US Business

Thousands of Panamanians took to the street again on Tuesday to protest rising inflation and government corruption, despite the announcement of price cuts for fuel and some food products.

The demonstrations, called for by the Central American country’s numerous unions, have lasted for two weeks and resulted in some main highways being closed.

President Laurentino Cortizo announced Monday that the price of gasoline for private vehicles will be reduced to $3.95 per gallon from July 15, a drop of 24 percent from the price at the end of June.

He also announced that his government would draft a decree to freeze the prices of a dozen essential food products. 

But several unions say that protests will continue until there is a general reduction in prices and gasoline rates drop below $3 per gallon.

Protesters in Panama City marched Tuesday from the central Porras Park to the heavily guarded National Assembly building.

Many carried Panamanian flags and banners with messages such as “Corruption embezzled my nation”, “We want honest governors” or “Where is the money?”

“The cost of living is what has the people in the streets,” protester Sergio Gallegos, an Indigenous man from the Ngabe-Bugle region, told AFP.

In La Chorrera, a town west of the capital, protesters marched on the Inter-American Highway, the main artery linking Panama with the rest of Central America.

Security minister Juan Pino made a “call for sanity” on Tuesday, so that “social peace” prevails over “any differences.”

The protests have stoked fears in the government and business sector that the country could see a drop in economic activity, or impacts on the tourism industry.

In Ecuador, 18 days of mass protests against high fuel prices last month cost the country over $1 billion, according to its central bank.

China’s economic expansion slumped in the second quarter to levels not seen since early 2020, an AFP poll of analysts found, owing to painful Covid lockdowns and lingering weakness in the real estate sector.

Leaders of the world’s second-biggest economy remain firmly wedded to a zero-Covid approach of stamping out clusters as they emerge, but the fallout has sapped growth and is pushing policymakers’ annual target of around 5.5 percent out of reach.

The slowdown comes after the country’s biggest city Shanghai was sealed off for two months over a virus resurgence — snarling supply chains and causing factories to shut — while dozens of others grappled with tightened rules to fight local outbreaks.

Gross domestic product is estimated to have expanded 1.6 percent on-year in April-June, according to the AFP poll of experts from 12 financial institutions.

Several analysts expect the economy to shrink on a quarterly basis — a first since 2020 at the height of the pandemic.

According to key gauges, activity in both the services and manufacturing sectors contracted in April and May, said Rabobank senior macro strategist Teeuwe Mevissen.

China’s property sector, an important economic driver, was also “still in limbo”, while lockdowns have severely hit supply and demand, he told AFP.

New home sales for the top 100 developers was 43 percent down on-year in June, according to China Real Estate Information Corporation data, with Nomura analysts adding that metro passenger trips in major cities remained below 2021 levels.

China has only logged a GDP contraction once in recent decades, and analysts expect the latest reading will drag full-year growth to around four percent, slashing earlier estimates.

Economists have long questioned the accuracy of official Chinese data, suspecting that figures are massaged for political reasons. 

And Friday’s official release will be closely watched as the Communist Party gears up for its 20th Congress when Xi Jinping is expected to be given another five-year term as president.

– Zero-Covid vs growth –

China’s policymakers want both zero-Covid and growth, an aim made clear during April’s Politburo meeting, said Macquarie economist Larry Hu in a recent report.

Authorities have vowed efforts to meet this year’s target, a goal reiterated by Xi last month, and leaders will likely “decide whether to double down or back down” in July, Hu said.

“Rhetorically, policymakers are unlikely to drop the name of ‘zero-Covid’ any time soon. That said, they could still redefine ‘zero-Covid’ to make it less and less disruptive to the economy,” he added.

Last Thursday, Premier Li Keqiang said the foundations for China’s recovery are “still unstable” and called for more work to stabilise the economy.

And “multiple uncertainties” also surround the latest rebound, said ANZ Research in a report.

Besides unexpected Covid outbreaks which could trigger more restrictions on movement, “a slowdown in the US economy and the Fed’s hiking moves may cloud the outlook for China’s exports,” ANZ added.

Domestically, consumer inflation climbed in June to the highest in two years as pork prices spiked, official data showed Saturday, threatening relative stability from a global surge in food prices.

