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Friday December 9th, 2022

US stocks gain on expectations of more Fed rate cuts; London falls

AFP – Wall Street stocks snapped a two-day skid Thursday on expectations that a weakening US economy will prompt more forceful action from the Federal Reserve, while London shares fell on British recession fears as the country prepares to leave the European Union.

US stocks initially dove after a closely-watched measure of services sector activity in September fell to a three-year low. The report from the Institute for Supply Management came on the heels of jobs and manufacturing data this week that exacerbated recession fears.

But stocks quickly shook off that gloom as markets bet the Fed would step in with more stimulus, analysts said.

Futures markets now overwhelmingly expect an interest rate cut later this month after being divided on that question earlier in the week.

The Dow Jones Industrial Average finished at 26,201.04, up 0.5 percent, after swinging more than 450 points during the session.

FTN Financial’s Chris Low, who has called for aggressive action from the Fed, said the slowdown in the services sector confirmed “serious” economic headwinds.

“The Fed missed their September opportunity, but it is not necessarily too late to act forcefully in October,” Low said. “Keep kicking the can with timid policy responses for too long, however, and there will be a recession.”

Investors will have fresh data to weigh on Friday with the key monthly government jobs report. Analysts expect the US added 150,000 jobs in September, while unemployment held steady at 3.7 percent.

– Brexit woes continue –

In Britain, the IHS Markit/CIPS UK services purchasing managers’ index fell to 49.5 in September from 50.6 in August, falling below the key 50-point threshold that indicates contraction.

The services report follows PMI surveys showing output also fell in construction and manufacturing.

“With downbeat data pouring in from all angles and across both sides of the Atlantic, investors are struggling to find much to cheer,” said City Index analyst Fiona Cincotta.

The data came one day after Prime Minister Boris Johnson issued his “final” Brexit proposals and warned that Britain would leave the EU without a deal on October 31 if they were not accepted.

EU Council President Donald Tusk, who will chair a make-or-break October 17-18 EU summit dominated by Brexit, tweeted a message to Johnson: “We remain open but still unconvinced.”
– Key figures around 2040 GMT –

New York – Dow: UP 0.5 percent at 26,201.04 (close)

New York – S&P 500: UP 0.8 percent at 2,910.63 (close)

New York – Nasdaq: UP 1.1 percent at 7,872.26 (close)

London – FTSE 100: DOWN 0.6 percent at 7,077.64 (close)

Paris – CAC 40: UP 0.3 percent at 5,438.77 (close)

Frankfurt – DAX 30: Closed for a public holiday

EURO STOXX 50: UP 0.1 percent at 3,417.37 (close)

Tokyo – Nikkei 225: DOWN 2.0 percent at 21,341.74 (close)

Hong Kong – Hang Seng: UP 0.3 percent at 26,110.31 (close)

Shanghai – Composite: Closed for a public holiday

Euro/dollar: UP at $1.0969 from $1.0959 at 2100 GMT

Pound/dollar: UP at $1.2340 from $1.2303

Dollar/yen: DOWN at 106.87 yen from 107.18 yen

Brent North Sea crude: UP less than 0.1 percent at $57.71 per barrel

West Texas Intermediate: DOWN 0.4 percent at $52.45 per barrel

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Sri Lanka president slams power regulator chief after conflicting with minister

ECONOMYNET – The powers to change the electricity tariff in Sri Lanka is vested with the Minister of Power and not the Public Utilities Commission (PUCSL), President Ranil Wickremesinghe told the Parliament.

The minister of Power and Energy, Kanchana Wijesekara has requested an upward price revision to be implemented in two phases both in January and July next year, saying the recent tariff hike was not enough for the state-run utility provider Ceylon Electricity Board (CEB) to continue uninterrupted power supply.

However, Jaynaka Ratnayake, the Chairman of the PUCSL had said  the recent tariff hike is enough for the CEB to cover the cost of production and it will not allow another price hike. However, he has said a twice a year price revision is necessary though it should be in April and October instead of January and July.

President Wickremesinghe said the PUCSL chief was opposing the tariff hike due to his personal reasons.

“The power is vested with the Minister and me. I am the one who made the PUCSL act and I know what is in it,” Wickremesinghe told the parliament on Thursday. quoting a letter from the Attorney General which mentioned provisions in the island nation’s Electricity Act.

