to declare the worst is over though and we are out of the woods. The way I see it is that this is a bit of a technical correction after things got a bit oversold."

The currency market was also calmer. The dollar rose against the yen as it pulled out of a four-day long slide that had left it at a seven-month low.

Traders said a rise in U.S. stock index futures and a brief rebound in Japanese stocks had helped spur dollar-buying against the yen earlier in the day, with the dollar rising to 120.11 yen at one point.

German Bund and other euro zone government bond yields also rose along with those on U.S. Treasuries as the previous day's rush for safety eased, although it was far from plain sailing.

Mainland Chinese shares had another calamitous day, with the Shanghai Composite Index falling another 8 percent and breaking below the psychological level of 3,000. The index fell 15 percent the previous three days, including an 8.5 percent collapse on Monday.

"Global investors are cannibalizing each other. Calling it a market disaster is not an overstatement," said Zhou Lin, an analyst at Huatai Securities.

"The mood of panic is dominating the market ... And I don't see any signs of meaningful government intervention."

Oil prices also stabilized, however, after plunging more than 6 percent and hitting 6 1/2-year lows.

U.S. crude futures traded at $38.73 per barrel, up 1.2 percent on the day, while Brent crude futures last stood at $43.03 after having fallen to $42.23 on Monday. Copper nudged up a fraction too to $4,956 a tonne.
source: www.abs-cbnnews.com

Banks reopen, taxes rise as Greece pays billions to creditors

ATHENS, Greece - Greece's government hiked taxes and paid billions of euros to its creditors on Monday, as banks reopened just days after the debt-laden country reached a reforms-for-cash deal with its European partners.

Greeks woke up to widespread tax rises -- on everything from sugar and cocoa to condoms, taxis and funerals -- as part of the tough reform package agreed last week in exchange for a three-year bailout of up to 86 billion euros ($93 billion) aimed at keeping Greece from crashing out of the eurozone.

The nation's banks were thronged with customers after a three-week shutdown estimated to have cost the economy 3.0 billion euros. The banks were ordered to close on June 29 to prevent mass cash withdrawals that could have caused the financial system to collapse.

Banks are continuing to offer only limited services -- with a ban on most transfers to foreign banks among the capital control measures still in place -- but a daily cash withdrawal limit of 60 euros ($65) has been relaxed.

Bank tellers were dealing with a hectic stream of customers, many expressing frustration over continuing restrictions on financial services.

"I came today to collect my pension but unfortunately I could only get a small percentage of it," said Spyros Papasotiriou as he left his bank in the northern Athens suburb of Neo Psychiko. "It's a big hassle."

A source close to the Greek finance ministry meanwhile confirmed that the government had completed payments of billions of euros that were due to the European Central Bank and International Monetary Fund on Monday, after the EU granted emergency bridge funding of 7.16 billion euros.

The IMF separately announced that Greece was no longer in default on its loans after remitting about two billion euros ($2.2 billion) to make up for missed repayments, while an ECB spokesperson said: "The ECB confirms it has been repaid."

Value-added tax (VAT) has gone up from 13 percent to 23 percent on a wide range of goods and services, although the tax on medicines, books and newspapers eased from 6.5 percent to 6.0 percent.

Tryphon Alexiadis, the new finance vice minister in charge of tax, vowed that "not a single euro from the tax rise will escape state coffers", adding that "a wave of inspections will be launched" to prevent tax evasion in a country where the problem is notoriously rife.

Along with the tax hikes, the Greek government -- led by the radical-left Syriza party that came to power in January promising to end austerity -- is also set to overhaul its ailing pension system as part of the reforms deal, and launch privatisations it had previously opposed.

'Crash test'

Louka Katseli, the head of Greece's bank association, said some 40 billion euros have been withdrawn from Greek banks since December by customers anxious over the safety of their deposits, seriously damaging the banks' ability to function normally.

She urged people to bring their savings back to the banks to support the crisis-hit financial system.

"If we take out the money from our safes and our houses -- where, in any case, it isn't safe -- and we deposit it in the banks, we will reinforce liquidity," she told the Mega TV channel.

Greeks are now able to withdraw a maximum of 300 euros at once until Friday, when a new weekly limit of 420 euros takes effect.

They can also use their credit cards for foreign purchases again, and certain exceptions to the capital controls have been introduced to help Greeks who are studying or undergoing medical treatment abroad.

But most people remain unable to take out large sums, transfer money to other countries or open new bank accounts.

The capital controls are taking a heavy toll on Greek businesses, with 23 percent of firms saying they are seeking to move their headquarters abroad to improve stability and cash-flow, according to a survey released Monday by non-profit group Endeavour Greece.

The austerity package caused a mutiny among lawmakers of Prime Minister Alexis Tsipras's ruling Syriza party -- forcing him to carry out a limited cabinet reshuffle on Friday -- and he faces a fresh challenge on Wednesday when parliament must approve a second wave of reforms tied to the rescue package.

Pro-government newspaper Avgi said the vote would be a "crash test" that could even result in Tsipras's resignation.

"If there are new losses, in whatever form, (Tsipras) will hand back his mandate," the daily said.

Analysts have said the divisions within the ruling party could force early elections.

