japan
Opinion & Analysis

Japan’s Manufacturing Output In March at Its Lowest Since 2016

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The manufacturing activity in Japan fell to its sharpest and lowest growth since 2016 as demand for the products fell both abroad and locally. As per the Purchasing Managers’ Index, PMI it was a little better than February but was still below the 50 point level which distinguishes from expansion and contraction.

What is PMI?

The Purchasing Managers Index is got from surveys conducted on private companies and is an indicator of the economy which is derived based on the data. A survey is conducted on up to 400 purchase managers from different domains of the manufacturing sector based on factors like new orders from clients, inventories, backlogs of orders, production, employment, and supplier delivery speed.

As per the March data, the new orders from customers both overseas and local fell and was the worst performance since 2016. The survey also indicated that companies had stopped hiring and resulted in the lowest job creation since November 2016. Additionally, the new orders and sales from its Chinese and Taiwan clients also fell.

Reasons for slow growth:

The PMI index for March was at 47 which is slightly above the minimum 46.9 and below the February data of 47.4. As per leading economist at IHS Markit Joe Hayes Japanese companies are in a tough situation due to global as well as local factors. PM Shinzo Abe due to the weak economic outlook and uncertainty has put off the hike of national sales tax to 10% from the existing 8% and also had to push the fiscal reforms on the back burner.

There is less demand locally and globally while the economic situation is not conducive either.

The US-China trade war is not just impacting China but also on Japan as most of the Chinese manufacturers obtained parts and other equipment from Japan. That has had a major impact on the demand from China. Other than China, Europe is the other leading overseas customer which is also in a downturn.

Economist Joe Hayes said ‘The likelihood of the negative trend in output being stymied anytime soon appears slim, with demand for goods from both domestic and international sources waning further. Asian goods producers face headwinds from slowing growth in Europe and China, while global trade risks are yet to be mitigated by a breakthrough in US-Sino relations’. He further added that the manufacturing companies due to this economic situation are ‘fiercely challenging’ due to slow growth.

Trading News

Oil Price Fall As U.S. Inventory Goes Up

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Oil prices dropped on Wednesday as a result of the bullish output forecasts by two of the biggest U.S. producers. The OPEC led production cuts that led to a buildup of weekly U.S. crude oil stockpiles also had a role in the oil prices falling on Wednesday.

International Brent crude futures dropped 39 cents to $65.47 per barrel from their last settlement. Brent fell to its lowest point at $65.22 on Wednesday earlier in the session.  

The U.S. West Texas Intermediate crude oil futures also went down by 0.7 percent to $56.15 per barrel.

According to Benjamin Lu, an analyst at Philip Futures, a Singapore based brokerage firm, crude oil futures will continue to have trouble as markets try to balance between rising U.S. production levels and OPEC led cuts. He also said that the rise in event-driven trading was also responsible for increasing market volatility.

Exxon Mobil Corp and Chevron Corp released Permian Basin projections on Tuesday, which pointed to increased shale oil production.

This will result in cementing the two companies as dominant players in New Mexico and West Texas field, with at least one-third of the Permian production coming under their control in the next five years.  American Petroleum Institute released data that showed a larger than expected gain in U.S. crude stockpiles.

U.S. crude inventories went up by 7.3 million barrels in the last week. This showed an increase of 1.2 million barrels compared to analysts’ expectations. According to Kim Kwang-Rae, an analyst at Samsung Futures, Seoul, saw a rise in U.S. crude inventories weighs heavily on oil prices. Rising concerns about the increasing oil production in the Permian region is also another reason for dropping oil prices.

U.S. Department of Energy’s Information Administration will be releasing official data later on Wednesday.

The rise in oil production in North America undermines the efforts led by OPEC (Organization of Petroleum Exporting Countries). U.S. crude oil inventories have gone up by 7.3 million bpd last week alone.  OPES and its allies had pledged to reduce its output to 1.2 million bpd (barrels per day).

