MONDAY, DECEMBER 1, 2014 BUSINESS

US dollar remains resilient against majors NBK MONEY MARKETS REPORT KUWAIT: The US dollar dropped dollar and closed the week at 118.63. States declined unexpectedly in Department reported that it would take try’s outlook. Governor Carney Stated against its major counterparts, as some November to a 5-mohth low, a sign that several weeks of sustained elevated that “in recent months, global econom- economic indicators released from the New home sales Americans are starting to be less opti- readings to confirm that the labor mar- ic conditions have deteriorated in two United States were worse than expect- The number of new home sales rose mistic about the US economy and the ket has taken a step back. of the major economies, Europe and ed, erasing the appeal of the US curren- only slightly by 0.7 percent to an annual labor market. The consumer confidence Japan” and that “the geopolitical situa- cy. Consumer confidence in the United rate of 458,000 in October from a index fell to 88.7 this month from 94.1 German Ifo business climate tion remains difficult”. Governor Carney States fell this month against forecasts revised 455,000 in September that was the previous month, which was the German business confidence unex- added that “the combination of that of a rise by market analysts. The dollar lower than initially reported. New highest level since October 2007. The pectedly rose for the first time in 7- suggests a heightened degree of exter- regained some of its losses towards the homes in the US sold at a slower pace figure came less than economists have months after the country’s economy nal risks to the UK”. Kristin Forbes, a end of the week, as US gross domestic member of the Monetary Policy product came out stronger than expect- Committee and former White House ed, reflecting bigger gains in consumer economic adviser said that “the biggest spending and business investments, risks the BoE are concerned about and surpassing the strongest six months today are external”, adding that the of growth in a decade. Across the Euro area, the UK’s biggest export mar- Atlantic, the European Central Bank ket, is enduring a “sharp downturn”. On became under pressure, after Euro area the other hand, Policy Maker, Ian inflation figures slowed in November to McCafferty, one of only two officials to a 5-year low, urging the central bank favor higher interest rates, out of the 9- toward expanding its unprecedented member committee stated that “there stimulus program. President Mario are balanced risks around the Draghi stated that he wants to raise Eurozone” and that “there’s a possibility inflation “as fast as possible”. that the US economy will strengthen The Euro started the week at 1.2370, over the course of the next two years”. and gained some momentum to reach a high of 1.2530 as figures showed that Kuroda speaks German business confidence unexpect- Japan’s inflation slowed for a third edly rose for the first time in 7-months month and retail sales fell more than after Europe’s largest economy returned forecast, showing the economy contin- to growth. At the same time in the US, ues to struggle from a sales-tax more Americans than forecast filed for increase as Prime Minister Shinzo Abe unemployment benefits, indicating the heads into an election next month. improvement in the labor market has Governor Kuroda stated that “that the stalled. The EUR closed the week at Bank strongly commits itself to achiev- 1.2452. ing the price stability target of 2 per- The sterling pound opened at cent at the earliest possible time and 1.5640, and dropped to a low of 1.5625 than forecasted, which stood at 471,000, forecasted which stood at an increase to returned to growth and the European maintaining it in a stable manner”. at the beginning of the week. The indicating that the strict lending rules 95.9. Although some economists have Central Bank added stimulus to the Euro Concerning global oil prices and Pound then regained its losses as US and slow wage growth have hampered stated that, this drop does not change area. The Ifo institutes business climate changes in the attitude of the central data disappointed. Cable slid lower first-time buyers, prompting builders to the view of an improving economy. index, based on 7,000 executives, hiked bank, Kuroda said, “If the current down- against the US dollar after data released cater instead to upper-income cus- to 104.7 in November from 103.2 in ward pressure on prices remains, albeit showed that the country’s GDP slowed tomers who are able to get financing or Unemployment claims October. The forecast for business confi- in the short term, there is a risk that in the third quarter, lower than the pre- pay cash. The number of people who filed for dence was for a decline to 103.0. conversion of the deflationary mindset vious 3-months. However, the currency unemployment assistance in the US last Germany’s economy is the largest in might be delayed”. In addition, Kuroda gained to a high of 1.5825 and dropped Core durable goods orders week rose more than expected, damp- Europe, which makes it pivotal to the stated that the central bank is “in the dramatically as the US dollar gained US Durable goods orders dropped ening optimism over the strength of the recovery of the whole Euro are, but the middle of trying to drastically change momentum, to closed the week at 0.9 percent in October, surprising mar- labor market. The US Department of pace of growth in Europe’s largest econ- the deflationary mindset through the 