AtOneGoFinancial Blog: November 2021

Tuesday, November 30, 2021

Matrade: Malaysia, Vietnam to achieve US$18b bilateral trade by 2025

KUALA LUMPUR, Nov 30 ― The Malaysia External Trade Development Corporation (Matrade) is promoting greater business cooperation between Malaysia and Vietnam to achieve US$18 billion (RM76 billion) bilateral trade by 2025.

Matrade director of Asean and Oceania Raja Badrulnizam Raja Kamalzaman said despite struggling with the impact of the pandemic and trade dispute between the world’s economic powerhouses, Vietnam managed to record a gross domestic product (GDP) growth of 2.9 per cent last year.

“It was one of the few countries that recorded positive growth amid the Covid-19 situation in 2020,” he said in a statement today.

Vietnam, which has more than 96 million people of whom 65 per cent are aged 35 years old and below, is currently experiencing a growing middle-income group and with business-friendly policies in attracting investments in the industrial sector, making it a popular destination for trade and business in Asean.

On November 23-25, 2021, Matrade led a group of 17 Malaysian companies to explore strategic business collaborations between Malaysia and local enterprises in the exciting and rapidly growing Vietnamese market, through the Virtual Export Acceleration Mission (EAM) to Vietnam.

The mission featured companies in the machinery, parts and components, cosmetics and personal care products as well as food and beverages, aimed at tapping into the growing demand in Ho Chi Minh City, Hanoi, and surrounding provinces.

“These companies offer a wide range of industrial solutions such as data-driven smart solution platform and automation machinery, total beauty care products covering from tip-to-toe, varieties of prepared meals, and ready-to-drink beverages, among others.

“Apart from providing a platform for Malaysian companies to expand their brands’ footprint in Vietnam, this EAM also hopes to open up opportunities for Vietnamese companies to explore partnerships amid uncertainty in the business environment due to the Covid-19 pandemic,” it said.

Through this mission, 142 online one-to-one business meeting sessions were arranged with 46 Vietnamese companies, which generated total sales of RM62.67 million, it added.

“Major interests were recorded for plants’ extracts derived from green biotechnology processes, feminine care, and skincare products as well as hair treatment solutions.

“Apart from the series of meetings, an online briefing session through a webinar was organised on Nov 23 in collaboration with the Investment and Trade Promotion Centre of Ho Chi Minh City (ITPC) and the Malaysian Business Chamber of Vietnam (MBC) to share market updates and business aspects in Vietnam,” it added. ― Bernama

Source: Malay Mail

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Bursa Malaysia stays higher at mid-day on strong buying interest

KUALA LUMPUR, Nov 30 ― Bursa Malaysia remained higher at mid-day today as buying interest intensified in sectors led by industrial products and services counters, said an analyst.

At 12.30pm, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) advanced 0.47 per cent or 7.10 points to 1,517.67 from 1,510.57 yesterday.

The benchmark index opened 2.01 points firmer at 1,512.58 and moved between 1,511.89 and 1,519.62 throughout the morning session.

On the broader market, gainers outpaced losers 636 to 317, while 345 counters were unchanged, 1,007 untraded, and 63 others suspended.

Turnover stood at 2.66 billion units worth RM1.97 billion.

The Healthcare index meanwhile was down 4.26 per cent or 108.28 points to 2,431.98 on profit-taking. IHH stock fell two sen to RM6.58 and Top Glove was down 37 sen to RM2.82.

An analyst said the buying sentiment was also in tandem with most Asian peers as traders weighed the new Omicron strain’s impact.

Meanwhile, on the local front, Malaysia’s exports in October, which grew faster by 25.5 per cent year-on-year to a new record of RM114.4 billion in value, exceeding 24.7 per cent in September and the market consensus of 25.0 per cent, could also provide a fillip to market sentiment.

AmBank Research in a note said it expects external demand to remain favourable in the remaining months of 2021.

The global recovery, added with further domestic reopening, have bolstered Malaysia’s exports.

“Nevertheless, we remain cautious over Covid-19 infections and ongoing constraints in the global supply chain which could affect the strength of growth in Malaysia’s trade sector,” said the research firm.

On Bursa Malaysia, other heavyweights Maybank added one sen to RM8.06, Public Bank was flat at RM3.96, Petronas Chemicals was up 42 sen to RM8.63, Tenaga recovered four sen to RM9.30, and CIMB rose five sen to RM5.16.

Of the actives, ATA IMS rose one sen to 53 sen, followed by Top Glove, while DNeX eased half-a-sen to 79 sen.

On the index board, the FBM Emas Index gained 71.03 points to 11,125.90, the FBMT 100 Index rose 65.79 points to 10,806.03, and the FBM Emas Shariah Index improved 85.22 points to 12,146.14.

The FBM 70 increased 148.75 points to 14,531.07 while the FBM ACE put on 47.33 points to 6,56.24.

Sector-wise, the Industrial Products and Services Index added 4.95 points to 197.00, the Plantation Index was up 97.13 points to 6,453.45 and the Financial Services Index advanced 84.74 points to 15,128.15. ― Bernama

Zara blocked in France over Uighur probe

BORDEAUX, Nov 30 — The expansion of a Zara clothing store in France was blocked over a probe into whether its parent company Inditex benefits from the use of forced labour of Uighurs in China, officials said yesterday.

Zara France wanted to double the surface area of its shop in the centre of the southern city of Bordeaux, but on November 9 the regional commission charged with examining the project voted against it.

The commission members who voted against the expansion invoked the existence of the probe into whether the Spanish firm benefits from the use of forced labour by members of the Uighur minority by its Chinese suppliers.

“It was a political decision by us,” said Alain Garnier, one of the elected officials on the commission.

“We wanted to send a strong signal by blocking the expansion of stores that don’t have sufficient control over their suppliers,” he added.

French magistrates opened in June an inquiry into allegations by rights groups that four fashion firms including Zara-owner Inditex profited from forced labour of the Uighur minority in China.

