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World stocks stumble after all-time high, kiwi takes a dive

Traders work in front of the German share price index, DAX board, at the stock exchange in Frankfurt, Germany, July 3, 2017. REUTERS/Staff/Remote

 

World stocks stumble after all-time high, kiwi takes a dive

LONDON (Reuters) – World stocks set a fresh record high before stalling in Europe on Thursday, as the longest winning streak for Japanese stocks since 1998 and the first close above 23,000 for Wall Street’s Dow index helped to offset nerves in Spain.

Traders were marking 30 years to the day since the 1987 Black Monday stock market crash but there couldn’t have been a greater contrast as equity markets have continued to clock up milestone after milestone.

The Nikkei enjoyed its 13th straight daily rise, helping the MSCI index of global stock markets .MIWD00000PUS – now up 17.6 percent for the year – add to its long list of record highs.

It wasn’t all one-way traffic, though.

European shares took their biggest tumble in almost two months after a new batch of third-quarter results brought some disappointments, notably from Anglo-Dutch consumer goods titan Unilever, French advertising group Publicis and Germany’s Kion.

They then took another lurch lower as signals emerged from Spain that Madrid was gearing up to invoke a never-before-used clause to re-impose central rule over the restive region of Catalonia.

The euro EUR=EBS trimmed gains that had taken it to a three-day high against the dollar, while Spanish bond ES10YT=TWEB markets gave up their early morning gains.

“Everyone is watching this with great interest but it just looks like a standoff,” said Saxo Bank FX strategist John Hardy, saying the situation was something of a ‘catch-22’ for Catalonia.

A declaration of independence would see it lose its prized autonomy ,while calling a regional election could mobilize Catalan voters who would prefer to stay part of Spain.

“But the market is not expressing any real fear over this and I think that is justified,” Hardy added.

The other big currency market move came from the New Zealand dollar. It was sent skidding to its lowest since May after the left-leaning Labour Party won the support of the minor nationalist New Zealand First party to form a ruling coalition.

It ended weeks of political guessing games but fanned concerns that the Labour Party’s hardline policies on immigrants and foreign ownership could hurt investor sentiment.

The New Zealand dollar NZD=D4 slid as much as 1.4 percent to $0.7047, which as well as the 4-1/2 month low was also the biggest percentage decline since November 2016.

CHINA FOCUS

Among the other headlines, China’s economic growth cooled slightly to 6.8 percent in the third quarter from a year earlier, from the second quarter’s 6.9 percent.

A modest loss of momentum had been expected as the government reins in the heated property market and cracks down on riskier lending.

Other data showed that China’s industrial output rose a stronger-than-expected 6.6 percent in September, while retail sales also outperformed. Property sales fell though for the first time in over two years.

The Chinese yuan and stocks eased, with Shanghai .SSEC falling 0.4 percent.

“The GDP reading could weigh negatively on both mainland stocks and currency markets as traders may position for further weakness into year-end, suspecting financial curbs will continue to have a negative impact on growth in China,” said Stephen Innes, head of Asia-Pacific trading at OANDA in Singapore.

The dollar index against a basket of six major currencies was broadly steady at 93.340 .DXY.

The index ended a four-session winning run overnight on lacklustre U.S. data but briefly resumed its climb after the 10-year Treasury yield US10YT=RR spiked 4 basis points with safe-haven bond prices falling on better investor risk appetite.

The dollar was little changed at 112.940 yen JPY= after climbing 0.6 percent overnight. The euro nudged up 0.15 percent to $1.1802 EUR=.

The term of current Fed Chair Janet Yellen’s expires in February and investors are keen to see whom U.S. President Donald Trump will pick as her replacement. The White House said Trump would announce his decision in the “coming days”.

In commodities, Brent crude oil futures LCOc1 dropped 1.2 percent to $57.43 a barrel and U.S. WTI CLc1 dropped 1.5 percent.

Brent had risen to a three-week high of $58.54 a barrel on Wednesday on worries about tensions in Iraq and Iran, but lost steam after a surprising drop in U.S. refining rates and an unexpected build in fuel stocks signaled slower demand in the world’s top oil consumer.

Reporting by Marc Jones; Editing by Gareth Jones

 

Published at Thu, 19 Oct 2017 09:01:43 +0000

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Asia shares at 10-year high ahead of U.S. data, China Congress

 

Asia shares at 10-year high ahead of U.S. data, China Congress

TOKYO (Reuters) – Asian stocks edged to a 10-year high on Friday thanks to expectations of brisk global growth, although investors held off chasing shares higher ahead of U.S. economic data and next week’s Chinese Communist Party Congress.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.15 percent, having gained 3.6 percent so far this month. Japan’s Nikkei edged up 0.2 percent to another 21-year high.

Wall Street shares dipped slightly on Thursday, pulled down by a fall in AT&T after the telecoms company reported subscriber losses in its cable TV business.

But MSCI’s broadest gauge of the world stock exchanges covering 47 markets also stood at record levels, extending its gains so far this year to 17 percent.

China’s trade data showed both growth in exports and imports accelerated in September, with imports beating expectations, adding to the evidence of recent resilience in China’s economy.

“It is hard to think the current ‘goldilocks economy’ will suddenly change,” said Nobuyuki Kashihara, head of research group at Asset Management One, referring to an economy that is neither too hot, or too cold, but just right.

“Stock prices will continue to rise in line with growth in corporate earnings globally.”

On top of a broad consensus that the global economy is in its best shape in recent years, expectations that U.S. President Donald Trump would push through a tax cut also encouraged investors.

“While we don’t know the details of the tax reforms, the announcement of a plan to make the biggest tax overhaul in three decades triggered a fresh wave of reflation trade,” said Mutsumi Kagawa, chief global strategist at Rakuten Securities.

In currencies, the dollar lost some steam in recent days as U.S. bond yields appeared to have peaked for now, with minutes from the last U.S. Federal Reserve meeting showing policymakers remained divided on U.S. inflation prospects.

The next big test for the dollar is U.S. consumer inflation figures due later in the day.

“The data will likely be disrupted by the hurricanes. But if inflation is picking up, that is still positive for the dollar,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

On top of the near-term inflation readings, investors are also looking to who Trump will nominate as successor to Fed Chair Janet Yellen, whose term expires next February.

White House Chief of Staff John Kelly said on Thursday that Trump was “some time away” from making a decision, while another official said Trump had met with Stanford University economist John Taylor to discuss the job.

Another main focus is China’s 19th Communist Party Congress that begins on Oct 18, where President Xi Jinping is expected to lay out new policy initiatives and consolidate his power for a second five-year term.

”Specific economic policies won’t be laid out at this

meeting, but official statements and who ascends to

power will set the tone for the third Plenary Session … in March 2018, which will give more specifics about China’s economic agenda for the next five years,” said analysts at RBC Capital Markets.

The euro traded at $1.1849, slipping from Thursday’s high of $1.1880 but has kept weekly gain of almost 1 percent, though the currency remains dogged by the crisis around the Catalonian independence movement’s campaign to split from Spain.

The yen was little moved at 112.10 yen per dollar, though at that level, it is on course for a slight gain on the week, which would be its first in five weeks.

Bitcoin soared more than 4 percent after Thursday’s 13 percent gain to hit a record high of $5,846, a gain of 450 percent on the year.

The Chief Financial Officer of JPMorgan Chase & Co said the firm is open minded on the potential use cases in future for digital currencies, appearing to dial back comments last month from his boss, Chief Executive Officer Jamie Dimon, that bitcoin was a “fraud”.

Copper prices held firm after hitting a one-month high on Thursday as optimism over the demand outlook from major consumer China fueled buying.

London copper futures were at $6,862 a tonne early on Friday.

Oil prices edged up on Friday as both U.S. crude production and inventories declined. U.S. crude ticked up 0.5 percent to $50.87 a barrel. Brent crude rose 0.4 percent to $56.49 per barrel.

Reporting by Hideyuki Sano; Editing by Simon Cameron-Moore

 

Published at Fri, 13 Oct 2017 03:42:47 +0000

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Asian shares hit decade highs, Catalan fears ease

 

Asian shares hit decade highs, Catalan fears ease

SYDNEY (Reuters) – Asian shares jumped to the highest in a decade on Wednesday as Wall Street scaled all-time highs, while the dollar loitered around two-week lows on worries President Donald Trump’s tax plan could stall.

The euro traded around a 10-day peak after Catalonia’s leader suspended plans to leave Spain, easing near-term concerns about euro zone stability.

The MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.5 percent to 546.38, a level not seen since December 2007.

Australian stocks jumped to 1-1/2 month highs while South Korea’s KOSPI added 0.6 percent to within a whisker of record peaks.

Japan’s Nikkei edged closer to a 21-month top, even as scandal-hit Kobe Steel extended losses.

Sentiment was boosted after the International Monetary Fund upgraded its global economic growth forecast for 2017 and 2018, driven by a pickup in trade, investment, and consumer confidence.

“A risk-on mood has set in and money is flowing out of bond funds into equities funds,” said Hugh Dive, chief investment officer at Atlas Funds Management.

“One of the biggest drivers of global equities is the United States and some of the macro data coming out from there has been quite positive. There is also this view that China is traveling much better than many people had expected.”

