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BUSINESS Oil above $111, Saudi sees stronger demand LONDON: Oil edged further above $111 a barrel yesterday as the prospect of stronger demand in Asia outweighed concern over the pace of economic recovery in top consumer the United States. Demand for crude from Saudi Arabia is likely to rise over the coming months, Saudi Oil Minister Ali Al-Naimi said on Monday - a sign the OPEC heavyweight sees a recovery in its biggest export market, Asia. China, the world’s secondlargest oil consumer, imported just over 1 million barrels a day from the Kingdom last year, up more than 7 percent from 2011. Brent gained 44 cents to $111.52 a barrel by 1053 GMT. US crude rose 4 cents to $97.11 a barrel. “The fact that oil prices have been able to gain despite negative framework conditions of late - weaker data from China and the US just now, and a firmer US dollar, weaker equity markets and rising US inventories last week - can be interpreted as a sign of an incipient trend reversal,” Commerzbank said in a research note. But some investors anticipate downward pressure on oil prices as cooling US factory activity in March suggests the world’s largest economy lost some momentum at the end of the first quarter. “You see the US economy settling into a long hard grind of moderate growth of around 1 to 1.5 percent. Growth in previous recoveries was closer to 3.5 percent,” said Ric Spooner, chief market analyst at CMC Markets, in Sydney. “With this kind of growth, the United States is going to struggle to bring down unemployment, which is a real drag on the economy.” US crude could also be pushed lower by a pipeline leak in Arkansas that threatens to increase the supply of oil coming from Canada to the US Midwest. Exxon Mobil continued efforts to clean up thousands of barrels of heavy Canadian crude oil spilled from a near 65-year-old pipeline in the US state. Exxon’s Pegasus pipeline, which can carry more than 90,000 barrels per day (bpd) of crude to Texas from Illinois, is used to supply US Gulf Coast refineries. “Any kind of bottleneck will cause weakness in the mid-continent, so you could see some temporary weakness in WTI,” said Tony Nunan, a risk manager at Mitsubishi Corp in Tokyo, referring to West Texas Intermediate-grade crude oil. —Reuters WEDNESDAY, APRIL 3, 2013 SYDNEY: A passenger boat makes a turn in front of the National Maritime museum at darling harbor in Sydney yesterday. It has been widely tipped there will be no change to the current cash rate when the RBA hands down its monthly interest rate yesterday. — AFP Australia keeps rates on hold SYDNEY: Australia’s central bank kept interest rates on hold at 3.0 percent yesterday, saying global downside risks appeared to have eased but domestic pressures were lingering. Reserve Bank of Australia governor Glenn Stevens said there were a “number of indications that the substantial easing of monetary policy during late 2011 and 2012 is having an expansionary effect” but more time was needed. The stubbornly high Australian dollar is squeezing local industries despite a drop in export prices, while households and businesses remained cautious. Globally, however, the picture is improving, with the United States expanding at a “moderate” pace while growth in key market China had “stabilized at a fairly robust pace”, shoring up similar improvements across Asia. “Global growth is forecast to be a little below average for a time, but the downside risks appear to be reduced,” said Stevens following the bank’s monthly meeting on monetary policy. “At today’s meeting, the board judged that it was prudent to leave the cash rate unchanged.” Stevens noted that growth had been close to long-term averages in 2012, underpinned by “very large increases” in mining spending, which offset weakness in other industries. “Looking ahead, the peak in resource investment is drawing close. There will, therefore, be more scope for some other areas of demand to strengthen,” he said. JOHANNESBURG: South African platinum producer Lonmin PLC appointed Anglo American Platinum (Amplats) executive Ben Magara as its new chief executive yesterday as it strives to rebound from a wave of deadly strikes which hammered it last year. Magara, who will start in July, will be tasked with guiding Lonmin’s turnaround and improving industrial relations at the company after illegal strikes last year triggered violence which killed 46 people, including 34 strikers shot dead by police in a single day at its Marikana mine. A Zimbabwean national who ran Anglo America’s South African coal operations before taking over engineering and capital projects at Amplats, Magara faces a militant labor force which closed Marikana for a day last month, embarrassing Lonmin as it