With the ongoing U.S- China trade talks, the market is on the lookout for further signs for resolving the conflict between the world’s two largest economies. According to Mike Pompeo, U.S. Secretary, the U.S. President Donald Trump is not willing to accept any deal that is not perfect. However, Trump is open to work until an agreement is reached with Beijing.

GDP Slowdown Could Instigate Rate Cuts in Australia
Opinion & Analysis

GDP Slowdown Could Instigate Rate Cuts in Australia

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The Australian economy has been in doldrums over the past few months as growth came to a virtual standstill and the Gross Domestic Product (GDP) left a lot to be desired. In such a situation, an interest rate cut from the central bank is one of the most effective ways to cheapen credit and stimulate economic activity. According to reports, the Central Bank of Australia could actually go for rate cuts even though a senior member of the bank stated that it is unlikely. The numbers paint a sorry picture for the Australian economy, which is worth $1.3 trillion and it is believed that rate cuts could be in the offing soon.

The actual figures illustrate the dismal state of the Australian economy over the past year. While the estimated GDP growth for 2018 was 2.5%, it grew at only 2.3%, and it is interesting to note that domestic economic activity nosedived during the latter half of the year. GDP rose by only 0.2% in the fourth quarter and by 0.3% in the quarter before that. The poor show also sent the Australian dollar into a meltdown. Many investors believe that the rate cuts are coming and that could also be a reason behind the fall in the Australian dollar.

Andrew Ticehurst, who is an economist at Nomura has prepared a report in which he has stated that rate cuts are likely. He stated, “We think rate cuts this year, while not guaranteed, are now more likely than not. We expect another round of material growth forecast reductions from the RBA [Reserve Bank of Australia] and see an increasing risk that inflation continues to fall short of the target band for an extended period.” In addition to that, JP Morgan and Australia’s own investment banking giant Macquarie have also stated that a rate cut is likely. However, the most telling indication that a rate cut is likely can be gleaned by having a look at the interest rate futures. According to reports, the probability of a rate is now 100%. On Tuesday, that probability stood at 86%.

The fall in the GDP in the third and fourth quarters in 2018 is an alarming development. The last time that the GDP fell in two back to back quarters was in 2006. Philip Lowe, Governor of the RBA, is, however, optimistic about the future of the Australian economy and did not sound as gloomy as one would expect. Prior to the publication of the GDP data, Lowe had said, “The adjustment in our housing market is manageable for the overall economy. It is unlikely to derail our economic expansion.” 

News

Popularity of Face Mask makes Koreans Billionaire

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With Korean face masks becoming increasingly popular, they have the ability to do wonders to your skin besides building fortunes like in Kim Jung-Woong’s case.

The growing importance given to skincare and beauty has helped a few Koreans amass plenty of wealth as customers look for the ever elusive dewy look. Large cosmetic manufacturers and banks have started noticing the impact of Korean beauty products.

In October 2018, the Goldman Sachs Group Inc acquired five percent of Kim’s GP Club Co. Ltd., a company that manufactures lipsticks, creams, and other beauty products and is valued at $1.3 billion. Kim Jun-Woong and his family own the remaining 95 percent of the company.

According to Son Moon-ho, Chief Operating Officer at GP Club, the investment bank had been following the company. The Goldman Sachs spokesman declined to comment about the deal.

Unilever spent around 2.27 billion euros in 2017 to acquire a majority of Carver Korea Co., a skincare product manufacturer. It bought out stakes held by Bain Capital, Goldman and the company’s founder, Le Sang-rok.

The Credit Suisse Group AG bought a three percent stake for about 40 billion won in L&P Cosmetic Co., the Mediheal mask sheet manufacturer.

South Korea is only a quarter of the size of Japan, and yet is the sixth largest exporter of cosmetics in the world in 2017, as per data provided by the Korea Trade-Investment Promotion Agency. In 2018, the company logged almost $4.6 billion of exports in the first 9 months. The demand from China has helped drive up the figure by almost 31 percent compared to last year.

