Major International Business Headlines Brief::: 06 September 2021

Mon Sep 6 08:51:18 CAT 2021

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Major International Business Headlines Brief::: 06 September 2021

 <https://www.nedbank.co.zw/> 

ü  Ikea struggles with supply problems due to driver shortage

ü  Asia shares mixed, mull implications of U.S. jobs shock

ü  Great Reboot: Germany's auto show tries for more climate friendly image

ü  Volkswagen CEO: smart cars, not e-cars, are 'gamechanger'

ü  Singapore to allow Boeing 737 MAX to return to service

ü  Texas city to offer Samsung large property tax breaks to build $17 bln chip plant

ü  Relax immigration rules to fix jobs squeeze, companies urge UK

ü  China's export, import growth likely eased in Aug on COVID-19 cases, supply bottlenecks: Reuters poll

ü  Daimler CEO says carmakers could face chip shortage into 2023

ü  Oil extends losses after deep Saudi price cuts signal demand concerns

ü  End of the summer: Events that may shake markets in September

ü  Refinitiv examines changes to key daily FX fixing window

 <mailto:info at bulls.co.zw> 

Ikea struggles with supply problems due to driver shortage

Furniture giant Ikea is struggling to supply about 1,000 product lines as a shortage of HGV drivers continues to hit businesses.

The company said the shortage of products, including mattresses at some stores, was down to Covid and Brexit.

Businesses ranging from flu vaccine suppliers to food and drink firms have also been suffering from supply issues.

The government has previously said it is "working closely with industry to address sector challenges".

Ikea said that all 22 of its UK and Ireland stores were having supply problems with 10% of its stock, or around 1,000 product lines.

"Like many retailers, we are experiencing ongoing challenges with our supply chains due to Covid-19 and labour shortages, with transport, raw materials and sourcing all impacted. In addition, we are seeing higher customer demand as more people are spending more time at home. 

 "As a result, we are experiencing low availability in some of our ranges, including mattresses."

The retailer apologised and said it hoped the situation would improve "in the coming weeks and months".

"What we are seeing is a perfect storm of issues, including the disruption of global trade flows and a shortage of drivers, which have been exacerbated by the pandemic and Brexit," Ikea said.

There has been disruption in the global container shipping industry due to the pandemic, while Brexit labour shortages span from lorry drivers to meat production workers.

Labour problems linked to Brexit are also hitting meat production.

The National Pig Association warned on Sunday that there was a backlog of 85,000 pigs on farms dues to a significant shortage of abattoir workers, and that this figure was growing at 15,000 per week.

"If processors continue not to take the pigs they will have to go somewhere," said National Pig Association chief executive Zoe Davies.

"If the government doesn't act soon to alleviate labour shortage in plants, farmers will be forced to make difficult choices.

"The last thing we want to see is pigs being destroyed on farms and the meat wasted, so we are talking to processors about options."

She added that the government does not appear to have "the slightest interest in helping us here which I find both incredibly disappointing and galling in equal measure considering this situation is entirely within their gift to resolve".

Businesses across the board have been hit by supply chain problems which hauliers have blamed on Covid and Brexit.

Flu jabs in England and Wales have been delayed due to the HGV driver shortage, and food firms including Tesco and Iceland have said there could be shortages of some products in the run-up to Christmas.

Wetherspoons ran short of some beer brands, but downplayed the link to Brexit, instead saying the shortages were down to industrial action. Unions, however, say this industrial action never took place.

Brewers Heineken and Molson Coors, and fast food chains McDonald's, KFC and Nando's were also hit by supply issues.

There is a shortage of more than 100,000 drivers in the UK, according to the Road Haulage Association.

During the pandemic as travel restrictions came in, many European lorry drivers went home to their own countries, and then decided to work elsewhere.

There have also been tax changes which mean it's now more expensive for foreign drivers to work in the UK.

Logistics firms have been calling for the government to allow temporary work visas for lorries in the short term to try to alleviate the problem.

But the government has consistently said that firms have to do more to find UK drivers.

