Oil slides to lowest since may after Fed signals intent to taper
Oil extended its drop to the lowest level since May after the U.S. Federal Reserve on Wednesday signaled it was set to start tapering asset purchases within months, hurting commodities and lifting the dollar.
West Texas Intermediate futures fell as much as 4.3%, declining for a sixth straight day and sinking in tandem with equities and other raw materials like copper and iron ore. The Fed delivered a fresh blow to crude, which had already been struggling as the delta coronavirus variant menaces Asia, leading to worsened demand indicators including a slip in China refinery output.
“The dollar is seeing considerable strength as the Fed moves to cool the economy,” said John Kilduff, a partner at Again Capital. “Oil was already seeing downward pressure as the market reeled from softened demand coming out of China, and waning commodities appeal is encouraging the slump further.”
To cushion the U.S. economy from the blow inflicted by the pandemic, the Fed has been buying $120 billion of assets every month, buoying commodities. The minutes of the bank’s July meeting showed a potential pullback in its monthly bond purchases, as most participants now judged it could be appropriate to start reducing the pace of stimulus.
Oil’s rally in the first half of the year has lost momentum since July amid the threat to demand posed by the spread of the delta variant. Gains in the dollar in recent weeks have also weighed on crude, making commodities priced in the U.S. currency more expensive. At the same time, OPEC+ has pushed ahead with gradually restoring supplies.
WTI for September delivery fell $2.46 to $63 a barrel by 11:12 a.m. in New York. It slipped as much as 4.3% earlier.
Brent for October settlement declined $2.42 to $65.81 a barrel.
The Bloomberg Dollar Spot Index extended gains.”Economic growth concerns, stronger dollar and a risk-off environment are not helping oil,” said Giovanni Staunovo, an analyst at UBS Group. “Demand will continue to recover in an uneven way over the coming weeks and the oil market remains under-supplied. So that should still support prices down the road.”
Published : August 20, 2021
By : Syndication Washington Post, Bloomberg · Ari Hawkins
U.S. initial unemployment claims drop for fourth straight week
Applications for U.S. state unemployment benefits dropped for a fourth consecutive week, a trend that suggests labor market conditions are improving as the economy recovers.
Initial unemployment claims in regular state programs dropped 29,000 to 348,000 in the week ended Aug. 14, a pandemic low, Labor Department data showed Thursday. Economists in a Bloomberg survey had called for a decline to 364,000.
Continuing claims for state benefits fell to 2.8 million in the week ended Aug. 7, also the lowest since the pandemic began.
The decrease in initial claims points to strengthening business and fewer dismissals as economic activity improves. That said, a pickup in initial filings in the next few weeks could point to labor market weakness as the delta variant of Covid-19 spreads.
Some states and cities have reintroduced mask mandates in recent weeks in response to coronavirus variants, and businesses have pushed back their return-to-office plans. But there’s little evidence so far to suggest the delta variant has resulted in layoffs, especially because restrictions haven’t been put on restaurants, bars and entertainment venues.
Texas and Illinois posted the largest declines in initial claims last week. Virginia posted the largest increase, followed by New Mexico and California.
More than 20 governors have prematurely ended federal unemployment programs — including an extra $300 weekly payment — put into place during the pandemic, hoping that removing the enhanced payments would incentivize workers to look for jobs. Lawsuits in some of those states challenging the governors’ legal authority to end the aid could restore the halted benefits until they officially expire in early September.
The initial claim figures coincide with the survey week for the Labor Department’s monthly job report.
Continuing claims in all programs declined to 11.7 million in the week ended July 31. That compares to a high of about 32.8 million in June 2020.
Published : August 20, 2021
By : Syndication Washington Post, Bloomberg · Olivia Rockeman
FTC refiles antitrust case against Facebook, argues no social network comes close to its scale
WASHINGTON – The Federal Trade Commission on Thursday refiled a bolstered version of its antitrust case against Facebook in a last-ditch effort to save what has been described as its most important competition lawsuit in decades.
Seeking to overcome a judge’s stunning dismissal of its original lawsuit because the FTC had not presented ample evidence that Facebook is a monopoly, the FTC argues in its new filing that Facebook is in a class of its own and shouldn’t be compared to popular apps such as TikTok, Twitter and Pinterest, which attract a public-facing audience. The complaint argues that Snapchat, with tens of millions fewer monthly users than either Facebook or Instagram, is the company’s next-closest competitor.
