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Monday, 18 February 2019

Euro gains as U.S.-China trade-talk optimism boosts sentiment


LONDON (Reuters) - The euro rallied and riskier currencies like the Australian dollar strengthened on Monday as optimism over a breakthrough in U.S.-China trade war talks encouraged investors.

The euro has been stuck in a trading range against the dollar for several months as growing weakness in the euro zone economy offset dwindling expectations the Federal Reserve will raise U.S. interest rates again this year.

But after dropping to a three-month low on Friday, the euro has recovered, helped by improved investor sentiment as hopes rose for an end to the U.S.-China trade conflict after both sides reported progress in talks.

The dollar, the world’s most liquid currency, tends to perform well during bouts of investor nervousness.

“Generally the mood is still quite positive on the outlook for trade,” said Adam Cole, a currencies analyst at RBC Capital Markets, adding that he thought the “risk-on” mood would continue.

“If anything we would be running with it. You have a background of quite decent growth and a Fed that is putting rates on hold.”



However, he said a better way to play the Fed’s pausing of rate increases was in dollar/yen, as more Japanese investors choose not to hedge purchases of dollar-denominated assets which already earn a decent yield after 2018’s U.S. rate rise.

Cole sees dollar/yen rising to 120 yen per dollar by the end of 2019 from current levels of 110.55.

The euro ticked 0.3 percent higher to $1.1328, while the dollar index, which measures the U.S. unit against a basket of rivals, slipped 0.2 percent to 96.687 in a quiet session with U.S. markets closed for a holiday on Monday.

Despite Monday’s gains, traders are betting on a weaker euro in the coming months. They expect the European Central Bank to maintain its easy monetary policy against a backdrop of slow growth, tepid inflation and political uncertainty.

Commerzbank analysts said the single currency also remained vulnerable to any flare-up in a U.S.-European trade dispute.

“There would be very little to report on the euro positive side if this conflict were to escalate. The smallest economic disruptions would no doubt be damaging for the euro in the light of the fragile state of the euro zone economy,” they wrote.


The Australian dollar, considered a barometer of global risk sentiment, rose 0.2 percent to $0.7154.

Sterling gained 0.3 percent to $1.2918, up from last week’s one-month lows as investors awaited the outcome of talks between Britain and the European Union, with London trying to convince Brussels to tweak its withdrawal agreement.

Emerging market currencies were mixed.

Reference: Tommy Wilkes

Nikkei reaches 2-month peak, boosted by U.S.-China trade talks


TOKYO, Feb 18 (Reuters) - Japan’s Nikkei share average advanced to a two-month peak on Monday, with investor risk appetite lifted by growing expectations that the latest Sino-U.S. talks would ease trade tensions between the two economic superpowers.

The Nikkei ended the day up 1.82 percent at 21,281.85 after brushing 21,306.36, its highest since Dec. 18.

The Tokyo market got a boost after Wall Street surged on Friday as the United States and China reported progress in five days of negotiations in Beijing last week. The two countries will resume talks this week in Washington.

“The market is in the process of gradually pricing in the possibility of the March 1 U.S.-China trade negotiation deadline being extended, led by bids from short-term participants,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.


“Political risks still remain a threat, and each development in Washington has to be gauged carefully.”

U.S. President Donald Trump on Friday declared a national emergency in a bid to fund his promised wall at the U.S.-Mexico border.

Companies that derive a large portion of their sales in China advanced. Industrial machinery maker Komatsu Ltd added 3.1 percent, robot maker Fanuc Ltd rose 2.9 percent and Hitachi Construction Machinery Co jumped 4.6 percent.

Tyre maker Bridgestone Corp gained 4.9 percent after the company said it will buy back up to 200 billion yen ($1.81 billion), or 7.6 percent, of its outstanding stock through Dec. 23.

Restaurant chain operator Hotland Co rose 5.2 percent after the company forecast its 2019 operating profit would jump by 88.2 percent to 1.62 billion yen.

