UPDATE 2-Lebanon launches IMF talks to rescue economy

(Adds analyst quotes)

BEIRUT, May 13 (Reuters) – Lebanon began talks with the International Monetary Fund on Wednesday, aiming to secure some $10 billion of badly needed aid to help the country out of the worst financial crisis in its history.

Tough negotiations lie ahead for Lebanon, which will be expected to enact economic reforms its sectarian leaders have long avoided if Beirut hopes to secure international aid, analysts say.

With Lebanon in a coronavirus lockdown, the first round of talks began via videoconferencing.

“We are comfortable with the atmosphere of these initial discussions, and we expect that the upcoming discussions will be equally constructive,” Finance Minister Ghazi Wazni said in a statement.

Beirut officially asked for IMF assistance earlier this month, in what Prime Minister Hassan Diab called a “historic moment” for a country facing the biggest threat to its stability since the 1975-90 civil war.

The talks will be based on a government rescue plan which maps out tens of billions of losses in the financial system.

An international support group including the United States and France said in a statement the decision to request an IMF programme was “a first step in the right direction”.

Domestic political support was “necessary for successful conduct and rapid completion of negotiations with the IMF”, the support group noted, hinting at the need for consensus among Lebanon’s fractious politicians.

Foreign donors, which have helped Lebanon in the past, say they will not think about giving any fresh aid before the state enacts reforms to address rampant corruption and waste – root causes of Lebanon’s economic problems.

“Whilst there are no quick and easy fixes to economic reconciliation given that there will inevitably be losers in a likely fraught reform process, the crisis has become so complex that the need for sweeping action is now,” said Ehsan Khoman, head of MENA research and strategy at MUFG.

None of Lebanon’s main parties are opposed to going to the IMF, widely seen as the only way for the country to secure support. However some groups, including the powerful, Iran-backed Shi’ite group Hezbollah, have warned against conditions that would violate the country’s sovereignty.

Lebanon descended into crisis late last year as capital inflows dried up and protests erupted against the ruling elite over decades of bad governance and corruption.

The crisis has more than halved the value of the local currency and fuelled unrest, as inflation, unemployment and poverty soar.

Cash-strapped banks have largely frozen depositors out of their savings for months as dollars have grown ever more scarce.

After defaulting on its sovereign debts in March, Lebanon hopes an IMF programme will help in talks with its creditors.

Some economists see the plan as a good first step but remain sceptical about Lebanon’s ability to enact reforms to cut public sector spending and overhaul the banking sector after years of dragging its feet and political wrangling.

“We are certainly nowhere near out of the woods yet, but a coherent, credible and coordinated IMF rescue package will, over time, reassure investors that Lebanon is on a more sustainable footing,” said Khoman.

The plan has also faced strong pushback from banks that are projected to sustain losses of some $83 billion. The banks, major lenders to the government for decades, are working on their own plan that seeks to keep some of their capital.

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JPMorgan sees more Gulf companies linking up but no liquidity crunch

DUBAI, May 13 (Reuters) – JPMorgan expects more consolidation among Gulf companies this year in sectors such as banking, real estate and hospitality, but it sees no liquidity crunch in the region, despite the twin blow of the new coronavirus and low oil prices.

“We are going to continue to see consolidation themes building up on what we have witnessed in the previous years. I expect banking consolidation to continue its way through and to spill over in sectors such as real estate and hospitality,” said Karim Tannir, head of investment banking for the Middle East and North Africa and co-head of MENA at JPMorgan.

The economic downturn in the Middle East is expected to be worse than the 2008/09 financial crisis and the 2014/15 oil price crash, the International Monetary Fund has said.

But Tannir said the region had entered 2020 with strong finances and, after an initial phase of assessing liquidity needs, companies and governments are now looking more strategically at potential opportunities.

“Unlike the 2008-2009 global financial crisis, we have gone into the current crisis with the corporates, the financial institutions and the government having more liquidity and stronger balance sheets, in a very low interest rate environment that has been low for a while,” he said.

