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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….

It’s not too late – learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don’t waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.

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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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tags
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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U.S. dollar drops sharply after Trump calls it ‘too strong’

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Trump slams China as currency manipulator

Trump slams China as currency manipulator

  @byHeatherLong

President Trump caused the U.S. dollar to slump Wednesday.

The dollar dropped 0.7%, a major move, after Trump told the Wall Street Journal that the dollar is “getting too strong.”

“I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me,” Trump said. “But that’s hurting — that will hurt ultimately.”

The dollar hit its highest level in 13 years shortly after Trump won the election. It was widely viewed as a sign that investors believe America will grow faster than other parts of the world.

But now the dollar might be getting too mighty. The president is worried that US businesses, especially manufacturers, won’t be able to compete. American goods are more expensive relative to European or Japanese products when the dollar’s value is too high.

“It’s very, very hard to compete when you have a strong dollar and other countries are devaluing their currency,” Trump said.

trump dollar falls

 

On the campaign trail, Trump frequently slammed China for purposefully weakening its currency, the yuan, to make its goods cheaper on the world market.

He vowed to label China a “currency manipulator” on Day One of his presidency, the equivalent of saying that China cheats. That didn’t happen, but the president continued to talk tough on China. In early April, he called China the “world champions” of currency devaluation.

But now, Trump is saying something very different.

“They’re not currency manipulators,” he said Wednesday.

The U-turn in the president’s stance comes mere days after Trump and China’s President Xi’s first big meeting. The two countries are trying to work together to keep North Korea from launching missiles.

Trump also acknowledged that China is no longer manipulating its currency, at least not in a harmful way to the US. China has actually been attempting to prop up the yuan lately so wealthy Chinese investors keep their money at home instead of investing overseas.

In addition to softening his tone on the dollar, Trump also sounded a lot more upbeat about Federal Reserve Chair Janet Yellen.

“I like her, I respect her,” Trump told the Wall Street Journal.

Only a few months ago, Trump said Yellen should “be ashamed of herself” for keeping interest rates low. He said she was just doing that to help President Obama.

Now the president said he “likes” low interest rates and that he might even ask Yellen to stay on when her term expires in early 2018.
Published at Wed, 12 Apr 2017 20:10:14 +0000

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Flight to safety lifts yen, gold and bonds

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Flight to safety lifts yen, gold and bonds

Investors ducked for cover on Wednesday as a drumbeat of alarming geopolitical news sent the safe-haven yen and gold to five-month highs and yields on top-rated sovereign bonds to their lowest for the year so far.

The unease tarnished an otherwise brightening outlook for global economic growth and put equities on the defensive.

Japan’s Nikkei .N225 slid 1 percent in early trade, while MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was near flat.

In contrast, gold XAU= climbed to $1,275.66 an ounce and touched its highest since Nov. 10.

“A degree of uncertainty has found its way into previously seemingly bulletproof financial markets,” wrote analysts at ANZ.

“There is clearly some nervousness out there, with tensions around North Korea ratcheting higher and adding to an already heightened geopolitical environment. Global cyclical assets have not yet responded, but that can’t last.”

North Korea warned on Tuesday of a nuclear attack on the United States at any sign of aggression, as a U.S. Navy strike group steamed toward the western Pacific – a force President Donald Trump described as an “armada”.

Trump said in a Tweet that North Korea was “looking for trouble” and the U.S. would “solve the problem” with or without China’s help.

The bellicose language has dragged South Korean stocks and the won to four-week lows and caused jitters right across Asia.

At the same time, U.S. Secretary of State Rex Tillerson was in Moscow to denounce Russian support for Syria’s Bashar al-Assad, raising the stakes in the Middle East.

A joint press conference by Trump and NATO Secretary General Jens Stoltenberg is also likely to generate headlines.

 

A YEN FOR YEN

The yen, a favored harbor in times of stress due to Japan’s position as the world’s largest creditor nation, climbed across the board.

