Category: Economy

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Economy

Italian sovereign, banks CDS jump on coronavirus threat

LONDON, Feb 26 (Reuters) – The cost of insuring exposure to debt issued by Italy’s government and some of its lenders rose on Wednesday on fears over the economic toll the coronavirus spread could take on the country’s economy.

Five-year credit default swaps (CDS) on Italy’s sovereign debt added 2 basis points (bps) from Tuesday’s close to 116 bps, the highest level in four weeks, according to data from IHS Markit.

Two of the country’s banks, UniCredit and Intesa Sanpaolo , both saw their CDS rise by 4 bps to 78 bps, trading at their highest since mid-January and late January respectively. (Reporting by Karin Strohecker; Editing by Dhara Ranasinghe)

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Economy

UPDATE 2-CIBC profit beats on capital markets strength, takes C$339 mln severance charge

(Adds details throughout)

By C Nivedita and Nichola Saminather

Feb 26 (Reuters) – Canadian Imperial Bank of Commerce reported better-than-expected quarterly profit on Wednesday, becoming the latest domestic bank to exceed estimates thanks to a boost from its capital markets business.

Canada’s fifth-largest lender also recorded an employee severance charge of C$339 million ($255.16 million), related to its drive to cut costs and become more efficient.

CIBC is the fourth of Canada’s six biggest lenders to have reported better earnings than expected for the three months ended Jan. 31, after posting the worst profit growth since the financial crisis last year, as trading and advisory revenues grew strongly.

It also benefitted from a nearly 23% decline in loan-loss provisions, contributed largely by a drop in provisions in its capital markets unit, where net income surged 63%.

Excluding items, the bank earned C$3.24 per share, beating analyst expectations for C$3.00 per share. Still, net income of C$2.63 a share, which included the impact of the restructuring charge, missed estimates based on Refinitiv IBES data.

Chief Executive Officer Victor Dodig flagged layoffs late last month and told staff that CIBC needs to challenge itself to be “a more efficient bank by focusing on continuous improvement and keeping a careful eye on costs.”

The Globe and Mail newspaper reported last week that the bank would cut about 2,000 jobs. CIBC did not say on Wednesday how many jobs would be eliminated.

Even so, growth in CIBC’s non-interest expenses outpaced its increase in revenue, and its adjusted efficiency ratio also rose from a year earlier. Its workforce grew 3% from a year earlier.

The bank announced a raft of senior executive changes, including a new head of personal and business banking and a new chief risk officer.

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Singapore economy seen shrinking 0.6% in Q1 from coronavirus: Reuters poll

(REUTERS) – The effects of the coronavirus outbreak are likely to reverberate beyond China as most major economies in the region are expected to either slow down significantly, halt or shrink outright in the current quarter, Reuters polls of economists found.

Singapore is forecast to be the worst affected from the fallout, with growth dropping by more than 1 percentage point for 2020. The least impact would be on Indonesia, which is expected to grow 4.7 per cent this year.

A port city and a major trade partner with China, Singapore is expected to contract 0.6 per cent in the January to March quarter of this year, a first since the 2009 recession after the global financial crisis.

Many Asian economies, which were just limping back to growth from the spillover effects of the 18-month long US-China trade dispute, were again dealt a blow by the outbreak, which has shut down businesses and cities.

With the Covid-19 contagion interrupting global supply chains that most countries depend on for trade and commerce, economic activity is likely to slow, but at varying degrees.

Forecasts from economists collected Feb 19-25 showed that Singapore, Australia, South Korea, Taiwan and Thailand are all expected to put in their worst performance in years in the first quarter. Only Indonesia was expected to remain relatively unscathed.

“The impact of the coronavirus on economies in Asia is potentially huge, as tourism in the region takes a beating. From deserted hotels to empty airports, the impact of this little scrap of protein and lipid on economies in the region is potentially enormous,” said Robert Carnell, chief economist and head of research for Asia-Pacific at ING in Singapore.

“If this doesn’t sound sufficiently scary, bear in mind that tourism is just one of the channels through which the coronavirus can weaken the GDP growth of Asian countries grappling with this epidemic.”

A similar Reuters poll published a little over a week ago found the Chinese economy will grow at its slowest pace in the current quarter since the financial crisis, with a worst-case scenario showing it at 3.5 per cent, nearly half of the 6.0 per cent reported in the fourth quarter of 2019.