hosted a media tour. Industry sources say he has invaluable experience of South Africa’s highly-charged labor and political environment, in which mining executives do not have just investors to please. “He seems to get - more than almost anyone else - that the mining game has changed and that your stakeholders are as important as your shareholders,” said a senior lawyer who has worked with Magara. “For a company like Lonmin, that doesn’t seem to have that institutional nous, this is a great hire,” the lawyer said. South Africa’s mining landscape has been radically transformed by the emergence of the militant Association of Mineworkers and Construction Union, which has poached members from the once dominant National Union of Mineworkers in a bloody turf war that was at the root of last year’s violence. The government and the ruling African National Congress also have the mining industry under a microscope and have lashed out at plans by Lonmin rival Amplats, the world’s biggest platinum producer, to cut up to 14,000 jobs to restore profits. Lonmin had been searching for a new chief executive since the end of last year, when Ian Farmer officially stepped aside due to illness. The company has been recovering and in January said production in the last three months of 2012 bounced back more strongly than expected from crippling strikes. Platinum, used in catalytic converters in cars, has come under pressure since the global economic downturn. The strikes, weak platinum prices and high costs forced Lonmin to turn to investors in November to raise $817 million to avoid breaching lending terms. Lonmin said Simon Scott, who has been acting chief executive since August 2012, will resume his role as chief financial officer when Magara joins. Lonmin’s shares in London were down 0.5 percent at midday. — Reuters Inflation and wages were both contained, he added, supporting the bank’s view that an “accommodative stance” remained appropriate. “The board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the target over time,” he said. The Australian dollar was little moved by the widely expected decision, dipping from $1.0460 to $1.0450. Analysts said the commentary suggested there would have to be a significant deterioration in economic indicators before the RBA took action, with further cuts looking unlikely in the near term. “The signs of improvement that we’re currently seeing would have to peter out or there would have to be some sort of global shock, and they certainly don’t seem in any rush to move,” said AMP Capital Investors economist Shane Oliver. Rates have since December been at 3.0 percent, a historic low not seen since the global financial crisis and well below their most recent peak of 4.75 percent in October 2011. Ratings giant Fitch affirmed Australia’s AAA credit rating last week, meaning it is among only a handful of nations with the coveted top-flight rating from all three major agencies including Moody’s and Standard & Poor’s. The economy grew 0.6 percent in the three months to December as exports lifted, but analysts have warned of a subdued picture overall. — AFP Lonmin picks Amplats exec to lead rebound Trade body eyes integrity tests for bankers LONDON: Thousands of financial sector workers risk being frozen out of the industry unless they pass mandatory tests measuring their personal ethics and integrity. The Chartered Institute for Securities & Investment (CISI), a professional body for individuals working, or seeking careers in wealth management and capital markets, wants all of its members to undergo integrity screening or face losing their membership, as it battles to restore public faith in finance. Until now, only individuals offering financial advice had to take such a test as a condition of their CISI status and to comply with UK rules on how investment funds are sold to savers. Bankers working in areas like corporate finance and mergers and acquisitions, and traders in bonds, shares and derivatives have no such regulatory requirements imposed upon them. But the CISI said yesterday that systematic checks on the ethics and integrity of workers across the entire financial services industry were long overdue. “There has been much talk about a number of initiatives which are aimed at restoring trust in financial services. This is one that has come to fruition and today we are introducing a real change,” CISI Chief Executive Simon Culhane said. Based in London, the CISI is an international organization with offices in financial centres such as Dublin, Singapore, Dubai and Mumbai. Around 7,300 of CISI’s 40,000 members have sat the Integrity Matters test since it was introduced in late 2008. The CISI hopes the additional roll out will reassure savers that the industry is serious about ending so-called ‘casino-banking’. The test offers users six dilemmas, all based on real life examples from the financial sector. Each dilemma evolves over a series of time periods, with each response determining how the scenario develops. As well as demanding compliance across its entire global membership, the CISI said it would no longer accept entry-level candidates for its capital markets qualifications unless they had passed the exam first. Some institutions including Bank of America require staff working in retail investment advisory roles to take examinations set by, or belong to, approved bodies like the CISI so they can more easily demonstrate competence of their employees to regulators.—Reuters