The three major Wall Street indices set record highs again, with Dow up 0.3 percent, the S&P 500 adding 0.2 percent and the Nasdaq inching 0.1 percent higher.

In currency markets, the dollar held around a two-week trough as U.S. President Donald Trump’s escalating war of words with Senator Bob Corker raised concerns about the administration’s ability to pass promised reforms.

The dollar index steadied at 93.314 against a basket of currencies, around the lowest level since Sept.29.

FED MINUTES

The greenback was also under pressure amid ongoing uncertainty over the next Federal Reserve Chairman, with the predictions market site, PredictIt, favoring Fed governor Jerome Powell as the most likely candidate.

While Powell is regarded as more hawkish than incumbent Janet Yellen, whose term expires in February, analysts say he might be less aggressive in winding back stimulus than Kevin Warsh, another possible candidate for the role.

Investors will keep an eye on the minutes of the Fed’s September meeting due later in the day, which might help bolster views of a December rate hike.

The euro held around $1.1803, not far from Tuesday’s high of $1.1825, after Catalonian President Carles Puigdemont called for talks with Madrid to discuss the region’s future.

The gesture tempered fears of immediate unrest in a major euro zone economy and cheered investors. Madrid’s IBEX 35 Index futures added 1.1 percent, after the cash IBEX stock index closed down 0.9 percent on Tuesday.

“Markets were on edge, and no doubt so was he,” said David Plank, head of Australian economics at ANZ Banking Group, referring to Puigdemont’s address at Catalonia’s parliament.

“But the declaration for independence did not come, at least not explicitly,” Plank said. “This issue remains extremely fluid. But one thing is clear – this is not going to go away quickly or quietly.”

In commodities, U.S. crude rose 12 cents to $51.04 per barrel and Brent added 7 cents to $56.68 on signs of tighter near-term supply.

Gold prices came off their highest in two weeks, with spot gold at $1,287.61 an ounce.

Reporting by Swati Pandey; Editing by Sam Holmes

 

Published at Wed, 11 Oct 2017 03:58:55 +0000

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Quest: Are Theresa May’s days in charge numbered?

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Brexit trouble for Theresa May
Brexit trouble for Theresa May

Quest: Are Theresa May’s days in charge numbered?

  @richardquest

Quest’s Profitable Moment

I wonder if we will look back on this week as the turning point when it became obvious Theresa May’s prime ministership is over. Her keynote speech to the Tory conference was by every conclusion a mishap-filled disaster.

Firstly, a prankster managed to get on the stage and handed her a P45 — the form used in the U.K. for dismissal. Then May got a coughing fit and had to be handed a throat lozenge by the chancellor. Finally, some of the letters on the screen behind her fell off while she was finishing up.

At the moment, the only reason to keep Theresa May is the alternatives are grim, if not worse. The foreign secretary, Boris Johnson, is a brilliant man suffused by his own ambition. Everyone else is either dull, dangerous or deluded. So, Mrs. May continues.

It would be a grave mistake for the European Union to engage in schadenfreude, rubbing their hands in glee at this confusion. Some clearly hope the British confusion will enable the EU to “get one over” on the U.K., punishing them for leaving and sending a warning to other upstarts. That would be disaster. A failed negotiation may hurt the Brits more than the rest, but in the long run everyone will suffer.

Theresa May’s days as prime minister are numbered. What comes after may be worse. The Brexit negotiations are stuck in phase one and time is running out. Politics as normal must not be the way forward on either side if we are to avert disaster of the worst kind.

 

Quick takes

Warren Buffett gets into truck stop biz on the same day he trolls Trump, GOP

More Uber drama: Former CEO gets slapped down. Japan’s SoftBank invests

Wells Fargo slammed by Elizabeth Warren, accused of lying to Congress

Shock over Equifax/IRS deal at hearing that Monopoly Man photobombed

Echoes of the dotcom bubble as China’s tech stocks party like it’s 1999

What’s next

Jobs, jobs, jobs:The U.S. Labor Department is set to release September jobs numbers on Friday. The unemployment rate is expected to reflect layoffs linked to Hurricanes Harvey and Irma, which hit hard in Texas and Florida.

Big banks share earnings:It’s a big week for investors who keep an eye on big banks. JPMorgan and Citigroup report earnings on October 12. PNC, Bank of America and Wells Fargo will follow suit the next day.

 

Published at Fri, 06 Oct 2017 04:10:24 +0000

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Political Tremors In Germany And Spain

 

Political Tremors In Germany And Spain

by THE MOLE

The datacenter hosting my VPS’ decided to hand me and a bunch of its client a crate of lemons when moving all its servers to a new location without previously advising its sub vendors. Well at least that is what mine is claiming and if you search for quickpacket on twitter you do indeed find a bunch of angry complaints on how the migration was handled. Now for me that means most of my VPS’ have been down since Sundays, leaving me hanging high and dry. Fortunately the Zero’s VPS is hosted somewhere else, so at least all you Zero subs will not be deprived of the signals today.

Now you probably know the old saying: if life hands you a bunch of lemons, make lemonade! While I unfortunately won’t be able to properly post my usual charts and campaign updates I believe the political crisis currently unfolding here here in Spain as well as in Germany may be worth summarizing as there appear to circulate a lot of myths and misinformation on both ends. And as a born German come American now living in Spain I do feel that I am somewhat qualified to offer my perspective on what is going on and where I believe things are heading here in Europe.

Germany

angela-merkel-headshot

So let’s start with Germany, a subject pretty dear to my heart as I was born there and spent about 12 years of my life living in various parts of the country. Apologies for the picture but that is literally the friendliest snapshot of Chancellor Angela Merkel I was able to find. She’s not exactly a people person and the sweeping changes to Germany she spearheaded over her past three administrations do to some extent reflect the fact that she grew up under the East German regime in which she was a low level player in her early youth. She’s an extremely smart woman who holds a degree in quantum chemistry and was awarded prizes for her proficiency in Russian and Mathematics.

After the unification of Germany in 1989 the Democratic Awakening party Merkel had previously joined merged with West Germany’s CDU. Then Chancellor Helmut Kohl took her under his wings as sort of a protégé and the rest is history as the saying goes. After 12 years in power she is now embarking on her fourth term as German chancellor, but due to various controversial policies during her reign, mass immigration and a shift in energy policy being the most salient, a new nationalist party called the Alternative Für Deutschland (AfD) managed to more than double its percentage from under 5% to slightly over 12% during yesterday’s federal elections. Plus several of her allies and previous coalition partner SPD are now starting to distance themselves from Mrs. Merkel, not surprisingly so as their own election results yesterday took a major hit as well.

It is difficult to project forward from here as, just with the Federal Reserve, one should never under estimate the political skill of Angela Merkel. She has repeatedly run circles around her opponents and I am pretty confident that she will once again find a way to form a coalition and determine the course of Germany over the next four years to come. However that said, the easy days are over for Mrs. Merkel as she now will face not only the conservative AfD but also a strengthened FDP as well as both an embattled CDU and CSU (the Bavarian version of the CDU) which are now realizing that they are facing a fight for political relevancy.

Now I do have a pretty unique perspective on the situation as I left Germany in 1991, just after the reunification. The way I still remember Germany is what some people today may call antiquated and backward as much of the political shift toward the left happened after I was long gone. I suspect that previous chancellors like Helmut Kohl or Willy Brandt would be considered political extremists in this day and age but if one peruses the election program of the CDU or SPD from about 25  years ago then you’ll find that there’s a lot of overlap between them and what the AfD stands for today. You may disagree on that front but there simply is no way that Germany will be taken over by Neonazi right wing extremists. The German people have learned from history and they would never ever let this happen again.

I actually think that this may turn out to be a blessing in disguise, not so much for Mrs. Merkel and her CDU, but for Germany, as it once again gives the political center a chance to reassert itself. The last thing the liberals want to do is to continue ignoring or outright ostracizing a large percentage of its own population for political opinions that were considered mainstream just two or three decades ago. Because that is exactly what has happened over the past few years and once the center disappears completely what you may get is polarization on both fronts, which puts you on the fast track to civil war. And Germany in chaos always means Europe in chaos. I hope the Germans will continue to remember their lesson and use the coming four years as an opportunity to engage in mutual dialog and to prevent the rise of political extremism on both sides, the right and the left.

Spain

Spain_manifestacion

When it comes to Spain I am somewhat stunned by the overwhelming international support that Catalonia seems to be receiving in its struggle for independence. I wonder if California or Texas attempting to secede from the United States would receive a similar response. Be this as it may, this has been a train wreck in the making for a good part of the past decade now and the independista movement is just now receiving global recognition. Which always surprised me a little as a break off from Spain may send shockwaves through the entire European Union.

As I am a guest here I will not post my personal opinion on the subject as I believe this is something that Spain and Cataluña will have to sort out amongst each other. You will probably come across a lot of opinion pieces on the subject with both sides presenting very compelling arguments. All I would like to offer however is this: Although I do believe that secession would be terrible for both Spain and Cataluña as well as the rest of Europe, I also believe that all people have the right to self determination and to decide their own future. If a large part of a region wants to establish independence then it should be allowed to at least pursue that course.

