Islamic finance looks to outgrow bad habits as it expands

After a year of landmark deals which are opening new markets for Islamic finance, the industry is under fresh pressure to address some of its shortcomings and prove that it is not just an imitation of conventional finance.
Born in its modern form during the 1970s, Islamic finance has boomed in the last few years on the back of strong economic growth in its core markets, the Gulf and southeast Asia.
Over the past 12 months it has shown signs of going global, as even non-Muslim countries have promoted it in the hope of luring cash-rich Islamic funds. Britain, Hong Kong and South Africa issued debut sovereign Islamic bonds; the industry's worldwide assets are now estimated to total over $2 trillion.
But with this success have come doubts over whether Islamic finance is living up to all of its principles. After all, it was launched not merely to make money, but to promote Muslim values such as equity, risk-sharing and social inclusion.
Those values may sometimes be getting lost as financial institutions engineer products which obey the letter of Islamic law - for example, a ban on interest payments - while mimicking conventional finance in many ways.
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Pound Sterling to Australian Dollar Exchange Rate Forecast: GBP/AUD Stronger after Chinese Data

Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Jumps after Chinese Manufacturing Data

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate advanced over the weekend as China’s Manufacturing PMI fell flat, adding to calls for the People’s Bank of China (PBOC) to introduce additional stimulus measures.
China’s manufacturing PMI dipped to 49.8 in January. This is the first time the measure has eased below the 50 mark separating growth from contraction for 2 1/2 years.
ANZ economists noted; ‘China still needs decent growth to add 100 million new jobs this year, plus China is entering a rapid disinflation process. We (think) the People’s Bank of China will cut the reserve requirement ratio by 50 basis points and cut the deposit rate by 25 basis points in the first quarter.’
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate was trading in the region of 1.9476.
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EUR/USD Forecast: bearish below 1.1440

After setting a new 11-year low at 1.1097 following Greek elections result last Monday, the EUR/USD pair spent the week in consolidative mode, finding finally sellers in the 1.1422 level, slightly below the 61.8% retracement of the post ECB-QE-announcement slide. As the week fades, the pair trades right below the 1.1300 mark, under pressure as dollar strengthens across the board, closing in the green for the first time in eight weeks.

The weekly chart shows that technical indicators maintain a strong bearish momentum in extreme oversold levels, which suggest there’s still room for further gains in correction mode, but are in no way confirming a bottom. In the daily chart, indicators have bounced from extreme oversold readings but remain deep in the red, whilst moving averages maintain their bearish slope well above current price, being the shortest, and the closest, 20 SMA around 1.1520. Price has been consolidating for most of these last days in a quite tight range, but as long as capped below 1.1440, 61.8% retracement of the above mentioned rally, the upside will likely remain limited. It will take some steady follow through above the mentioned 1.1520 to see the corrective movement extending over the upcoming days, eyeing tops early January lows in the 1.1750 price zone.
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OPEC oil output rises in January as key members stand firm: survey

LONDON (Reuters) - OPEC's oil supply has risen this month due to more Angolan exports and steady to higher output in Saudi Arabia and other Gulf producers, a Reuters survey showed, a sign key members are standing firm in refusing to prop up prices.
The Organization of the Petroleum Exporting Countries at a November meeting decided to focus on market share rather than cutting output, despite concerns from members such as Iran and Venezuela about falling oil revenue.
Supply from OPEC has averaged 30.37 million barrels per day (bpd) in January, up from a revised 30.24 million bpd in December, according to the survey based on shipping data and information from sources at oil companies, OPEC and consultants.
At the Nov. 27 meeting, OPEC retained its output target of 30 million bpd, sending oil prices to a four-year low close to $71 a barrel. Crude since fell to a near six-year low of $45.19 on Jan. 13 and was trading above $49 on Friday.
OPEC Secretary General Abdulla al-Badri, speaking in London on Monday, defended the no-cut strategy and said prices may have reached a floor, despite oversupply. Other OPEC delegates have since echoed this message.
"Prices are stabilizing," said a delegate from a Gulf producer. "But the world economy is not very strong and stocks are too high."
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Crude oil rallies over 1% but supply glut worries still weigh