Rights groups believe at least one million Uighurs and other mostly Muslim minorities have been incarcerated in camps in the Xinjiang region, where China is also accused of forcibly sterilising women and imposing forced labour.

Inditex disputed at the time that it had used cotton from Xinjiang and said it has strict traceability controls in place.

“With the impact of fast fashion on the environment and suspicions about the use of forced labour of Uighurs, Zara’s project seemed to us to breach the sustainable development criteria” taken into consideration by the commission, said another member, Sandrine Jacotot.

Jacotot, who is also Bordeaux’s deputy mayor for commerce, said it was now up Zara to appeal the decision on the national level “to explain the company respects” the sustainable development criteria. — AFP

Bursa Malaysia higher at mid-morning as bargain hunting continues

On the broader market, gainers outpaced decliners 625 to 262, while 330 counters were unchanged, 1,088 untraded, and 63 others suspended. — Picture by Azneal Ishak

KUALA LUMPUR, Nov 30 — Bursa Malaysia was higher at mid-morning today as buying support continued in most indices, led by construction as well as industrial products and services counters, said an analyst.

At 11.13am, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) advanced 7.39 points to 1,517.96 from 1,510.57 on Monday.

The benchmark index opened 2.01 points firmer at 1,512.58.

On the broader market, gainers outpaced decliners 625 to 262, while 330 counters were unchanged, 1,088 untraded, and 63 others suspended.

Turnover stood at 2.07 billion units worth RM1.45 billion.

Maybank IB Research said as earnings season comes to an end, investors will likely switch attention to macro headlines, which include slower economic growth and inflation.

“Glove makers will remain in the limelight but expect trading to be choppy.

“Technically, we expect the benchmark index to range between 1,500 and 1,530, with support levels at 1,500 and 1,483,” it said in a note.

The healthcare index was in profit-taking mode after an overbought session yesterday.

IHH was down two sen to RM6.58 and Top Glove dived 29 sen to RM2.90

In other heavyweights, Maybank was flat at RM8.05, Public Bank added one sen to RM3.97, Tenaga and CIMB rose six sen each to RM9.32 and RM5.17 respectively, and Petronas Chemicals was up 21 sen to RM8.42.

Of the actives, ATA IMS erased five sen to 47 sen, followed by Top Glove, while Solution Group added four sen to 68 sen.

Among the top gainers, MPI rose RM20.00 sen to RM50.86, Genetec was RM1.82 higher at RM39.52, and F&N increased 92 sen to RM24.82.

On the index board, the FBM Emas Index climbed 73.42 points to 11,128.29, the FBMT 100 Index rose 65.75 points to 10,805.99, and the FBM Emas Shariah Index gained 83.53 points to 12,144.45.

The FBM 70 increased 140.19 points to 14,522.52 while the FBM ACE widened 59.00 points to 6,574.91. Sector-wise, the Industrial Products and Services Index added 3.28 points to 195.33, the Plantation Index was up 76.15 points to 6,432.47 and the Financial Services Index advanced 84.09 points to 15,127.50. — Bernama

US man suspected of killing his four kids

LOS ANGELES, Nov 30 — A US man who allegedly shot and killed his four young children and their grandmother was being questioned by police on Monday.

The four children, who were all under the age of 12, were declared dead at the scene in the small town of Lancaster, near Los Angeles.

The children’s grandmother, who was in her 50s, also died in the shooting on Sunday evening.

All five victims had gunshot wounds to their upper bodies, law enforcement officers said.

The Los Angeles County Sheriff’s office said Germarcus David, 29, had been arrested on suspicion of the multiple murders, and was being held on US$2 million (RM8.4 million) bail.

The Los Angeles Times reported that David is a security guard whose firearm licence had been cancelled.

The paper quoted a man named Waki Jones, who said he had been taking the two eldest of the children — Amaya, 12, and Demarcus, aged nine — to elementary school and daycare for several years.

“Amaya was a sweet girl...She was always protecting her brother, making sure he was safe at school,” Jones told the paper.

“It’s just unbelievable. I can’t believe they’re gone.”

Gun violence is a huge problem in the United States, fuelled by lax gun laws and an abundance of firearms, campaigners say.

Liberal attempts to restrict ownership are frustrated by a powerful minority in the pro-gun lobby, who point to the 2nd amendment to the US constitution which provides for the right to bear arms. — AFP

Asia share markets rebound from virus-led sell-off

Hong Kong’s Hang Seng Index underperformed, down 0.25 per cent while China’s blue chip CSI 300 index was up 0.13 per cent. — Reuters pic

HONG KONG, Nov 30 — Asian share markets were trading in positive territory today as investors became cautiously optimistic the new Omicron variant might not cause a widespread global economic disruption to worsen the coronavirus pandemic.

The higher open followed a brighter lead from Wall Street yesterday which reacted to news from U.S President Joe Biden that new lockdowns as a result of the variant were off the table for now.

MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.52 per cent higher today.

In Australia, the S&P/ASX200 was up 1.15 per cent while Japan’s Nikkei was trading 1.2 per cent higher early in the session.

Hong Kong’s Hang Seng Index underperformed, down 0.25 per cent while China’s blue chip CSI 300 index was up 0.13 per cent.

Activity in China’s services sector grew at a slightly slower pace in November, official data showed today, as the sector took a hit from fresh lockdown measures as authorities raced to contain the latest outbreak.

The official non-manufacturing Purchasing Managers’ Index (PMI) fell to 52.3 in November from 52.4 in October, data from the National Bureau of Statistics (NBS) showed.

The better performance across Asian equities markets came after a virus-led selldown late last week when global investors were concerned the variant could prompt further lockdowns which could impede the economic recovery.

“All my clients and colleagues were net buyers on Monday and today,” said John Milroy, an adviser at Ord Minnett in Sydney.

“Sure there is another new variant but unless there are renewed and widespread lockdowns the V-shaped recovery is intact, particularly in the US Earnings forecasts are intact and households are flush with cash.”