Energy-related shares gained as crude prices advanced to three-month highs. Refiners Showa Shell Sekiyu and Idemitsu Kosan Co rose 5.2 percent and 5.8 percent, respectively. Petroleum and natural gas developer Inpex Corp advanced 3.6 percent.


Apartment construction and leasing company Leopalace 21 Corp tumbled 10.2 percent, falling for the sixth consecutive session. Leopalace shares have shed roughly 60 percent in value during the past six sessions, with the company being charged with construction code violations and posting losses related to repair costs.

All 33 subsectors of the Tokyo Stock Exchange (TSE) were in positive territory, led by oil and coal and rubber products.

Reference:  Shinichi Saoshiro

Asia shares bounce on trade talk, stimulus wagers


SYDNEY (Reuters) - Asian share markets bounced broadly on Monday as investors dared to hope for both progress at Sino-U.S. trade talks in Washington this week and more policy stimulus from major central banks.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.9 percent, largely recovering from a sharp fall last Friday.

Japan’s Nikkei climbed 1.8 percent to its highest level of the year so far, while Shanghai blue chips rallied 2.1 percent.

E-Mini futures for the S&P 500 were flat as trade was thinned by a holiday in U.S. markets, while spreadbetters pointed to a firmer opening for European bourses.

The Dow and the Nasdaq had boasted their eighth consecutive weekly gains on wagers the United States and China would hammer out an agreement resolving their protracted trade war.

The two sides will resume negotiations this week, with U.S. President Donald Trump saying he may extend a March 1 deadline for a deal. Both reported progress in five days of talks in Beijing last week.

“That does not rule out a setback or two between now and the start of March,” said analysts at CBA in a note.


“Even so, we still think that both sides have good reasons to want to get to an agreement. And, so motivated, it makes an agreement more likely than not.”

There are also growing expectations of more reflationary policies from some of the world’s more powerful central banks.

The need for stimulus was highlighted on Monday by data showing a sharp slide in Singapore exports and a big drop in foreign orders for Japanese machinery goods.

Beijing is already taking action with China’s banks making the most new loans on record in January in an attempt to jumpstart sluggish investment.

Minutes of the Federal Reserve’s last policy meeting are due on Wednesday and should provide more guidance on the likelihood or not for rate hikes this year. There is also talk the bank will keep a much larger balance sheet than previously planned.

“Given the range of speakers since the January meeting who support “patience,” the Fed minutes should reiterate a dovish message overall,” said analysts at TD Securities in a note.

A roll call of Fed officials are speaking at various events this week including a round table on Friday covering the future of its balance sheet.


EYEING THE ECB
The European Central Bank’s Olli Rehn told a German newspaper on Sunday that recent data point to a weakening euro zone economy and interest rates would remain at the current level until monetary policy goals have been met.

That came amid much speculation the ECB would launch another round of Targeted Long-Term Refinancing Operations (TLTRO) to support bank lending.

The risk of an easy ECB saw the euro touch a three-month low on Friday before then bouncing on dovish comments from Fed officials.

The single currency edged up 0.2 percent on Monday to $1.1312, though that was still well within the $1.1213/1.1570 trading range that has held since mid-October.

The dollar was steady on the yen at 110.53, having backed away from a two-month top of 111.12.

Sterling was a shade firmer at $1.2913 ahead of Brexit talks between British Prime Minister Theresa May and European Commission President Jean-Claude Juncker this week.

All of which left the dollar down at 96.765 on a basket of currencies and away from last week’s top of 97.368.

In commodity markets, the drift in the dollar helped spot gold firm 0.2 percent to $1,323.56 per ounce.

Oil prices reached their highest for the year so far, buoyed by OPEC-led supply cuts and U.S. sanctions on Iran and Venezuela.

