GLOBAL NEWS:
President Donald Trump on Wednesday extended for another year an executive order signed in May 2019 declaring a national emergency and barring U.S. companies from using telecommunications equipment made by firms posing a national security risk. The order invoked the International Emergency Economic Powers Act, which gives the president the authority to regulate commerce in response to a national emergency that threatens the United States. U.S. lawmakers said Trump’s 2019 order was aimed squarely at Chinese companies like Huawei Technologies Co and ZTE Corp. The U.S. Commerce Department is also expected to extend again a license, set to expire on Friday, allowing U.S. companies to keep doing business with Huawei, a person briefed on the matter said. In March, the Commerce Department sought public comments on whether it should issue future extensions and asked what was the “impact on your company or organization if the temporary general license is not extended?” The Commerce Department also asked about the costs associated with ending the licenses. The group argues that “ongoing, limited engagement with Huawei to protect the security of equipment and devices in the market benefits American consumers by reducing the risk that they will be subject to device compromise.” Since adding Huawei to an economic blacklist in May 2019, citing national security concerns, the department has allowed it to purchase some U.S.-made goods in a move aimed at minimizing disruption for its customers, many of which operate wireless networks in rural America. Steven Barry, who heads the Competitive Carriers Association, told a congressional hearing in March that rural carriers were “essentially attempting to rebuild the airplane in mid-flight” by having to remove and replace network equipment.
Japan was expected to lift a state of emergency across a large part of the country on Thursday, but the capital Tokyo will remain under restrictions until there is a convincing containment of the coronavirus. Prime Minister Shinzo Abe is scheduled to hold a news conference at 6 p.m. where media said he is expected to announce the lifting of the state of emergency for 39 of Japan’s 47 prefectures, but not including Tokyo. The world’s third-largest economy declared a nationwide state of emergency a month ago, urging citizens to reduce person-to-person contact by 80% in an effort to slow the pace of new infections and ease the strain on medical services. The government had said it would reassess the situation in mid-May. The government is set to add four economists to its advisory panel for combating the epidemic, and another review will be conducted again in about a week. Economists said any normalisation would be gradual as the government treads cautiously with an eye on a possible second wave of infections such as seen in countries such as South Korea and China. The 39 prefectures account for 54% of Japan’s population, while the greater Tokyo area that will remain under the state of emergency represents about a third of the economy. Although Japan’s state of emergency declaration lacks enforcement powers, mobility data has shown a marked drop in the movement of people. Osaka, Japan’s second-biggest metropolis, is also set to remain a target of the state of emergency, but the governor has announced criteria for gradually lifting some restraints on businesses including eateries and bars.
Asian equities were set to slump on Thursday after the head of the Federal Reserve warned of a “significantly worse” U.S. recession than any downturn since World War Two because of coronavirus pandemic fallout, sentiments that drove bonds higher on a safety bid. Fed Chair Jerome Powell on Wednesday issued his sober review of an economy slammed by a record pace of job losses and bracing for worse ahead as most U.S. states moved toward reopening following lockdowns aimed at curbing the spread of the virus. Hong Kong's Hang Seng index future. HSIc1 slipped 0.92%, Australian S&P/ASX 200 futures fell 1.07%, while Japan's Nikkei 225 futures rose 0.05%. Wall Street's three major indexes closed lower for the second day in a row, the Dow Jones Industrial Average fell 2.17%, the S&P 500 lost 1.75%, and the Nasdaq Composite dropped or 1.55. The U.S. Dollar Currency Index, which measures the greenback’s strength against six major currencies, was up 0.23% on the day at 100.26. The index fell as low as 99.57 earlier in the session. Authorities in Wuhan, the Chinese city where the novel coronavirus emerged, has launched an ambitious campaign to test all of its 11 million residents, after a cluster of new cases raised fears of a second wave of infections. In commodity markets, oil prices fell about 2% despite the first decline in U.S. crude inventories since January, following Powell’s remarks that a rebound may take awhile. Global benchmark Brent crude settled down 79 cents, or 2.6% at $29.19 a barrel. West Texas Intermediate crude futures, the U.S. benchmark, settled down 49 cents, or 1.9% at $25.29 a barrel. Yields on benchmark U.S. Treasury 10-year notes last fell 1/32 in price to yield 0.6525%, from 0.651%.