“The base case is rapidly shifting from ‘Bad’, meaning only China is impacted, to ‘Ugly’, where both emerging Asia and developed economies see soaring infection rates and deaths,” said Michael Every, head of financial markets research for Asia-Pacific at Rabobank in Hong Kong.

“Its effects will likely resemble the global financial crisis of 2008-2009 more than the Sars outbreak in 2003,” he said, referring to the economic impact.

That fear in financial markets was clear on Monday, when world stocks took a nosedive to a two-year low as a surge in virus infections outside mainland China fuelled fears of a global pandemic.

Proximity to the region’s economic powerhouse and trade relations mean any impact from a slowdown in the world’s second-largest economy is likely to be felt across the region.

While a bounce back in the next quarter is expected for most major Asian economies polled, growth for this year is likely to be lower than predicted just last month, suggesting some activity would be permanently lost.

More than three-quarters of economists, 57 of 77, who answered an additional question also expect growth across these other Asian economies to pick up in the second quarter.

While South Korea was the hardest hit by the virus outside of China, its impact on the economy so far seems modest, according to forecasters who expect it to grow 2.1 per cent in the first quarter, down only 0.4 percentage point from a January Reuters poll.

Thailand’s and Taiwan’s economies are forecast to expand at a paltry 0.2 per cent and 1.3 per cent in the current quarter, the lowest in nearly half a decade.

Australia’s economy, a proxy for Chinese economic growth, is forecast to grind to a halt in the current quarter, ending the country’s near three-decade growth streak which started in 1991.

“This (the virus outbreak) can be hurtful to growth in several countries beyond just the negative spillovers from China. A sharp rise in infections reported by several countries raises concerns of a deeper hit to these countries and also global growth,” said Johanna Chua, emerging markets Asia economist at Citi in Hong Kong.

But if the grim outlook doesn’t improve, under a worst-case scenario, economists expect growth in all countries polled to drop further by 0.5 percentage point to one full percentage point.

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Coronavirus travel: national advice not all of a piece

LONDON (Reuters) – Should travelers avoid parts of the world near coronavirus hotspots? Or go – but then tread carefully? The official advice they receive may depend on whether they live in Amsterdam, Helsinki, Madrid or Lagos.

    As the new coronavirus spreads from China, travel guidelines being issued by governments across the world all express notes of growing caution. But they contain subtle differences on where to avoid, how to behave and what to do after a trip.

With few exceptions, the prevailing advice of national authorities is to avoid Hubei province – epicenter of an outbreak that has now infected 80,000 people worldwide – and to reduce Chinese travel to the bare minimum.

    Once inside China, Swiss travelers for example are urged by their government to avoid large gatherings and “cough or sneeze into a tissue, or use the crook of your arm”. France tells its nationals not to eat raw meat or visit animal markets.

    The Spanish Foreign Ministry also urges against contact with animals in China and suggests making sure that you stay at least one meter away from the next person.

    For travelers to Italy – the country most badly hit by the virus in Europe – the Dutch government recommends that its citizens avoid areas already locked down by local authorities and only travel to parts of the wider Lombardy region around the closed-off towns if necessary. The Finnish Foreign Ministry advice on Italy is simply to “take special care”.

    Differences also emerge in the advice to travelers on their return from an affected area.

Germany’s main authority for infectious diseases tells those returning with symptoms from outbreak regions in Italy to see a doctor and call prior to their visit. But France asks such people not to visit the doctor but to call emergency services.

    Britain urges its nationals to “self-isolate” at home if they have been to the areas quarantined by Italy whether or not they have symptoms. The Danish Health Authority currently stipulates no routine quarantine or isolation of people who have traveled to China or other places hit by the outbreak.

    Countries outside Europe take different stances. Turkey advises against all but essential travel to China but has not yet issued travel advice on Italy.

Nigeria has a voluntary two-week self-quarantine in place for all passengers arriving from China or any country with “a major outbreak”. Guidance for returning air passengers says “try to avoid” going out but wear a mask if you do.

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Eastern Chinese city quarantines arrivals from Japan, South Korea for coronavirus

BEIJING (Reuters) – The eastern Chinese city of Weihai said it would quarantine people arriving from Japan and South Korea from Tuesday, as a spike in cases of the novel coronavirus in neighboring countries adds to the threat facing China.

The move marks the first country-specific compulsory quarantine requirement for arrivals from overseas in China, which has criticized travel restrictions implemented by other countries.

