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US and China stop imposing import tariffs

Monitoring Desk

WASHINGTON: China and the US say they will stop imposing penalizing import tariffs, putting a possible trade war “on hold”.

The deal came after talks in the US aimed at persuading China to buy $200bn (£148bn) of US goods and services and thereby reduce the trade imbalance.

US Treasury Secretary Steven Mnuchin did not give figures, but said the US would impose tariffs worth $150bn if China did not implement the agreement. Chinese Vice-Premier Liu He described the deal as a “win-win choice”.

He said dialogue was the way to resolve such issues and “treat them calmly” in the future. How did the prospect of a trade war come so close? The US has a $335bn annual trade deficit with Beijing.

Before being elected, President Donald Trump had spoken of China “raping” the US, and promised to label it a currency manipulator on his first day in office.

This did not happen, but he ordered a review of the trade imbalance last August. It found a range of “unfair” practices in China, including restrictions on foreign ownership that pressured foreign companies into transferring technology, unfair terms on US companies, Chinese investments in US strategic industries and Chinese cyber-attacks.

In March this year, Mr Trump announced plans to impose tariffs on Chinese imports – mainly steel and aluminum.

Beijing threatened equal retaliation, including tariffs on a number of US imports – among them aircraft, soybeans, cars, pork, wine, fruit and nuts.

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US, China agree to ditch trade war: Beijing

Monitoring Desk

BEIJING: Washington and Beijing have agreed to abandon any trade war and back off from imposing tariffs on each other, Chinese state media reported Sunday.

The announcement came after high-level talks in the US capital and followed months of tensions over what President Donald Trump has blasted as an unfair commercial relationship between the two economic giants.

Vice-Premier Liu He, who led Chinese negotiators in Washington said: “The two sides reached a consensus, will not fight a trade war, and will stop increasing tariffs on each other,” state-run news agency Xinhua reported Sunday.

Liu called the agreement a “necessity”, but added: “At the same time it must be realised that unfreezing the ice cannot be done in a day, solving the structural problems of the economic and trade relations between the two countries will take time.”

An earlier joint statement issued in Washington said Beijing would “significantly” increase its purchases of American goods, but offered few details.

The apparent detente comes after months of increasing tensions that have set markets on edge over fears of a damaging trade war.

Trump has repeatedly railed against his country´s trade deficit with China, describing it as a danger to US national security and threatening to impose tariffs on billions of dollars´ worth of Chinese goods.

US levies on $50 billion of Chinese imports could have come into effect as early as next week. The talks in Washington were between delegations led by US Treasury Secretary Steven Mnuchin and Liu, who also met Thursday with Trump. The sides had met earlier in Beijing.

“There was a consensus on taking effective measures to substantially reduce the United States trade deficit in goods with China,” the joint statement said.

“To meet the growing consumption needs of the Chinese people and the need for high-quality economic development, China will significantly increase purchases of United States goods and services.”

Last year, the United States had a $375.2 billion trade deficit with China, with populist politicians blaming the Asian powerhouse for the leeching of American jobs over the last few decades.

Washington reportedly had demanded the deficit be slashed by at least $200 billion by 2020. However, the joint statement held no indication that China had assented to that target.

It said both sides had agreed on “meaningful increases” in US agriculture and energy exports. Liu said the new trade cooperation would extend to medical care, high-tech products, and finance, according to Xinhua.

They also agreed to strengthen cooperation on protecting intellectual property — a long-standing source of US discontent.

The two countries, their economies enormously interlinked, opened the delicate negotiations a few weeks ago.

Trump had threatened China with tariffs on up to $150 billion of imports, prompting Beijing to warn it would target US agricultural exports, aircraft, and even whiskey.