MOSCOW: The Russian central bank kept its main refinancing rate unchanged at 8.25 percent yesterday but appeared hint at future rate cuts amid pressure from policymakers for a action to boost economic activity. The Bank Rossii appeared to leave the door open for a cut in the future by saying inflation, currently high at 7.2 percent, should return to within its target range in the second half of the year. While keeping the benchmark rate unchanged, it also snipped several more minor rates by 25 basis points including longer-term rates for liquidity operations in a bid to push forward faltering activity. The bank gave a downbeat assessment of Russia’s economic growth prospects, saying that recent data pointed towards a continued slowing of growth and risks of a further slowdown. “The decision (to hold the headline rate) has been taken against the background of an estimation of the inflation risks and the prospects for economic BUSINESS Russia CB keeps main interest rate unchanged LONDON: Mervyn King, the Governor of the Bank of England, talks to an employee of the Prudential Regulation Authority (PRA), during the opening in central London yesterday. —AP UK manufacturing shrinks again, mortgages fall LONDON: Britain’s manufacturing activity shrank for a second consecutive month in March, a survey showed yesterday, leaving the country’s more resilient services sector as the best hope of avoiding a new recession. The Markit/CIPS manufacturing purchasing managers’ index came in at 48.3, only slightly above February’s surprisingly poor reading of 47.9, and a touch weaker than the consensus forecast. The output component of the survey fell in March at its fastest pace since October. There were signs of weakness in the key housing market too. While lending to Britain’s consumers ticked up in February, the number of mortgage approvals for house purchases fell for a second month, Bank of England data showed. Nonetheless, the value of home-backed lending rose. But there was better news from the country’s largest business survey which showed that export orders with British firms rose strongly in the first three months of 2013 and confidence about the next 12 months picked up.The Markit PMI survey suggests that manufacturing exerted an even bigger drag on growth between January and March than it did in the fourth quarter of 2012, when it accounted for a third of the economy’s 0.3 percent contraction. “The onus is now on the far larger service sector to prevent the UK from slipping into a triple-dip recession,” said Rob Dobson, senior economist at Markit. Official GDP data for the first quarter won’t be released until April 25 but the evidence so far suggests a strong risk that Britain will record a second consecutive quarter of contraction - the technical definition of recession. A third recession in less than five years would be an embarrassment for the government which is sticking to tough austerity measures. “All this still points to a very subdued economy, which will keep the pressure on the BoE to do more to offset the UK’s tight fiscal stance,” said James Knightley, an economist with ING, referring to Tuesday’s data. “However, our central case remains for a nochange decision this week.” The Bank of England’s policymakers meet today and tomorrow. More action, possibly in the form of renewed government bond-buying or quantitative easing (QE), is only expected later this year.