Despite the positive open today, advisers say some investors are still cautious about the impact Omicron could have in disrupting trade, travel and economic activity.

“There are so many unknowns about Omicron and the market has been jumping at shadows,” said James Rosenberg, a Sydney-based financial advisor at EL&C Baillieu said.

“After such a strong run and with elevated valuations the market will always be susceptible to the odd shakeout on news that could bring risk.”

The gains today came after the Dow Jones Industrial Average yesterday rose 236.6 points, or 0.68 per cent, to 35,135.94, the S&P 500 gained 60.65 points, or 1.32 per cent, to 4,655.27 and the Nasdaq Composite added 291.18 points, or 1.88 per cent, to 15,782.83.

In Asian trading, the yield on benchmark 10-year Treasury notes was at 1.5192 per cent compared with its US close of 1.529 per cent yesterday.

The two-year yield, which rises with traders’ expectations of higher Fed fund rates, touched 0.502 per cent compared with a US close of 0.51 per cent.

Gold eased as the result of other markets firming and fell 0.7 per cent to US$1,783.1 (RM7,533.60) per ounce in the US session but it ticked up slightly higher early in Asia to be neutral.

US crude jumped 1.43 per cent to US$70.95 a barrel. Brent crude rose to US$74.4 per barrel. — Reuters

China factory activity unexpectedly grows as some bottlenecks ease

BEIJING, Nov 30 — China’s factory activity unexpectedly picked up in November, growing for the first time in three months as the crippling surge in raw material prices and power rationing eased, taking some pressure off the manufacturing sector.

The official manufacturing Purchasing Managers’ Index (PMI) rose to 50.1 in November from 49.2 in October, data from the National Bureau of Statistics (NBS) showed today.

The 50-point mark separates growth from contraction. Analysts had expected it to come in at 49.6.

The world’s second-largest economy, which staged an impressive rebound from last year’s pandemic slump, has lost momentum in the second half of this year as it grapples with slowing manufacturing, debt problems in the property market and Covid-19 outbreaks.

Analysts expect the slowdown in gross domestic product (GDP)seen in the third-quarter to continue in the fourth with demand expected to remain soft.

“A series of recently introduced policies and measures to ensure energy supply and stabilise market prices has been proven to be effective,” said Zhao Qinghe, senior statistician at the NBS.

“Power rationing eased somewhat in November while prices for some raw materials dropped significantly, driving an expansion in manufacturing PMI.”

Reflecting the positive headline PMI, a subindex for production rose to 52.0 in November from 48.4 in October while new orders fell at a slower pace, although November marked the fourth straight month of declines in customer demand.

Temporary reprieve

There were also signs of relief elsewhere in Asia with Japanese factory output rising for the first time in four months in October as facilities in other parts of the region resumed operations after Covid-19 closures.

The supply resumption helped cool the prices of crucial production materials.

A sub-index for input prices in the Chinese PMI stood at 52.9 in November, down significantly from 72.1 in the previous month, pointing to easing cost pressures.

That drove prices charged lower, falling for the first time since May 2020.

Despite the improvement, Nie Wen, an economist at Hwabao Trust, said he expects the manufacturing PMI to hover around 50 for the months to come, due to constraining factors such as power curbs, high raw material prices and weaker consumption.

Analysts also warn that there could be new restrictions on manufacturing in northern China due to the upcoming Beijing Winter Olympics while the impact from new Covid-19 strain Omicron on China’s economy remains to be seen.

Factory gate inflation hit a 26-year high in October, further squeezing profit margins for producers and heightening stagflation concerns. As a result, policy sources say China’s central bank will likely move cautiously on loosening monetary policy to bolster the economy.

Premier Li Keqiang last week acknowledged that China’s economy faces new downward pressures but said authorities should avoid “aggressive” one-size-fits-all policy responses.

In contrast to the uptick in the factory sector, growth in the services sector slowed slightly with the official non-manufacturing PMI in November easing to 52.3 from 52.4 in October.

Fresh lockdown measures as China raced to contain the latest Covid-19 outbreak have weighed on services activity, which has been otherwise propped up by brisk construction.

The construction activity subindex rose to 59.1 in November from 56.9.

China’s official October composite PMI, which includes both manufacturing and services activity, stood at 52.2, up from October’s 50.8. — Reuters

Bursa Malaysia opens higher on renewed buying interest

KUALA LUMPUR, Nov 30 ― Bursa Malaysia opened higher today on renewed buying interest after undergoing selling pressure on Monday amid concerns over new Covid-19 variant Omicron, said an analyst.

At 9.05am, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) rebounded 2.56 points to 1,513.13 from 1,510.57 yesterday.

The benchmark index opened 2.01 points firmer at 1,512.58.

On the broader market, gainers led losers 214 to 155, while 254 counters were unchanged, 1,682 untraded, and 63 others suspended.

Turnover stood at 383.69 million units worth RM189.85 million.

Malacca Securities Sdn Bhd said that the positive overnight Wall Street performance might have provided some support for the local equities.

“We think selling pressure is overdone for the near term, contributing to oversold signals and hammer candlesticks on most of the stocks.

“Also, some economists claimed that the economic impact stemming from the Covid-19 Omicron variant will be less severe than that in 2020,” it said in its Morning Pulse note today.

On the commodity markets, the brokerage firm said a mild rebound was noticed in both crude palm oil and crude oil prices.

It reckoned that the technology counters should continue to be in a sweet spot for investors considering its high earnings visibility going forward, coupled with the overnight rebound on Wall Street.

“Besides, the healthcare stocks may be traded actively, but upside might be capped after a significant rally,” it said.

Of the heavyweights, Maybank and CIMB dropped two sen each at RM8.03 and RM5.09 respectively, Public Bank added one sen to RM3.97 and Tenaga rose eight sen to RM9.34.

Petronas Chemicals and IHH were flat each at RM8.21 and RM6.60, respectively.

Of the actives, ATA IMS erased 9.5 sen to 42.5 sen, BCM Alliance eased one sen to 5.5 sen, and Borneo Oil was flat at 2.5 sen.