Crude oil futures rallied over 1% on Friday, on the back of a weaker dollar but the commodity still remained within close distance of a nearly six-year low as ongoing concerns over a glut in global supplies continued to weigh.
On the New York Mercantile Exchange, U.S. crude oil for delivery in March traded $0.56 or 1.26% higher to $45.10 a barrel during European early afternoon trade.
Prices rose $0.08 or 0.18% on Thursday to settle at $44.53.
Futures were likely to find support at $43.58, Thursday's low and a nearly six-year low and resistance at $46.55, the high from January 27.
Oil prices have fallen nearly 60% since June as the Organization of Petroleum Exporting Countries resisted calls to cut output, while the U.S. pumped at the fastest pace in more than three decades, creating a glut in global supplies.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, slipped 0.27% to 94.71, moving away from last Friday's more than 11-year highs of 95.77.
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Wall St. closes down for January, Shake Shack rallies in debut

NEW YORK (Reuters) - U.S. stocks closed down on Friday after a volatile session as investors worried at the end of a rough month for the market about weak U.S. growth data and whether instability in Europe could hurt corporate earnings in the United States.
U.S. economic growth slowed sharply in the fourth quarter as weak business spending and a wider trade deficit offset the fastest pace of consumer spending since 2006.
This came after Greece's finance minister said the government would not cooperate with the European Union and International Monetary Fund mission.
A brief afternoon rally from rising oil prices failed to stick as investors, nervous about U.S. and global economies, fled to bonds from equities and even sold off utilities stocks, the worst performing sector on the day.
"It feels like a flight-to-safety trade on a month-end. People are putting money into assets that have done well this month," said Peter Coleman, head trader at ConvergEx Group in New York, who said Friday was a good reflection of the month.
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Forex - USD/CAD jumps over 1%, hits fresh 6-year highs

The U.S. dollar rose over 1% to fresh six-year highs against its U.S. counterpart on Friday, even as data showed that the U.S. economy grew at a slower pace than expected in the last quarter, as downbeat Canadian growth data weighed on the nation's currency.
USD/CAD hit 1.2750 during early U.S. trade, the pair's highest since March 2009; the pair subsequently consolidated at 1.2755, climbing 1.09%.
The pair was likely to find support at 1.2506, Thursday's low and resistance at 1.3063.
The Bureau of Economic Analysis reported on Friday that U.S. gross domestic product rose 2.6% in the last quarter of 2014, down from a previous estimate of 3.0% and from a growth rate of 5.0% in the three months to September.
The greenback remained supported after the Federal Reserve indicated this week that interest rates could start to rise around mid-year.
Meanwhile, a report by Statistics Canada showed that the country's GPD fell 0.2% in November, compared to expectations for a 0.1% downtick and after a 0.3% gain in October.
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Forex - EUR/USD off session highs after batch of U.S., E.Z. data

The euro erased gains against the U.S. dollar on Friday, despite tepid U.S. economic reports as earlier data from the euro zone failed to boost confidence in the bloc's economic recovery.
EUR/USD pulled away from 1.1364, the session high, to hold steady at 1.1308 during U.S. morning trade.
The pair was likely to find support at 1.1223, the high of January 27 and resistance at 1.1421, the high of January 27.
In a revised report, the University of Michigan said its consumer sentiment index ticked down to 98.1 in January from 98.2 the previous month. Analysts had expected the index to remain unchanged this month.
The UoM also said its inflation expectations for the next 12 months rose to 2.5% this month from 2.4% in December.
A separate report showed that the Chicago purchasing managers' index rose to 59.4 this month from 58.8 in December, whose figure was revised up from a previously estimated reading of 58.3. Analysts had expected the index to fall to 57.5 in January.
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Mattel Reports Fourth Quarter and Full Year 2014 Financial Results