The dollar was nursing a grudge at 109.62 yen JPY=, having been as low as 109.53 at one stage. Dealers warned there was little in the way of chart support until the 200-day moving average at 108.72.

The euro sank to its lowest in five months at 116.16 yen EURJPY=R having fallen 11 sessions in a row, a record for the single currency. It was steadier on the dollar at $1.0610 EUR=.

Political uncertainty in France added to the euro’s woes as hard-left candidate Jean-Luc Melenchon surged in the polls ahead of the May Presidential election.

All this unease boosted bonds with yields on 10-year Treasuries US10YT=RR boasting their lowest close of the year on Tuesday. Yields were last at 2.296 percent and testing a hugely important barrier on the charts.

Wall Street’s losses were relatively minor so far as investors wagered on an upbeat earnings season, which kicks off this week with a handful of banks.

The Dow .DJI eased 0.03 percent, while the S&P 500 .SPX lost 0.14 percent and the Nasdaq .IXIC 0.24 percent.

Analysts expect earnings for all S&P 500 companies to have risen 10 percent in the first quarter from a year ago, according to Thomson Reuters data.

Oil got an added lift from reports that Saudi Arabia told OPEC officials it wants to continue OPEC cuts for an additional six months.

Global benchmark Brent LCOc1 edged up 13 cents in early trade to $56.36 a barrel, while U.S. crude CLc1 added 12 cents to $53.52.

(Editing by Shri Navaratnam)

 
Published at Wed, 12 Apr 2017 00:50:33 +0000

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Guinness Exports Subject to Brexit Uncertainty

Guinness Exports Subject to Brexit Uncertainty

By Shoshanna Delventhal | April 8, 2017 — 11:09 PM EDT

Diageo Plc’s (DEO) iconic Guinness beer could face problems as the Dublin-based brewer foresees potential border compilations between the United Kingdom and Ireland, a European Union member state.

The 310-mile border between The Republic of Ireland and Northern Ireland will serve as the only land border between the U.K. and another EU country. Barrels of Guinness cross this border twice before being shipped out to beer connoisseurs around the world.

Companies Fear Return of Hard Border

Ingredients for Guinness are shipped from across Ireland to Dublin where they are mixed and fermented at the brand’s famous brewery at St. James Gate. The stout is then transferred into tanker trucks and moved 90 miles north to a Diageo packaging facility across the border in East Belfast. The Guinness, ready to hit the markets, then passes the unmarked border a second time before returning back home to Dublin.

Over the past two decades, an open border has allowed for the overall peaceful exchange of trade and culture between the U.K. and Ireland. While E.U. and British politicians say border controls between the states won’t return, many wonder how realistic that is. “For me, there’s no question, there has to be some sort of customs visibility on either side of the border,” Bloomberg quoted Robert Murphy, a former European Commission worker in Brussels.

Restraint of Trade?

The Irish government estimates cross-border trade between the U.K. and Ireland surpasses an annual 3 billion euros, or about $3.2 billion. A hard border could cost corporations big time, as the two states have a highly integrated agri-food sector. Diageo, for example, is estimated to lose 100 euros on each beer journey from Ireland just due to a time delay, amounting to 1.3 million euros in additional cost per year given border controls revamp.

The Economic & Social Research Institute estimated Brexit​ could cut trade flows between Ireland and the U.K. by 20%. Diageo for one, has said it will work with the the two governments on finding a solution to the border issue. E.U. leaders are scheduled to meet later this month for a summit to begin what is estimated to become two years of Brexit negotiations. (See also: Diageo: Finally Benefiting From ‘Transition Year’?)
Published at Sun, 09 Apr 2017 03:09:00 +0000

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Stocks spooked, safe assets jump after U.S. missile strike on Syria

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 Stocks spooked, safe assets jump after U.S. missile strike on Syria

By Nichola Saminather and Wayne Cole| SYDNEY

Bonds, gold and the yen jumped in Asia on Friday, while stocks retreated, as investors fled to safe assets after the United States launched cruise missiles against an airbase in Syria, raising the risk of confrontation with Russia and Iran.

