Business

BUENOS AIRES — Thousands of people demonstrated in Buenos Aires on Thursday, demanding a "universal salary" in crisis-ridden Argentina.

Protesters congregated outside the presidential palace, where centre-left President Alberto Fernandez was meeting his economy minister Silvina Batakis, who is opposed to such an idea, as rumours abound that a Cabinet reshuffle is in the works.

"Poverty has taken control of the country," Monica Sulle, a leader of the Socialist Workers' Movement (MST), said.

Argentina is gripped by an economic crisis marked by soaring inflation and rapid currency devaluation.

Radical leftist groups close to the Frente de Todos (Everyone's Front) ruling coalition have for weeks been demanding a universal living wage.

They are angry at the government for the deteriorating social conditions faced by ordinary Argentinians.

Protesters want a minimum living wage worth 67,000 pesos (around $490 at the official exchange rate), which amounts to the cost of two basic food baskets, for the country's lowest earners.

Some 37 per cent of Argentina's 45-million population live in poverty, while inflation for the first half of the year topped 36 per cent.

"This unstoppable inflation is taking a seat at the family dinner table at every level of society, but in the poorest sectors it's a catastrophe," said Vilma Ripoli, a Workers' Leftist Front leader.

Argentina, which earlier this year renegotiated repayments on a $44 billion loan with the International Monetary Fund (IMF), has committed to reducing its public deficit from 3 per cent in 2021 to 0.9 per cent by 2024.

Batakis has just returned to the country from Washington, where she met IMF managing director Kristalina Georgieva.

Local press has been speculating that Batakis, who has been in the post for less than a month since the resignation of Martin Guzman, could be one of the heads to roll in a cabinet reshuffle.

SEOUL — South Korean chip powerhouse Samsung Electronics said on Thursday that second-quarter operating profits were up 12.18 per cent, with record profits in its system semiconductor division despite global supply chain woes.

The company's "system semiconductor businesses... achieved a record high quarterly profit", Samsung said in a statement, adding it had both expanded its product line-up and increased the supply of chips to global customers.

"Earnings in the Memory Business improved both year-on-year and quarter-on-quarter as the Company focused on meeting solid demand for servers," Samsung said.

In June, the company became the first chipmaker in the world to mass-produce 3 nanometre microchips as it sought to match and eventually outpace Taiwan's TSMC in the race to manufacture the world's most advanced chips. 

The new chips will be smaller, more powerful and efficient, and will be used in high-performance computing applications before being put into gadgets such as mobile phones.

The vast majority of the world's most advanced microchips are made by just two companies — Samsung and TSMC — both of which are running at full capacity to alleviate a global shortage.

Samsung is the market leader in memory chips, but it has been scrambling to catch up with TSMC in its advanced foundry division, which makes high-tech microchips for other companies.

Samsung, which is also a world leader in handset production, said demand and profits from its smartphone division were down from the first quarter.

"Overall market demand declined from the previous quarter amid geopolitical issues and concerns over inflation on top of continued weak seasonality," it said.

"Profitability decreased from the previous quarter at some degree due to rising costs of components and logistics as well as negative effects of foreign exchange movement," it added.

But overall, the weakness of the Korean won against the US dollar benefited the company, it said in the statement, "resulting in an approximately 1.3 trillion won [$994 million] company-wide gain in operating profit compared to the previous quarter".

Weak chip market

Samsung's mobile business is "expected to improve in the second half of the year from the second quarter, which was heavily affected by external elements such as the war in Ukraine", Park Sung-soon, an analyst at Cape Investment & Securities, said .

But decreased market demand for memory chips due to concerns over a possible global recession will hamper the company's profit outlook, he said.

"What determines Samsung's overall profit is its semiconductor business. With what's expected to be faltering demand for memory chips down the road, sales could weaken in the second half of the year." 

Global demand for chips is "entering a period of weakness, which will persist through 2023", Richard Gordon, an analyst at research company Gartner, said in a report, according to Bloomberg.

"We are already seeing weakness in semiconductor end markets, especially those exposed to consumer spending."

The supply of memory chips has become an issue of global geopolitical significance recently, with leading governments scrambling to secure advanced chip supplies.

That was demonstrated in May when US President Joe Biden kicked off a South Korea tour by visiting Samsung's sprawling Pyeongtaek chip plant.

Russia's invasion of Ukraine has "further spotlighted the need to secure our critical supply chains", Biden said at the plant, underscoring the importance of bolstering technology partnerships among "close partners who do share our values".

HONG KONG — Asian and European markets rose on Thursday following a surge on Wall Street fuelled by hopes that the Federal Reserve (Fed) could slow its pace of inflation-fighting interest rate hikes.