Kim initially started off his career by selling cosmetics to Chinese wholesalers and establishing JM Solution, his own brand in 2016. It took off right from the beginning and gained popularity on Taobao, Alibaba’s e-commerce platform.

In 2017, geopolitical tensions struck the Korean beauty market after South Korea gave permission to the U.S. military in order to install the Terminal High Altitude Area Defense system to counter nuclear threats from North Korea. Beijing considered this move as a security threat and urged a boycott of Korean products.  Gp Club took advantage of these tensions to pull ahead of the competition.

The company also introduced new products like the Honey Luminous Royal Propolis Mask and lowered prices so that customers in mainland China were able to afford it compared to the foreign goods which were priced higher.

Manchester City Mostly to Invest in Indian Club
News

Manchester City Mostly to Invest in Indian Club

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City Football Group (CFG) is the company that acquires Manchester City is planning to buy a club in India, reported by CFG executive Ferran Soriano. City Football Group also owns New York City, Melbourne City and Premier League club. The company has shares in four other sites across the world.

The owners of Premier League champions Manchester City are thinking of making investments in Indian club so as to expand their presence in Asia, Ferran Soriano mentioned.

The City Football Group acquires seven different clubs namely, League Soccer’s New York City FC, Japan’s Yokohama F Marinos, Spanish side Girona and A-League side Melbourne City. They are hopeful of getting through the deal to buy a club in India by the end of this year.

Ferran Soriano quotes, and was reported by BBC, “The company owners show interest in few markets and countries wherein the people have a genuine passion for football and of bigger opportunities that has been noticed in China and now even in India.”

The City Football Group has recently invested in Chinese team Sichuan Jiuniu, two weeks ago and has purchased shares of them, and now the company is heading to invest in India, Soriano mentioned.

From over two years, the CFG was studying the Indian market and observing closely over India and with this developments, the company needs to be patient and we will able to reach out a deal of investing in India by this year, he added.

CFG was established in 2013 when New York City FC was acquired and was the second team under CFG ownership next to Manchester City. From the past six years, CFG was able to make investments in five various clubs and Soriano is hopeful about more investments to come.

Soriano added, “We are not sure after 10 years what will happen, but the company might have 2 to 3 teams more. Although about the vision which we had from 6 years, I believe the company may have at least two to three more clubs.”

The CFG group has acquired stakes in Melbourne City, New York City, Yokohama F Marinos, Atletico Torque, Girona and Sichuan Jiuniu.

Oil Prices Climbs Up Due to Progressive Trade Talks
Trading News

Oil Prices Climbs Up Due to Progressive Trade Talks Between US-China, OPEC Cuts Supply

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Oil prices were high on Monday in Asia, with a slight recovery from its last week performance. During the time, when the OPEC the manufacturer club, tightened its supply output, there were progressive ongoing trade talks between the US and China. The report suggests that both the countries were very close to reach out a deal which will eventually bring an end to the tariff issue which had led for the slowdown of the economic growth globally.

The International Brent futures at 0135 GMT were at 65.46 dollar, which was up by 39 percent from its previous close. At the same time, the US West Texas Intermediate (WTI) crude futures were high by 36 percent at 56.16 dollars.

The recovery in the oil prices was noticed when the reports mentioned that the United States and China were both were close to end their trade dispute which had impacted the global economic slowdown.

In the on-going negotiation between the US and China, President Trump and President Xi might reach out to a formal trade deal during the summit which is to take place on March 27, the report has mentioned that there were productive talks taking place between the two countries, the report was published by Wall Street Journal on Sunday.

This positive news gave the needed support to the market which had affected the production of oil cuts from the past two months.

The Reuters survey observed that oil supply from the Organization of the Petroleum Exporting Countries (OPEC) was down to almost 4 years low in February. The top oil exporters Saudi Arabia and its Gulf associates have out-performed on oil group supply. Meanwhile, Venezuela has registered a further decline in the output.

