Consumer prices fell 0.1% in December, in line with expectations from economists
Inflation crisis poses greatest near-term global threat, Davos survey warns
China cuts deal with Taliban to extract oil in Afghanistan
The Taliban is cutting its first major energy extractions agreement since taking control of Afghanistan in 2021, agreeing to a 25-year pact with a Chinese company to drill for oil in the country’s Amu Darya basin.
“The Amu Darya oil contract is an important project between China and Afghanistan,” Wang Yu, the Chinese ambassador to Afghanistan, said at a press conference in Kabul, according to a BBC report last week.
The Taliban’s agreement is with China’s Xinjiang Central Asia Petroleum and Gas Company and is set for 25 years, while another Chinese state-owned company is also reportedly in talks with the Taliban to operate a copper mine in eastern Afghanistan.
Afghanistan sits on reserves of natural gas, copper and rare earth minerals estimated to be worth over $1 trillion, which remain untapped amid decades of war and turmoil in the country.
https://www.foxnews.com/world/china-cuts-deal-with-taliban-extract-oil-afghanistan
Goldman Sachs says it no longer expects a recession in euro zone in 2023
Goldman Sachs GS-N -0.59%decrease said on Tuesday it expects the euro zone economy to grow by 0.6 per cent this year, compared with its previous forecast of a contraction, thanks to a fall in natural gas prices and the reopening of China’s borders.
“We maintain our view that Euro area growth will be weak over the winter months given the energy crisis but no longer look for a technical recession,” Goldman Sachs economists led by Sven Jari Stehn said in a note.
The Wall Street bank had in November forecast a 0.1 per cent contraction for the region. A technical recession is typically defined as two consecutive quarters of contraction in gross domestic product (GDP).
Euro zone inflation is expected to be around 3.25 per cent at the end of 2023 compared with 4.50 per cent forecast earlier, the economists said.
In December, consumer price growth across euro zone slowed to 9.2 per cent from 10.1 per cent a month earlier, Eurostat data showed last week.
Core inflation for the region is also seen slowing to 3.3 per cent by the year-end as goods prices cool, but continued upward pressure is expected on services inflation due to rising labour costs, Goldman said.
Given the “sticky” nature of inflation, Goldman expects the European Central Bank to remain hawkish and deliver 50 basis points hikes in February and March before slowing to 25 bps for a terminal rate of 3.25 per cent in May.
For the U.K., Goldman sees a smaller contraction of 0.7 per cent in GDP, compared with an earlier expectation for it to shrink by 1 per cent, helped by lower wholesale gas prices.
As the U.K. labour market remains overheated, the U.S. bank sees another 100 bps worth of hikes by the Bank of England.
Microsoft reportedly in talks to invest US$10-billion in ChatGPT-owner OpenAI
Microsoft Corp MSFT-Q +0.88%increase is in talks to invest $10-billion in ChatGPT-owner OpenAI as part of funding that will value the firm at $29-billion, Semafor reported on Monday, citing people familiar with the matter.
The news underscores rising interest in the artificial intelligence company, whose chatbot has dazzled amateurs and industry experts with its ability to spit out haikus, debug code and answer questions while imitating human speech.
The funding could also include other venture firms and documents sent to prospective investors outlining its terms indicated a targeted close by the end of 2022, according to the report.
Microsoft declined to comment, while OpenAI did not immediately respond to Reuters requests for comment.
The software giant had in 2019 invested $1-billion in OpenAI, founded by Elon Musk and Sam Altman. Microsoft’s cloud services arm also provides the computing power needed by the AI firm.
Microsoft last year unveiled plans to integrate image-generation software from OpenAI into its search engine Bing. A recent report from the Information said similar plans were under way for ChatGPT as Microsoft looks to take on market leader Google Search.
According to Semafor, Microsoft will also get 75 per cent of OpenAI’s profits until it recoups its initial investment.
After hitting that threshold, Microsoft would have a 49 per cent stake in OpenAI, with other investors taking another 49 per cent and OpenAI’s non-profit parent getting 2 per cent, Semafor said.
Reuters reported last month a recent pitch by OpenAI to investors said the organization expects $200-million in revenue next year and $1-billion by 2024.
OpenAI charges developers licensing its technology about a penny or a little more to generate 20,000 words of text, and about 2 cents to create an image from a written prompt.
It spends about a few cents in computing power every time someone uses its chatbot, Altman recently said in tweet that has raised concerns about OpenAI’s cash burn.
A Wall Street Journal report said last week OpenAI was in talks to sell existing shares at a roughly $29-billion valuation in a tender offer that would attract investment of at least $300-million.
Payment Technology Company Nuvei Signs Deal Valued At US$1.3B To Buy Paya
The Canadian Press – Canadian Press – Mon Jan 9, 8:26AM CST
MONTREAL — Payment technology company Nuvei Corp. has signed a deal to buy U.S. company Paya Holdings Inc. valued at US$1.3 billion.
Under the agreement, Montreal-based Nuvei will pay US$9.75 per share in cash.
