Bank of Russia Cuts Interest Rates

Strong Dollar Forces Factories to Lose Flab

Volkswagen Strains to Keep Foot on the Gas

By William Boston

Updated Dec. 10, 2014 9:50 p.m. ET

WOLFSBURG, Germany—Seven years into a decadelong push to outsell rivals Toyota Motor Corp. and General Motors Co. , Volkswagen AG Chief Executive Martin Winterkorn appeared to be in the passing lane.

Volkswagen, after all, is on track to sell more than 10 million cars and trucks in 2014—four years ahead of plan. It overtook GM last year and could soon eclipse Toyota to claim the industry’s top spot.

But on Tuesday, Mr. Winterkorn surprised investors by announcing he would step down as CEO of the VW brand, the company’s namesake marque which has suffered dwindling sales in most markets as well as weak overall profits. He will retain his position as group CEO. His replacement at the VW unit, a top executive from German rival BMW AG , Herbert Diess, will come aboard in October.

Read More:http://www.wsj.com/articles/volkswagen-strains-to-keep-foot-on-gas-1418259788

Russia Moves to Help Lift Sinking Ruble

By Nicole Hong in New York, Andrey Ostroukh in Moscow and Chiara Albanese in London
Dec. 15, 2014 7:38 p.m. ET

A spiraling currency crisis, fueled by the bite of Western sanctions and the plummeting price of oil, spurred Russia’s central bank to raise interest rates late Monday, a drastic move aimed at shoring up the collapsing ruble.

The surprise action came at the end of a turbulent day for global financial markets. Currencies and stock markets from several developing nations were buffeted by the deepening oil-price slump and worries about future interest-rate increases in the U.S.

The epicenter of the troubles was Russia, where the ruble plunged to a record low in its biggest one-day decline since 1999.

The ruble’s fall, described by analysts as “staggering” and “extreme,” prompted Russia’s central bank to hike a key interest rate by 6.5 percentage points, to 17%, after New York’s trading day had ended. One dollar now buys more than 65 rubles, compared with 33 rubles at the start of the year.

Before Russia’s late move, U.S. stocks posted their fifth loss in six sessions, with the Dow industrials dropping 99.99 points, or 0.6%, to 17180.84. The selling was more intense in other markets, with Europe’s main index down 2.2%. Stock markets from Thailand to Mexico also dropped.

Analysts chalked up that bout of selling to growing anxiety about the impact on fragile developing economies of falling oil prices and the Federal Reserve’s looming policy shift. Many investors expect the Fed to signal at the end of its two-day meeting Wednesday that it is closer to raising interest rates than it has indicated in the past. That would deliver a hit to emerging markets that have benefited from years of easy-money policies by the U.S.

Russia’s central bank, which announced its decision after a late-night board meeting, said it increased rates because of devaluation and inflation threats. It also raised another key benchmark, known as the repurchase rate, to 18% from 11.5%. The moves risk pushing Russia closer to recession and are liable to be a blow to Russian consumers, who will face much higher rates to borrow the currency.Analysts chalked up that bout of selling to growing anxiety about the impact on fragile developing economies of falling oil prices and the Federal Reserve’s looming policy shift. Many investors expect the Fed to signal at the end of its two-day meeting Wednesday that it is closer to raising interest rates than it has indicated in the past. That would deliver a hit to emerging markets that have benefited from years of easy-money policies by the U.S.

Russia’s central bank, which announced its decision after a late-night board meeting, said it increased rates because of devaluation and inflation threats. It also raised another key benchmark, known as the repurchase rate, to 18% from 11.5%. The moves risk pushing Russia closer to recession and are liable to be a blow to Russian consumers, who will face much higher rates to borrow the currency.

Read More:http://www.wsj.com/articles/russia-moves-to-help-lift-sinking-ruble-1418690337

India Aims to Shed Its ‘Fragile’ Label

By Nicole Hong and Shefali Anand
Dec. 1, 2014 3:36 p.m. ET

When India’s newly elected prime minister visited New York in September, almost 20,000 people showed up to see Narendra Modi speak at Madison Square Garden, about the same number who turned out to see Billy Joel earlier that month.

Investors around the world are giving Mr. Modi, and India, the rock star treatment.