In the previous week, the oil prices were moving down due to a decline in the manufacturing index data which was noticed in both the countries and there was a rise in the crude oil output. On Friday, Brent crude oil fell down to 1.9 percent, as much as 3 percent for the whole week and WTI crude were down by 2.6 percent for the week.

The result of the on-going trade talks that were taking place from a very long time between the US and China will increase the oil prices, and the investors will also focus on the supply of crude oil. The progressive trade talk news has improved the market performance across Asia and has declined the gold and dollar rate.

Oil prices have been significantly driven by the US sanctions against OPEC members of Iran and Venezuela, which Barclays bank predicts to have further resulted in the reduction of 2 million BPD (barrels per day) in the global crude supply.

There are positive signs in the United States regarding oil production. They believe that crude oil production is growing high than of past years. While, the energy companies of US had reduced the number of oil rigs in the previous week so as to look for new reserves which was at the lowest as compared to 9 months because few oil manufacturers strictly follow on plans to cut the expenditure, even though there was a 20 percent increase in the crude oil futures in this year.

Barclays further say that the performance of crude oil might be repeated in the second half of 2019 and we truly hope for it especially for US oil output.

The US sanction against Venezuela and Iran, both the OPEC members have supported for raising the prices in 2019 starting from January 1, Brent crude oil has achieved around 17 percent, and WTI crude has nearly achieved 18 percent gain.

During this week, the American Petroleum Institute on supplies numbers will be noticed by the investors on Tuesday, and on Wednesday the report on stockpiles from the US Energy Information Administration. On Friday, Baker Hughes is intended to publish its weekly oil rings counts which are active in the US.

The production of US has been up from 2018 onwards to around 12.1 million BPD at the time when the OPEC members and few of its non-affiliated members like Russia had reduced its output by 1.2 million BPD so as to support oil prices. These OPEC cuts have supported for a decent fall in the oil prices at the end of last year.

Indias Diesel Consumption Forecast To Set Record In 2019
Stocks

India’s Diesel Consumption Forecast To Set Record In 2019

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Increasing expenditure by the current government on infrastructure in an attempt to hold off rivals in the upcoming elections in 2019 may lead to an increase in diesel consumption within the country.

India is the third largest oil user globally. The increasing diesel consumption by the country solidifies India’s role as a driver of oil demand globally.

Growing concerns about a slip in crude oil demand in 2019 due to the slowdown in economic growth have been put to rest with India’s growing fuel prices. In fact, analysts believe that India’s surging diesel consumption can help stabilize fuel and oil prices.

India’s diesel demand has been forecasted to rise by 5.7 percent by analysts at the Fitch Solutions and by 6.4 percent by the consultants at Wood Mackenzie in 2019. According to the data released by the Ministry of Petroleum, India consumed 6.9 million tons of diesel each month in 2018. This comes to around 1.7 million barrels per day.

According to Sanjiv Singh, the Chairman of Indian Oil Corp, India is a diesel driven economy. He also said that there is a high demand for energy in different sectors, which will continue rising in 2019. With GDP more than seven percent and plenty of urbanization going on, it is no surprise that diesel demand continues to grow.

Peter Lee, a senior analyst at Fitch Solutions, forecast a major growth in vehicle sales due to India’s positive demographics, loose monetary policy, and low vehicle penetration. The increase in vehicle sales will ultimately lead to an increase in fuel demands.

As per the data collected by the International organization of Motor Vehicle Manufacturers in 2015, India held twenty-two cars per thousand people versus 821 cars per thousand people in the U.S.

The upcoming elections in April and May will add to the growing diesel demand with election rallies and deployment of polling officers right around the corner.

The government has allocated 190 billion rupees in improving infrastructure like roads, which will lead to a surge in diesel consumption.

According to Aman Verma, a senior research analyst at Wood Mackenzie, the increased activity as a result of upcoming elections will fuel diesel demands during the first half of this year.

