Wednesday, January 29, 2014

US Fed cuts $10bn more from stimulus; As China slows, the pain emerges; Facebook revenue up 63%; India IT sector enters middle age



1 US Fed cuts $10bn more from stimulus (Dominic Rushe in The Guardian) The US Federal Reserve has instituted a further cut to its massive economic stimulus programme, in a move that rattled stock markets already worried by recent poor jobs figures. After a two-day meeting – the last to be headed by outgoing chairman Ben Bernanke – the Fed announced a $10bn cut to its $75bn-a-month bond-buying programme, known as quantitative easing (QE). The decision received the unanimous approval of the federal reserve open markets’ committee, the first time no one has dissented since June 2011.

The cut follows an earlier $10bn reduction to the programme in December. At this rate, the programme, which started in September 2012, could be over by the end of the year. The Fed also repeated its pledge to keep interest rates close to zero, where they have been since 2008. Shortly after the December’s decision the Labor Department released disappointing jobs growth figures, showing that the US had added just 74,000 new jobs in that month. In previous months, the department had posted rises of 200,000 and above.

Further bad economic news has rattled investors in recent weeks. The Fed committee met amid new concerns of financial crisis in Turkey, as well as signs of slowing growth in China and other emerging markets. US stock markets, which hit record highs last year, have been losing momentum in 2014. Turkey’s currency crisis already seems to have spread. South Africa was forced to raise interest rates for the first time since 2008 on Wednesday in an attempt to halt a sell off by investors concerned about a crash in the emerging markets. Brazil, Indonesia and Thailand are seen as the next most likely emerging market to raise rates.

http://www.theguardian.com/business/2014/jan/29/federal-reserve-cuts-economic-stimulus

2 As China slows, the pain emerges (Keith Bradsher in The New York Times) Economists and investors around the world have been fretting in recent days about the effects on smaller emerging markets if China’s economic slowdown worsens. Those concerns have driven down share prices and currencies from Jakarta to Istanbul to Buenos Aires, although emerging markets staged a partial recovery on Wednesday. They helped to prod the central banks of Turkey and India to raise benchmark interest rates unexpectedly on Tuesday.

Yet the most vulnerable producers these days may not be the coal mines in Indonesia, palm oil plantations in Malaysia or soybean farms in Brazil, but the farms and particularly the mines in China itself. China’s steadily strengthening renminbi, persistent inflation and soaring blue-collar wages have combined to erase much or all of the cost advantage of domestic production for a long list of commodities. At the same time, tightened pollution regulations have made it harder for steel mills to use China’s low-grade iron ore reserves or for power plants to burn China’s low-quality coal.

Another profound change in Chinese society is also having an impact. Hundreds of millions of Chinese are eating more meat and drinking more milk. The extra animal feed, as well as chicken, beef and dairy products, for that shift is coming increasingly from farms as distant as Uruguay and Argentina. Chinese farms have grown uncompetitive because they tend to be small and inefficient and have a reputation for contaminated food. Charter rates for bulk freighters, often a good leading indicator of China’s commodity imports, have stayed strong. The shipping industry is betting that even when long-distance freight charges are included, new mines opening in Brazil and Australia will outcompete mines in China.

http://www.nytimes.com/2014/01/30/business/international/as-china-slows-the-pain-hits-home.html?ref=business&_r=0

3 Facebook revenue up 63% (BBC) Social networking giant Facebook has reported profits of $523m and a 63% increase in revenue for the fourth quarter, beating expectations. The boost in revenue was mostly due to stronger mobile advertising sales, a priority of boss Mark Zuckerberg. Advertising revenue increased 76% from the same period last year, with more than half of that coming from mobile.

Overall, Facebook said it had 757 million daily global users as of December 2013. For the full year for 2013, Facebook reported profits of $1.5bn and said its daily active users grew by 22%. "It was a great end to the year for Facebook," said Mr Mark Zuckerberg. Facebook turns 10 years old next Tuesday, completing a remarkable transformation from a project started in Mr Zuckerberg's student room to a global empire with more than 1.23 billion monthly users.

Two years ago, Facebook had no revenue from mobile advertising sales. Since then, the firm has made a concerted push to spruce up its mobile app in order to woo users and advertisers. According to research firm eMarketer, Facebook had a 16% share of all mobile advertising dollars spent in the US this year, up from 9% in 2013. This comes after Facebook surpassed Yahoo as the number two digital advertising seller in the US. Globally, Google is still the dominant player, with a 32.4% share of the $117.6bn spent on digital advertising in 2013.

http://www.bbc.co.uk/news/business-25954825

4 India IT sector enters middle age (Khaleej Times) As India's $108-billion industry enters middle age and its growth slows, the three-million-strong workforce is also getting older, making it harder to extract some of the cost advantages of the young, cheap labour for which it is known. “Middle-aged or married couples prefer to go back home on time, so don’t like to stay back at work till late or do weekends,” said Megha Jain, 34, a Bangalore-based employee of an Indian IT company. “There is more focus by the company to fine-tune policies around work from home and overtime.”

The likes of Bangalore-based Infosys and Wipro Ltd were built on a young, cheap and educated workforce that also drew global giants such as IBM Corp and Accenture to the country. In India, many in their first jobs continue to live with parents, whereas working in IT often meant moving to another city, such as Bangalore, Hyderabad or Pune. Now, many Indian IT firms have tied up with childcare centres to help working couples manage. Some offer flexible working hours or extended time away from work, options that exist with few other Indian employers.

IT firms in India are placing increasing emphasis on training and developing existing staff, while slower growth means they no longer recruit college leavers at the same pace. By March 2013, just over a quarter of nearly 157,000 employees at Infosys, the second largest industry player in India, were older than 30, compared with 15 percent of its 91,000 staff just four years earlier, according to an analysis by Barclays.
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Barclays reckons that every half-year increase in average employee age leads to a decline of 1 percentage point in EBIT (earnings before interest and taxes) margins for services provided within India at Infosys. The ageing of the workforce is partly the result of the industry’s push to offer higher-value services and break the linear correlation between headcount and revenue growth - an effort that so far has had mixed success.

http://khaleejtimes.com/kt-article-display-1.asp?xfile=data/editorschoice/2014/January/editorschoice_January7.xml&section=editorschoice

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