Money managers have poured $16.5 billion into Indian stocks this year, the most of any developing country tracked by the Institute of International Finance. India’s S&P BSE Sensex has soared 35% this year, closing at a record 54 times in 2014.

Investors are betting that Mr. Modi, elected in a landslide in May, will introduce policies to jump-start India’s economy, boosting profits at companies ranging from banks to cement makers. It is a sharp reversal in sentiment for a country that had been in its worst slowdown since the 1980s. Just last year, Morgan Stanley labeled India one of the “fragile five” emerging economies most at risk from slowing growth and ballooning deficits.

India’s changing fortunes illustrate how investors are eager to pile into countries that promise to unlock faster growth, at a time when most developing markets are slowing and wealthy economies are sluggish. The payoffs would be huge. India is the world’s 10th-biggest economy, but its performance has often lagged behind other emerging markets due to the country’s unwieldy bureaucracy and poor infrastructure.

Economists predict India will expand at a faster rate this year, the only one of the BRIC countries—which include Brazil, Russia and China—expected to accelerate. The International Monetary Fund expects growth in India to reach 6.4% next year, from 5.6% this year. For money managers who have to invest billions on behalf of large institutions, India may be one of the last developing economies of its size that can offer steady, highflying returns.

“The potential of India, which had been suppressed for so long, could finally…be unlocked,” said Rasmus Nemmoe, a portfolio manager at LGM Investments, which oversees $2.8 billion. He has bought Indian stocks over the past year, and they now make up 25% of his emerging-markets portfolio
However, the success or failure of this big India bet will ride on whether Mr. Modi can overcome decades of steeped bureaucracy in the country. Data released last week showed India’s economic growth slowed in the third quarter, raising concerns about how quickly Mr. Modi can implement politically tough overhauls. So much money has crowded into India’s stock market that any disappointment or unforeseen event could push it into a downward spiral.

Some analysts said Mr. Modi could struggle to push through politically unpopular overhauls. In the next few weeks, lawmakers are expected to take up a bill toward establishing a national tax for goods and services. But the government faces hurdles in winning over states run by political parties that oppose the plan.

“Expectations have been quite high for reform in India, but some of the hard data doesn’t really tally up,” said Shilan Shah, India economist for research firm Capital Economics, pointing to the lack of improvement in the country’s industrial production and export growth since Mr. Modi took office. “Some progress has been made…but it’s been a little bit underwhelming given [Mr. Modi’s] mandate.”

Read More:http://www.wsj.com/articles/india-aims-to-shed-its-fragile-label-1417466212?mod=trending_now_5

Russia Plans Emergency Fund for Companies Hurt by Ukraine Sanctions

By Alexander Kolyandr and Andrey Ostroukh
Updated Sept. 15, 2014 4:08 p.m. ET


MOSCOW—Russia said it would create a multibillion-dollar emergency fund for companies hurt by Western sanctions imposed over the Ukraine crisis—a sign that the country is girding for a long period of economic isolation.

The creation of the bailout fund, which will last at least through next year, comes amid increasingly frank admissions that, despite initial bravado about sanctions strengthening the nation and its domestic producers, Russia’s economy is starting to hurt.

The Russian ruble fell to a record low of 38.5 against the dollar Monday before recovering slightly, as gloom deepened after Friday’s new round of Western sanctions took effect, spurring fears of Russian retaliation.

Finance Minister Anton Siluanov said Monday that the government could divert at least 100 billion rubles ($2.65 billion), initially destined for pensions, to support companies facing sanctions-related financial troubles.

The economic impact is spreading far beyond the targeted companies and individuals, however. Companies are running short of capital, investors are pumping cash out of the country and consumers are reining in spending.

“The impact from already-imposed sanctions, including limiting access to foreign financial markets for Russian companies, will have a prolonged effect,” the central bank said in its annual monetary policy strategy document, released Friday.

The U.S. and European Union sanctions imposed so far have been relatively narrowly targeted. They include financing limits on some major banks and energy companies, restrictions on technology transfers in the defense and oil industries, as well as asset freezes and travel bans on dozens of top officials and tycoons.

But officials and industry executives say they’ve had a much broader indirect effect, dragging on a Russian economy that was already stalling before the Ukraine crisis exploded early this year.

