Canadian dollar weakens as bleak prospects for oil output weigh - Reuters News
Canadian dollar weakens as bleak prospects for oil output weigh - Reuters News
Canadian dollar falls 0.1% against the greenback
Loonie weakens 0.8% for the week
Canada plans to help small businesses with rent payments
Canadian bond yields trade mixed across a flatter curve
By Fergal Smith
TORONTO, April 24 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Friday as investors reasoned that the potential for oil production cuts would hurt prospects for the commodity-linked currency, with the loonie adding to its decline for the week.
At 3:41 p.m. (1941 GMT), the Canadian dollar CAD=D4 was trading 0.1% lower at 1.4088 to the greenback, or 70.98 U.S. cents. The currency, which was down 0.8% for the week, traded in a range of 1.4026 to 1.4120.
"Rapidly filling (oil) storage capacity will likely result in further cuts to Canadian production, which should keep CAD upside limited for now," Ronald Simpson, managing director, global currency analysis at Action Economics, said in a note.
U.S. crude oil futures CLc1 were up about 3.4% at $17.06 a barrel but lost ground for the third straight week as production shutdowns failed to keep pace with sliding demand. (Full Story)
On Monday, U.S. oil fell into negative territory for the first time, to minus $37.63 a barrel. Oil is one of Canada's major exports, so the crash in crude prices could hurt the domestic economy, which is already reeling from the coronavirus outbreak.
Mounting economic damage and the Bank of Canada's reluctance to reduce interest rates below 0.25% are pointing to increased quantitative easing in Canada, TD Securities strategists, including Andrew Kelvin, said in a note.
Kelvin expects asset purchases by the central bank to reach C$500 billion over the next two years.
The Bank of Canada has begun buying Government of Canada bonds and other assets to support the economy, while Ottawa is rolling out more than C$100 billion in direct aid as well as credit support measures and deferral of tax payments.
Canada will help small businesses with rent payments and craft guidelines for regions less affected by the coronavirus outbreak to open their economy, Canadian Prime Minister Justin Trudeau said on Friday. (Full Story)
Canadian government bond yields were mixed across a flatter curve, with the 10-year CA10YT=RR down 1.8 basis points at 0.582%.
China's industrial firms' profits contract in March but at slower pace - Reuters
March industrial profits fall by 34.9% y/y
Eight of 41 sectors saw profits rise
Still no time for optimism, says stats bureau official
BEIJING, April 27 (Reuters) - Profits at China's industrial firms fell in March although at a slower pace than in the first two months, with many sectors seeing significant declines, suggesting the economy is still struggling to resume production after the coronavirus outbreak.
The world's No.2 economy is limping back after weeks of near paralysis caused by the health crisis and tough containment measures, but recovery has been patchy with worries about a second wave of infections and a global recession adding to the challenges for policymakers.
China's industrial firms earned 370.66 billion yuan ($52.43 billion) in March, down 34.9% from a year earlier, data from the National Bureau of Statistics showed. This follows a 38.3% slump in January-February, the steepest drop since at least 2010.
For the quarter ended March, industrial firms' profits fell 36.7% on an annual basis to 781.45 billion yuan.
Electronics and drinks manufacturers saw some recoveries in profits from the first two months, the data showed. Eight out of 41 sectors surveyed marked profit increases in March, better than only four in January-February.
The advanced manufacturing sector, as well as private, small-scale and foreign invested companies all saw narrower drops in profits in March compared with the first two months.
But we still cannot be optimistic about the profits situation, said Zhang Weihua, an official at the bureau.
Market demand has not recovered completely, and production costs remain relatively high, Zhang said in a statement published alongside the data.
The deep drop in industrial firms' profits comes as China's economy shrank for the first time since at least 1992 in the first three months. Factory gate prices, a key barometer for industrial demand, posted the deepest deflation in five months in March. (Full Story) (Full Story)
"China has faced a continued fall in demand for goods from foreign economies due to COVID-19's impact on those economies' job markets and wages growth," said Iris Pang, chief economist, Greater China for ING.
"Industrial profits will have to rely more on domestic demand. But conditions are not much better in China."
RELIEF MEASURES
Beijing has stepped up tax and credit relief for virus-hit firms since February, including cuts in borrowing costs.