Government spokeswoman Olga Gerovassili ruled out another vote while Athens was still negotiating the bailout.

"Elections are not useful at the moment and the government has no intention of organising any," Gerovassili told state news agency ANA.

"The goal is to finalise the deal (with Europe) and restore normality and stability," she said.

source: www.abs-cbnnews.com

Greece prepares to reopen banks

ATHENS -- Greece prepared Sunday to restart its struggling economy with a revamped government, a bank reboot and a new round of tax hikes agreed after months of fraught confrontation with its creditors.

Banks are set to reopen Monday after a three-week shutdown estimated to have cost the economy some $3.3 billion in market shortages and export disruption.

Crisis-hit Greeks will also have to endure widespread price hikes with a broad batch of goods and services -- from sugar and cocoa to condoms and funerals -- now taxed at 23 percent, up from 13 percent.

The measures are part of a tough fiscal package Greece had to agree to last week to earn a three-year bailout from its international creditors and avoid crashing out of the eurozone.

The austerity package caused a mutiny among lawmakers of the ruling radical Syriza party, forcing Prime Minister Alexis Tsipras to carry out a limited reshuffle on Friday.

Even so, most analysts and even government officials say early elections are now inevitable, and are likely to be held in September.

Tsipras -- who barely has time to eat or sleep, according to his mother -- faces a fresh challenge in parliament on Wednesday to approve a second wave of reforms tied to its economic rescue.

The leftist government has agreed to raise taxes, overhaul its ailing pension system and commit to privatizations it had previously opposed, in exchange for a bailout of up to $94 billion over the next three years.

The draconian agreement -- accepted by a party that came to power in January promising to end austerity -- came after over 61 percent of Greeks on July 5 rejected further cuts in a referendum called by Tsipras himself.

His critics accuse the prime minister of kowtowing to blackmail by Greece's creditors, who had threatened to expel the country from the euro.

"The commission is prepared for everything... We have a Grexit scenario, prepared in detail," European Commission head Jean-Claude Juncker had warned on July 8.

The Kathimerini newspaper on Sunday said the "Grexit" plan, which also entailed Greece's expulsion from the Schengen Treaty, had been secretly prepared in less than a month by a 15-member European Commission team.

French Finance Minister Michel Sapin on Sunday insisted that the "real humiliation would have been for Greece to have been kicked out of the euro."

"There was a real confidence problem... now this confidence is being restored," Sapin told the To Vima weekly.

The Greek crisis exposed a rift between the eurozone's top powers, Germany and France, on how far to apply austerity to meet fiscal goals.

French President Francois Hollande on Sunday called for the euro's governance to be "strengthened," calling for "the addition of a specific budget and a parliament to ensure democratic control."

Commentators say the lack of centralized governance over national fiscal policies -- a jealously-guarded sovereignty area for member governments -- is a major flaw in the single European currency.

Greece is also scheduled Monday to repay 4.2 billion euros to the European Central Bank (ECB).

For this purpose, the EU on Friday approved a short-term loan of 7.16 billion euros, which will also enable Athens to repay debts to the International Monetary Fund outstanding since June.

source: www.abs-cbnnews.com

Index surges as Greece reaches deal with creditors

MANILA - Share prices rallied yesterday as optimism prevailed after euro zone leaders clinched a deal with Greece to negotiate a third bailout plan.

The benchmark PSEi closed at 7,496.33, surging 103.74 points or a change of 1.40 percent.

The All Shares index closed at 4,268.78, higher by 41.57 points or 0.98 percent. All other indices closed higher with the mining and oil, property and the holding firms indices recording the biggest gains.

Value turnover amounted to P4.764 billion, down from Friday’s P6.790 billion.

“If all things push through as planned, that could reduce volatility in currencies and might prompt funds to reposition anew in equities,” said Grace Cerdenia, Research head at F. Yap Securities.

European leaders held yesterday a 17 -hour session, which has been described as one of the most contentious diplomatic standoffs in European Union history before finally reaching an agreement in Brussels.

According to reports, the agreement would require approval from European parliaments.

As part of the agreement, Greece must push through parliament a series of cuts and reforms, including divisive overhauls of its pension and tax system.

Read more on Philippine Star.

source: www.abs-cbnnews.com

Euro dips, markets mostly up as Greece talks drag on

HONG KONG, China - The euro edged down Monday but stock markets mostly rose as European leaders presented Greece with a painful set of demands to secure a debt bailout or face a eurozone exit.

Traders also took some support from figures showing a pick-up in Chinese exports that tempered worries about the country's economy and provided some stability to Shanghai stocks after weeks of fierce volatility.

During the high-stakes summit talks, Germany and other eurozone leaders handed Greece a brutal ultimatum for desperately needed bailout cash Sunday, with Chancellor Angela Merkel pushing for a temporary euro exit -- or "time out" -- if it does not agree.

However, there was still no agreement early Monday morning despite more than 10 hours of talks, with Greece's economy and banking system at risk of imminent collapse.

Athens said the plans were "very bad", but with its lenders on the brink it looked to have little choice but to bow to reform demands that effectively rob it of control of much its finances.

In Japanese trade the euro dipped but managed to stave off heavy losses as the talks continued in Brussels.

