Business

ISTANBUL — Turkish President Recep Tayyip Erdogan on Friday unveiled a long-promised economic reform package that he hopes will boost the confidence of skittish foreign investors and temper inflation while boosting trade.

It included tax breaks for small business owners and a pledge to improve efficiency that could help export-driven growth.

But he made no mention of supporting the central bank's independence in future interest rate decisions — a key foreign investor demand.

He identified the fight against persistent inflation as "one of the main objectives" with the goal of quickly "bringing it down to single digits".

The Turkish lira lost more than half-a-per cent against the dollar in the course of Erdogan's hour-long address in Istanbul.

Erdogan has been promising to unveil a major reform package since overhauling his economic team in November.

That shakeup included installing market-friendly economist Naci Agbal as the new central bank chief and accepting his once-powerful son-in-law Berat Albayrak's resignation as finance minister.

Albayrak was widely credited with overseeing a failed policy that focused on supporting growth by keeping interests rates low despite soaring inflation.

The central bank burned through most of its reserves in the meantime while trying to support the lira.

Agbal's hike of the main interest rate to 17 per cent in the past four months has helped stabilise the currency.

But Erdogan's unorthodox belief that high interest rates cause inflation — instead of slowing it down — and past pressure on the central bank to keep rates low have drained investor confidence in the Turkish market.

Erdogan's pledges on Friday included an income tax break for 850,000 small businesses and improved transparency in public tenders. 

He also vowed to replace imports with domestic products to help local producers and to limit the spending of Turkey's sprawling government administration.

Other pledges included a plan to help banks deal with bad loans and improve their asset quality.

Erdogan set no deadlines for his proposals.

The government's ultimate goal is to bring the annual inflation rate down to 5 per cent by the time Erdogan faces a new election in 2023.

HONG KONG — Asian and European markets ticked higher on Thursday as inflation concerns eased, allowing investors to focus on the global recovery and progress in fighting the coronavirus pandemic.

Investors were given a positive lead from Wall Street, where the Dow ended at a new record, helped by news that Joe Biden's stimulus had cleared its last hurdle in Congress, as expected, meaning he can sign it into law before the weekend, pumping almost $2 trillion into the economy.

Hopes for an improvement in China-US relations were also given a lift by news that top Washington and Beijing officials will meet for their first talks next week.

Fears that a strong rebound in world growth this year will cause a surge in inflation that forces the Federal Reserve and other central banks to wind back their ultra-loose monetary policies -- including record-low interest rates -- have fuelled a sell-off across risk assets in recent months.

But data on Wednesday showing US prices rose slightly less than expected in February soothed those concerns, with the main diver of the increases being food and energy costs.

That came as a closely watched auction of benchmark US 10-year Treasuries went off without any problems with the notes selling at a yield broadly in line with expectations.

Worries about a surge in inflation have lifted US yields to around one-year highs, while a weak sale of seven-year bonds sparked a stock market sell-off. Yields rise as prices fall.

"For now there is nothing for the inflation …as to ring the alarm, while at the same time it provides the Fed plenty of breathing space" ahead of its meeting next week, said National Australia Bank's Rodrigo Catril.

The inflation data "suggests the music will keep playing for some time, with the Fed not even close to pondering the option of watering down the punchbowl".

He said the consumer price index will naturally jump next month owing to the low base effect from last year.

 Fresh China-US hopes 

Asian markets were positive on Thursday, taking their lead from Wall Street, as well as a third straight record in Frankfurt and a one-year high for Paris.

Hong Kong rose more than one per cent with Taipei, Shanghai jumped more than two per cent and Seoul 1.9 per cent. Tokyo, Singapore, Wellington and Bangkok also rose, while Sydney was barely moved and Manila fell.

London, Paris and Frankfurt all rose at the open.

The healthy US data came as the House of Representatives passed Biden's economic rescue package, which will plant up to $1,400 into struggling Americans' pockets, expend unemployment benefits, boost healthcare funding and ramp up vaccine distribution.

The get-together between key Chinese and US aides in Alaska also provided an optimistic tone Thursday, after four years of Donald Trump's sledgehammer diplomacy with Beijing that rattled world markets.

"Regional markets have seized on hopes that Sino-US relations could be about to improve, which will be bullish for trade and, by default, positive for Asia," said OANDA's Jeffrey Halley.

"Those hopes may be premature, but that hasn't stopped animal spirits from being released across mainland China equity markets, and their equally FOMO (fear of missing out) neighbours in Hong Kong, Taiwan and South Korea."