Fourth Quarter Highlights

• Worldwide net sales down 6% (including an unfavorable impact from changes in currency exchange rates of 3%);
• North American Region¹ gross sales down 2% and International Region gross sales down 5% (including an unfavorable impact from changes in currency exchange rates of 8%);
• Worldwide gross sales by core brands: Barbie^® down 12%; Hot Wheels^® up 5%; Fisher-Price^® down 11% and American Girl^® down 4%;
• Gross margin decreased 410 basis points of net sales, partially due to the acquisition of MEGA^® Brands;
• SG&A increased 390 basis points of net sales, including the impact of the acquisition of MEGA Brands;
• Operating income of $237.0 million compared to operating income of $479.3 million in the fourth quarter of 2013; and
• Earnings per share of $0.44 (includes a negative impact of $0.05 per share from MEGA Brands integration costs² and a negative tax impact of $0.03 per share) vs. prior year earnings per share of $1.07.

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Forex Market: EUR/USD daily trading forecast

Yesterday’s trade saw EUR/USD within the range of 1.1262-1.1366. The pair closed at 1.1335, gaining 0.41% on a daily basis.
At 8:42 GMT today EUR/USD was up 0.22% for the day to trade at 1.1342. The pair touched a daily high at 1.1353 at 8:35 GMT.
Fundamentals
Italian unemployment
The rate of unemployment in Italy probably reached a new record high level in December at 13.5%, according to the median forecast by experts, from 13.4% during the prior month. The number of unemployed people dropped 0.2% in November compared to October to reach 3.457 million. At the same time, employment in the country was 0.1% lower to 55.5% to reach 22.31 million persons. Youth unemployment rate climbed 0.6% to a new all-time high of 43.9% in November, according to the National Institute of Statistics.

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India's foreign exchange reserves down by US $97.9 million to US $322 billion

India's foreign exchange reserves declined marginally by US $97.9 million to US $322.037 billion in the week to January 23, RBI said on Friday. In the previous reporting week, the reserves had jumped by a whopping US $2.66 billion to US $322.135 billion, a new record high.
Foreign currency assets (FCAs), a major constituent of overall reserves, fell by US $19.7 million to US $297.510 billion in the reporting week, Reserve Bank data showed. FCAs, expressed in dollar terms, include the effect of appreciation and depreciation of non-US currencies such as the euro, pound and yen, held in reserves.

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Daily FX Trading Update: Japanese Inflation Figures Fall Short – Jan 30, 2015

The US dollar was able to advance against most of its FX trading counterparts when risk aversion extended its stay in the currency market. Traders are also increasing their long dollar bets after the FOMC retained its hawkish bias earlier this week. Data from the US economy was mixed, as the initial jobless claims showed a better than expected 265K reading versus the projected 301K figure while the pending home sales report marked a 3.7% decline. For today, the US advanced GDP reading is due and another strong figure might lead to more gains for the dollar. Analysts are expecting to see a 3.0% growth figure for Q4.

The euro recovered slightly in recent FX trading, despite weaker than expected data from Germany. The preliminary CPI showed a 1.0% decline instead of the projected 0.8% drop while the unemployment change report showed a mere 9K drop in joblessness. Apart from that, the previous month’s reading was downgraded to show a smaller decline in unemployment. German retail sales and French consumer spending figures are up for release today, with the former likely to show a 0.4% gain and the latter to print a 0.3% uptick. Also up for release are the Spanish flash GDP and CPI figures, along with the euro zone CPI flash estimates.