It’s a bit like owning a dog and keeping it on a leash at all times. The more you try to exert control, the more eager it will be to run off at the first opportunity. The more space and love you give it the more it wants to stick around. Clearly a lot of political mistakes have been made and instead of demonizing Cataluña Madrid should take a good look at itself and ask why the Catalans are so eager to separate themselves from Spain in the first place. On the other side the Catalans of course need to carefully evaluate the pros and cons of secession, especially on a long term basis. A decision made as a result of regional pride and frustration about unfavorable policies coming out of Madrid may in the long term lead to unintended consequences.

But the die is cast now and increasing exchanges between pro-independence groups and Spanish loyalists will only accomplish exactly what I have warned about in my chapter on Germany – increasing polarization on both sides. Whether this in the end devolves into another regional civil war remains to be seen but I do believe that the potential for violent conflict exists as the Catalans are very proud and politically engaged people, and are not expected to simply stand by idly if they feel treated unfairly.

It’s important to remember that the Catalans always have considered themselves to be Catalans first and then perhaps Spaniards. Unlike down here in Valencia where Valenciano is used actively alongside with Spanish the Catalans insist on speaking mainly Catalan and will often refuse to engage you in Spanish. This shows a lot about their passion and the importance they put on their own regional language, culture, and of course their political future.

In closing, I wouldn’t worry too much about Germany at the current time and instead look at Spain for future signs of trouble. While Merkel will continue to dominate the international headlines it is Spain that is sitting on a proverbial powder keg that could go off at a moment’s notice.

 

Published at Mon, 25 Sep 2017 13:35:15 +0000

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Asia shares settle after rally, dollar squares losses on Trump comments

 

Asia shares settle after rally, dollar squares losses on Trump comments

TOKYO (Reuters) – Asian stocks steadied on Wednesday, taking a breather after the previous day’s surge, lacking the momentum to keep up with a global rally spurred by gains for tech shares on Wall Street and miners in Europe.

The dollar initially wobbled against the yen following campaign-rally threats by U.S. President Donald to force a government shutdown over funding a border wall, but it eventually squared the losses.

Spreadbetters expected a mixed start for European stocks, forecasting Britain’s FTSE .FTSE would open 0.15 percent lower, Germany’s DAX .GDAXI to start 0.05 percent higher and France’s CAC .FCHI to open unchanged.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS, which initially inched up to a two-week high, pulled back to stand little changed following a 0.7 percent rally on Tuesday.

Australian stocks were down 0.3 percent and South Korea’s KOSPI .KS11 gave back earlier modest gains to slip 0.1 percent.

Japan’s Nikkei .N225 bucked the trend and rose 0.3 percent, lifted as the dollar strengthened against the yen.

The Nikkei took its cues from Wall Street, which saw the Dow .DJI rise 0.9 percent, the S&P 500 .SPX climb 1 percent and the Nasdaq .IXIC gain 1.4 percent on Tuesday as technology shares rallied. [.N]

European stocks had also risen overnight, supported by upbeat results from miners and a weaker euro. [.EU]

Financial markets have been buffeted in recent weeks by heightened tensions on the Korean peninsula, turmoil in the White House, and growing doubts about Trump’s ability to fulfil his economic agenda.

Stocks, however, continue to attract buyers in an environment where bond yields remain relatively low and companies have largely notched up strong earnings.

“The return of bargain hunters after a shallow correction in U.S. markets again demonstrates that investors are reluctant to reduce exposure to equity markets given low bond yields, solid profit growth and a lower US$,” said Ric Spooner, chief market analyst at CMC Markets in Sydney.

“In a situation where earnings yields on stocks remain attractive in relation to bond yields, investors are reluctant to respond too negatively to ‘risk events’ unless they represent a clear and present short-term danger.”

The dollar was flat at 109.535 yen JPY=, coming off the day’s low of 109.370 plumbed after President Trump told supporters in Arizona “If we have to close down our government, we’re building that wall” in reference to his pledge to tighten immigration at the U.S.-Mexican border.

The greenback remained clear of a four-month low of 108.605 yen plumbed last week, when turmoil in the White House and geopolitical tensions took a toll on the currency.

“The dollar had been caught in a downtrend amid ebbing expectations towards U.S. inflation. It requires a surge in U.S. shares to break this pattern and that is what happened as Wall Street rallied,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

The dollar also drew support as U.S. Treasury yields rose and pulled away from two-month lows as some of the risk aversion that gripped the broader markets last week began to ebb.

The dollar index against a basket of six major currencies was little changed at 93.514 .DXY after rising 0.5 percent the previous day.

The euro was steady at $1.1759 EUR= after slipping about 0.5 percent overnight following weaker-than-expected German investor confidence.

A gathering of global central bankers on Friday in Jackson Hole, Wyoming, has also prompted investors to rebalance their currency positions ahead of the event, leading them to reduce some of their short dollar bets.

Speeches from Fed Chair Janet Yellen and European Central Bank President Mario Draghi will headline the event, although neither are expected to announce any significant policy.

In commodities, Brent crude LCOc1 slipped 0.35 percent to $51.69 a barrel after data from the American Petroleum Institute showed a crude stockpile decline largely in line with expectations and a surprise build in gasoline inventories.

Improving Libyan output also added to oversupply concerns in the crude oil market. [O/R]

Copper retreated from a three-year high, and other base metals also fell or trimmed gains, as speculators and funds locked in some profits after a steep rally. [MET/L]

Copper on the London Metal Exchange CMCU3 was down 0.3 percent at $6,562.50 per tonne after striking $6,649 on Tuesday, the highest since November 2014.

Spot gold XAU= was a shade higher at $1,285.50 an ounce, after losing 0.5 percent overnight as the precious metal felt the pressure from a stronger dollar. Spot gold had reached a nine-month high above $1,300.00 an ounce on Friday.

Reporting by Shinichi Saoshiro; Editing by Shri Navaratnam and Eric Meijer

 

Published at Wed, 23 Aug 2017 05:35:29 +0000

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These Oil Stocks Are at Risk From Venezuela’s Chaos

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These Oil Stocks Are at Risk From Venezuela’s Chaos

By Robert Gray | Updated August 21, 2017 — 6:24 AM EDT

Political chaos and troubled times in Venezuela’s oil patch are posing problems for a number of international oil companies, according to a recent report in Barron’s.

The story notes that Venezuela has some 300 billion barrels of proven oil reserves, but it cites Credit Suisse analysts who write that the country’s oil production has fallen by more than half to just over 2 million barrels from 3.3 million barrels in 2004.

And of course the slide in crude prices over the past few years is expected to weigh on production and profits in the South American country. (see also: Venezuela: 4 Reasons Why This Country May Go Under).

Plus there’s the threat of broader sanctions on Venezuela (see also: Oil Prices May Spike as Odds Increase of US Sanctions on Venezuela).

A History of Bad Business

Venezuela’s lack of investment in its state oil company — Petroleos de Venezuela or PDVSA — may leave it crippled even if the current political regime were overturned, according to Barron’s, which also notes the nation’s checkered past with foreign oil firms left holding contracts that Venezuela has backed out of in years past. In fact, Exxon Mobil Corp. (XOM) and ConocoPhillips Co. (COP) are still in arbitration with Venezuela over 2007 government actions.

The oil companies are apparently angling for better results: Schlumberger NV (SLB) has severely limited activity since the second quarter of 2016 until it has visibility on getting paid, per Barron’s. The story points out the international and national oil companies with the most exposure to Venezuela: Chevron Corp. (CVX), France’s Total SA (TOT), Repsol SA of Spain (REPYY), Eni SpA (E) from Italy, and Russia’s Rosneft.

Rosneft has provided $6 billion in financing to Venezuela, which used its Citgo refineries in the U.S. as collateral in the deal last fall, per Barron’s. The Russian company has oil-for-loan deals with the government and state-run PDVSA, and the two have joint ventures together—although Barron’s points out that many of them have not been developed yet due to lack of funding by the state company.

The Credit Suisse research note posits that Rosneft’s loans may get some priority over other payments, adding that China has more exposure to Venezuela and those loan repayments “appear to be behind schedule.”

 

Published at Mon, 21 Aug 2017 10:24:00 +0000

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Asian shares fragile as Trump turmoil, Korea tensions weigh

 

Asian shares fragile as Trump turmoil, Korea tensions weigh

TOKYO (Reuters) – Asian shares were fragile on Monday as investors remained unconvinced about U.S. President Donald Trump’s ability to fulfill his economic agenda, even as the departure of his controversial policy strategist raised hopes of some progress.

Japan’s Nikkei shed 0.3 percent, hitting a 3-1/2-month low, shrugging off a Reuters poll which showed confidence at Japanese manufacturers rose to its highest in a decade in August.

MSCI’s broadest index of Asia-Pacific shares outside Japan was barely in the black thanks to modest gains in China, but many markets, including Australia and South Korea, were in the red.

European shares are expected to dip, with spread-betters seeing a lower opening of 0.3 percent in Britain’s FTSE, and 0.2 percent in France’s CAC.

