No elk or trout, but Fed’s virtual retreat may stoke market’s ‘animal spirits’

No elk or trout, but Fed’s virtual retreat may stoke market’s ‘animal spirits’
US Federal Reserve Chair Jerome Powell. (AP)
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Updated 23 August 2020

No elk or trout, but Fed’s virtual retreat may stoke market’s ‘animal spirits’

No elk or trout, but Fed’s virtual retreat may stoke market’s ‘animal spirits’
  • “The market is telling you there is asset price inflation occurring when there is still ... underlying weakness”

NEW YORK: Investors could get a hint from Federal Reserve Chairman Jerome Powell this week about how aggressively the US central bank will try to manage the long-term recovery from the coronavirus pandemic.

Powell will discuss the Fed’s monetary policy framework review — a review it has been undertaking for nearly two years into how it conducts monetary policy — on the opening day of the Kansas City Fed’s annual symposium on Thursday.

Since the 2007-2009 financial crisis, Fed chiefs have used their keynote speaking appointment at the conference — not being held this year in the hunting and fishing resort of Jackson Hole, Wyoming, for the first time in nearly four decades because of the pandemic — to signal important shifts in monetary policy or the economic outlook.

The market backdrop this time around could hardly be less dramatic. Spurred by Fed buying of assets, stocks have recovered their entire pandemic-related losses and are trading around record highs, while bond yields have been near record lows.

“The stock market is telling you there is asset price inflation occurring when there is still a lot of underlying weakness in the economy. I think the Fed is unlikely to view that as a signal of success on policy and, therefore, decide there is nothing more to do,” said Tony Rodriguez, chief fixed income strategist at Nuveen.

A major question — particularly ahead of the Fed’s September policy meeting — is whether or not the central bank will shift its inflation targets to an average, which would allow inflation to run higher than previously expected before interest rates are raised.

“We fully expect that they are going down the path of average inflation targeting,” said Bob Miller, head of Americas Fundamental Fixed Income at BlackRock.

Investors have been increasing their bets on inflation in reaction to the roughly $9 trillion in stimulus measures from central banks worldwide. Gold, a popular hedge against inflation and a falling US dollar, is up 28 percent for the year to date and near record highs, while the dollar has fallen close to two-year lows.

Benchmark 10-year Treasury yields hit near record lows of 0.504 percent earlier this month, before backing up to 0.638 percent after a rash of Treasury supply.

Real yields for the notes, which show yield returns after adjusting for expected inflation, dropped this month to a record low of minus 1.11 percent.

The shift to looking at an average measure of inflation would be a “big deal” and help the central bank avoid the same negative interest rate policies adopted by central banks in Europe and Japan, Miller said.

The Fed is trying to spur inflation over the next several years in order to prevent a deflationary spiral, as the global economy struggles to right itself from the shock of the global coronavirus disease pandemic.

“The Fed is rightly concerned about the unstable economic recovery so far and the degree to which we still need to absorb the job losses over the last five months,” said Gene Tannuzzo, the deputy global head of fixed income at Columbia Threadneedle.

An average inflation target would allow inflation to make up for the periods in which it fell below the Fed’s target. The Fed, like most central banks, shoots for 2 percent inflation but has missed that target for most of the past decade. With interest rates near historic lows, the central bank has fewer ways to help stimulate the economy.

Minutes from the Fed’s July meeting released on Wednesday showed that one tool to keep borrowing costs low — yield curve control — was likely off the table for now, but some think that the Fed could shift some of its buying to longer-dated debt.

Investors will also likely be looking for signs that the Fed is exploring additional ways to support the global economy should a stimulus package fail in Congress, Rodriguez said.

“If we get to a point where there is no stimulus package and no additional unemployment support, then the Fed will definitely feel like they have more to do,” Rodriguez said.


