Global central bankers from Japan to the U.K. promised to act as needed to stabilize financial markets rattled by the spreading coronavirus as pressure builds on monetary policy makers to do more to safeguard their economies.
In an emergency statement on Monday, Governor Haruhiko Kuroda said the Bank of Japan would “strive to provide ample liquidity and ensure stability in financial markets.” The Bank of England followed up by saying it’s working with U.K. authorities and international partners to “ensure all necessary steps are taken to protect financial and monetary stability.”
The commitments came after Federal Reserve Chairman Jerome Powell on Friday opened the door to cutting interest rates in the U.S. to contain what he called the “evolving risks” to economic growth from the virus.
The prospect of central banks’ action helped halt the worst rout in stocks since the global financial crisis more than a decade ago. Money markets now see the Fed lowering its main rate by 50 basis points this month and give a 70 per cent chance the European Central Bank will pare its by 10 basis points.
There is even speculation the Fed will move before its policy makers are set to gather on March 17-18 and some economists see the potential for global policy makers to coordinate cuts for the first time since 2008, when central banks acted to prevent the collapse of the international banking system.
Investors increasingly bet the central banks of Australia and Canada will ease at meetings already scheduled for this week.
“Global central banks will almost certainly all induce one form of easing or another, “ said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore.
In another sign of increasing worry, the OECD said global economic growth will sink to levels not seen in over a decade as the outbreak hammers demand and supply.
The French government said on Monday that Group of Seven finance ministers will hold a conference call this week to coordinate their response to the spread of the virus. Italy is already seeking to widen its budget deficit to pay for at least 3.6 billion euros (US$4 billion) in proposed emergency economic measures.
Just a week ago, key central bankers were saying it was too soon to respond to the outbreak. The plunge in global stocks has forced a change in stance. Economists at Goldman Sachs predict the Fed will slash its key rate 50 basis point this month and ultimately by 100 basis points in the first half of the year. The Bank of England will cut by 50 basis points and the European Central Bank by 10 basis points, it said.
“Global central bankers are intensely focused on the downside risks from the virus,” economists led by Jan Hatzius said in a report on Sunday. “We suspect that they view the impact of a coordinated move on confidence as greater than the sum of the impacts of each individual move.”
Japan to Indonesia
The Bank of Japan backed up Monday’s promise to help markets by offering to buy 500 billion yen (US$4.6 billion) of government bonds to provide liquidity. Indonesia’s central bank lowered the amount lenders need to keep on reserve to shore up liquidity in its markets.
By not alluding to monetary policy as Powell did, Japan’s statement revealed the constraints the BOJ and many other central banks are under. Japan’s key rate is already minus 0.1 per cent compared to the Fed’s 1.5 per cent to 1.75 per cent range.
The ECB is also limited by a deposit rate that stands at minus 0.5 per cent. Prior to the virus outbreak, policy makers were signaling a reluctance to reduce it even further given concern that banks, who are already seeing profit margins squeezed by negative rates, might pull back on lending.
President Christine Lagarde said last week that the ECB didn’t yet think the outbreak will have a lasting impact on inflation, its primary mandate.
An ECB spokesman declined to comment on whether a statement would be issued on Monday, and referred back to Lagarde’s comments of last week.
“We are vigilant, we are mobilized, but we remain calm and proportional in the responses we need to have,” Bank of France Governor Francois Villeroy de Galhau said on BFM Business television on Monday.
Less Effective?
Even before the latest crisis, economists were questioning the benefits of ultra-loose monetary policies given more than 700 interest rate cuts and several rounds of bond-buying since the financial crisis. They boosted asset prices, but failed to generate substantial rebounds in economic growth.
For central bankers, the new challenge is that easier monetary policy may be even less effective to combat the economic pain posed by a health emergency.
That’s because by shutting workplaces in China and increasingly abroad, the virus is dealing a blow to the world’s capacity to produce goods. Lower rates won’t help manufacturers whose factories are closed or which lack materials to make their own products. On the demand-side, they would likely also fail to spur consumers to shop or travel if they’re worried about infection.
But easier monetary policies should offset tighter financial conditions, support markets and maintain the supply of credit, thus helping to drive a rebound in demand once the virus is under control. Inflation below target also gives the central banks scope to act.
Fresh evidence of the economic shock triggered by the virus came Monday as IHS Markit reported its Chinese factory index had dropped to the lowest since the series began in 2004. Gauges for Japan and South Korea also slumped.
“Rate cuts are not the silver bullet, although they can support markets somewhat,” said Jerome Jean Haegeli, chief economist at the Swiss Re Institute in Zurich.
Governments will likely have to help too. Economists at Morgan Stanley predict the combined fiscal deficit of the four largest advanced economies plus China will now run to at least 4.7 per cent of global gross domestic product this year, the biggest since 2011.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