Weihai, home to a sizeable Korean expatriate community, is near the eastern tip of the Shandong peninsula across the Yellow Sea from South Korea.

The rules apply both to Chinese and foreign nationals arriving in the city.

They will be put up in hotels free of charge for the duration of a 14-day quarantine period, according to a notice on the city’s official Wechat account.

The capital, Beijing, earlier this month told residents returning from extended Lunar New Year holidays to self-quarantine to stop the virus spreading.

Central China’s Hubei province, where more than 2,500 people have died, is the epicenter of the outbreak, but South Korea has now reported 10 deaths and almost 1,000 infections.

Japan has 159 confirmed cases, not including 691 on a cruise ship that was quarantined near Tokyo.

People who arrived in the city from South Korea or Japan from Feb. 10 onwards have already been contacted by the Weihai government, the statement said, adding it had “appropriately handled” cases of fever.

The government of a second Shandong port city, Yantai, on Tuesday decided that all business travelers and short-term visitors to the city should stay in designated hotels, it said in a statement.

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CORRECTED-UPDATE 1-Lebanon to appoint Cleary Gottlieb to advise on Eurobonds-source

(Corrects name of Global Sovereign Advisory in paragraph 6)

BEIRUT, Feb 24 (Reuters) – Lebanon will appoint Cleary Gottlieb Steen & Hamilton LLP as legal adviser on its Eurobonds, a source close to the government said on Monday, as investors and ratings agencies expect the heavily indebted state to restructure its debt.

Officials are in the last phase of deciding on the firm that will separately be appointed financial adviser, the source said.

Lebanon is grappling with a choking financial crisis. A foreign currency liquidity crunch has forced banks to impose tight restrictions on access to hard currency and transfers abroad and the Lebanese pound has slumped.

One of Lebanon’s most influential leaders, Parliament Speaker Nabih Berri, said last week that debt restructuring was the best solution for looming Eurobond maturities, which include a $1.2 billion Eurobond due on March 9.

The finance ministry said on Friday it had issued requests for proposals to 12 firms to provide it with financial advice on a potential debt restructuring.

It listed the firms as Lazard, Rothschild & Co , Guggenheim Partners, Houlihan Lokey, Citibank JP Morgan, PJT Partners, Newstate Partners, Standard Chartered, Global Sovereign Advisory, Deutsche Bank, and White Oak.

S&P last week lowered Lebanon’s sovereign rating on the expected debt restructuring. Moody’s also downgraded Lebanon, saying the rating reflected expectations that private creditors would likely incur substantial losses in any debt restructuring.

Fitch also said Lebanon’s financing position points to debt restructuring. (Reporting by Samia Nakhoul; Writing by Tom Perry; Editing by Alison Williams and Andrew Heavens)

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EMERGING MARKETS-Latam stocks, FX caught in coronavirus-fueled rout

    * Mexican peso touches lowest level in 11 weeks
    * Slide in oil prices hits Colombian peso 
    * Brazil, Argentina shut for carnival festival 

 (Updates prices, adds comments)
    By Susan Mathew and Shreyashi Sanyal
    Feb 24 (Reuters) - Latin American currencies and stocks were
caught in a global sell-off on Monday as investors steered clear
of risky bets after a jump in the number of coronavirus cases
outside China exacerbated global growth worries. 
    Fears of a pandemic rose after Italy, South Korea and Iran
reported a sharp rise in the number of new infections and
deaths, while other Middle Eastern countries also reported new
cases.
    "The spread of the virus outside of China... combined with
continued heavy restrictions within China, challenges the
assumption that the outbreak will blow over with only limited
damage to the global economy," said Jonas Goltermann, senior
economist at Capital Economics. 
    With markets in Brazil and Argentina closed for local
holidays until Tuesday, MSCI's index of Latam currencies
 fell 0.3%, while its stocks counterpart
 slipped 1.2%, on course for its third straight
session of losses.
    Mexico's peso slipped 0.8%, touching an 11-week low
early in the session, set for its a third straight session of
declines. Mexican stocks fell 2.5% to their lowest in almost two
months.   
    Mexican consumer price inflation came in slightly below
forecasts in the first half of February but remained above the
central bank's target rate, data showed on Monday.
    Markets had reflected intermittent sparks of optimism over
the last two weeks on hopes that the coronavirus outbreak might
pass over by April, with falling numbers of new cases in China
lending weight to that assessment. 
    But fears have increased that the virus will continue to
spread, leading to more travel curbs and suspended activity at
factories and retail outlets, causing a broader hit to global
supply and demand. 
    "The market is still looking at the base-case of a V-Shape -
a steep slump and a sharp recovery. But the fact is that people
still don't have a handle on how bad this can get," said Win
Thin, head of emerging market currency strategy at Brown
Brothers Harriman.     
    A nearly 4% slide in oil prices knocked Colombia's peso
lower, putting it on track for its steepest one-day drop
since November.
    The International Monetary Fund on Friday trimmed Colombia's
growth estimate for the year, saying the country needs a more
durable fiscal adjustment to meet its financial targets. It 
added that the central bank should increase reserves to protect
against external shocks.
    Chile's currency gave up 1% as prices of copper fell
on the London Metals Exchange.
    Santiago-listed stocks slumped 2% to their lowest
in more than three months.  
    
