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Jumat, 09 Agustus 2019

US producer prices rise 0.2%; underlying inflation muted - CNBC

U.S. producer prices increased moderately in July, lifted by a rebound in the cost of energy products, while underlying producer inflation retreated, which could allow the Federal Reserve to cut interest rates again next month.

The Labor Department said on Friday its producer price index for final demand rose 0.2% last month after nudging up 0.1% in June. In the 12 months through July the PPI increased 1.7% after advancing by the same margin in June.

Economists polled by Reuters had forecast the PPI would rise 0.2% in July and increase 1.7% on a year-on-year basis.

Excluding the volatile food, energy and trade services components, producer prices edged down 0.1% last month. That was the first decline since October 2015 and followed an unchanged reading in June. The so-called core PPI increased 1.7% in the 12 months through July after rising 2.1% in June.

The Fed, which has a 2% inflation target, tracks the core personal consumption expenditures (PCE) price index for monetary policy. The core PCE price index increased 1.6% on a year-on-year basis in June and has undershot its target this year.

Financial markets have fully priced in a rate cut following a recent escalation in the bitter trade war between the United States and China, which led to an inversion of the U.S. Treasury yield curve and raised the risk of a recession.

Muted inflation could boost expectations for a half-percentage-point cut at the Fed's Sept. 17-18 policy meeting. Worries about the trade war's impact on the U.S. economic expansion, the longest on record, prompted the U.S. central bank to lower its short-term rate last week for the first time since 2008.

U.S. tariffs on Chinese goods so far have had a marginal impact on inflation as they have mostly been on capital goods.

That could change after President Donald Trump announced last week an additional 10% tariff on $300 billion worth of Chinese imports starting Sept. 1. The new tariffs would affect mostly consumer goods.

In July, wholesale energy prices rebounded 2.3% after falling 3.1% in the prior month. They were boosted by a 5.2% percent jump in gasoline prices. Goods prices increased 0.4% last month, reversing June's 0.4% decline.

Energy prices accounted for more than 80% of the rebound in the cost of goods last month.

Wholesale food prices rose 0.2% in July after advancing 0.6% in June. Core goods prices edged up 0.1% after being unchanged for three straight months.

The cost of services fell 0.1% in July, the first decrease since January, after rising 0.4% in June. Services were pulled down by a 4.3% drop in the cost of hotel and motel rooms.

The cost of healthcare services edged up 0.1% last month after rising 0.2% in June. Those healthcare costs feed into the core PCE price index.

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2019-08-09 12:33:19Z
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Stock market news: August 9, 2019 - Yahoo Finance

Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S. REUTERS/Brendan McDermid

U.S. stock futures were lower Friday, as U.S.-China trade tensions continued to keep investors on edge around the world.

Here were the main moves in the market, as of 8 a.m. ET:

S&P futures (ES=F): -0.63%, or -18.50 points
Dow futures (YM=F): -0.55%, or -144 points
Nasdaq futures (NQ=F): -0.83%, or -64.50 points
10-year Treasury yield (^TNX): +3.2 bps to 1.716%
Crude oil (CL=F): +1.20% to $53.17 per barrel

It has been a tumultuous week for the markets, as the trade war, and now currency war, rages on between the U.S. and China. The People’s Bank of China (PBOC) set the yuan’s daily fixing at 7.0136 per U.S. dollar on Friday. This move was the second time this week that the official reference rate was weaker than 7, and the rate was the weakest since April 3, 2008. Nevertheless, Friday’s yuan rate was still stronger than what analysts were expecting.

The yuan has been on market watchers’ radars after the yuan weakened past the key psychological level of 7-per-dollar on Monday. That send markets into a frenzy, and stocks posted their worst day of 2019. It has been a choppy trading week since, as more uncertainty gets pumped into the market.

Meanwhile, crude oil is also in focus after the International Energy Agency (IEA) reported on Friday that demand growth is at its lowest level in over a decade. The agency noted that global oil demand growth in the first half of this year was the slowest since the financial crisis. With China being the only major source of growth, the IEA lowered its global demand forecast to 1.1 million barrels per day for 2019 and 1.3 million barrels per day for 2020.

