Oil prices sank more than five percent on Tuesday, reversing some of the previous day’s gains as analysts predicted Saudi output would recover sooner than expected after weekend drone attacks.
At the same time, global stocks were in a holding pattern while investors awaited the US Federal Reserve’s latest decision on monetary policy due on Wednesday.
Economists widely expect the Fed to cut interest rates.
In the space of several minutes during afternoon European trading, North Sea Brent crude oil for delivery in November tumbled from $67.75 to $65.00. It fell as low as $64.24, before recovering a little.
The market was already trading in negative territory after the previous day’s record gains fueled by attacks on Saudi facilities which wiped out half the kingdom’s crude output.
“The markets were once again wrong-footed by the Saudi news,” said Forex.com analyst Fawad Razaqzada in reaction to Tuesday’s price drop.
“This time prices slumped on reports of sooner-than-expected return for oil production after the attacks.
“Although little details have emerged, speculators are evidently happy to sell now and ask questions later. And who would blame them after that big (price) gap?”
The spike in the oil price had stoked fears that costlier energy and geopolitical instability could weigh on an already slowing global economy, but a quick recovery in Saudi exports and a return to earlier price levels would alleviate those concerns.
“Arguably Monday’s spike in oil was unsustainable, since oversupply concerns have been the much more dominant theme this year, but the sudden drop came earlier and quicker than expected,” said Chris Beauchamp, chief market analyst at online trading firm IG.
Traders were nervously awaiting a further response from the United States after it said Iran was likely to blame.
US Secretary of State Mike Pompeo was due to fly to Saudi Arabia to discuss possible retaliation after US officials claimed they had proof the weekend attacks had originated in Iran.
The crisis revived fears of a conflict in the tinderbox Gulf region and raised questions about the security of crude fields in the world’s top exporter Saudi Arabia as well as other producers.
US President Donald Trump has said he is ready to help Riyadh following the strikes but would await a “definitive” determination on who was responsible.
Iran-backed Huthi rebels in Yemen claimed responsibility but Washington and Riyadh have accused Tehran, which denies the accusations.
Iran’s supreme leader on Tuesday ruled out negotiations with the US “at any level,” as tensions mounted between the arch-foes.
Ayatollah Ali Khamenei said the United States had adopted a policy of “maximum pressure” on Iran because it believes it cannot bring the Islamic Republic to its knees through other means.
The attack on Saudi oil facilities also took attention away from the upcoming trade talks between China and the US, as well as a much-anticipated policy meeting of the Federal Reserve, which is expected to cut interest rates Wednesday.
Europe’s leading stock markets finished the day mixed, while Wall Street popped into positive territory late Tuesday after a largely flat trading day ahead of the Fed’s decision on interest rates.
Key figures around 2100 GMT
Brent North Sea crude: DOWN $4.47 at $64.55 per barrel
West Texas Intermediate: DOWN $3.56 at $59.34 per barrel
New York – Dow: UP 0.1 percent at 27,110.80 (close)
New York – S&P 500: UP 0.3 percent at 3,005.70 (close)
New York – Nasdaq: UP 0.4 percent at 8,186.02 (close)
London – FTSE 100: DOWN less than 0.1 percent at 7,320.40 points (close)
Frankfurt – DAX 30: DOWN less than 0.1 percent at 12,372.61 (close)
Paris – CAC 40: UP 0.2 percent at 5,615.51 (close)
EURO STOXX 50: UP 0.1 percent at 3,521.26 (close)
Tokyo – Nikkei 225: UP 0.1 percent at 22,001.32 (close)
Hong Kong – Hang Seng: DOWN 1.2 percent at 26,790.24 (close)
Shanghai – Composite: DOWN 1.7 percent at 2,978.12 (close)
Euro/dollar: UP at $1.1071 from $1.1002 at 2300 GMT
Dollar/yen: UP at 108.13 yen from 108.10 yen
Pound/dollar: UP at $1.2497 from $1.2424
Euro/pound: UP at 88.57 pence from 88.56 pence
Revocation of GSP+ to aggravate situation of low-income sectors
The European Chamber of Commerce (ECC) has aired its concern over the European Union Parliament’s threat to revoke the Philippines export tariff incentives, as it will aggravate the situation of low-income sectors, its members, and the country’s economic situation.
In an interview, ECC President Nabil Francis emphasized that his group strongly calls for the retention of the Generalized Scheme of Preferences (GSP+) grant in the Philippines, threatened to be withdrawn by the European Parliament in a resolution last 17 September mainly because of the deteriorating human rights violations happening in the Philippines.
“The EU is among the largest trading partners of the Philippines. The year after qualifying for the GSP+, Filipino exports to the EU expanded by 27 percent according to the Department of Trade and Industry (DTI). The removal of the GSP+ will put at risk thousands of jobs generated in both the agriculture and manufacturing sectors,” according to Mr. Nabil, who governs more than 200 predominantly European businesses venturing in the country for years.
