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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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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)

(Why?)
Published at Fri, 17 Feb 2017 08:27:44 +0000

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Mexico doubles down on Trump ‘contingency plan’

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Top Mexico official eyes 'openness' in Trump stance
Agustin Carstens, Governor, Bank of Mexico, eyes ‘openness’ in Trump stance

  @CNNMoney

Mexico is pulling out all the stops to shield itself from President Trump’s looming policies.

The country’s central bank raised interest rates Thursday for the third time since the U.S. election in an effort to save Mexico’s currency, the peso, which is near an all-time low. It raised rates by 0.5%.

Mexican leaders are very worried about all of Trump’s threats — a potential 20% tax on Mexican imports, a wall on the border, and renegotiating a trade deal.

In the big picture, Mexico’s leaders want — as best they can — to ease Trump’s impact on their economy and the peso’s diminishing value.

On Thursday, the peso did jump up a bit after the announcement. However, Trump has largely dictated its fate of late. The currency is down 10% since Trump’s election victory.

“The peso movement has mostly been a reaction to Trump” says Rodrigo Aguilera, an economist at the Economist Intelligence Unit. “Mexico hasn’t really had a huge influence in how the peso has behaved.”

Mexico’s central bank governor, Agustin Carstens, told CNN in November that Trump’s policies, if enacted, would be like a “hurricane” for the Mexican economy.

Mexico sends 80% of its exports north of the border, and its economy heavily relies on the northern neighbor.

The interest rate hikes are a part of what Carstens has called Mexico’s “contingency plan” to deal with Trump. However, Carstens announced late last year that he’ll be resigning from the central bank in June. It’s unclear who will take over for him and see through the contingency plan.

The contingency plan didn’t go well initially. Carstens and his colleagues tried rate hikes and selling dollars to international investors to prop up the peso, but none of it worked. Only recently, has the peso stopped bleeding despite being very low. One dollar equals 20.30 pesos. Before Trump’s election it was 18.30 pesos.

CNNMoney (Mexico City)First published February 9, 2017: 3:23 PM ET

Published at Thu, 09 Feb 2017 20:39:26 +0000

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Asian stocks at 18-month highs as China rises

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A man looks at a stock quotation board outside a brokerage in Tokyo, Japan, April 18, 2016. REUTERS/Toru Hanai

By Saikat Chatterjee
| HONG KONG

Asian shares climbed to their highest in more than 18 months on Thursday, as investors grew more confident about China while the dollar slightly firmed in the wake of growing concerns over political instability in Europe.

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.3 percent to their highest since July 2015 with Hong Kong, Taiwan and China among the region’s best performing markets.

European stocks are set to follow Asia’s cues, with spread-betters expecting a rise of up to 0.1 percent in Britain’s FTSE, 0.2 percent in Germany’s DAX and 0.3 percent in France’s CAC.

“In China we have an overweight view on equities as we see improved corporate earnings outlook with the Chinese PPI (producer price index) turning around from deflation trend,” said Fan Cheuk Wan, head of investment strategy for Asia at HSBC Private Bank.

It also has overweight recommendation on India and Indonesia.

An ongoing rally in commodity prices led by copper and iron ore, along with gentle policy tightening by Beijing via money market rates, has led to a more optimistic view of Chinese corporate earnings, analysts said.

Earnings growth for MSCI China is expected at nearly 15 percent over the next 12 months, slightly ahead of 13 percent projected for companies in MSCI Asia outside Japan, according to Thomson Reuters data.

 

Pictet Asset Management has cut its exposure to U.S. markets due to expensive valuations, and has turned bullish on emerging markets in Asia, citing strong correlations with commodity prices.

In other markets, New Zealand stocks rose after the central bank signaled that a further cut in interest rates was no longer likely while Japanese shares were in focus before a meeting between U.S. President Donald Trump and Japan’s Prime Minister Shinzo Abe on Friday.

Abe will propose a new cabinet level framework for U.S.-Japan talks on trade, security and macroeconomic issues, including currencies, a Japanese government official involved in planning the summit in Washington said.

“Trade and defense will be in focus,” said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. “We need to see if anything is said that has an effect on currencies, or on specific companies.”

 

COMMODITY RALLY

In commodities, copper stepped back after a sharp gain the previous day as the world’s top two mines said strikes and permit delays would force them to cut output.