The purchase price is a 25 per cent premium to Paya’s closing price on Friday of US$7.79.
Atlanta-based Paya is a payment technology company with more than 100,000 customers and over 2,000 key distribution partners.
Nuvei chair and chief executive Philip Fayer says the deal will accelerate the company’s integrated payment strategy and diversify its business into key areas.
Nuvei expects to finance the deal with a combination of cash on hand, an existing credit facility and a new secured credit facility.
This report by The Canadian Press was first published Jan. 9, 2023.
Companies in this story: (TSX:NVEI)
Gold hits 8-month peak as bets of slower rate hikes dent dollar
Gold prices hit an eight-month high on Monday, as the dollar slipped on bets for slower U.S. interest rate hikes, while investors also cheered top bullion consumer China reopening its borders.
Spot gold rose 0.49% to $1,874.78 per ounce, its highest since May 9, 2022. U.S. gold futures gained 0.53% to $1,879.50.
The weaker dollar is likely the main factor lifting gold, and investors have also started slowly increasing their holdings in exchange-traded funds (ETFs), indicating positive sentiment in gold, UBS analyst Giovanni Staunovo said.
Making gold cheaper for overseas buyers, the dollar index eased 0.2%, still under pressure after recent U.S. data raised hopes for a slowdown in the pace of rate hikes by the Federal Reserve.
Elevated rates dampen interest in non-yielding gold, as they did for the majority of 2022.
“Data suggests that the Fed’s cumulative tightening in 2022 is starting to have its effects felt on the economy and that the Fed can afford to slow its pace of tightening,” said OCBC FX strategist Christopher Wong.
Traders will now assess Fed Chair Jerome Powell’s speech at a central bank conference in Stockholm on Tuesday and U.S. consumer price index data due later this week.
“We believe (gold) prices are trading at the upper end of a fundamentally justified range,” Julius Baer analyst Carsten Menke said in a note, adding that central bank buying had become a new focus area for the bullion market.
China held 64.64 million fine troy ounces of gold, as of end-December.
However, UBS’ Staunovo said while China’s reopening of its borders could support jewellery demand to some extent, the overall impact on gold market may be limited.
Oil jumps 3% on demand optimism as China borders reopen
Oil extended gains on Monday, rising about 3% after China’s move to reopen its borders boosted the outlook for fuel demand and overshadowed global recession concerns.
The rally was part of a wider boost for risk sentiment supported by both the reopening of the world’s biggest crude importer and hopes for less-aggressive increases to U.S. interest rates, with equities rising and the dollar weakening.
Brent crude was up $2.29, or 2.9%, at $80.86 a barrel by 1150 GMT while U.S. West Texas Intermediate crude rose $2.46, or 3.3%, to $76.23.
“If recession is avoided, global oil demand and demand growth will remain resilient,” said Tamas Varga of oil broker PVM, adding that developments in China were the main reason for Monday’s gains.
“The gradual reopening of the Chinese economy will provide an additional and immeasurable layer of price support,” he said.
The rally followed a drop last week of more than 8% for both oil benchmarks, their biggest weekly declines at the start of a year since 2016.
As part of a “new phase” in the fight against COVID-19, China opened its borders over the weekend for the first time in three years. Domestically, about 2 billion trips are expected during the Lunar New Year season, nearly double last year’s and 70% of 2019 levels, Beijing says.
In oil-specific developments, China issued a second batch of 2023 crude import quotas, according to sources and documents reviewed by Reuters, raising the total for this year by 20% from the same time last year.
Despite Monday’s oil rebound, there is still concern that the massive flow of Chinese travellers could cause another surge in COVID infections while broader economic concerns also linger.
Those concerns are reflected in oil’s market structure. Both the near-term Brent and U.S. crude contracts are trading at a discount to the next month, a structure known as contango, which typically indicates bearish sentiment.
European markets close higher as travel stocks get a boost; German inflation lower than expected
The pan-European Stoxx 600 closed up 1.2%, with almost all sectors in positive territory. Europe’s banking index rose 2.4% to lead gains, while oil and gas stocks bucked the trend to end the session down 0.7%.
Of the major bourses, the U.K.’s FTSE 100 closed up 1.4%, while Germany’s DAX index added 0.8% and France’s CAC 40 was up 0.4%.
Germany published lower-than-expected inflation figures for December, down to 9.6% year on year. They will be followed by inflation figures from France on Wednesday, Italy on Thursday, and a flash estimate for the whole euro area on Friday.
U.K. markets were closed Monday. Shares across the rest of the continent rose, as euro zone manufacturing data indicated that the worst may have passed for the 20-member currency bloc.
The figures offered hope of a light at the end of the tunnel, after a year beset by recession fears as central banks around the world hiked interest rates aggressively to rein in soaring inflation.
Meanwhile, markets in Asia-Pacific were mixed as investors weighed the short-term implications of the rise in coronavirus infections in China against the potential longer-term boost from the full reopening of the world’s second-largest economy.