Month: April 2024

By Jamie McGeever

(Reuters) – A look at the day ahead in Asian markets.

Asian markets are primed for a positive start to the new quarter following more evidence of the U.S. “soft landing” on Friday and figures on Sunday that showed manufacturing and service sector activity in China last month accelerated in tandem.

Trading volume on Monday will be lighter than usual with much of Europe still closed for the Easter holiday, but U.S. stock and bond markets are open again. 

Asia’s economic calendar is packed with key indicators — manufacturing purchasing managers index reports from several countries including Japan; South Korean trade; Indonesian inflation; and Japan’s quarterly tankan business conditions surveys.

The exchange rates of Asia’s two largest economies will once again be under the spotlight – Japan’s yen remains in “intervention” territory, and while China’s yuan is also under pressure against the dollar but is at a 30-year high against the yen.

The yuan last week slipped in spot trading to its weakest level this year around 7.22 per dollar but the People’s Bank of China has kept the daily fixing rate virtually unchanged around 7.0950 for the past four days.

This suggests the PBOC doesn’t want any volatility or abrupt weakness. But Beijing’s predicament is exacerbated by the yuan’s exchange rate with the yen — it is at 30-year high against the Japanese currency, giving Tokyo a competitive advantage on the world trade stage. 

But Beijing will have welcomed the latest earnings from tech giant Huawei, and official PMI figures that showed manufacturing activity expanding for the first time in six months.

The manufacturing PMI rose to 50.8 from 49.1 a month earlier and export orders also picked up. The official services PMI rose to its highest since June and the composite PMI its highest since April — numbers that could give Chinese and global markets a lift on Monday. 

China’s unofficial Caixin manufacturing PMI figures will be released on Monday.

Investors will also be looking to see whether Japan’s first quarter tankan business conditions surveys shows evidence of economic momentum and recovery in domestic demand. Capex plans of large firms could also signal whether Japan’s stock market boom has more upside.

Another market-mover on Monday could be Indonesian consumer inflation. Rising meat and food prices are expected to lift the annual rate to 2.91% in March from 2.75%, which would be the highest since August although still within Bank Indonesia’s 1.5%-3.5% target.

The central bank left its policy rate unchanged at 6% for the fourth consecutive meeting in February and is likely to wait for the Fed to cut rates before easing.

Regional highlights later include more PMIs, inflation from South Korea and the Philippines, and the latest monetary policy decision and guidance from the Reserve Bank of India. 

Here are key developments that could provide more direction to markets on Monday:

– China Caixin manufacturing PMI (March)

– Japan tankan survey (Q1)

– Indonesia inflation (March)

(By Jamie McGeever; Editing by Lisa Shumaker)

By Can Sezer and Burcu Karakas

ISTANBUL (Reuters) -Turks dealt President Tayyip Erdogan and his party their biggest electoral blow on Sunday in a nationwide local vote that reasserted the opposition as a political force and reinforced Istanbul Mayor Ekrem Imamoglu as the president’s chief rival.

With most of the votes counted, Imamoglu led by 10 percentage points in the mayoral race in Istanbul, Turkey’s largest city, while his Republican People’s Party (CHP) retained Ankara and gained 15 other mayoral seats in cities nationwide.

It marked the worst defeat for Erdogan and his AK Party (AKP) in their more than two decades in power, and could signal a change in the country’s divided political landscape. Erdogan called it a “turning point” in a post-midnight address.

He and the AKP fared worse than opinion polls predicted due to soaring inflation, dissatisfied Islamist voters and, in Istanbul, Imamoglu’s appeal beyond the CHP’s secular base, analysts said.

“Those who do not understand the nation’s message will eventually lose,” Imamoglu, 53, told thousands of jubilant supporters late on Sunday, some of them chanting for Erdogan to resign.

“Tonight, 16 million Istanbul citizens sent a message to both our rivals and the president,” said the former businessman, who entered politics in 2008 and is now widely touted as a likely presidential challenger.

Erdogan, who in the 1990s was also mayor of his hometown Istanbul, had campaigned hard ahead of the municipal elections, which analysts described as a gauge of both his support and the opposition’s durability.

Addressing crowds gathered at AKP headquarters in Ankara, the capital, Erdogan said his alliance had “lost altitude” across the nation and will take steps to address the message from voters.

“If we made a mistake, we will fix it” in the years ahead, he said. “If we have anything missing, we will complete it.”

Elsewhere in Ankara, thousands more supporters had earlier waved Turkish and party flags for a speech by reelected CHP Mayor Mansur Yavas, who trounced his AKP challenger in another disappointment for Erdogan.

According to 92.92% of ballot boxes opened in Istanbul, Europe’s largest city and the country’s economic engine, Imamoglu had 50.92% support compared with 40.05% for AKP challenger Murat Kurum, a former minister in Erdogan’s national government.

Polls had predicted a tight contest in Istanbul and possible CHP losses across the country.

Yet partial official results reported by state-run Anadolu Agency showed AKP and its main ally giving up mayoralties in 19 key municipalities including big cities Bursa and Balikesir in the industrialised northwest, possibly reflecting strains on wage earners.