The ECC reiterated that the EU’s mull revocation of the country’s tariff benefits in the midst of a pandemic will also exacerbate the economic situation of the country.
“The International Trade Centre has estimated that the total export and import loss of the Philippines from its EU trading partners could reach $300 million and $175 million, respectively, due to COVID-19 supply chain disruptions,” Francis told the Daily Tribune.
The ECC in its July survey said 91.8 percent of its members have significantly been affected by the pandemic, and cancellation of the GSP+ rating will add another burden to its members.
“The Chamber’s membership roster widely varies in terms of industry and company size. A considerable number of them are GSP+ beneficiaries. Among the top Philippine exports under the EU GSP+ to the EU are agricultural oil products, electrical machinery, processed meat & fish, optical products, processed vegetables, and fruits and nuts,” Francis emphasized.
He added that the revocation of the GSP+ in the midst of a pandemic will surely aggravate the situation of low-income sectors, and the country by and large.
“Furthermore, current investor confidence among the European-Philippine business community remains dampened due to the uncertain business landscape in the country as revealed in a recent study conducted by the ECCP,” according to Francis.
On its 17 September decision, the EU legislative assembly ruled “given the seriousness of the human rights violations in the country, calls on the European Commission, in the absence of any substantial improvement and willingness to cooperate on the part of the Philippine authorities, to immediately initiate the procedure which could lead to the temporary withdrawal of GSP+ preferences.”
The GSP+ status of the Philippines covers 6,274 locally-made products, including those manufactured by the micro, small and medium enterprises (MSMEs).
Last Friday, 18 September, Malacanang, through Spokesman Harry Roque, berated EU’s Parliament move and even provoked the EU to go on with its economic sanctions, even as the country continues to grapple with the coronavirus pandemic which plunged the economy into a recession, the worst in three decades.
Labor group to Palace: Resolve issues with EU parliament
In a statement, workers group Associated Labor Unions-Trade Union Congress of the Philippines (ALU-TUCP) called on the Philippine government to address the resolution of the European Union Parliament that calls for a review of the tariff incentives extended to the country’s export products in the light of the allegations on abuses on human and labor rights, environmental protection and good governance.
“We urge the government to take the right action and take more steps in addressing the issues raised by the resolution. We have workers and their families behind every products being sold in the EU market, if the Philippine government fails to make the right response to the resolution we will lose the market which result to more unemployment and to loss of business opportunities, ” said Gerard R. Seno, ALU National Executive Vice President.
It can be recalled that in a news briefing Friday, a fuming Presidential Spokesman Harry Roque dared the EU to go on with its economic sanctions, even as the country continues to grapple with the coronavirus pandemic which plunged the economy into a recession which was the worst in three decades.
“If they want to add to the burden of the Filipino nation during this pandemic, so be it. We will accept that as history repeating itself. Let’s stop these discussions,” Roque said.
The labor group vice president maintained that the Philippines has been enjoying since 25 December 2014 a zero tariff on 6,274 products to the EU market to help the country develop, provided it improves its compliance to human and labor rights, environmental protection and good governance standards.
Seno revealed some of these products which enjoy no tariff includes pineapples, mangoes, tuna, vegetables, nuts, coffee, cacao and garments, footwear, pearls, precious metals and selected furniture.
The group noted that based on the Department of Trade and Industry (DTI) records, in 2014, the then granting of GSP+ tariff-free export increase Philippine exports to the EU by 35 percent and created 200,000 more jobs.
“If the revocation of the GSP+ privilege is completed, we will lose these jobs,” the group stated.
“Sana wag na maging proud. Tingnan kung ano pa ang pagkukulang natin at gawin ang tamang response to satisfy or meet the requirements of the EU GSP+,” Tanjusay told the Daily Tribune.
Asked for his comment regarding the Palace’ statement, Trade Secretary Ramon Lopez said he will not comment anymore since he already issued statement regarding the matter.
“So far, we are able to explain objectively the Philippines side on issues that are raised and we dont see any reason why our GSP+ privilege will be withdrawn. It is precisely helping address poverty and attendant social and economic issues, and helping MSMEs in many parts of the country, by allowing greater EU market access for Philippine products,” Lopez told reporters, Friday.
Regulations on virtual-only banks needed amid contactless era
Bangko Sentral ng Pilipinas fully supports the bill that seeks to establish a separate regulatory authority for virtual-only banks.
Governor Benjamin Diokno said the central bank welcomes House Bill (HB) 5913, or the Virtual Banking Act, as “the creation of a regulatory framework for digital banks promotes a level playing field by allowing new entrants to credibly compete with existing banks, as well as prevents regulatory arbitrage.”