The U.S. dollar dropped as much as 0.6 percent, while gold and oil prices rallied hard, though the early market panic ebbed when a U.S. official called the attack a “one-off”, with no plans for escalation.

“It was a knee-jerk reaction because markets are starting to come back a little, as it doesn’t seem like there will be further retaliation coming,” said Christoffer Moltke-Leth, head of institutional client trading at Saxo Capital Markets in Singapore.

European stocks were also poised for a negative start, with financial spreadbetters expecting Britain’s FTSE 100 and France’s CAC 40 to open down 0.2 percent, and Germany’s DAX to start the day 0.3 percent lower.

U.S. President Donald Trump ordered the strikes on Thursday against an airbase controlled by Syrian President Bashar al-Assad’s forces in retaliation for a chemical attack, launched from the base on Tuesday, that killed at least 70 people.

Facing his biggest foreign policy crisis since taking office in January, Trump took the toughest direct U.S. action yet in Syria’s six-year-old civil war.

A Syrian human rights monitor said the missile strike had almost completely destroyed the airbase near Homs, and the city’s governor said five had been killed and seven wounded.

While U.S. allies including Britain, Australia and Saudi Arabia, as well as Syria’s opposition group, welcomed the move, Russia and Iran condemned the attack.

A Russian lawmaker said the nation would call for an urgent meeting of the United Nations Security Council, adding the strikes could be viewed as an “act of aggression” against a U.N. member.

“The action adds a complexity to geopolitics that wasn’t there before, given Russia’s support for Syria and Trump’s pre-election pledges to try and repair relations with (Russian President Vladimir) Putin,” Michael Hewson, chief market analyst at CMC Markets in London, wrote in a note.

“The U.S. would now appear to be on a collision course with Russia.”

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.4 percent after earlier sliding as much as 0.85 percent to a 2-1/2-week low. The index is set to end the week down about 0.2 percent.

E-mini S&P 500 futures lost 0.3 percent, having earlier tumbled as much as 0.7 percent, in unusually sharp moves for Asian hours.

But Japan’s Nikkei reversed course to close up 0.4 percent, narrowing losses for the week to 1.3 percent.

Secretary of State Rex Tillerson noted the attack was “proportionate”, suggesting no follow-up was planned.

“The unexpected and unequivocal nature of the U.S. response to the sarin-centric carnage in Syria by President Trump was very much in keeping with his promise not to telegraph his military options to the world in advance of taking action,” wrote Peter Kenney, senior strategist at Global Markets Advisory Group in New York.

Investors had already been on edge with Trump set to begin talks on Friday with Chinese leader Xi Jinping over flashpoints such as North Korea and China’s huge trade surplus with the United States.

Markets are also bracing for U.S. non-farm payroll data for March later in the session, with economists forecasting a significant drop in job gains from February.

HIGHS FOR OIL AND GOLD

The yen, a favored haven in times of stress, climbed across the board. The dollar moderated losses, last trading at 110.635 yen, after earlier touching 110.14, its lowest since March 28.

The dollar was otherwise steady against a basket of currencies at 100.63, as it benefited from flows into safe-haven U.S. Treasuries.

Yields on 10-year U.S. Treasuries fell as much as five basis points to 2.289 percent, its lowest level since November, briefly breaking a significant chart barrier at 2.30 percent for the first time this year. It was last at 2.3069 percent.

Spot gold added 1.2 percent to $1,262.46 an ounce after earlier hitting its highest point since Nov. 10.

Oil prices soared more than 2 percent on concerns the military intervention could affect supplies, but pulled back a little as that possibility receded.

U.S. crude added 1.6 percent to $52.50 a barrel, after touching its highest in a month, putting it on track for a 3.8 percent gain this week.

Global benchmark Brent climbed 1.4 percent to $55.66, set to end the week up 5.4 percent.

The euro was trading at $1.0651, just a hair above its close on Thursday following comments by the European Central Bank head Mario Draghi that he sees no need to deviate from the ECB’s stated policy path at least until the end of the year.

