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Tuesday, 30 October, 2012
$500 million for IP g
Exports to Beijing on the up Pakistan’s exports to China rising, Beijing investing more: envoy
Iran to provide $500 million for laying Pakistan’s portion of IP gas pipeline
ISLAMABAD AGENCIES
Ambassador of the People’s Republic of China Liu Jian on Monday said Pakistan’s development is our progress and difficulties of Islamabad are our problem which we would mutually overcome soon. He said that investment climate in Pakistan is very good while government is providing best possible security to investors therefore no Chinese entrepreneur is worried to come to Pakistan. The Ambassador said that while talking to business community and Chinese Pakistanis at the house of Muhammad Raza Khan, former Chairman Coordination of FPCCI. Former President ICCI Nasir Khan and other business leaders were also present on the occasion. Ambassador China Liu Jian said that Beijing is encouraging Chinese companies to invest more in Pakistan so that this brotherly country can progress on a fast pace. Cooperation and trade between Islamabad and Beijing is increasing, bilateral trade has crossed $ 10 billion mark while Pakistan exports to China have increased by 54 per cent, informed Liu Jian.
ISLAMABAD NNI
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RAN is to provide five hundred million dollars for laying Pakistan’s portion of the Iran-Pakistan gas pipeline project The remaining amount will be arranged by Pakistan through collection of gas infrastructure development cess. Tehran will also provide material support.
He said that China is working on 120 projects in Pakistan of which some initiatives are related to energy. Asking Pakistan to resolve energy crisis as soon as possible, he said that we would be pleased if Chinese companies are invited to take part in TAPI gas pipeline project. He said that China has become Pakistan’s largest trading partner and and the fourth largest export destination. We should further strengthen cooperation in energy, agriculture, infrastructure, financial sector, and other fields, as well as enhance people to people exchanges, he said. Both countries should try to get maximum benefit of bilateral Currency Swap Agreement and recent Agency Agreement signed between State Bank of Pakistan and the People’s Bank of China, he stressed. At the occasion, Raza Khan demanded of the government to include Chinese companies in the TAPI project. China has set a record by completing 7500 km pipeline in 18 months which means it can complete TAPI project in 4-5 months resolving energy our crisis, said Raza Khan. Nasir Khan said that China is our best and tested friend and all Pakistanis are proud of Beijing.
Politics puts Italy, Spain back in market focus Italian political turmoil and Spanish hesitancy over seeking euro zone assistance put the two countries on the front line of the currency area’s debt crisis back under market pressure on Monday as their leaders met in Madrid
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MADRID/ROME AGENCIES
Former Prime Minister Silvio Berlusconi’s weekend threat to bring down his successor Mario Monti’s government, and regional elections in Sicily in which a protest party led by a stand-up comic polled strongly, highlighted the political risks in Italy. Rome’s borrowing costs have fallen since July partly due to the European Central Bank’s pledge to buy unlimited quantities of bonds if necessary to help states that request aid and accept strict conditions, but also due to hopes that Monti, a reformist technocrat, may stay on after next year’s general election. Italian and Spanish bond yields rose on Monday as some investors sought the safety of German Bunds, partly due to political uncertainty in the euro zone’s recession-stricken third and fourth largest economies. But Italy paid less than a month ago to sell 8 billion euros of sixmonth bills. The euro also slipped on uncertainty over whether near-bankrupt Greece, the country that triggered Europe’s debt crisis, can agree to a deal on new austerity measures and its international lenders can figure out how to make its huge debts sustainable. A German government spokesman rejected talk of any new write-down of Greek debt, this time involving official creditors, saying German law would not permit such a haircut while new aid for the struggling country was being discussed. The European Central Bank has also refused to take any losses on its sizeable holdings of Greek government bonds, saying that would be illegal. Some market players are also concerned by signs that Spanish Prime Minister Mariano Rajoy, having almost completed this year’s borrowing, will try to avoid the stigma of requesting a precau-