It eased to $1.1125 from $1.1149 in New York late Friday. In earlier electronic trading, the single currency fell as low as $1.1089. It was also at 136.40 yen compared with 136.58 yen in US trade.

"Market reaction in the euro is surprisingly muted," said Steven Englander, global head of Group-of-10 currency strategy at Citigroup.

"The absence of agreement and toughness of terms are eye-catching, but investors are waiting for the outcome more than trying to anticipate it."

On share markets Tokyo was up 1.21 percent, Seoul added 0.52 percent and Sydney gained 0.41 percent.

China trade boost

Shanghai rose 0.52 percent, extending a rebound at the end of last week that came after weeks of extreme volatility, with investors settled by government moves last week to prevent a market crash.

But Hong Kong lost 0.50 percent after climbing almost six percent over Thursday and Friday.

While Greece's future in the eurozone hangs in the balance, attention is also on China, which releases its crucial trade statistics later in the day.

China's stock market rose in the previous two sessions but dealers remain nervous after a month of massive selling that has seen the Shanghai Composite index fall about 30 percent, wiping trillions of dollars off valuations.

Investors welcomed an upbeat trade report that showed exports increased more than expected in June.

"Imports improved significantly in June because of lower import duties," said Liu Xuezhi, an economist with Bank of Communications Co. in Shanghai, told Bloomberg News. "Exports are expected to maintain modest growth in coming months to help the economy."

But Sam Tuck, a senior currency strategist in Auckland at ANZ Bank New Zealand Ltd., added: "We've got a watching brief on China. It's positive that the authorities didn't feel the need to do anything over the weekend but markets are still clearly nervous and we need to see most of the stock market open.

"There's still lots of halts."

The sell-off spread to other regional markets on fears for the world's number two economy and key driver of global growth.

On oil markets, US benchmark West Texas Intermediate for delivery in August fell 80 cents to $51.94 and Brent dropped 87 cents to $57.86.

Gold fetched $1,162.32 compared with $1,163.50 late Friday.

source: www.abs-cbnnews.com

Asian shares edge up, euro gains after new Greek proposals

TOKYO - Asian shares and the euro gained in early Asian trade on Friday after Greece offered new reform proposals to creditors, raising hopes of a cash-for-reform deal at a weekend summit of European leaders.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.3 percent, but still on track for a weekly loss over 4 percent in a period marred by a savage correction in Chinese stock markets.

U.S. stock futures also rose, with S&P 500 mini futures ESc1 jumping as high as 2061.75, up 1.0 percent from late U.S. levels. They were last up 0.7 percent.

But Japan's Nikkei stock index dropped 0.3 percent, headed for a weekly loss of over 3 percent.

The euro extended gains, adding 0.4 percent to $1.1072, while the dollar gained 0.3 percent against the safe-haven yen to 121.71 yen.

The euro surged 0.7 percent to 134.81 yen, recovering from a six-week low of 133.30 yen plumbed on Wednesday.

New measures Greece offered included a tax hike on shipping companies and scrapping tax breaks for its islands, higher value added tax for restaurants and a firm timetable for privatizations.

The Greek government will ask for parliament's approval on Friday to negotiate on the text of "prior actions" that could form the basis of a cash-for-reforms deal with creditors, a government source said.

Germany, Athens biggest creditor, also made a small concession on Thursday by acknowledging that Greece will need some debt restructuring as part of the new program to make its public finances viable in the medium-term.

Hopes on a deal for Greece is likely to support Asian shares, though volatility in Chinese shares will likely need to ease off further before many investors step up buying.

"U.S. futures are higher, but we are waiting to see if stocks in Shanghai continue to recover, and if the VIX comes off its highs, before we can say that risk sentiment has improved, even as the Greek news has raised hopes," said Junichi Ishikawa, market analyst at IG Securities in Tokyo.

Beijing's increasingly frantic attempts to stem a stock market rout were finally rewarded on Thursday as Chinese shares bounced around 6 percent.

But investors are not sure if the worst is over in the short term, and the costs of heavy-handed state intervention in the stock market are likely to weigh on the market for a long time.

In commodities trading, crude oil futures were steady but remained on track for steep weekly losses. U.S. crude was trading up 0.2 percent at $52.89 per barrel, more than 7 percent below last Friday's close. Brent crude was slightly higher on the day at $58.63 a barrel, but still more than 2 percent down for the week.

source: www.abs-cbnnews.com

Greece faces last chance to stay in euro as cash runs out

BRUSSELS/ATHENS - Greek Prime Minister Alexis Tsipras is expected to present new proposals to an emergency euro zone summit on Tuesday, under pressure from European leaders to come up with credible ideas as his country's banks face potential meltdown.

With Greek lenders down to their last few days of cash and the European Central Bank tightening the noose on their funding, Tsipras must persuade the bloc's other 18 leaders, many of whom are exasperated with five years of crisis, to open negotiations fast on a new loan to rescue Greece.

The leaders of Germany and France, the currency area's two main powers, said after conferring on Monday that the door was still open to a deal to save Greece from plunging into economic turmoil and ditching the euro.

