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Current Affairs – 26 February 2021


WORLDWIDE: HEADLINES 

 

China’s economy could grow 8-9% in 2021 under ‘usual circumstances’: central bank adviser 

BEIJING – China’s gross domestic product (GDP) could grow 8-9% in 2021 under “usual circumstances”, and by over 15% year-on-year in the first quarter, Liu Shijin, a policy adviser to the People’s Bank of China, said on Friday.

 

This would be a result of 2020’s low base, and would not mean China has returned to a “high-growth” period, said Liu. China’s economy grew 2.3% last year amid significant disruptions caused by the pandemic.

 

If 2020 and 2021’s average GDP growth is around 5%, this would be a “not bad” outcome, he said, speaking at an online conference.

 

Full coverage: REUTERS 

 

 

Kia shares rise after report says still scope for Apple partnership 

SEOUL – Shares in Kia Corp rose as much as 8.1% on Friday after a South Korean online news site said there was still potential for the automaker to form a partnership with Apple Inc.

 

Shares in Hyundai Motor Co and its affiliate Kia were roiled earlier this year after Hyundai initially confirmed early stage talks with the tech-giant on autonomous electric cars, but later said they were no longer in talks.

 

Online site Chosun Biz said on Friday that Apple and Kia had signed a memorandum of understanding (MOU) last year and had agreed to pursue cooperation in eight sectors, including electric vehicles. It said negotiations on electric vehicles had not been completely cancelled.

 

“Even if the negotiations on electric vehicles fail, there are many items that can be negotiated in other fields, so we are still optimistic about the possibility of partnership between the two sides,” Chosun cited an unnamed source familiar with negotiations between Hyundai and Apple as saying.

 

Aside from electric vehicles, Kia and Apple are also discussing cooperation in “last mile” mobility, or transport to complete a final short distance to a destination after using another means of transportation, Chosun said.

 

A Hyundai Motor Group spokesperson and Apple had no immediate comment.

 

Full coverage: REUTERS 

 

 

WORLDWIDE: FINANCE / MARKETS  

 

Oil prices fall on rising U.S. dollar, expectations for supply gains 

MELBOURNE – Oil prices fell on Friday as a collapse in bond prices led to gains in the U.S. dollar and expectations grew that with oil prices back above pre-pandemic levels, more supply is likely to come back to the market.

 

U.S. West Texas Intermediate (WTI) crude futures dropped 36 cents, or 0.6%, to $63.17 a barrel at 0241 GMT, giving up all of Thursday’s gains.

 

Brent crude futures for April fell 18 cents, or 0.3%, to $66.70 a barrel, following a 16 cent loss on Thursday. The April contract expires on Friday. The more active May contract fell 32 cents, or 0.5%, to $65.79.

 

“Bonds are selling off reasonably aggressively and the U.S. dollar has firmed this morning. That’s providing a bit of a headwind for crude oil this morning,” said Lachlan Shaw, National Australia Bank’s head of commodity research.

 

A stronger greenback makes U.S.-dollar priced oil more expensive for those buying crude in other currencies.

 

Despite the drop in prices on Friday, both Brent and WTI are on track for gains of about 20% this month, as markets have grappled with supply disruptions in the United States, while optimism has built for demand to improve with vaccine rollouts.

 

Investors are betting that next week’s meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies, together called OPEC+, will result in more supply coming back to the market, given the recent jump in prices and expectations that demand will improve as pandemic lockdowns ease heading into the northern hemisphere summer.

 

Full coverage: REUTERS 

 

 

Asian markets roiled as bond rout turns ‘lethal’ 

SYDNEY/MIAMI – Asian stocks skidded to one-month lows on Friday as a rout in global bond markets sent yields flying and spooked investors amid fears the heavy losses suffered could trigger distressed selling in other assets.

 

The scale of the selloff prompted Australia’s central bank to launch a surprise bond buying operation to try and staunch the bleeding, helping yields there come off early peaks.

 

Yields on the 10-year Treasury note eased back to 1.494% from a one-year high of 1.614%, but were still up a startling 40 basis points for the month in the biggest move since 2016.

 

“The fixed income rout is shifting into a more lethal phase for risky assets,” says Damien McColough, Westpac’s head of rates strategy.

 

“The rise in yields has long been mostly seen as a story of improving growth expectations, if anything padding risky assets, but the overnight move notably included a steep lift in real rates and a bringing forward of Fed lift-off expectations.”

 

Markets were hedging the risk of an earlier rate hike from the Federal Reserve, even though officials this week vowed any move was long in the future.

 

Fed fund futures are now almost fully priced for a rise to 0.25% by January 2023, while Eurodollars have it discounted for June 2022.

 

Even the thought of an eventual end to super-cheap money sent shivers through global stock markets which have been regularly hitting record highs and stretching valuations.

 

MSCI’s broadest index of Asia-Pacific shares outside Japan slid 2.4% to a one-month low, while Japan’s Nikkei shed 2.5%.

 

Chinese blue chips joined the retreat with a drop of 2.5%.

 

NASDAQ futures fell 0.5% after a sharp drop overnight, while S&P 500 futures eased 0.1%. EUROSTOXX 50 futures lost 1.2% and FTSE futures 1.1%.

 

Full coverage: REUTERS 

 

 

Dollar firms after U.S. yield spike; yen continues march lower 

TOKYO – The U.S. dollar held gains Thursday after rebounding overnight from three-year lows following a spike in U.S. bond yields.

 

The yen, which tends to weaken when U.S. yields rise, slid to a fresh six-month low versus the greenback.

 

Government bonds, and particularly U.S. Treasuries, have become the focal point of markets globally, which have aggressively moved to price in earlier monetary tightening than signalled by the Federal Reserve and its peers.

 

The yen’s decline came even amid a sell-off in stocks, as the surge in yields fomented inflation worries. The yen and dollar are both traditional haven currencies.

 

Emerging-market and commodity-linked currencies retreated, with the Australian and Canadian dollars stepping back from three-year highs.

 

“The fixed income rout is shifting into a more lethal phase for risky assets,” after initially being interpreted as a “story of improving growth expectations,” Westpac strategists wrote in a client note.

 

“It appears to be the case that bond markets are ‘taking on’ the central bankers’ world view, and standing in front of the current momentum is unwise.”

 

Bond yields have climbed this year on the outlook for massive fiscal stimulus amid continued ultra-easy monetary policy, led by the United States.

 

The benchmark 10-year Treasury yield spiked above 1.6% overnight for the first time in a year, after an auction of $62 billion of 7-year notes was met with weak demand.

 

The dollar index edged up to 90.381, holding on to a 0.2% rise from Thursday, when it rebounded from losses of as much as 0.26% before the bond tender.

 

The greenback was little changed at 106.2 yen after earlier touching 106.43 for the first time since September. It has strengthened 2.8% after the first back-to-back monthly increases since mid-2018, putting the yen among the worst performing major currencies this year.

 

The Australian dollar continued its retreat after topping $0.80 on Thursday for the first time since February of 2018, declining 0.2% to 0.78525.

 

The Canadian dollar weakened to C$1.2613 after falling from its own three-year top to the greenback at C$1.2468 overnight.

 

The euro weakened 0.1% to $1.2158 after touching a seven-week high of $1.22435 on Thursday.

 

Full coverage: REUTERS 

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