“This will reinforce the provisions of the General Banking Law with respect to the proposal of the BSP which introduces digital banks as a new bank classification, distinct from the existing categories of banks, i.e., universal and commercial banks (U/KBs), thrift banks (TBs), rural banks (RBs), cooperative banks, and Islamic banks,” Diokno stated in a letter to the House of Representatives and bill author Albay Representative Joey Salceda.
Under the proposal, which also gained the support of the Cebu Bankers Club, virtual-only banks will be a separate classification of banks and will be encouraged to pursue financial inclusion initiatives.
HB 5913 also outlines the minimum macro-prudential standards for virtual-only banks, and opens the virtual banking sector to some degree of foreign ownership. It is expected to attract some of the financial technology know-hows of other countries and ensure adequate capital.
The bill may also incorporate measures to further develop financial technology to help modernize payment systems in the country.
The BSP assured regulatory “sandboxes” are in place to help financial technology companies thrive.
Regulatory sandboxing is a practice of piloting a new sector or technology within a limited scope to protect the wider economy from the risks of the novel sector.
Swedish retailer H&M bounces back into profit
Swedish clothing giant Hennes and Mauritz (H&M) bounced back into profit last quarter despite many of its stores remaining closed due to coronavirus restrictions, sending its share price surging Tuesday.
H&M had tumbled into a loss in its March-May quarter when, like many other non-essential retailers, lockdowns forced it to close shops.
And while sales for the June-August quarter were still down 19 percent from last year to 50.9 billion Swedish kronor (4.9 billion euros, $5.8 billion), a move towards higher value collections, less discounting, and cost-cutting helped it turn a profit, the company said in a preliminary earnings statement.
The preliminary pre-tax profit of approximately 2.0 billion kronor was much more than the 250 million expected by analysts, sending H&M shares climbing by more than 10 percent in morning trading in Stockholm.
The group is to publish its complete third quarter results on October 1.
UK unemployment climbs to 4.1% on virus fallout
Britain’s unemployment rate jumped above four percent in July on economic fallout from the coronavirus pandemic, official data showed on Tuesday.
The rate grew to 4.1 percent in the three months to the end of July from 3.9 percent the previous quarter, the Office for National Statistics said in a statement.
The number of people claiming jobless benefits stood at 2.7 million in August, up almost 121 percent since March when Britain went into lockdown over the virus.
SoftBank Group selling Arm to NVIDIA for up to $40 billion
SoftBank bought Arm in 2016 for $32 billion in a deal that left investors cold and saw the conglomerate’s stock plunge sharply.
Analysts at the time said SoftBank had paid too much for the firm and the purchase revived concerns about the Japanese company’s balance sheet.
Amir Anvarzadeh, senior market strategist at Asymmetric Advisors in Singapore, said Arm had been “underperforming”, making the sale more attractive for SoftBank.
But he said the acquisition was “going to raise some eyebrows” in the semiconductor industry because so many of NVIDIA’s competitors work with Arm’s designs.
“They will need some guarantees… otherwise Arm may lose business or face lawsuits,” he said.
NVIDIA said in a statement that under the deal it will pay SoftBank $21.5 billion in common stock and $12 billion in case, $2 billion of which will be payable at signing.
SoftBank may receive up to another $5 billion in cash or stock, dependent on Arm’s performance.
And NVIDIA will also issue $1.5 billion in equity to Arm employees, for a deal worth a total of up to $40 billion.
SoftBank said it felt Arm would perform better in combination with NVIDIA and the sale would “contribute to an increase in our company’s value for shareholders”.
It said the deal would give it a combined total of 6.7-8.1 percent in NVIDIA’s outstanding shares, but insisted that would not make the US firm a subsidiary or affiliate.
“Our belief in the power of Arm’s technology and its potential remains unchanged, and we, as a strategic major shareholder in NVIDIA, will be committed to Arm’s long-term success,” SoftBank added.
NVIDIA said the acquisition would help “create the premier computing company for the age of artificial intelligence”.
It said Arm would retain its name and remain in Cambridge in the UK, where a new global centre for excellence in AI will be set up.
The sale, which comes as SoftBank engages in a massive push to boost its cash reserves, renewed speculation about the firm’s future plans.
Bloomberg News, citing unnamed people familiar with the matter, said senior SoftBank executives planned to revisit a management buyout, which had previously met with internal opposition.
The report said the discussions were at an early stage and might not result in the firm going private, but reflected pressure from those who feel SoftBank would be subject to less scrutiny if it were not publicly listed.
But Anvarzadeh was skeptical, noting that SoftBank has been buying back stock, raising its share price, which would be counterproductive if it was planning a management buyout.
It would be “kind of a waste of money. You’re selling your best assets and keep buying back shares,” he told AFP.