Among the top gainers, MPI rose 90 sen to RM49.76. Genetec was 50 sen higher at RM38.20, and KLK increased 28 sen to RM20.42.

On the index board, the FBM Emas Index climbed 26.78 points to 11,081.65, the FBMT 100 Index rose 26.26 points to 10,766.50, and the FBM Emas Shariah Index gained 35.81 points to 12,096.73.

The FBM 70 increased 67.09 points to 14,449.41 while the FBM ACE fell 1.47 points to 6,514.44.

Sector-wise, the Industrial Products and Services Index added 0.29 of-a-point to 192.34 and the Plantation Index perked 20.61 points to 6,376.93 but the Financial Services Index reduced 4.94 points to 15,038.47. ― Bernama

Ringgit opens slightly higher against US dollar in cautious trade

At 9am, the local note rose to 4.2360/2385 against the greenback from 4.2370/2395 at yesterday’s close. — Picture by Hari Anggara

KUALA LUMPUR, Nov 30 ― The ringgit opened slightly higher against the US dollar today in cautious trading as traders digested the news on the Omicron variant.

The greenback ended flat against the ringgit at yesterday’s close amid uncertainties surrounding the market and growing concerns over the global economic outlook, a dealer said.

At 9am, the local note rose to 4.2360/2385 against the greenback from 4.2370/2395 at yesterday’s close.

ActivTrades trader Dyogenes Rodrigues Diniz said after a long bullish movement that started at 4.1400, the US dollar had now touched a major resistance at 4.2400 against the ringgit and was starting to show signs of exhaustion in buying strength.

He said a bearish movement was likely to happen in the coming days, especially if the price managed to break below 4.2285.

The possible bearish move could take the price to the 4.2050 level in a few days’ time, where the US dollar rally against the ringgit was likely to resume, he told Bernama.

“From a macro perspective, the market has already started pricing a 0.75 per cent increase in the United States (US) interest rates as early as 2022 and this has the potential to further boost the greenback.

“If the interest rate does rise, the US dollar could target the 4.4450 region versus the ringgit in 2022,” he added.

Meanwhile, Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said that the prevailing market condition indicated that the situation was extremely fluid.

“There appears to be some relief over the Omicron as its symptoms have been said to be milder.

“This should provide some support to the ringgit but it remains highly uncertain as the investigations by scientists are still ongoing,” he said.

The local note was also traded mostly higher against a basket of major currencies at the opening, except the Singapore dollar.

It rose versus the British pound to 5.6419/6453 from 5.6517/6551 at Monday's close and improved vis-a-vis the euro to 4.7816/7844 from 4.7819/7847 yesterday.

The ringgit increased against the Japanese yen to 3.7213/7239 from 3.7376/7402 yesterday but depreciated versus the Singapore dollar to 3.0972/0997 from 3.0968/0990. ― Bernama

Twitter CEO Jack Dorsey hands reins to technology chief Agrawal

SAN FRANCISCO, Nov 30 — Twitter Inc Chief Executive Officer Jack Dorsey is stepping down from his role and Chief Technology Officer Parag Agrawal will now lead the company, the social networking site announced yesterday.

The appointment of Agrawal, a 10-year veteran of Twitter, signalled a tacit endorsement by the board of a strategy the company previously laid out to double its annual revenue by 2023, even if investors were not so sure.

Twitter shares surged nearly 10 per cent after the announcement and closed down 2.7 per cent.

Dorsey, who co-founded Twitter in 2006, is leaving after overseeing the launch of new ways to create content through newsletters or audio conversations while simultaneously serving as CEO of his payments processing company Square Inc

He also navigated the tumultuous years of US President Donald Trump’s administration before banning the Republican from the platform after the January 6 attack on the US Capitol.

The CEO change is effective immediately and Dorsey will remain on the board until his term expires at the 2022 annual shareholder meeting, the company said.

In an email to employees yesterday, Dorsey said he chose to step down due to the strength of Agrawal’s leadership, the naming of Salesforce Chief Operating Officer Bret Taylor as the new chairman of the board and his confidence in the “ambition and potential” of Twitter’s employees.

“I’m really sad ... yet really happy,” he wrote. “There aren’t many companies that get to this level,” adding that his move to step down “was my decision and I own it.”

“We recently updated our strategy to hit ambitious goals, and I believe that strategy to be bold and right,” Agrawal said in an email to employees. “But our critical challenge is how we work to execute against it and deliver results.”

Over the past year, Twitter has fought to end years-long criticism that it has been slow to introduce new features for its 211 million daily users and was losing ground to social media rivals like Instagram and TikTok.

Under Dorsey’s leadership, Twitter acquired email newsletter service Revue and launched Spaces, a feature that lets users host or listen to live audio conversations.

The company also rolled out advertising improvements to help brands find Twitter users likely to be interested in their product, a key component of the company’s goal to double annual revenue by 2023.

However, shares of Twitter have slumped in recent months, adding pressure on Dorsey to end his unusual arrangement of being CEO of two public companies.

In early 2020, Dorsey faced calls from Elliott Management Corp to step down, after the hedge fund argued that he was paying too little attention to Twitter while also running Square Inc

Dorsey fended off the pressure by giving Elliott and its ally, buyout firm Silver Lake Partners, seats on Twitter’s board.

In a joint statement issued after the announcement, Elliott Managing Partner Jesse Cohn and Marc Steinberg, a senior portfolio manager, endorsed the baton passing. “We are confident that they (Agrawal and Taylor) are the right leaders for Twitter at this pivotal moment for the company.”

Dorsey will now focus on leading Square and other pursuits such as philanthropy, a source familiar with the matter told Reuters.

The company’s board has been preparing for Dorsey’s departure since last year, the source said.

Engineering focus

The appointment of Agrawal as Twitter’s new CEO suggests the company has picked engineering as its top priority.

Agrawal has helped lead Twitter’s work on incorporating cryptocurrencies and blockchain technologies into the company and also pursue its long-term ambition to rebuild how social media companies operate.

