India faces at least “a one-in-three” chance of losing its prized sovereign grade rating, global ratings agency Standard and Poor's has warned.

New Delhi - India faces at least “a one-in-three” chance of losing its prized sovereign grade rating, global ratings agency Standard and Poor's has warned, amid new threats to economic growth and reforms.

The announcement surprised the finance ministry which had been pitching for a ratings upgrade, saying the government has taken strong steps to improve India's public finances, promote investment and revive growth.

India's BBB-minus investment rating is already the lowest among its Brics peers Brazil, Russia, China and South Africa, and cutting it to “junk status” would push up the country's hefty borrowing costs as it would signal higher risk.

“There is at least a one-in-three chance that we will lower the ratings in the next 12 months,” S&P said late on Friday, adding “risks to India's growth from stalled reforms in parliament still tilt the credit risks to the downside.”

The warning from S&P, which cut the outlook on India's BBB-minus rating to negative from stable last year, came after parliament adjourned early amid opposition uproar over corruption scandals.

The shutdown stalled the economic reform drive by Prime Minister Manmohan Singh's minority government, hobbled by a string of graft controversies with two cabinet ministers entangled in scandals quitting late last week.

The government has opened up the retail and aviation sectors to wider foreign investment and partly freed fuel prices. But it has been striving to pass other bills to open the the insurance and pension sectors to more overseas investment and streamline industrial land acquisition to spur economic growth.

Leading business group, the Confederation of Indian Industry, called S&P's economic outlook “harsh” and said the government was making efforts to rein in the ballooning current account deficit - the broadest measure of trade.

Meanwhile, the chief economic advisor to the finance ministry, Raghuram Rajan, described S&P's comments as “disappointing”.

But with the 2014 elections looming, analysts say Singh is fast running out of time to complete his legislative reform agenda.

“The big worry is they may have nothing to show in their report card,” said Parsa Venkateshwar Rao, a columnist for the DNA daily.

S&P said it may also cut India's ratings if it decides Asia's third-largest economy will not revert to higher seven to eight percent growth levels notched up earlier in this decade.

India's growth right was bumping along at 5.0 percent for the last financial year to March 2013, the lowest level in a decade, but the government expects it to pick up to six percent this year and is targeting seven percent in 2014.

S&P credit analyst Takahira Ogawa said, “We have indicated compared to one year ago, there is some easing of the pressure towards the downgrade of the rating.”

But despite government efforts to cut red tape in implementing long-delayed infrastructure and power projects, its “success in raising investment growth remains uncertain”, he added. - Sapa-AFP

South Africa's mining industry can ill afford to offer wage rises during talks that are about to start.

London - South Africa's mining industry can ill afford to offer wage rises during talks that are about to start with a new and unpredictable union, so it may well face fresh strikes, Impala Platinum said on Friday.

South African mining companies are due to embark on one of their toughest periods of wage talks in the next one or two weeks, with increasingly radicalised unions.

The world's biggest platinum producing country is hoping to avoid the 2012 wildcat strike action that cost billions in lost revenue and production.

Mining companies are hurting from a nearly 20 percent drop in platinum prices in the last two years, as the supply disruptions failed to offset weakness in demand for the metal used chiefly in motor vehicle catalysts.

Workers are hoping the unions can deliver deals like the 11-to-22 percent pay rise Lonmin gave illegal strikers after 34 were shot dead by police at its Marikana mine.

“I don't think we have a mandate yet for wage levels, I just know from the mines' point of view that any kind of increase is going to be difficult to afford,” Derek Engelbrecht, Impala's group executive marketing, told Reuters in an interview.

“I think there certainly is potential for further industrial action in the form of strikes,” he added.

Over the past year the Association of Mineworkers and Construction Union (AMCU) has poached tens of thousands of members from the once dominant National Union of Mineworkers (NUM), which has been hurt by a view that its leaders had become too close to management.

The AMCU leader, Joseph Mathunjwa, on Friday threatened to bring Africa's biggest economy to a standstill and the rand extended its slide after tumbling to a four-year low against the dollar on Thursday on fears of a strike at Anglo American Platinum (Amplats).

More than 50 people have been killed in more than 12 months of unrest stemming from a turf war between the two unions.

“We are now going into uncharted territory,” Engelbrecht said. “We are going to negotiate with a new union that we have never dealt with before on wages, so trying to predict the outcome would be foolhardy.”

The negotiations will start against a backdrop of jobs cuts and approaching elections.

Impala is looking at plans to cut capital and operational expenses, including staffing numbers, Engelbracht said.