China’s economy has started to recover after lockdown restrictions were lifted in Shanghai from June 1, said Oxford Economics’ lead economist Tommy Wu.

But even if future outbreaks are less disruptive as authorities fine-tune their strategies, “pressure on consumption will likely persist”, he added.

This week, an auto industry association downgraded its 2022 sales forecast on weaker demand.

“Consumer sentiment is unlikely to turn sanguine as strict mobility restrictions will be imposed even when the number of Covid cases in a small neighbourhood is very low,” Wu added.

China’s economic expansion slumped in the second quarter to levels not seen since early 2020, an AFP poll of analysts found, owing to painful Covid lockdowns and lingering weakness in the real estate sector.

Leaders of the world’s second-biggest economy remain firmly wedded to a zero-Covid approach of stamping out clusters as they emerge, but the fallout has sapped growth and is pushing policymakers’ annual target of around 5.5 percent out of reach.

The slowdown comes after the country’s biggest city Shanghai was sealed off for two months over a virus resurgence — snarling supply chains and causing factories to shut — while dozens of others grappled with tightened rules to fight local outbreaks.

Gross domestic product is estimated to have expanded 1.6 percent on-year in April-June, according to the AFP poll of experts from 12 financial institutions.

Several analysts expect the economy to shrink on a quarterly basis — a first since 2020 at the height of the pandemic.

According to key gauges, activity in both the services and manufacturing sectors contracted in April and May, said Rabobank senior macro strategist Teeuwe Mevissen.

China’s property sector, an important economic driver, was also “still in limbo”, while lockdowns have severely hit supply and demand, he told AFP.

New home sales for the top 100 developers was 43 percent down on-year in June, according to China Real Estate Information Corporation data, with Nomura analysts adding that metro passenger trips in major cities remained below 2021 levels.

China has only logged a GDP contraction once in recent decades, and analysts expect the latest reading will drag full-year growth to around four percent, slashing earlier estimates.

Economists have long questioned the accuracy of official Chinese data, suspecting that figures are massaged for political reasons. 

And Friday’s official release will be closely watched as the Communist Party gears up for its 20th Congress when Xi Jinping is expected to be given another five-year term as president.

– Zero-Covid vs growth –

China’s policymakers want both zero-Covid and growth, an aim made clear during April’s Politburo meeting, said Macquarie economist Larry Hu in a recent report.

Authorities have vowed efforts to meet this year’s target, a goal reiterated by Xi last month, and leaders will likely “decide whether to double down or back down” in July, Hu said.

“Rhetorically, policymakers are unlikely to drop the name of ‘zero-Covid’ any time soon. That said, they could still redefine ‘zero-Covid’ to make it less and less disruptive to the economy,” he added.

Last Thursday, Premier Li Keqiang said the foundations for China’s recovery are “still unstable” and called for more work to stabilise the economy.

And “multiple uncertainties” also surround the latest rebound, said ANZ Research in a report.

Besides unexpected Covid outbreaks which could trigger more restrictions on movement, “a slowdown in the US economy and the Fed’s hiking moves may cloud the outlook for China’s exports,” ANZ added.

Domestically, consumer inflation climbed in June to the highest in two years as pork prices spiked, official data showed Saturday, threatening relative stability from a global surge in food prices.

China’s economy has started to recover after lockdown restrictions were lifted in Shanghai from June 1, said Oxford Economics’ lead economist Tommy Wu.

But even if future outbreaks are less disruptive as authorities fine-tune their strategies, “pressure on consumption will likely persist”, he added.

This week, an auto industry association downgraded its 2022 sales forecast on weaker demand.

“Consumer sentiment is unlikely to turn sanguine as strict mobility restrictions will be imposed even when the number of Covid cases in a small neighbourhood is very low,” Wu added.

Asian markets fought Wednesday to recover some of the losses suffered at the start of the week as recession alarms continue to ring loud and oil struggled to erase the previous day’s sharp drop owing to growing demand fears.

The euro clawed its way back slightly after hitting parity with the dollar for the first time in two decades, though it remains under pressure from growing concerns about an energy crisis across the eurozone and the European Central Bank’s slower pace of monetary tightening.