Accordingly the Act, the PUCSL would be statutorily obliged to give effect to such policy. It is observed that neither the Act nor the PUCSL Act contains any provisions that empowers the PUCSL to change or act invariant of such policy guidelines.

“The Chairman of the PUCSL is misguiding the general public. I have to meet him and see,” Wickremesinghe said.

WIckremesinghe said the Chairman does not want the tariff hike because he owns one of the highest electricity consuming companies.

“He is the Chairman of the Trillium corporation. It is the firm that takes up the most energy”, he said.

The Trillium group is managed by Janaka Ratnayake and he also holds positions as the chairman and CEO of Trillium Property Management & Services Ltd., City Housing and Real Estate PLC, Trillium Residencies Ltd., Computer Care (Pvt) Ltd., and Rent a Comp Services (Pvt) Ltd., and JR Management Consultants (Pvt) Ltd.

“It means when the electricity bill increases, his expenses increase as well”

He said the CEB still has a loss of 300 billion rupees since 2013 and it needs to be covered.

The CEB issue can be solved only in three ways, either printing more money, increasing value added tax or increasing the tariffm, he said. (Colombo/Dec08/2022)

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Sri Lanka President bemoans over inconsistent LNG deals

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe bemoaned over successive governments’ liquefied natural gas (LNG) deal that has brought in all the world powers into the discussion.

Wickremesinghe’s center-right United National Party (UNP) had discussions with India and Japan between 2002-2004 for an LNG project.

“Following dialogues with India and Japan, the UNP government could come to agreements to get two LNG power plants. After we were defeated the successor government, without cancelling those agreements granted it to New Fortress company in USA,” Wickremesinghe told the parliament.

“Thereafter, as they did not like New Fortress, they gave it back to Pakistan and China. So within the same premises, there were China, Pakistan, India, USA, Japan and only Russia was not there.”

“It was wonderful that a world war did not ignited there as there were five main powers in the world.”

“Now there is no LNG or anything here and now they ask me to solve this issue.”

Wickremesighe’s outburst comes as his government is forced to raise tariffs on power prices after successive governments failed to implement cheap and renewable power generation projects.

He said a total loss for the state-run Ceylon Electricity Board since 2013 was 300 billion rupees and a possible drought next year could increase the 2023 electricity cost to 420 billion rupees.

“If it rained, we need Rs. 352 billion while Rs. 295 is required if rained so much to have floods. How are we going to find this money? We would have to print money, but Rupee would depreciate. We would have to increase VAT but it would increase the price of all commodities or to charge it direct.” (Colombo/Dec08/2022)

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Air quality drop forces Sri Lanka to close schools; public warned

ECONOMYNEXT – A rapid drop in air quality in Sri Lanka has forced the Colombo government to close all schools across the country after a deep depression over Southeast Bay of Bengal, officials said.

The Education Ministry, issuing a special notice on Thursday said, it has decided to close all government schools for Friday, after discussing with the officials in Meteorology Department and Disaster Management Center.

An official said the drop was due to the deep depression over Southeast Bay of Bengal carrying the air from India.

Due to the depression over South east Bay of Bengal (370 km east of Trincomalee) has concentrated into a cyclonic storm “Mandous” by Wednesday night.

“Cyclone in the Bay of Bengal that is the prime reason for the increase in the pollution load as we receive more wind from India,” H.D.S.Premasiri, Senior Scientist, Coordinator-Air Quality, noise and vibrations at National Building Research Organization (NBRO) told EconomyNext on Thursday.

Officials said there is a likelihood of the cyclone moving west-northwestwards and further intensify into a severe cyclonic storm tonight and cross North Tamil-Nadu, Puducherry and South Andhra Pradesh coast around midnight of 09 th December and the maximum wind speeds will be 70-90 km per hour and can increase up to 90 in sea areas.

“Hopefully, today we can expect normalization in the environment and the effects of the fog will disappear”.

According to the NBRO’s real time Air Quality Index Indicator, the quality of air in northwestern coastal district of Puttalam has dropped drastically and indicated a particular matter (PM) 132, while Kegalle (85) and Mannar (84) were the districts which had next worst air quality.

According to NBRO, Battaramulla, Polonnaruwa, Dambulla, Kegalle, Mannar and Puttalam indicate a poor quality of air due to higher PM.

“The fog will lead to lung and breathing issues,” Premasiri said.

“So the public is warned to wear a mask when they travel outside. The pollution highly prevails in city areas and has a less impact on the other parts of the areas.” (Colombo/ Dec08/2022)

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