But Chancellor Angela Merkel, under pressure in Germany to cut Greece loose, made clear it was up to Tsipras to come up with convincing proposals after Athens spurned the tax rises, spending cuts and pension and labor reforms that were on the table before its 240 billion euro bailout expired last week.

European Commission President Jean-Claude Juncker, under suspicion from both sides for trying to broker a last-minute deal, told the European Parliament: "There are some in the European Union who openly or secretly are working to exclude Greece from the euro zone."

He did not name names but may have been referring to German Finance Minister Wolfgang Schaeuble, who has made no secret of his scepticism about Greece's fitness to stay in the euro.

From the Greek side, the key to making any deal politically acceptable will be to win a stronger commitment from Merkel and other lenders to reschedule Greece's giant debt burden, which the International Monetary Fund says is unsustainable.

Without some firmer pledge of debt relief, neither Greece nor the IMF is likely to accept a deal. But that may be more than Germany and its northern allies can swallow.

"The door is open to negotiations, but there isn't much time left and the situation is urgent both for Greece and for Europe," French President Francois Hollande said in a joint media appearance with Merkel in Paris.

At stake at the emergency summit beginning at 6 p.m. (2.00 p.m. EDT) in Brussels is more than just the future of Greece, a nation of 11 million that makes up just 2 percent of the euro zone's economic output and population.

If Greek banks run out of money and the country has to print its own currency, it could mean a state leaving the euro for the first time since it was launched in 1999, creating a precedent and fuelling doubts about the long-term viability of an incomplete European monetary union.

"Even if it did not trigger a short-term domino effect, the integrity of the euro zone would come under fresh threat with each episode of political uncertainty within member countries," said Thibault Mercier, an analyst at BNP Paribas.

CONCESSIONS UNCLEAR
Strengthened by the overwhelming 61.3 percent 'No' vote in Sunday's referendum, the leftist Tsipras won the unprecedented support of all other Greek party leaders on Monday and replaced his abrasive Finance Minister Yanis Varoufakis with the soft-spoken negotiator Euclid Tsakalotos.

"They (creditors) wanted a 'Yes' to prevail so they could humiliate the Greek prime minister, to go weakened, under these conditions of funding asphyxiation, and be a pushover. That didn't happen," Labour Minister Panos Skourletis told Antenna TV.

In an intensive round of telephone diplomacy, Tsipras spoke to the heads of the ECB, the IMF and the European Commission, as well as Merkel, Russian President Vladimir Putin and U.S. Treasury Secretary Jack Lew.

But he gave little clue of what reform concessions he would make to try to convince deeply sceptical European leaders to lend Athens more money after five months of acrimonious and fruitless negotiations with his leftist administration.

His proposals were not expected to go much beyond a letter he sent to euro zone partners last week, accepting most of the terms of a creditors' offer that was no longer on the table, but still seeking some loopholes for social or coalition reasons.

The United States, China and Japan all called for a solution in which Greece stays in the euro zone.

Juncker told EU lawmakers in Strasbourg he was working night and day to get negotiations reopened but he chided the Greeks for their confrontational approach, saying it was unacceptable to accuse the EU of behaving like "terrorists", as Varoufakis did last week.

"Throwing Greece out of the monetary union or indeed the European Union is not something we want or indeed should want," said the EU's chief executive, who was heckled by leftists and Eurosceptics when he said Greeks hadn't been properly informed about what they were voting on.

European Central Bank policymaker Ewald Nowotny suggested the bank might be able to provide some sort of bridge funding while Greece negotiated a longer-term conditional loan to see it over a crucial July 20 bond redemption to the ECB.

Greek newspapers dramatized the make-or-break nature of the Brussels showdown.

Centrist daily Ethnos headlined: "Time has run out for a solution before catastrophe," while the center-right Eleftheros Typos said: "Tsipras’ games finish at today's council: Time of crisis: deal or Grexit."

Greek newspapers said the proposals would be based on ideas that Juncker put forward at the end of June with a few tweaks and would not differ much from the last plans presented by Athens itself last week.

Euro zone national officials were irritated that Juncker had gone beyond the agreed negotiating mandate of the three creditor institutions in his last-ditch diplomacy, and it is not clear that they will be more receptive to his ideas now.

A clear majority of Greece's 18 partners favor a hard line at the summit, arguing that they too are democracies and that Greeks should not get easier money because they had rejected the austerity terms, casting further doubt on whether they would implement any reforms agreed now.

The ECB left unchanged its emergency liquidity lifeline for Greek banks but raised the discount it charges on collateral they have to present for funds - a measure banking sources said was largely symbolic since the total they could borrow was capped.

A bank closure in force since the talks collapsed was prolonged until Thursday at least, and cash withdrawals remain limited to 60 euros a day, with 20 euro notes running out.

The Athens stock exchange was also ordered closed for two days in Tuesday and Wednesday to throttle speculation.

Even with the country on the brink of economic collapse, Greek newspapers reported the government was still seeking exceptions from its reform pledges for special interests.

Athens wants to keep a 30 percent discount on value added tax on Greek islands and protect defense spending from cuts, which rightist junior coalition partners the Independent Greeks have called "red lines".

source: www.abs-cbnnews.com

Greece votes in referendum with future in euro in doubt

ATHENS - Greece votes on Sunday on whether to accept more austerity in exchange for international aid, in a high-stakes referendum likely to determine whether it leaves the euro-currency area after seven years of economic pain.