“The whole thing has been reviewed to try and reduce both absolute and unit costs and improve productivity,” he said.

The world's largest platinum miner Amplats plans to cut 6,000 jobs and mothball two unprofitable mines near the platinum belt city of Rustenburg.

However, a protest strike called for Friday by at least two AMCU officials failed to materialise. - Reuters

The percentage of global investment that goes to developing countries should triple in the next two decades.

Washington - The percentage of global investment that goes to developing countries should triple in the next two decades as emerging economies catch up to richer nations and become more integrated into financial markets, the World Bank predicted in a report on Thursday.

These nations and their comparatively younger and bigger populations are also set to become the largest sources of capital, with China and India turning into the world's two biggest investors by 2030, the global development lender said.

The shifting landscape of saving and investment has profound implications for everything from which currencies will dominate global markets to the rise of new financial centres, patterns of capital flows and investment priorities.

But policymakers are still woefully unprepared for the changes, fixating instead on what will happen in the next three to six months, Kaushik Basu, the World Bank's chief economist, said.

“The big question that should concern us all is what will happen to the major drivers of growth and development: namely savings and investment,” Basu told reporters ahead of the report's release.

“In some sense, some of the global economic turmoil that we are seeing today are some of the early indicators of the kind of turbulent period that the world is going into,” he said.

Standard & Poor's earlier this week predicted that Chinese non-financial companies will overtake US companies in their borrowing needs over the next two years.

By 2030, for every dollar invested in the world, 60 cents will flow into developing countries, a dramatic change from 20 cents to the dollar in 2000. China will make up 30 percent of all investment activity, while the United States will have 11 percent and India, 7 percent.

The numbers assume the world will grow on average 2.6 percent to 3 percent a year in the next two decades, while emerging economies will grow 4.8 to 5.6 percent a year.

For a full set of assumptions and figures, see http://www. worldbank.org/CapitalForTheFuture.

As more capital flows from one developing country to another, known as South-South flows, China's yuan currency and its monetary policy will have a greater impact on the rest of the world, reducing the influence of US and euro area policies.

A richer world in 2030 will also have a greater demand for services over manufacturing, meaning countries will face pressure to reduce protectionist barriers to trade in services, the World Bank said.

But shifts in global saving may not be equally distributed in each country, warned lead report author Maurizio Bussolo - a key concern for the poverty-fighting World Bank. In most developing countries, the top segment of the population saves three to four times more than the poorest.

Governments must make an effort to level the playing field in education, which has a strong correlation with higher earnings, savings and future wealth, he said.

“So in terms of our projections, we see the increased importance of developing countries. But behind that, there is a lot of work to do, and very little time,” Bussolo said. - Reuters

Britain's top share index hit fresh five and a half year highs, as banks were buoyed by an upgrade.

London - Britain's top share index hit fresh five and a half year highs on Friday, as banks were buoyed by an upgrade, the prospect of the end of state ownership in the sector and rotation out of defensive stocks.

The FTSE 100 closed up 35.26 points, or 0.5 percent, at 6,723.06, just 0.1 percent off October 2008's closing high and marking the index's fourth successive week of gains.

Banks combined to add 18 points to the index, benefitting from an upgrade by UBS and led up by Lloyds and RBS .

The banks, which both received state help during the financial crisis, gained 3.2 and 5.7 percent respectively after Lloyds broke through the 61.2 pence level which the government regards as breakeven on its 20.5 billion pound ($31 billion) rescue.

“The prospect of both of those banks being released from the taxpayers clutches is helping sentiment in the whole area,” Mike van Dulken, head of research, said.

Friday saw a volatile day of trade as options expired mid-morning, with buying pressure to lift the index above 6,650 and 6,700 levels, where there were a lot of open “call” positions.

As a right to buy the index at a certain level, these positions would be worthless if the index was below that level when the options expired.

Options expiry has seen investors abandon hedges against falls in European indexes, and extend bets on future rises in an asset class which has rallied on the back of easy monetary policy.

Friday's session began on a weaker note after a Federal Reserve official said the central bank could begin to slow its monetary stimulus this summer.

However good US data on Friday was received well by the market, despite the possibility that it will accelerate the Fed's tapering of purchases.

“People are a bit unsure about how to read the Fed yesterday, because this whole market rally is caused by central bank intervention, and they're beginning to hint that it won't be there... but it will only be withdrawn if the economy is good,” Joe Rundle, head of trading at ETX Capital, said.