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Three months on, fruitless CEO search overshadows Sanofi

PARIS (Reuters) - Barring a last-minute breakthrough, drugs firm Sanofi's Chairman Serge Weinberg may have to acknowledge in his results presentation next week that the hunt for a new chief executive is not going well.
At least three potential candidates in a narrow field have turned their back on the job heading France's largest company.
The manner of Chris Viehbacher's shock dismissal three months ago, and the surprisingly small pay-off he won last week, have cast a long shadow over the process.
"I think it is going to take time," said a source close to the company. "What we risk missing in the meantime is a strategic vision that you cannot have without a deep knowledge of the pharmaceuticals sector."
Last week Christophe Weber, the French chief operating officer of Japan's Takeda Pharmaceutical Co, told Reuters he had rejected an approach.
Paris-schooled Olivier Bohuon, chief executive of British medical devices maker Smith & Nephew, told staff in November he had no plans to leave, and in the same month, former Wyeth boss Bernard Poussot joined the board of Sanofi's rival Roche.
AstraZeneca Chief Executive Pascal Soriot, another prominent French pharma executive, has played down any interest by saying he sees himself as more Australian than French.
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Dollar softens but holds near multi-year highs ahead of U.S. data

The dollar lost some ground but remained with close distance of a more than 11-year peak against the other major currencies on Friday, as investors awaited the release of fourth-quarter U.S. economic growth data, as well as additional U.S. reports due later in the day.
The dollar remained supported after the Federal Reserve indicated this week that interest rates could start to rise around mid-year.
The greenback was also boosted by data on Thursday showing that U.S. jobless claims fell to the lowest level since 2000 last week.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.10% to 94.90, not far from last Friday's more than 11-year highs of 95.77.
EUR/USD was almost unchanged at 1.1320 after Eurostat reported that the annual rate of euro zone inflation fell by 0.6% in January, after a 0.2% slip in December. Economists had expected an annual decline of 0.5%.
Core inflation, which strips out volatile measures such as food and energy costs, rose 0.5% on a year-over-year basis, but was still well below the European Central Bank's target of close to, but just under 2%.
In a separate report, Eurostat said the euro zone’s unemployment rate ticked down to 11.4% in December from 11.5% the previous month, confounding expectations for the rate to remain unchanged.
Earlier Friday, official data showed that French consumer spending increased by 1.5% in December, exceeding expectations for a 0.2% rise, while a separate report showed that Spanish GDP rose 0.7% in the fourth quarter of 2014, above expectations for a 0.6% gain.
In Germany, retail sales gained 0.2% last month, official data showed, disappointing expectations for a 0.3% rise.
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Declines in RMB spot prices hint at downward pressure

The efforts of the People's Bank of China (PBOC) to stabilize the currency rates did not hinder the market from testing how low the renminbi can go during the last week of January.
The renminbi plummeted by nearly 2%–the maximum trading range permitted by regulators–during the Jan. 29 session after the PBOC set the daily reference price of the renminbi against the US dollar 0.0053 yuan (US$0.0008) lower to 6.1335 yuan (US$0.98).
It was the third nearly 2% drop during the four sessions of the week despite the PBOC's reference price showing a rise of 0.0049 yuan (US$0.0008) during that period.
The Chinese currency has shed 3.5% against the greenback in the spot market for the month as of Jan. 29 and saw a record 1.95% intra-session decline on Jan. 28.
Although the PBOC attempts to stabilize the price of the renminbi through the management of the daily mid-point price for the foreign exchange market, analysts said that the nearly 2% declines during recent sessions showed the bearish sentiment toward the Chinese currency.
They also said the concern that central banks around the world may decide to weaken their currencies after several countries unexpectedly introduced monetary easing measures.
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Forex Market: USD/CAD daily trading forecast

Yesterday’s trade saw USD/CAD within the range of 1.2507-1.2678. The daily high has also been the highest level since March 18th 2009, when a high of 1.2755 was recorded. The pair closed at 1.2617, gaining 0.64% on a daily basis.
At 9:20 GMT today USD/CAD was up 0.28% for the day to trade at 1.2652. The pair broke the first key weekly resistance level and touched a daily high at 1.2663 at 9:05 GMT.