The dollar also struggled to bounce back from a sell-off — sitting at a three-week low against the yen — that came in response to comments by Fed chief Jerome Powell suggesting its next super-sized increase could be its last.

However, analysts cautioned that the initial joy, which sent New York's three main indexes soaring, could be short-lived as the global economy continued to face several headwinds and inflation would likely not come down quickly.

As expected, the Fed lifted borrowing costs 75 basis points to a range of 2.25 to 2.5 per cent, close to the neutral level it considers neither stimulating nor slowing economic growth.

Forecasts have rates going as high as 3.8 per cent in 2023, as the bank tries to control runaway inflation.

There is a growing concern that the sharp rise in rates is bearing down on the world's top economy and could send it into recession.

In his post-meeting comments, however, Powell said he did not consider that was the case, because "there are too many areas of the economy that are performing too well". 

He did note that growth was slowing.

Powell added that officials would not give any guidance on their next move, instead taking each decision on a meeting-to-meeting basis. 

While he said another "unusually large increase could be appropriate" in September and officials "wouldn't hesitate" to lift by 1 percentage point, markets took heart from the suggestion that the bank was ready to take its foot off the gas towards the end of the year.

On Wall Street, the Dow and S&P rallied and the Nasdaq soared more than 4 per cent — its best one-day rise since late 2020 — as tech firms caught a wave of optimism. The sector is more susceptible to higher rates.

Asia followed suit, though with more muted gains.

Shanghai, Tokyo, Sydney, Seoul, Singapore, Mumbai, Manila, Jakarta and Wellington were also well in the green.

But Hong Kong dipped as the city's de facto central bank followed the Fed in lifting rates owing to its currency peg.

London, Paris and Frankfurt were up in the morning.

The prospect of a slower pace of rate hikes weighed on the dollar against most other currencies, and on Thursday it hit its lowest level against the yen since July 6.

There was a warning that the positive mood likely will not last, however.

"This market move is the victory of hope over experience," Jeffrey Rosenberg, at BlackRock Inc, told Bloomberg Television. "I'd be a little bit cautious here."

Citigroup's Andrew Hollenhorst and Veronica Clark added that traders appeared to be misjudging Powell's remarks.

"We read Chair Powell's press conference as more hawkish than the market's interpretation," they said, adding that inflation readings excluding food and energy will "push the Fed to hike more aggressively than they or markets anticipate".

All eyes were now on the release of second-quarter growth data that was due on Thursday. After a 1.6 per cent contraction in the previous three months, another negative reading would put the economy into a technical recession.

An expected phone call between US President Joe Biden and his Chinese counterpart Xi Jinping will also be high on the agenda for investors as the world's superpowers try to navigate a period of rising tensions. Updates on US tariffs and Taiwan will be among the main areas of focus.

Oil prices rose after data showed a big drop in US stockpiles, while Powell's comments on the economy eased recession concerns and the weaker dollar made the commodity cheaper for buyers with other currencies.

FRANKFURT — German automaker Mercedes-Benz said on Wednesday it was upgrading its forecast for full-year sales as its decision to focus on top-of-the-range models begins to pay off despite supply constraints in the industry. 

The Stuttgart-based group said in a statement that its net profit inched forward to 3.2 billion euros ($3.3 billion) in the second quarter from 3.1 billion euros a year earlier on a 7 per cent increase in revenues to 36.4 billion euros. 

Unit sales, however, declined by seven per cent in the period from April to June, as a shortage of semiconductors — a key component in cars' electrical systems — put the brakes on production. 

Mercedes its resilient revenue figures resulted from its decision to focus on higher-end models with larger margins.

The carmaker said it was raising its revenue outlook for the full year to "significantly above" the 167.9 billion euros it booked last year.

Mercedes also raised its forecast for underlying or operating profit. 

Chief Executive Ola Kallenius said the group had managed the bottlenecks in supply as well as "increasingly complex macroeconomic and geopolitical challenges". 

Russia's invasion of Ukraine has clouded the outlook for the economy in Europe and raised fears of a recession, as Moscow threatens to cut off gas supplies to the continent.

Mercedes, whose home market would be acutely affected by a shutdown in gas supplies, said it was looking at ways of "substituting the use of natural gas in vehicle production".

The carmaker said it could reduce its usage by "around 50 per cent".

Mercedes was also steeling itself against a general economic downturn, but had "good reasons to remain confident, with ongoing strong demand", Kallenius said.

BERLIN — Russian energy giant Gazprom drastically cut gas deliveries to Europe via the Nord Stream pipeline on Wednesday to about 20 per cent of its capacity, German authorities said.