“We don’t think that that is going to be sufficient to push the (bank) into the sanctioning QE as soon as this week,” said Philip Shaw, an economist with Investec. “But nonetheless, the committee can’t be altogether happy with some of these indicators which have shown the economy remaining in uncertain mode.” The Markit report blamed the poor performance of manufacturing in March on tough market conditions, subdued client confidence and ongoing bad weather. New orders from abroad contracted for the 15th month running in March. The survey blamed the fall on weak demand from Europe and strong competition in US and South Asian markets. In further bad news for UK policymakers, there were also signs that inflation pressures were picking up. Output prices rose at the fastest pace in three months while input prices picked up sharply, driven by the weakness of sterling and higher energy and food costs. Manufacturing accounts for around a fifth of British economic output. Surveys of the construction and service sectors for March are due to be released today and tomorrow respectively. There have been signs that the services sector is faring better than manufacturing. It grew at its fastest pace in five months in February, according to Markit and official data showed it notched up its best performance in January for five months. —Reuters Yemen discusses aid with IMF, eyes faster growth DUBAI: The International Monetary Fund is discussing fresh financial aid to Yemen with the government of the impoverished country, a senior IMF official said yesterday. Masood Ahmed, director of the IMF’s Middle East and Central Asia department, told reporters that the talks focused on a new financial program for Yemen. “We have a team that has been working with authorities over the last couple of weeks and they made good progress in those discussions,” he said ahead of a meeting of Arab finance ministers and central bank governors in Dubai. “We are working with the authorities to see how we can support Yemen over the coming years,” he added, without saying when agreement on the aid might be reached, or how much money might be involved. The IMF resumed lending to Yemen in April last year, approving the payment of a $93.7 million loan to help the country with its balance of payments deficit, which had been worsened by a year of political turmoil. Ibrahim Al-Nahari, Yemen’s central bank sub-governor for foreign operations and research, told Reuters that the new IMF facility might be as large as $500 million. “We are at the beginning stage (of the IMF talks). The program will be an extended facility to the magnitude of $450-500 million over three years.” In an interview with Reuters late on Monday, Yemen’s central bank governor said he was comfortable with the current level of interest rates and that he expected economic growth to accelerate to about 7 percent this year. The central bank slashed its main interest rate by 3 percentage points to a three-year low of 15 percent in February, helped by a sharp fall of inflation, in an effort to support economic recovery in the volatile Arab state. Asked whether he expected to cut interest rates again in coming months, Governor Mohammed Awad bin Hamam said: “Will see, wait and see.” February’s rate cut was the first since October, when the central bank began an easing cycle. Yemen’s economy improved last year but recovery remains fragile in the second-poorest Arab state after Mauritania; a third of Yemen’s 25 million people live on less than $2 a day. Hamam said he expected the Yemeni economy to pick up speed this year after it grew 4.5 percent in 2012; the non-oil sector expanded about 6 percent last year. “I expect this year will be better, maybe it will be 7 percent,” he said of economic growth. That is more optimistic than the IMF’s latest public forecast of 4 percent growth for Yemen. The IMF said in January that Yemen’s central bank had room to reduce interest rates gradually to support growth, but warned that the political transition after the overthrow of president Ali Abdullah Saleh in February 2012, and security concerns - particularly attacks on key oil and electricity facilities - were risks to the economic outlook. Inflation in Yemen dived to 5.8 percent in the final quarter of 2012 from a peak of 25 percent in October 2011. Hamam said the central bank’s foreign currency reserves currently stood at $6 billion, adding that he expected $2 billion worth of aid to arrive this year from international donors. Last year wealthy Gulf Arab states, Western governments and other donors pledged $7.9 billion in aid over several years to Yemen, but only a small fraction has so far arrived. “Now, we are at the start and we have not received that much. We are waiting for the amount to be collected by the ministry of planning,” Hamam said. —Reuters growth,” the bank said. “The Bank Rossii will continue to monitor the inflation risks and the risks of economic slowdown,” the bank said, adding that its next monetary policy meeting was scheduled for the first half of May. The bank cut its three-month refinancing rate to 6.75 percent from 7.00 percent and for 12 months to 7.75 from 8.00 percent. But crucially the rates for its most widely-used one day and one week operations were unchanged at 5.50 percent. BRUSSELS: “Unacceptably” high euro-zone unemployment ran at a record 12 percent in February, official data showed yesterday, with more than 19 