Connect with us

Economy

Asian economic powers warn of risks from war, monetary policy normalisation

Published

on


© Reuters. FILE PHOTO: A worker adjusts an ASEAN flag at a meeting hall in Kuala Lumpur, Malaysia, October 28, 2021. REUTERS/Lim Huey Teng

By Tetsushi Kajimoto

TOKYO (Reuters) -East Asian economic leaders warned on Thursday of risks to the region’s outlook and pledged to remain committed to market stability and sound fiscal policy.

Economic risks included unexpectedly early rises in interest rates “in some advanced nations”, runaway inflation and supply chain disruption on top of the war in Ukraine, finance ministers and central bank governors said in a joint statement.

The statement followed annual meetings, held online, of the officials from China, Japan, South Korea and the 10 members of the Association of South East Asian Nations (ASEAN).

The Japanese, Chinese and South Korean officials affirmed their commitment to supporting financial market stability and to long-term fiscal sustainability.

“We must remain on guard against heightening risks to which the regional economic recovery is being exposed … on top of the ongoing Russia-Ukraine conflict and earlier-than-expected monetary policy normalisation in some advanced nations,” it said.

“These factors could become downside risks to the regional economic outlook, causing volatility to financial markets and capital flows.”

The officials’ joint statement comes amid concerns that U.S interest rate rises and related reduction in central bank assets have driven up the dollar. This has raised the prospect of capital flight from some emerging markets and a rising burden of dollar-denominated debt in the developing world.

The officials steered clear of references to currency market moves, notably rises in the dollar and falls in the yen, or sanctions against Russia’s invasion of Ukraine, which Moscow calls a “special operation.”

Instead, they underscored progress in regional initiatives, including a mechanism aimed at helping countries in times of financial distress, the Chiang Mai Initiative Multilateralisation currency swaps deal.

A deep divide has emerged within the Group of 20 (G20) major economies, which includes Western nations that have accused Moscow of war crimes in Ukraine. Other members – China, Indonesia, India and South Africa – have not joined Western-led sanctions against Russia over the conflict.

ASEAN is chaired by Cambodia this year and includes Indonesia, which currently chairs the G20.

Japanese Finance Minister Shunichi Suzuki used harsher words than the joint statement in discussing the invasion of Ukraine.

“Russia’s unjustifiable invasion of Ukraine has shaken the foundation of international order and is a clear violation of international law,” Suzuki told reporters. “It is having a serious impact on the global economy with energy and food price rises, supply-chain disruptions, destabilisation of financial markets and increasing numbers of refugees.”

Economy

Australian banks enter tech arms race as rising rates squeeze profit

Published

on

4/4

© Reuters. FILE PHOTO: A view of a Commonwealth Bank of Australia branch in Sydney, Australia, April 18, 2018. REUTERS/Edgar Su

2/4

By Byron Kaye

SYDNEY (Reuters) – The 10-minute home loan – at the tap of a smartphone screen – is emerging as the next frontier in Australian banking as rising interest rates quash a pandemic-fuelled property boom, eating into mortgage income and renewing focus on cost-cutting tech.

The Big Four lenders booked blockbuster profit during the COVID-19 pandemic due to a leap of nearly one-third in property prices since 2020, but raging inflation brought a shock rate hike this month and expectations of several more.

That has left banks, which make most of their profit from mortgages, looking to automate every step of the loan process and cut overheads such as staffing and real estate to keep growing profit from what analysts say may be a shrinking pool of money.

So far only Commonwealth Bank of Australia (OTC:CMWAY) (CBA), the biggest lender, has put a speed target on its automation drive. It said a fully digitised loan service that went live on Tuesday could process an application in as little as 10 minutes.

But in earnings updates this month, National Australia Bank (OTC:NABZY) Ltd (NAB), Westpac Banking (NYSE:WBK) Corp and Australia and New Zealand Banking Group Ltd (ANZ) all pointed to automation to offset the impact of a cooling property market.

“They’re incentivised to invest in tech and get up to where CBA is because it drives people online,” said Hugh Dive, chief investment officer at Atlas (NYSE:ATCO) Funds Management, which holds shares of major banks.

“They can improve profit without growing their top line.”