STC partners with Irish software firm to develop in-car applications

Saudi Telecom Co. (STC), the Kingdom’s largest mobile network operator, has entered into a partnership with Irish vehicle software firm Cubic Telecom to develop in-car software solutions for Saudi drivers. (Supplied)
Saudi Telecom Co. (STC), the Kingdom’s largest mobile network operator, has entered into a partnership with Irish vehicle software firm Cubic Telecom to develop in-car software solutions for Saudi drivers. (Supplied)
Updated 5 min 39 sec ago

STC partners with Irish software firm to develop in-car applications

Saudi Telecom Co. (STC), the Kingdom’s largest mobile network operator, has entered into a partnership with Irish vehicle software firm Cubic Telecom to develop in-car software solutions for Saudi drivers. (Supplied)
  • As a result of the link up, the software will then also allow STC to easily add a range of in-car services to Saudi vehicles

RIYADH: Saudi Telecom Co. (STC), the Kingdom’s largest mobile network operator, has entered into a partnership with Irish vehicle software firm Cubic Telecom to develop in-car software solutions for Saudi drivers.

As a result of the link up, the software will then also allow STC to easily add a range of in-car services to Saudi vehicles, including an emergency call system which automatically alerts healthcare services in the event of an accident.

Gerry McQuaid, chief commercial officer at Cubic, told Arab News: “Basically we partnered with STC as a premier car integrity partner in Saudi Arabia. We are enabling the customer to benefit from a range of safety, entertainment, and navigation features when they purchase the car.”

Similar to every market, Saudi Arabia had a strict range of regulations for how connectivity was managed, he said, adding that the software partnership would make it easier for features to be added by carmakers and third-party developers.

“I can’t give a precise date, but in a not-too-distant future you actually don’t need a driving license, the car will actually drive autonomously for the citizens. That is the big difference,” McQuaid said.

“Already software solutions can support this capability, but it does need important regulations to be introduced to start with semi-driving.

“You can request the car on your smart phone, and it will drive to you to get in and the car will drive to your destination. You can listen to music, do some work, and have a conversation while the car drives. This is not science fiction,” he added.

Soon cars will have a whole range of applications, such as an iPhone or other smart phone, with touchscreen interaction and voice regulations, and people will interact with the car from outside using smart phone apps, he said.

On safety regulations, McQuaid pointed out that solutions included an “emergency call” system which would automatically alert emergency services in the event of an accident, give details about the incident, and suggest if it required attention.

Barry Napier, CEO of Cubic Telecom, said: “We are delighted to be working with STC to help car manufacturers activate new opportunities in a very significant market.”

Dr. Sultan bin Saeed, STC’s vice president of business development, said: “Partnering with Cubic enables STC as a digital enabler to simplify the delivery and management of advanced in-car services and gives us a foundation for innovating and meeting the changing needs of customers as new services evolve.”

Cubic Telecom provides connected software solutions in more than 5 million vehicles and devices to at least 100 countries and has already partnered with some of the Gulf region’s largest mobile operators.


Saudi Arabia to ship gas to South Korea and take CO2 back

Saudi Arabia to ship gas to South Korea and take CO2 back
Updated 31 sec ago

Saudi Arabia to ship gas to South Korea and take CO2 back

Saudi Arabia to ship gas to South Korea and take CO2 back
  • Hyundai to take LPG cargoes
  • CO2 sent back to use in oil fields

RIYADH: Saudi Arabia plans to ship gas to South Korea where it will be used to make hydrogen, and the carbon dioxide produced in the process will be transported straight back to the Kingdom, Asharq reported, citing Bloomberg.

Hyundai Oil Bank Co. will take liquefied petroleum gas cargoes from Saudi Aramco and convert them into hydrogen, to use for chemical and power solutions, the Korean energy company’s parent Hyundai Heavy Industries Holdings Company said.

Aramco and Hyundai OilBank Co. agreed in the deal signed on Wednesday, that the carbon dioxide emitted in the hydrogen-making process will be transported back to Aramco, to use it in its oil production facilities, according to a Hyundai Heavy spokesman.

“It seems the project will bank on the idea that shipping LPG to Korea and carbon dioxide back to Saudi Arabia will be cheaper than shipping hydrogen to Korea,” said Martin Tengler, BloombergNEF’s lead hydrogen analyst.

Saudi Aramco has huge quantities of natural gas, which it has identified as a key area of expansion for domestic supply and export in the form of liquefied natural gas (LNG).

“We basically look at natural gas as an area for growth for the company,” Khalid Al-Dabbagh, Aramco’s chief financial officer, said in an investor call in the run-up to its successful IPO back in 2019.