S&P Mini futures were down 0.1 percent at 2,424, not far from their one-month low of 2,419.5 touched on Friday.

Wall Street shares got only a short-lived boost on Friday after Trump fired White House chief strategist Steve Bannon.

“Markets seem to think that the administration will remain fragile and its ability to carry out its policies will be hampered even after Bannon’s departure,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

Although Bannon’s departure removes a major source of friction within the White House, Trump’s attacks on fellow Republicans following violence in Virginia earlier this month have isolated him, prompting some Republicans to begin questioning Trump’s capacity to govern.

Investors were also wary of any flare-up of tensions between North Korea and the United States as U.S. troops and South Korean forces started a joint exercise on Monday.

Many investors suspect Pyongyang might respond to the latest drill with more sabre-rattling, such as missile tests, although it has said last week it delayed a decision on firing four missiles toward Guam, home to a U.S. air base and Navy facility.

Tech-heavy Korean shares – one of the best performers globally for much of this year – have lost momentum since last month, partly on worries about escalating tensions in the Korean Peninsula.

JACKSON HOLE

In the currency market, the dollar was also hampered by political uncertainty in Washington.

Against the yen, the dollar fetched 109.24 yen, not far from Friday’s four-month low of 108.605.

The euro stood at $1.1750, stuck in its rough $1.17-$1.18 range in the past two weeks.

Investors are looking to European Central Bank chief Mario Draghi’s comments later this week at a meeting of the world’s central bankers in Jackson Hole, Wyoming. But sources told Reuters last week he will not deliver any fresh policy messages.

Federal Reserve Chair Janet Yellen’s keynote speech at the symposium will also be a main attraction for markets.

Comments last week from Fed officials suggested the stock market’s steady rise, still low long-term bond yields and a sagging dollar are girding the Fed’s intent to raise interest rates again this year despite concerns about weak inflation.

“People focus on inflation but in the Fed’s minutes policymakers spend a lot of time discussing whether bond yields are too low or asset prices are too high. If Yellen questions market stability, markets will expect a tighter policy,” Hiroko Iwaki, senior bond strategist at Mizuho Securities.

The 10-year U.S. Treasuries yield slipped to as low as 2.162 percent on Friday – its lowest since late June – and last stood at 2.199 percent.

Oil markets were stable, holding on to Friday’s big gains even though rising U.S. output weighed on hopes the market will tighten with crude inventories down 13 percent since March.

U.S. crude futures fetched $48.46 per barrel, down 0.1 percent while Brent futures were down 0.2 percent at $52.63 per barrel.

Editing by Kim Coghill and Jacqueline Wong

Published at Mon, 21 Aug 2017 05:55:07 +0000

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Frankfurt and Dublin make bankers feel wanted in battle for Brexit jobs

Frankfurt and Dublin make bankers feel wanted in battle for Brexit jobs

LONDON/DUBLIN (Reuters) – “I’m here to send you the regards of the Federal Chancellor. I am entitled to tell you we want you in Germany.” This private message from Angela Merkel, delivered by a regional politician to Wall Street bankers last year, is having the desired effect.

Frankfurt, along with Dublin, is emerging on top in the battle to draw highly-paid banking jobs – and the tax revenue that they bring – away from London before Britain’s departure from the European Union in March 2019.

Germany has favored a subtle approach, with Chancellor Merkel saying little if anything in public on what is a sensitive issue at home. Instead she relied on Volker Bouffier, prime minister of the state of Hesse where Frankfurt is located, to take her invitation to New York in November, according to three sources familiar with the discussions.

Irish leaders have been less reticent, but both countries have sent the same welcoming message to U.S., Japanese and other foreign banks – despite the public unpopularity of bankers that still lingers after the global financial crisis.

While Paris and Amsterdam are set to lure one or two major lenders, Germany and Ireland have so far secured the bulk of commitments from big-name banks.

Even then, the work of lobbyists is not over: they are pushing to host the huge business of clearing deals in euro-denominated securities, now dominated by the British capital.

Banks have been undertaking legal, financial and economic analysis in choosing new bases for their EU business if it can no longer be done from London. But they also need to know the political climate will be favorable.

“Bankers want reassurance that the government wants them,” one senior banking executive told Reuters. “Business does care about political sentiment towards them. There’s a reason: if there are problems you know that government will use its powers to help you.”

The largest global banks in London have indicated that about 9,600 jobs could go to the continent or Ireland in the next two years, though few have yet moved, according to public statements and information from industry sources.

In recent weeks Morgan Stanley, Citi and Bank of America as well as Japan’s Nomura, Mizuho and Sumitomo Mitsui have announced decisions for new EU headquarters, all opting for Frankfurt or Dublin.

These cities’ success follows year-long campaigns, as government agencies and lobby groups staged a charm offensive with the banks unseen since the 2007-09 crisis.

BAILOUT MEMORIES

Merkel, who is seeking re-election next month, left city and Hesse officials to do the rounds in New York. That included the one-on-one meetings with senior executives on Wall Street when Bouffier passed on her message.

German taxpayers had to fund a series of bank bailouts during the crisis, and the bad memories remain due to Deutsche Bank. While Germany’s biggest bank did not needed rescuing, it has run up a litigation bill of 15 billion euros ($17.5 billion) since 2009 due to extravagant market bets and misconduct.

Local officials have had fewer inhibitions than the national politicians. The Frankfurt Main Finance lobby group went on more than 50 trips to foreign banks’ home bases in the past year. “We’ve had indications that two thirds of the major banks’ moves will be to Frankfurt,” lead campaigner Hubertus Vaeth said.

Morgan Stanley, Citi and JPMorgan say Frankfurt will be their EU trading base after Brexit. However, Vaeth told Reuters: “The strategy was to be subtle. There was no glee or triumphalism.”

As a medium-sized provincial city, Frankfurt has also been proclaiming its cultural attractions. That involved taking Wall Street firms to the city’s English-language theater and Japanese bankers to see the Eintracht Frankfurt soccer team play.

Ireland has adopted similar sporting tactics. When Dublin hosted an American Football game between Boston College and Georgia Tech last year, government ministers worked the room at a dinner of 500 executives from Boston and Atlanta, including State Street CEO Jay Hooley.

The Irish political welcome has been more evident. New Prime Minister Leo Varadkar, building on work by his predecessor Enda Kenny, has met several bank bosses and posted a picture on his website of him smiling with Bank of America CEO Brian Moynihan.

Politicians posing with bankers had been close to anathema since a collapse of the Irish financial system forced the country to take an international bailout in 2010, bringing austerity policies which hurt voters badly.

An IDA Ireland sign is seen in the IDA Ireland offices in London, Britain, August 14, 2017.Hannah McKay

EXPENSE AND DISRUPTION

Extra banking jobs and tax revenue are vital for Ireland, a small economy that has relied for decades on foreign investment.

Having attracted all 10 of the world’s largest pharmaceutical companies as well as technology firms such as Google, Facebook and Apple, Ireland moved pre-emptively to offset any economic damage inflicted when Britain – its second biggest export market – leaves the EU.

IDA Ireland, the state agency charged with winning foreign business, began meeting banks three months before Britons voted to leave the EU. When billboards went up around London after the referendum extolling Paris as a financial center, IDA officials were already in boardrooms making their pitch for Dublin.

“These investments are won through engagement at a senior level. We weren’t trying to build relationships from scratch,” IDA chief executive Martin Shanahan told Reuters.

Dublin has bagged the planned EU headquarters of Barclays and Bank of America. JPMorgan has bought a building in the city, and is expected to move more middle and back office jobs – such as risk management and deal processing – there.

Kieran Donoghue, IDA Ireland’s head of International Financial Services speaks during an interview in London, Britain August 14, 2017.Hannah McKay

Banks, however, are holding off on moving large numbers of people yet, focusing on ensuring they have the right legal and operational framework to do business in the EU if Britain fails to negotiate a favorable exit deal, executives say. Citi for example has said the maximum number of jobs it may need to shift out of London is only around 150.

The worry for Dublin and Frankfurt is that banks could set up the EU legal entities for their trading businesses in the cities, leaving national regulators with the task of overseeing their massive balance sheets, but with the bulk of jobs staying in London or placed elsewhere in the EU.

“Most banks are looking to minimize expense and disruption by relocating as little as possible in the first instance,” said Matt Austen, UK head of financial services at Oliver Wyman.

Supervisors are on guard for setups that are little more than fronts for staff still working in London. The European Central Bank has repeatedly warned that “shell” operations will not be accepted.

MASSIVE BENEFITS

Many banks’ concerns still center on issues such as a country’s regulatory regimes, infrastructure and economy.

Bill Winters, chief executive at Standard Chartered, told Reuters his bank opted for Frankfurt as its new EU base due to Germany’s AAA credit rating. With Ireland’s rating up to six notches lower, that went against Dublin.

“It would’ve been easy to set up there also. But at the end of day it involved an interesting issue around the country’s credit rating. We felt large institutional investors would prefer Germany,” he said.

Paris also assembled a group of leading lobbyists including some of France’s most respected business executives. Teams went to meet bankers in New York.

HSBC, which has extensive French operations, has said it would move up to 1,000 traders to Paris in the case of a “hard” Brexit. French banks are also expected to transfer back some staff now based in London.