1.5645. ket expectations of a 0.5 percent Labor said the number of individuals fil- omy remains slow, and the Bundesbank easing program, and medium to long The Japanese yen gained against increase, after falling 0.1 percent in ing for initial jobless benefits in the have stated that “the nation’s economy term inflation expectations have been the US dollar amid signs its decline September. Orders for long-lasting week ending November 22 increased by will lack momentum at least until the on the path to 2 percent. Governor had become overdone and as Bank goods such as computers and machin- 21,000 to a seasonally adjusted 313,000 end of the year”. Kuroda also said that the Bank will of Japan Governor Haruhiko Kuroda ery declined last month, while orders for from the previous week’s revised increase its asset purchases in order to stated that the economy is on track motor vehicles rebounded. The drop 292,000. Meanwhile, analysts had Inflation report accelerate the pace of increase in the to achieving policy makers’ 2 percent signals that recent increases may be expected jobless claims to fall by 5,000 Bank of England Governor, Mark monetary base. inflation target. The pair found sup- hard to match in the coming months. to 287,000 last week. The number of Carney, spoke of elevated peripheral port around the 117.20 level as Americans applying for new jobless risks threatening the United Kingdom Kuwait investors took profit. Finally, the Yen Consumer confidence benefits hiked above the 300,000 for the as weakening global economies and Kuwaiti dinar at 0.29130. The USDKD weakened against a stronger US Consumer Confidence in the United first time since last September. Labor political tensions weigh on the coun- opened at 0.29130 yesterday morning. Slowing inflation may pave way for more ECB action ECB gets nervous as consumers become happy

FRANKFURT: Slowing euro-zone inflation via its LTRO and TLTRO programs, and soon as Thursday. “The ECB will meaning- is likely to make the European Central unveiled asset purchase programs (ABSs fully revise downwards its growth and Bank increasingly nervous and pave the and covered bonds) to pump liquidity into inflation projections on Thursday. Given way for further monetary easing, analysts the financial system. But it has so far shied the already low starting point, this would say. away from a controversial policy of quanti- strengthen the case for further stimulus,” But the ECB looks unlikely to fire the lat- tative easing (QE) that other central banks said UniCredit economist Marco Valli. est weapon in its anti-deflation armory as around the world have embarked upon in “We expect Draghi to signal that a new early as this coming week when it holds its order to stimulate their economies. dose of monetary easing is in the pipeline.” last monthly policy meeting of the year. According to official data last week, infla- ‘Matter of time’ ‘When and how big?’ tion in the 18 countries that share the QE is the large-scale purchase of gov- But the exact timing for action is “a BRUSSELS: EU Commissioner Guenther Oettinger during a press conference at the euro slowed to 0.3 percent in November ernment bonds and such a policy has close call”, Valli said. “On the one hand, the EU headquarters in Brussels. Germany’s EU commissioner Oettinger warned yester- from 0.4 percent the previous month, many critics in Europe, not least the ECB does not have any real incentive to day that France had only won a reprieve against sanctions over its bloated budget feeding fears of imminent deflation. German central bank or Bundesbank, delay a move that appears warranted by and that failure to implement reforms could still trigger penalties. — AFP Falling prices may sound good for the because it is felt that it takes the ECB out- economic fundamentals. On the other consumer, but they can trigger a vicious side its remit and is effectively a license to hand, some governing council members spiral where businesses and households print money to get governments out of seem to prefer to wait... before consider- Germany’s EU commissioner delay purchases, throttling demand and debt. “Broad-based bond purchases by the ing new stimulus measures.” causing companies to lay off workers. ECB now seem to be only a matter of time,” Jonathan Loynes at Capital Economics warns France to fix budget “What pleases consumers makes the ECB said Commerzbank economist Weil. agreed. “It seems clear that the ECB will increasingly nervous,” said Commerzbank Such expectations appeared to be con- soon embark on a full-blown quantitative ERLIN: Germany’s EU commissioner Oettinger, Germany’s EU commissioner and economist Christoph Weil. The central firmed last week when the ECB’s number easing program incorporating sovereign warned yesterday that France had only an ally of Chancellor Angela Merkel, as say- bank is scheduled to publish its latest two, Vitor Constancio, said the central debt purchases,” he said. won a reprieve against sanctions over its ing. “We need resilient reforms of the job updated inflation and growth forecasts on bank would only be in a position to gauge “The key questions now are when and bloated budget and that failure to imple- market,” he added. If Paris does not set out Thursday and it is worried that medium- whether the previous stimulus measures how big? While we think that the contin- ment reforms could still trigger penalties. a reform plan by the beginning of March, term inflation expectations could become are working in the first quarter of 2015. “If