It has previously said: "We're working closely with industry to address sector challenges, which are similarly being faced by other countries around the world.

"This includes plans to streamline the process for new drivers to gain their HGV licence and to increase the number of driving tests able to be conducted.

"We want to see employers make long-term investments in the UK domestic workforce and make employment more attractive through offering training, careers options and wage increases."-BBC

Asia shares mixed, mull implications of U.S. jobs shock

(Reuters) - Asian shares got off to a mixed start on Monday as a disappointing U.S. payrolls report promised to keep policy there super-loose for longer, but also clouded the outlook for global growth and inflation.

A holiday in the United States made for thin conditions and kept MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) flat in early trade.

Japan's Nikkei (.N225) added 1.7%, but South Korea (.KS11) eased 0.1%. Nasdaq futures were barely changed, while S&P 500 futures dipped 0.1%.

Investors were still assessing the fallout from the September payrolls report which showed a much smaller increase in jobs than expected, but also a pick up in wages. read more

The latter was enough to nudge longer-dated Treasury yields higher and steepen the yield curve, even as markets speculated the Federal Reserve might start tapering later.

"Employment decelerated sharply in August, with little indication of a pickup in labour supply," said Barclays economist Jonathan Millar. "This puts the Fed in a quandary as it balances risks of a sharp demand slowdown against those of tight supply and inflation."

"We still expect the Fed to signal tapering in September, but now expect it to begin in December not November. QE will likely end by the middle of 2022."

The rise in U.S. 10-year yields to 1.32% limited some of the pressure on the dollar from the poor payrolls print, though its index still touched a one-month low before steadying at 92.128 .

The dollar remained sidelined on the yen at 109.76 , while the euro was firm at $1.1881 after hitting a five-week top of $1.1908 on Friday.

The European Central Bank holds its policy meeting this week and a number of policy hawks have been calling for a step back in their huge asset buying programme, though President Christine Lagarde has sounded more dovish. read more

"We expect the ECB to announce a reduced pace of Q4 PEPP (pandemic emergency purchase programme) at its September meeting on the back of easier financial conditions," said analysts at TD Securities.

"All other policy levers are likely to be left on hold, with inflation forecasts revised sharply up this year and next. Communication risks are high, and Lagarde will want to avoid sounding overly hawkish, instead emphasising 'persistence'."

The prospect of a later start to Fed tapering was positive for non-yielding gold, which stood at $1,826 an ounce , having reached its highest since mid-June at $1,833.80.

Oil investors were more concerned the poor pace of U.S. hiring would be a drag on demand and prices slipped.

Brent fell 65 cents to $71.95 a barrel, while U.S. crude lost 59 cents to $68.70.

The Thomson Reuters Trust Principles.

Great Reboot: Germany's auto show tries for more climate friendly image

(Reuters) - Germany's biggest motor show, taking place in Munich this week, is no longer just about cars.

This year's IAA show, the first major motor industry event worldwide since the COVID-19 pandemic, wants to be about mobility in general, from bikes to e-scooters to cars.

"Climate-friendly engines, the digital connectivity of transport - that's what this fair is about," Hildegard Müller, president of industry association VDA, which organises the bi-annual show, said at a pre-event press conference last week. "The goal of climate protection is guiding us."

The show, which has shifted this year from Frankfurt to Munich and is themed "Mobility of the Future", is a far cry from its usual format showcasing the biggest and mightiest cars on the market. The pandemic and growing concern over climate change have cast an uncomfortable shadow over the event, already under pressure from waning attendance numbers in previous years - from 930,000 in 2015 to just 560,000 in 2019.

Indeed, many industry stalwarts have decided against showing up: Toyota (7203.T), Jaguar's Land Rover, Stellantis (STLA.MI) - including its German brand Opel - and Ferrari (RACE.MI), to name a few.

Yet, as construction workers scrambled on Sunday to put up remaining exhibition booths ahead of the official opening on Tuesday, cars were clearly still the dominant feature. A lone CANYON e-bike tent was distinctly outnumbered by far larger, glitzier carmaker stands from Mercedes-Benz (DAIGn.DE), Audi, MINI (BMWG.DE) and others.