Staged against a backdrop of shuttered banks and threats of financial apocalypse, the vote is too close to call and may not produce the clear mandate for negotiations that Athens' creditors seek.

Greeks are split on whether to accept an offer by creditors that Prime Minister Alexis Tsipras calls a "humiliation" and is urging people to reject. Investors and European policymakers say a rejection would set Greece on a path out of the euro, destabilizing the global economy and financial markets.

"On Sunday we should all send a message of democracy and dignity to the world," Tsipras told tens of thousands of Greeks rallying for a 'no' vote before campaigning ended.

Voting on whether to accept more taxes and pension cuts would be divisive in any nation, even at the best of times.

In Greece, the choice is faced by an angry and exhausted population who, after five years of crippling austerity, have now suffered through a week of capital controls imposed to prevent the collapse of the nation's financial system.

Pensioners besieging bank gates to claim their retirement benefits, only to leave empty-handed and in tears, have become a symbol of the nation's dramatic fall over the past decade.

Eleven years ago, in the early morning of July 5, 2004, Greeks poured into the streets, united in celebration of their country's victory in the European Cup soccer tournament. Today, Greece is divided -- and scared -- as rarely before.

"There is an atmosphere of fear. You can just feel it," said Sarafianos Giorgos, a 60-year-old teacher in Athens, who says he will vote in favour of the creditors' proposals.

Polls open at 7 a.m. local (0400 GMT) and shut at 7 p.m, with the first official projection of the result expected at 9 p.m.

Four opinion polls published on Friday showed the 'Yes' vote marginally ahead. A fifth put the 'No' camp 0.5 percentage points in front. All were well within the margin of error.

Anxious Greeks rallying for a 'Yes' vote agree Greece has been handed a raw deal but say the alternative, a collapse of the banks and a return of the old drachma currency, would be worse.

Those pledging to deliver a rousing 'No' to tax hikes and pension cuts in return for more loans say Greece cannot afford more of the austerity that has left one in four without a job. They agree with Tsipras that Europe is "blackmailing" Greece.

"As a Greek woman, I am embarrassed at those who are going to vote 'Yes' for fear of leaving the euro. They are asking us to accept unending slavery. I am offended," said Tenekidou Ermioni, a 54-year-old teacher.

NIGHTMARE RESULT

Greeks are likely to face more financial and political turmoil in the days and weeks ahead.

"All in all, Prime Minister Alexis Tispras' early exit from office is still more likely than Grexit," wrote Wolfgang Piccoli of Teneo Intelligence.

"Regardless of Sunday's result, significant levels of political volatility are here to stay."

Finance Minister Yanis Varoufakis promised Greeks on the eve of the vote that European creditors would immediately have to grant Athens better terms, including massive debt relief and less austerity, if they voted 'No'. EU ministers and officials have warned that his pledge is a cruel illusion.

If Greeks vote 'Yes' to the bailout, both Tsipras and Varoufakis are expected to resign -- triggering a new chapter of uncertainty as political parties try to cobble together a national unity government to keep talks with lenders going until elections are held.

European creditors have said a 'Yes' vote will resurrect hopes of aid to Greece. But capital controls, and default last week to the IMF, have undermined Greece's economic standing and creditworthiness, so a new bailout package would probably entail harsher terms than those on offer even last week.

A 'No' vote would bring even greater uncertainty, and the prospect of a sudden financial collapse.

European policymakers have openly warned such a result would be read as a rejection of talks with creditors and the euro, leaving Greece to fend for itself without any realistic prospect of funds to avoid bankruptcy.

Much would depend on the European Central Bank, which will review on Monday morning its policy on emergency liquidity, which Greek lenders rely on.

The ECB could decide to freeze the liquidity or cut it off altogether if Greeks vote 'No', or if Athens subsequently defaults on a bond redemption to the ECB on July 20.

There is concern that an inconclusive result might sow further confusion, and possibly lead to violent protests, rather than sending a clear signal about Greek intentions.

"The nightmare result would be 51-49 percent in either direction," a senior German official said. "And the chances of this are not insignificant."

(Additional reporting by Noah Barkin in Berlin and Lefteris Karagiannopoulos; Writing by Deepa Babington; Editing by Alessandra Galloni and Andrew Roche)

source: www.abs-cbnnews.com

Crying Greek pensioner: The story behind the poignant photo

THESSALONIKI, Greece - Retiree Giorgos Chatzifotiadis had queued up at three banks in Greece's second city of Thessaloniki on Friday in the hope of withdrawing a pension on behalf of his wife, but all in vain.

When he was told at the fourth that he could not withdraw his 120 euros ($133), it was all too much and he collapsed in tears.

The 77-year-old told AFP that he had broken down because he "cannot stand to see my country in this distress".

"That's why I feel so beaten, more than for my own personnel problems," Chatzifotiadis said.

The image of him sitting outside the bank, openly crying in despair with his savings book and identity card on the floor, was captured by an AFP photographer illustrating how ordinary Greeks are suffering during the country's debt crisis.