Traders are also awaiting the release of a series of key indicators this week, including the all-important consumer price index later Wednesday, with expectations for another increase to a fresh 41-year high.

Another big spike in prices will reinforce the Federal Reserve’s determination to lift interest rates 75 basis points for a second successive month in July, adding to concerns that officials could go too far and tip the economy into recession.

Still, Lauren Goodwin of New York Life Investments said policymakers were unlikely to shift from their hawkish tilt for now.

“This is widely expected to be a really strong print,” she told Bloomberg Television.

“Even if it is not, I don’t think that changes the Fed’s perspective in a couple of weeks. We won’t have enough evidence that inflation is convincingly turning over.”

In a further sign of the pressure being felt around the world from surging prices, the South Korean central bank lifted rates 0.5 percentage points Wednesday, the first such increase since 1999.

While European markets enjoyed a rare advance thanks to bargain-buying, all three main indexes on Wall Street dropped.

Asian equities fluctuated, with Tokyo, Hong Kong, Seoul, Wellington and Taipei slightly higher but Shanghai, Sydney, Singapore, Manila and Jakarta in the red.

– Europe gas crisis –

Stephen Innes at SPI Asset Management said equities could continue to struggle owing to a perfect storm of crises engulfing trading floors.

“Typically, equity markets can deal with one risk relatively well,” he said in a note. “But the current setup of sticky inflation, rapid Fed tightening, growth/recession risks and excessive rates volatility, to name a few, have at times left investors defenceless. 

“And with the market coalescing to a bearish consensus, stocks are having trouble sustaining a meaningful rally.”

Both main crude contracts were flat, staying below $100 and nowhere near recovering the more than seven percent drops suffered Tuesday, hit by bets on a drop in demand and fears of more Covid-19 lockdowns in Shanghai.

The commodity has lost a large chunk of the gains seen after Vladimir Putin’s invasion of Ukraine, despite bans on imports from Russia, with some analysts saying consumers were simply choosing not to buy fuel because of the high price.

Data from the American Petroleum Institute showed US stockpiles rose 4.76 million barrels last week, Bloomberg News reported citing people familiar with the figures, indicating demand slacking off even during the key summer driving season.

Joe Biden’s visit to Saudi Arabia on Friday will be followed intently as he tries to persuade the crude giant to pump more to help reduce prices.

On currency markets, the euro held just above $1.0 a day after hitting parity on Tuesday for the first time since late 2022, with a worsening energy crisis fanning expectations that the eurozone will plunge into recession.

With Russian energy giant Gazprom starting 10 days of maintenance Monday on its Nord Stream 1 pipeline, the bloc — and particularly gas-reliant Germany — is waiting nervously to see if the taps are turned back on.

“A prolonged cut to the gas supply would halt a lot of economic activity, sending (Germany) deep into recession,” said Tapas Strickland at National Australia Bank.

He said July 21 — when the gas should be switched back on — will be a crucial date.

“That date also happens to be the day of the next ECB meeting,” he added. “Either of these events are key risk events. Russia playing gas politics by not switching on the gas supply would likely see the euro lurch much lower.”

– Key figures at around 0250 GMT –

Tokyo – Nikkei 225: UP 0.3 percent at 26,423.11 (break)

Hong Kong – Hang Seng Index: UP 0.6 percent at 20,963.55

Shanghai – Composite: DOWN 0.3 percent at 3,270.99

Euro/dollar: DOWN at $1.0032 from $1.0037 Tuesday

Pound/dollar: UP at $1.1893 from $1.1889 

Euro/pound: DOWN at 84.34 pence from 84.40 pence

Dollar/yen: UP at 137.14 yen from 136.84 yen

West Texas Intermediate: FLAT at $95.80 per barrel

Brent North Sea crude: FLAT at $99.52 per barrel

New York – Dow: DOWN 0.6 percent at 30,981.33 (close)

London – FTSE 100: UP 0.2 percent at 7,209.86 (close)

Moments after US President Joe Biden touches down in Tel Aviv on Wednesday, the Israeli military will show him new hardware it says is essential to confronting Iran: anti-drone lasers.