Helping sentiment was a recent pick-up in China’s producer price index to its highest levels since September 2011. Copper prices are up 27 percent since late October.

 

Oil prices stabilized on Thursday, boosted by an unexpected draw in U.S. gasoline inventories. Brent crude futures was trading at $55.45 per barrel, up 0.5 percent.

However, bubbling political concerns, including a strong showing by far-right candidate Marine Le Pen in France’s presidential race, have pushed up premiums demanded by investors to buy French debt over comparable bonds and pushed the yen and U.S. Treasuries higher.

Uncertainty translated into another day of gains for bonds, with 10-year U.S. benchmark bond yields declining for a third consecutive day to 2.34 percent, the lowest level in three weeks and retracing one-third of its rise since Trump’s victory in early November.

The dollar bounced after the previous day’s drop, but falling yields are set to limit the greenback’s gains.

Against a broad trade-weighted basket of its rivals, the dollar was trading at 100.39 compared to a level of 99.30 last week. The Japanese yen also held its ground thanks to a broad rush to safety.

(Additional reporting by Yoshifumi Takemoto in TOKYO; Editing by Jacqueline Wong and Richard Borsuk)
Published at Thu, 09 Feb 2017 07:02:40 +0000

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Deutsche to pay $425 million to New York regulator over Russian ‘mirror trades’

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By Karen Freifeld and Arno Schuetze
| NEW YORK/FRANKFURT

Deutsche Bank AG (DBKGn.DE) has agreed to pay $425 million to New York’s banking regulator over a “mirror trading” scheme that moved $10 billion out of Russia between 2011 and 2015, the regulator said on Monday.

In addition, Britain’s Financial Conduct Authority is about to penalize the bank roughly $200 million for the suspicious trades, a person familiar with the matter said.

The scheme involved clients buying stocks in Moscow in rubles and related parties selling the same stocks shortly thereafter through the bank’s London branch, the New York Department of Financial Services (DFS) said in a statement.

The trade of a Russian blue chip stock, typically valued at between $2 million to $3 million an order, was cleared through the bank’s New York operations, with the sellers typically paid in U.S. dollars, DFS said.

The regulator, which licenses and supervises the New York branch, found the bank conducted its business in an unsafe and unsound manner in violation of state banking law.

Though the trades appeared to have no legitimate economic purpose, Deutsche’s deficient anti-money laundering controls and know-your-customer policies did not detect and stop the scheme for years, DFS superintendent Maria Vullo said.

Deutsche Bank said “it has been unable to identify the actual purpose behind this scheme,” according to a consent order between the New York regulator and the bank. “It is obvious, though, that the scheme could have facilitated capital flight, tax evasion or other potentially illegal objectives.”

In addition to the penalty, Deutsche is required to retain an independent monitor to review the bank’s compliance programs.

 

Deutsche Bank said in a statement that the settlement monies were already reflected in existing litigation reserves. It said the regulator considered its cooperation and remediation in reaching the penalty.

Deutsche also said it was cooperating with other regulators and law enforcement authorities with their ongoing investigations of the trades.

A spokesperson for the Financial Conduct Authority declined to comment. The source on the FCA’s expected penalty did not want to be identified because the terms were not public.

The New York regulator said it worked closely on the investigation with the FCA.

 

Reuters reported on Monday that Deutsche Bank was poised to settle with British and U.S. authorities over the trades.

The U.S. Department of Justice, which also has been investigating the suspicious trades, is not party to the deal. A spokesman for the department declined to comment on the status of its probe.

Deutsche Bank disclosed last September that it had taken disciplinary measures against certain employees as part of an investigation of the trades and would continue to do so.

The bank also cut back on its investment banking activities in Russia last year.

 

Monday’s consent order found Deutsche Bank’s Moscow traders facilitated the scheme, with most of the trades placed by a single trader representing both sides of the transaction.

Deutsche’s Moscow traders did not question the suspicious trades because it made for easy commissions when their Russian business had slowed, the regulator found.

The regulator also noted that one Moscow supervisor may have been bribed to facilitate the schemes, and that senior bank employees missed red flags and did not take action towards real reform until 2016.

Deutsche Bank had set aside 1 billion euros ($1.1 billion) in provisions for the Russian probes, people close to the matter have told Reuters.

The resolution of the New York mirror trade probe comes on the heels of a $7.2 billion agreement with the Justice Department for misleading investors in selling mortgage-backed securities in the run-up to the financial crisis. The two settlements lift much of the uncertainty swirling around the bank over its exposure to fines and enforcement.