Athens had imposed capital controls and shut all banks since Monday to stem a haemorrhage of cash, but on Wednesday allowed some branches to reopen for three days so retirees who have no bank cards could withdraw their pensions -- capped at 120 euros.

Recounting how he had gone from bank to bank in a futile attempt to collect his wife's pension, Chatzifotiadis said when he was told at the fourth "that I could not get the money, I just collapsed".

Both he and his wife, like many Greeks in the north of the country, had spent several years in Germany where he "worked very hard" in a coal mine and later a foundry.

And it is to Berlin, which is being blamed by many in Greece for its hardline stance in demanding the government impose more austerity measures for fresh international aid, that Chatzifotiadis is sending his wife's pension.

"I see my fellow citizens begging for a few cents to buy bread. I see more and more suicides. I am a sensitive person. I cannot stand to see my country in this situation," he said.

"Europe and Greece have made mistakes. We must find a solution," he added.

But Chatzifotiadis feels he can do little to change the situation, and he is not even sure if he would be able to vote at Sunday's referendum on whether to accept international creditors' bailout conditions.

European leaders have warned that a 'No' vote would also mean no to the eurozone.

Pointing out that the polling station is 80 kilometers (50 miles) away, Chatzifotiadis said: "I have no money to go there, unless perhaps if my children would take me in their car."

source: www.abs-cbnnews.com

Global shares rise as investors hold nerve after Greek default

LONDON - European shares and peripheral euro zone bonds rose on Wednesday and the euro held its own as some investors kept faith with expectations that, despite defaulting on an IMF loan, Greece will find a way to stay inside the currency zone.

While an unwelcome milestone for Athens, the default came as no surprise to markets after weeks of debt-talk brinkmanship, and news that the bloc's finance ministers were to hold another teleconference later, show the drama is far from over.

Stocks in London, Paris and Frankfurt as well as Italy, Spain and Portugal opened 0.6 percent to 0.9 percent higher, while the euro hovered just above $1.1110 versus the dollar.

There was plenty of uncertainty though. The failure to reach a deal kept Greece on course for a referendum at the weekend on whether to accept the euro zone/IMF demands for more swingeing spending cuts.

Arguably the biggest focus of the day was whether the European Central Bank would begin cutting the emergency funding it is providing to Greek banks following the missed payment to the IMF.

"It is very difficult to see how one could conclude that banks that are basically closed because they have no access to cash, operating under a government that has just defaulted to the IMF, could possibly be solvent," said Gary Jenkins, chief credit analyst at LNG Capital.

"So it really becomes a political decision as to whether the ECB sticks to its rules or decides to keep everything as it is."

With the feeling that the ECB would not want to deliver the fatal blow to Greece and investors still harboring hopes of a deal at some stage, Italy, Spain, Portugal and Ireland -- the other high-debt countries that were in the crosshairs of the euro zone crisis a few years ago -- saw their bonds hold firm.

Currency markets were also relatively rangebound.

The U.S. dollar index was up 0.08 percent at 95.568, having bounced from Tuesday's low of 94.847. Against the yen, the dollar stood at 122.57, up from a five-week low of 121.93 plumbed on Tuesday.

CHINA ROLLERCOASTER

There was a flurry of European economic data too.

France's manufacturing sector grew in June for the first time since early 2014 while the equivalent data from Spain and Italy dipped as factory growth remained tepid in the euro zone overall.

Underlining Greece's woes, manufacturing activity there shrank for the 10th month in a row, as export orders and production slumped anew.


"The accelerated contraction in goods production in June ended the worst quarter for the Greek manufacturing sector for two years," said data complier Markit economist Phil Smith.

Asia had been generally calmer overnight after two days of wild swings.

MSCI's broadest index of Asia-Pacific shares outside Japan bounced 0.6 percent. Malaysian shares rallied 1.8 percent after Fitch unexpectedly raised the country's outlook to "stable".

Japan's Nikkei added 0.4 percent, a second day of modest gains as it stabilized after Monday's steep fall.

There was unexpectedly upbeat news from the Bank of Japan's latest survey of manufacturers which improved in the three months to June, supporting the bank's view that growth is gathering momentum.

Chinese shares went on another rollercoaster ride. They had looked like they had recovered from another erratic start before a late plunge left them down 5 percent in their fourth fall in the last five sessions.

Data was mixed from China where surveys showed sluggish factory activity but a pick-up in the service sector, a sign the transition to a more consumer-led economy remained on track.

Beijing's efforts to stem recent market selling are struggling to gain traction. A combination of cuts in interest rates, allowing local government pension funds to buy stocks and talk of behind-the-scenes "window guidance" to institutional investors, has yet to calm a skittish mood.

In commodities, safe-haven gold nudged up while oil fell after bouncing strongly on Tuesday to end the second quarter with hefty gains. Brent was quoted down 55 cents at $62.84 a barrel, while U.S. crude eased 89 cents to $58.57.

source: www.abs-cbnnews.com

Oil prices down as Greece default looms

SINGAPORE - Oil prices extended losses in Asia Tuesday on expectations Greece will miss a key debt repayment later in the day and edge closer to a eurozone exit, analysts said.

US benchmark West Texas Intermediate (WTI) for August delivery fell 23 cents to $58.10 while Brent crude for August eased 15 cents to $61.86 in late-morning trade.