The CHP led nationwide by almost 1% of the votes, a first in 35 years, the results showed.

Mert Arslanalp, assistant professor of political science at Istanbul’s Bogazici University, said it was Erdogan’s “severest election defeat” since coming to national power in 2002.

“Imamoglu demonstrated he could reach across the deep socio-political divisions that define Turkey’s opposition electorate even without their institutional support,” he said. “This makes him the most politically competitive rival to Erdogan’s regime.”

IMAMOGLU’S RISE

In 2019, Imamoglu had dealt Erdogan a sharp electoral blow when he first won Istanbul, ending 25 years of rule in the city by AKP and its Islamist predecessors, including Erdogan’s own run as its mayor in the 1990s. CHP also won Ankara that year.

The president struck back in 2023 by securing reelection and a parliamentary majority with his nationalist allies, despite a years-long cost-of-living crisis.

Analysts said the economic strains, including nearly 70% inflation and a slowdown in growth brought on by an aggressive monetary-tightening regime, moved voters to punish AKP this time.

“The economy was the decisive factor,” said Hakan Akbas, a senior adviser at the Albright Stonebridge Group. “Turkish people demanded change and Imamoglu is now the default nemesis to President Erdogan.”

Erdogan said ending the second election cycle in less than a year will itself bring a reprive for the economy.

In front of the Istanbul Municipality building, flag-waving supporters said they wanted to see Imamoglu challenge Erdogan for the presidency in the future.

“We are very happy. I love him so much. We would like to see him as president,” said Esra, a housewife.

Rising popular support for the Islamist New Welfare Party, which took an even more hardline stance than Erdogan against Israel over the Gaza conflict, also sapped AKP support. The party took Sanliurfa from an AKP incumbant in the southeast.

Imamoglu was reelected despite the collapse of the opposition alliance that failed to topple Erdogan last year.

The main pro-Kurdish party, which backed Imamoglu in 2019, fielded its own candidate under the DEM banner in Istanbul this time. But many Kurds put aside party loyalty and voted for him again, the results suggest.

In the mainly Kurdish southeast, DEM reaffirmed its strength, winning 10 provinces. Following previous elections, the state has replaced pro-Kurdish mayors with state-appointed “trustees” following previous elections over alleged militant ties.

Violence erupted earlier in the day, including one incident in the southeast in clashes by groups armed with guns, sticks and stones, killing one and wounding 11. In another, one neighbourhood official, or “muhtar”, candidate was killed and four people were wounded in a fight, Anadolu reported.

Several others were hurt in other incidents while one person was shot dead and two were wounded overnight ahead of the vote in Bursa, the Demiroren news agency reported.

By Steven Scheer

JERUSALEM (Reuters) -The Bank of Israel on Sunday warned of economic damage if more ultra-Orthodox Jewish men do not join the country’s military, weighing in on a contentious issue that has caused a rift in Prime Minister Benjamin Netanyahu’s wartime government.

In its 2023 annual report, the central bank said Israel’s war against Palestinian Islamist group Hamas in Gaza that began on Oct. 7 had highlighted the personnel needs of the military and has added a burden to the economy due to the sharply increased amount of service days that will be required for both conscripts and reserve soldiers.

This, it said, impairs the soldiers’ economic output as well as the spouse’s employment. “As the burden of military service is divided among a higher number of soldiers … the economic impact on each of them declines, as does the aggregate impact on the economy,” the Bank of Israel said.

“Expanding the circle of military personnel to include the ultra-Orthodox population….will therefore make it possible to answer the increasing defence needs while moderating the impact to personnel and to the economy.”

Netanyahu’s government said in February that it would seek a way to end exemptions to military service for ultra-Orthodox Jews, which date to the foundation of Israel in 1948, to spread the wartime burden across society more fairly.

But the decision met with a backlash from ultra-Orthodox Jewish parties and created a rift in the coalition.

Sunday had been the deadline for the government to come up with legislation to resolve the issue but Netanyahu filed a last-minute application to the Supreme Court for a 30-day deferment.

The Bank of Israel said that the fast growing ultra-Orthodox sector is now 7% of the economy but will be 25% in 40 years time. Only 55% of ultra-Orthodox men work and if this trend continues, Israel will lose six percentage points of gross domestic product by 2065, while the tax burden will jump.

Bank of Israel Governor Amir Yaron also said that to maintain fiscal discipline, the plan to boost annual defence spending must be met with cuts to civilian spending – although doing so also has an economist cost.

“It is important that if there is an additional increase in that budget, beyond what was already decided, it should be accompanied by fiscal adjustments that will at least prevent an enduring increase in the public debt to GDP ratio,” Yaron said in a letter to cabinet ministers and parliament members.

Lawmakers this month approved an amended 2024 state budget that added tens of billions of shekels to fund the war, while Israel intends to add some 20 billion shekels ($5.4 billion) of spending towards defence a year going forward.

($1 = 3.6831 shekels)