While Israel has long been known for its efforts to thwart Tehran’s nuclear ambitions, Israeli officials have increasingly been sounding the alarm over Iran’s fleet of unmanned aerial vehicles (UAVs).

This month, the Israeli military said it had intercepted a total of four unarmed drones headed for an offshore gas rig. It said the drones were Iranian-made and launched by the Lebanese group Hezbollah, which is backed by Tehran.

As concerns mount over drone warfare, Israel hopes the new “Iron Beam” system will secure its skies.

While not yet operational, the military hardware was described as a “game-changer” in April by then-prime minister Naftali Bennett. 

Presenting such technology to Biden is a strategic move for Israel, which saw Washington approve a billion-dollar package in September for Israel’s active Iron Dome system. 

The defence system has been used countless times to intercept rockets fired by militants from the Gaza Strip, which is controlled by Iran’s ally Hamas.

The Iron Dome costs roughly $50,000 per launch, while Bennett priced the Iron Beam at $3.50 per deployment.

He said the new defence system was “silent” and could “intercept incoming UAVs, mortars, rockets and anti-tank missiles.”

Uzi Rubin, a former Israeli defence ministry specialist in anti-missile systems, said intercepting drones was a significant challenge.

“The laser technology will have more capacity against drones than rockets and missiles,” said Rubin, who is based at the Jerusalem Institute for Strategy and Security.

“It is going to help if we get some American financing” for the Iron Beam, he added. 

– Rare regional talks –

For Israel, a priority of Biden’s Middle East tour is broadening US-backed security cooperation among regional countries with shared hostility towards Iran.

The US president will fly Friday to Saudi Arabia, Iran’s main regional rival, following meetings with Israeli and Palestinian officials. 

Saudi Arabia and its neighbour the United Arab Emirates have both come under drone attack by Yemen’s Iran-backed Huthi rebels since 2019.

The Wall Street Journal reported last month that senior Israeli and US military officials had visited Egypt to discuss Iranian drones.

Participants in the talks included the UAE and Bahrain, which both normalised ties with Israel in 2020, as well as Saudi Arabia and Qatar, which don’t recognise the Jewish state.

Israel’s Defence Minister Benny Gantz subsequently made comments which were widely interpreted as confirming the discussions.

“We are building our wide partnership with additional countries in the region to ensure a secure, stable and prosperous Middle East. Among other things, this also includes aerial defence,” Gantz said.

The race to develop arsenals of UAVs in the region has been described as a “drone revolution” by Washington’s Middle East Institute.

The normalisation of ties with the Jewish state has “opened new horizons” for Abu Dhabi’s tech sector, the institute said in March, as Israel has been “at the forefront of the drone industry since the 1980s”.

– ‘Significant platform’ –

According to Eyal Pinko, a former Israeli navy intelligence officer, Israel has been anticipating the rising threat of drones from Iran and its regional proxies.

“Since 2009, there was an understanding among Israeli naval intelligence that Hezbollah’s UAVs would be a threat to Israeli rigs,” said Pinko, a specialist at Tel Aviv’s Bar-Ilan University.

“Iran understood many years ago that drones were force multipliers, a significant platform and relatively cheap,” he told AFP.

Earlier this year, the Israeli military said that in March 2021 it had intercepted two Iranian drones laden with weapons for Gaza militants.

Tehran “is positioning itself as a major drone power in the region”, according to an article published by the European Council on Foreign Relations think tank.

“The country built up its vast drone fleet over many years mainly out of necessity, aiming to compensate for its old and decaying air force, which has been battered by decades of sanctions,” the May report said.

Its fleet includes the “Gaza” drone, which can fly for 35 hours, according to Iran’s Fars News Agency.

On Monday, the White House revealed intelligence that Tehran was “preparing to provide Russia with up to several hundred UAVs… on an expedited timeline” for use in the war in Ukraine.

While Israel aims to counter Iranian UAVs with new technology and regional alliances, it may also be going on the offensive.

In March, Israeli media said the army had launched an attack on an Iranian site storing dozens of armed drones.

But weeks later, Iranian state television broadcast footage of a facility hidden in the mountains: an underground base for scores of military UAVs.