WTI sank $1.30 and Brent lost down $1.25 Monday.

Crude tracked losses in global equity markets Monday after Greek Prime Minister Alexis Tsipras stunned the world at the weekend by breaking off bailout reform talks and calling for a referendum on austerity conditions demanded by its creditors.

The move means Athens is unlikely to agree a deal to unlock bailout funds to repay an IMF debt by the end of Tuesday, putting it in default and in danger of crashing out of the eurozone.

Top European leaders including Germany's Angela Merkel France's Francois Hollande and Italy's Matteo Renzi called on the Greek people to vote for the creditors' proposals, warning a "no" would mean exiting the eurozone.

"This display of volatility comes from the uncertainty with Greece," said Daniel Ang, investment analyst with Phillip Futures in Singapore.

Ang said with the US dollar holding firm due to investors viewing it as a safe haven, oil prices would remain pressured. A stronger greenback makes dollar-priced crude more expensive for buyers using weaker currencies.

Dealers were also waiting to see if Iran and major world powers can reach a deal on curbing Tehran's nuclear program by the end of Tuesday, a deadline set by both sides.

Such an agreement would allow Western powers to remove sanctions, paving the way for more Iranian crude to hit the already oversupplied international market.

US Secretary of State John Kerry warned Monday that "it was too early to make any judgements" on whether the deal will be agreed by the deadline.

source: www.abs-cbnnews.com

Falling yen raises specter of 'currency war' in Asia

SINGAPORE - From South Korea to Indonesia and India, monetary authorities are preparing to let their currencies weaken as a falling Japanese yen makes their economies uncompetitive, and drags them into what some policymakers are calling a "currency war".

The Indonesian rupiah, Malaysian ringgit, Thai baht and other currencies had been sliding gradually against a broadly strong U.S. dollar this year.

They hit fresh lows this week, their sudden declines coming after the yen dropped to a 13-year low on Friday. The region's normally interventionist authorities, however, kept their feet off the brakes.

An adviser to India's finance minister said the country's export growth was flailing not just because of weak global demand but also as a result of the currency-weakening monetary stimulus policies pursued in major economies such as Japan and the euro zone.

"Call it competitive devaluation, currency war or something else, the fact is such policies are having and will have implications for trading partners," the adviser said. "We cannot afford to let our currency become less competitive."

India's rupee has been an outperformer as most other currencies ceded ground to a dollar that has been pushed up by expectations that U.S. interest rates will rise at some point this year.

Indonesia's rupiah is down nearly 8 percent against the dollar so far in 2015, eclipsing a 7 percent decline in Malaysia's ringgit.

While the yen has lost 16 percent in 9 months and the euro has fallen 18 percent since early May 2014, Asian currencies have depreciated far less, making their exports less cheap in international markets.

Theoretically Asian currencies ought to be weaker as, in general, inflation levels in the region are higher than those of major trading partners, most of which are dicing with deflation.

Yet, data from the Bank for International Settlements (BIS) shows China's yuan was 30 percent higher in April in trade and inflation-adjusted terms than in 2010. Korea's won was 15 percent more expensive than in 2010, while the yen was 28 percent weaker.

Korea's exports have fallen every month this year while Chinese exporters have seen both their sales and profits fall.

"There is a risk of currency war where the dollar tends to strengthen, so other countries will be affected," Indonesian central bank Governor Agus Martowardojo told reporters on Monday.

NOT AS BRUTAL AS 1997

There are parallels with 1997 when an extremely weak yen, highly uncompetitive exchange rates and current account deficits culminated in the Asian currency crisis.

"I don't think it is going to get as brutal as that," said Gaurav Saroliya, a macro strategist at London-based Lombard Street Research, listing crucial differences.

Inflation is less of a problem than it was then, making it easier for Asia to cope with weaker currencies. Asian central banks possess far bigger currency reserves. Moreover, the regions' markets are more flexible and foreign investment flows are less volatile than they were in 1997.

Without going anywhere near as far as the massive quantitative easing policies employed in Japan and Europe, authorities in Asia have been subtly nudging their currencies lower.

India's central bank effectively capped the rupee by mopping up investment inflows and building currency reserves.

Thailand eased controls on domestic investors moving cash abroad, while Indonesia loosened its tight grip on rupiah trading.

South Korea is particularly sensitive to the yen's faster depreciation as its exporters compete with Japanese firms in the same markets for cars and electronic goods.

Officials in Seoul told Reuters, however, that they lack the tools to push the won down to the same extent as the yen.

Whereas Asian currencies have undergone a creeping depreciation since 2014, the yen's fall last week could prove to be a trigger for Asia's currencies to weaken further.

"A lot of these countries are facing a double whammy of poor exports because of a very uncompetitive exchange rate, thanks to Japan and years of portfolio inflows during the QE environment, and also poor household demand," said Saroliya.

"It is overall a major headwind. So they will be forced into choosing a weaker exchange rate through monetary easing or non standard measures."

source: www.abs-cbnnews.com

PSEi up for 8th day

MANILA, Philippines - The Philippine Stock Exchange index (PSEi) is up for an 8th straight day, with property companies leading the rally.