Activists and environmental groups, too, point out that for all the talk of mobility and diversified transport, automakers still make the vast majority of their money from fossil-fuel emitting SUV sales.

"Adding 'mobility' to the event's name and pushing their e-models to the fore won't do the trick as long as they keep selling primarily gas-guzzling combustion engines," Marion Tiemann, transport expert for Greenpeace in Germany, said, branding the event a "greenwashing bonanza".

Environmental groups including Friends of the Earth Germany and Greenpeace plan a major demonstration on Saturday against the greenwashing of the auto industry and for a faster shift to sustainable mobility. Activist organisation Sand im Getriebe ('Sand in the Gears'), which smashed up 40 luxury vehicles at a dealership near Frankfurt before the last IAA in 2019, has promised "mass civil disobedience" at this year's event.

Up to 4,500 police will be on site during the show which ends next Sunday, the biggest police presence for an event in Munich in 20 years.

Volkswagen CEO: smart cars, not e-cars, are 'gamechanger'

(Reuters) - Volkswagen (VOWG_p.DE) head Herbert Diess on Sunday said autonomous cars, not electric vehicles, were the "real gamechanger" for the auto industry, which is facing the end of combustion engines in Europe by 2035.

Diess' comments signal the pace at which the 62-year old tries to transform Europe's largest carmaker by basically saying that the shift towards battery-powered electric vehicles (EV), which still needs to be backed up by actual sales, was sealed.

"Autonomous driving is really going to change our industry like nothing else before," Diess said in Munich ahead of the official opening of the IAA car show, adding the shift towards electrified cars was "kind of easy" in comparison.

"The real gamechanger is software and autonomous driving."

Diess spoke as environmental pressure on the auto sector is ramping up, with the European Commission in July proposing an effective ban on the sale of new petrol and diesel cars from 2035.

On Friday, Greenpeace and German environmental NGO Deutsche Umwelthilfe (DUH) said they would take legal action against German carmakers, including Volkswagen, if they failed to step up their policies to tackle climate change.

Diess, who was confronted by Greenpeace activists before entering the venue on Sunday, is therefore not only aiming to overtake Tesla (TSLA.O) and turn Volkswagen into the world's largest seller of electric vehicles by 2025.

He also wants to make software services for autonomous cars a key pillar of the group's future business, which is why Volkswagen has bought into self-driving software startup Argo AI, a competitor to Alphabet Inc's (GOOGL.O) Waymo.

Traditional carmakers and tech firms have poured billions of dollars over the past decade to realise the vision of driverless cars, but robotaxis remain elusive due to technical and regulatory hurdles that require continued human presence.

Volkswagen expects 1.2 trillion euros ($1.43 trillion) of software enabled sales in the car sector by 2030, accounting for about a quarter of the global mobility market, which is expected to more than double to 5 trillion euros as a result.

"By 2030 ... about 85% of our business is cars, private cars, privately owned, shared rental cars. And about 15% of mobility should be shuttles, mobility as a service," Diess said.

This ties into the group's recent move to lead a consortium in an acquisition of car rental firm Europcar (EUCAR.PA), a bet on potentially lucrative mobility services that still need to become reality.

($1 = 0.8416 euros)

The Thomson Reuters Trust Principles.

Singapore to allow Boeing 737 MAX to return to service

(Reuters) - Singapore's aviation regulator said on Monday it would approve the return to service of the Boeing Co (BA.N) 737 MAX more than two years after the plane was grounded, becoming the latest country in the Asia Pacific region to do so.

The approval is based on operators including Singapore Airlines Ltd (SIAL.SI) complying with airworthiness directives and additional flight crew training requirements, the Civil Aviation Authority of Singapore (CAAS) said in a statement.

Singapore grounded the 737 MAX in March 2019 following two fatal crashes. The approval for its return comes months after the model returned to service in the United States and Europe, and follows more recent lifting of grounding orders in other countries, including Australia, Fiji, Japan, India and Malaysia. read more

China is the biggest market in the region that has yet to approve the return of the 737 MAX, though Boeing last month conducted test flights in the country. read more

Singapore Airlines has six of the planes and it plans to take delivery of another eight in the financial year ending March 31, 2022, the carrier said in a presentation in May.