Citi banking analyst Brendan Sproules in a client note said chief executive officers face an “endless battle to transform their 1970s/80s process and systems into the modern digital age”.

“A rising cash rate might just provide the opportunity to accelerate this transformation along faster than we first thought.”

Instead of filling in paper forms and supplying documents, to be verified and analysed by back-office staff, a customer would enter the address of a property they planned to buy plus their bank account login. Their computer or smartphone camera would confirm their identity.

Algorithms figure out the rest, such as employment history and probable purchase price.

A bank employee only steps in if the software picks up discrepancies in the data, people who work on loan automation software said.

Some smaller and online-only lenders already automate mortgage applications but – until now – not the Big Four, which dominate Australia’s A$10 trillion ($7.00 trillion) housing market with three-quarters of loans by value.

“What we’re seeing right now is a lot of optimisation using existing processes, using existing loan origination systems,” said Hessel Verbeek, head of banking strategy at KPMG Australia.

“The room for improvement will include when people actually start to replace some of the key systems.”

Banks have not specified how much money they plan to spend automating mortgage approvals, nor how much they would save.

Of the A$3.6 billion the Big Four invested in the first half of the 2022 financial year, 35% went to “productivity and growth”, versus 32% a year earlier, showed data from KPMG.

NAB, the second-biggest lender, said last week its “investment in customer experience, efficiency and sustainable revenue” rose 46% in October-March from the same period a year earlier, to A$228 million. It said it wants every home loan automated by 2024.

ANZ, which has been losing mortgages for two years as understaffing led to a surge in approval times, said it has only begun work digitising processes.

“There’s no doubt we’ve got some catching up to do,” CEO Shayne Elliott was quoted as saying in The Australian.

SLOW START

Banks were slow to start automating retail products partly because large compliance and risk management overhauls sapped both investment budgets and management attention since regulatory scrutiny dramatically increased in 2018, analysts and industry participants said.

Rebecca Engel, head of Microsoft Corp (NASDAQ:MSFT)’s Australian financial services unit, said there was a “massive increase in investment, deployment, acceptance and trust in technology” by banks in tandem with heightened regulatory attention and higher transaction volume during the pandemic.

“The goal should be higher levels of assurance, higher levels of quality, at a lower cost,” Engel told Reuters.

“That is driven by technology.”

($1 = 1.4282 Australian dollars)

Continue Reading

Economy

Wall Street ends sharply higher, fueled by Apple

Published

on


© Reuters. FILE PHOTO: A Wall Street sign is pictured outside the New York Stock Exchange in New York, October 28, 2013. REUTERS/Carlo Allegri

By Amruta Khandekar and Noel Randewich

(Reuters) – Wall Street finished sharply higher on Tuesday, lifted by Apple, Tesla (NASDAQ:TSLA) and other megacap growth stocks after strong retail sales in April eased worries about slowing economic growth.

Ten of the 11 major S&P sector indexes advanced, with financials, materials and technology among the top performers.

Investors were cheered by data showing U.S. retail sales increased 0.9% in April as consumers bought motor vehicles amid an improvement in supply and frequented restaurants.

Recently punished shares of Microsoft Corp (NASDAQ:MSFT), Apple Inc (NASDAQ:AAPL), Tesla Inc and Amazon (NASDAQ:AMZN) drove the S&P 500 and the Nasdaq higher.

Tuesday’s broad rally followed weeks of selling on the U.S. stock market that last week saw the S&P 500 sink to its lowest level since March 2021.

“The largest pockets of stocks that investors tend to buy have been essentially beaten up. They’re either in correction or bear market territory,” said Sylvia Jablonski, chief investment officer of Defiance ETF. “I think investors are looking at these opportunities to buy on the dip, and I suspect that today is a good day to do that.”

The S&P 500 Banks index jumped, with Citigroup (NYSE:C) climbing after Warren Buffett’s Berkshire Hathaway (NYSE:BRKa) disclosed a nearly $3 billion investment in the U.S. lender.

Another set of economic data showed industrial production accelerated 1.1% last month, higher than estimates of 0.5%, and faster than a 0.9% advance in March.

“This is consistent with continued economic growth in the second quarter and not a recession underway,” said Bill Adams, chief economist for Comerica (NYSE:CMA) Bank in Dallas.