“Without meaningful competition, Facebook has been able to provide lower levels of service quality on privacy and data protection than it would have to provide in a competitive market,” the FTC said in the complaint.
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Facebook spokesman Christopher Sgro said in a statement that it was “unfortunate” that the FTC decided to proceed with the case. “There was no valid claim that Facebook was a monopolist – and that has not changed,” he said. “We fight to win people’s time and attention every day, and we will continue vigorously defending our company.”
It remains to be seen whether this renewed argument will be enough to persuade the judge, in a legal battle that will be an early and much anticipated assessment of FTC Chair Lina Khan. Khan is under immense political pressure to score a victory in the case, as Facebook’s reputation in Washington has deteriorated dramatically in recent years following privacy and other scandals.
“I don’t think there’s a fundamental change in the structure of the complaint, other than to say that this doesn’t just hurt competition but also consumers,” said George Hay, a professor at Cornell Law School who served in the Justice Department’s antitrust division in 1970s.
Although the filing does not offer profoundly new evidence, it provides a more detailed description of the company’s history alongside an explicit explanation of how Facebook’s alleged behavior harms consumers. It notably expands on an argument that Facebook’s platform, which allows people to maintain relationships with family and friends online, is singular and a wide range of companies that aim to distribute content to strangers should not be considered competitors.
Launched by Khan’s predecessor, who was appointed by President Donald Trump, the case is expected to be a years-long, costly battle, and its outcome will be a demonstration of the new chief’s ability to use her position to follow through on promises to impose boundaries on the business practices of Silicon Valley giants. The Facebook case is the most high-profile challenge that the agency has brought against a tech company in decades, and it’s being watched as a bellwether, not just of the FTC and Khan’s performance, but of the growing movement in Washington to curb concentration in the tech industry.
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In the suit, the agency seeks to prove that Facebook attempted to control prices and exclude competition, through strategic moves to acquire and neutralize rivals, rather than innovating on their practices.
“In navigating its own transition from small start-up to business behemoth, Facebook’s leadership came to the realization – after several expensive failures – that it lacked the business talent required to maintain its dominance amid changing conditions,” the suit says. “Unable to maintain its monopoly by fairly competing, the company’s executives addressed the existential threat by buying up new innovators that were succeeding where Facebook failed.”
Following U.S. District Judge James Boasberg’s assertion that the FTC’s initial complaint did not fully define the company’s market share, the new filing argues that Facebook’s competition is limited to social platforms that connect users with people they already know. Notably, the agency says that TikTok, which according to one survey overtook Facebook in number of downloads, is not its competition.
Industry-backed groups criticized the FTC’s definition of the social networking market, arguing that it defied logic to exclude TikTok and Twitter as rivals of Facebook. Carl Szabo, vice president and general counsel of NetChoice, which represents tech companies including Facebook, argued that when politicians criticize social media, they’re usually referring to many companies beyond Facebook.
“Never do they say social media is only Facebook,” he said. “They’re complaining about all of them because they are interchangeable, because they’re competitors.”
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Charlotte Slaiman, the competition policy director at the consumer group Public Knowledge, said the new filing was a “really strong complaint” and included the data and details needed to respond to the judge’s initial concerns about the case.
“It’s got those additional details to go further toward proving the case that Facebook has a monopoly,” Slaiman said.
This is the latest development in a saga that began in December, when the FTC first filed the suit challenging the company’s pattern of acquiring or crushing smaller rivals. Brought under then-FTC Chair Joseph Simons, the suit received bipartisan support as the agency sought to force the company to divest from WhatsApp and Instagram, as well as to prevent Facebook from imposing anticompetitive conditions on software developers.
This widespread support – as well as the fact that state attorneys general from both parties signed on to a related lawsuit – underscored how the company’s relationship had deteriorated with both Republicans and Democrats, amid a pandemic and the intense political polarization in the fallout of the 2020 election.
The lawsuit was refiled on a party-line vote, with the commission’s two Republicans voting against the case. They both also voted against the initial case under Simons. Republican Commissioner Christine Wilson said in her dissent that she thought it was “bad policy” for the agency to challenge Facebook’s previous deals, particularly its acquisitions of Instagram for $1 billion in 2012 and WhatsApp for $19 billion in 2014, both deals the government might have blocked but did not.
Facebook vowed to vigorously defend itself against the agency’s allegations, and subsequently brought a motion to dismiss the agency’s suit, which the company said failed to clearly support its claim that Facebook has monopoly power.
Boasberg sided with the company, but he allowed the agency to refile its complaint with additional supporting details.