Singapore Airlines said on Monday it would continue to work closely with CAAS and other relevant regulators in the coming weeks to meet the requirements to return its 737 MAX planes to service. Further details on its 737 MAX operations will be announced at a later date, the airline added.

The Thomson Reuters Trust Principles.

Texas city to offer Samsung large property tax breaks to build $17 bln chip plant

(Reuters) - The city of Taylor, Texas - one of two locations in the state under consideration by Samsung Electronics (005930.KS) for a $17 billion chip plant - plans to offer extensive property tax breaks if it is chosen by the South Korean tech giant.

Taylor is competing with Austin, Texas to land the plant which is expected to create about 1,800 new jobs. Samsung has also said it is looking at other potential sites in Arizona and New York.

Other potential sites have yet to disclose planned tax breaks.

A proposed resolution posted on the city's website shows that for the land Samsung will use, it is set to be offered a grant equivalent to 92.5% of assessed property tax for 10 years, 90% for the following 10 years and then 85% in the 10 years after that.

Other measures include a 92.5% tax waiver on new property built on the site for 10 years and the repayment of development review costs.

The proposed resolution will be considered on Wednesday by the Taylor City Council and Williamson County Commissioners.

The Taylor site is located about 25 miles (40 kilometres) from Austin. It is about 1,187.5 acres (4.81 square kilometres)in size, much bigger than the Austin site. Samsung last year purchased more than 250 acres in Austin, which is in addition to 350 acres it owns that includes its sole U.S. chip factory.

If Samsung decides on Taylor, it plans to break ground by the first quarter of next year with production due to start by end-2024, a document previously filed with Texas state officials has said. [nL4N2OS0M5

The Thomson Reuters Trust Principles.

Relax immigration rules to fix jobs squeeze, companies urge UK

(Reuters) - Britain must relax its new immigration rules to allow in more foreign workers and ease labour shortages caused by the coronavirus pandemic and Brexit, a leading employers group, the Confederation of British Industry, said on Monday.

Since COVID restrictions began to ease earlier this year, allowing the economy to reopen, companies have complained increasingly of a lack of workers especially in hospitality, food processing and logistics which has led to gaps on supermarket shelves and restaurant closures.

A shortage of truck drivers has forced some employers to offer signing-on and retention bonuses of up to 5,000 pounds ($6,900), and official data shows a record number of job vacancies. read more

The CBI said drivers, welders, butchers and bricklayers should be classed as shortage occupations for immigration purposes. This would allow easier access to visas, but also for the employers sponsoring them to pay salaries below thresholds for migrant workers under Britain's new migration system.

The government has called on employers to train more British people to fill their vacancies but the CBI said that would take up to two years.

The pandemic and uncertainty about precise immigration rules had made it hard to prepare for the end of free movement for most EU workers on Jan. 1 of this year, it said.

"The government promised an immigration system that would focus on the skills we need rather than unrestrained access to overseas labour. Yet here we have obvious and short-term skilled need but a system that can't seem to respond," CBI director-general Tony Danker said.

The government had also failed to follow official advice on which jobs should qualify for shortage status, and rules on what kinds of training qualified for support under a government apprenticeship scheme were also too restrictive, the CBI said.

Britain's government has been reluctant to ease its immigration rules. Last month the business ministry rejected a call from retailers and logistics firms for an exemption for truck drivers, and said the industry should improve pay and conditions instead. read more

The CBI said it did not expect the end of the government's furlough programme on Sept. 30 - when several hundred thousand private-sector workers are likely to become unemployed - would make it significantly easier for companies to find staff.

The Thomson Reuters Trust Principles.

China's export, import growth likely eased in Aug on COVID-19 cases, supply bottlenecks: Reuters poll

(Reuters) - China's export growth is expected to have moderated in August amid port congestion caused by fresh COVID-19 cases, a Reuters poll showed, while the pace of imports also slowed, highlighting the growing pressure on the world's second-largest economy.