Eyes were still wide open on the European Central Bank's policy meeting that was due to be held later in the day, which will be followed for its outlook on interest rates and its vast bond-buying programme as the world economy recovers from last year's collapse.

The Fed holds its gathering next week, which Axi's Stephen Innes said "could provide a trigger for a renewed selloff in US rates" if policymakers continue to brush off the rise in bond yields.

BERLIN — US tech giant Apple said on Wednesday it planned to invest more than one billion euros ($1.2 billion) in Germany and open Europe's biggest research facility on mobile wireless semiconductors and software. 

Apple said it would make Munich its "European Silicon Design Centre", creating hundreds of new jobs at a facility for 5G and wireless technologies. 

"I couldn't be more excited for everything our Munich engineering teams will discover — from exploring the new frontiers of 5G technology, to a new generation of technologies," Apple CEO Tim Cook said in a statement.

"Munich has been a home to Apple for four decades," he added.

Apple has had a base in Munich since 1981 and now has hundreds of engineers developing microchips at its centres in southern Germany.

The latest investment in the region would "exceed one billion euros in the next three years alone", the company said. 

It added that the planned new facility in Munich, slated to open in 2022, would host "Apple's growing cellular unit, and Europe's largest R&D site for mobile wireless semiconductors and software". 

The announcement comes a day after the EU said it aims to capture 20 per cent of the world's semiconductor market by 2030 as Europe looks to become a tech power to rival the US and China.

Under a new roadmap, the European Commission also wants the EU to develop its first quantum computer before the end of the decade in order to be ready for a new era in fast computing.

A key component in everyday products such as cars and mobile phones, semiconductors are currently in short supply worldwide and Europe is dependent on Chinese and American imports in a market estimated at 440 billion euros ($523 billion) a year.

Shortages, caused by changes in supply chains because of the coronavirus pandemic, have forced some major German manufacturers including Volkswagen to suspend production lines.

LONDON — European and US equities mostly pushed higher, striking records on both sides of the Atlantic, as US inflation remained muted and the massive $1.9 trillion stimulus programme neared the legislative finish line on Wednesday.

This year's global equities rally on stimulus and the vaccine-driven reopening of the global economy has recently hit an air pocket over fears over the prospect of soaring inflation and rising interest rates.

As approval of US President Joe Biden's vast COVID-19 stimulus nears, investor focus has been on the impact of an expected post-lockdown spending splurge by the government and Americans.

Thus, markets were paying keen attention to US consumer price inflation data for February, which in the event rose only by 0.1 per cent over the month excluding volatile food and energy prices.

Annual "core" inflation, actually dipped a tenth of a percentage point to 1.3 per cent.

"Wednesday's data does suggest that, for now at least, the fears over inflationary pressures have been overstated," said market analyst Connor Campbell at Spreadex.

"Quick to express their relief, investors poured into a pricey Dow Jones, sending it more than 300 points higher" to strike an intra-day record peak of 32,200.

In Europe, Frankfurt's DAX also set records for a third day in a row, closing above 14,500 for the first time. Paris set a one-year high, nearing the record it set just before the pandemic, but London dipped.

Inflation concerns had recently pushed investors to sell their holdings of government bonds, as they worried that inflation would eat into their returns.

The markets will be watching an auction of 10-year US government bonds closely.

Fears that inflation would force the Federal Reserve to begin winding back ultra-loose monetary policies — including record low interest rates — that have been a key driver of the year-long equities rally, saw investors sell off equities last week.

Tech stocks, which are particularly sensitive to interest rates, were hit the hardest with the tech-heavy Nasdaq Composite actually falling into correction territory — a drop of more than 10 per cent from its record high set last month.

But the Nasdaq bounded higher on Tuesday, soaring 3.7 per cent, and was up 0.5 per cent in late morning trading on Wednesday.

The House of Representatives was expected to give final approval to the package later Wednesday, the final step before it is sent to Biden for signature into law.

In addition to $1,400 checks for most Americans, the package also extends supplemental unemployment insurance and provides money for state and local governments, many of which have seen their finances eroded by the pandemic.

"While traders have been looking for this package as means to turbocharge the US economic recovery, there are plenty of questions over the impact it could have upon inflation," said IG analyst Joshua Mahony.

By Jerome Taylor
Agence France-Presse

HONG KONG — Hong Kong carrier Cathay Pacific said on Wednesday it suffered a record $2.8 billion loss last year as the coronavirus pandemic wiped out demand for travel — and the airline warned of a long road to recovery ahead.

Chairman Patrick Healy described 2020 as the "most challenging" in the airline's 70-year history and said much will now depend on how effective and widespread global vaccination programmes are. 