The bank is due to report fourth-quarter financial results on Thursday.

(Reporting by Karen Freifeld and Arno Schuetze; Editing by Bernard Orr)
Published at Tue, 31 Jan 2017 00:33:54 +0000

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U.S. tech leaders sound alarm over Trump immigration ban

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Published at Sat, 28 Jan 2017 21:49:17 +0000

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Swiss private banks see asset influx after U.S. election: Baer CEO

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By Brenna Hughes Neghaiwi
| ZURICH

Swiss private banks have profited from rising stock markets and renewed client optimism since the election of U.S. President Donald Trump, Julius Baer Chief Executive Boris Collardi said on Thursday.

“We have seen client interest in financial markets increasing,” Collardi told Reuters. “With stocks going up, you have assets going up, transaction volumes going up, which is all a positive for the banks because we have more assets, more revenues.”

Over the medium to long term, banks also stand to gain from deregulation in a sector increasingly saddled with mounting compliance efforts since the 2008 financial crisis, he said.

Speaking earlier at a conference in Berne about the implications of Britain’s decision to exit the European Union, Collardi warned Switzerland should not unnecessarily cut off any negotiating possibilities amid a changing political landscape and uncertain future for the EU.

While the consequences of Brexit will remain manageable for Swiss banks in the foreseeable future, Switzerland stands little chance of gaining significantly from the weakness of London’s financial center, he said.

This year would be a year of many changes and he expected consolidation in Europe’s banking sector over the medium term.

“As long as the cost of money remains low and stock valuations go up, we could be in a positive environment for M&A,” Collardi said.

“We still have overcapacity in the European banking sector. I could imagine that some of the Swiss banks, based on their strength, may continue to take advantage of international M&A opportunities.”

 

(Editing by Mark Heinrich)
Published at Thu, 26 Jan 2017 13:48:29 +0000

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Exclusive: Germany calls bankers to Frankfurt for Brexit move talks – sources

FILE PHOTO – The moon is partly covered by clouds as it rises above the skyline of Frankfurt, Germany, early evening November 14, 2016. REUTERS/Kai Pfaffenbach/File Photo

Exclusive: Germany calls bankers to Frankfurt for Brexit move talks – sources

By John O’Donnell, Anjuli Davies and Andreas Kröner
| FRANKFURT/LONDON

German regulators will meet more than 20 foreign banks on Monday to spell out requirements for moving some operations to Frankfurt, people familiar with the matter said, as the city accelerates plans to win over business from London after Brexit.

The meeting, the first such gathering of its kind in Germany, is being hosted by financial supervisor Bafin to cope with increasingly detailed inquiries from banks as Britain prepares to trigger EU divorce talks, people involved said.

“Bafin wants to give the participants an overview of the main issues for those who want to move businesses to Germany after Brexit,” said one of the people involved.

The sources said Bafin would make it clear that no “letter-box” operations would be accepted and that banks would have to have significant risk management arrangements and senior executives based in Frankfurt.

Other people said officials from the German central bank and the European Central Bank would also attend.

Bafin, which has close ties to the finance ministry, confirmed that the meeting would take place but declined to give further details. The Bundesbank and the ECB declined to comment.

About 40 executives will attend Monday’s gathering, to be held as German Finance Minister Wolfgang Schaeuble discreetly starts supporting Frankfurt’s efforts to attract thousands of bankers from London, according to people familiar with government thinking.

Many Germans are skeptical about the practices of largely U.S. and British investment banks, that often run their international operations from London. This view was reinforced when Deutsche Bank – a German bank on Wall Street – had to pay $7.2 billion in U.S. penalties for selling toxic mortgage securities before the 2008 financial crisis.

German politicians, however, are increasingly pragmatic as banks in London search for alternative locations in the European Union to continue selling in the bloc once Britain leaves.

Banks with large London operations are shifting from contingency planning toward more concrete action after Prime Minister Theresa May said last week that Britain would leave the EU’s single market, a move that would isolate the City of London from many of its clients.

 

May has said her government will invoke Article 50 of the EU treaty, starting two years of negotiations to arrange Britain’s departure, by the end of March.

Frankfurt looks set to be one of the biggest winners from any exodus from London, with several major investment banks said to be in talks to base people there.