“Now that we have started moving out of assessing the operational impact, and the industrial impact of COVID 19, businesses are starting to have a clear view of their liquidity needs. The debate now will probably shift towards what strategic moves you can make and how to do that in the region.”

JPMorgan was one of the top advisors of Saudi oil giant Aramco for its record-breaking initial public offering last year. This year, it has worked with the governments of Saudi Arabia, Qatar, Abu Dhabi, and Bahrain on over $30 billion in international bond issues.

Governments and companies in the Gulf are expected to borrow heavily this year to offset the impact of low oil prices. Abu Dhabi’s state fund Mubadala raised $4 billion in bonds this week.

“I cannot say if this year will be record year in terms of debt issuance from the region, but it’s going to be intense,” Tannir said. (Reporting by Davide Barbuscia and Saeed Azhar; editing by Larry King)

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Bombardier sees Q1 earnings plummet after coronavirus pandemic shutters factories

Bombardier Inc. took a major earnings hit last quarter — with more losses to come — as fallout from the COVID-19 pandemic blocked aircraft deliveries and shut down operations across dozens of plants.

The company, which keeps its books in U.S. dollars, reported a $200 million loss in its first quarter and burned through $1.6 billion in cash as borders and factories closed in March when all non-essential work ground to a halt.

Though plants are gradually ramping up again, the plane-and-train maker expects business activity to hit a low point in the second quarter before mounting a slow comeback in the second half of the year.

“At a certain point, all our facilities were closed,” said chief executive Eric Martel on his first conference call as head of the company.

“We saw a significant impact in Q1, with more to come in Q2, as a large part of our operations have been shut down for the past eight weeks.”

Meanwhile travel restrictions meant that “we got caught with a whole bunch of airplanes that logistically we just couldn’t deliver,” said chief financial officer John Di Bert.

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Bombardier expects delivery of business jets to drop between 25 and 35 per cent this year. The second quarter alone could see another $1.6 billion in cash burn, Martel said.

Helping to offset the losses are the expected completion of a pair of divestitures amounting to more than $1 billion.

The US$550-million sale of Bombardier’s CRJ jet program to Mitsubishi is expected by June 1, Martel said. The US$500-million sale of its aerostructures business in Belfast and Morocco to Spirit Aerosystems — initially anticipated in the first half of 2020 — should close “in the coming months.”

It has become a penny stock with junk-status credit ratings as it slims down to a single revenue stream — private planes — just as the economy plunges into a downturn.

“We have a very, very solid backlog in the (Global) 7500 and we don’t see that moving a lot,” Martel said. The market for the smaller Learjet and Challenger airplanes, however, looks “a little bit more volatile,” he said.

Bombardier shuttered operations and sent 12,400 employees _ 70 per cent of its Canadian workforce _ on unpaid leave on March 24 as non-essential services ground to a halt across the country. About 11,000 furloughed staff _ 9,000 of them in Quebec _ will return to work over the next few weeks, benefiting from the federal wage subsidy that funds 75 per cent of an employee’s pay up to a maximum of $847.

For the first quarter, Bombardier lost 11 cents per diluted share compared with a profit of $239 million or eight cents per share a year ago.

Revenue totalled $3.69 billion in the three-month period ended March 31, up from nearly $3.52 billion in the first quarter of 2019.

On an adjusted basis, Bombardier says it lost $169 million or 10 cents per share in the first quarter compared with an adjusted loss of $122 million or seven cents per share a year earlier.

Analysts on average had expected an adjusted loss of seven cents per share for the quarter, according to financial markets data firm Refinitiv.

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UPDATE 2-Norway central bank cuts rates to zero to soften coronavirus impact

* Norges Bank cuts to record low

* Third rate cut in less than two months

* Expects rates to stay at zero for several years

* Crown currency weakens against euro (Adds background)

By Terje Solsvik and Victoria Klesty

OSLO, May 7 (Reuters) – Norway’s central bank has cut its key interest rate to a record-low zero percent from 0.25%, it said on Thursday in a surprise move, seeking to cushion an economy reeling from the COVID-19 pandemic.

Most economists polled by Reuters had predicted rates would stay on hold.