The U.S. Federal Reserve will “keep pushing” to tighten U.S. monetary policy until it is clear inflation is declining, Fed Chair Jerome Powell said at an event on Tuesday.

Traders are pricing in an 85% chance of a 50-basis point rate hike in June.

According to preliminary data, the S&P 500 gained 81.54 points, or 2.03%, to end at 4,089.55 points, while the Nasdaq Composite gained 323.23 points, or 2.77%, to 11,986.02. The Dow Jones Industrial Average rose 432.62 points, or 1.35%, to 32,659.17.

Walmart (NYSE:WMT) Inc tumbled after the retail giant cut its annual profit forecast, signaling a bigger hit to margins.

Retailers Costco (NASDAQ:COST), Target (NYSE:TGT) and Dollar Tree (NASDAQ:DLTR) also fell.

United Airlines Holdings (NASDAQ:UAL) Inc gained after the carrier lifted its current-quarter revenue forecast, boosting shares of Delta Air, American Airlines (NASDAQ:AAL) and Spirit Airlines (NYSE:SAVE).

A positive first-quarter earnings season has been overshadowed by worries about the conflict in Ukraine, soaring inflation, COVID-19 lockdowns in China and aggressive policy tightening by central banks.

The S&P 500 is down about 14% so far in 2022, and the Nasdaq is off around 24%, hit by tumbling growth stocks.

U.S.-listed Chinese stocks jumped on hopes that China will ease its crackdown on the technology sector.

Continue Reading

Economy

Fed’s Powell vows to raise rates as high as needed to kill inflation surge

Published

on


© Reuters. FILE PHOTO: Federal Reserve Chair Jerome Powell testifies before the Senate Banking Committee in Washington, U.S., March 3, 2022. Tom Williams/Pool via REUTERS

WASHINGTON (Reuters) -Federal Reserve Chair Jerome Powell on Tuesday pledged that the U.S. central bank would ratchet interest rates as high as needed to kill a surge in inflation that he said threatened the foundation of the economy.

“What we need to see is inflation coming down in a clear and convincing way and we’re going to keep pushing until we see that,” Powell said at a Wall Street Journal event. “If we don’t see that, we will have to consider moving more aggressively” to tighten financial conditions.

“Achieving price stability, restoring price stability, is an unconditional need. Something we have to do because really the economy doesn’t work for workers or for businesses or for anybody without price stability. It’s the bedrock of the economy really.”

Acknowledging the possible “pain” that controlling inflation might cause in terms of slower economic growth or higher unemployment, Powell said there were “pathways” for the pace of price hikes to ease without a full-blown recession.

But if inflation does not fall, Powell said the Fed would not flinch from raising rates until it does.

“If that involves moving past broadly understood levels of ‘neutral’ we won’t hesitate to do that,” Powell said, referring to the rate at which economic activity is neither stimulated nor constrained. “We will go until we feel we are at a place where we can say ‘yes, financial conditions are at an appropriate place, we see inflation coming down.'”

The Fed has raised its benchmark policy rate by three-quarters of a percentage point this year, and is on track to increase it again in half-percentage-point increments at its next two meetings in June and July. Market interest rates on Treasury bonds, 30-year mortgages and other forms of debt have risen much faster in a financial tightening predicated on upcoming Fed actions.

What happens next – how much more the central bank hikes rates, and how fast – depends on how the economy and inflation evolve, something Powell said the Fed would evaluate “meeting by meeting, data reading by data reading.”

His remarks solidified expectations in rate futures markets that the Fed’s target rate would reach at least 2.75% to 3.00% by the end of this year and perhaps more, steadily rising from the current range between 0.75% and 1%. CME Group’s (NASDAQ:CME) FedWatch tool on Tuesday showed a greater than one-in-four prospect for the policy rate to end the year at between 3.00% and 3.25%, up from about a one-in-10 chance on Monday.

‘UNTIL SOMETHING BREAKS’

Economists meanwhile are divided between those who feel inflation will collapse on its own and let the Fed do less, and those who feel the central bank may need to hike in increments of three-quarters of a percentage point to ever get control of inflation that reminds some of the shocks of the 1970s and early 1980s.