But other lenders proved reluctant to make any decision in favor of Paris before knowing the outcome of elections in May.

Former Bank of France governor Christian Noyer, who is lobbying for Paris, said attitudes have improved since Emmanuel Macron, a pro-EU ex-banker and economy minister, won the presidency. Some bankers, however, remain skeptical that his government can change labor laws and the tax system, which they say are major deterrents to setting up in France.

Rival centers are moving on to the next struggle to win over clearing houses for the likes of euro-denoninated derivatives, with Frankfurt and Paris the main contenders.

“There’s a 50 percent chance of having clearing business move to Frankfurt,” said Vaeth. The number of jobs would be relatively modest, but he added: “Success would mean 100 billion euros of assets … The long term benefits are massive.”

Reporting By Anjuli Davies and Padraic Halpin; Additional reporting by Maya Nikolaeva; editing by David Stamp

 

Published at Fri, 18 Aug 2017 06:49:29 +0000

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Day 1 of NAFTA talks: ‘This agreement has failed’

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U.S., Canada and Mexico begin NAFTA negotiations
U.S., Canada and Mexico begin NAFTA negotiations

 Day 1 of NAFTA talks: ‘This agreement has failed’

  @CNNMoney

President Trump’s trade team didn’t mince words on the first day of trade talks with Canada and Mexico.

Leaders from the U.S., Canada and Mexico on Wednesday officially began renegotiating NAFTA, the three-nation trade pact, in Washington.

Mexican and Canadian leaders started a press conference on a positive note, touting the advantages of NAFTA and saying the new agreement must work for all three nations.

Then, U.S. Trade Representative Robert Lighthizer spoke. He noted that NAFTA has benefited many Americans, such as farmers, and said the U.S., Canada and Mexico have a strong friendship.

But he soon tore into NAFTA, Trump-style.

“For countless Americans, this agreement has failed,” Lighthizer said. “We cannot ignore the huge trade deficits, the lost manufacturing jobs, the businesses that have closed or moved because of invectives, intended or not, in the current agreement.”

Lighthizer said at least 700,000 American jobs have been lost due to NAFTA. He added “many people believe the number is much, much bigger than that.”

The stakes of renegotiation are high. Millions of jobs and thousands of companies rely on NAFTA. American consumers benefit immensely from free trade while factory workers say they’ve gotten the short end of the deal, with their jobs outsourced to Mexico.

The threat facing the pact is real, too. Trump says if the U.S. can’t get a better deal, he’ll withdraw from NAFTA. He’s also threatened to slap tariffs on Mexico, and he’s already slapped some on Canada. They have in turn cautioned that they’ll retaliate against any U.S. tariffs.

Mexican and Canadian leaders framed their desires around “modernizing” NAFTA to reflect more of today’s global economy, including guidelines for e-commerce, which isn’t included in the 23-year-old deal.

“The issue is not tearing apart what works, but rather making our agreement work better,” Mexico’s economy secretary Ildefonso Guajardo said on Wednesday.

“We want to protect NAFTA’s record of job creation and economic growth,” Canada’s foreign minister Chrystia Freeland said. Freeland also delivered remarks in Spanish, which appeared to be a gesture of goodwill toward Mexico.

Negotiations will begin with what isn’t in NAFTA already — digital trade, protection of intellectual property and energy trade, among other topics.

Leaders admitted that’s the easy part. “After modernizing, the tough work begins,” Lighthizer said.

Future rounds of negotiations will take place in Mexico and Canada over coming months.

Thorny issues surround several topics, including where and how car companies manufacture vehicles. Trump’s team sees this as an area where they can reshape NAFTA to create more factory jobs.

Right now, 62% of the parts of a car sold in North America have to come from the region. U.S. officials will likely aim to raise that level, though it’s unclear how much.

But experts caution if companies have to produce more parts in the U.S., it will likely cause American consumers to pay higher prices on cars, clothing and other goods.

“It sounds difficult to achieve both things, something has to give,” says Marcelo Carvalho, head of emerging markets research at BNP Paribas.

Another challenge facing the negotiators: Time. Mexico has a presidential election next year and the front runner, Andres Manuel Lopez Obrador, is a major critic of Trump. Current Mexican officials warn that NAFTA talks need to end before Mexico’s election season starts next spring because it will be very hard to ratify a deal in that political environment.

And Lighthizer noted that Trump isn’t interested in “tweaking” NAFTA. They want a “major improvement.”

Experts say the administration will be challenged to get a truly new deal done before the spring.

“I’m skeptical that you can fundamentally rewrite the agreement in six to eight months,” says Matthew Rooney, economic growth director at the Bush Institute in Texas.

As talks get underway, one lingering question hangs over the three nations.

“If they can’t get an agreement, does President Trump get rid of it entirely?” said Lori Wallach, global trade watch director at Public Citizen, a non-profit. “It depends on the will of the parties.”

Published at Wed, 16 Aug 2017 16:18:14 +0000

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‘Made in Germany’ faces new test as antitrust claims are leveled at automakers

 

Made in Germany’ faces new test as antitrust claims are leveled at automakers

  @MarkThompsonCNN

Germany’s biggest industry is again facing tough questions about how it does business.

Still dealing with the “dieselgate” scandal sparked by Volkswagen’s admission in 2015 that it rigged engines to appear cleaner than they were, the country’s top car manufacturers now stand accused of operating a huge cartel since the 1990s.

News magazine Der Spiegel dropped the bombshell on Friday, citing a letter it said Volkswagen(VLKAY) had written to German antitrust officials last summer in which it admitted to possible anti-competitive behavior.

The article alleges that hundreds of executives from Volkswagen(VLKAY) (and its subsidiaries Audi and Porsche), Mercedes-Benz owner Daimler(DDAIF), and BMW(BMWYY) had participated in 60 secret industry working groups over decades.

The alleged aim? To suspend competition in everything from vehicle development and engines, to suppliers and diesel emissions systems.

European antitrust officials, who are responsible for ensuring that big business plays fair in the European Union, were quick to respond to the report.

“The European Commission and the Bundeskartellamt [German cartel office] have received information on this matter, which is currently being assessed by the Commission,” the European Commission said in a statement on Saturday. “It is premature at this stage to speculate further.”

The German cartel office has declined to comment.

There’s a huge amount at stake. If EU officials ultimately find that the carmakers broke competition law, they could fine them billions of euros.

Shares in all three companies slumped on Friday, and lost more ground Monday. Volkswagen and BMW traded nearly 3% lower, while Daimler stock fell by 3.7%.

The potential for damage goes way beyond the companies. The industry employs 800,000 people in Germany, where it accounts for 20% of total industry revenue,

It’s also a powerful ambassador for Europe’s biggest economy. One in every five cars worldwide carries a German brand, and their reputation for engineering excellence has helped “Made in Germany” products become No.1 with consumers worldwide.

Volkswagen and Daimler have declined to comment since the news broke Friday. Volkswagen’s supervisory board will hold an extraordinary meeting Wednesday “due to the current situation,” a spokesman said. He would not comment on the details of the agenda.

In a statement on Sunday, BMW said its diesel emissions system differed significantly from others in the market, and none of its vehicles were manipulated to pass emissions tests.

“We compete to provide the best exhaust treatment system,” it said in a statement.

A BMW spokesperson declined to comment on the broader cartel allegations arising from the Spiegel article.

german carmakers ceos
Daimler CEO Dieter Zetsche, BMW CEO Harald Krueger and Volkswagen CEO Matthias Mueller at an industry conference in 2016.

 

BMW also said Sunday it was offering owners of at least 350,000 diesel cars a voluntary software upgrade free of charge to incorporate “knowledge gained in the field over the last years to realize further improvements in emissions.”

The Munich-based carmaker said the move was part of a comprehensive plan to improve air quality in Germany’s cities while avoiding “across-the-board driving bans.”

Like other carmakers, it will take part in a “diesel summit” with German politicians on August 2.

Daimler last Tuesday announced a voluntary recall of more than 3 million Mercedes vehicles in Europe amid mounting questions over its diesel engines. It is offering European owners a service upgrade to reduce emissions.

At the same time, it said it had created a new line of diesel engines with “exemplary emissions” that would be introduced rapidly across the company’s entire range.

And on Friday, Audi said it would retrofit 850,000 diesel cars to improve their emissions in “real driving conditions.”

(Why?)

Published at Mon, 24 Jul 2017 13:42:18 +0000

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Asia stocks hit near-decade high, yen slips as BOJ cuts inflation forecast

Asia stocks hit near-decade high, yen slips as BOJ cuts inflation forecast

Nichola Saminather

SINGAPORE (Reuters) – Asian shares rose to their highest levels in nearly a decade on Thursday, bolstered by a surge in global markets, while the yen eased after the Bank of Japan reinforced expectations that it will keep massive stimulus in place far longer than other major central banks.

European markets were also set for a positive start, with financial spreadbetter CMC Markets expecting Britain’s FTSE 100 and France’s CAC 40 to open up 0.1 percent and Germany’s DAX to start the day 0.2 percent higher.

MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.1 percent, hovering near its highest level since December 2007.