However the likes of Paris and Dublin are also expected to win some jobs – HSBC has said it will move around 1,000 roles to the French capital – while some U.S. banks may shift some positions back to New York.

Executives, chiefly those in charge of regulatory issues, from banks including Morgan Stanley, Goldman Sachs and Citigroup are due to attend the meeting in Bafin’s Frankfurt offices, the people said. Those banks declined to comment.

The gathering comes after a series of one-on-one meetings involving bank executives, politicians and regulators across EU countries.

It follows months-long attempts to persuade bankers of Frankfurt’s appeal, matching smaller rivals such as Ireland, whose prime minister Enda Kenny this week emphasized ease of access to policymakers.

OPEN FOR BUSINESS

Frankfurt made contingency plans for Brexit even before Britons voted on June 23 to leave the EU. “We’ve been prepared for Brexit in Frankfurt since before the day of the vote,” said Hubertus Vaeth, head of Frankfurt Main Finance, a group backed by local government to promote the city.

He predicts that 10,000 jobs will move to Frankfurt over five years, starting gradually in 2017 before gathering pace the following year, with investment banks among the early movers.

“The demand has been so large from banks that the regulators have to be creative to keep up,” said Vaeth. “That’s why we are having the meeting.”

Stefan Winter, chairman of the Association of Foreign Banks in Germany, whose members include some of Europe’s largest banks, said the mood among politicians in Germany was becoming increasingly welcoming toward banks.

“Germany is open for business,” he said. “Politicians in Berlin are open to having more banks in Frankfurt, so long as they are properly controlled. That is different to what was the case 12 months ago.”

While Schaeuble campaigned earlier for a tax on financial market transactions, the issue does not appear on the agenda for Germany’s current presidency of the G20 group of leading global economies.

Germany’s economic strength and the fact that Frankfurt is home to the ECB makes it attractive for banks. But it faces some hurdles in attracting foreign bankers. There is a shortage of housing for newcomers, while the region’s 13 international schools are already well subscribed.

Nightlife in the city – where many town center bars are largely empty for much of the week – is also seen as a turn-off for bankers used to London’s offerings.

Madjid Djamegari, who owns a night club and cocktail bar in Frankfurt, went to London late last year with a small delegation to persuade business people there of the city’s appeal.

However, even he admits Frankfurt’s evening entertainment can appear a little lackluster. “It’s a bit of a German mentality. They are a bit conservative. We don’t have the habit of going for an after-work drink. This can change if people come from the UK,” he said.

(Writing by John O’Donnell; editing by David Stamp)
Published at Wed, 25 Jan 2017 15:13:45 +0000

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Japan’s PM says will keep seeking Trump’s understanding on TPP

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Japanese Prime Minister Shinzo Abe said on Monday he believed U.S. President Donald Trump understood the value of free trade and that he would keep pitching a multinational trade pact that Trump’s administration has vowed to exit.

“I believe President Trump understands the importance of free and fair trade, so I’d like to pursue his understanding on the strategic and economic importance of the TPP (Trans-Pacific Partnership) trade pact,” Abe told a session of parliament’s lower house.

Abe also said he wanted to strengthen the U.S.-Japan security alliance, based on mutual trust with Trump.

“When we met last time, I believed him to be trustworthy, this belief has not changed today,” Abe added, referring to his November meeting with then-president-elect Trump.

Abe also said Tokyo wanted to explain how its companies have contributed to the U.S. economy, a stance the Japanese government has adopted to try to fend off threats of a “border tax” on imports into the United States.

Japanese Chief Cabinet Secretary Yoshihide Suga said separately that Tokyo would closely monitor any impact of the new U.S. administration’s policies on its companies and that he wanted to deepen economic ties between the two countries.

Trump took office as the 45th president of the U.S. on Friday and pledged to end what he called an “American carnage” of rusted factories and crime in an inaugural address that was a populist and nationalist rallying cry.

The new Trump administration said on Friday its trade strategy to protect American jobs would start with withdrawal from the 12-nation Trans-Pacific Partnership (TPP) trade pact.

The trade deal, which the United States signed but has not ratified, was a pillar of former president Barack Obama’s pivot to Asia, and Abe has touted it as an engine of economic reform, as well as a counter-weight to a rising China.

