Archives for: Analysis Category

 

A planned high-speed railway stretching some 7,000 kilometers between Moscow and Beijing will cost about 7 trillion rubles ($153 billion) to build, a Russian Railways executive was quoted as saying Friday.

Over half of the sum, or 4 trillion rubles ($87.5 billion), is expected to come from Chinese investors, said Alexander Misharin, who heads Russian Railways’ subsidiary High-Speed Rail Lines, news agency TASS reported.

Russia and China signed a memorandum of cooperation on the development of a high-speed rail network in mid October that included construction of a high-speed rail line from Moscow to Beijing.

Trains are expected to hurtle along the new line at an average speed of 400 kilometers per hour, cutting the travel time between the two cities from the current 6 or more days to about 33 hours.

A high speed link between Moscow and Kazan, almost 800 kilometers to the east, is intended as the first section of the continent-spanning new railroad. But it is not clear who will foot the 1 trillion rubles ($21 billion) bill for the project. >> Read More

China ends world’s oldest monopoly

22 November 2014 - 11:00 am
 

The world’s oldest monopoly has crumbled.

The Chinese government this week dissolved its salt monopoly, ending the state’s control over a sector that has been in place since the 7th century BC as it pursues market reforms and a streamlined bureaucracy.


The importance of the salt revenues for ancient Chinese states gave rise to a number of philosophical debates over the utility and morality of indirect taxes. The most famous of these adumbrated modern Communist China: that a strong state, rather than private merchants, underpins a strong economy.

Similar debates may persist but the role of salt itself has diminished hugely: indeed China National Salt Industry Corp, which functions as both salt regulator and marketer, is now a recipient of state largesse, pocketing Rmb720m ($118m) in subsidies in 2012.

“It’s only a small portion of national revenues. There’s no reason to have so many people involved up and down the bureaucratic chain,” says Ma Wanfeng, of Beijing Orient Agribusiness Consultant. >> Read More

 

On November 30, Swiss nationals head to the polls on three separate issues: abolishing a flat tax on resident, non-working foreigners, an immigration cap, and a proposal on Swiss gold reserves. As Visual Capitalist notes, the one we are most interested in is the latter section of the ballot, and today’s infographic sums up everything you need to know about the upcoming Swiss gold referendum.

The referendum, if passed, will mean that (1) The Swiss National Bank must hold 20% of all assets as gold, (2) Switzerland will repatriate the 30% of their gold held abroad by England and Canada, and (3) Switzerland may no longer sell any gold they accumulate.

In the most recent polling, 38% of respondents supported the initiative, 47% were against, and 15% were undecided. The poll has a 3% margin of error as well. While support is down from the previous poll, anything is still possible on November 30th.

Switzerland currently holds 1,040 tonnes, or 7.7% of its reserves in gold. The country actually holds the highest amount of gold per capita (4.09 oz per citizen). However, it used to be an even bigger holder of the yellow metal. In 2000, the SNB held 2,500 tonnes of gold and it has also been the biggest national seller since.

The implications of the vote are huge. With a “yes”, the SNB would have to purchase at least 1,500 tonnes of gold to meet the 20% threshold for 2019. That’s about half the world’s annual production. It would also put Switzerland back in the top three for most gold holdings worldwide.

>> Read More

 

India’s forex reserves rose by $419.4 million to $315.551 billion in the week to November 14, driven by a rise in foreign currency assets.

According to data released by the Reserve Bank today, reserves had dipped by $778.4 million to $315.131 billion in the previous week.

The foreign currency assets, a major constituent of the overall reserves, increased by $422.7 million to $290.062 billion, the central bank said.

Foreign currency assets, expressed in dollar terms, include the effect of appreciation and depreciation of non-US currencies such as the euro, pound and the yen held in reserves.

Despite a spike in gold prices, the country’s gold reserves remained unchanged at $19.738 billion.

The special drawing rights (SDRs) were down by $2.4 million to $4.229 billion, while the country’s reserve position with the IMF declined by $0.9 million to $1.521 billion during the week, the RBI data showed.