It was Norges Bank’s third rate cut in less than two months, slashing the cost of borrowing from 1.5%, and rates are likely to stay at zero for the next several years, its forecasts showed.

“We do not envisage making further policy rate cuts,” Governor Oeystein Olsen said in a statement.

Norges Bank now predicts the mainland economy, which excludes oil and gas output, will contract by 5.2% in 2020, down from a March 13 forecast of 0.4% growth. It expects growth of 3.0% in 2021, up from 1.3% seen earlier.

The crown currency, which has weakened from the twin impacts of the novel coronavirus and a crash in oil prices, fell to trade against the euro at 11.14 at 0811 GMT, down from 11.07 just before the 0800 GMT rate announcement.

“This decision comes unexpected, and is not in line with consensus,” Nordea Markets said in a note to clients.

RECORD LOW

Until March, Norway’s key policy rate had never been lower than 0.5%, the level which it stood at from 2016 to 2018.

“So it was one more cut, we are down to a nil key policy rate! At the same time Norges Bank is clear that the effective lower limit for the rate is reached,” said Kjersti Haugland, chief economist at DNB, Norway’s largest bank.

“The probability of a negative rate in Norway is thus significantly reduced,” she said.

The government has invoked emergency powers to restrict travel and shut many public and private institutions, although steps are now taken to gradually open up society.

April unemployment surged to more than 15%, the highest level on record, amid mass layoffs by corporations, data from Norway’s Labour and Welfare Agency (NAV) show.

The government has offered business loans, tax deferments and spending worth 360 billion crowns ($35 billion), while the central bank pumped money into the financial industry and said it may intervene in the currency market.

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COVID-19 pandemic hammers job market, but there are ‘opportunities,’ say analysts

In the worst employment market in decades, job hunters need to prepare for what will inevitably be a video interview, say employers and job market experts who suggest there are opportunities out there.

Statistics Canada reported more than one million Canadians lost their jobs at the onset of the COVID-19 crisis in March, which is eight times worse than the previous one-month record during the financial meltdown in January 2009.

Statistics Canada says the unemployment rate jumped 2.2 percentage points to 7.8 per cent in March, the highest since October 2010. April’s unemployment numbers are due within days.

But it’s not all doom and gloom, says Jessica Hodgson, human resources director at Later, a visual marketing platform in Vancouver with more than two million users.

“There are jobs to be had,” she said in a telephone interview.

“The tech sector for sure is well positioned to handle this. There are also industries where they’re looking for more people. Anybody that’s involved in shipping, logistics, supply chain manufacturing, those people are still operating and still expect to be operational.”

Hodgson acknowledged the struggles of many companies. She said her company had 1,500 job applications in March for about 15 openings, but that number increased to 3,500 in April.

Hodgson said after conducting numerous video job interviews on Zoom with potential candidates she’s come up with a preparation sheet. Many companies, including Later, are working remotely, she said, adding that conducting meetings and interviews online will not end with the pandemic.

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Hodgson said her top tips for a successful Zoom job interview include letting the people where you live know that you will be on an important call to prevent distractions; turning off other devices that use a wireless network to minimize the chances of a choppy signal; and trying to schedule interviews in the morning because Wi-Fi signals are stronger earlier in the day.

Jason Kipps, managing director of employer-branding firm Universum Canada, said his most recent data shows almost 50 per cent of companies are reporting decreases in hiring due to COVID-19, but the door on new employees has not slammed shut.

Almost 70 per cent of companies offered potential new employees deferred start dates rather than rescinding jobs offers as was the practice during the 2008 global financial crisis.

“What we’re not seeing is a lot of those companies saying, ‘We’re not going to be hiring after all,’ ” Kipps said in a telephone interview from Orangeville, Ont.

He said companies that are hiring and will be hiring soon are looking for people who can thrive in various conditions and can quickly adapt to a virtual team environment.

“I think about candidates succeeding in this market and it’s those candidates who are able to demonstrate their self-management skills,” said Kipps.

