global economic


S.Korea downgrades this year’s growth target to 2-2.1%

SEOUL: South Korea’s finance minister said economic growth this year is expected to be around 2.0-2.1%, in line with projections by key international organisations but missing the ministry’s target set in early July.

“I think this year’s economic growth will be around the level of forecasts seen by the International Monetary Fund (IMF) and Organisation for Economic Cooperation and Development (OECD),” Finance Minister Hong Nam-ki told reporters on Friday at a media briefing on the sidelines of G20 meeting in Washington.

In its regular update on the global economic outlook released late on Tuesday, the International Monetary Fund slashed South Korea’s 2019 and 2020 economic growth forecasts by 0.6 of a percentage point each to 2.0% and 2.2%, respectively.

The OECD in mid-September also trimmed the nation’s growth estimate to 2.1% and 2.3% for this year and next year due to a slowdown in global trade and cooling demand from China.

South Korea’s finance ministry said in its mid-year update of economic forecasts in early July that it aims to achieve growth between 2.4% and 2.5% this year, slower than the 2.6-2.7% range projected in its previous forecast in December last year.

South Korea’s central bank cut its policy interest rate on Wednesday for the second time in three months to lift the faltering economy, hit by cooling global demand and the prolonged U.S.-China tariff war.

The Bank of Korea said it expects the economy to grow less than its July projection of 2.2%, “owing chiefly to the continued U.S.-China trade dispute and heightened geopolitical risks.”

The economy grew 1.9% year-on-year in the first half of this year, and full year growth in 2018 was 2.7%. The central bank is scheduled to release third quarter gross domestic product estimates on Thursday. – Reuters

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China’s Q3 GDP growth slows to 6%, slowest in 27 years

BEIJING: China’s economy expanded at its slowest rate in nearly three decades in the third quarter, hit by cooling domestic demand and a protracted US trade war, official data showed Friday.

The Chinese economy grew 6.0 percent in July-September, compared with 6.2 percent in the second quarter, according to the National Bureau of Statistics (NBS).

The reading — in line with an AFP survey of 13 analysts — is the worst quarterly figure since 1992 but within the government’s target range of 6.0-6.5 percent for the whole year. The economy grew at 6.6 percent in 2018.

“The national economy maintained overall stability in the first three quarters,” said NBS spokesman Mao Shengyong.

“However, we must be aware that given the complicated and severe economic conditions both at home and abroad, the slowing global economic growth, and increasing external instabilities and uncertainties, the economy is under mounting downward pressure.”

Services and high-tech manufacturing were the key areas of growth, while employment was “generally stable”, he added.

Propping up economy

Beijing has stepped up support for the economy with major tax and rate cuts and has scrapped foreign investment restrictions in its stock market.

In its latest measure to shore up growth, the central bank said Wednesday it was pumping 200 billion yuan ($28 billion) into the financial system through its medium-term lending facility to banks, which is designed to maintain liquidity in the market.

But the efforts have not been enough to offset the blow from softening demand at home.

The trade conflict and weak domestic demand prompted the International Monetary Fund to lower its 2019 growth forecast for China from 6.2 percent to 6.1 percent on Tuesday.

The long-running trade war with the US has also chipped away at the Chinese economy.

This week, China reported weaker-than-expected import and export figures for September after Washington imposed new tariffs that month, triggering a tit-for-tat response from Beijing.

There were mixed signals for the economy in September.

Industrial output rose 5.8 percent, from 4.4 percent in August, led by a surge in demand for solar panels and electric vehicles, according to the NBS.

But fixed-asset investment slid to 5.4 percent on-year in January-September, from 5.5 percent in January-August, as the government warned against risky borrowing to build roads and bridges that could artificially pump up GDP in the short run.

China’s army of consumers were slowly starting to open their wallets again, with retail sales edging up 7.8 percent on-year in September, compared with 7.5 percent in August.

Let’s make a deal

A “phase one” deal announced by US President Donald Trump last Friday after he met China’s top negotiator Liu He in Washington offers a temporary reprieve from further tariff hikes.

But it did not roll back any of the stinging tariffs already imposed on hundreds of billions of dollars in trade between the economic powers, nor did it address another round of import taxes planned for December.

“A limited agreement will not resolve the underlying areas of disagreement between the two sides as long-term divergence in US and China national interest remains across trade, technology, investment and geopolitics,” said Michael Taylor, a managing director for Moody’s Investors Service.

“We expect further rounds of negotiation to remain challenging, with further potential for financial markets volatility.”

China’s commerce ministry spokesman Gao Feng said Thursday that its negotiators have “accelerated efforts” to hammer out the details of this mini-deal, and the two sides were aiming for an “early agreement”.

Trump had said Wednesday that he hopes to sign the deal with his Chinese counterpart President Xi Jinping at the APEC summit in Chile next month.

But Gao declined to offer details on whether the text of the partial deal, or a full agreement, would be ready before the mid-November deadline. – AFP

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Asian shares pause after 5-day rally, Brexit in focus

TOKYO/SYDNEY: Asian stocks barely moved on Thursday as soft U.S. retail sales data raised fears about the health of the world’s largest economy, sucking the steam out of a five-session rally, while hopes of a Brexit deal kept sterling volatile.

South Korean, Australian and New Zealand indexes were all in negative territory. Chinese shares were mostly flat while Japan’s Nikkei ticked up and U.S. stock futures were barely changed.

That left MSCI’s broadest index of Asia-Pacific shares outside Japan slightly higher with gains largely led by Hong Kong’s Hang Seng index.