The decision underscored the strength of the legal resources of the $1 trillion tech behemoth and the challenges ahead for the FTC, especially in a court system that has for decades held a relatively narrow view of antitrust harms. It also sparked calls from lawmakers in both parties to pass legislation to ensure that competition challenges could be brought more easily against tech giants.
Sen. Amy Klobuchar, D-Minn., chairwoman of the House Judiciary antitrust subcommittee, praised the agency for advancing its case. “Facebook’s long history of anticompetitive behavior is no secret,” she said in a statement. “I’m glad the FTC is taking renewed action to stop Facebook’s anticompetitive behavior and I encourage them to continue to consider all available options under the law to hold Facebook accountable.”
Khan’s allies praised the refiled suit as a signal of the more aggressive antitrust enforcement under Khan, who has promised to crack down on what she says is widespread abuse of corporate power in the tech world.
“It also sends a clear message: Under the leadership of Chair Khan, the agency will no longer be bullied by corporate titans,” Sarah Miller, executive director of the American Economic Liberties Project, said in a statement.
The praise comes as President Joe Biden has elevated several Big Tech critics to key roles in his administration. Most recently, he nominated Jonathan Kanter, who has challenged large tech companies including Google in court, to serve as the head of the Justice Department’s antitrust division. The Kanter nomination awaits confirmation in the Senate. Biden also named Tim Wu, another prominent tech critic, to serve on the National Economic Council.
Facebook has sought the recusal of Khan from the case, given her criticism of the company and other tech industry giants in academic writing and previous jobs. However, the FTC said in a blog post on Thursday that it had dismissed the petition.
“The FTC’s Office of General Counsel carefully reviewed Facebook’s petition to recuse Chair Lina M. Khan,” the agency said in a statement. “As the case will be prosecuted before a federal judge, the appropriate constitutional due process protections will be provided to the company.”
Stocks fluctuate in volatile session; dollar gains
Stocks resumed gains in a volatile session ahead of Fridays options expiration. Treasuries and the dollar rose. Commodities sank.
The S&P 500 rose, with technology and defensive industries such as consumer staples and utilities climbing. The Cboe Volatility Index was on track for its biggest weekly surge since January. An earlier equity slide was driven by anxiety over the withdrawal of Federal Reserve stimulus, the virus spread and global supply chains. Metals prices slumped as part of a selloff that extended to agriculture, oil and natural gas.
Investors are bracing for the withdrawal of unprecedented liquidity as the developed world looks to mass vaccinations to keep the recovery on track. However, the persistent spread of coronavirus and slowing China growth raise questions about whether the global economy can absorb the winding down of stimulus. For Lindsey Bell, chief investment strategist at Ally Invest, even when the Fed starts tapering, there’s still going to be “a lot of money” in the market.
“Today might be finally the day when we’re starting to buy the dip,” said Bell. “But also, don’t forget, it’s summer and volumes are a lot lower. That adds more volatility to the marketplace.”
Nvidia Corp., the largest U.S. chipmaker by market value, rallied after reporting a surge in earnings and giving predictions that exceeded even rosy Wall Street estimates. Robinhood Markets Inc. sank after warning cryptocurrency-driven trading that fueled quarterly revenue may quickly fade. Chinese stocks listed in the U.S. endured another day of selling after officials unleashed a fresh round of proposed regulations. Tencent Holdings Ltd. and Alibaba Group Holding Ltd. each tumbled more than 6%.
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Some of the main moves in markets:
Stocks
The S&P 500 rose 0.1% as of 4 p.m. EDT
The Nasdaq 100 rose 0.5%
The Dow Jones industrial average fell 0.2%
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The MSCI World index fell 0.7%
Currencies
The Bloomberg Dollar Spot Index rose 0.5%
The euro fell 0.3% to $1.1676
The British pound fell 0.9% to $1.3635
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The Japanese yen was little changed at 109.79 per dollar
Bonds
The yield on 10-year Treasurys declined two basis points to 1.24%
Germany’s 10-year yield was little changed at -0.49%
Britain’s 10-year yield declined three basis points to 0.54%
Commodities
West Texas Intermediate crude fell 2.2% to $64.02 a barrel
Gold futures were little changed
Published : August 20, 2021
By : Syndication Washington Post, Bloomberg · Rita Nazareth, Vildana Hajric
Krungthai Bank’s Compass Research Centre has cut its forecast of Thai GDP growth this year from 0.9 per cent to 0.5 per cent.