The Russian state-run company had announced on Monday that it would choke supply to 33 million cubic metres a day — half the amount it has been delivering since service resumed last week after 10 days of maintenance work.

EU states have accused Russia of squeezing supplies in retaliation for Western sanctions over Moscow's war in Ukraine.

Gazprom cited the halted operation of one of the last two operating turbines for the pipeline due to the "technical condition of the engine".

The German economy ministry dismissed the explanation, saying there was "no technical reason for a reduction of deliveries". Government spokeswoman Christiane Hoffmann spoke on Wednesday of a "power play" by Moscow.

Klaus Mueller, head of Germany's energy regulator, said gas flows had dropped to 20 per cent of the pipeline's capacity on Wednesday from 40 per cent.

"We'll see today if it stays that way," he said in a statement.

In parallel, Italian energy major Eni said Gazprom had informed the group it would only deliver "approximately 27 million cubic metres" on Wednesday, down from around 34 million cubic metres in recent days.

Kremlin spokesman Dmitry Peskov blamed EU sanctions for the limited supply.

"Technical pumping capacities are down, more restricted. Why? Because the process of maintaining technical devices is made extremely difficult by the sanctions adopted by Europe," Peskov said. 

"Gazprom was and remains a reliable guarantor of its obligations... but it can't guarantee the pumping of gas if the imported devices cannot be maintained because of European sanctions."

Mueller praised consumers and industry for voluntarily reducing energy use, saying that even correcting for warmer summer temperatures, recent consumption had been cut between 5 and 7 per cent.

He said this would allow Germany to add to its gas reserves, which currently stand at about 65 per cent of capacity. Economy Minister Robert Habeck outlined targets last week for stocks to reach 95 per cent by November 1 ahead of the cold German winter.

"In the autumn, the situation will change and gas use will rise," Mueller said, noting the country's strong reliance on gas for its heating.

"Germany has got to use less gas," he said, calling energy part of Russian "foreign policy and war strategy". 

The European Union on Tuesday agreed a plan to reduce gas consumption in solidarity with Germany, Europe's top economy. Berlin takes a major share of the 40 per cent of EU gas imports that came from Russia last year.

"It is true that Germany, with its dependence on Russian gas, has made a strategic mistake but our government is working... to correct this," Habeck said on Tuesday. 

German daily Sueddeutsche Zeitung called the bloc's plan a "lesson in humility for the EU's would-be schoolmaster", Germany. 

"Suddenly we are not the strong ones and are dependent on others' help," it said. 

The Rheinische Post newspaper said the EU agreement was welcome, but noted that if President Vladimir Putin "turns off the taps completely, then 15 per cent will start looking like a drop in the ocean".

WASHINGTON — Surging inflation and severe slowdowns in the United States and China prompted the International Monetary Fund (IMF) to downgrade its outlook for the global economy this year and the next year, while warning on Tuesday that the situation could get much worse.

"The outlook has darkened significantly since April. The world may soon be teetering on the edge of a global recession, only two years after the last one," IMF Chief Economist Pierre-Olivier Gourinchas said.

In its latest World Economic Outlook, the International Monetary Fund cut the 2022 global gross domestic product (GDP) estimate to 3.2 per cent, four-tenths of a point lower than the April forecast, and about half the rate seen last year.

Last year's "tentative recovery" from the pandemic downturn "has been followed by increasingly gloomy developments in 2022 as risks began to materialise", the report said.

"Several shocks have hit a world economy already weakened by the pandemic," including the war in Ukraine which has driven up global prices for food and energy, prompting central banks to raise interest rates sharply, the IMF said.

Ongoing COVID-19 lockdowns and a worsening real estate crisis have hindered economic activity in China, while the Federal Reserve's aggressive interest rate hikes are slowing US growth sharply.

But the IMF offered a stark caveat to the forecasts, cautioning that "risks to the outlook are overwhelmingly tilted to the downside", and if they materialise could push the global economy into one of the worst slumps in the past half-century.

Key among the concerns is the fallout from the war in Ukraine including the potential for Russia to cut off natural gas supplies to Europe, as well as a further spike in prices and a food shortage due to the chokehold the war has on grain supplies that could trigger famine.

In an ominous warning, the WEO said "such shocks could, if sufficiently severe, cause a combination of recession accompanied by high and rising inflation ['stagflation']."

That would slam the brakes on growth, slowing it to 2 per cent in 2023. The global growth rate has only been slower five times since 1970, the IMF said.