(Reporting by Kaori Kaneko and Oliview Fabre; writing by Linda Sieg; Editing by Kim Coghill)
Published at Mon, 23 Jan 2017 09:26:46 +0000

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Sterling skids on Brexit anxiety; investors hope for Trump clarity

by lensicle from Pixabay

Sterling skids on Brexit anxiety; investors hope for Trump clarity

By Wayne Cole

| SYDNEY

Sterling slid to three-month lows in Asia on Monday with investors spooked anew by concerns over Britain’s divorce from the European Union, while U.S. policy uncertainty lingered ahead of President-elect Donald Trump’s inauguration.

Regional share markets were hesitant. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS eased 0.5 percent, Japan’s Nikkei .N225 lost 0.6 percent and Shanghai .SSEC shed 1.4 percent.

Spread betters pointed to likely opening gains for UK shares, but a drop for German equities.

All the early action was in currencies where the pound sank as low as $1.1983 GBP=D4, depths not seen since the flash crash of October, having finished around $1.2175 in New York on Friday. It was last down 1.2 percent at $1.2032.

Dealers said the market was reacting in part to a report in the Sunday Times that U.K. Prime Minister Theresa May will use a speech on Tuesday to signal plans for a “hard Brexit”, quitting the EU’s single market to regain control of Britain’s borders.

Investors have been worried such a decisive break from the single market would hurt British exports and drive foreign investment out of the country.

“It is impossible to say by how much a hard Brexit could weaken GBP, but we do not believe that a further 5-10 percent depreciation should be regarded as an extreme scenario when set aside the UK’s high dependence on foreign capital,” wrote analysts at JPMorgan in a note.

The flight from sterling benefited the safe-haven Japanese yen, with the pound down 1.5 percent to 137.34 yen GBPJPY= while the U.S. dollar dipped to 114.17 JPY=.

Against a basket of currencies, the dollar was up 0.3 percent at 101.510.

The euro pared initial losses to stand at $1.0611 EUR=.

 

WAITING ON REFLATION

The dollar index put in its worst weekly performance in more than two months last week as investors reconsidered the whole “reflation” trade – that Trump’s promises of debt-funded fiscal spending and lower taxes would stoke inflation and drive the Federal Reserve to raise interest rates faster.

Fed Chair Janet Yellen will have an opportunity to lay out her thinking with speeches on monetary policy scheduled for both Wednesday and Thursday this week.

All eyes will then be on Trump’s inauguration on Friday for any clarity on his economic plans.

“The market is showing greater reluctance to push on with reflation-type trades without more details of proposed fiscal spending plans and the economic data to back it up,” said analysts at ANZ in a research note.

“It looks as though more than just reasonable data will be needed to see yields and the dollar push higher again. Some decent positive surprises may be necessary for the market to gain conviction.”

Asian markets are also waiting anxiously to see if Trump makes good on a campaign pledge to brand Beijing a currency manipulator on his first day in office, and starts to follow up on a threat to slap high tariffs on Chinese goods.

Analysts fret that the specter of deteriorating U.S.-China trade and political ties is likely to weigh on the confidence of exporters and investors worldwide.

Wall Street ended last week mixed, with the Dow .DJI off slightly but the Nasdaq .IXIC at a record high.

Sentiment this week could be driven by results from the major banks with Morgan Stanley (MS.N), Citibank (C.N) and Bank of New York Mellon (BK.N) among those reporting.

In commodity markets, oil prices inched higher after shedding around 3 percent last week. Brent crude LCOc1 was up 18 cents at $55.63 a barrel, while U.S. crude CLc1 rose 16 cents to $52.51.

Spot gold XAU= added 0.5 percent to $1,203.00 an ounce.

(Reporting by Wayne Cole; Editing by Shri Navaratnam and Eric Meijer)
Published at Mon, 16 Jan 2017 05:24:46 +0000

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Davos elites struggle for answers as Trump era dawns

by PeteLinforth from Pixabay

Davos elites struggle for answers as Trump era dawns

By Noah Barkin

DAVOS, Switzerland – The global economy is in better shape than it’s been in years. Stock markets are booming, oil prices are on the rise again and the risks of a rapid economic slowdown in China, a major source of concern a year ago, have eased.

And yet, as political leaders, CEOs and top bankers make their annual trek up the Swiss Alps to the World Economic Forum in Davos, the mood is anything but celebratory.

Beneath the veneer of optimism over the economic outlook lurks acute anxiety about an increasingly toxic political climate and a deep sense of uncertainty surrounding the U.S. presidency of Donald Trump, who will be inaugurated on the final day of the forum.