 

 

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No help yet for Hong Kong stock market

HONG KONG (Agencies): The losing streak has hit three sessions for the Hong Kong stock market, which has stumbled almost 600 points or 2 percent in that span. The Hang Seng Index now rests just above the 30,940-point plateau and it may extend its losses again.
The global forecast for the Asian markets is slightly soft on trade concerns between the U.S. and China, although the downside may be limited by support from crude oil prices. The European markets were up and the U.S. bourses were down and the Asian markets figure to follow the latter lead.
The Hang Seng finished modestly lower again on Thursday following losses from the financials and oil and insurance companies.
For the day, the index dropped 168.05 points or 0.54 percent to finish at the daily low of 30,942.15 after peaking at 31,416.71.
Among the actives, Tencent Holdings surged 3.74 percent, while WH Group plummeted 2.15 percent, Sino Land plunged 2.05 percent, Industrial and Commercial Bank of China tumbled 1.89 percent, CNOOC skidded 1,83 percent, Sands China and Hengan International both soared 1.52 percent, AIA Group dropped 1.31 percent, Lenovo Group retreated 1.30 percent, China Life and China Mobile both declined 0.88 percent, China Mengniu Dairy advanced 0.73 percent, CITIC shed 0.67 percent, Ping An Insurance lost 0.44 percent, China Petroleum and Chemical (Sinopec) fell 0.37 percent, Hong Kong & China Gas added 0.35 percent, New World Development gained 0.33 percent and Galaxy Entertainment eased 0.15 percent.
The lead from Wall Street is uninspired as stocks showed a lack of direction on Thursday, bouncing back and forth across the unchanged line before closing modestly lower.
The Dow dipped 54.95 points or 0.22 percent to 24,713.98, the NASDAQ slipped 15.82 points or 0.21 percent to 7,382.47 and the S&P 500 edged down 2.33 points or 0.09 percent to 2,720.13.

The choppy trading on Wall Street came as traders expressed uncertainty about the second round of trade talks between the U.S. and China. Blaming the policies of previous administrations, President Donald Trump expressed doubt about whether the talks with China will be successful.

In economic news, the Conference Board noted an increase in its index of leading economic indicators, while the Labor Department reported a bigger than expected increase in initial jobless claims in the week ended May 12. Also, the Philadelphia Federal Reserve showed a spike in regional manufacturing activity in May.

Energy stocks saw considerable strength, with the sector continuing to perform well even as the price of crude oil pulled back off its early highs. After reaching a three-and-a-half year high of $72.30 a barrel, crude for June delivery ended the day unchanged at $71.49 a barrel.

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Deutsche Boerse to include tech stocks

FRANKFURT (Reuters): Deutsche Boerse, the German stock exchange operator, is planning a major shakeup of the composition of three key indexes later this year that affects technology stocks.

Technology shares will now be included in the midcap index MDAX and the smallcap index SDAX, Deutsche Boerse said. Previously, medium and small technology stocks were only included in the TecDAX index.
Also, bluechip technology stocks in the benchmark DAX index will also be included in the TecDAX index. The change, which was announced late on Friday and is effective Sept. 24, also increases the number of companies in the MDAX to 60 from 50 and in the SDAX to 70 from 50.

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US, China talks focus on cutting trade gap

WASHINGTON/BEIJING (Reuters): China is “meeting many” Trump administration demands to cut its trade surplus with the United States, but a definitive deal to resolve deep trade differences could take a while to develop, White House economic adviser Larry Kudlow said on Friday.

“China has come to trade,” Kudlow told reporters at the White House as U.S. officials met with a Chinese trade delegation for a second day in Washington.

“They are meeting many of our demands. There is no deal yet to be sure, and it’s probably going to take a while to process, but they’re coming to play.”

Kudlow said the Chinese had offered a package of U.S. goods purchases and other steps to cut China’s annual U.S. trade surplus by some $200 billion, contradicting a Chinese foreign ministry spokesman who denied that such a reduction had been offered.

“This rumour is not true. This I can confirm to you,” Chinese foreign ministry spokesman Lu Kang told a regular news briefing on Friday, adding that consultations in Washington “are constructive.”

Kudlow said the Chinese offer included energy and farm commodities purchases, adding “the number is a good number,” adding that China would also need to lower non-tariff barriers and agree to a “verifiable process whereby the technology transfers and the theft of intellectual property stops.”