Inflation priority 

The top priority for policymakers is to rein in soaring prices, even at the cost of inflicting pain on their citizens, the fund said, since the damage caused by allowing inflation to rage out of control would be much worse.

Gourinchas, in a blog post about the report, noted that the "synchronised" moves by major central banks to deal with the inflation threat "is historically unprecedented, and its effects are expected to bite".

"Tighter monetary policy will inevitably have real economic costs, but delaying it will only exacerbate the hardship," he said.

The IMF now sees consumer prices jumping 8.3 per cent this year, nearly a full point higher than previously forecast, while emerging market economies face a 9.5 per cent increase in consumer prices.

But, "further supply-related shocks to food and energy prices from the war in Ukraine could sharply increase headline inflation."

That would increase the pain for poor nations least able to withstand the shock, where food makes up a larger share of family budgets.

US, China slowdown 

While the global economy did a bit better than expected in the first three months of the year, it appears to have "shrunk in the second quarter — the first contraction since 2020", the IMF said.

The IMF downgraded growth forecasts for most countries, including big revisions for the United States and China, which cut more than a point off the prior forecasts.

The fund now sees US growth this year of just 2.3 per cent, amid slowing consumer spending and rising interest rates, and the report said a recession — defined by two quarters of negative growth — may already have begun.

China's economy is expected to slow dramatically in 2022, expanding just 3.3 per cent — the lowest in more than four decades other than the 2020 pandemic crisis — due to COVID concerns and the "worsening crisis" in the property sector, the report said.

"The slowdown in China has global consequences: Lockdowns added to global supply chain disruptions and the decline in domestic spending are reducing demand for goods and services from China's trade partners," the report said.

There were some exceptions to the gloomy outlook, including upgrades for Italy, Brazil and Mexico, as well as for Russia which is still expected to contract but is benefitting from rising oil prices due to Western sanctions, the WEO said.

AMMAN — The Industrial Producers' Price Index rose by 15.86 per cent in the first five months of 2022, reaching 138.55 points compared to 119.58 points in the same period of 2021, according to the Amman-based Department of Statistics (DoS) figures released on Tuesday.

The Industrial Producers' Price Index for May reflected an increase by 18.90 per cent to 145.71 points up from 122.54 points at the end of the same month of 2021, the DoS said in a statement carried by the Jordan News Agency, Petra, on Tuesday.

However, this index reflected a slight drop when compared to the 2022 April figure. In May 2022, the index saw an 0.08 per cent drop when compared to the previous month, registering 145.71 points compared to 145.83 in April of 2022, according to the DoS figures.

LONDON — European and American stocks advanced on Monday as markets began a busy week, with the US Federal Reserve (Fed) poised to lift interest rates again and some of the world's biggest companies scheduled to publish their latest earnings reports.

Asian markets ended lower.

The Fed is widely tipped to hike borrowing costs by 0.75 percentage points on Wednesday as it battles soaring inflation.

US second-quarter gross domestic product data are due Thursday, with some observers warning it could show a second successive contraction — which is considered a technical recession.

Investors are also awaiting the release of earnings from business titans Apple, Amazon and Google parent Alphabet.

"Stock markets are modestly in the green, with a fair amount of straw clutching at play once more," said market analyst Craig Erlam at OANDA.

"Earnings not being as bad as feared, the Fed only hiking by 75 basis points and China putting together a plan in the hope of averting the next wave of the property crisis is among the reasons being given for stock markets rising."

"It all seems a bit desperate."

Patrick J. O'Hare at Briefing.com said that bad news has been priced in by investors. 

"Hence, when bad news isn't as bad as expected, it is cheered for being better than feared, whereas good news is just the bee's knees," he said.

Markets were roiled last week when the European Central Bank (ECB) finally began ramping up interest rates to tackle runaway consumer prices in the eurozone.

The ECB had surprised investors on Thursday with a bigger-than-expected rate increase of 0.5 percentage points.

Consumer prices are soaring worldwide after economies reopened from pandemic lockdowns and as the Ukraine war keeps energy prices elevated.

That, in turn, has sparked aggressive rate hikes from major central banks to try and dampen inflationary pressures.

All three main indices on Wall Street ended last week with a loss, ending a three-day rally, following a big data miss on the crucial US services sector.

Fed chiefs have already said their main priority was bringing inflation down from four-decade highs, even at the expense of growth.

"We still see further downside for risky assets as recession fears accumulate and central banks remain committed to fighting inflation at the expense of growth," said Standard Chartered Strategist Eric Robertsen.

Others warned that while inflation could begin to ease, the Fed could still push borrowing costs to around five per cent and was unlikely to lower rates as soon as many traders hope.