He has been a key figure in Bluesky, a Twitter-funded organisation that is seeking to build a “decentralised” common standard for social media companies. Such a standard would allow different social platforms to operate on the same technology and let users post content across the services, for instance.

Bluesky’s work will likely take years to complete, Dorsey has said.

For now, investors are hoping Agrawal’s technical prowess will help Twitter’s advertising “engine” grow, said analysts from Baird Equity Research in a note yesterday.

Twitter earns the majority of its revenue from selling advertising on its website and app. But its ability to offer highly targeted advertising to drive product sales has lagged far behind larger rival Facebook, advertising experts have said.

The company previously said it sought to grow its highly targeted advertising segment to 50 per cent of its business — it currently constitutes just 15 per cent.

As investors digested the news, the market likely realised Agrawal’s “mountain to scale” to reach the company’s revenue targets and felt “some disappointment that a Twitter outsider hasn’t been brought in to offer fresh ideas,” said Susannah Streeter, an analyst at Hargreaves Lansdown. — Reuters

Fed’s Powell warns Omicron poses risks to US economy

Federal Reserve Chairman Jerome Powell has consistently said the recent spike in inflation would be transitory, but acknowledged that the factors pushing US prices higher will 'linger well into next year.' — Reuters pic

WASHINGTON, Nov 30 — The Omicron variant of Covid-19 could slow the recovery of the US economy and labour market and also heighten uncertainty regarding inflation, Federal Reserve Chair Jerome Powell said in testimony released yesterday.

Powell has consistently said the recent spike in inflation would be transitory, but acknowledged that the factors pushing US prices higher will “linger well into next year.”

The comments to be delivered to the Senate Banking Committee today indicate the central bank chief is growing more concerned about this year’s price increases, which has put pressure on the central bank to raise interest rates more quickly.

The Fed slashed interest rates to zero in the early days of the pandemic and flooded the financial system with liquidity, which together with massive government aid helped to prevent a more damaging economic downturn.

While the US economy has “continued to strengthen,” the resurgence of the pandemic has dragged on the recovery, starting with the arrival of the Delta variant over the summer, he said.

The latest strain, which first emerged in South Africa, has jolted global policy and health officials as they scramble to determine if Omicron is more infectious or more serious, and whether current vaccines will be as effective.

Financial markets tanked on Friday amid fears the global economy would suffer a severe setback, but rebounded yesterday.

“The recent rise in Covid-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity, and increased uncertainty for inflation,” Powell said.

“Greater concerns about the virus could reduce people’s willingness to work in person, which would slow progress in the labour market and intensify supply-chain disruptions.”

Those global snags have caused shortages of a variety of products, while pent up demand for goods also have contributed to a burst of price hikes.

Unpredictable inflation

Powell noted that inflation is running “well above” the Fed’s two-per cent goal, with the central bank’s preferred price gauge seeing a surge of five per cent for the 12 months ending in October.

“Supply chain problems have made it difficult for producers to meet strong demand, particularly for goods. Increases in energy prices and rents are also pushing inflation upward,” he said.

While the Fed still expects that “inflation will move down significantly over the next year as supply and demand imbalances abate,” Powell acknowledged the trend is “difficult to predict.”

Noting that rising prices hurt “those least able to shoulder the burden,” including Black and Hispanic families, he pledged to act to support the recovery and “prevent higher inflation from becoming entrenched.”

The Fed already has begun to pull back on its stimulus measures put in place to buffer the economy from the pandemic hit, but Powell has said policymakers can be patient before raising lending rates.

However, more Fed officials have signaled rates could be raised from zero in the middle of 2022, and possibly be followed by a second increase. Some private economists are predicting three hikes next year.

‘Eviscerate’ the recovery

Treasury Secretary Janet Yellen, who is due to testify in the Senate alongside Powell, said the US recovery is on track, with hiring averaging half a million positions per-month since the start of the year.

But she warned lawmakers that failing to raise the US debt limit would undermine that progress.

“I cannot overstate how critical it is that Congress address this issue. America must pay its bills on time and in full. If we do not, we will eviscerate our current recovery,” she said in her prepared testimony.

Yellen earlier this month said the Treasury will run out of funds on December 15 unless Congress raises or suspends the cap on borrowing. — AFP

World Bank considers releasing humanitarian aid for Afghanistan

World Bank's management will discuss the proposal at an informal board meeting today to re-direct funds from the Afghanistan Reconstruction Trust Fund 'to support humanitarian efforts through UN and other humanitarian agencies with presence and logistic capabilities in the country,' the source said, without providing further details.— AFP pic

WASHINGTON, Nov 30 — The World Bank will consider a compromise plan to release humanitarian aid for Afghanistan by shifting funds intended for rebuilding efforts, a source told AFP yesterday.

The bank’s management will discuss the proposal at an informal board meeting today to re-direct funds from the Afghanistan Reconstruction Trust Fund (ARTF) “to support humanitarian efforts through UN and other humanitarian agencies with presence and logistic capabilities in the country,” the source said, without providing further details.

The United Nations has warned that around 22 million Afghans, or more than half the country, will face an “acute” food shortage in the winter months due to the combined effects of drought caused by global warming and an economic crisis aggravated by the Taliban takeover in August.

The financial crunch worsened after Washington froze about US$10 billion (RM42.3 billion) of the country’s reserves and deteriorated further after the World Bank and International Monetary Fund halted Afghanistan’s access to funding.

The World Bank move is part of a compromise struck with the United Nations and the US government, and could shift up to US$500 million from the ARTF to humanitarian groups, according to a report by the Reuters news agency citing people familiar with the plan.

That would unlock aid but bypass the Taliban.

The next steps and timing of the release would be up to the ARTF donors, the source told AFP.

The fund currently has 34 donors and was “the largest single source of funding for Afghanistan’s development, financing up to 30 per cent of Afghanistan’s civilian budget, and supporting core functions of the government,” according to the website. — AFP

Investors cling to hope as Omicron spreads, shares rebound

NEW YORK, Nov 30 — A semblance of calm returned to world markets yesterday as investors waited for more details to assess the severity of the Omicron coronavirus variant on the world economy, allowing battered stocks and oil prices to rebound.