Last year, the consensus here was that Trump had no chance of being elected. His victory, less than half a year after Britain voted to leave the European Union, was a slap at the principles that elites in Davos have long held dear, from globalization and free trade to multilateralism.

Trump is the poster child for a new strain of populism that is spreading across the developed world and threatening the post-war liberal democratic order. With elections looming in the Netherlands, France, Germany, and possibly Italy, this year, the nervousness among Davos attendees is palpable.

“Regardless of how you view Trump and his positions, his election has led to a deep, deep sense of uncertainty and that will cast a long shadow over Davos,” said Jean-Marie Guehenno, CEO of International Crisis Group, a conflict resolution think-tank.

Moises Naim of the Carnegie Endowment for International Peace was even more blunt: “There is a consensus that something huge is going on, global and in many respects unprecedented. But we don’t know what the causes are, nor how to deal with it.”

The titles of the discussion panels at the WEF, which runs from Jan. 17-20, evoke the unsettling new landscape. Among them are “Squeezed and Angry: How to Fix the Middle Class Crisis”, “Politics of Fear or Rebellion of the Forgotten?”, “Tolerance at the Tipping Point?” and “The Post-EU Era”.

The list of leaders attending this year is also telling. The star attraction will be Xi Jinping, the first Chinese president ever to attend Davos. His presence is being seen as a sign of Beijing’s growing weight in the world at a time when Trump is promising a more insular, “America first” approach and Europe is pre-occupied with its own troubles, from Brexit to terrorism.

British Prime Minister Theresa May, who has the thorny task of taking her country out of the EU, will also be there. But Germany’s Angela Merkel, a Davos regular whose reputation for steady, principled leadership would have fit well with the WEF’s main theme of “Responsive and Responsible Leadership”, will not.

 

‘REJOICING IN THE ELEVATORS’

Perhaps the central question in Davos, a four-day affair of panel discussions, lunches and cocktail parties that delve into subjects as diverse as terrorism, artificial intelligence and wellness, is whether leaders can agree on the root causes of public anger and begin to articulate a response.

A WEF report on global risks released before Davos highlighted “diminishing public trust in institutions” and noted that rebuilding faith in the political process and leaders would be a “difficult task”.

Guy Standing, the author of several books on the new “precariat”, a class of people who lack job security and reliable earnings, believes more people are coming around to the idea that free-market capitalism needs to be overhauled, including those that have benefited most from it.

“The mainstream corporate types don’t want Trump and far-right authoritarians,” said Standing, who has been invited to Davos for the first time. “They want a sustainable global economy in which they can do business. More and more of them are sensible enough to realize that they have overreached.”

But Ian Bremmer, president of U.S.-based political risk consultancy Eurasia Group, is not so sure.

He recounted a recent trip to Goldman Sachs headquarters in New York where he saw bankers “rejoicing in the elevators” at the surge in stock markets and the prospect of tax cuts and deregulation under Trump. Both Goldman CEO Lloyd Blankfein and his JP Morgan counterpart Jamie Dimon will be in Davos.

“If you want to find people who are going to rally together and say capitalism is fundamentally broken, Davos is not the place to go,” Bremmer said.

 

PACE OF CHANGE

Suma Chakrabarti, president of the European Bank for Reconstruction and Development (EBRD), believes a “modern version of globalization” is possible but acknowledges it will take time to emerge.

“It is going to be a long haul in persuading a lot of people that there is a different approach. But you don’t have to throw the baby out with the bath water,” he told Reuters.

Still, some attendees worry that the pace of technological change and the integrated, complex nature of the global economy have made it more difficult for leaders to shape and control events, let alone reconfigure the global system.

The global financial crisis of 2008/9 and the migrant crisis of 2015/16 exposed the impotence of politicians, deepening public disillusion and pushing people towards populists who offered simple explanations and solutions.

The problem, says Ian Goldin, an expert on globalization and development at the University of Oxford, is that on many of the most important issues, from climate change to financial regulation, only multilateral cooperation can deliver results. And this is precisely what the populists reject.

“The state of global politics is worse than it’s been in a long time,” said Goldin. “At a time when we need more coordination to tackle issues like climate change and other systemic risks, we are getting more and more insular.”

(Additional reporting by Ben Hirschler; Editing by Pravin Char)
Published at Sun, 15 Jan 2017 22:06:00 +0000

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