Data in recent weeks have been chock with conflicting signals.

Retail sales, hiring, and manufacturing output all show an economy that is itself unflinching, so far, in the face of higher borrowing costs.

“The economy is strong. Consumer balance sheets are healthy. Businesses are healthy,” Powell said, contending that strength is one reason the Fed can push interest rates higher and slow growth enough to cool inflation without causing the sort of painful contraction the central bank has used in the past to clamp down on prices.

At the same time, the war in Ukraine is making food and fuel more expensive around the world, while a new round of coronavirus lockdowns in China threatens to keep prices rising for manufactured goods and industrial inputs.

Coupled with still strong consumer demand in the United States, that could force the Fed into even tougher action.

The Fed targets an inflation rate of 2% annually, but prices using the central bank’s preferred measure are currently rising at more than three times that level. Inflation that is too fast can distort household and business planning, and, more to the point for the sense of urgency felt by Powell and his Fed colleagues, erode the ability of the central bank to keep it under control.

“Once the Fed starts hiking, they continue to hike until something breaks. Now the question becomes is what we should be looking at as a potential break? The equity market? Is it credit? Is it housing? I think that’s going to be this cycle’s big unknown,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets in New York.

Continue Reading

News

Stock Markets6 mins ago

Glass Lewis backs McDonald’s directors in boardroom fight with Carl Icahn

2/2 © Reuters. FILE PHOTO: A sign with the logo is on display near a McDonald’s restaurant in Moscow, Russia...

Economy6 mins ago

Australian banks enter tech arms race as rising rates squeeze profit

4/4 © Reuters. FILE PHOTO: A view of a Commonwealth Bank of Australia branch in Sydney, Australia, April 18, 2018....

Stock Markets6 mins ago

China Eastern crash probe eyes intentional action – sources

© Reuters. FILE PHOTO: Rescue workers work at the site where a China Eastern Airlines Boeing 737-800 plane flying from...

Stock Markets7 mins ago

U.S. accuses casino tycoon Wynn of acting as Chinese agent

2/2 © Reuters. FILE PHOTO: Steve Wynn, Chairman and CEO of Wynn Resorts, speaks during the Milken Institute Global Conference...

Cryptocurrency7 mins ago

Commissioner Kristin Johnson to sponsor CFTC Market Risk Advisory Committee

Commissioner Kristin Johnson to sponsor CFTC Market Risk Advisory Committee United States Commodity Futures Trading Commission (CFTC) commissioner Kristin N....

World7 mins ago

Pollution killing 9 million people a year, Africa hardest hit – study

5/5 © Reuters. FILE PHOTO: A boy swims in the polluted water of the Makoko community in Lagos, Nigeria March...

Politics37 mins ago

McConnell urges Biden administration to ensure sustained aid to Ukraine

© Reuters. FILE PHOTO: U.S. Senate Minority Leader Mitch McConnell (R-KY) listens as another Republican senator speaks to reporters following...

Stock Markets37 mins ago

Prominent hedge funds invested in Twitter before Musk unveiled plans

© Reuters. FILE PHOTO: The Twitter logo and trading information is displayed as a trader works on the floor of...

World37 mins ago

N.Korean leader Kim slams officials’ ‘immature’ response amid COVID outbreak

© Reuters. FILE PHOTO: People wearing protective face masks walk amid concerns over the new coronavirus disease (COVID-19) in front...

Stock Markets37 mins ago

Architect of Allianz fraud made $60 million as he lied to investors, U.S. says

3/3 © Reuters. FILE PHOTO: Allianz Global Investors logo is pictured at the company’s headquarters in Frankfurt, Germany August 16,...

Cryptocurrency1 hour ago

Crypto users react to Terraform Labs legal team purportedly leaving company

Crypto users react to Terraform Labs legal team purportedly leaving company The ongoing saga with Terraform Labs, the blockchain developer...

World1 hour ago

Michigan judge blocks enforcement of state’s pre-Roe v. Wade abortion ban

© Reuters. FILE PHOTO: Pro-Choice supporters of Planned Parenthood rally outside a Planned Parenthood clinic in Detroit, Michigan, U.S. February...