Huawei is grabbing the attention of investors after announcing that it has launched its own operating system called HongmengOS, or HarmonyOS in English. CEO of Huawei’s consumer division, Richard Yu, made the announcement at the Huawei Developer Conference. This new operating system allows Huawei to be less reliant on Google’s (GOOGL) Android. Google’s parent company, Alphabet, stock was lower by 1.3% in pre-market trade.

Investors are also keeping an eye on ride-sharing companies Uber (UBER) and Lyft (LYFT). Uber’s weaker-than-expected second quarter earnings sent the stock tumbling more than 7% in pre-market trade. Adjusted sales were worse than what analysts were expecting, and Uber reported a shocking $5.24 billion net loss in the second quarter. That was Uber’s largest quarterly net loss ever. Uber’s report comes on the heels of Lyft’s much better-than-expected results. Gross bookings in the second quarter also fell short of expectations at $15.76 billion. Analysts expected $15.83 billion in gross bookings. Uber posted an adjusted EBITDA loss of $656 million, which was a 25% decline from last quarter.

“Our platform strategy continues to deliver strong results, with Trips up 35% and Gross Bookings up 37% in constant currency, compared to the second quarter of last year,” CEO Dara Khosrowshahi said in a statement. “In July, the Uber platform reached over 100 million Monthly Active Platform Consumers for the first time, as we become a more and more integral part of everyday life in cities around the world.”

Uber expects between $65 billion to $67 billion in gross bookings this year and expects adjusted EBITDA losses between $3.2 billion to $3 billion. The company did not give an adjusted net revenue forecast. Khosrowshahi also noted that Uber would be upping its marketing spend despite having cut 400 market employees recently. The question among investors remains whether or not Uber can continue its growth while attempting to simultaneously achieve profitability.

—

Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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2019-08-09 12:02:00Z
52780347148725

Oil Price Fundamental Daily Forecast – IEA Cuts Oil Demand Growth - FX Empire

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher on Friday shortly before the regular session opening after clawing back earlier losses. Helping to keep a lid on prices are concerns that the trade dispute between the United States and China will lead to a global economic slowdown and lower demand. However, the market is also being underpinned by expectations of more OPEC production cuts.

At 09:03 GMT, September WTI crude oil is at $52.82, up $0.28 or +0.51% and October Brent crude oil is at $57.81, up $0.43 or +0.84%.

U.S.-China Relations Worsen

There is not much optimism over the U.S. and China reaching a trade deal anytime soon. Conditions could even worsen as both try to force the other side into making an unfavorable deal. President Trump raised tensions a week ago when he announced new tariffs on China. Then the world’s second largest economy retaliated by letting its currency drift below the psychologically important 7 yuan to the dollar level, and cancelling all U.S. agricultural deals.

Crude will have very little chance of sustaining a rally if the U.S. and China continue to try to weaken each other’s stance.

IEA Cuts Demand Growth Forecast

Earlier today, the International Energy Agency (IEA) cut its global oil demand growth forecasts for this year, citing fears of an economic downturn. The energy agency now expects oil demand growth to reach 1.1 million barrels per day (b/d) in 2019 and 1.3 million b/d in 2020. That constitutes a downward revision of 100,000 b/d for this year and 50,000 b/d for next year.

In its closely-watched monthly oil report, the IEA said there was “growing evidence of an economic slowdown” with many large economies reporting weak gross domestic product (GDP) growth in the first half of the year.

“The situation is becoming even more uncertain,” the IEA said, before describing global demand growth in the first half of the year as “very sluggish.”

“Meanwhile, the prospects for a political agreement between China and the United States on trade have worsened. This could lead to reduced trade activity and less oil demand growth.”

Looking ahead, the IEA said the outlook for oil demand growth is “fragile,” with a greater likelihood of a downward revision than an upward one.

Daily Forecast

Friday’s marginal gains and recovery from early session weakness is not enough to get excited about a rally. It’s just price action led by short-covering and position-squaring. The hedge funds are short and likely looking to add to positions in the wake of today’s bearish IEA report.