Companies that demonstrate loyalty and empathy to employees during the pandemic stand better chances of strong returns to the market once the turmoil subsides, he said.

“That’s what employees are going to remember through this is how they were treated throughout this whole crisis.”

Catherine Holt, chief executive officer at the Greater Victoria Chamber of Commerce, said the pandemic has decimated the city’s tourism and hospitality sectors, but she’s surprised at the number of available jobs being posted by employers.

“I’ve been saying it’s a strange experience where it’s almost like two parallel economies going on side by side,” she said in a telephone interview. “We’ve had about 200 jobs posted just since the distancing measures and the direction from the province to work from home. It’s a fascinating array of jobs.”

Holt said there are postings for obvious jobs at grocery stores, pharmacies, seniors’ homes and for health services, but employers are also looking for cooks, trucker drivers, mechanics, cleaners and sales people in electronics, building and garden supplies.

“I don’t think it’s top of mind when everyone’s hearing so much about the layoffs,” she said.

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Turkish lira down 0.8% after latest curbs on FX market

ISTANBUL, May 6 (Reuters) – Turkey’s lira slipped 0.8% and was among the weakest emerging-market currencies on Wednesday after a financial regulator clamped down further on foreign investors’ access to local currency liquidity.

The lira was at 7.122 against dollar at 0732 GMT, compared to 7.065 the day before. It slipped for a fifth straight session ahead of a planned conference call later on Wednesday between Finance Minister Berat Albayrak and investors.

Late on Tuesday, the BDDK banking watchdog said it will limit banks’ Turkish currency placements, depo, repo transactions and loans with foreign financial institutions to 0.5% of their legal capital.

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UPDATE 1-German industrial orders slide to record low as virus hits

(Adds details from economy ministry, economist)

BERLIN, May 6 (Reuters) – Orders for German industrial goods collapsed in March to their lowest level since records began in 1991, data showed on Wednesday, as the coronavirus slashed domestic and foreign demand for goods from Europe’s biggest economy.

Statistics Office figures showed a 15.6% dive in orders for Made in Germany goods, far worse than a Reuters poll of analysts for a 10.0% fall.

Germany is braced for its deepest recession since World War Two, the economy minister has warned as a lockdown has shuttered shops, businesses and factories, although a gradual easing of restrictions has started.

The economy ministry blamed the dramatic fall in orders on the global economic shock of the coronavirus and the steps taken to slow down its spread.

“It is to be expected that production will decline sharply from March onwards due to corona,” the ministry said in a statement.

Domestic contracts slumped by 14.8% and orders from abroad were down by 16.1%, a huge blow for an export-oriented economy.

“The significance of the figures on incoming orders can hardly be topped,” said Thomas Gitzel, Chief Economist at VP Bank Group, adding the scale of the decline does not bode well.

“They show how strong the effects of the corona crisis will still be on manufacturing industry … Even during the financial market crisis, orders did not collapse as sharply,” he said.

Demand for capital goods was hit particularly hard, down 22.6%, the data showed. (Reporting by Madeline Chambers Editing by Riham Alkousaa and Paul Carrel)

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Occidental posts loss on $1.4 bln charges, cuts budget again

May 5 (Reuters) – Troubled oil producer Occidental Petroleum Corp posted a loss in the first quarter on Tuesday, hit by $1.4 billion in impairment charges, and cut its budget for the third time since March as oil prices crashed to historic lows.

It reported a net loss of $2.23 billion, or $2.49 per share, for the quarter ended March 31, compared with a profit of $631 million, or 84 cents per share, in the year-ago period.

The company cut its capital budget for the year to between $2.4 billion and $2.6 billion after earlier downsizing it to between $2.7 billion and $2.9 billion, nearly half the original forecast. (Reporting by Shariq Khan in Bengaluru; Editing by Arun KoyyurEditing by Arun Koyyur)

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UPDATE 1-Brazil's Itau Unibanco profit dives as loan defaults loom

(Adds return on equity, loan book)

By Carolina Mandl

SAO PAULO, May 4 (Reuters) – Brazil’s largest lender, Itau Unibanco Holding SA, posted weaker-than-expected quarterly earnings on Monday after setting aside 10.1 billion reais ($1.82 billion) in reserves in anticipation of a potential wave of coronavirus-led loan defaults.