Monthly diesel sales in 2014, during the last general elections, averaged around 6.2 million tons. This was around seven percent more than the monthly average sales in the other months during the same year.

Gold Prices Drop to a Two Week Low as Dollar Rebounds Over Trade Caution
Stocks

Gold Prices Drop to a Two-Week Low, as Dollar Rebounds Over Trade Caution

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Gold prices on Thursday dropped to a two-week low, as the dollar recovered losses after cautious comments from the US Trade Representative Robert Lighthizer which dented investors’ hope for ending the tariff war with China.

As of 0340 GMT, sport gold and the US gold future slipped by 0.1% to $131850 and $1320.10 per ounce respectively. The metal considered to be safe heaven, has dipped to its lowest point since February 15 at $1316.43 in the previous session slipping for the first time in five months.

MCX Gold was trading at 0.11% down at Rs 33248 per 10gm at around 10:30 AM IST. On the other hand, MCX Silver jumped by 0.12% at Rs 39809 per 1kg around the same time.

In an address to a Congressional hearing, Lighthizer told that it was too early to predict the outcome of ongoing trade talks with China, and the United States would need to maintain the threat of tariffs on Chinese goods for years to come even if the two parties strike a deal.

An economist at the National Australian Bank, Jon Sharma said that there is some amount of uncertainty about the trade deal which has led some of the demand for gold to go to the US dollar. He said that this shift of demand has taken a bit of bid from gold. Sharma further added that gold is expected to come up with some corrections and that prices will move around the $1310-$1330 bracket depending on the dollar. He claimed that main support for gold comes from Federal Reserve’s dovish stance and that a lot if central banks are keen on accumulating gold.

Federal reserve chairman Jerome Powell said on Wednesday that the US Central Bank would stop shrinking its $4 trillion balance sheet later this year, ending a process that investors say works at cross-purposes with the Fed current pause on interest rate hikes. During his testimony to the Senate Banking Committee on Tuesday, Powell reaffirmed that the Federal Reserve would maintain patience in hiking interest rates.

Back in India GDP of the third quarter will be focused on, as a disappointing growth figure will keep the rupee under tension. This could restrict any major fall in gold prices on the domestic exchanges. Motilal Oswal Financial services stated that Gold on MCX is expected to quote in the range of Rs 33030 and Rs 33450 for the day.

Edward Moya, a senior market analyst at OANDA, said in a note that the precious metal’s recent consolidation is supported by hesitation the financial markets have in pricing in what will be the Fed’s next move. He noted that Gold may struggle climbing higher until the market sees further deterioration in US data, which would seal the market expectation for the next move to be a rate cut.

Spot silver slipped by 1% to $15.72 per ounce, on the other hand, platinum dipped by 0.4% at $861.80. Moreover, spot palladium dipped further down from its all-time peak of $1565.09 per ounce that it hit earlier this week and was down by 0.1% on Thursday at $1527.50.

Company News

Jet Airways Grounds Seven More Planes

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On Wednesday, the domestic airline firm in India, Jet Airways has grounded seven more aircraft as the carrier has failed to make the payments to its lessors, taking the tally of planes hamstrung by the defaults to thirteen. On an official press release, “Jet Airways is currently is actively engaged with all its aircraft lessors,” adding that its aircraft lessors have been supportive of the company’s efforts to improve liquidity.

Jet Airways is now having debts of more than 1 billion dollars, Jet has defaulted on loans and has not paid pilots, leasing firms and suppliers for many months. The loss-making Indian airline approved a rescue deal in mid of February after months of talks to plug an 85 billion rupees ( which approximately equal to 1.2 billion dollars) funding hole.