India’s government said on Wednesday it will offer nearly $60 billion of loan guarantees for small businesses, shadow banks and power companies as part of measures to combat the economic damage caused by the novel coronavirus pandemic. In addition, the government will set up two debt and equity funds amounting to 700 billion rupees to support stressed businesses, and will contribute to the social security funds of workers for three months. The measures are part of a 20 trillion rupee fiscal and monetary package announced by Prime Minister Narendra Modi on Tuesday to support the economy, which has been battered by a weeks-long lockdown to curb the virus’ spread. Finance Minister Nirmala Sitharaman told reporters the government aims to help 4.5 million businesses by October by providing credit guarantees to help them access collateral-free loans from banks. She also said the government will provide 900 billion rupees for power distribution companies via state-run power finance companies. Real estate companies will be able to claim relief from regulatory penalties for up to six months when completion of projects is delayed because of the coronavirus, Sitharaman said. She declined to disclose the impact on India’s fiscal deficit, which many private economists say could widen to over 5% of GDP due to a fall in revenue and additional spending. Earlier, this month the government said it planned to borrow 12 trillion rupees in the fiscal year to March 2021, up from the previously budgeted 7.8 trillion rupees, to set off the fall in revenue and fund extra spending. In an address to the nation on Monday, Modi said the package was equivalent to 10% of India’s gross domestic product, and was aimed at the multitudes out of work and businesses reeling from the impact of the prolonged shutdown.
Oil prices crept up on Thursday, supported by a surprise decline of U.S. crude inventories, but gains were capped by worries that a potential second wave of the coronavirus pandemic might trigger fresh lockdowns and slam fuel demand once again. Brent crude futures rose 6 cents, or 0.2%, to $29.25 per barrel at 0045 GMT. U.S. West Texas Intermediate (WTI) crude futures were up 8 cents, or 0.3%, to $25.37 a barrel. Crude stocks in the United States had billowed since mid-January on falling fuel demand around the world as a result of the pandemic. But U.S. crude inventories fell by 745,000 barrels to 531.5 million barrels in the week to May 8, the Energy Information Administration said on Wednesday, comforting the market after analysts in a Reuters poll had forecast a 4.1 million barrel increase. The mood in the market has also been boosted major oil producers’ commitments to curb output to help restore supply-demand balance. The Organization of Petroleum Exporting Countries and its allies including Russia agreed in April to curtail their production by 9.7 million barrels per day in May and June. Saudi Arabia, de facto leader of OPEC, also said it would cut its oil output by an additional 1 million bpd to 7.5 million bpd starting in June.
Gold eased on Thursday as U.S. Federal Reserve Chairman Jerome Powell downplayed the possibility of negative interest rates, but his warning of an extended period of weak economic growth capped the metal’s losses. Spot gold was down 0.2% to $1,712.58 per ounce by 0336 GMT, having jumped 0.8% in the previous session on Powell’s dour view on the recovery of an economy battered by the coronavirus pandemic. U.S. gold futures rose 0.3% to $1,721.60. However, Sandu said the overall speech was bullish for gold, adding that: “Prices rallied after Powell said economies are not doing well because of the virus and you can expect further stimulus. He’s expecting more from the fiscal side.” Gold tends to benefit from widespread stimulus measures as it is often seen as a hedge against inflation and currency debasement. SPDR Gold Trust holdings, the world’s largest gold-backed exchange-traded fund, rose 0.78% to a fresh seven-year high of 1,092.14 tonnes on Wednesday. Palladium climbed 0.8% to $1,832.71 an ounce and platinum gained 1.3% to $766.72, while silver fell 1.1% to $15.47.