    Key Latin American stock indexes and currencies at 1943 GMT:
    
   Stock indexes           Latest    Daily %
                                      change
 MSCI Emerging Markets    1055.40         -2.66
                                   
 MSCI LatAm               2674.52          -1.2
                                   
 Mexico IPC               43695.6         -2.47
                                5  
 Chile IPSA               4430.63         -2.25
                                   
 Colombia COLCAP          1609.56         -1.34
                                   
                                               
       Currencies          Latest    Daily %
                                      change
 Mexico peso              19.0587         -0.86
                                   
 Chile peso                 808.1         -0.72
                                   
 Colombia peso             3433.5         -1.62
 Peru sol                   3.404         -0.56
                                   
 
    

 (Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru;
Editing by Dan Grebler)

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UPDATE 2-Closed museums, mask buying spree amid S.Korean surge in coronavirus

(Adds official comment, events cancelled, mask buying spree)

By Hyonhee Shin

SEOUL, Feb 24 (Reuters) – South Korea reported 161 new cases of the coronavirus, bringing the total number of infected patients in the country to 763, health authorities said on Monday, a day after the government raised its infectious disease alert to its highest level.

Of the new cases, 115 were linked to a church in the southeastern city of Daegu after a 61-year-old woman known as “Patient 31” who attended services there tested positive, according to the Korea Centres for Disease Control and Prevention (KCDC).

KCDC also reported the seventh death from the virus, a 62-year-old man from a hospital in Cheongdo, a county that saw surges in confirmed cases along with nearby Daegu in recent weeks.

“If we cannot block the spread in the Daegu region in an effective way, there are high possibilities it would lead to a nationwide transmission,” Vice Health Minister Kim Kang-lip told a regular briefing.

While most of the new cases were traced to Daegu, almost all major cities and provinces reported some infections.

Authorities are still investigating the exact cause of the new outbreak, with Patient 31 having no recent record of overseas travel.

Kim said the government has taken self-quarantine measures and is conducting tests on about 9,500 people who took part in services at a Daegu branch of the Shincheonji Church of Jesus, also known as the Temple of the Tabernacle of the Testimony, attended by Patient 31.

South Korea imposed its highest infectious disease alert on Sunday, vowing limiting public activities and extra resources to Daegu and Cheongdo, which were designated “special care zones” last week.

In Daegu and elsewhere, citizens flocked to large supermarkets and pharmacies to buy surgical masks and supplies. Local media photos showed hundreds of people lining up in front of E-Mart stores in Daegu starting as early as 8 a.m.

A series of political and cultural events for this week has been cancelled, while the culture ministry said on Monday a total of 24 national museums and libraries will temporarily close.

The National Assembly called off a government questioning session slated for Thursday afternoon as at least three lawmakers underwent a check after coming in contact with an education official who tested positive. (Reporting by Hyonhee Shin; Editing by Himani Sarkar and Raju Gopalakrishnan)

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UPDATE 1-S.Korea reports 161 new cases of coronavirus, brings total to 763

(Adds Patient 31 details, background)

SEOUL, Feb 24 (Reuters) – South Korea reported 161 new cases of the coronavirus, bringing the total number of infected patients in the country to 763, health authorities said on Monday, a day after the government raised its infectious disease alert to its highest level.

Of the new cases, 115 were linked to a church in the southeastern city of Daegu after a 61-year-old woman known as “Patient 31” who attended services there tested positive, according to the Centres for Disease Control and Prevention (KCDC).