Australian stocks rose 0.5 percent and South Korea’s KOSPI was up 0.3 percent.

Chinese blue chips advanced 0.1 percent, while the Shanghai Composite edged up 0.2 percent. Hong Kong’s Hang Seng crept up 0.2 percent.

The MSCI World index inched up in its 10th straight session of gains and set a record high for the sixth consecutive day, lifted by all-time closing highs on Wall Street in the wake of strong earnings reports.

“Fresh all-time highs had once again been printed on various US indices including the S&P 500 and the NASDAQ, inspired by earnings,” Jingyi Pan, market strategist at IG in Singapore, wrote in a note.

“Gains in the U.S. and the higher crude prices are (helping) energize regional markets while earning reports in the Asian region will also be watched.”

In currency markets, the yen weakened after the BOJ once again pushed back its projected timing for hitting its 2 percent inflation target, as it cut price forecasts until fiscal year 2020.

The yen slipped 0.2 percent to trade at 112.135 yen to the dollar following the BOJ decision. The weaker yen helped the Nikkei extend gains to 0.6 percent.

The euro was steady at $1.1511 on Thursday, ahead of a meeting of the European Central Bank later in the session.

The common currency hit 14-month high this week following seemingly hawkish comments by ECB President Mario Draghi.

At Thursday’s meeting, the ECB may drop a reference to its readiness to increase the size or duration of its asset-purchase program before announcing in the autumn how and when it will start winding down its bond buying.

“The euro has surged enormously on the back of hopes that the ECB is going to start the process of shutting the door on loose monetary policy,” Naeem Aslam, chief market analyst at ThinkMarkets UK, wrote in a note.

“The ECB needs to be clear about its forward guidance and it should reinforce that in a subtle manner. Coming out of the gates too aggressively would create shock waves in the market.”

The dollar index, which tracks the greenback against a basket of trade-weighted peers, rose 0.1 percent to 94.894.

The Australian dollar set a new two-year high on Thursday, still heady from the minutes of the last Reserve Bank of Australia meeting, released Tuesday, which showed the central bank had turned more upbeat on the economic outlook.

It pulled back from that high to trade down 0.2 percent from Wednesday’s close at $0.7939.

The Canadian dollar was 0.1 percent weaker at C$1.262 to the dollar. On Tuesday, it touched a 14-month high on record domestic factory sales and stronger oil prices.

Oil prices dipped after hitting a two-week peak on Wednesday on a bigger-than-expected weekly draw in crude and gasoline inventories in the United States.

U.S. crude eased less than 0.1 percent to $47.10 a barrel, after jumping 1.6 percent overnight.

Global benchmark Brent also lost nearly 0.1 percent to $49.67, holding on to most of Wednesday’s 1.8 percent gain.

Gold slid as the dollar pulled higher, falling 0.15 percent to $1,238.10 an ounce on Thursday.

Reporting by Nichola Saminather; Editing by Sam Holmes, Jacqueline Wong and Kim Coghill

Published at Thu, 20 Jul 2017 05:45:52 +0000

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Brazil’s turmoil to boost M&A pipeline after a quiet quarter, bankers say

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Brazil’s turmoil to boost M&A pipeline after a quiet quarter, bankers say

By Tatiana Bautzer and Guillermo Parra-Bernal| SAO PAULO

 

Escalating political turmoil and a widening graft scandal are driving more Brazilian companies to sell businesses, promising a strong pipeline of mergers and acquisitions after dealmaking hit its slowest pace in a year in the second quarter, bankers said.

 

While stricter legal scrutiny related to the corruption scandal helped slow second-quarter M&A, bankers said funds and multinational firms were still seeking Brazilian assets. Despite economic and political headwinds, merger activity could be reignited by falling borrowing costs and an increasingly stable currency.

 

Pressure from creditors could also speed up asset sales by companies restructuring almost 180 billion reais ($56 billion) of debt, bankers said.

 

“M&A is relatively resilient to the macroeconomic and political environment as strategic players seek opportunities with long-term potential,” said Patricia Moraes, head of Brazil banking for JPMorgan Chase & Co, which topped Thomson Reuters local advisory rankings last quarter.

 

Uncertainty surrounding the timeframe for an economic recovery from Brazil’s worst recession on record, as well as concerns about the stability of President Michel Temer’s administration, have deterred some buyers and sellers from committing to deals.

 

Companies announced $7.052 billion worth of Brazil-related mergers last quarter, down 76 percent from the prior quarter, the rankings showed. A year earlier, when tougher due diligence procedures were implemented, announced M&A deals totaled $6.861 billion.

 

Last quarter, the number of announced deals fell to 132 from 141 in the prior three months and 135 a year earlier.

 

Brazilian markets tanked in mid-May after members of the billionaire Batista family accused Temer of seeking to obstruct the massive corruption probe known as Operation Car Wash. The market turmoil compounded the impact of Brazil’s recession, keeping buyers and sellers at odds over valuations.

 

Temer has called a corruption charge filed against him by Brazil’s top prosecutor a “fiction” as he faces possible removal from office.

 

Fallout from Operation Car Wash has led to increased due diligence concerning companies ensnared in the scandal, such as building group Odebrecht SA. Usual timeframes for such proceedings have doubled over the past year, to up to six months.

 

“Deals are going though an adjustment,” said Alessandro Farkuh, head of M&A for Banco Bradesco BBI SA. “There’s a lot of work but, because of the country’s situation, M&A negotiations are taking place in an unusual way.”

 

CONSOLIDATION

 

More assets are on the block as companies seek to cut debt or improve their capital and tax structures, said Eduardo Miras, co-head of Brazil investment banking at Morgan Stanley & Co, Brazil’s No. 1 M&A bank this year.

 

“Some companies are being forced to sell,” Miras said. “Opportunistic buyers and strategic players with a long-term view find themselves with a flurry of good Brazilian assets.”

 

Car Wash-related M&A deals include J&F Investimentos SA’s planned sale of a dairy producer and the maker of the popular Havaianas flip flops, Alpargatas. Members of the Batista family, which controls J&F, admitted to bribing 1,893 politicians.

 

Roderick Greenlees, global head of investment banking at Itaú BBA SA, said he expected deals to pick up in the third and fourth quarters amid growing interest from multinational firms and buyout funds, which are more likely to meet buyers’ prices for attractive companies.

 

“Some premium assets are being sold because of the current situation, which in general keeps us excited about the dealflow ahead,” Greenlees said.

 

JPMorgan and Morgan Stanley topped value rankings for the second quarter and the first half, respectively. JPMorgan worked on Itaú’s $2 billion purchase of a minority stake in brokerage XP Investimentos SA.

 

Itaú BBA led the rankings for the number of deals after working on seven transactions last quarter and 18 this year.

 

In the first six months, the total of 273 Brazilian M&A-related transactions was worth $36.177 billion, more than three times the amount recorded in the same period of last year, the data showed.

 

For years, investment banks have derived nearly half of their annual Brazil revenues from M&A advisory. As dealmaking suffers, banks have turned to structured lending, transactional banking or, in some cases, securities trading.

 

Following is a table with Brazil M&A ranking for the second quarter and the first six months. Numbers are expressed in U.S. dollars, unless specified.

 

(Editing by Phil Berlowitz)

 

(Why?)

Published at Wed, 05 Jul 2017 12:13:58 +0000

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It’s official. Business isn’t investing in Britain.

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The headaches of negotiating Brexit
The headaches of negotiating Brexit

 It’s official. Business isn’t investing in Britain.

  @ivanakottasova

The man running Britain’s economy has warned that uncertainty over Brexit is stopping businesses from investing in the country.

“There is a large amount of business investment that is being postponed until business can see more clearly what the likely outcome of [Brexit] is,” Treasury chief Philip Hammond said Thursday in a televised interview.

It’s not the only warning to sound in recent weeks.

Research from Bank of America Merrill Lynch showed that business investment dropped in the final quarter of 2016 to its weakest level in almost three years. And a recent survey of 700 businesses conducted by the Bank of England indicated that uncertainty was causing some companies to rethink investments.

The British government kicked off divorce negotiations with the European Union on Monday.

But it’s still not clear exactly what Prime Minister Theresa May hopes to achieve before the clock runs out on talks in March 2019. May had promised a clean break with the EU, but that was before a disastrous election wiped out her majority in parliament and emboldened rivals who want to maintain closer ties to Europe.

Investors have now been dealing with elevated uncertainty for a year. But huge risks still loom.

“If we leave the single market and the customs union, the costs involved will be significant,” said Vicky Pryce, an economist at the Centre for Economics and Business Research. “Businesses have been very worried.”

Corporate leaders are most anxious about a scenario in which Britain crashes out of the EU without a deal. They would face new trade barriers and huge amounts of red tape.

Hammond favors a transitional period to help British companies adapt to life outside the bloc.

“The earlier we can give business that reassurance the more quickly we will get businesses investing again,” he said on Thursday.

While there have been some big investments announced in the wake of the referendum — especially in the tech sector, broad momentum appears to be fading.

Several major banks have already announced they will move jobs and investment out of the country. The budget airline Ryanair(RYAAY) said it will pivot investment out of the U.K.