There is a wildcard out there. It’s China’s interest in U.S. oil. Recently showed Chinese buyers rekindled their interest in U.S. crude, as imports climbed to a nine-month high of 247,000 barrels per day, according to the Energy Information Administration (EIA). This, however, may have been a goodwill gesture tied to the on-going trade negotiations. Because of the increasing tensions between the two countries, China may decide to dramatically reduce its intake of U.S. crude imports. This could trigger another steep break in prices.

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2019-08-09 09:52:29Z
52780348857200

'The question is when': How Bank of Canada rate expectations are changing - The Globe and Mail

Expectations are mounting the Bank of Canada will be forced to cut interest rates and join a growing number of central banks that have eased monetary policy as the U.S.-China trade war intensifies and recession signals ripple through financial markets.

The bank’s key rate has been locked at 1.75 per cent since October, 2018, and a recent bout of strong economic data has given Governor Stephen Poloz and his colleagues little reason to move.

But the Bank of Canada finds itself increasingly isolated. At least 23 central banks have cut their key rates in 2019, according to Bloomberg data, including the U.S. Federal Reserve last week. Three of them – in New Zealand, India and Thailand – did so on Wednesday, and more easing appears imminent.

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On top of that, U.S. President Donald Trump has ratcheted up the trade war, saying the United States would impose a 10-per-cent tariff on an additional US$300-billion of Chinese imports, raising fears for the global economy’s outlook.

“If you’re asking yourself if [the Bank of Canada will cut], it’s the wrong question,” said Ian Pollick, head of North American rates strategy at CIBC Capital Markets. “The question is when.”

Given trade concerns, CIBC has moved up its projection for a rate cut to the first quarter of 2020 from the second quarter.

Investors have set a more aggressive timeline. Futures tied to the Bank of Canada’s overnight lending rate imply a 60-per-cent chance the central bank will cut in December. A month ago, those odds were 10 per cent.

Even more aggressive is Capital Economics. The research firm expects the first of three Bank of Canada rate cuts to land in October, with the benchmark rate declining to 1 per cent by early 2020.

“The Bank’s forecasts are not as strong as other people seem to be suggesting they are, and … the downside risks really are mounting now,” said Stephen Brown, senior Canada economist at Capital Economics.

Much of the downside is coming from abroad. In addition to trade concerns, a variety of weak economic data has spilled out in recent weeks, including mediocre manufacturing figures out of Europe. This has raised concerns the global economy is ripe for a sizable slowdown.

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By comparison, Canada has been a beacon of strength. Economic data have been strong in the second quarter, and growth is trending toward a 3-per-cent annualized expansion in that period.

On two of the Bank of Canada’s big concerns – inflation and jobs – the returns are likewise solid. Some inflation measures are tracking above the bank’s 2-per-cent target, and hiring has been robust in 2019, with close to 250,000 jobs added through the first half of the year. In percentage terms, it has been the strongest start to a year for job creation since 2010.

The next Labour Force Survey is released Friday, and the consensus estimate calls for 15,000 jobs added in July, with the jobless rate holding at 5.5 per cent.

Because of this strong run, the Bank of Canada has a “hall pass” to stand by and see how macroeconomic conditions develop, Mr. Pollick said.

But, he added, if global uncertainty weighs on domestic sentiment and affects business spending, “then from a purely risk-management perspective, you need to do something to add more stimulus to the economy ….”

Not everyone thinks the Bank of Canada will move. Sal Guatieri, senior economist at BMO Nesbitt Burns, expects it to hold steady, noting its benchmark rate is negative in real terms (that is, after accounting for inflation) and that the jobless rate suggests full employment.

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“The Bank must also be wary of fanning the embers of a warming housing market and more sustainable household credit growth. Patience seems warranted,” Mr. Guatieri wrote in a client note.

“However, if the trade war takes a bigger toll on the global economy and oil prices, the Bank will likely be forced to take out some insurance of its own.”