The plan has been approved by the shareholders of Jet Airways that includes selling off a majority stake to a consortium led by State Bank of India, the airline’s biggest creditor, at 1 rupee. Reuters had previously reported that international lessors had grounded more Jet Airways planes before potentially moving them out of India, as skepticism built over whether the bailout of the carrier can clear their dues on time. However, on Saturday the airlines revealed that it had grounded two more aircraft in addition to the four earlier this month over default to its lessors.

According to the sources, currently, Jet Airways has a total of 123 fleet that includes most of the Boeing planes, including 16-owned aircraft. However, the rest are leased from a range of lessors including GE Capital Aviation Services, US-based BBAM and Japan’s SMBC Aviation Capital.

JP Morgan
Opinion & Analysis

JP Morgan’s Cryptocurrency to Obliterate Ripple; XRP seems to be in trouble

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The $340 billion banking giant, JP Morgan launched a stablecoin called JPM Coin. Industry experts have foreseen the stablecoin to thrash Ripple in the long run.

Co-host of Bloomberg’s What’d You Miss? Joe Weisenthal said, “If it turns out that the blockchain framework turns out to be a good one for banks transferring money around, then the JPM Coin should entirely obliterate Ripple.”

Weisenthal started his argument with the premise of blockchain becoming a more effective way of moving money for banks. With that, he states it would be more reasonable for banks to use the JPM stablecoin than to use Ripple’s XRP. The suggestion that the XRP cryptocurrency might be obliterated is hinged on the fact that Ripple counts on regulated institutional customers.

The argument was further reinforced with the exchange rate volatility risk associated with using XRP as a bridge currency. He suggests that the fiat-backed JPM coin sounds to be far more appropriate for the customer-base Ripple is targeting.

The Ripple blockchain network is an advanced payment infrastructure for cross-border transactions used by banks and financial institutions to send and receive payments with low costs and faster clearing time. For more details visit https://www.ripplenews.world

The JPM coin can be considered as a form of short-term credit that is moved instantly. However, the underlying transaction goes through the settlement process. Also, when the actual money goes through, the coins are destroyed, as the funds replace them. Hence, the JPM coin may not be in direct competition with other cryptocurrencies but might steal the entire target market of Ripple.

RippleNet and XRP serve as the primary tools on the Ripple blockchain network. Any valuable settlement requires liquidity. However, on a banking network, the cash comes directly from many banks, which exists on the network.

Ripple had its vision clear in establishing partnerships with both banks and fintech service providers throughout the past several years, mainly to improve the liquidity of the network.

The CEO of JP Morgan has made notable remarks in the past about the blockchain trend, saying Bitcoin is a fraud at one point. However, JP Morgan seems to be leading the charge of the banks into blockchain.

The primary concerns of the industry’s executives and experts for the growth of XRP are that if JPMorgan uses JPM Coin to settle payments between its clients, then as the bank said, it will eventually put XRP in competition with JPM Coin directly.

Speaking to CNBC, JPMorgan’s blockchain projects head, Umar Farooq said that JPM Coin would have three core use cases and the primary use case is international payments for corporations.

Ripple CEO Brad Garlinghouse said the technologies banks use today was developed by Swift decades ago and hasn’t evolved since then or kept up with the market. Swift quoted that not so long ago that he didn’t see blockchain as a solution to correspondent banking.

Technically, JPM Coin and Ripple have the same use, targeting the same market, and are both battling to take hold of the SWIFT network.

JPMorgan would “wipe the floor with Ripple,” emphasizing that banks would instead use a technology developed by banks rather than a company outside of the traditional financial sector, said Tushar Jain, a general partner at Multicoin Capital.

Some stakeholders in the crypto space have weighed in their opinion on the matter, questioning the purpose of the XRP coin going forward. Tushar Jain, a managing partner at Multicoin Capital, stated that banks would not allow Ripple Inc. to become enriched by using XRP for settlements. He went further to hint that other banks will produce their form of coin like JP Morgan just did.

While this development brings institutional legitimacy to the blockchain industry, it remains to be seen how cryptocurrencies like Ripple’s XRP will navigate this new trend and stay relevant.