The German car maker BMW(BAYRY) is considering whether to produce the new electric version of its iconic Mini car in mainland Europe rather than at its main U.K. facility in Oxford.

“There have been some purchases, mainly because foreign companies took advantage of the weaker pound, but very little in terms of real investment,” said Pryce.

Bank of England Governor Mark Carney also raised warning flags this week. He said that Britain is in a vulnerable position because it imports more goods and services than it exports.

“The U.K. relies on the kindness of strangers at a time when risks to trade, investment, and financial fragmentation have increased,” he said in a speech to financial titans.

Published at Thu, 22 Jun 2017 15:50:26 +0000

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Exclusive: Trump administration concerned about U.S. firms giving financial ‘lifeline’ to Venezuela

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Exclusive: Trump administration concerned about U.S. firms giving financial ‘lifeline’ to Venezuela

By Matt Spetalnick and Girish Gupta| WASHINGTON

 

The Trump administration is concerned about any action by U.S. companies that provides a financial lifeline to Venezuela’s government, senior White House officials told Reuters, after Goldman Sachs Group Inc came under fire for purchasing $2.8 billion of state oil company bonds at a steep discount.

 

Venezuela’s political opposition and some U.S. lawmakers have condemned the purchase of so-called “hunger bonds” as a way to prop up President Nicolas Maduro’s cash-strapped government, accused of being behind food shortages affecting millions of Venezuelans in a worsening crisis.

 

The New York-based investment bank said last week that it never transacted directly with Venezuelan authorities when it bought the bonds of oil firm PDVSA for pennies on the dollar.

 

“We’re concerned by anything that provides a lifeline for the status quo,” one U.S. official, speaking on condition of anonymity, told Reuters. “I would prefer them not to.”

 

A second administration official said U.S. companies making Venezuela investments should “think morally about what they’re doing.”

 

The officials said they did not know whether the Trump administration had made its case directly to Goldman Sachs.

 

Goldman Sachs did not respond to a request for comment.

 

Julio Borges, head of Venezuela’s opposition-led Congress, accused Goldman Sachs on Monday of “aiding and abetting the country’s dictatorial regime.”

 

In a letter to Goldman Sachs President Lloyd Blankfein, Borges said Congress would open an investigation into the transaction and he would recommend “to any future democratic government of Venezuela not to recognize or pay these bonds.”

 

Eliot Engel, the senior Democrat on the House of Representatives Foreign Affairs Committee, urged President Donald Trump on Friday to condemn Goldman Sachs for the bond purchase.

 

The Trump administration, which has several former Goldman Sachs executives in senior roles, has yet to officially comment on the issue.

 

Engel said the bond purchase allowed Maduro and his associates to “regularly abuse the human rights of Venezuelan citizens while at the same time blocking their access to much-needed food and medicine.”

 

Venezuela’s opposition won control of the legislature in a 2015 election, but the pro-government Supreme Court has annulled all its measures and essentially stripped its powers. The country has been engulfed in two months of anti-government unrest, which has left more than 60 people dead on both sides.

 

Maduro’s government says the United States and Venezuela’s opposition are seeking to oust him from power.

 

With Venezuela’s inefficient state-led economic model struggling under lower oil prices, Maduro’s unpopular government has become ever more dependent on financial deals or asset sales to bring in coveted foreign exchange. Venezuela’s international reserves rose by $749 million on Thursday and Friday, reaching around $10.86 billion, according to the central bank.

 

(Reporting by Matt Spetalnick and Girish Gupta; Editing by Yara Bayoumy and Mary Milliken)

Published at Sun, 04 Jun 2017 05:13:30 +0000

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Euro Island

by PeteLinforth from Pixabay

 

Euro Island

The 2nd round of the French presidential elections almost seemed procedural to me in that Macron was clearly the front runner plus it was clear that various voting blocks would coalesce in order to prevent Le Pen from gaining a majority. So suffice to say that Monsieur Macron’s overwhelming 65% win wasn’t exactly a big surprise to me. Which is exactly why I had been accumulating a big stack of € cash ahead of the final round. Although I anticipated a bit of weakness after the election I did not think we would find ourselves near the lower edge of the current island again.

2017-05-10_EURUSD_island

Now it’s quite possible that the current sell off is just an extended round of profit taking, a.k.a. sell the news. But it’s gone a bit further than I for one had expected. The daily panel currently shows a very well developed island formation with a 100 pip gap just below.

2017-05-10_6E_volume

I think there’s a good chance to see a drop to a little further below to 1.085 at which point the EUR bulls will have to show their cards. Either run it back higher or let her drop through the gap and then regroup. As you can see there ‘s not much accrued volume within the gap which should accelerate a slider lower.

Caveat – I do however not see a huge potential for an extended sell off and based on the current formation it seems that the EUR is going to remain above 1.065 at least for the foreseeable future. Unfortunately for me of course as life is going to be a wee bit more expensive for me over here in Europe. If the EUR continues to strengthen from here I may even be forced to cut down my nudie bar visits from four to three times per week. The horror!

2017-05-10_soybeans_addendum

By the way whoever is making market in soybeans did a great job stopping me out and bouncing right back. No comment…

2017-05-10_soybean_meal_update

Speaking of crack smokers I don’t know what’s going on in soybean meal but I’m starting to get dizzy. More seriously though – if you’re deployed just like yours truly then this can be either very good or very bad. Good as in that it establishes more and more context above your entry position which later provides valuable buffer space above your b/e spot. Bad as in well, just take a look at soybeans above….

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P.S.: About the title image – I couldn’t find a good EUR island, so bite me
Published at Wed, 10 May 2017 13:19:59 +0000

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Trump’s NAFTA is already running out of time

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NAFTA explained
NAFTA explained

  @CNNMoney

President Trump wants a new trade deal with Mexico and Canada soon. But he’s running out of time.

Trump says his promise to get tough on America’s trade partners — particularly China and Mexico — is a big reason why he was elected in the first place.

“It’s probably one of the primary reasons I’m sitting here today as president,” Trump said on April 20.

He’s labeled NAFTA, the free trade deal with Canada and Mexico, the worst in history.

Adding uncertainty to NAFTA’s fate, two senior Trump administration officials told CNN on Wednesday that Trump is considering an executive order to pull out of the deal.

Trump has said he wants a deal that benefits US workers, but hasn’t said exactly what he wants in a new deal.

If Trump decides to stay in and renegotiate, time isn’t on his side.

His trade team, led by Commerce Secretary Wilbur Ross, must trigger a 90-day consultation period before trade talks can begin. At the earliest, talks could start in August.

Edward Alden, a senior fellow at the Council on Foreign Relations, said “it’s completely unrealistic” to get a deal done this year.

“The notion that you’re going to have a negotiation that’s both fast and productive is just an illusion,” Alden added.

It’s also worth noting that the original NAFTA agreement, which became law in 1994, took years to put together.

Ross said Tuesday he hasn’t started the consultation period because U.S. Trade Representative Robert Lighthizer, a longtime trade expert, hasn’t been confirmed by the full Senate yet. (He was approved Tuesday by the Senate Finance Committee.)

But that’s not the only problem.

Mexican leaders want negotiations done by early 2018 because Mexico has presidential elections in July of next year. There’s no telling whether the next Mexican president will cooperate with Trump on NAFTA.

“It will be in the best advantage of the countries involved that we finish this negotiation within the context of this year,” said Mexico’s economic minister, Ildefonso Guajardo, to CNNMoney earlier this month.

Trump added a twist to talks on Monday, slapping a 20% tariff on Canadian softwood lumber. Experts say that won’t help Trump’s future trade negotiations with Canada.

“You’ve disturbed a lot of waters. It’s going to be a long negotiation,” says Gary Clyde Hufbauer, a trade expert at the Peterson Institute for International Economics. “Getting a deal done by early 2018 or the end of this year was wishful thinking.”

Canadian leaders denounced Trump’s decision, saying it was made on “baseless” accusations of government subsidies provided to Canadian lumber companies.

And Canada isn’t even Trump’s main target. Mexico is. Experts say Trump could use all the help he can get from Canada if he plans to strong arm Mexico.

Mexican and Canadian leaders say they’re ready to negotiate. They’re just waiting for Trump.

“We are ready to come to the table anytime, but the United States, in fact, has yet to actually initiate the negotiating process,” Canada’s Foreign Minister Chrystia Freeland told CNN on Tuesday.

The Commerce Department and the White House were not immediately available for comment.

–Jeremy Diamond contributed reporting to this article
Published at Wed, 26 Apr 2017 14:59:44 +0000

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Stocks soar after French election first round

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Investors cheer French election results
Investors cheer French election results

  @lamonicabuzz

Vive la France!

Investors around the world cheered the French presidential election results. The hope is that the centrist candidate Emmanuel Macron will have no problem defeating the anti-EU challenger Marine Le Pen in a runoff election on May 7.

Stocks soared in Europe and were set to pop in the United States as well. The Dow rose more than 200 points Monday morning, a gain of about 1%.

Many market observers had worried that Le Pen, much like U.S. President Donald Trump, could wind up defying the odds and win in France.