(Reporting by Nichola Saminather; Additional reporting by Charles Mikolajszak; Editing by Shri Navaratnam and Will Waterman)
Published at Fri, 07 Apr 2017 06:19:39 +0000

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Mexican peso almost recovered from Trump plunge

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Will Trump's border wall become a fence?
Will Trump’s border wall become a fence?

  @CNNMoney

The Mexican peso is finally almost back to where it was after plunging in the wake of President Trump’s election.

On Friday, one dollar equaled about 18.70 pesos. On Nov. 8, it was worth 18.50 pesos.

But at one point after Trump’s win, a dollar equaled nearly 22 pesos — a major swing for a currency. The day after the election the peso plummeted 11%.

Why has the peso enjoyed such a massive rebound? Investors believe the most severe of Trump’s trade threats may not come to fruition. And Mexico’s central bank has taken steps to buoy the battered currency.

Trump administration officials signaled in a draft memo to Congress this week that they don’t plan a wholesale rewrite of NAFTA, the free trade deal between the U.S. Canada and Mexico.

Trump calls NAFTA a “one-sided deal” that’s only benefited Mexico, and he’s threatened to use widespread tariffs on Mexican imports and even withdraw from NAFTA. That spooked investors.

The administration now plans to seek relatively minor changes to the agreement. It is asking for the right to use temporary tariffs if an import from Canada or Mexico is causing “serious injury or threat of serious injury” to a U.S. industry.

Commerce secretary Wilbur Ross is expected to officially submit formal notice of the administration’s intent to renegotiate NAFTA to Congress very soon.

And the toned down rhetoric has eased the peso’s pain.

On top of that, Mexico is pulling out all the stops to stave off the currency’s decline.

Mexico’s central bank raised its key interest rate Thursday for the fourth time since the U.S. election. Higher interest rates can help boost a currency’s value. The central bank also sold dollars to international investors to prop up the peso.

However, it’s important to note that while the peso has rallied from the worst of its post-U.S. election lows, it isn’t strong by any means. One peso equals only about 5 U.S. cents — near an all-time low.
Published at Fri, 31 Mar 2017 15:47:00 +0000

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Asia stocks mixed after strong Wall Street, dollar gains on U.S. data

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Asian shares were mixed and the dollar extended its overnight gains on Friday on signs of strong U.S. economic growth, while the euro inched up after sliding overnight on data suggesting slowing growth in Europe.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS retreated 0.15 percent, as investors balanced positions on the last day of the month and quarter. The benchmark is up almost 13 percent for the quarter.

China’s CSI 300 index .CSI300 added 0.25 percent, putting it on track for a 4.1 percent quarterly rise.

Activity in China’s manufacturing sector expanded to 51.8 in March, an official survey showed, beating expectations for 51.6. The services sector rose to 55.1 from 54.2 in February. The 50-point mark separates growth from contraction.

The data comes as U.S. President Donald Trump foreshadowed a tense meeting with Chinese President Xi Jinping next week by tweeting on Thursday that the United States could no longer tolerate massive trade deficits and job losses.

Trump also tweeted that the meeting, which is also expected to cover differences over North Korea and China’s strategic ambitions in the South China Sea, “will be a very difficult one”.

Vice Foreign Minister Zheng Zeguang said on Friday that China does not have a policy to devalue its currency to promote exports, and neither does China seek a trade surplus with the United States.

“The Trump comments on Xi aren’t material, although they may weigh slightly on Asian sentiment, with trade discussions, being a known risk in the increasingly protectionist Trump era,” said Angus Gluskie, managing director of White Funds Management in Sydney.

Japan’s Nikkei .N225 jumped 0.6 percent after Japanese core consumer prices rose 0.2 percent in February. While that is the fastest annual pace in nearly two years, it is still a far cry from the central bank’s 2 percent target.

The Japanese benchmark is set to end the first quarter up 0.3 percent.

The South African rand dropped to a seven-week low after President Jacob Zuma sacked finance minister Pravin Gordhan in a cabinet reshuffle after days of speculation that has rocked the country’s markets and currency, replacing him with home affairs minister Malusi Gigaba.