"It is by no means clear how the pandemic and its impact will develop over the coming months," he warned, saying the group expected passenger traffic to remain "well below" half of pre-pandemic levels throughout 2021.

The company's losses were higher than estimates compiled by Bloomberg News.

Cathay racked up an attributable loss of HK$21.6 billion ($2.8 billion) for 2020, going deeper into the red as the year wore on.

Its second half losses clocked in at HK$11.8 billion, up from HK$9.9 billion in the first six months of the year when the pandemic first emerged.

Revenue was better than expected at HK$46.93 billion, thanks mainly to cargo which the airline has kept flying throughout the global health crisis.

Like all major airlines, Cathay Pacific has seen its business evaporate during the coronavirus pandemic but the Hong Kong carrier has had an especially torrid year because it has no domestic market to fall back on. 

It also entered the pandemic in an already vulnerable position. When the coronavirus first emerged Hong Kong had fallen into recession and Cathay Pacific in the red as months of huge and disruptive democracy protests in 2019 led to a plunge in customers, especially from the lucrative mainland Chinese market.

The airline also found itself punished by authorities in Beijing because some of its employees joined or voiced support for the protests.

First vaccinations 

As the pandemic spread, the airline went on a cost-cutting spree, closing its Cathay Dragon subsidiary, making about 8,500 redundancies and slashing executive pay.

With the help of a government bailout it underwent a recapitalisation in July that raised HK$39 billion. 

But passenger numbers have been some 98 per cent below pre-pandemic levels since April and for much of last year the company was burning through cash at a rate of up to HK$1.5 billion a month. 

By the time 2020 closed, Cathay's shares had fallen 29 per cent for the year. On Wednesday they closed 0.56 per cent down. 

In Wednesday's annual report, Cathay said it had managed to reduce the cash burn towards the end of the year but longer quarantine restrictions that Hong Kong placed on all long-distance flight crew in January was now cancelling out most of those savings.

It added that it would keep executive pay slashed and ask staff to go on a third round of unpaid leave — to which some 80 per cent of employees have already signed up.

Its liquidity at the end of 2020 was HK$28.6 billion and Cathay also issued HK$6.74 billion in convertible bonds in January to secure more funds.

Hong Kong managed to keep coronavirus infections comparatively low by bringing in strict quarantine measures for all arrivals early on in the pandemic.

Currently, most of those arriving in the city must quarantine in a hotel for 21 days, one of the longest mandatory quarantine periods in the world. Outbound travel is almost non-existent.

There is little sign of those measures being lifted any time soon.

The first vaccinations began last month but so far only 114,000 of the city's 7.5 million population have received a first dose, the vast majority China's Sinovac jab.

Authorities say they hope to vaccinate all residents by the end of the year.

Last week, the head of the city's tourist board warned it could be at least six months before residents would be able to travel again.

LONDON — Stocks markets on both sides of the Atlantic pushed into record territory on Tuesday on growing confidence in the global economic recovery from the Covid pandemic.

A rally in equities across the world over the past months appeared to have run out of steam on concerns about a rise in interest rates, but those worries were pushed to the background on Tuesday as yields on US government bonds retreated.

"The dip in government bond yields has acted as the green light for the equity bulls," said David Madden at CMC Markets UK.

On Wall Street, the Dow came within striking distance of its all-time high set last month and could close at a record level.

Meanwhile, Frankfurt's DAX closed at a record high for a second straight day.

"The positive mood is being fuelled by the hopes the US government will implement the $1.9 trillion relief package soon," added Madden.

The package is on track to be signed by US President Joe Biden this week.

Sentiment was also boosted by the Organisation for Economic Co-operation and Development sharply raising its 2021 global growth forecast as the deployment of vaccines and a huge US stimulus programme have greatly improved economic prospects.

Concerning inflation, the organisation said underlying price pressures generally remain mild and are being held in check by ample spare capacity around the world.

Next week's US Federal Reserve policy meeting will be pored over for signs of change in its outlook for interest rates and its huge bond-buying scheme, with Biden's stimulus likely to have been signed by then.

A rise in benchmark US Treasury yields in recent weeks has been fuelled by investors moving out of the haven assets, betting that a rise in inflation will eat into their returns.

Fears of higher rates has in particular hit US tech stocks hard, with the Nasdaq Composite having entered correction territory by falling more than 10 per cent from the record high it set last month.

However, the Nasdaq rebounded sharply on Tuesday, jumping 3.6 per cent in late morning trading.

Oil prices rose and then fell back, a day after Brent briefly shot above $71 per barrel following a drone attack on Saudi oil facilities, with the main international contract slumping below $68.