tionary credit line from the euro zone’s ESM rescue fund. “As time passes there should be a growing move towards pricing in an uncertainty premia to the Spanish curve ... and Berlusconi’s rant perhaps highlights the less than stable nature of Italian politics and reinjects some degree of political risk into BTPs,” said Richard McGuire, rate strategist at Rabobank. The risk premium on Spanish bonds has tumbled since ECB President Mario Draghi’s move, some Spanish banks have regained money market access and the Treasury has almost cleared its 2012 issuance needs and can soon being to prefund 2013 borrowing. But Spanish yields have stopped falling and some analysts expect them to rise the longer Rajoy holds off. In a sign of the depth of the recession battering Spain, retail sales fell at their fastest pace on record in September, hit by a hike in value-added tax, after unemployment topped a record 25 percent in August. NUDGE: Monti sought to nudge Rajoy towards applying for a rescue when the two men met in early August in the belief that Italy would benefit indirectly from a backstop for Spain, European diplomats told Reuters at the time. The Italian premier said as recently as October 12 that a Spanish aid request would help calm financial markets, and diplomats say the International Monetary Fund is also pressing for Madrid to seek for a credit line sooner rather than later. But with market pressure far less acute since the ECB announced its bond-buying policy, the incentive for Rajoy to apply has waned. Germany, the biggest contributor to the ESM, continues to insist that Spain does not need a bailout. In Italy, Berlusconi appeared to have cleared the way last week for a new political era by announcing he would not run in
a general election due in April, raising the prospect of Monti retaining a guiding role in economic policy. However, in a furious reaction to being sentenced to four years in prison for tax fraud, the billionaire former premier threatened on Saturday to unseat the Monti government and make a comeback, raising new uncertainty over the electoral outlook. Against this backdrop, Sicilians voted on Sunday for a new regional government, with an exit poll in regional capital Palermo showing the anti-establishment 5 Star Movement of comic Beppe Grillo leading with 26 percent on a low turnout. A strong performance for the 5 Star Movement, after its success in local polls in May, would reinforce its status as the main vehicle for protest against Monti’s
austerity policies and disillusion with mainstream parties. GREEK DRAMA: Greece’s foreign lenders have refused to make any further concessions on changes to labor laws contested by a junior coalition partner, the country’s finance minister said on Sunday, prolonging an impasse on a crucial austerity package. Athens has been locked in talks with its EU and IMF lenders on the austerity package for months, but a final agreement has been held up by the small Democratic Left party’s refusal to back the new wage laws. The publication of a list of more than 2,000 wealthy Greeks with Swiss bank accounts, including well-known business and political figures, has fuelled public anger at more pay and benefit cuts when the rich are
suspected of tax evasion on a massive scale. Newspaper Ta Nea reprinted the names after the magazine editor who first published the list was arrested on Sunday and was due to appear in court on Monday for violating data privacy laws. The list, given to Greece by French authorities in 2010, contains the names of 2,059 Greek account holders at HSBC in Switzerland to be probed for possible tax offences. It has become known as the “Lagarde List” after Christine Lagarde, the head of the IMF who was the French Finance Minister when the list was handed over. Greek authorities have said there is no evidence that people included in the list have violated the law, but Greek media have criticized former ministers for not investigating suspected tax evaders on the list.
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Euro falls vs dollar, yen on euro zone uncertainty
The euro fell against the dollar and yen on Monday, hurt by uncertainty over whether Greece can agree to a deal on austerity and with no sign of when Spain might request aid NEW YORK HE single currency was expected to stay subdued against the dollar and the yen, with investors preferring safehaven currencies also on renewed worries about weak earnings from top companies in the region. Near-bankrupt Greece needs a comprehensive deal on an austerity package to unlock its next tranche of aid before it runs out of cash in mid-November. International lenders have refused to make more concessions on changes to labor laws contested by a junior partner in the ruling coalition, prolonging the impasse on a reforms package and weighing on the euro. A Spanish bailout would enable the
trading. “There’s no quick fix for Europe’s problems and even though this week’s European bond auctions and Spanish bond redemption may pass smoothly, the stability will be a mere illusion,” said Kathy Lien, managing director at BK Asset Management in New York. “Spain is in a state of denial about its problems and while current borrowing costs are more manageable, they need to drop below 5 percent to remove the need for a bailout.” The single currency was down 0.2 percent at $1.2915, not far from a two-week low of $1.2881, with bids from sovereign investors cited at $1.2850. Technical analysts saw support at its 200-day moving average. The euro bought 102.95 yen, down 0.1 percent and well off a six-month peak touched on October 23.