A statement from the president’s office just after midnight on Thursday said Zuma had also appointed Sfiso Buthelezi as Deputy Finance Minister replacing Mcebisi Jonas.

The weakened rand saw the dollar up 0.9 percent at 13.4075 rand ZAR=, on track to end the week almost 8 percent higher.

Overnight, all three major Wall Street indexes closed about 0.3 percent higher after fourth-quarter annualized growth in U.S. gross domestic product was revised up from the previously reported figure. Consumer spending growth was also revised up.

The upbeat data also helped lift the dollar.

The dollar index .DXY, which tracks the greenback against a basket of six peers, rose 0.1 percent to 100.51, after hitting a two-week high on Thursday. Despite this week’s gains – it is up almost 1.7 percent since Monday’s four-month low – the greenback is set to end the quarter 1.7 percent lower.

The dollar added 0.2 percent to 112.125 yen JPY= after Thursday’s 0.8 percent jump, but is heading for a 4 percent quarterly decline.

Nervousness could return to U.S. markets over concerns about the ties between Trump’s presidential campaign and Russia. Trump’s former national security adviser, Michael Flynn, has discussed with congressional committees the possibility of giving testimony in their investigations of potential ties between the Trump campaign and Russia, his lawyer said on Thursday.

“Looking forward, this is important,” Gluskie said. “The stability of the Trump administration appears to be critical to markets. As markets have shown over recent weeks, if Trump’s position is undermined by security issues or a reticent right wing Congress, investors are likely to respond negatively.”

The euro EUR=EBS inched up slightly to $1.068 in an effort to make up some of Thursday’s 0.8 percent tumble. The common currency is on track to post a gain of 1 percent for March and 1.5 percent for the quarter.

Data showed German and Spanish consumer inflation slowed more than expected in March on a pull back in oil prices, disappointing investors who were hoping for a wind down of the European Central Bank’s monetary stimulus.

In commodities, oil prices retreated early on Friday.

U.S. crude slipped 0.2 percent to $50.24 a barrel. On Thursday, it closed 1.7 percent higher after zipping to a three-week-high earlier in the session after Kuwait backed an extension of OPEC production cuts.

It is heading for a 6.4 percent loss for the week.

Global benchmark Brent LCOc1 lost 0.25 percent to $52.83 and is on track for a 7 percent decline for the quarter.

Gold XAU= pulled back 0.1 percent to $1,241.41 an ounce, extending Thursday’s 0.7 percent loss on the dollar’s strength, but remains set for a 7.8 percent quarterly gain.

(Reporting by Nichola Saminather; Editing by Shri Navaratnam)
Published at Fri, 31 Mar 2017 02:49:26 +0000

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Samsung chief Lee arrested as South Korean corruption probe deepens

Samsung Group chief, Jay Y. Lee, leaves the Seoul Central District Court in Seoul, South Korea, February 16, 2017. Picture taken on February 16, 2017. Shin Wong-soo/News1 via REUTERS

 

Samsung chief Lee arrested as South Korean corruption probe deepens

By Hyunjoo Jin and Joyce Lee| SEOUL

Samsung Group chief Jay Y. Lee was arrested on Friday over his alleged role in a corruption scandal rocking the highest levels of power in South Korea, dealing a fresh blow to the technology giant and standard-bearer for Asia’s fourth-largest economy.

The special prosecutor’s office accuses Lee of bribing a close friend of President Park Geun-hye to gain government favors related to leadership succession at the conglomerate. It said on Friday it will indict him on charges including bribery, embezzlement, hiding assets overseas and perjury.

The 48-year-old Lee, scion of the country’s richest family, was taken into custody at the Seoul Detention Centre early on Friday after waiting there overnight for the decision. He was being held in a single cell with a TV and desk, a jail official said.

Lee is a suspect in an influence-peddling scandal that led parliament to impeach Park in December, a decision that if upheld by the Constitutional Court would make her the country’s first democratically elected leader forced from office.