The cut was in response to the longer-than-expected Covid-19 crisis, the research house said, citing the high number of daily infections.
Thailand’s daily caseload has risen above 20,000 in recent weeks.
Exports continue to expand at a monthly average of 14 per cent while the tourism boost over the last two months would help support 0.5 per cent growth this year, said the centre.
However, it warned the Thai economy is still highly vulnerable to the virus situation. As such, the manufacturing sector requires careful handling to maintain production during the epidemic so that demand from the global market could be met, it added.
Thai GDP to shrink 1.1% this year if virus crisis worsens: CIMBT
CIMB Thai Bank (CIMBT) forecasts Thailand’s GDP will expand about 1 per cent (0.7-1.3 per cent) this year as long as the Covid-19 situation does not worsen.
The forecast comes after the bank cut its GDP projection for next year from 4.2 per cent to 3.2 per cent.
However, Thai GDP could shrink by 1.1 per cent this year and not expand next year if the Covid-19 situation worsens, warns CIMBT’s chief economist Amornthep Chawla.
The bank also cut its forecast for GDP growth in July from 1.3 per cent to 0.4 per cent, following the surge in Covid-19 infections.
Figures for the second quarter of this year show Thailand’s economy grew 7.5 per cent from the same period last year but only 0.4 per cent from the previous quarter.
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Amornthep warned the economy might expand slower than expected in the second half amid the worsening outbreak and restrictions on business activities. Economic activities may increase in the fourth quarter but not in the service industry and tourism, he said, citing low vaccination rates and the Delta-driven outbreak as a deterrent to travel.
Meanwhile, private-sector consumption is down on last year, he added.
However, exports offered hope for the Thai economy amid rising demand from the US, Europe and China. Export growth is being seen in automotive parts, electronics, chemicals, processed agricultural products, and processed foods.
The Covid-19 threat to export factories could be minimised by limiting the workforce and continuous testing, said CIMBT.
Turning to the real estate market, Amornthep said demand for new properties is slowing, especially in the condominium market. This would cause property developers to switch focus to horizontal projects.
He proposed that the government borrow another 1 trillion baht to boost the economic recovery in two ways – by investing in public utilities and increasing liquidity among debt-crippled businesses.
He said the Bank of Thailand could also cut its policy rate by 0.25 per cent.
Amornthep said the baht should also be allowed to weaken to 33.50/US dollar if the US Federal Reserve tapers its quantitative easing programme in the third quarter.
The baht could be allowed to strengthen to 33 per dollar when the Covid-19 situation improves in the fourth quarter, which would attract foreign investors and tourists next year, he added.
SET down as Thai protests, outbreak spook foreign investors
The Stock Exchange of Thailand (SET) Index closed at 1,544.28 on Thursday, down 7.59 points or 0.49 per cent. Transactions totalled THB78.14 billion with an index high of 1,553.90 and a low of 1,543.75.
In the morning session, Krungsri Securities expected the day’s index to fluctuate between 1,540 and 1,560 points after the US Federal Reserve signalled it would taper its quantitative easing programme this year in response to the economic recovery.
Krungsri said the index would come under pressure from the outflow of foreign funds and ongoing anti-government protests in Thailand.
“However, hopes of the lockdown being eased as domestic Covid-19 cases stabilise will help boost the index,” it said.
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The 10 stocks with the highest trade value today were HANA, PSL, KBANK, B, KCE, PTTGC, PTT, TU, CBG and BCH.
Other Asian indices were down with one exception: Japan’s Nikkei Index closed at 27,281.17, down 304.74 points or 1.10 per cent. China’s Shanghai SE Composite Index closed at 3,465.55, down 19.73 points or 0.57 per cent, while the Shenzhen SE Component Index closed at 14,487.36, up 33.25 points or 0.23 per cent. Hong Kong’s Hang Seng Index closed at 25,316.33, down 550.68 points or 2.13 per cent. South Korea’s KOSPI Index closed at 3,097.83, down 61.10 points or 1.93 per cent. Taiwan’s TAIEX closed at 16,375.40, down 450.87 points or 2.68 per cent.
Central bank to test-drive digital currency next year
The Bank of Thailand (BOT) plans to develop and test its Retail Central Bank Digital Currency (Retail CBDC) in a real-life environment in the second quarter of 2022.
The pilot test will initially be conducted on a limited group under the BOT before it is expanded to the public, retail stores,banks and non-banking facilities, said Vachira Arromdee, assistant governor of BOT’s Financial Markets Operations Group.
