UPDATE-GLOBAL ECONOMY WEEKAHEAD-Euro zone inflation, US jobs set to dominate

28 Sep 2015 | Author: | No comments yet »

Dollar rises on rate hike talk, Shanghai bounces.

The dollar edged back towards a five-week high against a basket of major currencies on Monday, as investors eyed U.S. payrolls numbers and Chinese data later in the week for confirmation of bets the Federal Reserve will hike interest rates this year.ANZ’s Warren Hogan believes there is ‘a global trade recession on now’, despite Janet Yellen, of the US Fed indicating a rate rise still to come this year.

The dollar index hit its highest since late August on Friday .DXY after Fed Chair Janet Yellen said she expected to begin raising rates later in 2015, as long as inflation remained stable and the U.S. economy was strong enough to boost employment. Dealers will closely watch the release of key US data this week, including employment, that will provide a better idea of when the central bank will announce lift-off. Photo: AP Norway became the latest central bank to cut interest rates in an unexpected move that suggests the battle against slowing growth is not over yet, despite United States Federal Reserve chair Janet Yellen’s apparent readiness to raise interest rates. Thursday will also see the Bank of Japan release its Tankan survey of business confidence, with analysts forecasting a dip in reaction to China’s growth slowdown which has rattled global markets.

The Reserve Bank of Australia is believed by some economists to be likely to bow under the same pressure as Norway, where the collapse in energy prices mirrors the plunge in the iron ore price. BNP Paribas’ Lynton-Brown said a vote in Catalonia that saw secessionists win a majority of regional parliamentary seats would have little impact on the euro. The moves were unsurprising to ANZ chief economist Warren Hogan, who in the past week revised his forecast to factor in two further RBA rate cuts taking the cash rate to 1.5 per cent by May 2016. “There’s very little growth out there, there’s a lot of competition for it, there’s excess capacity in manufacturing, there might not be major problems in Europe or America or Asia financially but we’re just losing growth.” The actions of Norges Bank and Taiwanese policymakers were prompted by similar forces, Mr Hogan argued. “They’re for two different reasons, one because commodity prices are on their knees, and Taiwan because they’re caught in the crossfires of the region.” But both were consequences triggered by the slowdown in the global economy, which hurt both developed markets and advanced economies. Thursday’s China Caixin Purchasing Managers’ Index (PMI), however, will be more closely watched than usual by currency traders, who reckon a sharply slowing Chinese economy could delay Fed rate hikes. “We have two big events this week. Chinese data now seems to be classified in the payrolls category of events,” said Mitul Kotecha, head of Asia-Pacific FX strategy for Barclays in Singapore. “There’s (a) reason not to be doing anything until you see these two big numbers.”

He does not believe the world has dipped into an economic recession as yet but “it does show you the way the world is operating right now”. “Another way I think about it, and have for a while, is the cyclical forces are just being overwhelmed by the secular forces,” he added, citing aging populations and the disruptive affect of technology. The dollar is set to gain broadly.” Stock markets were mostly in the red on the prospect of higher US interest rates — which would hurt investment in the region — and fears over China’s long-running woes, which have sent world markets tumbling for weeks. Governor Glenn Stevens delivered a more upbeat assessment of the economy a week ago in Canberra, saying he was “content” with the level of interest rates. Dudley, San Francisco Fed President John Williams and Yellen. “There are U.S. data and Fed officials speaking this week, but stocks dictate in the near term, with the yen being bought when equities decline,” said Junya Tanase, chief foreign-exchange strategist at JPMorgan Chase & Co. in Tokyo.

Meanwhile, Citigroup foreshadowed the capital drain on emerging markets to continue because of slowing activity in China, exacerbated by renewed US dollar strength and the need to lower rates in response, fostering currency weakness in emerging markets. Shanghai staged a recovery after a morning sell-off, ending 0.27 percent higher despite data showing China’s crucial industrial companies saw profits fall 8.8 percent in August — hit by last month’s shock yuan devaluation, weak demand and plunging stocks. Australian equities are in a correction, having fallen below 5000 points for the first time in two years on Wednesday, recovering to around 5050 points by the end of the week. The result is the latest highlighting weaknesses in the Chinese economy after news last week that a gauge of factory activity in September had hit its lowest point in six-and-a-half years. Fresh off a plane from Los Angeles, Stan chief executive Mike Sneesby says that Hollywood studios are keen on the local Netflix rival’s new original Australian comedy – .

Mr Sneesby also revealed that Stan is on the verge of hitting 400,000 gross sign-ups, claiming that 70 per cent of users who have taken its free first-month trial are still staying on as paying customers. The subscription video on-demand service, which is a 50-50 venture between Nine Entertainment Co and Fairfax Media, publisher of The Australian Financial Review, held private preview screenings for , which will feature guest cast members Tim Minchin and Jake Johnson, at QT Sydney last week ahead of the show’s launch in late October. He told a joint press conference with US President Barack Obama after White House talks that China had moved from “speed-based growth to quality-based growth”.

Mr Sneesby said he had not anticipated overseas interest in No Activity: “We made the show for Australians, for Stan, it’s such an important part of our strategy.” But he added: “The feedback from every studio executive was overwhelming. Chinese authorities are trying to rebalance the economy — which accounts for one out of every eight dollars of worldwide GDP — from one reliant on exports and government investment to one where domestic consumption is the main driver. The response was always ‘this is absolutely hilarious’ and ‘who is buying this internationally?’.” Mr Sneesby, who still has to convert that interest into a sale, said that Stan’s Wolf Creek series, which is currently in the development stage, and is earmarked for a six-part TV series has also garnered interest from the United States. “We will take those shows; we will commit the dollars up front and take some risk on the production of the show. The ambitious model replicates that of Netflix, which has been hugely successful with a string a original productions, including House of Cards, Orange is the New Black and Unbreakable Kimmy Schmidt. Exact subscriber numbers across the burgeoning streaming market are hard to come by, with a report by technology analysts Telsyte suggesting the Australian market has already hit 2 million subscribers – Netflix generally agreed upon as the clear market leader.

Citi estimated in August that Netflix had 1.6 million customers in Australia, with 900,000 paying, while at the time Stan was estimated to have 332,000 users with 153,000 paying. Stan launched in January this year, joining Foxtel’s joint venture with Seven West Media, Presto and incumbent minnow Quickflix, which has since suspending trading on the ASX to attempt a restructure and head off potential insolvency. Our position and our objective is to be the preferred streaming service for Australians and in any household where they don’t pick Stan as number one, then we certainly want to be the number two.” Netflix reported its second quarter financial results in July showing it had added 2.3 million paying international customers in the quarter taking overseas subscription numbers to 21.6 million, while at home it add 742,000 additional paid memberships to reach more than 41 million.

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