U.S. President Donald Trump has threatened to impose tariffs on up to $150 billion of Chinese goods to combat what he says is Beijing’s misappropriation of U.S. technology through joint venture requirements and other policies. Beijing has threatened equal retaliation, including tariffs on some of its largest U.S. imports, including aircraft, soybeans and autos.

China took a surprise conciliatory step to end an anti-dumping probe that had heaped hefty duties onto U.S. sorghum grain, effectively halting $1.1 billion in U.S. exports, causing turmoil in grain markets and sparking concerns about rising costs in China.

As the talks continued, Trump administration officials have been contacting groups in the agriculture, technology and energy sectors to vet the Chinese proposals and determine whether increasing exports was feasible, people familiar with the talks said.

Two sources involved in the negotiations said that the Treasury has been contacting American technology firms to test their support for liberalizing export control laws to allow more high-tech exports to China.

Chinese officials had proposed a list of goods covered by U.S. export controls that are not restricted by other countries, implying that these could be purchased from the United States, the sources said. China has long sought to increase purchases of U.S. high-technology goods.

Achieving a $200 billion reduction of the U.S.-China trade deficit on a sustainable basis would require a massive change in the composition of commerce between the two countries, prompting skepticism from economists. The $200 billion figure is larger than all of the United States’ global annual agricultural and oil exports.

It was unclear whether any agreements that could emerge from the talks later on Friday would include a relaxation of paralyzing restrictions on Chinese telecommunications equipment maker ZTE Corp imposed last month by the U.S. Commerce Department. The sanctions-related move banned U.S. firms from selling semiconductors and other components to ZTE, causing the Shenzhen-based firm to cease operations.

Earlier this week, Trump tweeted that he directed Commerce to put ZTE back in business and said the company’s situation was part of an overall trade deal with China.

But Kudlow distanced the ZTE issue from the current trade talks and said the company’s punishment may or may not be changed.

“The Chinese government has asked for a bit of relief on the remedy. It doesn’t mean there won’t be a remedy. There will be very strong remedies,” he said.

Trump, speaking at a White House event on prison reform, said he was determined to negotiate “great trade deals” with China and other countries.

“We’re changing a lot of those horrible trade deals. They take our jobs, they take our money, we end up with no money, no taxes, no employment. Not a good combination.”

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Wall Street posts weekly loss as banks, chipmakers weigh

NEW YORK (Reuters): The S&P 500 ended lower on Friday after a choppy trading session as bank and chipmaker stocks weighed on the index and investors grappled with U.S.-China trade talks.

All three major U.S. stock indexes posted a weekly loss as the markets reacted to reports from the U.S.-China trade summit, rising U.S. government bond yields and increasing oil prices.

“I think everybody’s waiting on some sort of direction on American trade talks that are occurring right now, and there’s anxiety about oil prices,” said Oliver Pursche, vice chairman and chief market strategist at Bruderman Asset Management in New York.

China denied accounts by some U.S. officials that it had offered a package to slash the U.S. trade deficit by up to $200 billion, but said the consultations were “constructive,” in the latest salvo of tit-for-tat messages to emerge from the high-level meeting.

“Markets tend to get over that sort of thing very quickly lately,” Pursche said. “You may have a statement that … impacts sentiment and movements over a half hour or so, but it reverses back because there’s so much confusion out there right now.”

Boeing Co (BA.N) shares rose on hopes for a reduction in the U.S.-China trade deficit, after an American source said the company would be major beneficiary of a narrowed trade gap. Boeing sells about a fourth of its commercial aircraft to Chinese customers. The plane maker’s shares advanced 2.1 percent, helping keep the Dow Jones Industrial Average out of negative territory.

Relatively tariff-immune small-cap stocks continued to outperform, with the Russell 2000 hitting its third straight record closing high.

Yields of U.S. 10-year Treasuries US10YT=RR pulled back from near seven-year highs as buyers emerged after a bond sell-off earlier in the week prompted by growing inflation worries.

Although banks typically benefit from higher interest rates, shares of JPMorgan Chase (JPM.N), Citigroup (C.N), Bank of America (BAC.N) and Wells Fargo (WFC.N) were all lower, pulling the S&P Financial index .SPSY down 0.9 percent.