Positives & Negatives of This Week

22 November 2014 - 9:06 am
 

Positives:

1. The Philly fed came in at 40.8, vs expectations of 20.7. This was the best reading since 1993!
2. The S&P 500 and Dow Jones both made new all-time highs, the third consecutive week both did so.
3. Headline CPI was flat m/o/m and is up 1.7% y/o/y. Core CPI rose 0.2% m/o/m and is up 1.8% y/o/y.
4. The BOJ called off next year’s tax hike after seeing lousy GDP numbers, stocks liked it.
5. Existing home sales came in at 5.26mm, better than expected and up from 5.18mm in September.
6. The purchase component of mortgage applications rose 11.7% w/o/w, the biggest rise since July.
7. China cut rates and Draghi spoke with an accommodative tone; it’s the same global story, stocks went higher.
8. The highest percentage of S&P 500 companies are beating EPS since 2010.
9. Energy prices fell 1.6% y/o/y/.
10. The NAHB home builder sentiment index rose to 58 versus 55 expected and up from 54 last month.

Negatives: >> Read More

 

US GDP

On Tuesday, a second reading of US third quarter economic activity arrives. Wall Street economists forecast activity will be revised down modestly to a 3.3 per cent quarter-on-quarter annualised gain, compared to a 3.5 per cent preliminary reading.

Economists at Bank of America expect that a wider trade deficit, weaker construction spending and the possibility of a downward revision to government spending could weigh on US economic growth. They add an uptick in consumer spending may offset those declines.

Global GDP

Also on the agenda next week are third quarter GDP readings from Germany, the UK, Brazil, Canada, South Africa and eastern European countries.

Wall Street economists expect Germany, Europe’s largest economy, to grow 0.1 per cent from the previous quarter and 1.2 per cent from the previous year. Meanwhile, the UK economy is expected to expand 0.7 per cent from the previous quarter, and 3 per cent from the previous year.

Opec meeting

Following a 30 per cent decline in the price of Brent crude, the global oil benchmark, many analysts expect Opec to announce measures to stabilise prices when oil ministers from the oil cartel meet in Vienna on November 27. >> Read More

 

bovespa-blast

Brazilian markets rose on Friday on reports that Brazil’s President Dilma Rousseff has appointed a former treasury secretary, Joaquim Levy, as finance minister.

The benchmark iBovespa stock index rose 5 per cent to 56,084 points on the reports while the Brazilian real strengthened 2.3 per cent to R$2.52 against the dollar.

Mr Levy, who won a reputation as fiscally responsible when he served under Ms Rousseff’s predecessor Luiz Inácio Lula da Silva as treasury secretary in 2003, will replace Guido Mantega, the embattled finance minister of her first term, according to local media, including business newspaper Valor Econômico, without naming sources.

The reports could not be immediately confirmed with the presidential palace in Brasília. Mr Levy did not return a call for comment >> Read More

Overnight US Market

22 November 2014 - 8:38 am
 

The Dow and S&P 500 hit new closing highs Friday, registering a fifth straight week of stock gains.

The Dow Jones industrial average climbed 91 points, or 0.5% to a new all-time finishing high of 17,810.06.

Up 11 points, or 0.5%, was the Standard & Poor’s 500. The index settled at its new closing high of 2063.50.

The Nasdaq composite index added 0.2%.

Global markets rallied sharply as central bankers from China and Europe reiterated their support for markets and struggling economies abroad.

The global rally was sparked after China announced a surprise interest rate cut and the European Central Bank chief Mario Draghi said the ECB is ready to take additional steps to stimulate the weak Eurozone economy. >> Read More

 

You know the market is a joke when Italian stocks rally almost 4% on hints of the European Central Bankbuying Italian bonds when they’re already at record low rates. Here are the changes for the main equity markets in Europe:

  • UK FTSE +1.2%
  • German DAX +2.6%
  • French CAC +2.7%
  • Italy MIB +3.9%
  • Spain IBEX +3.2%

The Italian MIB is a nice looking chart:

Italy MIB daily

 

Russia is discussing the possibility of cutting oil production to support prices, the country’s energy minister said on Friday.

The comments come a week before one of the most closely-watched meetings in years for Opec, the oil producers’ cartel of which Russia is not a member, following a tumble in oil prices to a four-year low

Alexander Novak told journalists that the question of cutting production “requires careful consideration” and that the government had not yet made a decision.

Separately, Saudi Arabia’s foreign minister met his Russian counterpart in Moscow on Friday, and the two ministers “expressed their willingness to cooperate on energy and oil market issues”, according to the Russian foreign ministry.

Igor Sechin, the powerful chief executive of state oil company Rosneft, will travel to Vienna ahead of the Opec meeting next week to participate in a conference “on the development of the world oil market” with Venezuela. >> Read More

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Technically Yours,
Team ASR,
Baroda, India.