Fundamentals

United States

Gross Domestic Product – preliminary estimate The preliminary estimate of the US Gross Domestic Product probably pointed to an annualized rate of growth of 3.3% in the fourth quarter of the year. The final GDP estimate for Q3, reported on December 23rd, pointed to an annual growth of 5.0%. The latter has been the highest growth rate since Q3 2003, which reflected an upturn in consumer spending and investment. Real personal consumption expenditures rose 3.2% in the third quarter, compared to a 2.5% increase in Q2. Real non-residential fixed investment increased 8.9% in Q3, following an increase of 9.7% in the second quarter. Real exports of goods and services were up 4.5% in the third quarter, compared to an increase of 11.1% in Q2, while real federal government consumption expenditures and gross investment expanded 9.9%, after a decrease of 0.9% in the second quarter, according to data by the US Department of Commerce.
In quarterly terms, US economy probably expanded 1.0% in Q4, following a final growth rate of 1.4% in Q3, which was reported on December 23rd.
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Stock Market News for January 29, 2015 - Market News

Benchmarks eroded initial gains to end in the red as another decline in oil prices offset the positive impact of Apple's record earnings results and the Fed's encouraging view on economy and labor market. After concluding its two-day meeting on Wednesday, the Federal Open Market Committee (FOMC) provided a positive picture regarding economic growth and labor market, and also maintained it would remain "patient" before hiking interest rate.

For a look at the issues currently facing the markets, make sure to read today's  Ahead of Wall Street  article

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Tel Aviv Stock Exchange Weekly Review: 25-29 January 2015

Trading on the Tel Aviv Stock Exchange (TASE) during the last week of January was characterized by a mix trend in all the leading share indices; TA-Oil and gas Index made notable increase of 6.0%; Trading commences in derivatives on the TA-100 Index

TEL AVIV, Israel, January 29, 2015 /PRNewswire/ --

TA-25  

The TA-25 index decreased 0.5% over the week and decreased 1.2% since the beginning of the year, after an increase of 10.2% for the whole of 2014.

     (Logo: http://photos.prnewswire.com/prnh/20130117/588933 )

TA-100  

The TA-100 index decreased 0.1% over the week and decreased 1.5% since the beginning of the year, after an increase of 6.7% for the whole of 2014.

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Forex - UK Preview: due 2 Feb, 09:30GMT - Jan manufacturing PMI survey

We look for a small increase in the manufacturing PMI survey to 53 in January following its fall to 52.5 in December. This will keep the survey far below the levels seen in January last year and is also weaker than the last year's average of 54.8. Weaker economic activity abroad is certainly having a negative impact on the sector and Markit stated with the December survey 'that the main weak spot remains exports, with overseas new order inflows stagnating amid weaker economic growth in key markets and the ongoing lethargy of the euro area'. Domestic demand is however still faring rather well and it is also positive to see employment continue to edge higher.

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FOREX: Cyprus firms lose €43m, Saxo Bank sheds $107m

Demetra Kaloyirou, Chairman of the Cyprus Securities and Exchange Commission that regulates more than 180 investment firms and fund managers, said that 24 companies had lost an accumulated 42.5 mln euros from their client trading accounts.
She added that of the vast majority, or 158 approved investment firms, have not been affected.
“The remaining CIFs said that they experienced some losses, which either do not affect their capital adequacy or are insignificant,” she said.
“The affected investment firms maintain equity and capital adequacy ratio above the minimum limit, set by the law, which is 9%”, Kaloyirou noted.
Meanwhile, Denmark’s retail forex broker Saxo Bank, that also has a Cyprus presence, reports that due mainly to negative client balances on which it may not be able to collect, the bank may be forced to take a loss of up to DKK 700 mln, or about $107 mln. However, even if no collections take place and it takes the maximum possible loss, it will remain capitalised well in excess of regulatory requirements. 

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