Some investors have expressed skepticism that the banking sector has much more room to rise unless loan growth accelerates or regulations slacken considerably.

The Dow Jones Industrial Average .DJI was essentially flat, ending the session at 24,715.09, the S&P 500 .SPX lost 7.16 points, or 0.26 percent, to 2,712.97 and the Nasdaq Composite .IXIC dropped 28.13 points, or 0.38 percent, to 7,354.34.

Alphabet Inc (GOOGL.O) stock slid 1.1 percent ahead of an expected story about the tech bellwether on CBS News’ “60 Minutes” program this weekend.

Shares of Applied Materials (AMAT.O) dropped 8.2 percent after the chip equipment maker’s weak 2019 forecast added to concerns of softening smartphone demand.

The Philadelphia Semiconductor index .SOX ended the session down 1.4 percent, its worst loss since April 19.

Deere & Co (DE.N) helped bolster the industrials sector, jumping 5.7 percent after the company raised its full-year earnings estimate.

Campbell Soup Co (CPB.N) fell 12.4 percent after its chief executive officer abruptly stepped down and the company cut its full-year profit forecast, saying it expects higher costs to weigh on margins.

The S&P Energy index .SPNY dropped 0.8 percent as crude prices fell. Despite the session’s decline, oil still posted its sixth consecutive weekly advance.

Declining issues outnumbered advancing ones on the NYSE by a 1.01-to-1 ratio; on Nasdaq, a 1.03-to-1 ratio favored decliners.

The S&P 500 posted 10 new 52-week highs and five new lows; the Nasdaq Composite recorded 144 new highs and 33 new lows.

Volume on U.S. exchanges was 6.18 billion shares, compared with the 6.64 billion-share average for the full session over the last 20 trading days.

 

 

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Cambridge Analytica starts bankruptcy proceedings in US

LONDON (BBC): Cambridge Analytica has filed for bankruptcy in the US.

The consultancy was at the centre of the Facebook data-sharing scandal in which it was accused of improperly obtaining information on users.

The bankruptcy proceedings are part of the process of closing down the company and its UK parent, SCL Elections, that started in early May.

The company blamed a “siege of media coverage” for driving away customers and forcing its closure.

In court papers filed with a New York court, Cambridge Analytica said it had assets of up to $500,000 (£370,000) and debts in the range of $1m to $10m.

Regulators have said that, despite the firm’s shutting down and laying off staff, they will still pursue a probe into how the firm used Facebook data.

The social network said data on about 87 million users was grabbed when people completed a quiz hosted on the site. This information was then passed on to Cambridge Analytica which has been accused of using it for political campaigning.

The political consultancy always maintained that it did nothing wrong in the way it obtained and used the data.

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PayPal to buy iZettle for $2.2B in an all-cash deal

Monitoring Desk

WASHINGTON: PayPal is taking its biggest bet yet on point-of-sale transactions, small businesses and markets outside of the U.S. as it looks to raise its game against Square, Stripe and others in the world of payments: The company has confirmed that it is buying iZettle — the Stockholm-based payments provider commonly referred to as the “Square of Europe” — for $2.2 billion in an all-cash deal.

The deal — which is expected to close in Q3 2018 — will see iZettle’s  co-founder and CEO Jacob de Geer stay on to lead iZettle. He will report to PayPal’s  COO Bill Ready. Others in iZettle’s exec team will also stay on to run the business, which will become a “center of excellence” for in-store and offline payments in Europe, PayPal said.

The timing of the deal is notable: It comes on the heels of iZettle filing for an IPOearlier this month (just nine days ago, in fact) in its own bid to scale out its business: iZettle had planned to raise $227 million on the Stockholm Nasdaq exchange, which would have valued the company at around $1.1 billion.

From what I understand from sources, the two had been talking “for years.” I guess the IPO filing suddenly gave those talks a new kind of urgency. And maybe double so: The news was supposed to be announced on Friday, but after rumors started to leak out today the company has decided to come out with it officially.