GRAPHIC: From Beirut to Damascus currencies take a battering

GRAPHIC: From Beirut to Damascus currencies take a battering
Updated 04 March 2021

GRAPHIC: From Beirut to Damascus currencies take a battering

GRAPHIC: From Beirut to Damascus currencies take a battering

Lebanon’s president this week ordered the central bank governor to open an investigation into currency speculation, after the Lebanese pound plunged to record lows on the black market.
But the battered Lebanese pound is not alone among regional currencies that have been decimated by the impact of the pandemic and other factors.
The Syrian pound also fell to a record low on the black market this week, dragged down by its close commercial and banking ties with Lebanon.
“Businessmen and traders are fretting over fears of a free-fall in coming days and watching if unrest grows in Lebanon and its impact on dealings since Lebanon is our lifeline to the outside world,” said one Damascus-based trader told Reuters, who requested anonymity.


Saudi energy minister urges caution and vigilance on OPEC+

Saudi energy minister urges caution and vigilance on OPEC+
Updated 1 min 26 sec ago

Saudi energy minister urges caution and vigilance on OPEC+

Saudi energy minister urges caution and vigilance on OPEC+
  • OPEC and allies meet today
  • Oil price rises ahead of meeting

DUBAI: The Kingdom’s Energy Minister Prince Abdul Aziz bin Salman again urged caution and vigilance among fellow ministers in the OPEC+ alliance of oil producers, as they met to consider the next crucial steps for global crude markets.

The virtual meeting, organized from OPEC’s Vienna headquarters, is to decide whether or not to raise production levels in the face of a strong recovery in the oil price over the past month. 

Brent crude, the global benchmark, jumped over $65 a barrel as the prince was speaking.

“I have said for a long time that recovery in global oil demand is closely linked to vaccine acceptance and the speed at which these vaccines are being rolled out around the world,” he said. “The uncertainty surrounding the pace of recovery has not receded. Against this background - and at the risk of sounding like a stuck record - I would once again urge caution and vigilance.”

Some OPEC+ members, notably Russia and Kazakhstan, want to increase production next month. Others want to keep the current level of cuts in place until the recovery in demand becomes more apparent.

Saudi Arabia is also considering whether or not to halt the additional and voluntary cut of a million barrels a day it announced in January, a move credited with sparking the recent strong price rise but which expires at the end of the month.

“The right course of action now is to keep our powder dry, and to have contingencies in reserve to insure against any unforeseen outcomes”, the prince said.

Analysts took his remarks to indicate that Saudi Arabia might consider rolling over at least some part of that cut for at least another month.

“We have elected for a careful and proactive approach that has proved successful. Before we take our next step forward, let us be certain that the glimmer we see ahead is not the headlight of an oncoming express train,” the energy minister said.

The level of compliance with OPEC+ agreed targets was 103 percent in February, according to OPEC officials. Some producers, notably Nigeria, have stuck to the agreement to compensate for past over-production.

“Compliance levels have remained at the historically high levels that have been a hallmark of our joint endeavor. The list of countries on the compensation schedule continues to shorten, and I truly commend Nigeria for completing its compensation,” the prince said.


Saudi energy minister: Recovery in oil demand related to speed of COVID-19 vaccine distribution

Saudi energy minister: Recovery in oil demand related to speed of COVID-19 vaccine distribution
Updated 17 min 22 sec ago

Saudi energy minister: Recovery in oil demand related to speed of COVID-19 vaccine distribution

Saudi energy minister: Recovery in oil demand related to speed of COVID-19 vaccine distribution
  • Urging caution and vigilance, Prince Abdulaziz said that “The uncertainty surrounding the pace of recovery has not receded”

LONDON: The recovery in oil demand is related to the speed of COVID-19 vaccine distribution, Saudi Arabia’s energy minister said on Thursday.

Speaking at the opening of a meeting of the Organization of the Petroleum Exporting Countries, Russia and its allies, a group known as OPEC+, Prince Abdulaziz bin Salman said that the Kingdom has “contingency and backup plans in case unforeseen things happen,” Al-Ekhbariya reported. 

He added that the situation in the oil market had improved but the outlook for a recovery in demand remained uncertain.

Urging caution and vigilance, Prince Abdulaziz said that “The uncertainty surrounding the pace of recovery has not receded.”

Ministers from OPEC members and their allies started a meeting to discuss the future of an oil output cut at 01:00 P.M. GMT.