“The momentum is completely on the upside, and people are just trying to get into this market now... Any little pullback is a great opportunity to get back involved.”

On the down side, Goldman Sachs downgraded food and beverages to underweight and personal and household to neutral. These sectors combined with other defensive plays in utilities and health care to be the biggest weights on the index.

The top individual faller was miner ENRC, which slid 8 percent in afternoon trade after a report that the group's trio of founding shareholders had submitted a letter detailing an offer below 300 pence per share. - Reuters

European auto sales grew in April for the first time since September 2011, ending 18 consecutive months of decline.

Milan - European auto sales grew in April for the first time since September 2011, ending 18 consecutive months of decline, but the improvement was a technical one because of two extra work days last month, the European automaker's association said Friday.

In April, 1.038 million new cars were registered in the European Union, up from the historic low for April of 1.021 million reached in 2012, ACEA said.

In absolute terms, April 2013 sales were the third lowest recorded for the month.

The auto industry has been victim of the region's deepening recession and rising unemployment, and Europe's mass carmakers are looking to see when the bottom will hit.

Already some have raised alarms that the contraction could be greater than 5 percent that many used to base their forecasts.

Many have had to announce factory closures or put off new car launches in bids for survival.

Sales rebounded in Germany, posting a 3.8 percent gain in April after dropping by 13 percent in March.

Sales also were up in Spain, helped by new incentives, and continued strong in Britain.

France and Italy, the No. 3 and No. 4 markets, posted declines of 5.3 percent and 10.8 percent respectively. - Sapa-AP

The dollar soared against a basket of currencies, reaching a nearly three-year peak.

New York - The dollar soared on Friday against a basket of currencies, reaching a nearly three-year peak, and global equity indexes gained as speculation mounted over whether the Federal Reserve would soon begin to rein in its asset-buying program.

Wall Street advanced, with the benchmark S&P 500 rebounding from its worst decline in nearly three weeks.

European equity indexes climbed in sync with a rally in carmakers' shares, which were bolstered by signs of a revival in domestic sales.

US stocks also got a lift from a survey showing a rebound in US consumer sentiment in early May to the highest level in nearly six years as Americans felt better about their financial and economic prospects, particularly among upper income households.

The dollar's strength was largely attributed to the euro, which fell to a six-week low on market talk that the European Central Bank could introduce negative deposit rates, a move that would make banks pay to park their cash overnight with the ECB.

The dollar index, which measures its value against a basket of six major currencies, rose to 84.371, its highest in nearly three years.

Around midday in New York, the dollar index was up 0.8 percent at 84.255.

The euro fell 0.4 percent to $1.2830, while the dollar hit a 4-1/2 year high versus the Japanese yen, up 0.66 percent at 102.91.

“People are positive about the US economic recovery despite recent weak data and today's theme is mostly about the broadly strong dollar,” said Charles St-Arnaud, FX strategist at Nomura Securities.

“Meanwhile, data in the euro zone shows they remain in a recession and raised expectations the ECB will take further action is weighing on the euro,” he said.

A measure of global equity activity, MSCI's all-country world stock index, dipped 0.02 percent, pulled lower by emerging markets.

The Dow Jones industrial average was up 62.48 points, or 0.41 percent, at 15,295.70.

The Standard & Poor's 500 Index was up 8.02 points, or 0.49 percent, at 1,658.49.

The Nasdaq Composite Index was up 15.85 points, or 0.46 percent, at 3,481.10.

Among other indexes, the Russell 2000 index was up 6.96 points, or 0.71 percent, at 992.30.

The FTSEurofirst-300 index of European shares bounced off session lows to rise 0.11 percent to provisionally close at 1,246.79.

In London, the FTSE-100 index gained 0.53 percent to 6,723.06.

Gold fell for a seventh straight session, its longest losing streak in four years, driven by speculation that the Fed may soon ease its asset-purchase program to boost the economy.

Spot gold prices lost $23.69 to $1,362 an ounce.

US stocks and gold prices fell on Thursday, while the dollar rose following comments from John Williams, president of the Federal Reserve Bank of San Francisco, that the Fed could begin easing up on stimulus this summer.

Prices for US Treasuries added to losses after the Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment rose to 83.7 in early May from 76.4 last month, topping economists' expectations for 78.

The May reading was the highest level since July 2007.

The benchmark 10-year US Treasury note fell 15/32 in price to yield 1.9297 percent.

In Europe, German Bunds hit one-week highs, with traders citing talk that the ECB was checking with some banks on whether they were ready for a potential cut in its deposit rate to below zero.