Itau Unibanco’s first-quarter recurring net income, which excludes one-off items, fell 43.1% from a year earlier to 3.912 billion reais ($706 million), and below an estimate by Refinitiv of 6.242 billion reais ($1.13 billion).

The Sao Paulo-based bank’s loan-loss provisions almost tripled from a year earlier, according to a securities filing.

The bank’s management said in a statement that the outlook for both companies and consumers had deteriorated since mid-March, when the coronavirus outbreak started gaining momentum in Brazil.

Profit was also hit by lower trading gains and hedging, which came in down 38.9% year-on-year, at 760 million reais.

Itau’s return on equity fell to 12.8%, its lowest in at least the past five years. While Itau is normally the top ranked among Brazilian lenders according to the measure of profitability, it fell behind Santander Brasil in the latest quarter, as its rival decided to set aside less money for expected loan losses.

Itau’s core capital ratio also dropped to 10.3% from 13.2% in the previous quarter.

Its loan book was mainly boosted by corporate loans in the first quarter, as big companies have sought credit to strengthen their cash positions to help weather impacts stemming from the coronavirus pandemic.

The lender’s loan book grew by 8.9% from December, but excluding exchange rate fluctuation, it went up 2.7% in the quarter.

Its 90-day loan default rate was roughly stable at 3.1% in the first quarter.

In a move to help consumers and small companies cope with the coronavirus crisis, Itau is allowing clients to defer debt payments for up to six years.

Chief Executive Candido Bracher will discuss the bank’s outlook on Tuesday morning in calls with analysts and journalists.

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CANADA FX DEBT-Canadian dollar recovers from 11-day low as oil rallies

 (Adds dealer quotes and details throughout; updates prices)
    * Canadian dollar trades near flat against the greenback
    * Loonie hits an 11-day low intraday at 1.4151
    * Price of U.S. oil increases 7.7%
    * Canadian bond yields trade mixed across a steeper curve

    By Fergal Smith
    TORONTO, May 4 (Reuters) - The Canadian dollar was little
changed against its broadly stronger U.S. counterpart on Monday,
with the loonie rebounding from an earlier 11-day low as oil
rallied.    
     The U.S. dollar        was bolstered by safe-haven flows as
risk appetite waned amid fears that last year's U.S.-China
dispute will be reignited, this time over the novel coronavirus.
            
    "Despite a stronger U.S. dollar today versus most major
currencies, the Canadian dollar stands out as the exception,"
said Michael Goshko, corporate risk manager at Western Union
Business Solutions. "The currency is being helped by oil's
recent strength."    
    U.S. crude oil futures        gained 7.7% to $21.30 a barrel
as more countries announced they would begin easing coronavirus
lockdowns and as crude supply cuts by the world's top producing
nations and companies take hold.             
    The major Canadian province of Quebec, worst hit by the
coronavirus, gradually began reopening its economy on Monday but
pushed back plans for a restart in the city of Montreal, citing
health concerns.              
    The Canadian dollar        was trading nearly unchanged at
1.4087 to the greenback, or 70.99 U.S. cents. The currency
touched its weakest intraday level since April 23 at 1.4151.
    Canada's central bank will do its part to help bridge the
economy through the coronavirus outbreak while standing ready to
adjust its asset purchases to support a lasting recovery, Bank
of Canada Senior Deputy Governor Carolyn Wilkins said.
             
    Wilkins was widely seen as the front-runner to become the
next governor of the central bank but lost out to Tiff Macklem,
a former senior deputy governor, when the appointment was
announced on Friday.                 
    Canadian government bond yields were mixed across a steeper
yield curve on Monday, with the 10-year             up 4.9 basis
points at 0.574%.
    Canada's trade report for March is due on Tuesday, while the
April employment report is due on Friday.

 (Reporting by Fergal Smith
Editing by Nick Zieminski and Jonathan Oatis)
  

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