The forecast slackening in overall trade add to a flurry of soft Chinese data since July and is likely to reinforce market expectations for more near-term support measures to revitalise the flagging economic recovery.

Exports are expected to have risen 17.1% in August from a year earlier, the median forecast in a Reuters poll of 31 economists showed on Monday, compared with growth of 19.3% in July. The data are due out on Tuesday.

Nomura analysts attributed the slower growth to a shift in consumption towards services in developed economies following their reopening on the back of rapid vaccine rollouts, and shipment disruptions at the Ningbo-Zhoushan port caused by the latest wave of local COVID-19 cases.

Offsetting some of this, a few analysts say, is the possible diversion of export orders back to China due to rising COVID-19 cases in Southeast Asia.

Imports likely rose 26.8% last month year-on-year, the poll also showed, compared with 28.1% growth in July.

The Chinese economy made a remarkably strong revival after the initial coronavirus-led slump last year, but momentum has come off over the past few months as businesses grapple with sporadic COVID-19 outbreaks, supply bottlenecks and higher raw material costs. Commodity prices remain elevated despite Beijing's attempts to cool them.

These factor drove China's manufacturing activity into contraction in August for the first time in nearly 1-1/2 years, a private survey showed on Wednesday. read more

The country appears to have largely contained the latest coronavirus outbreaks of the more infectious Delta variant, but it promptd measures including mass testing for millions of people as well as travel restrictions of varying degrees in August.

"If there's demand from the market, cutting reserve requirement ratios and even lowering interest rates are both viable options," Zeng Gang, vice director at National Institution for Finance and Development, told state-owned China Securities Journal in an interview.

Many analysts expect the People's Bank of China to deliver a further cut to the amount of cash banks must hold as reserves later this year to lift growth, on top of July's cut which released around 1 trillion yuan ($6.47 trillion) in long-term liquidity into the economy.

Daimler CEO says carmakers could face chip shortage into 2023

(Reuters) - Soaring demand for semiconductor chips means the auto industry could struggle to source enough of them throughout next year and into 2023, though the shortage should be less severe by then, Daimler AG's (DAIGn.DE) CEO said on Sunday.

Carmakers, forced by the COVID-19 pandemic to shut down plants last year, face stiff competition from the sprawling consumer electronics industry for chip deliveries, hit by a series of supply chain disruptions during the pandemic.

Cars have become increasingly dependent on chips - for everything from computer management of engines for better fuel economy to driver-assistance features such as emergency braking.

"Several chip suppliers have been referring to structural problems with demand," Ola Källenius told reporters during a roundtable event ahead of the Munich IAA car show. "This could influence 2022 and (the situation) may be more relaxed in 2023."

The IAA show is the first major motor industry event worldwide since the COVID-19 pandemic. read more

Daimler said last week it expected significantly lower third-quarter sales at its Mercedes unit due to a global semiconductor shortage, becoming the latest in a string of automakers to take a hit to revenues. read more

Automakers from U.S. group General Motors (GM.N) to India's Mahindra (MAHM.NS) and Japan's Toyota (7203.T) have slashed output and sales' forecasts due to scarce chip supplies, made worse by a COVID-19 resurgence in key Asian semiconductor production hubs.

Källenius said on Sunday that despite the ongoing chip shortage, the German carmaker hopes its own supply of semiconductors will improve in the fourth quarter.

As part of its plans to electrify its model range, Mercedes-Benz will show off several fully electric vehicles at the show in Munich.

These will include global premiers for the EQE, the first fully electric for the premium carmaker’s high-performance AMG brand and a concept car for its luxury Maybach brand. The company will also introduce a fully electric SUV, the EQB, to the European market.

In July Daimler said it will spend more than 40 billion euros ($47.5 billion) by 2030 to take on Tesla Inc (TSLA.O) in an all-electric market, but warned the shift in technology would lead to job cuts. read more

Outlining its strategy for an electric future, the German carmaker said it will build eight battery plants as it ramps up electric vehicle (EV) production and from 2025 all new vehicle platforms will only make EVs.