BOT also released a study on the implications of Retail CBDC on the Thai financial sector as well as results of a public survey on the development of the currency. This study was based on “The Way Forward for Retail Central Bank Digital Currency in Thailand” published on April 2 this year.
The results of the study and feedback from the survey are being used to determine guidelines for the pilot test. The key points are summarized as follows:
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1. Implications of Retail CBDC on the Thai financial sector
Studies show that for the design and development of Retail CBDC to have the maximum potential, the CBDC must not adversely eaffect monetary policy transmission, financial institutions, or overall financial stability.
In this regard, the following characteristics are key: the CBDC shall be cash-like and non-interest-bearing; intermediaries such as financial institutions shall be the distributors of CBDC to the public; and conditions or limits for converting CBDC shall be established.
These guidelines are to ensure that the CBDC does not compete with deposits or cause runs on financial institutions, and preserves the role of intermediaries in collecting deposits and providing credit as well as managing liquidity in the overall financial system.
The BOT predicts that the public’s demand for Retail CBDC will gradually rise over time and that CBDC could become an alternative payment option in the future.
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2. Survey results
Feedback collected via a public survey and focus group discussions show that most respondents agree with the BOT’s approach to Retail CBDC development and view the currency as a beneficial infrastructure open to access and competition, with the potential to foster greater development of a safe financial innovation in the future.
Respondents also agree that the CBDC design guidelines can help mitigate any negative impacts on the Thai financial sector.
Some respondents further advised the BOT to focus on promoting consumers’ knowledge and understanding of the benefits and uses of CBDC, particularly on how it differs from current electronic payment options.
3. Pilot test plans
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Based on the study and survey results, the BOT has established guidelines for the pilot test under two tracks, as follows:
1) Foundation Track: To test and evaluate the usage of CBDC in conducting cash-like activities within a limited scale, such as accepting, converting, or paying for goods and services. This phase of testing is expected to begin in the second quarter of 2022.
2) Innovation Track: To test and evaluate how CBDC can be further developed for innovative use cases, by allowing participation from the private sector and technology developers. The BOT is currently in the process of considering the format and criteria for participation.
The BOT will assess all results and associated risks from the pilot test, to ensure that Retail CBDC is beneficial to the public, business sector, and country as a whole, and does not undermine economic and financial stability in the future.
The price of gold dropped by THB50 in morning trade on Thursday.
AGold Traders Association report at 9.23am said the buying price of a gold bar was THB28,050 per baht weight and selling price THB28,150, while gold ornaments cost THB27,545.72 and THB28,650, respectively.
At close on Wednesday, the buying price of a gold bar was THB28,100 per baht weight and selling price THB28,200, while gold ornaments cost THB27,591.20 and THB28,700, respectively.
The spot gold price on Thursday morning was moving around US$1,781 (THB59,450) per ounce after Comex gold on Wednesday dropped by $3.40 to $1,784.40 per ounce amid a slowdown in trading just before the US Federal Reserve was to reveal results of its Federal Open Market Committee board meeting for July. The New York gold market was also closed for trading prior to the release of the minutes of the key meeting.
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The Hong Kong gold price meanwhile dropped by HK$10 to $16,580 (THB71,034) per tael, the Chinese Gold and Silver Exchange Society reported.
Foreign fund outflows, anti-govt protest expected to constrain SET
The Stock Exchange of Thailand (SET) Index fell by 2.09 points or 0.13 per cent to 1,549.78 on Thursday morning.
Krungsri Securities predicted that the day’s index would fluctuate between 1,540 and 1,560 points after the US Federal Reserve signalled it would reduce its quantitative easing programme this year as the economy is recovering.
It also predicted that the outflow of foreign funds and ongoing anti-government protests in Thailand would pressure the index.
“However, hopes that the lockdown would be eased as domestic Covid-19 cases stabilise would help boost the index,” Krungsri Securities said.
It recommended selective buying of the following companies’ shares as an investment strategy:
▪︎ Hana, KCE, TU, CPF, GFPT, Asian, EPG and NER, which benefit from a weakening baht.
▪︎ PSL, TTA and RCL, which would benefit from a rise in the freight rate.
▪︎ AOT, CPN, CRC, HMPro, AAV, BA, Mint, Centel, Amata and WHA, which would benefit from the country reopening.
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The SET Index closed at 1,551.87 on Wednesday, up 7.65 points or 0.50 per cent. Transactions totalled THB81.90 billion with an index high of 1,557.08 and a low of 1,545.33.
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