Global stocks rallied, oil prices bounced and safe-haven bonds lost ground as markets latched onto hopes the new variant would prove milder than initially feared.

The Dow Jones Industrial Average rose 236.6 points, or 0.68 per cent, to 35,135.94; the S&P 500 gained 60.61 points, or 1.32 per cent, at 4,655.23; and the Nasdaq Composite added 291.18 points, or 1.88 per cent, at 15,782.83.

The pan-European STOXX 600 ended up 0.7 per cent, logging its best day in a month and recovering some of Friday’s 3.7 per cent slump triggered by concerns around the newly discovered variant.

MSCI’s gauge of stocks across the globe gained 0.67 per cent.

News of the variant triggered alarm and a sell-off on Friday that wiped roughly US$2 trillion (RM8.4 trillion) off the value of global stocks as countries imposed new restrictions for fear the variant could resist vaccinations and upend a nascent economic reopening after a two-year global pandemic.

Omicron, detected in South Africa last week, has been found as far as Canada and Australia. The World Health Organisation said yesterday the heavily mutated variant poses a very high risk of infection surges.

Still, investors drew comfort from signs that its impact might not be as grave as feared. In South Africa a top infectious disease expert said existing Covid-19 vaccines are probably effective at preventing severe disease and hospitalisation.

“Right now the market is reacting positively to statements that this variant is not going to be a major issue but there still remains a fair amount of concern,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

A South African doctor who was one of the first to suspect a new strain said on Sunday patients so far appeared to have mild symptoms.

“It was reported the new strain of the virus is ‘unusual but mild’ and that seems to be the driving force behind the rally in stocks today,” said David Madden, market analyst at Equiti Capital.

MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.4 per cent, but found support ahead of its 2021 low. Japan’s blue-chip Nikkei fell 1.6 per cent as the country moved to bar foreigners to head off the Omicron strain.

Oil prices rallied, after plunging more than 10 per cent on Friday in their biggest one-day drop since April 2020.

US crude futures settled at US$69.95 per barrel, up 2.6 per cent. Brent futures settled at US$73.44 per barrel, up 1 per cent.

Speculation that oil producing group Opec and its allies, known as Opec+, may pause an output increase in response to the spread of Omicron aided the oil price rebound.

Shifting expectations

European Central Bank policymakers sought to reassure investors rattled by the new variant, arguing that the euro zone’s economy had learned to cope with successive waves of the pandemic.

This encouraged a move out of safe-haven bond markets, which had rallied on Friday as investors priced in the risk of a slower start to rate hikes by the US Federal Reserve, and less tightening by some other central banks.

Benchmark 10-year notes last fell 9/32 in price to yield 1.5141 per cent, from 1.485 per cent late on Friday day.

European sovereign bond yields rose , with latest inflation numbers highlighting the challenges ahead for the ECB.

German inflation is set to surpass the 5 per cent threshold in November for the first time in nearly three decades, regional data from several states suggested yesterday.

Gold prices eased, resuming a broad decline from the previous week, as the dollar firmed and risk sentiment recovered.

US gold futures settled 0.2 per cent lower at US$1,782.30.

The dollar index rose 0.07 per cent, with the euro down 0.32 per cent to US$1.1281. — Reuters

Wall Street rebounds after virus-related sell-off

Among the S&P’s 11 major sectors, technology was the leading percentage gainer, up 2.6 per cent, followed by the consumer discretionary sector, which closed up 1.6 per cent, with boosts from Amazon.com and Tesla Inc. — Reuters pic

NEW YORK, Nov 30 — Wall Street stocks closed higher yesterday, regaining some of the ground they lost in Friday’s sell-off, as investors were hopeful that the Omicron coronavirus variant would not lead to lockdowns after reassurance from US President Joe Biden.

The Nasdaq led gains among the major averages with help from the technology sector, while the S&P and the Dow advanced after suffering their biggest one-day percentage declines in months in Friday’s holiday-shortened session as investors worried that the latest Covid-19 variant would cause economic disruption.

Biden said yesterday that Omicron-related lockdowns were off the table for now and he urged Americans not to panic about the variant. However, he did recommend vaccination and mask wearing indoors to combat the virus and said the United States was working with pharmaceutical companies to make contingency plans if new vaccines were needed.

Those comments and indications from drug companies that they are taking the variant seriously were reassuring for investors, who had been anxious about the potential for further Covid restrictions.

“Friday was a major de-risking event. You had the market go back to its worst fears of Covid spreading and the return of lockdowns,” said Edward Moya, senior market analyst at OANDA.

“Now you’re starting to see there is some optimism when you listen to the President, when you listen to the Pfizer CEO. The Omicron panic is easing, and we’re into a period of wait and see.”

Vaccine makers such as Pfizer, its partner BioNTech and their rivals Moderna and Johnson & Johnson said yesterday they are working on vaccines that specifically target Omicron in case existing shots are not effective against the variant. nFWN2SK0VH]

“It’s not like the start of the pandemic all over again,” said Carol Schleif, deputy chief investment officer for the BMO family office in Minneapolis who also noted that after Friday’s knee-jerk reaction, investors have been trained this year to buy the dip. “People are willing to just take a deep breath and try to reassess, be a little more patient.”

The Dow Jones Industrial Average rose 236.6 points, or 0.68 per cent, to 35,135.94, the S&P 500 gained 60.65 points, or 1.32 per cent, to 4,655.27 and the Nasdaq Composite added 291.18 points, or 1.88 per cent, to 15,782.83.

Among the S&P’s 11 major sectors, technology was the leading percentage gainer, up 2.6 per cent, followed by the consumer discretionary sector, which closed up 1.6 per cent, with boosts from Amazon.com and Tesla Inc.

Other big boosts from single stocks in the S&P came from Microsoft and Apple Inc, which gained ground after HSBC raised its price target for the iPhone maker.