Källenius said the company's plan to spin off its trucking unit Daimler Trucks by the end of 2021 remains on track.

($1 = 0.8416 euros)

The Thomson Reuters Trust Principles.

Oil extends losses after deep Saudi price cuts signal demand concerns

(Reuters) - Oil prices extended losses on Monday, falling more than 1%, after the world's top exporter Saudi Arabia slashed crude prices for Asia over the weekend, signalling demand concerns and that global markets are well supplied.

Brent crude futures for November fell 90 cents, or 1.2%, to $71.71 a barrel by 0250 GMT while U.S. West Texas Intermediate crude for October was at $68.45 a barrel, down 84 cents, or 1.2%.

State oil giant Saudi Aramco notified customers in a statement on Sunday that it will cut October official selling prices (OSPs) for all crude grades sold to Asia, its biggest buying region, by at least $1 a barrel. The price cuts were larger than expected, according to a Reuters poll among Asian refiners. [nL1N2Q800P] read more

"The OSPs to Asia are bearish, signalling softer demand and potentially higher supply," Energy Aspects analyst Virendra Chauhan said.

The decline in crude futures added to falls on Friday after a weaker than expected U.S. jobs report indicated a patchy economic recovery that could mean slower fuel demand during a resurgent pandemic. read more

Losses were capped by concerns that U.S. supply would remain limited in the wake of Hurricane Ida.

The U.S. government is releasing crude from strategic petroleum reserves as production in the U.S. Gulf Coast struggled to recover. Some 1.7 million barrels of oil and 1.99 billion cubic feet natural gas output remained offline, government data released on Friday showed, while power shortages are preventing some refineries from resuming operations. read more

The hurricane also led U.S. energy firms to cut last week the number of oil and natural gas rigs operating for the first time in five weeks, data from Baker Hughes showed on Friday. The oil rig count alone fell the most since June 2020.

The Thomson Reuters Trust Principles.

End of the summer: Events that may shake markets in September

(Reuters) - After a summer in which stocks have hit a seemingly never-ending run of record highs, September brings a series of monetary and political events that could jolt investors out of their complacency.

The will-they-won't-they debate over trimming pandemic-era stimulus gets an airing with several G10 central banks holding meetings. A showdown over U.S. national debt alongside crucial elections in Japan and Germany add to the risks.

Here are eight events, listed chronologically, which investors will watch in September:

TAPER DOWN UNDER -- SEPT. 7

The Reserve Bank of Australia meets on Tuesday and provides September's first test of central banks' determination to stick with plans to cut stimulus.

Last month, it stuck with plans to reduced weekly bond buying to A$4 billion ($2.9 billion) in September from the previous A$5 billion.

Yet the rapid spread of the Delta variant and a slowing economy are piling pressure on the RBA to delay the tapering -- or even to go into reverse and ease again. read more

Australian unemployment and interest rates

WHO LET THE HAWKS OUT? ECB MEETS -- SEPT. 9

Thursday's European Central Bank meeting could be a lively affair. ECB policy hawks have been out in force, arguing now is the time to start debating the end of a stimulus scheme read more .

The ECB might opt to slow the pace of purchases but chief Christine Lagarde will likely stress this is not the same as tapering.

Communicating that will not be easy. The risk is markets interpret such a step as hawkish -- lifting the euro and sovereign borrowing costs.

CANADA ELECTION -- SEPT. 20

Canadian Prime Minister Justin Trudeau called a snap vote two years early and now faces a tight race.

Trudeau is hoping his management of the pandemic and vaccine rollout will deliver him a majority, but polls show his Liberals in a statistical tie with Erin O'Toole's Conservatives.

Canadian elections rarely register for global markets, but with the Liberals proposing tax hikes on big banks and both candidates proposing spending increases, this one will be watched closely. read more

FED TAPER TIMELINE -- SEPT. 21-22

Weak August U.S. payrolls have not entirely derailed expectations the Federal Reserve might announce a taper timeline at its September meeting. But with a year-end start to the taper mostly priced in, focus is shifting to when interest rates may rise.

