Asian shares gain, dollar firm on Fed outlook

TOKYO -- Asian shares gained on Wednesday, taking cues from sharp gains in European and U.S. financial shares while the dollar was underpinned as investors count on the U.S. Federal Reserve to hike U.S. interest rates in coming months.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4 percent while Japan's Nikkei jumped 1.7 percent.

U.S. new home sales data out on Tuesday showed a jump in April to their strongest monthly pace in more than eight years, with prices setting record highs.

Coming after a raft of positive U.S. data and comments from various Fed officials explicitly highlighting a chance of a Fed rate hike in June or July, the data helped to cement the case for a rate hike in coming months.

The yield on policy-sensitive two-year U.S. notes rose to a 10-week high of 0.930 percent. U.S. interest rate futures are pricing in more than 60 percent chance of a rate hike by July, compared to around 20 percent about 10 days ago.

"There appears to be a consensus among Fed policymakers that they have to put a rate hike back on the table because markets had been pricing in almost no chance of a rate hike," said Koichi Yoshikawa, executive director of financial markets at Standard Chartered Bank.

Higher interest rates benefit financial shares as they increase interest income, helping to lift bank shares.

On Wall Street, S&P 500 Index rose 1.4 percent, helped by high-tech and bank shares.

European shares gained sharply overnight, led by financial shares, with the pan-European stock index rising 2.3 percent to its highest level since late April.

The news flows in Europe were generally positive for investor sentiment.

A UK poll showed a 13-point lead in support among Britons to stay in the European Union over their "Leave" rivals while Greek bond yields hit six-month lows as European finance ministers appeared likely to approve new loans to Athens.

In a major breakthrough, euro zone finance ministers also agreed a deal with Greece and the International Monetary Fund in the early hours of Wednesday that will address Athens's requests for debt relief.

The "Brexit" poll results helped the British pound gain 1.1 percent, its biggest daily gain in 10 weeks, on Tuesday.

The sterling traded at $1.4622, near last week's peak of $1.4663, a break of which could open the way for a test of $1.4770, its four-month peak hit in early May.

In another clear sign of easing concerns on the "Brexit", implied volatilities on sterling options also fell to lowest level in almost a month.

The U.S. dollar held firm against most other currencies thanks to expectations of a rate hike by the Fed.

The dollar strengthened to 110.09 yen from this week's low of 109.12, within sight of testing its three-week high of 110.59 touched on Friday.

The euro dropped to a 10-week low of $1.1133, shedding more than 4 percent since it hit an eight-month peak of $1.1616 in early May, showing little reaction to the news on agreement on debt relief for Greece.

The Australian dollar slipped to a 12-week low of $0.7145 on Tuesday and last stood at $0.7190 as it is pressured by expectations of a rate cut by the Reserve Bank of Australia.

Gold also hit a six-week low of $1,226.50 per ounce on Tuesday and last stood at $1,227.60.

Many emerging market currencies felt the dollar's heat but the Turkish lira jumped 1.6 percent off near four-month lows after investor-friendly deputy prime minister Mehmet Simsek kept his post in the government.

Oil prices held firm, helped by a rise in overall risk appetite and expectations of a drawdown in U.S. crude inventories.

U.S. crude futures hit a 7 1/2-month high of $49.29 per barrel in early Asian trade.

Brent crude futures rose to $49.14 per barrel, near last week's 6-month high of $49.85.

source: www.abs-cbnnews.com

Expert reveals biggest concerns of world's top CEOs

Marios Maratheftis, the Global Chief Economist of Standard Chartered Bank, is the person sought by top-level CEOs for advice on big industrial leaps.

Nowadays, he says, three of the biggest concerns for them are the Fed’s interest rate hikes, the deceleration of the Chinese economy, and the big drop of oil prices.

The 25 basis points that the U.S. Federal Reserve has hiked may seem a small movement, but Maratheftis notes that after nine and a half years of cutting rates, the first hike in December 2015 indicates that there's more to come.

“It signals a change in the regime and in the world order. And it has been significant. We’ve seen a lot of currencies, especially in emerging markets, moving quite rapidly in anticipation of a hike,” he tells Cathy Yang on The Boss.

He also says the U.S. economy will probably slow down this year and could see a shallow, short-term recession in 2017.

He predicts, however, that after one more hike this month, the Fed’s next move will be a cut. While this decline is always a bad thing, the interest cuts mean more capital flow into emerging markets.

The second biggest economy in the world has also seen a slowdown the previous year. The Chinese economy, however, is slowing down by design, with their policy-makers opting to shift their economic model from manufacturing and construction to a more sustainable model of services and construction.

Maratheftis says it is inevitable that there will be a slowdown, but the market’s reaction to it is much ado about nothing.

“The Chinese have the tools to maintain growth of up to 7%. They can cut interest rates, they can cut their reserve requirement ratio if they want to, and they can use fiscal policy and spend more in their economy. They’ve implemented these measures already.”

Problems in the petroleum industry, Maratheftis maintains, is rooted on the huge drop in prices over very little surplus in oil. With only a million barrels in excess per day, the supply can deplete quickly.

Standard Chartered estimates the price of oil to rise from $30 per barrel to $60-$70 per barrel should this continue. He adds that “the question isn’t the demand, because people are still buying; but are there going to be enough sellers or suppliers to satisfy that demand? Our answer is no.”

Considering all of the aforementioned, his recommendation to the captains of industry for years 2016 and 2017 is to "retreat, regroup, rebound."

Although financial markets are in the retreat phase, the fundamentals indicate, according to Maratheftis, that the current situation is not as bad as the markets have expected.

source: www.abs-cbnnews.com

Standard Chartered to cut 4,000 retail bank jobs

HONG KONG - Standard Chartered will axe around 4,000 jobs worldwide at its retail banking division, according to an internal memo reviewed by Reuters on Thursday, in a push to achieve the cost cuts that chief executive Peter Sands hopes will return the bank to past glory.

The memo said 2000 of the cuts have already been made or announced, with 2000 more to come.

The memo also confirmed a Reuters report on Thursday that the bank is exiting its global equities business, seen as non-core and underperforming.

The cost cuts in the retail banking segment will deliver cost savings of around $200 million in 2015, half of the total savings identified by Sands as essential to turn the bank around.

The exit from the equities business will generate $100 million of savings next year, the memo also said.

source: www.abs-cbnnews.com

Deutsche, Stanchart mandated for $650-M San Miguel bridge loan

HONG KONG (Basis Point) - Deutsche Bank and Standard Chartered Bank have been mandated by San Miguel Corp for a one-year bridge loan which funds the takeout of an outstanding $600 million in exchangeable notes due in 2014, according to sources.

The loan size is $650 million and is fully underwritten by the banks, said a source familiar with the matter.

The deal has an opening margin of 165bp over Libor, stepping up to 200bp over Libor after six months, according to sources.

San Miguel launched on Jan. 24 the tender offer for redemption of the 2014 notes. The notes, issued in 2011, are listed on the Singapore stock exchange.

The tender offer closes on Tuesday.

source: abs-cbnnews.com