U.S. crude was last up 25 cents at $55.84 a barrel, while Brent crude futures rose 5 cents to $66.30.

Reference: Wayne Cole

Friday, 15 February 2019

Corbyn Consoles May | Lord of The Rings Brexit 2




Just for fun.

Mnuchin says U.S. had 'productive' trade meetings with China


BEIJING (Reuters) - Top U.S. and Chinese trade negotiators had “productive meetings”, U.S. Treasury Secretary Steven Mnuchin said in a tweet on Friday, as the world’s largest economies wound down two days of high-level talks to resolve their bruising trade war.

Mnuchin did not elaborate on the discussions he and U.S. Trade Representative Robert Lighthizer had with Chinese Vice Premier Liu He, a top economic advisor to President Xi Jinping, who the two U.S. officials met later on Friday in Beijing.

The U.S. delegation had a banquet with Chinese counterparts at a Beijing hotel on Thursday night, a person with knowledge of the meetings said. But neither country had offered details on how the two sides might de-escalate a tariff war that has roiled financial markets and disrupted manufacturing supply chains.
U.S. duties on $200 billion worth of imports from China are scheduled to rise to 25 percent from 10 percent if no deal is reached by March 1 to address U.S. demands that China curb forced technology transfers and better enforce intellectual property rights.

Although U.S. President Donald Trump said earlier in the week that an extension of the deadline was possible if a “real deal” was close, Larry Kudlow, director of the National Economic Council, said the White House had made no such decision.

Several sources informed about the meetings told Reuters there was little indication negotiators had made major progress on sticking points to pave the way for a potential meeting between Xi and Trump in coming weeks to hammer out a deal.


“Stalemate on the important stuff,” said one of the sources, all of whom requested anonymity because the talks are confidential.

“There’s still a lot of distance between parties on structural and enforcement issues. I wouldn’t quite call it hitting a wall, but it’s not a field of dreams either,” said a second source.

The Financial Times cited sources as saying the two sides were trying to reach a memorandum of understanding to help bring about a leaders meeting.

A third source told Reuters the White House was “irate” over earlier reports that the Trump administration was considering a 60-day extension to the tariff deadline.


Lighthizer and Mnuchin left their Beijing hotel on Friday afternoon without taking questions from reporters.

‘SLEIGHT OF HAND’
Reuters reported earlier that in recent meetings China has pledged to make its industrial subsidy programs compliant with World Trade Organization rules and end those that distort markets, but had offered no details on how it intends to achieve that goal.

The offer has been met with scepticism from U.S. negotiators, in part because China has long refused to disclose its subsidies.
And some in U.S. industry have been unimpressed with the extent of other reported Chinese offers to address U.S. concerns, such as Beijing’s proposal to increase purchases of U.S. semiconductors to $200 billion over six years.

John Neuffer, President and CEO of the Semiconductor Industry Association (SIA), told Reuters that the offer would be “akin to an accounting sleight of hand” and “an attempt to rearrange our supply chains and drive them deeper into China”.

“We are confident U.S. government negotiators will wisely dismiss this offer and continue pushing for meaningful reforms that create a fair and level playing field for U.S. companies doing business in China,” Neuffer said.

The proposal, first reported by the Wall Street Journal, was part of a “recycled” package of goods purchase offers that Beijing first presented in the spring of 2018, a source told Reuters on Thursday.

Amazon, GM may buy into electric truck startup
Many U.S. lawmakers and business groups have urged Trump in recent weeks not to settle for an agreement based largely on increased Chinese purchases of farm and energy commodities.

Trump has said he did not expect to meet with Xi before March 1, but White House spokeswoman Sarah Sanders has raised the possibility of a meeting between the leaders at the president’s Mar-a-Lago retreat in Florida.

China has long denied Washington’s accusations of trade abuses, and it has retaliated to U.S. tariffs with its own duties on American goods.