There is also the possibility that Mr. Poloz could surprise, Mr. Brown of Capital Economics said. In January, 2015, Mr. Poloz shocked markets by cutting rates for the first of two times that year, in response to an oil-price collapse that threw Alberta into recession.

“The Bank has a history of surprising, and when it comes to monetary policy, the old adage is, ‘You should shock on the way down and sign-post everything on the way up,’” Mr. Brown said.

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August 09, 2019 at 04:18AM

Chase Bank to its Canadian credit card holders: 'you owe no balance' - Global News

Paul Adamson was paying his bills online last week when he came across something curious — the balance on one of his credit cards was wiped clean.After noticing that his bank had removed the Chase Bank credit card from his list of payees, he phoned both and got a delightfully unexpected answer from the customer service agent.“She said, ‘Actually, you owe no balance,'” said Adamson, 43. The southwestern Ontario resident said he should have owed about $1,645.Story continues below“I was a little confused and kind of skeptical at her response,” he told The Canadian Press.READ MORE: Ontario woman files class action against Capital One following data breachBut a letter from the credit card issuer a day later confirmed that financial institutions are capable of forgiveness.“I was stunned, I’ll be honest. I just said, ‘Hey, here’s one more thing we don’t need to worry about.'”Adamson is just one of the Canadian consumers of Chase Bank who are now off the hook for credit card debt.The New York-based institution confirmed Thursday it is forgiving all outstanding debt owed by users of its two Canadian credit cards as part of its exit from Canada’s credit card market.WATCH: Protecting your money from hackers

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August 09, 2019 at 05:32AM

Oil Supply Growth Under Fire From Low Oil Prices | OilPrice.com - OilPrice.com

Fears of weakening demand continue to drag down oil prices, which in turn could cut into supply growth.

“Concerns about demand and the escalating trade conflict are still keeping the oil market in a stranglehold,” Commerzbank wrote on Tuesday. Brent fell below $60 per barrel this week for the first time in six months as expectations surrounding a slowing global economy set in following the escalation of the U.S.-China trade war.

“We believe the oil market is starting to price in the fear of a severe and multiyear breakdown in US-China economic relations,” Standard Chartered wrote in a note.

“Money-manager positioning in oil is already heavily concentrated on a negative trade view.” The investment bank said that the negative positioning from speculators would “deepen and extend further along the curve across all risk assets.” The bank slashed its forecasted 2019 Brent price to just $66 per barrel, down from $74 previously, and it also cut its 2020 price to $70 from $83. For WTI, Standard Chartered lowered its estimate to $57 from $66 previously.

The trade war could undercut global economic growth, which in turn will drag down oil demand. Major forecasters such as the IEA, EIA and OPEC have repeatedly slashed their demand growth estimate as the economic outlook has darkened. The IEA stuck with its 1.2-million-barrel-per-day forecast in its July Oil Market Report, which it based on the assumption that the trade war would ease and growth would accelerate in the second half of the year.

With the trade war only escalating, more downward revisions seem inevitable. For its part, Standard Chartered said that demand growth is on track to reach only 0.94 mb/d. As “consensus started the year above 1.4mb/d growth, we think the move to a sub-1mb/d consensus will likely have a strongly negative effect on sentiment, reinforcing the basis for lower prices,” the bank concluded. Related: The Reason China Is Winning The Battery Race

Meanwhile, Vitol Group estimates demand growth at a paltry 650,000 bpd this year.

But, of course, lower prices would feed through to the supply side as well. The shale sector is already suffering from significant financial stress. Lower prices would only magnify the pressure on struggling E&Ps.

The EIA warned about the slowdown in U.S. oil production, after years of blistering growth. “EIA expects monthly growth in Lower 48 onshore production to slow during the rest of the forecast period, averaging 50,000 b/d per month from the fourth quarter of 2019 through the end of 2020, down from an average of 110,000 b/d per month from August 2018 through July 2019,” the agency said in its latest Short-Term Energy Outlook released on Tuesday. Still, the EIA said U.S. production would average 12.3 mb/d this year, which is down only slightly from 12.4 mb/d forecasted in previous months.