Fed boss Jerome Powell could stress again that tapering and rate increases are separate and that he regards current inflation spikes as transitory.

Fed fund futures are pricing the first hike for early 2023. And we should also know by the meeting whether it will be Powell who presses the button on that rise -- his term expires in February 2022. Ninety percent of economists polled by Reuters expect his tenure to be extended.

NORWAY TO HIKE -- SEPT. 23

Norway is set to raise interest off 0%, becoming the first of the G10 group of developed economies to do so.

A rate hike will demonstrate its willingness to look beyond rising COVID-19 infections and to focus on a strongly recovering economy.

Investors expect the rise, but confirmation that a major central bank is actually tightening rather than just talking about it -- especially after New Zealand unexpectedly baulked at raising in August -- would still mark a significant moment for markets hooked on cheap cash.

GERMANY VOTES -- SEPT. 26

Western Europe's longest-ruling incumbent leader, Angela Merkel, steps down as German chancellor after 16 years in charge and four straight election victories.

The election has a wider-than-usual range of possible outcomes, especially as the centre-left Social Democrats are leading in the opinion polls, pulling ahead of Merkel's conservatives for the first time in 15 years.

Two key questions for markets -- what will a new government mean for fiscal policy at home and at the European level? And what does it mean for European integration? read more

JAPAN'S NEXT PREMIER -- SEPT. 29

Prime Minister Yoshihide Suga's decision to resign has given a surprise twist to Japanese politics read more .

Amid a wave of COVID-19 infections, Suga's popularity had sunk but there is no frontrunner in the race to succeed him as chief of the ruling Liberal Democratic Party.

Possibles include ex-foreign minister Fumio Kishida and the popular minister in charge of Japan's vaccination rollout, Taro Kono. Whoever triumphs is assured to become premier given the party's majority in parliament's lower chamber.

The contest is slated for Sept. 29, and the winner must call the general election by Nov. 28.

The U.S. Treasury technically hit its $28 trillion debt "ceiling" a month ago but by dipping into its bank accounts, it has postponed the day it runs out of borrowing room. Yet the day will soon come -- probably in October -- when it lacks the money to pay its obligations.

To prevent a government shutdown or worse, a technical default, Congress must this month raise or suspend that limit. Republican senators, opposed to the Democrats' $3.5 trillion infrastructure plan, have vowed to vote against raising the ceiling.

Back in 2011 the debt ceiling bickering induced S&P Global to cut U.S. credit ratings to AA+ from AAA. Fitch might do the same this time, leaving the United States with only a Moody's triple-A rating.

While there is no sign bond markets are pricing in a risk of default, that could change. In the words of NatWest analysts, it "sets up a September to remember in DC".

The Thomson Reuters Trust Principles.

Refinitiv examines changes to key daily FX fixing window

(Reuters) - Refinitiv is considering a series of changes to its daily foreign exchange (FX) fixing, including lengthening the trading window used to calculate it, a senior company executive said, amid industry concerns over the global benchmark which used to value trillions of dollars of assets.

The 27-year-old WM/R benchmark, which is calculated by its owner Refinitiv, has a five-minute trading window, known as the "fix", at 4:00 p.m. in London each weekday when investors and banks flood the market with buy and sell orders.

The WM/R is by far the most popular benchmark and baked into contracts such as those used by U.S. fund managers wanting to buy European stocks, who would sell dollars and buy euros at exchange rates set at the fixing.

One concern among some asset managers, who move billions of dollars through the window, is that more nimble hedge funds can spot and trade off large transactions, leaving investors with worse exchange rates.

A European Central Bank-organised FX group said in April 2020 its members were concerned that concentrating end-of-month trading at particular FX fixings was "likely to create additional volatility and pressure on market functioning".