PayPal itself has a market cap of around $94 billion and in its last earnings said it had $7.8 billion in cash, cash equivalents and investments — giving it ample funds for this deal.

iZettle becomes PayPal’s biggest-ever transaction. For some context, in 2015 PayPal acquired money-transfer startup Xoom for $890 million, and when it was still a part of eBay, in 2013, it acquired Braintree and its Venmo business for $800 million.

iZettle has operations in 12 markets, including several in northern Europe and Mexico in Latin America, where PayPal doesn’t have an extensive offline presence, such as Brazil, Denmark, Finland, France, Germany, Italy, Mexico, Netherlands, Norway, Spain and Sweden. (Its Latin American expansion was made by way of a strategic investment from the Spanish bank Santander.) iZettle is very strong also in the U.K., so will help PayPal strengthen its business in that market at a time when Square has finally emerged as a competitor there.

Like Square, iZettle has made a lot of headway in building out a point of sale business by way of a card-reading dongle that links up with a smartphone or tablet, working with smaller businesses that might have never used a card service in the past because of the prohibitive costs of taking card payments. From that, it has extended into other financial services for those business, from inventory management to loans.

For those who follow PayPal, you’ll know that the company has also been working hard to expand its own point-of-sale payments, both in the U.S. and globally, although some might argue that these have not been as much of a home run for the company as its legacy online payments operations.

iZettle’s de Geer has wanted to expand the company’s horizons in the future to encompass larger businesses and also companies that do not have brick-and-mortar presences of any kind, but it’s the size and reach of iZettle’s operations precisely in existing areas that was what attracted PayPal, as complements to its existing business.

“Small businesses are the engine of the global economy and we are continuing to expand our platform to help them compete and win online, in-store and via mobile,” said PayPal president and CEO Dan Schulman in a statement. “iZettle and PayPal are a strategic fit, with a shared mission, values and culture—and complementary product offerings and geographies. In today’s digital world, consumers want to be able to buy when, where and how they want. With nearly half a million merchants on their platform, Jacob de Geer and his team add best-in-class capabilities and talent that will expand PayPal’s market opportunity to be a global one-stop solution for omnichannel commerce.”

On the side of iZettle, this will give the startup a much bigger opportunity to scale out its business as part of a global payments giant.

“Combining our assets and expertise with a global industry leader like PayPal allows us to deliver even more value to small businesses to help them succeed in a world of giants,” de Geer said in a statement. “The combination of iZettle and PayPal will provide tremendous benefits to our merchants who will have access to an even wider range of tools to help them get paid, sell smarter and grow.”

In its IPO filing, iZettle noted that it’s still operating at a loss, although those losses appeared to be narrowing. In the first three months of 2018, the company reported negative earnings before tax, depreciation and amortization of SEK73 million ($8.3 million), slightly narrower than its negative EBITDA of SEK78 million ($8.8 million). It projects EBITDA profitability by 2020.

iZettle expects to generate gross revenues (its own cut, that is) of around $165 million in 2018, with approximately $6 billion of total payment volume expected to be processed on its platform, PayPal noted. Its revenues have been growing at a compound annual growth rate of 60 percent between 2015 and 2017.

 

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Pakistan’s current account deficit reaches record high

Monitoring Desk

KARACHI: Pakistan’s current account deficit has widened 50% to a record high of $14.03 billion in the first 10 months of the current fiscal year 2018, reported the central bank on Friday.

The deficit stood at $9.35 billion in the same period of the previous fiscal year, according to the State Bank of Pakistan (SBP).

The deficit increases woes of the country’s economic managers as a widening current account takes toll on foreign exchange reserves that have already fallen below $11 billion last week.

The situation may even force the government to go back to the International Monetary Fund (IMF) for a bailout package, analysts say.

The deficit is also expected to surpass the estimated figure of $16 billion for fiscal year 2018 after the price of crude oil (the benchmark Brent crude) surged sharply in the international market to three-and-a-half-year high of $80 per barrel on Thursday from around $50 per barrel at the outset of the current fiscal year on July 1, 2017.