KCDC also reported the seventh death from the virus, a 62-year-old man from a hospital in Cheongdo, a county that saw surges in confirmed cases along with nearby Daegu in recent weeks.

Authorities are still investigating the exact cause of the new outbreak, with Patient 31 having no recent record of overseas travel.

South Korea imposed its highest infectious disease alert on Sunday, vowing extra resources to the region and limiting public activities. (Reporting by Hyonhee Shin; Editing by Himani Sarkar)

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GLOBAL MARKETS-Shares drop, gold surges as coronavirus fears trigger flight for safety

* Asian stock markets : tmsnrt.rs/2zpUAr4

* MSCI ex-Japan down 0.7%, Japan closed for public holiday

* E-mini futures for S&P500 fall 1% in early Asia trading

* Gold prices surge to highest since 2013

* South Korea on high alert after virus cases surged over 600

* Coronavirus has killed 2,442 people in China

By Swati Pandey

SYDNEY, Feb 24 (Reuters) – Global shares and oil extended losses on Monday while safe-haven gold soared as the spread of the coronavirus outside China accelerated with infections jumping in South Korea, Italy and the Middle East, in a worrying new development in the outbreak.

South Korea put the country on high alert after the number of infections surged to over 600 with six deaths. In Italy, officials said a third person infected with the flu-like virus had died, while the number of cases jumped to above 150 from just three before Friday.

Iran, which announced its first two cases on Wednesday, said it had confirmed 43 cases and eight deaths, with most of the infections in the Shi’ite Muslim holy city of Qom. Saudi Arabia, Kuwait, Iraq, Turkey and Afghanistan imposed travel and immigration restrictions on the Islamic Republic.

In a sign of panic, E-minis for the S&P500 dropped 1% in early Asian trades while Nikkei futures slipped more than 1% too.

Australia’s benchmark index slid 1.6% while New Zealand was down about 1%. South Korea’s KOSPI index fell 2.2%.

That left MSCI’s broadest index of Asia-Pacific shares outside Japan off 0.7% to 541.48, the lowest since Feb. 5. Japanese markets were closed for a public holiday.

“It promises to be an interesting session here in Asia, with the bears back wrestling a bit more of a say here, and gold and bond bulls feeling pretty good about their exposures,” said Chris Weston, head of research at broker Pepperstone.

“The news flow from the weekend has changed the game somewhat, where the focus is much more on the threat of an outbreak outside of China.”

The virus has killed 2,442 people in China, which has reported 76,936 cases, and slammed the brakes on the world’s second largest economy.

It has spread to some 28 other countries and territories, with a death toll of around two dozen, according to a Reuters tally.

Investors fretted over the mounting economic toll from the virus, betting on more monetary policy action from central banks. In response, U.S. Fed fund futures surged signalling more rate cuts later this year.

While markets had largely brushed aside fears of long-term economic damage from the virus, a steady drip of new cases in countries beyond China has kept concerns alive.

On Friday, U.S. stocks were beaten down by concerns about the virus and after data showed American business activity stalled in February, signaling a contraction for the first time since 2016.

U.S. chipmakers fell sharply last week as a flash reading of the IHS Markit services sector Purchasing Managers’ Index dropped to its lowest level since October 2013. The manufacturing sector also clocked its lowest reading since August.

The dollar fell for a second straight session on Monday against the yen to be last at 111.48.

The Australian dollar, considered a liquid proxy for China plays, was down 0.4% as it languished near an 11-year low.

The euro eased a tad to $1.0836.

That left the dollar index slightly higher at 99.430.

Analysts expect the Korean won to slump against the dollar as one of the favourite risk proxies for investors.

The won has fallen more than 4.5% on the dollar so far this year. It was last unchanged at 1,206.87

“Whether this proves to be a driver of more mainstream FX pairs, such as AUDJPY and AUDUSD is yet to be seen, although AUDUSD looks the better short on the weekly chart,” Pepperstone’s Weston said.

Oil prices slid as investors fretted about crude demand being pinched by the impact of the coronavirus outbreak, while leading producers appeared to be in no rush to curb output.

Brent crude slumped 2.8%, or $1.63, to $56.87 a barrel while U.S. crude dropped 2.6%, or $1.4, to $51.97 a barrel.

U.S. gold futures climbed 1.2% at $1,668.6 an ounce. Spot gold jumped to a seven-year high of 1,678.58 after marking its biggest weekly gain last week since early August.

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