European Central Bank to buy the country’s bonds. Unless Spain formally seeks a rescue, sentiment toward the euro is unlikely to turn positive, traders said. A meeting between Italian Prime Minister Mario Monti and Spanish Prime Minister Mariano Rajoy on Monday had little impact on
Traders expect activity will be thin as Hurricane Sandy is expected to slam into the U.S. East Coast later on Monday. U.S. stock and options markets will be closed on Monday, and possibly Tuesday, as regulators, exchanges and brokers worry about the integrity of markets and the
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safety of employees. “The market is likely to remain quiet today as many are more focused on personal safety and the safety of their family and property,” said Brad Bechtel, managing director at Faros Trading in Stamford, Connecticut. “I would expect we remain in a sluggish risk tone, meaning U.S. dollar bid and emerging market soft through the
remainder of today as there isn’t much to shift the grumpy mood of the market today.” YEN CONSOLIDATES: The dollar rose 0.1 percent to 79.73 yen, just off the session high of 79.75 yen but below Friday’s fourmonth high of 80.36 yen. The BOJ is expected to further ease monetary policy and might make a stronger commitment to keep pumping in cash until its 1 percent annual inflation target is achieved, sources have said. “BOJ easing expectations were a big factor for markets last week, but are not having much impact this week, with the likely outcome already factored in,” said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.
Gasoline jumps as Sandy threatens; crude little changed NEW YORK AGENCIES
New York heating oil futures also gained more than 1 percent, touching the highest level relative to U.S. crude oil on record as dealers hedged against the risk of power outages and flooding that could damage refineries for weeks to come. The crack spread, the difference between wholesale petroleum product prices and crude oil prices, touched $45.15 a barrel. “Markets will be watching for reports of damage to energy infrastructure, notably refineries, post-Sandy given the state of extremely low gasoil inventories as we move into winter season,” Deutsche Bank analysts said. Front-month RBOB gasoline futures rose as high as $2.8115 a gallon, the highest price since October 17, in early trading, but later pared gains as dealers reckoned that the almost total shutdown of eastern seaboard roads and airports would reduced fuel demand, offsetting the refinery outages. By 11:28 a.m. EST, gasoline futures were up 4.34 cents or 1.6 percent at $2.7425 a gallon. “When life stands still, the effect should be bearish for oil prices as consumers consume less oil when they are forced to stay indoors,” said oil analyst Tamas Varga at brokerage PVM Oil Associates in London. U.S. crude futures dipped in choppy trading as ample domestic crude supply and curbed use by shut refineries hemmed prices in. Fifty million people from the U.S. MidAtlantic to Canada were in the path of Hurricane Sandy. Forecasting services expected the storm to strike the New Jersey shore near Atlantic City on Monday night. Brent December crude rose 26 cents to $109.81 a barrel, having reached $110.26. Brent on Monday was on pace to post about a 2 percent loss for the month, a second straight monthly loss. U.S. December crude was down 34 cents at $85.94 a barrel, having swung from $85.34 to $86.43. U.S. crude futures were on track to end October down more than 6 percent, after sliding more than 4 percent in September.