German Bund futures rose as much as 43 ticks on the day to 145.74, before paring gains to trade 14 ticks higher.

Oil pared gains on concern about the strength of global demand.

Brent crude rose 13 cents to $103.91 a barrel. US crude futures rose 24 cents, or 0.25 percent, to $95.40 a barrel. - Reuters

The founding shareholders behind Kazakh miner ENRC have indicated they wish to take it private with a buyout.

London - The founding shareholders behind Kazakh miner ENRC have indicated they wish to take it private with a buyout at or below the current, depressed market price, an approach rejected by the independent directors.

ENRC's independent directors said on Friday they had received an unspecified indicative proposal from a consortium including the trio of founders - Alexander Machkevitch, Alijan Ibragimov and Pathokh Chodiev - the Kazakh government and Kazakhstan's sovereign wealth fund, which together wish to buy out the shares they do not already hold.

“We believe the current proposal materially undervalues ENRC, and we will ... seek an improved and formal proposal,” the chairman of the independent committee of the board, Mohsen Khalil, said.

The board did not, in its statement, detail the offer, but a source with knowledge of the matter told Reuters a letter received by the board on Thursday had detailed a proposal “not materially below” a market price of around 270 pence.

The source said the founders, in a letter requesting more time to formulate a bid, outlined several elements that still needed to be resolved, including an agreement between the members of the bidding consortium and final financing deals.

The board has agreed to the founders' demand for more time, asking the Takeover Panel to grant them until June 3.

The current deadline is 18:00 SA time on Friday.

ENRC's co-founders said last month they were weighing up a buyout of the miner's minority investors, with the support of the Kazakh government, which is also a major shareholder.

At the time, they were given 28 days - until May 17 - to declare a “firm intention” to bid. In the case of a cash offer, under UK rules, this stage requires suitors to lay out details of the bid including confirmation that resources are available.

Earlier this week, however, sources with knowledge of the matter said the bidders were still in the throes of hammering out the terms of financing with lenders and were also still working out a formal agreement to tie together their consortium. - Reuters

Americans felt better about their economic and financial prospects in early May.

New York - Americans felt better about their economic and financial prospects in early May as consumer sentiment rose to the highest level in nearly six years, an encouraging sign after other recent data had suggested broader US growth is cooling.

A gauge of future economic activity released on Friday also suggested the expected slowdown will be temporary, with the index rising in April to a near five-year high.

Economists expect growth will likely slow in the second quarter from the 2.5 percent pace at the beginning of the year as tighter fiscal policy starts to bite. But recent stronger than expected improvement in several areas, including the labor market and retail sales, has suggested the recovery remains resilient.

“We're still definitely on the recovery path. We expect that this is going to be a very long and gradual recovery,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

“Most economists are looking for stronger growth in the second half of the year and into next year.”

The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment rose to 83.7 from 76.4 in April, topping economists' expectations for 78.

It was the highest level since July 2007.

Economists will watch to see if the improvement will be confirmed at the end of the month with the final sentiment reading. There has been some volatility lately between the initial and final reports as government austerity takes effect, Barclays wrote.

The cheery attitudes at the beginning of the month were particularly seen among upper-income households.

More consumers gave a favourable view of their personal finances than in anytime since 2007, with the largest gains among households in the upper third of income levels. More respondents also thought the economy would continue to improve in the year ahead.

Higher earners more frequently reported having less debt and higher asset values, though consumers were still not that much more optimistic they would see higher income in the year ahead.

Upper income households are more likely to be invested and therefore reap the benefits of the stock market rally, which has taken the market to record highs this year. Since the beginning of 2013, the benchmark S&P 500 is up about 16 percent.

The rise in stocks may also be offsetting any hit to consumers following the expiration of the payroll tax holiday at the beginning of the year, which raised taxes for many Americans.

“For (upper income) people, the payroll tax and gasoline prices didn't really matter much, but stock prices and home prices rising, that's a big, big plus,” said Brown.

The barometer of current economic conditions jumped to 97.5 from 89.9, the highest since October 2007, while the gauge of consumer expectations gained to 74.8 from 67.8.

Shopping plans were similarly encouraging, with the gauge of buying attitudes for durable goods rising to 148 from 137. Consumer activity accounts for about two-thirds of the economy.

“Changes in confidence don't always filter through into changes in spending, but the omens are good,” said Amna Asaf, economist at Capital Economics.

Friday's reports gave a boost to stocks with Wall Street trading higher in the late-morning. The dollar rose against the euro and yen shortly after the data, while Treasuries prices fell further.