Unusual price swings at the fixing were reported during 2020 when the COVID-19 pandemic raised currency market volatility, and most recently on July 27 when sterling suddenly surged alongside a spike in trading volumes. read more

"We are very focused on making sure (the benchmark) evolves, and aligns with changes in the market structure," Shirley Barrow, Global Head of Benchmarks and Indices at Refinitiv, said, adding that it was open to lengthening the window, but had not decided what was "insufficiently wide".

Beyond expanding the trading window, Barrow said other possible improvements include sourcing trading data from more than the current three platforms, Refinitiv Matching, EBS and Currenex, which could make prices more representative of the $6.6-trillion-a-day FX market.

Concerns about the fixing and whether investors were getting a good deal have existed for years but resurfaced during the pandemic, encouraging Refinitiv to assess its options.

Refinitiv began gathering data on the benchmark's performance and asking clients for feedback on potential changes last year, Barrow told Reuters.

This revealed that some users want the window widened to address concerns, including that computer-driven algorithmic traders are taking advantage of slower-moving asset managers.

By widening the window, large buy or sell orders should have less market impact as transactions can be spread out, making it harder for algorithms, or so-called algos, to track investor order flows.

However, some asset managers say the current system works well and that lengthening the window would solve little because when putting a large order through a defined period, there will always be a 'market impact' others can spot.

These managers say there are already measures the funds can take, such as not executing the whole order within a single window.

"You are going to have impact whether it's a 20-minute window or a five-minute window. There's a cost to trading," said Mike Eyre, Global Head of FX trading at asset management giant Vanguard. "There are some orders where the best outcome is to take more time, to do the order over multiple days."

Refinitiv will publish a white paper this month asking for more feedback on a list of possible improvements, Barrow said.

"Our focus is on getting that optimal, the size of the window versus still having our objective of a price at a specific point in time," she said.

Refinitiv is owned by the London Stock Exchange Group (LSEG.L) and is the largest customer of Reuters News. Thomson Reuters, the parent company of Reuters News, holds a minority stake in the LSE.

The fix has become more important in recent years, with more currency trading coalescing around it, possibly as equity market turnover is concentrated towards the end of the trading day.

Some rivals have sought to capitalise on concerns and in April a benchmark called Siren was launched by Raidne, a company which provides analytics and trade surveillance.

This is calculated using an algorithm over a 20-minute window. Raidne says it will save users execution costs compared with "the legacy 4 p.m. fix", claiming the longer window and its algorithm can limit the adverse impact on prices that users get when they transact big orders.

Unlike stocks, currencies are traded across dozens of platforms, making the market highly fragmented. Hedge funds and high-frequency traders deploying so-called algos are particularly active on platforms that feed into WM/R.

Barrow said WM/R offered a series of regulated benchmarks that fix at different times, adding that investors who use the 4 p.m. window and are worried should "consider other times".

Our Standards: The Thomson Reuters Trust Principles.

INVESTORS DIARY 2021

Company

Event

Venue

Date & Time

BAT

Analyst Briefing

H1 Virtual

September 7 -1230pm

Hippo

AGM

virtual

September 17 -  (9am)

Star Africa

AGM

virtual

September 23 -11am

National Unity Day

December 22

Christmas Day

December 25

Boxing Day

December 26

Public Holiday in lieu of Boxing Day falling on a Sunday

December 27

Companies under Cautionary

ART

PPC

Starafrica

Fidelity

Turnall

Medtech

Zimre

Nampak Zimbabwe

 <mailto:info at bulls.co.zw> 

DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of Faith Capital (Pvt) Ltd for general information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The information contained in this report has been compiled from sources believed to be reliable, but no representation or warranty is made or guarantee given as to its accuracy or completeness. All opinions expressed and recommendations made are subject to change without notice. Securities or financial instruments mentioned herein may not be suitable for all investors. Securities of emerging and mid-size growth companies typically involve a higher degree of risk and more volatility than the securities of more established companies. Neither Faith Capital nor any other member of Bulls ‘n Bears nor any other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents or otherwise arising in connection therewith. Recipients of this report shall be solely responsible for making their own independent investigation into the business, financial condition and future prospects of any companies referred to in this report. Other  Indices quoted herein are for guideline purposes only and sourced from third parties.

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