However, top policy advisers are still calling for stronger fiscal stimulus as soon as possible. (Full Story)
Beijing's policies are less aggressive than the quantitative easing of other major central banks and it balances the need for stimulus against high household and corporate debt
Chinese President Xi Jinping has said Beijing will step up investment in traditional industries such as transportation and energy as well as new infrastructure areas including 5G and artificial intelligence to boost the economy. (Full Story)
Earnings at China's state-owned industrial firms were down 45.5% on an annual basis for January-March, versus a 32.9% fall in the first two months, the statistics bureau data showed.
Liabilities at industrial firms rose 5.4% on year at end-March, versus a 5.3% increase as of end-February.
Private sector profits fell 29.5% in the first three months, improving from January-February's 36.6% slump.
The industrial profit data covers large firms whose annual revenue exceeds 20 million yuan from their main operations.
Bank of Japan expands stimulus as pandemic pain worsens - Reuters News
BOJ boosts corporate bond, commercial paper buying
BOJ scraps bond-buying target to allow unlimited purchases
Kuroda says current crisis more serious than Lehman shock
BOJ, government must cooperate to beat crisis - Kuroda
By Leika Kihara and Tetsushi Kajimoto
TOKYO, April 27 (Reuters) - The Bank of Japan expanded monetary stimulus on Monday and pledged to buy an unlimited amount of bonds to keep borrowing costs low, as the government tries to spend its way out of the growing economic pain from the coronavirus pandemic.
The step, which follows monetary easing only a month ago, puts the BOJ in line with other major central banks that have unleashed unprecedented amounts of monetary support as the health crisis stokes fears of a deep global recession.
BOJ Governor Haruhiko Kuroda said the central bank was ready to act further to fight the impact of the novel coronavirus, which he said could do more harm to the global economy than the 2008 collapse of Lehman Brothers.
"The current crisis could have a bigger negative impact than the Lehman shock. The government and the central bank obviously need to work together, particularly at a time like this," Kuroda told a news conference.
The BOJ also sharply cut its economic forecast and projected inflation would fall well short of its 2% target for three more years, suggesting its near-term focus will be to battle the crisis. (Full Story)
To ease corporate funding strains, the BOJ said, it will boost three-fold the maximum amount of corporate bonds and commercial paper it buys to 20 trillion yen ($186 billion).
The central bank also clarified its commitment to buy unlimited amounts of government bonds by scrapping a loose guidance to buy them at an annual pace of 80 trillion yen.
"The BOJ will purchase the necessary amount of government bonds without setting an upper limit" to keep long-term interest rates around its 0% target, it said in a statement.
Kuroda rebuffed the view held by some analysts and politicians the BOJ's bond buying was directly aimed at financing huge government spending.
He said the purpose was to keep yields stable and low, which could also boost the effect of fiscal spending.
"We aren't monetising government debt," he said. "But we also hope it will heighten the effect of a policy mix between fiscal and monetary measures."
At the meeting on Monday, cut short by a day as a precaution against the spread of the pandemic, the BOJ kept its interest rate targets unchanged, as had been widely expected.
The central bank, however, offered to pay a 0.1% interest rate to financial institutions that tap its new loan programme to combat the pandemic to try to encourage commercial banks to boost lending to cash-strapped firms.
"The amount of assets the BOJ pledged to buy and the degree to which it loosened rules on its purchases were bigger than expected," Mari Iwashita, chief market economist at Daiwa Securities said. "It just shows how concerned the central bank is."
YIELD CURVE CONTROL
Under a policy dubbed yield curve control, the BOJ targets short-term interest rates at -0.1% and 10-year bond yields around 0%. It also buys government bonds and risky assets to pump money aggressively into the economy.
The BOJ's rate review precedes those this week by the Federal Reserve and the European Central Bank, which have sailed into uncharted waters to keep their economies afloat.
Corporate funding costs have crept up in Japan despite the BOJ's decision last month to boost buying of risky assets, including corporate bonds and commercial debt, and create a loan programme to assist funding of business hit by the pandemic.
Removing the guidance on its bond buying is largely a symbolic move. The BOJ has only purchased less than 20 trillion yen per year, as the bank's huge presence in the market allows it to control yields with fewer purchases.
Still, it would help clarify to markets the BOJ's resolve to buy as much bonds as needed, Kuroda said.
"We won't hesitate to take additional monetary easing steps if needed," he said, adding that interest rate cuts would be among options if the BOJ were to ease again.
Japan expanded a state of emergency this month that asks citizens to stay home and businesses to close, adding to woes for an economy already on the cusp of recession.
To ease the pain on the economy, the government boosted its spending package last week to a record $1.1 trillion yen, which will be paid for partly by issuing more bonds - straining Japan's already tattered finances.