While the Dow advanced, it underperformed its peers with pressure from Merck & Co Inc, which closed down 5.4 per cent. The drugmaker extended losses from Friday when updated data from a study of its experimental Covid-19 pill showed lower efficacy in reducing risk of hospitalisation and deaths than previously reported.

Britain said it would offer a Covid-19 booster vaccine to all adults and give second doses to children aged between 12 and 15, in light of concern about the spread of the Omicron variant. It also said Moderna and Pfizer vaccines were the preferred boosters.

After the US market close, the US Centres for Disease Control and Prevention said everyone aged 18 years and older should get boosters six months after Pfizer or Moderna Covid vaccines or two months after a Johnson & Johnson shot.

Moderna rose 11.8 per cent on the day, while Pfizer fell almost 3 per cent and Johnson & Johnson rose 0.34 per cent.

The Philadelphia semiconductor index outperformed the broader market with a 4 per cent gain as chipstocks rose broadly. Nvidia provided the biggest boost with a 5.9 per cent gain.

Tesla’s shares gained 5 per cent after a report that chief Elon Musk urged employees to reduce the cost of vehicle deliveries.

Twitter Inc closed down 2.7 per cent, reversing early gains after the social media firm said CEO Jack Dorsey will step down and be succeeded by Chief Technology Officer Parag Agrawal. Dorsey had been in the unusual position of having the CEO job at two major technology companies, the second being digital payments firm Square Inc

Advancing issues outnumbered declining ones on the NYSE by a 1.31-to-1 ratio; on Nasdaq, a 1.35-to-1 ratio favoured decliners.

The S&P 500 posted 16 new 52-week highs and 21 new lows; the Nasdaq Composite recorded 39 new highs and 344 new lows.

On US exchanges, 11.13 billion shares changed hands yesterday compared with the 10.84 billion average for the last 20 sessions. — Reuters

From Hollywood to Detroit, pandemic-weary companies cautious on Omicron

The WHO warned yesterday the Omicron variant carries a very high global risk of infection surges. — Reuters pic

NEW YORK, Nov 30 — Pandemic-weary corporations struggled to assess the impact of the new Omicron variant of the coronavirus yesterday, with industries from Hollywood movie studios to airlines and autos awaiting more details to help determine how it might affect their operations and profits.

The World Health Organisation warned yesterday the Omicron variant carries a very high global risk of infection surges. Spooked investors wiped roughly US$2 trillion (RM8.4 trillion) off global stocks on Friday, but markets regained some ground yesterday.

Countries have swiftly imposed bans on travel from southern Africa, where the variant was first uncovered. Japan and Israel went even further, announcing bans on all foreign visitors.

Some airlines said they were not heavily changing schedules, but industry sources said big carriers moved swiftly to protect their hubs by curbing passenger travel from southern Africa.

Ryanair Chief Executive Michael O’Leary saw no reason to cancel flights although he was worried about some countries potentially shutting air travel. Lufthansa, Germany’s flagship airline, said its flights were still well booked.

US President Joe Biden met with chief executives of major retailers and other companies yesterday to discuss how to move goods to shelves as the US holiday shopping season begins in the shadow of Omicron.

Before the meeting, Walmart CEO Doug McMillon cited improvement in the supply chain, noting the retailer had seen a 26 per cent increase in shipping containers going through US ports over the past four weeks.

US Commerce Secretary Gina Raimondo said yesterday it was too soon to tell if Omicron will have any impact on global supply chains.

The prospect of a fast-spreading variant has raised fears of a return of the sort of restrictions that shut down a swathe of industries in 2020.

In Hollywood, where production on film and television shows returned to pre-pandemic levels this summer thanks to stringent health and safety precautions, the studios were waiting to learn more about this latest mutation of the coronavirus.

“With Covid, it keeps shape shifting. It’s like mercury — we can’t get our hands around it,” said Dr Neal Baer, a physician who was a longtime producer of Law & Order: Special Victims Unit.

“It’s going to take a couple of weeks for us to know, one, how well vaccinations protect us, two, whether you need a booster and whether a booster helps or three, whether the vaccine needs to be modified to make it effective against this mutation.”

In the United States, auto plants were closed for two months last year. Even after automakers restarted operations, they have curtailed production schedules due to semiconductor chip shortages and other supply-chain constraints. Automakers said it was too soon to predict the impact of Omicron.

“This is new,” Nissan Motor Co’s US spokeswoman Lloryn love-Carter said. “We’re monitoring of course, but we still have a lot of pretty strict Covid protocols in place.”

General Motors Co, the largest US automaker, said it was watching closely and its Covid-19 safety protocols remain in place at its plants.

“We continue to strongly encourage our employees to get vaccinated given the broad availability of safe and highly efficacious vaccines,” GM spokeswoman Maria Raynal said in an email. “We will continue to review and adjust our protocols as new information regarding this variant becomes available.”

Toyota Motor Corp said its US management team will meet today to discuss the Omicron variant.

“Right now we’re in the ‘gathering info’ mode,” Toyota’s US spokesman Scott Vazin said. “Since most of our employees are based in plants, we’ve never stopped Covid protocols such as social distancing, health screenings, masking up.” — Reuters

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Tech rally lifts Wall Street from Omicron-driven slump, Twitter surges

The Twitter logo is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York September 28, 2016. — Reuters pic

NEW YORK, Nov 29 — Gains in heavyweight technology stocks drove Wall Street indexes higher today as investors rushed to take advantage of steep virus-driven losses, with Twitter up on reports that chief Jack Dorsey is expected to step down.

The S&P technology and the communication services subindexes jumped more than 1 per cent each, indicating that investors were likely favouring pandemic-resistant technology stocks amid growing fears of the newly discovered Omicron variant.

The S&P 500 energy index jumped 3 per cent in early trade and was the best performer among its peers, as oil prices rebounded from Friday’s sell-off. A recovery in Treasury yields also pushed the banks index 0.8 per cent higher.