Stock Markets1 hour ago

U.S. sues to compel former casino magnate Wynn to register as agent of China

2/2 © Reuters. FILE PHOTO: Steve Wynn, Chairman and CEO of Wynn Resorts, speaks during the Milken Institute Global Conference...

World1 hour ago

Burkina Faso rescuers find no survivors in flooded mine’s rescue chamber

© Reuters. A view shows one of the galleries during a rescue operation inside Perkoa mine where water is still...

Politics1 hour ago

U.S. lawmakers unveil FDA emergency funds bill to address baby formula shortage

2/2 © Reuters. Empty shelves show a shortage of baby formula at a Target store in San Antonio, Texas, U.S....

Commodities1 hour ago

Oil falls 2% on Powell comments, hopes for Venezuela supply

© Reuters. FILE PHOTO: Oil pump jacks are seen at the Vaca Muerta shale oil and gas deposit in the...

Commodities1 hour ago

Venezuela’s Maduro, opposition expected to talk; U.S. eases some sanctions -sources

© Reuters. FILE PHOTO: Venezuela’s President Nicolas Maduro and his wife Cilia Flores dance during the May Day celebrations in...

Stock Markets2 hours ago

U.S. Senator Manchin backs Michael Barr for top Fed regulatory job

© Reuters. FILE PHOTO: The Federal Reserve building is seen before the Federal Reserve board is expected to signal plans...

Sports & General2 hours ago

Dallas hair salon shooting suspect had delusions about Asians, police say

2/2 © Reuters. An image shows the suspect in the shooting at the Hair World Salon in Dallas on May...

Commodities2 hours ago

Oil Inventories Unexpectedly Drop by 2.4M Barrels Last Week: API

© Reuters. By Yasin Ebrahim Investing.com — U.S. crude oil inventories unexpectedly dropped last week, the API reported Tuesday, following a...

Cryptocurrency2 hours ago

Do Kwon proposes Terra hard fork to save ecosystem

Do Kwon proposes Terra hard fork to save ecosystem On Monday, Do Kwon, co-founder of the troubled Terra Luna blockchain,...

Stock Markets2 hours ago

Elon Musk’s SpaceX is poised to become the most valuable U.S. startup

3/3 © Reuters. FILE PHOTO: A SpaceX Falcon 9 rocket lifts off carrying three NASA astronauts and one ESA astronaut...

Forex2 hours ago

U.S. considering move to block Russian debt payments -Treasury

© Reuters. FILE PHOTO: Russian Rouble coins are seen in front of displayed U.S. Dollar banknote in this illustration taken,...

Sports & General2 hours ago

Key moments in the Johnny Depp and Amber Heard defamation trial

© Reuters. Actor Johnny Depp walks into the courtroom after a break at the Fairfax County Circuit Courthouse in Fairfax,...

Stock Markets2 hours ago

Tesla stops taking orders for Cybertruck outside North America -website

2/2 © Reuters. Tesla’s Cybertruck is displayed at Manhattan’s Meatpacking District in New York City, U.S., May 8, 2021. REUTERS/Jeenah...

Stock Markets2 hours ago

Cisco Earnings, Lowe’s Outlook, Target Reports: 3 Things to Watch

By Liz Moyer Investing.com — U.S. stocks roared back after a strong retail sales report and reassurances from Federal Reserve...

Sports & General2 hours ago

Depp lawyer questions Heard about drugs, love notes in defamation case

2/2 © Reuters. Actors Amber Heard and Johnny Depp watch as the jury leaves the courtroom at the end of...

Stock Markets2 hours ago

What happened with Abbott baby formula that worsened a U.S. shortage?

2/2 © Reuters. FILE PHOTO: Abbott Laboratories logo is displayed on a screen at the New York Stock Exchange (NYSE)...

Stock Markets2 hours ago

Where’s the beef? McDonald’s, Wendy’s are sued over burger sizes

2/2 © Reuters. FILE PHOTO: The McDonald’s logo is seen outside the fast-food chain McDonald’s in New York, U.S., October...

Stock Markets2 hours ago

Slovak finance minister sets up battle with proposed tax on Russian oil processing

© Reuters. FILE PHOTO: Slovakia’s finance minister, Igor Matovic, speaks to the media as refugees fleeing from Ukraine arrive in...

Trending