The S&P 500 shed 0.20% on Wednesday after data showed U.S. retail sales contracted in September for the first time in seven months, in a potential sign that manufacturing-led weakness could be spreading to the broader economy.

“It looks like the trade war has claimed yet another victim, in addition to diminished business confidence and reduced investment spending, as consumers are starting to chicken out,“ said Chris Rupkey, chief financial economist at MUFG Union Bank.

Given U.S. consumption has been one of few remaining bright spots in the global economy, the data fanned worries the Sino-U.S. trade war would tip the world into recession.

U.S. Treasury Secretary Steven Mnuchin said on Wednesday that U.S. and Chinese trade negotiators were working on nailing down a Phase 1 trade deal text for their presidents to sign next month.

But he also said there were no plans for another high-level meeting on the trade deal outlined last week.

“While the U.S. suspended a hike in tariffs, it hasn’t gone as far as scrapping the tariffs altogether, so it is hard to expect a quick pick-up in the economy,“ said Yoshinori Shigemi, global market strategist at JPMorgan Asset Management.

Not for the faint-hearted

Losses in equities were somewhat offset by a solid start to the earnings season, though that is partly because investors have already marked down their expectations substantially. Earnings for S&P 500 companies are forecast to show a decline of 3% for the quarter, according to Refinitiv data.

Bank of America shares rose 2.0% following its quarterly results. Netflix rose 9.9% in after-hours trade after its earnings beat Wall Street estimates.

In the currency market, soft U.S. retail sales took the shine out of the dollar.

The dollar index was last at 98.005, having touched its lowest since Aug. 27 on Wednesday.

Against the yen, it was a flat at 108.73 after peaking at 108.90 on Tuesday.

The euro stood at $1.1074, near a one-month high of $1.1085 hit in U.S. trade on Wednesday.

Sterling traded at $1.2821, having risen to as high as $1.2877 on Wednesday, its loftiest since mid-May.

The pound has risen more than 5% in the past five sessions on hopes the United Kingdom and the European Union can strike a fresh deal in an EU leaders’ summit on Thursday and Friday.

Investors have welcomed optimistic comments from key officials in the last few days. British culture minister Nicky Morgan said late on Wednesday there is a good chance of a deal.

Still, many doubts remained, not the least of which is if British Prime Minister Boris Johnson can ensure his government and factious parliament approve the plan.

“Trading the British pound intra-day at the moment is not for the faint-hearted with deep pockets required,“ said Jeffrey Halley, senior market analyst at OANDA.

“The street clearly wants to take GBP higher on any Brexit hope, but traders should be aware that the pullback will be equally as ugly if progress stalls or collapses yet again.”

In commodities, oil prices slipped after industry data showed a larger-than-expected build-up in U.S. crude stocks, adding to concerns that demand for oil around the world may weaken amid further signs of a global economic slowdown.

Brent crude futures fell 0.47% to $59.14 a barrel while U.S. West Texas Intermediate (WTI) crude lost 0.7% to $52.98.

Spot gold was slightly weaker at $1,488.31 an ounce. -Reuters

Australia shares extend rally for 5th day cheered by Wall St

Australian shares rose on Wednesday, boosted by a solid start to the U.S. earnings season and reports that Britain still has a chance of avoiding a messy exit from the European Union.

The S&P/ASX 200 index notched up 0.9%, or 55.6 points, to 6,707.6 by 0123 GMT, poised for a fifth day of gains, after having added 1.6% in the last four sessions combined.

A string of strong third-quarter earnings reports helped dispel some concerns over a global economic downturn and pushed Wall Street up 1%, while news of a possible breakthrough in Brexit negotiations also aided investor confidence.

“A lot of these moves are predominantly short covering as the market was worried about this month,” said Mathan Somasundaram, market portfolio strategist at Blue Ocean Equities.

Markets have long been gripped by worries of escalation in the bruising U.S.-China trade war, but recent news of the “Phase 1” trade deal between Washington and Beijing had helped dial back risk ante even though nothing was agreed on paper.

“It will be short lived in my opinion…it’s a suckers rally,” said Brad Smoling, managing director at Smoling Stockbroking.

Australian bank stocks, the heaviest components on the benchmark, climbed as much as 1.3% and were set for their best session since end-August.

The “Big Four” banks advanced between 1% and 1.5%.

Energy firms gained more than 1%, lifted by improving oil prices, with the country’s biggest oil and gas producer Woodside Petroleum Ltd tacking on as much as 1%.

Industrial engineering company WorleyParsons moved up as much as 3.7% after it informed the foreign investments regulator of “creeping acquisitions” by its biggest shareholder, Dubai-based Dar Group.

Higher third quarter output from Brazilian miner Vale SA pressured China iron ore prices and sent the domestic mining sub-index down as much as 0.4%.

The world’s biggest miner, BHP Group Ltd, gave up 0.3%. Smaller peer Rio Tinto lost as much as 0.4% despite reporting a 5% rise in third-quarter iron ore shipments, helped by higher demand from Chinese steelmakers.

Gold miners fell as much as 2.8% to their weakest in 15 weeks, set for a fifth session of losses on diminished risk aversion.

Newcrest Mining declined as much as 2.5% to a more than two-month low.

The New Zealand benchmark rose 0.8% to 11,133.55, marking its fourth straight session of gains. Restaurant Brands New Zealand was the top gainer after upbeat guidance.

New Zealand’s inflation accelerated at a slightly faster-than-expected pace in the third quarter, but it did little to change the view that interest rates would be cut further this year to bolster the economy. -Reuters