"Today's choppy trade could reflect hesitancy to have a big position before the EIA weekly crude oil inventory report," said analyst Edward Moya at currency trading platform Oanda, referring to the weekly US government data on the market.

"Energy traders will want to closely watch how strong US production can bounce back and if that poses a risk for OPEC+'s hesitancy to raise output," he added.

Last week, OPEC and its allies held back on most of its scheduled production cuts despite indications of greater demand as vaccination campaigns in the US and elsewhere help economies get back to work.

PARIS — The Organisation for Economic Co-operation and Development (OECD) sharply hiked its 2021 global growth forecast on Tuesday as the deployment of coronavirus vaccines and a huge US stimulus programme greatly improve the economic prospects.

The Paris-based Organisation for Economic Cooperation and Development (OECD) said it now expects the global economy to grow 5.6 per cent, an increase of 1.4 percentage points from its December forecast.

"Global economic prospects have improved markedly in recent months, helped by the gradual deployment of effective vaccines, announcements of additional fiscal support in some countries, and signs that economies are coping better with measures to suppress the virus," it said in a report.

The recovery will be largely led by the United States, thanks to President Joe Biden's $1.9 trillion stimulus programme, according to Laurence Boone, chief economist of the OECD.

The OECD sees the US economy growing 6.5 per cent this year, a very sharp increase of 3.3 percentage points on its previous forecast, with the world as a whole returning to pre-pandemic output levels by mid-2021.

But for the moment, only China, India and Turkey have surpassed pre-pandemic levels and the picture is very mixed elsewhere.

"Despite the improved global outlook, output and incomes in many countries will remain below the level expected prior to the pandemic at the end of 2022," said the OECD, which groups the world's most developed economies.

It said the "top policy priority" is to deploy vaccines as quickly as possible, to save lives as well as to speed economic recovery.

"There are huge and significant risks to our economic projections, most notably the pace of vaccination," Boone noted.

"What we know is the faster countries vaccinate, the quicker they can reopen their economy," she said.

Britain, which also has rolled out vaccines quickly, got a 0.9 percentage point increase to 5.1 per cent — higher than the UK's own forecast, which was lowered last week.

The eurozone, where vaccination campaigns have been slower, received only a 0.3 percentage point bump to 3.9 per cent, as the recoveries in both Italy and France were revised lower.

LONDON — Luxury British carmaker Aston Martin will make its fully-electric vehicles in Britain from 2025, its chairman told The Financial Times (FT), in a boost to the country's auto sector.

Canadian billionaire Lawrence Stroll said a battery-powered sport utility vehicle (SUV) and fully-electric sports cars will be made at Aston plants in England and Wales.

James Bond's favourite carmaker is 20 per cent owned by Mercedes-Benz and there were suggestions production could have taken place in Germany.

Meanwhile, Aston plans this year to launch hybrid versions of its cars ahead of rolling out fully-electric versions.

In an interview with the business daily, Stroll said its electric "SUV will be built in Wales" and battery-operated sport cars at its plant in Graydon, England.

It comes as Stellantis, the newly-formed European carmaker, is yet to decide over the future of a Vauxhall plant in England.

Stellantis — a merger of France's PSA and US-Italian rival Fiat Chrysler — is said to be seeking financial incentives from the British government to produce a fully-electric vehicle in the UK.

Indian-owned Jaguar recently announced it would produce only electric vehicles from 2025 — and at its facilities in England.

With Britain banning the sale of new high-polluting diesel and petrol cars from 2030, the country's largely foreign-owned car manufacturing sector must increasingly switch to producing fully-electric vehicles.

Meanwhile, after much uncertainty, the UK automotive sector was a big winner from the recent Brexit agreement struck between London and Brussels as it allows for smooth tariff-free trade.

UK electric car exports will however face tariffs from 2027 if they do not have a majority of components sourced from either Britain or the European Union.

Monday's announcement comes after Aston last month revealed that its losses almost quadrupled in 2020.

Aston Martin's fortunes have been hit also by coronavirus-related delays to James Bond spy blockbuster "No Time To Die".

Bond films traditionally feature various top-end Aston Martin cars that give the company a valuable marketing boost.

The company launched on the stock market in 2018 to great fanfare.

However, losses almost doubled in 2019, as the group crashed spectacularly on weak global demand linked also to a Chinese economic slowdown.

Aston subsequently clinched a cash injection from Stroll at the start of last year.

As part of the deal, the Racing Point Formula One team — whose drivers include Lawrence Stroll's son Lance Stroll — has rebranded as Aston Martin for the 2021 season.