Samsung and Lee have denied wrongdoing in the case.

Prosecutors have up to 10 days to indict Lee, Samsung’s third-generation leader, although they can seek an extension. After indictment, a court would be required to make its first ruling within three months.

Prosecutors plan to question Lee again on Saturday.

No decision had been made on whether Lee’s arrest would be contested or whether bail would be sought, a spokeswoman for Samsung Group [SARG.UL] said.

“We will do our best to ensure that the truth is revealed in future court proceedings,” the Samsung Group said in a brief statement after Lee’s arrest.

The same court had rejected a request last month to arrest Lee, but prosecutors this week brought additional accusations against him.

“We acknowledge the cause and necessity of the arrest,” a judge said in his ruling.

The judge rejected the prosecution’s request to also arrest Samsung Electronics (005930.KS) president Park Sang-jin.

Shares in Samsung Electronics ended Friday down 0.42 percent in a flat wider market .KS11.

Ratings agencies did not expect any impact on the flagship firm’s credit ratings, and said Lee’s arrest would accelerate improvements in management transparency and corporate governance.

 

SENSITIVE TIME

While Lee’s detention is not expected to hamper day-to-day operations at Samsung firms, which are run by professional managers, experts said it could hinder strategic decision-making at South Korea’s biggest conglomerate, or chaebol.

Samsung is going through a restructuring to clear a succession path for Lee to assume control after his father was incapacitated by a heart attack in 2014.

Decisions that could be complicated by Lee’s arrest include deliberations over whether to reorganize the group under a holding company structure, as well as its plan to abandon its future strategy office, a central decision-making body that came in for criticism during the scandal.

Staff moves have also been in limbo. Samsung, which employs around half a million people, has yet to announce annual personnel promotions and changes, which it typically does in December.

One employee at Samsung Electronics’ chip division said colleagues were unsettled that prosecutors had singled out Samsung. “The mood is that people are worried,” the person said.

However, another Samsung Electronics employee described the situation as business as usual. “It wouldn’t make sense for a company of that size to not function properly just because the owner is away.”

Both employees declined to be identified, given the sensitivity of the matter.

Lee’s incarceration comes as Samsung Electronics tries to get past last year’s disastrous roll-out of its Galaxy Note 7 smartphones, which were prone to fires. It is under pressure for the upcoming launch of its next flagship phone, the Galaxy S8, to be a success.

 

WIDER IMPACT

Major business groups criticized the decision, worried about the impact on Samsung and the country.

“A management vacuum at Samsung, a global company representing the Republic of Korea, will increase uncertainty and undermine global confidence, posing a big burden on the already struggling economy,” the Korea Employers Federation said.

Lee’s arrest gives a boost to prosecutors who have zeroed in on Samsung to build their case against President Park and her close friend Choi Soon-sil, who is in detention and faces charges of abuse of power and attempted fraud.

Both Park and Choi have denied wrongdoing.

Prosecutors have focused on Samsung’s relationship with Park, 65, accusing the group of paying bribes totaling 43 billion won ($37.74 million) to organizations linked to Choi to secure government backing for the controversial 2015 merger of two Samsung units, a deal that was seen as key to smoothing Lee’s succession.

The prosecution office on Friday accused Lee of bribery not only in seeking to smooth the merger but in the broader process of his succession. A prosecution spokesman did not elaborate.

If parliament’s impeachment of Park is upheld, an election would be held in two months. In the meantime, she remains in office but stripped of her powers.

Her would-be successors praised the decision to arrest Lee.

“We hope it marks a beginning to end our society’s evil practice of cozy ties between government and corporations and move towards a fair country,” said Kim Kyoung-soo, a spokesman for Moon Jae-in, a member of the liberal opposition Democratic Party who is leading opinion polls in the presidential race.

 

(Additional reporting by Ju-min Park and Cynthia Kim; Writing by Tony Munroe; Editing by Lincoln Feast and Ian Geoghegan)

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Published at Fri, 17 Feb 2017 08:27:44 +0000

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