PPA launches contract tracing app, ticket vending machine
THE Philippine Ports Authority (PPA) will start utilizing the contact tracing application (app) next week, while the test-run for its automated ticket vending scheme to commence Sunday, 13 September, all interventions aimed to help control the increase of the coronavirus disease 2019 (Covid-19) infections in the country.
In a virtual presser Saturday, PPA General Manager Jay Daniel Santiago said they will start the use of Traze Contact Tracing App by next week to all PPA-governed ports.
“Port passengers are no longer needed to accomplish a health declaration form upon entry. We will use the app for that and it is already ready for download in the Apple and Google play store,” according to Santiago.
Traze contact tracing app was developed by Cosmotech Philippines Inc., and co-developed by the PPA, according to Santiago.
Meanwhile, the test run of its automated ticket vending machine in the Ports of Batangas and Calapan will roll-out 13, September.
“We develop these ticket vending machines to avoid passengers having physical contact with our ticket sellers. From there, we will check its efficiency when it comes to reduction of risks of contracting the virus,” Santiago explained.
He said safety health protocols, such as one-meter physical distance, no-mask, no face-shield, no-entry policy, hand washing corners and cargo disinfection are still in effect in all PPA-operated ports.
Pag-IBIG mulls to delay contribution hike
The Pag-IBIG Fund might put on hold its plan to raise the decades-old monthly contributions of their members in consideration of the plight of workers and businesses amid the pandemic.
Human Settlements Secretary Eduardo del Rosario, who heads the 11-member Pag-IBIG Fund Board of Trustees, has instructed the agency’s management to reconvene and discuss the possibility of delaying the January 2021 implementation of the P50-hike to the P100 monthly contributions or savings.
“We recognize that a number of our members and several businesses are experiencing financial hardships brought about by COVID-19. We understand their plight and we want to help them in any way we can,” Del Rosario said in a statement.
Pag-IBIG Fund chief executive officer Acmad Rizaldy Moti said that the board would consult stakeholders anew following del Rosario’s call.
“We will be in talks again with labor unions, non-government organizations and employer groups and we will consider their stand before we proceed. It is important for us to consult them and hear their voices before we decide,” Moti said.
He added that Pag-IBIG Fund’s “strong financial position” would allow them to postpone the increase in their members’ monthly savings.
“At the current monthly savings rate of P100, in addition to our housing and short-term loan payment collections, we have more than enough funds to support the home loan needs of our members,” Moti said.
In November 2019, the Pag-IBIG Fund Board approved the staggered increase of the members’ monthly savings from P100 to P150 by January 2021 and to P200 by January 2023.
Del Rosario said the demand for Pag-IBIG Fund housing loans steadily grew at an average rate of 17.5 percent annually the last five years.
“We expected then, that raising the monthly savings gradually by P50 will infuse more funds so that Pag-IBIG can continue to offer the lowest rates in the market and help more members acquire homes of their own,” he said.
“But again, the study and consultations were done in 2019. The continuing pandemic this 2020 has changed all that. So I urged the Pag-IBIG Fund Management to renew consultations with our stakeholders,” Del Rosario added.
Ph seeks Germany help in Wirecard probe
A top Philippine financial investigator said Friday he has asked Berlin authorities for information on dozens of “persons of interest” in a Manila inquiry on the Wirecard accounting scandal.
German payments giant Wirecard filed for insolvency in June after admitting that the 1.9 billion euros ($2.2 billion) missing from its accounts — which it initially claimed was deposited in two Philippine banks — did not exist.
The company’s former chief executive and several other top executives have since been arrested on fraud charges.
Mel Georgie Racela, executive director of the Philippines’ Anti-Money Laundering Council, said it and the justice department’s National Bureau of Investigation shared a list of “57 persons of interest” with German investigators.
It includes Jan Marsalek, Wirecard’s former chief operating officer who is also being sought by Berlin investigators, he said.
Another is German businessman Christopher Reinhard Bauer, who the Philippine government said died from natural causes in Manila in July.
“We also need evidence… that these foreigners are engaged in fraudulent activities,” Racela told an online news conference.
“Without a predicate offence we cannot proceed with our money laundering case against these foreigners,” he said.
Philippine investigators have not specified Bauer’s role in the accounting scandal, but the Financial Times has described him as a former Wirecard Asia Pacific executive.
The list also includes employees of the two Philippine banks where the Wirecard billions were supposedly deposited, as well as Filipino immigration officials suspected of fabricating Marsalek’s travel records to throw off investigators.
Racela did not name others in the list.
Investigators have established that the supposed Wirecard bank deposits “did not enter the Philippine financial system”, he added, echoing an earlier statement by the central bank.
They also looked into the activities of subsidiary Wirecard e-Money operating in the country but did not find any wrongdoing, Racela said.