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Moody's: China's Pursuit of Growth Target Risks Extending Economic Imbalances





Moody's Investors Service says that maintaining robust economic growth will remain the priority of China's (Aa3 stable) authorities in 2016, but some of the implications of this approach will be credit negative. Moody's notes that China's relatively robust GDP growth of 6.9% in 2015 owed to significant monetary and fiscal stimulus -- reflecting this focus -- which prevented a sharper slowdown from 7.3% in 2014. Policy support in the pursuit of growth targets is likely to persist in 2016, with the credit-negative effect of postponing deleveraging and the reduction of excess capacity. Moody's conclusions were contained in its just-released report on the Government of China, "Government of China: Stimulus Could Prolong Imbalances, a Credit Negative." In the context of equity and currency market volatility and persistent capital outflows, Moody's further notes that it is becoming increasingly difficult for the government to achieve its growth target while steering the economy toward a more balanced structure. While sustainable rebalancing advances one aspect of the authorities' policy agenda, a more rapid process would involve tackling excess capacity in parts of the industrial sector, with negative short-term consequences for the economy and potentially financial stability. In Moody's view, China's authorities will allow the fiscal deficit to widen to around 2.5-3% of GDP in 2016, after 2.7% in 2015 and under 2% in the previous five years, to provide room for policy support. Government debt will rise slightly above 40% of GDP, still in line with similarly rated peers. Moody's concludes that while fiscal and monetary policy supported overall GDP growth last year, they have not raised profitability in those sectors that the economy is rebalancing away from, such as heavy industry. As stimulus continues, it is likely to increase system-wide leverage -- or at least prevent it from falling -- without boosting profitability. This will raise debt serviceability risks.


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OPEC, Russia discuss likely joint action on supply glut





Senior OPEC and Russian officials talked over a potential joint act to resolve one of the worst supply gluts in decades. But Saudi Arabia implied its stance to letting the oil market rebalance itself. OPEC Secretary General Abdalla El-Badri said other producers should cooperate in order to settle oversupply for prices to recuperate. The Organization of the Petroleum Exporting Countries previously said it would only consider reducing output if others pledge to do so. So far, Russia has refused to collaborate, saying its fields and weather conditions are not similar to those in the Gulf region even as prices below $30 a barrel are way below what they need to break even.


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Federal Reserve leaves rates unchanged, accounts market selloff





The Federal Reserve, acknowledging a stock market selloff, kept interest rates unchanged and would closely monitor global economic and financial improvements, saying it cannot afford to ditch a plan to tighten this year's monetary policy. The decision by the Federal Open Market Committee was widely anticipated following stock markets in the United States and around the globe sustained month-long plunge, raising concerns a sudden global slowdown could dent US growth. In a statement, policymakers, after their two-day meeting, will be looking into the effects of global economic and financial growths in inflation and job market.


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Singapore Employment Logs Slowest Growth Since 2003





Singapore's employment increased at the slowest annual pace in 12 years on sluggish global economic conditions and weak performance of city-state economy, data published by the Ministry of Manpower showed Thursday. Total employment advanced 31,800 or 0.9 percent in 2015, which was the weakest expansion since 2003. In the fourth quarter, total employment grew 15,500 from the previous quarter when it rose 12,600. The ministry said total employment growth has moderated amidst weaker economic conditions and tightened supply of foreign manpower. Further, data showed that local employment increased marginally by an estimated 100 or zero percent in 2015, after growing strongly by 96,000 in 2014. Meanwhile, foreign employment, excluding foreign domestic workers, continued to grow at a moderate pace of an estimated 22,600, or 2 percent in 2015. The jobless rate slid to 1.9 percent in December quarter from 2 percent in September quarter. It was forecast to remain at 2 percent. For the whole of 2015, the annual average unemployment rate was broadly unchanged since 2011, at 1.9 percent.


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New Zealand Money Supply Growth Slows In December





New Zealand's money supply growth eased in December after accelerating in the prior month, figures from the Reserve Bank of New Zealand showed Friday. The broad money supply, or M3, climbed at a slower pace of 8.1 percent year-over-year to NZ$305,985 billion in December, following a 8.4 percent hike in November. In the same month of the preceding year, the rate of increase was 6.3 percent. At the same time, the annual growth in intermediate money supply, or M2, quickened to 14.2 percent in December from 13.7 a month earlier.


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Facebook glides Wall Street higher





The Wall Street soared as Facebook Inc.'s stellar quarterly report bolstered tech stocks higher and a leap in oil prices lifted up the energy sector. The social media company shares surged 15.5%, its largest one-day bounce since 2013, as digital advertising soared 52% in fourth quarter revenue. The S&P tech sector rose 1.48% as Alphabet advanced 4.28%. The S&P energy sector climbed 3.15% as oil prices increased almost 3%. Earnings from Facebook and other companies, as well as oil prices rebound were the forces behind most of the day's improved sentiment. But investors cautioned the accelerations could be short-lived.