“The Russian economy was practically stagnating before the sanctions and their effect could be nearly as disastrous as that of the 1998 default, with low investment, restricted imports of technology and high inflation,” said one senior official at a state-run financial institution. “Eventually, the Russian economy will be able to raise financing in Asia, but this can’t happen immediately.”

The central bank warned that growth is expected to continue slowing this year amid sanctions and “continued uncertainty,” falling to near-recession levels. The economy will grow no more than 0.5% this year, according to official forecasts, its weakest performance since 2009.

The Economy Ministry last month slashed its growth forecasts for the next two years to 1% in 2015 and 2.5% in 2016.

The ruble has been the most visible symbol of the economic damage. In an effort to stem the decline, the central bank has raised interest rates sharply this year and indicated they might go even higher if currency and inflation pressures persist.

(Read More:http://online.wsj.com/articles/russia-plans-emergency-fund-for-companies-hurt-by-ukraine-sanctions-1410802572)

As Yen Slides, Investors Shun Other Asian Currencies

By Anjani Trivedi
Nov. 19, 2014 12:18 p.m. ET

Investors are shedding holdings of Korean won, Singapore dollars and other Asian currencies, in a bet the yen’s fall against the dollar will reverberate through the region’s foreign-exchange markets.

The yen has dropped 4.8% against the dollar since the Bank of Japan surprised markets by introducing new monetary-stimulus measures on Oct. 31.

Investors are wagering that central banks from South Korea to Thailand will allow their currencies to weaken to stay competitive.

Companies and government officials across Asia fear a weak yen will allow Japanese exporters to grab market share. The yen’s decline could also push Japanese companies to invest at home instead of overseas, where their money won’t go as far.

One of the biggest casualties of the yen’s fall has been the South Korean won, which has dropped 3.7% since Oct. 31. Korean companies compete with Japanese firms in the automobile and technology sectors, among other areas, and would be hurt by cheaper exports from rivals.

“The magnitude of the move in the yen is staggering…. We do expect the yen to have an impact on Asian currencies,” said Rajeev Demello, head of Asian fixed income at Schroders Investment Management, which has $447.7 billion of assets under management.

Mr. Demello has reduced his fund’s positions in South Korean bonds and is cautious on Singapore.

Some economists say Asian currencies form a “yen bloc,” in which they rise and fall against the dollar in similar fashion to the yen due to strong trade and investment ties between different countries and Japan. A quarter of Japanese foreign direct investment went into Asia in the first half of this year, totaling $14.8 billion, according to data from the Japan External Trade Organization.

Read More:http://online.wsj.com/articles/as-yen-slides-investors-shun-other-asian-currencies-1416417517

As Ruble Slides, Russians Go Shopping to Beat Coming Price Hikes

By Alexander Kolyandr and Gregory L. White
Nov. 12, 2014 4:26 p.m. ET

MOSCOW—The ruble is down more than 30% against the dollar and the Russian economy is headed for stagnation at best, according to official forecasts. What are many Russians doing? Going shopping.

“For me, the currency crisis yielded a new Brompton £100 ($160) cheaper than in Britain,” said Peter Favorov, a magazine editor in Moscow, referring to a British-made folding bicycle that costs about £1,000 in the U.K.

The bikes are more sold in Moscow for rubles, but as on many goods, prices haven’t yet adjusted to the sharp drop in the ruble. So many Russians are looking to make major purchases now, before the ruble drops further or prices are raised to reflect the devaluation.

“People are getting rid of their cash and buying holiday gifts early,” said Lyudmilla Semushkina, spokeswoman for Inventive Retail Group, which runs about 270 stores around Russia for foreign brands such as Apple , Sony and Lego.

“People have started coming to our electronics stores with the clear intention of buying,” she said. When they get to the stores, they spend more—buying 55-inch TVs and the latest high-definition models, she said.

Floor traffic in shopping malls across Russia picked up as the ruble plumbed record lows—touching 48 per dollar, down from 31 at the start of the year. Watcom, a consultancy that tracks traffic data from around the country, says the pickup began in September, earlier than in past years, and has been relatively steady.

Retailers say the miniboom seems to be especially strong in big cities like Moscow and St. Petersburg, where consumers are wealthier. In Yekaterinburg, the Ural Mountain industrial center, the City Center mall on Lenin Avenue says sales are down about 50% from last year.