A separate report from the Conference Board showed its Leading Economic Index increased 0.6 percent to 95.0 last month, the highest level since June 2008. The index had slipped 0.2 percent in March.

Economists polled by Reuters had expected the index to rise only 0.2 percent in April. - Reuters

The US Federal Reserve Board said it has told Bank of Montreal to step up efforts to detect and prevent money laundering..

New York - The US Federal Reserve Board said it has told Bank of Montreal to step up efforts to detect and prevent money laundering at the Canadian bank's Chicago branch.

The warning puts Bank of Montreal in a growing category of financial institutions under pressure to do a better job of adhering to strict US requirements for identifying potentially illegal activity by their customers.

The Fed entered into a written agreement requiring Bank of Montreal to strengthen its compliance after a recent inspection by the central bank's examiners found deficiencies in Bank of Montreal's anti-money laundering program. The Fed made the agreement public on Friday.

A spokeswoman for the Fed declined to describe the problems it found, saying its policy prohibits discussion of specific institutions.

“Our remediation activities are well underway,” said BMO spokesman Paul Deegan. “BMO is fully committed to the highest standards of regulatory compliance with Bank Secrecy Act/Anti-Money Laundering requirements and expectations in each of the jurisdictions in which we operate.”

The agreement said the Fed found Bank of Montreal's Chicago branch “lacked effective systems of governance and internal controls to adequately oversee the activities of Bank of Montreal's US operations with respect to legal, compliance, and reputational risks.”

Banks operating in the United States, whether they are American or foreign, must closely monitor customer activity for signs of money laundering or other illegal acts. They must report unusual behaviour in the form of “suspicious activity reports” to the US Treasury Department.

The Treasury uses the reports - sharing them with the Federal Bureau of Investigation and other law enforcement agencies - to help track down criminals and terrorists.

The US Treasury is currently building a system to more broadly share the banks' reports with US spy agencies as well.

The anti-money laundering rules were first defined by the Bank Secrecy Act and later strengthened by the USA Patriot Act after the attacks of Sept. 11, 2001.

Scrutiny of these programs may get tougher this year, according to an April 5 note by Fitch.

Citing heavy fines the US levied against HSBC and Standard Chartered for lapses in anti-money laundering controls last year, Fitch analysts predicted banks could spend more this year on anti-money laundering compliance.

“For customers of affected banks, tougher AML scrutiny will likely lead to longer transaction times, increased documentation requirements, and potentially higher fees,” the analysts wrote.

JPMorgan Chase & Co and Citigroup have also run into trouble recently with anti-money laundering requirements. JPMorgan is under fire from another regulator, the Office of the Comptroller of the Currency, which expected to issue a “cease-and-desist” order - a more serious citation than the Fed's warning to Bank of Montreal - in the coming months.

The Fed told Citi in March to improve its money-laundering monitoring program. - Reuters

South African soybean futures advanced to a four-week high.

Cape Town - South African soybean futures advanced to a four-week high after prices in the US, the world’s biggest producer, rose after a bulk purchase by China, the largest soybean importer.

Soybeans for delivery in July, the most active contract, surged 1.1 percent to 4,765 rand ($508) a metric ton by the close in Johannesburg today.

The grain has climbed 3.4 percent this week, the biggest increase on that basis since the five days through April 19.

China purchased 79 percent of 346,634 tons in the week ended May 9 for delivery in the year beginning September 1, according to the US Department of Agriculture.

That takes total sales for the next marketing year to 8.86 million tons before most farmers even planted their crops, USDA data show.

Soybeans climbed to the highest since March 27 in Chicago yesterday.

“Soybean prices went up quite a lot following gains in Chicago, which came about because of tighter supply in the US,” Benjamin Swanepoel, a trader at Trademar Futures (Pty) Ltd., said by phone in Johannesburg.

White corn for delivery in July, the most active contract, gained 0.2 percent to 2,181 rand a ton after the rand declined to a four-year low against the dollar, making the price of locally produced varieties more attractive than imports for South African buyers.

The currency extended its longest losing streak in a year after renewed labor unrest and falling commodity prices raised concern over South Africa’s economy.

“The main thing that supported local corn prices on the market is rand weakness,” Swanepoel said.

South Africa is the continent’s biggest producer of corn.

The white grain is a staple food in the country, while the yellow variety is mainly used as animal feed.

Yellow corn due for delivery in July, the most active contract, fell by 0.2 percent to 2,162 rand. - Bloomberg