Some trade experts say China appears focused on securing a Xi-Trump meeting, in the hope that it would make a near-term deal to limit or reduce tariffs more likely.

Reporting by Michael Martina

Asian stocks retreat as lackluster China, U.S. data weigh


TOKYO (Reuters) - Asian stocks fell on Friday, retreating from four-month highs after data out of China raised concerns over deflationary pressures building in the world’s second biggest economy.

The bearish impulse appeared likely to be passed on to European stocks, with spreadbetters expecting Britain’s FTSE to open 0.1 percent lower, Germany’s DAX 0.3 percent down and France’s CAC 0.2 percent down.

Data released on Friday showed China’s factory-gate inflation slowed for a seventh straight month in January to its weakest pace since September 2016 amid cooling domestic demand.

The broader equity markets had already been under pressure after Thursday’s weak U.S. retail sales figures triggered fresh doubts about the strength of the world’s largest economy.

That offsetting some cautious optimism over trade talks in Beijing between the United States and China.

Also casting a shadow, the White House said U.S. President Donald Trump will declare a national emergency to try to obtain funds for his promised U.S.-Mexico border wall, drawing immediate criticism from Democrats.


Aside from the data, immediate focus was on a meeting on Friday between the Trump administration’s top two negotiators and Chinese President Xi Jinping in Beijing.

There has been no decision to extend a March 1 deadline for a deal that could forestall a further increase in U.S. tariffs on some imports from China, White House economic adviser Larry Kudlow said on Thursday.

MSCI’s broadest index of Asia-Pacific shares outside Japan, which had scaled a four-month high midweek on factors including expectations for reduced U.S.-China trade tensions, was down 1 percent.

The Shanghai Composite Index lost 0.8 percent following Friday’s discouraging data.

“With factory-gate deflation likely to deepen in the coming months, we expect policymakers to roll out further measures to ease financial pressure on industrial firms, including cuts to benchmark lending rates,” said Julian Evans-Pritchard, senior China economist at Capital Economics.

Japan’s Nikkei dropped more than 1 percent and South Korea’s KOSPI shed 1.45 percent.


In the United States, the S&P 500 lost about 0.3 percent on Thursday, a day after it hit a 10-week high on rising hopes that Washington and Beijing could reach a trade deal.

U.S. retail sales tumbled 1.2 percent in December, recording their biggest drop since September 2009 as receipts fell across the board.

The shockingly weak report led to economic growth estimates for the fourth-quarter being cut to below a 2.0 percent annualized rate, with the Atlanta Fed forecasting a 1.5 percent growth, much below its previous forecast of 2.7 percent about a week ago.

U.S. Federal Reserve Governor Lael Brainard said the central bank should stop paring its balance sheet by the end of this year.

The U.S. central bank built a 4 trillion dollar balance sheet over years of bond purchases aimed at lowering longer-term borrowing costs to stimulate the economy when near-zero rates were not delivering enough of a boost.

Daisuke Uno, chief strategist at Sumitomo Mitsui Bank, said the Fed “appears to be laying the ground work to end its balance sheet reduction early”.

The 10-year U.S. Treasuries yield fell to 2.655 percent, wiping out most of their rise this week.

Retail sales post biggest drop in nine years in December
In the currency market, the weak U.S. data dented the dollar.

The U.S. currency fetched 110.34 yen, stepping back from Thursday’s seven-week peak of 111.13.

The dollar’s weakness saved the euro from testing its 2018 low of $1.1216. The common currency stood at $1.1285 after having fallen to $1.1248 on Thursday following economic data showing Germany’s economy stalled in the fourth quarter.

The British pound traded a shade lower at $1.2797 following a descent to a near one-month low of $1.2773 overnight after Prime Minister Theresa May lost a symbolic Brexit vote in parliament, weakening her hand as she seeks to renegotiate her withdrawal agreement with Brussels.

Oil prices soared as top exporter Saudi Arabia said it would cut crude exports and deliver an even deeper output cut.