million people on the dole a “tragedy” for Europe. The figures and a weak manufacturing sector report added to the gloom after data earlier this year had encouraged some hope the European economy might finally have touched bottom. Analysts said the reports pointed instead to worse to come, with the jobless queues likely to grow as the debt crisis continues to sap the economy. “Such unacceptably high levels of unemployment are a tragedy for Europe,” said a spokeswoman for EU Employment Commissioner Laszlo Andor. “The EU has to mobilize all available resources to create jobs ... young people in particular need help,” she said. The Eurostat data agency said unemployment in the 17-nation eurozone at 12 percent was unchanged from January when the figure was initially given as 11.9 percent. In the full 27-member EU, unemployment in February rose to 10.9 percent from 10.8 percent, with 26.34 million out of work. Some 33,000 joined the jobless queues in the euro-zone and 76,000 in the EU over the month of February, Eurostat said. Compared with a year earlier, the increase was 1.78 million in the euro-zone and 1.81 million in the EU. The highest unemployment rates in February were in Spain with 26.3 percent and neighbor Portugal, on 17.5 percent. Greece was put at it 26.4 percent but this figure is for December, the latest available. The lowest rates were 4.8 percent in Austria and 5.4 percent in Germany, Europe’s biggest economy. With youth unemployment a huge cause of concern, Eurostat said the jobless rate for under-25s ran at 23.9 percent in the euro-zone and 23.5 percent in the EU. Among the countries with the highest youth jobless levels, Capital Economics said in a note to clients that the language of the statement reflected the extent to which Russia’s economic policymakers were “in a bind” as they sought to balance inflation worries with concerns about sluggish growth. But with inflation forecast to fall “interest rates are likely to be lowered over the coming months, and we are sticking to our forecast for a total of 75 basis points of cuts to key rates by the end of this year,” Capital Economics said. Spain was on 55.7 percent, followed by Portugal on 38.2 percent and Italy with 37.8 percent. Greece was the highest with 58.4 percent but this was also for December. Howard Archer of IHS Global Insight said the figures marked a “dis- mal landmark” at 12 percent-already very close to the official EU 2013 forecast of 12.2 percent. Archer said unemployment was now up for a consecutive 22nd month and even if the report did show the jobless numbers were not rising as fast as before, “an overall turnaround in euro-zone labor markets still looks some way off.” The second quarter outlook is “far from bright,” he said, and unemployment could “very well near 12.5 percent late in 2013 or early in 2014.” Jennifer McKeown at Capital Economics was equally downbeat. The February data “is further confirmation of the underlying weakness of the economy,” Mckeown said. Manufacturing data meanwhile showed the slump deepening sharply as even Germany was dragged down. The Markit Eurozone Manufacturing Purchasing Managers Index fell to 46.8 points in March, up from an initial estimate of 46.6 but well short of the already weak 47.9 posted in February. The outcome left the closely followed indicator at a three-month low and below the 50-points boom-bust line since August 2011. Germany at 49 points slipped to a two-month low while “rates of decline gathered pace in all the other nations ... with the exception of France,” Markit said in a statement. WEDNESDAY, APRIL 3, 2013 The decision comes as the central bank goes through a shake-up ahead of the arrival of Kremlin economic advisor Elvira Nabiullina in the summer as its new chief to replace the long-serving incumbent Sergei Ignatyev. While respected as an economist who served as a capable economy minister to 2012, Nabiullina is a close ally of President Vladimir Putin and some analysts have expressed concern that the Kremlin will have a greater influence over the central bank. —AFP Record unemployment clouds euro-zone hopes Over 19 million people on the dole France stood at 44 points, a threemonth high, while Italy was on 44.5, its lowest for seven months and Spain on 44.2, a five-month low. Manufacturing “looks likely to have acted as a drag on the economy in the first quarter, with an acceleration in NOCOSIA: People queue up outside a Bank of Cyprus (BOC) branch in the centre of the capital Nicosia yesterday. —AFP LONDON: A man leaves a branch of Laiki Bank UK, a subsidiary of Cyprus Popular Bank (Laiki Bank), in north London. —AFP Laiki Bank UK branch avoids Cypriot fallout LONDON: Customers of the British unit of failed bank Laiki will be protected from the levy that was part