Stock futures end shortened session lower on storm, Europe US stock index futures fell in a shortened session on Monday and cash equity trading was canceled as powerful Hurricane Sandy bore down on the US East Coast while renewed uncertainty in Europe hurt sentiment NEW YORK AGENCIES
All US stock markets were closed on Monday and may remain closed on Tuesday, the operator of the New York Stock Exchange said, depending on the damage from the huge and dangerous storm on financial center New York City overnight and on Tuesday. Index futures stopped trading electronically at 9:15 a.m. and will stay shut until further notice. Sandy, a mammoth storm, took aim at the most densely populated U.S. Northeast Coast on Monday, forcing hundreds of thousands to seek higher ground, halting public transport and closing schools, businesses and government departments. Italian political turmoil and Spanish hesitancy over seeking euro zone assistance put the two countries on the front line of the region’s debt crisis and back under market pressure on Monday as their leaders met in Madrid. “We have an illiquid market, we have a risk-off situation from overseas and we have some issues going on in the States with Sandy, so that is impacting things a little more than expected,” said David Lutz, managing director of trading at Stifel Nicolaus Capital Markets in Baltimore. Lutz was tracking markets from his home in Annapolis, Maryland, a coastal town near Washington D.C. that is expected to escape the worst of the storm surge as Sandy makes landfall further
north. “I do have a lot of customers that are still in, whether they’re in New York City or overseas,” he said. “I think a fair amount of people are probably logging in from home just because at this point in time there’s a lot of information gathering for us U.S. traders,” he said. S&P 500 futures fell 4.9 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures fell 69 points and Nasdaq 100 futures fell 15.75 points. Futures closed well off their lows of the session when S&P 500 futures fell more than 10 points. Futures will not reopen as usual during the day, including the popular S&P 500 e-mini contract that allows smaller traders to access index futures. Frank Lesh, a futures trader at FuturePath in Chicago, said he is expecting his day to be much quieter than usual as the e-mini is his firm’s biggest contract, but he is continuing to trade other futures contracts such as copper, soybeans and grains. “I guess it’s going to be a quiet day,” said Lesh. “We don’t know if we’re going to reopen tonight. I guess they’re going to follow the lead of New York.” E-mini contracts typically trade around the clock, closing for just 45 minutes of each day. If the market closure continues for more than a day it may start causing
problems for investors who need to trade in and out of positions, investors said. “If you go two days, you really start to create some serious financial stress for some players that need to get something done,” said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis. “A two-day closure will create more stress and therefore will allow electronic trading. That’s my best guess.” CME Group closed its interest rate operations, including Treasury, Eurodollar and fed funds futures and options on futures markets on the trading floor at 12:00 noon on Monday in line with a closure of the cash market. In Europe, Spanish and Italian bond
yields rose and German Bund futures hit two-week highs on Monday, partly prompted by former Italian Prime Minister Silvio Berlusconi’s threat to bring down the Rome government. Greece’s foreign lenders have refused to make any further concessions on changes to labor laws contested by a junior coalition partner, the country’s finance minister said on Sunday, prolonging an impasse on a crucial austerity package. Athens has been locked in talks with its EU and IMF lenders on the austerity package for months, but a final agreement has been held up by the small Democratic Left party’s refusal to back the
new wage laws. Weaker revenues have been a concern this U.S. earnings season. Just 36.9 percent of S&P 500 companies so far have reported revenue that beat forecasts, compared with the 62 percent that typically exceed expectations, according to Thomson Reuters data as of Friday. Stocks slid last week, following a series of weak results, especially from U.S. multinational companies. For the week, the Dow fell 1.8 percent, the S&P 500 lost 1.5 percent and the Nasdaq dropped 0.6 percent. The S&P 500 index is off nearly 4 percent since a peak in September and the index has fallen below its 50-day moving average, a closely watched momentum indicator. Some analysts are now looking to the 100-day moving average as the next area of support at 1,396.8. The index closed at 1,411.94 on Friday. European shares fell for the first time in four sessions on Monday, hit by worries over weak company results. The FTSEurofirst 300 index .FTEU3 fell 0.4 percent to 1,093.23 points and the euro zone’s blue-chip Euro STOXX 50 index .STOXX50E fell 0.7 percent to 2,477.62 points. Canadian ETFs traded in Toronto that hold U.S. equities or are exposed to U.S. indexes, such as the Horizons S&P 500 Index C$ Hedged ETF (HXS.TO), are available to trade. Some ETFs will be ineligible for subscriptions or redemptions. Horizons ETF warned that the bid/ask spread could be abnormally wide.
Tuesday, 30 October, 2012