One of the reasons that production growth may not be derailed by lower prices is that new drilling is increasingly in the hands of the oil majors, rather than the independent shale companies that drove growth in the Permian in the past. As shale E&Ps cut costs and idle rigs, the integrated oil majors – Chevron, ExxonMobil and ConocoPhillips, primarily – continue to spend heavily.

It’s not clear that their returns are any better, with data on the specifics a bit murky. Analysts generally assume that the majors have a better ability to turn a profit than the rest of the shale industry. Goldman Sachs wrote in a report that the “concentration of productivity/efficiency gains and production growth [are] in the hands of fewer producers, driven by technology and shale evolution that prioritizes contiguous acreage.” Related: Oil Craters On Fears of Currency War

The majors boast of low breakevens and their “manufacturing approach” to shale drilling, which should keep costs low. But the reality is that the majors have the ability to post losses in shale for years in the pursuit of positive cash flow, because they are making money in other sectors.

The Institute for Energy Economics and Financial Analysis took ExxonMobil to task, pointing out that even as production rose in the second quarter, so did the company’s debt as it needed to borrow to cover its dividend. “The only difference between ExxonMobil and the dozens of companies that are failing under the fracking sector’s inability to prove financially sustainable, is that the once-mighty oil giant has more assets to burn through before it hits bottom,” Tom Sanzillo and Kathy Hipple wrote in the IEEFA report.

Sinking oil prices won’t help matters. On Wednesday, WTI fell to the low-$50s, a six-month low. Sentiment is deteriorating rapidly and a price handle beginning with a “4” may not be far away.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:

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August 09, 2019 at 05:00AM

Uber posts US$5.2B Q2 loss; sales miss estimates - BNNBloomberg.ca

Uber Technologies Inc. (UBER.N) failed to assure investors Thursday of its growth potential or that it can turn a profit anytime soon. The ride-hailing company reported second-quarter adjusted sales that fell short of estimates and posted a net loss of US$5.24 billion, by far the largest ever for the business.

Most of that loss was attributed to stock-based compensation associated with the initial public offering in May, a routine expense for newly public companies. The adjusted loss—a more commonly used metric for ride-hailing companies, which excludes interest, tax and other expenses—more than doubled to US$656 million but wasn’t as large as the US$979.1 million analysts expected.

What really raised concerns, though, was Uber’s disappointing sales growth. Adjusted revenue in the second quarter increased 12 per cent from a year earlier, the slowest rate in the company’s history. The San Francisco-based company generated US$2.87 billion in adjusted revenue for the second quarter, below estimates of US$3.05 billion, according to data compiled by Bloomberg.

Uber hasn’t even been public for three months, but investors are wondering how long it can keep growing. Dara Khosrowshahi, the chief executive officer, suggested the business had a broader problem with bloat last week, when the company said it would cut about 400 employees in marketing.

On a call with reporters Thursday, Khosrowshahi acknowledged those concerns, while defending the business as one with “growth rates that companies at our scale would kill for.” However, he said, “the law of large numbers at some point will catch up with you.”

Khosrowshahi emphasized signs of growth potential during a conference call following the report. Gross bookings, a number used to track customer demand, rose 31% to US$15.76 billion. Uber expects to maintain that growth rate for the year, forecasting US$65 billion to US$67 billion in gross bookings.

On Wednesday, Lyft Inc. reported loss and revenue figures that both exceeded estimates and boosted its annual forecast. Lyft, which operates the No. 2 ride-hailing app in the U.S., indicated that the price war with Uber is abating and that the company expects to lose less this year than in 2018, which was welcome news to investors. Both stocks saw a bump as a result, but much of Uber’s gains were wiped out after it reported results. The stock was down about 6% in extended trading Thursday.

Khosrowshahi confirmed that the battle for market share is easing. “We’re definitely seeing the competitive environment improve,” he said. Still, Uber forecasts an adjusted loss of US$3 billion to US$3.2 billion this year. “We think that 2019 will be our peak investment year,” Khosrowshahi said. “In 2020, 2021, you’ll see losses come down.”

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August 09, 2019 at 03:21AM