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China PMI narrows than projected in January





China's manufacturing sector activity constricted more than predicted in January, weaker than the preceding month. Official figures showed Purchasing Managers' Index settled at 49.4 last month from 49.7 in December. Chinese economic growth skidded to 6.9% in the past year, its slowest expansion in 25 years, pressuring policymakers to renew confidence of traders in the country.


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Commodity Currencies Slide As China Manufacturing PMI Disappoints





Commodity currencies such as the Australian, the New Zealand and the Canadian dollars weakened against their major counterparts in the Asian session on Monday, after data showed that the manufacturing sector in China continued to contract in January. Data from the National Bureau of Statistics showed that the manufacturing sector in China continued to contract in January, and at a faster rate, with a PMI score of 49.4. That was shy of forecasts for 49.6, and was down from 49.7 in December. The government also said that its non-manufacturing PMI came in at 53.5 in January, down from 54.4 in the previous month but still safely in expansion territory. The results of a private survey released by Caixin showed that the manufacturing sector in China continued to contract in January, although at a slower pace, with a PMI score of 48.4. That topped forecasts for a reading of 48.1, and was also up from 48.2 in December. In other economic news, data from the Australian Industry Group showed that the manufacturing sector in Australia continued to expand in January, albeit at a slightly slower pace, with a PMI score of 51.5. That's down from 51.9 in December. In all, the index has expanded in seven straight months. Last Friday, the Australian dollar rose 0.18 percent against the U.S. dollar, 1.83 percent against the yen and 0.99 percent against the euro. The NZ dollar rose 0.44 percent against the U.S. dollar, 2.10 percent against the yen and 1.09 percent against the euro. The Canadian dollar rose 1.93 percent against the yen and 1.41 percent against the euro. Meanwhile, the Canadian dollar held steady against the greenback. In the Asian trading, the Australian dollar fell to a 6-day low of 0.9861 against the Canadian dollar and a 4-day low of 0.7042 against the U.S. dollar, from Friday's closing quotes of 0.9892 and 0.7082, respectively. If the aussie extends its downtrend, it is likely to find support around 0.97 against the loonie and 0.69 against the greenback. Against the yen and the euro, the aussie dropped to 85.31 and 1.5388 from last week's closing quotes of 85.79 and 1.5285, respectively. The aussie may test support near 81.00 against the yen and 1.59 against the euro. Meanwhile, the aussie slipped to 1.0901 against the NZ dollar, from Friday's closing value of 1.0914 and held steady thereafter. The NZ dollar fell to a 4-day low of 0.6449 against the U.S. dollar, from Friday's closing value of 0.6478. If the kiwi extends its downtrend, it is likely to find support around the 0.63 area. Against the yen and the euro, the kiwi edged down to 78.12 and 1.6802 from last week's closing value of 78.49 and 1.6691, respectively. The kiwi may test support near 74.00 against the yen and 1.62 against the euro. The Canadian dollar dropped to 1.5204 against the euro and 1.4013 against the U.S. dollar, from an early near 4-week high of 1.5111 and a 4-day high of 1.3966, respectively. The loonie may test support 1.56 near against the euro and 1.44 against the greenback. Against the yen, the loonie edged down to 86.48 from an early high of 86.92. If the loonie extends its downtrend, it is likely to find support around the 82.00 area. Looking ahead, final manufacturing PMI reports from major European economies for January and U.K. mortgage approvals data for December are due to be released later in the day. In the New York session, U.S. personal income and spending data for December, U.S. construction spending for December and U.S. and Canada's flash manufacturing PMI for January are slated for release. At 11:00 am ET, European Central Bank President Mario Draghi will testify about the 2015 ECB Annual Report before the European Parliament, in Strasbourg. Federal Reserve Governor Stanley Fischer is scheduled to speak about the U.S. economy and monetary policy at the Council on Foreign Relations in New York at 1 pm ET.


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BOJ should continue hitting 2% inflation target - Ishihara





Japan's Economy Minister Nobuteru Ishihara urged Bank of Japan should hold on to its goal of 2% inflation to boost the economy. The official said the BOJ's move to adopt negative interest rates will bolster the housing industry and capital expenditure, but he needs ample time to trail its effect.


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RBA Keeps Rates Unchanged


Australia's central bank maintained its record low interest rate for the ninth straight meeting on Tuesday as widely expected by economists. The policy board of the Reserve Bank of Australia left its cash rate unchanged at 2.00 percent. Policymakers judged that there were reasonable prospects for continued growth in the economy, with inflation close to target. The Board therefore decided that the current setting of monetary policy remained appropriate. Members noted that the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand. "Over the period ahead, new information should allow the Board to judge whether the recent improvement in labour market conditions is continuing and whether the recent financial turbulence portends weaker global and domestic demand," the bank said in a statement.




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