Pakistan’s economy depends heavily on imported oil and Liquefied Natural Gas (LNG) to fuel its industries as well as fulfil demands of domestic consumers. The country meets almost three-fourths of its energy needs through imports, which contributes close to one-third in the overall import bill of the country.

The government has also devalued the rupee by around 9.5% in two rounds (5% in December 2017 and 4.5% in March 2018) in a bid to narrow down the deficit. The measure has resulted in increasing exports, but largely failed to slow down imports.

The 10-month cumulative deficit of $14.03 billion is much higher than the complete fiscal year 2017’s deficit of $12.62 billion, according to the central bank.

April’s figure

The current account deficit in April 2018 alone stood at $1.95 billion, which is 61% higher than $1.21 billion recorded in the prior month of March 2018, it added.

The trade deficit increased 20% to $25 billion in 10 months compared to $20.77 billion in the same period last year. Accordingly, imports increased 17% to $45.56 billion from $38.91 billion and exports enhanced 13% to $20.55 billion from $18.14 billion.

The trade deficit (including of services) rose to $29.21 billion from $24.09 billion.

On the other hand, uptick in workers’ remittances sent home by overseas Pakistanis slightly controlled the widening deficit. Remittances rose 4% to $16.25 billion in the 10-month period compared to $15.64 billion in the corresponding period of the previous year.

FDI increased 2.4% in July-April, amounting to $2.24 billion from $2.18 billion in the same 10-month period of the previous year.

 

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Oil heads back toward $80

Monitoring Desk

LONDON: Benchmark oil contract Brent North Sea headed back toward $80 on Friday, while stock markets diverged and the dollar firmed. Brent stood above $80 on Thursday for the first time in three-and-a-half years — as a perfect storm of issues fuels concerns about supplies, with some forecasting it could break $100 at some point.

Around 1015 GMT Friday, Brent stood at $79.71 per barrel, up 41 cents compared with Thursday’s close.

Share prices of most energy firms continued to profit from oil’s gains, while elsewhere traders kept track of high-level China-US trade talks. Milan’s shares index was the biggest faller among leading markets in Europe — with Italy’s banks in particular dragged down by the prospect of the country being led by a coalition of far-right and anti-establishment parties.

Top European stock markets had meanwhile been propelled to heights Thursday by weakness in the pound and euro, which boosted share prices of exporters.

London’s FTSE 100 index closed at an all-time peak while the Paris CAC 40 ended at the highest level since 2007.

In trading Friday, London fell slightly, while Paris and Frankfurt rose.

“The FTSE 100 is drifting lower… coming off the back of yesterday’s record close,” noted Joshua Mahony, market analyst at IG trading group.

“A distinct lack of major economic releases throughout the day shifts the focus onto residual geopolitical and economic factors, with rising bond yields and fears over a breakdown in US-Chinese trade talks proving a drag,” he added.

Brent and WTI, the other key oil contract, are up about one third from their 2018 lows seen in February with upward pressure coming from US President Donald Trump’s decision to withdraw from the Iran nuclear deal as well as economic uncertainty in key producer Venezuela and an output cap by OPEC and Russia.

That comes on top of continued improvement in the global economy and ongoing unrest across the crude-rich Middle East region.

Higher prices are boosting expectations for fatter profits for global energy giants, while increasing expectations of higher inflation.

This in turn is cementing expectations of multiple interest rate hikes from the US Federal Reserve this year.

Key US 10-year bond yields are already at seven-year highs above three percent, with the prospect of paying more to borrow money sending the dollar higher.

Adding to market unease is a tariffs spat between the United States and China, which has raised concerns about a trade war between the world’s two biggest economies.

President Xi Jinping’s pointman on economic issues is in Washington holding talks with a top-level delegation led by Treasury Secretary Steven Mnuchin, with markets hoping the two sides can reach an agreement.

Trump sent Wall Street tumbling on Thursday when he lashed out at European and Chinese trading partners and cast doubt on the chances of reaching a deal with Beijing.

Also keeping markets on edge is the future of a summit between Trump and North Korean leader Kim Jong Un after Pyongyang threatened to pull out over US demands that it get rid of its nuclear programme.