The PSEi gained 0.11 percent to close at 7,834.86, a fresh all-time high.

SM Prime Holdings, which reported strong 2014 earnings on Monday, was the day's biggest gainer, rising as much as 3 percent.

Other advancers include Ayala Land, Megaworld and Century Properties.

CBRE Philippines said it expects the property sector to continue its strong growth, driven by the hospitality, gaming and retail industries.

At the foreign exchange market, the peso weakened to P44.33 against the US dollar.

Meanwhile, Southeast Asian stock markets traded stronger on Tuesday, although gains were capped as investors looked to Federal Reserve Chair Janet Yellen's statement later in the day for signs of when the U.S. central bank would raise interest rates.

The Thai SET index was up 0.5 percent by midday, led by a 1.8 percent gain in the country's top oil firm, PTT.

Yellen will deliver the central bank's semi-annual Monetary Policy Report to the Senate Banking Committee later in the day, in the first of two days of testimony to Congress on the state of the economy. And there is much uncertainty over whether she will echo the dovish tone of the minutes from the Fed's last meeting, or reaffirm June as a window for a first rate hike.

"Market traders continue to be cautious in the wake of 'unsettled issues' in Greece, but were also optimistic that China may lead the way with further market easing news," Singapore-based NetResearch Asia said in an investor note.

Euro zone ministers late on Friday agreed to extend Greece's financial rescue package by four months, a shorter extension than the six months the country had sought. But concerns over Greece's willingness for required reforms weighed on sentiment.

Singapore was up 0.3 percent, Malaysia traded 0.4 percent firmer, and Vietnam, which resumed trading after long holidays, gained 1 percent.

In Kuala Lumpur, energy shipping company MISC Bhd jumped 5.4 pct to its highest since July 2011 after it entered into an agreement with controlling shareholder Petroliam Nasional Bhd and South Korean shipbuilder Hyundai Heavy Industries Co Ltd, to build five liquefied natural gas carriers. - With reports from ANC and Reuters

source: www.abs-cbnnews.com

3 questions you may be asking about a possible 'Grexit'

ATHENS - The arduous negotiations between the EU and Greece over a temporary loan to resolve Athens' bailout crisis has reawakened fears of a "Grexit", or Greek exit from the single currency bloc.

Here are in three questions some of the issues at stake:

1. Could Greece really exit the eurozone?

The European Commission insists that a country cannot leave the common currency, because there is no provision for it in the EU's treaties. So once you're in, you're in.

"Even if there is no clause" permitting a country to quit the eurozone, "it is still possible to find a legal construct" which would allow it, according to Janis Emmanouilidis, from the European Policy Centre.

Leaving the euro might have to be tied to an exit from the European Union.

If Athens fails to fulfil its bailout obligations, the eurozone and European Central Bank (ECB) have the means to push the country out by putting the squeeze on its lenders and forcing it to introduce a parallel currency.

That drastic measure is not on the cards for now, with the ECB Wednesday extending and increasing for two weeks the amount of emergency liquidity available to Greek banks.

The Jacques Delors institute in Berlin has warned of two other possible scenarios, in the first of which Greece introduces a parallel currency to enable it to fulfil its pledges to end austerity and ease the burden on the poor.

But most Greeks are in favour of sticking with the euro and the radical left ruling party Syriza has never hinted it would contemplate such a dramatic move.

In the second scenario, Greece exits the euro "by accident", because a failure to reach a deal or even just a pause in negotiations sparks a sudden bank run, forcing the Greek government to introduce a parallel currency.

Greece's Finance Minister Yanis Varoufakis has said the eurozone is like the Hotel California of the Eagles song, somewhere you can never leave.

2. Consequences for Greece?

Athens would default on its debt and would no longer have access to the financial markets.

The country, heavily dependent on imports which would soar in price, would find itself at the mercy of "vulture funds", or be forced to ask China or Russia for help, a move which would have unprecedented geopolitical consequences.

But the Greek economy could profit from the expected rapid depreciation of its chosen new currency, as well as boosting exports and tourism.

Former French president Valery Giscard d'Estaing has said Greece cannot get back on its feet while in the eurozone because of the strength of the euro -- and has called for it to leave on its own in a "friendly exit".

3. Consequences for the eurozone?
Numerous analysts believe a Grexit would be less damaging to the eurozone than if Athens had crashed out at the height of the debt crisis in 2012, because since then safety nets such as the European Stability Mechanism have been put in place.

Standard & Poor's ratings agency said Thursday that a Grexit "would not lead to a degree of direct contagion that would drive other sovereigns out of the euro".

It also believes "the financial burden of a Grexit on the remaining 18 eurozone sovereigns would be moderate and absorbed over decades."

But an exit would still be very costly for those countries holding Greek debt, and a domino effect cannot be ruled out, according to experts such as US economist Barry Eichengreen.

"When a Portuguese family or Spanish businessman sees that euros have been converted into drachmas, they will take their cash out of their accounts. That could lead to a run on the banks," he told Germany's Die Welt daily.

Matthieu Pigasse, CEO of investment bankers Lazard -- who are advising the Greek government in their talks -- says the exit of any country, however small, from the eurozone would mean the end of the common currency.

source: www.abs-cbnnews.com