gencies for QE set out by president Draghi The EU Commission on Friday gave the EU Commission must react, Oettinger permanently de-anchored from the ECB’s not, we will have to consider buying other have already been met, governing council France, as well as Italy and Belgium, an told Spiegel, in its edition dated today. target of around 2.0 percent. Given that assets, including sovereign bonds in the members may want more time to assess additional three months until March to fix “It’s also a question of credibility,” he the ECB has already launched a multi- secondary market,” Constancio said. their existing policies.” their budgets, under new powers granted added. Earlier this month Oettinger wrote pronged offensive against deflation, Just days prior to that, ECB chief Mario Commerzbank economist Michael during the debt crisis. But the three EU an article in French daily Les Echos and the obtaining that objective could require Draghi had vowed to “step up the pressure Schubert said he did not expect QE to be member states still face humiliating sanc- Financial Times in which he criticized more radical action, according to analysts. and broaden even more the channels approved until one of the first three meet- tions if they fail to curb spending, it France for breaking the rules and failing to The ECB has so far cut its interest rates through which we intervene... without ings in 2015. “Only then will the ECB be warned. bring in reforms. Paris is set for a deficit of “Sanctions are only deferred, not lifted,” 4.3 percent of GDP in 2015, way above the to new all-time lows, made unprecedented any undue delay.” But ECB-watchers are able to assess the impact of the measures Spiegel news weekly quoted Guenther EU’s 3.0 percent ceiling. — AFP amounts of cheap loans available to banks sceptical that QE will be announced as taken so far,” he said. — AFP Romanian PM to face IMF grilling on budget

BUCHAREST: Weakened by his defeat in international lenders that campaign sion thanks to an emergency loan of 20 and Belgium an extra three months “The negative impact will be felt in the recent presidential election, promises such as raising the minimum billion euros from the IMF and EU in until March to fix their bloated budgets, 2015 too, because a billion invested in Romania’s Prime Minister Victor Ponta wage and doubling benefits for disad- 2009, and in 2013 reached a new two- but warned it would still enforce humili- infrastructure creates jobs and makes faces a new test in talks with the IMF vantaged children can be met while still year accord on a credit line of four billion ating sanctions if they fail to curb the economy turn”, said Grosu. Romania over the 2015 budget in one of the poor- limiting the deficit to 1.4 percent of euros to use in case of a major crisis. spending. has forecast 2.5 percent growth in 2015 est countries in Europe. A mission from gross domestic product (GDP). The central European country prom- Romania, the second poorest country after a 2.4 percent expansion this year, the International Monetary Fund and the According to Ionut Dumitru, chairman ised in return to cut its public deficit and in the EU after Bulgaria, has promised to but some economists say they expect European Union is expected in Bucharest of the independent Fiscal Council speed up reforms. invest billions of dollars into building these forecasts to be revised lower. tomorrow to discuss a budget that had charged with monitoring government Economic analyst Cristian Grosu said highways and renovating dilapidated The economy grew 1.9 percent in the been delayed due to November 16’s tax and spending policy, the campaign he expects to see more flexibility from hospitals. But in the first nine months of third quarter, according to the official vote, which led to the surprise choice of promises will create a shortfall of the IMF, which has been criticised for 2014, public spending for infrastructure statistics institute. On the political front, centre-right leader Klaus Iohannis as the between 3.5 and 4.0 billion euros ($4.4- austerity “cures” during the economic was slashed by 13.4 percent. Analysts 42-year-old Ponta faces the start of a next president. “The negotiations will be 5.0 billion) — around 2.2 percent of GDP. crisis that have hampered recovery. said the government’s inability to partnership with new president difficult, but on the basis of economic The government will be hard-pressed As long as the deficit remains below develop viable projects was to blame Iohannis, an ethnic German who has growth and better collection of public to fill that shortfall without raising taxes the EU ceiling of 3.0 percent of GDP, for this. vowed to tackle an entrenched culture receipts, we should be able to build a or negotiating a new deficit with the IMF, “the IMF will be lenient, while other So instead of the 2.2 percent public of corruption. balanced budget,” said Ponta this past said Dumitru. countries like Poland, France and Italy deficit negotiated with the IMF, the Iohannis, 55, leader of the centre- week, ruling out any tax hikes. plead for some relief so they can put Balkan country came up with an right Liberal Party, campaigned on an Ponta, who conceded defeat in the Infrastructure push falls flat more funds into investments,” Grosu unprecedented 0.3 surplus-and barely anti-graft platform to turn Romania into presidential run-off, has to convince Romania emerged from a deep reces- said. The EU on Friday gave France, Italy 50 km of a new motorway built. a “normal” country. — AFP