Brent crude futures stretched an overnight rally rose to as high as $65.10 per barrel, their highest level in nearly three months. The contracts have gained nearly 5 percent this week.

“Brent should average 70 dollars per barrel in 2019, helped by voluntary (Saudi Arabia, Kuwait, UAE) and involuntary (Venezuela, Iran) declines in OPEC supply,” wrote commodity strategists at Bank of America Merrill Lynch.

Oil exports from Venezuela and Iran have been the target of U.S. sanctions.

U.S. crude futures rose 0.35 percent to $54.60 per barrel and were headed for a weekly gain of roughly 4 percent.

Reporting by Shinichi Saoshiro and Hideyuki Sano

Thursday, 14 February 2019

U.S.-China trade talks move to higher level as deadline looms


BEIJING (Reuters) - U.S. Treasury Secretary Steven Mnuchin said he was looking forward to trade talks with China on Thursday, as discussions in Beijing moved to a higher level in a push to de-escalate a tariff war ahead of a March 1 deadline for a deal.

The talks, scheduled to run through Friday, follow three days of deputy-level meetings to work out technical details, including a mechanism for enforcing any trade agreement.

“Looking forward to discussions today,” Mnuchin told reporters without elaborating as he left his hotel.

He and U.S. Trade Representative Robert Lighthizer opened the meetings shortly afterward at the Diaoyutai state guest house with Chinese Vice Premier Liu He, the top economic adviser to Chinese President Xi Jinping.

U.S. tariffs on $200 billion worth of imports from China are scheduled to rise to 25 percent from 10 percent if the two sides don’t reach a deal by the deadline, increasing pressure and costs in sectors from consumer electronics to agriculture.

U.S. President Donald Trump told reporters on Wednesday that the negotiations had been progressing “very well”.

Trump’s advisors have described March 1 as a “hard deadline”, and the president has said a delay was possible though he preferred not to do so.

A Bloomberg report cited sources saying Trump was considering pushing back the deadline by 60 days to give negotiators more time.

Countering that, Hu Xijin, the editor-in-chief of China’s nationalist Global Times tabloid, tweeted that speculation on an extension was “inaccurate”, citing a source close to talks.

Trump has said he did not expect to meet with Xi prior to March 1, but White House Press Secretary Sarah Sanders has raised the possibility of a meeting between the leaders at the president’s personal retreat at Mar-a-Lago in Florida.

U.S. Department of Agriculture Deputy Secretary Stephen Censky said on Wednesday that the two presidents were expected to meet “sometime in March,” but no dates were set.

‘TESTED BY THE TRADE WAR’
The Chinese government has offered few details about the state of negotiations this week.

Chinese trade data released on Thursday showed imports from the United States fell 41.2 percent from a year earlier to $9.24 billion, the lowest amount in dollar terms since February 2016.

Exports to the United States also declined 2.4 percent to $36.54 billion, the lowest amount since April 2018.

China’s trade surplus with the United States narrowed to $27.3 billion in January, from $29.87 billion in December.

China’s soybean imports fell 13 percent in January from a year earlier, customs data showed, as a hefty duty on shipments from the United States, its second largest supplier, curbed purchases.

The United States has used tariffs as leverage to demand Beijing make major structural policy changes, including ending the forced transfer of American technology, fully enforcing intellectual property rights, and curbing industrial subsidies.


But China has denied accusations of trade abuses. While Chinese officials have repeatedly pledged to improve market access for foreign investors, few experts expect Beijing to agree to anything that would force fundamental changes to what Washington complains is its state-led approach to trade.

The Global Times struck a confident pose in an editorial late on Wednesday, saying that though Washington had started the trade fight, it “was now more willing to reach an agreement”.

“China will never harm its fundamental interests. The policy has been tested by the trade war and we have seen the change in Washington’s attitude,” the paper said.

Reporting by Michael Martina