of the euro-zone nation’s bailout deal, the Bank of England announced yesterday. The announcement, made by the BoE’s new finance watchdog the Prudential Regulation Authority, means that Laiki Bank UK customers will avoid any Cypriot levy on their accounts and will be able to access their accounts as normal. The BoE said in a statement that about £270 million ($410 million, 320 million euros) in deposits from Laiki Bank UK would be transferred to Bank of Cyprus UK, and placed in the British government’s compensation scheme that guarantees up to £85,000 per saver. Crisis-hit Cyprus was rescued with a 10billion-euro ($13-billion) EU-IMF bailout last week. As part of the rescue deal, Laiki or ‘Popular Bank’ will shut and merge with Bank of Cyprus. Depositors in Cyprus with more than 100,000 euros in the two banks-the island’s biggest — face losing a large chunk of their money. “Cyprus Popular Bank Public Co Ltd operating in the UK under the trading name ‘Laiki Bank UK’ has today reached an agreement with Bank of Cyprus UK Ltd to transfer all deposits to Bank of Cyprus UK, a UK subsidiary fully regulated by the Prudential Regulation Authority (PRA) and Financial Conduct Authority,” the BoE said in a statement. “The agreement does not affect access to bank accounts and therefore all customers who had an account with Laiki Bank UK will be able to access funds as normal and do not need to do anything.” The Cyprus crisis saw capital controls imposed for the first time by a euro-zone economy to prevent financial meltdown. Under the bailout deal agreed in Brussels last week, Cyprus must raise 5.8 billion euros to qualify for the full 10-billion-euro loan from the “troika” of the European Union, European Central Bank and International Monetary Fund. —AFP the rate of decline in March raising the risk that the downturn may also intensify in the second quarter,” Markit chief economist Chris Williamson said in a statement. “The surveys paint a very disappointing picture across the region,” Williamson said. The Cyprus debt bailout appeared not to have had any impact so far, he said, but “the concern is that the latest chapter in the (euro-zone debt) crisis will have hit demand further in April.” —AFP Greek CB sees delay in recapitalization ATHENS: Greece’s central banker has forecast that an eagerly-awaited recapitalization of the country’s crisis-hit leading banks could be delayed by a few weeks to May. “The recapitalization will be over in a few weeks,” Bank of Greece governor George Provopoulos told state television NET in a late Monday interview. “According to the program, it will have to be completed in April. I would say this date is slightly unrealistic, there could be a delay of a few weeks... it could go to the end of May,” Provopoulos said. The recapitalization of Greek banks, who took a major blow last year in helping the country reduce its sovereign debt, is a condition for the continued release of EU-IMF rescue loans for Greece’s crisis-hit economy. A sum of 50 billion euros out of the total EU-IMF bailout fund of 240 billion euros has been earmarked for this purpose. At least 10 percent of new capital must come from private investors to keep the banks from being effectively nationalized. A key stumbling block to the process has been an ongoing merger between Greece’s leading lender, National Bank, and third-ranked Eurobank. Provopoulos on Monday acknowledged the concern of Greece’s so-called troika of creditors-the EU, IMF and European Central Bank-that the new entity will both dominate the market and will be tough to recapitalize. “(The creditors) do not like the creation of such a major player with a market share of around 40 percent,” Provopoulos said. “The troika says, and I can also say, that there will be a greater difficulty in a combined National Bank-Eurobank entity, with capital needs in the order of 1.5 billion euros or slightly higher, a very large sum under the current circumstances. So there is a concern that if private investors cannot be found, it will come under state control,” he added. Senior troika representatives are returning to Athens this week to resume an audit of reforms that was suspended last month. Their report will determine whether Athens will receive a loan disbursement of 2.8 billion euros pending since March. Provopoulos noted that even if a bank had to turn to the Hellenic financial stability fund for help, “it’s not exactly state control.” “In the Stability Fund there is ECB representation, and the EU Commission, and the troika has oversight. In no way would the troika want a major bank to operate as a traditional (state) bank. I am also concerned and would not want it to happen. I do not think it will,” he said. —AFP
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