Car sales were down 9.9% last month, according to data released Wednesday, but that was the smallest decline in months. In part, that was due to a government-subsidy program for replacing old cars that took effect Sept. 1, according to the Association of European Business, which collects the figures.

Still, the group said the drop in the ruble played a role as well, and that the momentum has carried into November.

(Read More:http://online.wsj.com/articles/as-ruble-slides-russians-go-shopping-to-beat-coming-price-hikes-1415827561?KEYWORDS=russians)

Iraq’s Kurds Nickname Cars the Obama, Eyebrow and Monica (as in Lewinsky)

By Ben Kesling,
Nov. 10, 2014 8:48 p.m. ET

ERBIL, Iraq—When drivers here in Iraqi Kurdistan go car shopping, they face a tough choice: whether to get a hardy vehicle for rough roads or a sleek sedan for the smooth main routes.

It can come down to a Wanawsha versus an Obama .

“That’s a Wanawsha,” said Birwa Kamal, a 20-year-old car salesman, pointing to a Toyota Land Cruiser on his lot.

Foreign cars have flooded into Iraq’s Kurdish north since Saddam Hussein ’s fall in 2003, thanks to free trade and economic gains. But the Kurds have trouble pronouncing some of the marques.

So they use nicknames that roll more easily off the local tongue. Wanawsha is the screen name of a famous Kurdish actress and singer who is generally thought classy, like the sometimes-swanky Toyota SUV.

“People don’t know what a Land Cruiser is,” Mr. Kamal said, “if you don’t use the One recent evening, Kurds flocked to dozens of car lots that jam together outside downtown Erbil, the region’s capital. Hundreds of men strolled, drinking sodas, smoking and eyeing the sea of new and used vehicles.

“Some people can’t pronounce the names, so we come up with beautiful names,” said Amanj Azad, 21, a car salesman from Erbil.

“Did you tell him about the Obama?” he asked friends standing with him.

The Obama, a popular sedan in Iraqi Kurdistan, is a car Americans know as the Chrysler 300. “When he became president, that car first came to the Kurdish region,” Mr. Azad said.

(Read More:http://online.wsj.com/articles/iraqs-kurds-nickname-cars-the-obama-eyebrow-and-monica-as-in-lewinsky-1415670496?KEYWORDS=Northern+iraq%27s+car)

Clouds Emerge Ahead of Trade-Bloc Party

By David Luhnow, William Mauldin and Paul Vieira
Feb. 18, 2014 7:47 p.m. ET

MEXICO CITY—Mexico and Canada are set to push for expanded trade within North America and a bigger global role for their continental trading bloc, even as some U.S. politicians show deep ambivalence over foreign engagements.

“The most important thing is to strengthen this project—that at least my government is very dedicated to—of making North America a great center of competitiveness,” Mexican President Enrique Peña Nieto, said in an interview late Monday. “And that this concept be fully shared by the three governments.”

The three countries’ leaders of will meet here Wednesday to celebrate 20 years of the North American Free Trade Agreement, but trade experts say the U.S. political appetite for more free-trade deals has waned, casting a shadow over efforts to expand the pact and deepen trade ties between North America and Pacific Rim countries.

The one-day meeting among Mr. Peña Nieto, Barack Obama and Canadian Prime Minister Stephen Harper —an annual event often dubbed the “Three Amigos Summit”—will explore ways to update Nafta and advance a wider agreement, the Trans-Pacific Partnership being negotiated with Pacific rim nations like Japan, Australia, Singapore, Chile, Peru, Vietnam and Malaysia.

Messrs. Peña Nieto and Harper pledged at a bilateral meeting on Tuesday to move ahead on stronger diplomatic and commercial relations, although the thorny issue of visa restrictions on Mexicans visiting Canada remained unresolved.

The Obama administration is seeking the full support of its closest trading partners to increase leverage with Japan and other countries where major disagreements are unresolved, said former officials.

Mr. Harper is also expected to press Mr. Obama on the proposed Keystone XL pipeline. The project, which would boost crude-oil exports from landlocked Alberta, has faced extensive delays in part because of worries over the project’s environmental impact.

Mr. Obama travels to Mexico amid lingering uncertainty over the weak U.S. economic recovery. The White House says increased trade—especially exports—brings high-paying jobs and economic growth without tax increases.

(Read More:http://online.wsj.com/articles/SB10001424052702304899704579391432455935104)