Twitter Inc surged as much as 11 per cent after reports said Dorsey intended to step down. Dorsey had faced some pressure in 2020 to step down over allegations that he was paying too little attention to Twitter while also running payments processing company Square Inc.

Wall Street indexes had slumped between 2.0 per cent and 3.5 per cent on Friday after news of the coronavirus variant triggered a global sell-off, as countries introduced new travel curbs on fears the Omicron variant could resist vaccinations and upend a nascent economic reopening.

US President Joe Biden is due to update the public on the variant and the country’s response later in the day, the White House said.

Travel stocks, among the worst hit during Friday’s sell-off, marked strong gains. Shares of major airline operators rose between 0.7 per cent and 2.6 per cent after plummeting 3 per cent to 9 per cent on Friday.

“If Omicron did become a major issue, it would have to be bigger than the Delta waves which we just went through. There’s no question that the (Fed) taper would either be paused or delayed,” said Thomas Hayes, managing member, Great Hill Capital LLC, New York.

“You may get a little whiplash back and forth with headlines in coming weeks, but on balance, people need to have exposure into year end.”

At 9.46am ET, the Dow Jones Industrial Average was up 129.10 points, or 0.37 per cent, at 35,028.44 and the S&P 500 was up 39.39 points, or 0.86 per cent, at 4,634.01. The Nasdaq Composite was up 167.76 points, or 1.08 per cent, at 15,659.41.

Gains in the Dow Jones were stifled by Merck & Co Inc , which dropped 4.7 per cent, adding to a 3.8 per cent fall on Friday after updated data from study of its experimental Covid-19 pill showed lower efficacy in reducing risk of hospitalization and deaths than previously reported.

Among other stocks, casino operators Wynn Resorts and MGM Resorts International slipped 1.9 per cent and 0.4 per cent, respectively, tracking losses in their Macau units, which were rattled by arrests over alleged links to cross-border gambling and money laundering.

Advanced Micro Devices rose 2 per cent following a report electric-car maker Tesla Inc has started using a new AMD chip in Model Y vehicles in China.

Tesla’s shares gained 3.5 per cent after a report that chief Elon Musk urged employees to reduce cost of vehicle deliveries.

Apple Inc gained 1.7 per cent after HSBC raised its price target on the iPhone maker’s stock.

Advancing issues outnumbered decliners by a 2.46-to-1 ratio on the NYSE and by a 1.51-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and no new lows, while the Nasdaq recorded 20 new highs and 59 new lows. — Reuters

Cyber Monday spending expected to slow as shoppers see fewer deals

Amazon packages are transported by conveyor belts inside of an Amazon fulfilment centre on Cyber Monday in Robbinsville, New Jersey December 2, 2019. — Reuters pic

NEW YORK, Nov 29 — US retailers are estimated to generate online sales of up to US$11.3 billion (RM47 billion) on Cyber Monday, a decline in growth from a year earlier as fewer discounts and limited choices due to global supply chain disruptions deter shoppers.

Retailers had also spread out promotional deals across more weeks this year to protect profit margins from surging supply chain costs and to better manage inventories amid widespread product shortages ahead of the Christmas shopping season.

Those attempts have pinched sales on what are traditionally some of the biggest shopping days of the year, with Adobe Analytics data over the weekend showing spending online during Black Friday fell for the first time ever.

“Online sales on big shopping days like Thanksgiving and Black Friday are decreasing for the first time in history, and it is beginning to smooth out the shape of the overall season,” said Taylor Schreiner, director, Adobe Digital Insights.

US spending on Cyber Monday, which gained popularity in the mid-2000s, is expected to be between US$10.2 billion and US$11.3 billion, according to estimates from Adobe.

That translates to roughly flat growth at the midpoint compared to last year’s US$10.8 billion, which was a near 15 per cent jump from 2019.

Excitement on social media around Cyber Monday is also ebbing.

“Cyber Monday continues to be extremely relevant, particularly in the digital world, but the buzz has been more muted than we’ve seen in recent history,” said Rob Garf, general manager of retail at Salesforce.

Discount rates in the United States in the week leading up to Cyber Monday were on average 8 per cent lower than they were last year, according to Salesforce.

The holiday season kicks off just as the new Omicron coronavirus variant has triggered uncertainty over the economic reopening, but experts say it is too early to predict the impact on consumer spending. — Reuters

‘Omicron’ the cryptocurrency rides new variant rollercoaster

Syringes with needles are seen in front of a displayed stock graph and words ‘Omicron SARS-CoV-2’ in this illustration taken, November 27, 2021. — Reuters pic

LONDON, Nov 29 — As global markets fell last week on news of the new Omicron coronavirus variant, one cryptocurrency with the same name soared after the Greek letter entered the investor lexicon.

The price of the hitherto-obscure digital token, whose Twitter feed has little more than 1,000 followers, rose almost ten-fold from Friday to this morning when it hit US$688 (RM2,916), before tumbling as much as 75 per cent, crypto tracker CoinGecko said.

Omicron the token, which its website describes as “a decentralized treasury-backed currency protocol,” was trading at about US$371 at 1435 GMT. On Thursday it was worth about US$65.

The World Health Organization, which on Friday named the new Covid-19 variant Omicron, said as more countries reported cases it carries a “very high” global risk of surges, although scientists have said it could take weeks to understand its severity.

Bitcoin suffered its worst day in two months on Friday, dropping by more than 8 per cent as investors dumped stocks and other riskier assets in favour of perceived safe havens like the dollar. It has since recovered nearly all of its losses, with global markets gaining a semblance of calm on Monday.

From “squid game” to dogecoin, minor cryptocurrencies have this year benefitted from links to memes or web culture, recording rapid booms and busts while more mainstream names such as bitcoin soar in popularity.

It was not clear when the Omicron token was launched. Data on its price at CoinGecko was only available from November 8, while a Telegram channel under the name OmicDAO was launched a day earlier.

Reuters was not able to reach anyone representing Omicron for comment. — Reuters

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