There were also fears that far-left candidate Jean-Luc Mélenchon could pull off an upset and that the final presidential race would be between him (not Macron) and Le Pen.

“Voting outcomes have developed a habit of surprising people lately,” said Paul Simons, portfolio manager with the BMO Pyrford International Stock Fund. He was referring to both Trump as well as the U.K.’s Brexit vote.

“The good news here is that there aren’t two candidates that are anti the euro and EU,” Simons added.

And even though Le Pen is moving on to the runoff election, she still faces a big uphill climb since she is far behind Macron in the polls in a head-to-head race. Other candidates in France who lost this weekend have also quickly moved to back Macron.

“The French elections gave the markets a sigh of relief,” wrote Chuck Butler, managing director with EverBank Global Markets in a report Monday morning. “A lot of the risks that were associated with the French election have been put on the back burner.”

The S&P 500 and Nasdaq were up 1% as well. The Nasdaq, home to top tech stocks Apple(AAPL, Tech30), Amazon(AMZN, Tech30) and Facebook(FB, Tech30), is at a record high and within spitting distance of topping the 6,000 level for the first time.

Another reason investors are in a good mood? Trump promised late last week that a major announcement about tax reform is coming this Wednesday.

france us stocks up

Worries about the failure of Trump and Republican leaders in Congress to quickly come up with a plan to repeal and replace President Obama’s Affordable Care Act have quickly faded.

The double dose of good news from France and the U.S. could put the broader market back in rally mode, especially if big companies report strong earnings this week.

Caterpillar(CAT), Coca-Cola(KO), McDonald’s(MCD), AT&T(T, Tech30), Ford(F), GM(GM), Microsoft(MSFT, Tech30), Amazon, Google(GOOG) owner Alphabet, Exxon Mobil(XOM) and Starbucks(SBUX) are among the many blue chips that will report their latest results and give outlooks for the rest of 2017 this week.

Investors are clearly less nervous about the global outlook. The VIX,(VIX) a measure of volatility that is often dubbed Wall Street’s fear gauge, plunged 20% Monday morning, a sign that people are growing more bullish.

CNNMoney’s Fear & Greed Index, which looks at the VIX and seven other indicators of market sentiment, finished last week in Fear mode. But the index moved closer to Neutral territory on Monday as investors’ worries about global politics ebb.

Still, investors will continue to nervously watch France until the May 7 election. Monday’s gains could evaporate if Le Pen starts to gain momentum.

Mohamed El-Erian, chief economic adviser with Allianz, said that investors “are looking forward to the likelihood of a Macron win in two weeks, but are yet to overcome the uncertainty that comes with this anti-establishment moment in time.”
Published at Mon, 24 Apr 2017 15:26:32 +0000

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Euro jumps, shares firm on French election relief

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By RitaE from Pixabay

Euro jumps, shares firm on French election relief

By Marc Jones| LONDON

European shares opened sharply higher and the euro briefly vaulted to five-month peaks on Monday after the market’s favored candidate won the first round of the French election, reducing the risk of another Brexit-like shock.

The victory for pro-EU centrist Emmanuel Macron, who is now expected to beat right-wing rival Marine Le Pen in a deciding vote next month, sent the pan-European STOXX 50 index .STOXX50E up 3 percent, France’s CAC40 .FCHI almost 4 percent and bank stocks .SX7E more than 6 percent. [.EU]

Traders top-sliced some of the euro’s overnight gains, but it was still up more than 1 percent on the dollar EUR=EBS, more than 2 percent against the yen EURJPY= and 1.3 percent on the pound EURGBP= as the early flurry of deals subsided. [FRX/]

“It (the first round result) has come out in line with the market’s expectations so you have something of a risk rally as there was a bit of a risk-premium built into all markets,” said James Binny, head of currency at State Street Global Advisors.

There was also an unwinding of safe-haven trades.

Shorter-term German bonds DE2YT=TWEB saw their biggest sell-off since the end of 2015 as investors piled back into French FR10YT=TWEB as well as Italian, Spanish, Portuguese and Greek debt [GVD/EUR].

The Japanese yen’s fall was widespread JPY=EBS, the market’s so-called fear-guage, the VIX volatility index .VIX, plunged the most since November and gold XAU= saw its biggest tumble in more than a month. [GOL/]

E-mini futures for Wall Street’s S&P 500 ESc1 climbed 0.9 percent in early trade, while yields on 10-year U.S. Treasury notes US10YT=RR rose almost 8 basis points to 2.31 percent.

 

RISK RALLY

Asia also saw a risk rally. Japan’s Nikkei .N225 jumped 1.5 percent as the yen retreated, while MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS edged up 0.3 percent.

Shanghai shares .SSEC fell 1.7 percent after state media signaled Beijing would tolerate more market volatility as regulators clamp down on riskier financing.

But Macron’s success set the tone.

The euro jumped in relief, and was last up 1.1 percent at $1.0840 EUR=, having been as far as $1.0940, the highest since early November.

The safe-haven yen slipped across the board with the euro surging as much 2.4 percent to 119.77 yen EURJPY= while the U.S. dollar gained 1 percent to 110.20 yen JPY=.

“The rise of the euro and risk appetite rebounding is understandable and this should also see yields in Europe fall, spreads to Bunds tighten and stocks rally,” said Tim Riddell, an analyst at Westpac.

“However, such gains are likely to be contained when markets reflect upon the marked shift away from the ‘establishment’ and just how effective the new president may be,” he added.

 

SKEPTICAL ON TAX

Wall Street on Friday had only a modest lift from news President Donald Trump would announce the broad outline of his proposed tax package on Wednesday.

“Markets are skeptical that the real details will be forthcoming,” said analysts at ANZ in a note.

“There is also plenty of conjecture about whether any tax cuts will be able to be revenue neutral, and that could affect their ease of passage through Congress.”

The Dow .DJI ended Friday down a minor 0.15 percent, while the S&P 500 .SPX lost 0.30 percent and the Nasdaq .IXIC fell 0.11 percent.

Investors were also keeping a wary eye on tensions in the Korean peninsula.

North Korea said on Sunday it was ready to sink a U.S. aircraft carrier to demonstrate its military might, in the latest sign of rising tension as Trump called the leaders of China and Japan to discuss the situation.

South Korea responded by asking Washington about holding joint drills with the USS Carl Vinson aircraft carrier strike group as it approaches waters off the Korean peninsula.

Oil prices recouped just a little of last week’s hefty losses, still weighed by signs U.S. production and inventory growth were offsetting OPEC’s attempts to reduce the global crude glut.

Brent futures LCOc1 were up 16 cents at $52.12 a barrel, while U.S. crude futures CLc1 added 17 cents to $49.79.

 

(Additional reporting by Wayne Cole in Sydney; Editing by Andrew Heavens)
Published at Mon, 24 Apr 2017 06:07:26 +0000

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U.S. business group urges Washington to ‘use every arrow’ against China

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 U.S. business group urges Washington to ‘use every arrow’ against China

By Michael Martina| BEIJING

The United States should “use every arrow” in its quiver to ensure a level commercial playing field in China, a U.S. business lobby said on Tuesday, warning that 2017 could be the toughest year in decades for American firms in the country.

China’s policies designed to support domestic companies and create national champions have narrowed the space for foreign companies, the American Chamber of Commerce in China said in its annual business climate report.

The White House has said U.S and Chinese officials are fleshing out a pledge by leaders Donald Trump and Xi Jinping for a 100-day plan to cut the U.S. trade deficit with China, which reached $347 billion last year.

But the chamber said it hoped more attention would be paid to market access for American firms in China.

“Right now basically we are recommending everything you have in your quiver – please use every arrow possible, with the understanding that some of these points of leverage could be counterproductive to us,” chamber chairman William Zarit said, referring to possible backlash from Beijing.

He was speaking at a briefing on the report.

U.S. business groups want U.S. officials to act against Beijing on market imbalances, but not push the world’s two largest economies toward a trade war.

Nonetheless, more vociferous complaints by American businesses mark a shift from years past, when many companies eschewed the idea of forceful action by Washington for fear of retribution by China.

Foreign technology companies fear what they see as Beijing’s plans for subsidies of billions of dollars to domestic competitors and regulations that could force the surrender of key technology or hit competitiveness.

“With uncertainty stemming from political and economic transitions in both the U.S. and China, perceptions of a deteriorating investment environment for foreign companies in China, and a slowing economy, 2017 will likely be one of the most challenging years in decades for U.S. companies in China,” the chamber said.

China is committed to further opening its economy, in a process whose speed is “quite visible,” the foreign ministry said.

“China is already one of the most open developing nations,” spokesman Lu Kang told a regular news briefing.

U.S. business leaders also worry that Trump’s focus on reining in North Korea could undercut U.S. commercial interests in China. Last week, Trump tweeted that Beijing would get a better trade deal if it helped resolve the issue.

“I’m sorry to see there is a possibility we may lose some momentum on helping to level the playing field with China in our economic relationship, due to the situation in North Korea, if there is some kind of trade-off,” Zarit said.

(Reporting by Michael Martina; Additional reporting by Christian Shepherd; Editing by Clarence Fernandez)
Published at Tue, 18 Apr 2017 08:31:52 +0000

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