Economy

Finland's central bank governor Rehn in Helsinki
Finland’s central bank governor Olli Rehn in Helsinki, Finland July 17, 2018. REUTERS/Ints Kalnins

May 25, 2019

By Anne Kauranen

HELSINKI (Reuters) – European Central Bank presidential hopeful Olli Rehn spelled out the challenges facing Mario Draghi’s successor in an interview published on Saturday, but declined to comment on the process.

The ECB rate setter and Bank of Finland chief has been tipped as a potential successor to Draghi when the ECB president leaves on Oct. 31, but the process is steeped in secrecy.

“I trust that EU decision makers will find a person for the job who will be able to manage it even through tight spots which will also come,” Rehn was quoted as saying by Finland’s Helsingin Sanomat newspaper.

Replacing Draghi, who famously pledged in 2012 to do “whatever it takes” to save the euro, has left markets anxiously awaiting news of his successor.

“The governor has to be both qualified in monetary and financial policy as well as capable of team play,” Rehn said, while declining to comment on the deliberations.

Rehn’s previous posts include Finnish minister for economic affairs as well as a decade working as a European commissioner overseeing the bloc’s enlargement as well as economic policy.

In March, a Reuters poll of economists found that while French ECB board member Benoit Coeure was considered best-suited for the top job, the most likely compromise candidate was Rehn’s compatriot Erkki Liikanen, a former Finnish central bank chief.

When asked who was the most likely to win, well over a third named Liikanen, with the remainder almost equally split between Coeure, Rehn, French central bank chief Francois Villeroy de Galhau and Bundesbank chief Jens Weidmann.

In the newspaper interview, Rehn paraphrased former England soccer player Gary Lineker’s line that, in the end, the Germans always win, although no German has so far held the top ECB job.

“It’s good to remember that even Germany can be beaten. You can ask Antonin Panenka about it,” Rehn added, referring to the former Czech footballer who scored the winning goal against West Germany in the 1976 final of soccer’s European Championships.

The goal? A softly chipped penalty in the middle of the net as the goalkeeper dived to one side.

(Writing by Terje Solsvik; Editing by Alexander Smith)

Source: OANN

Illustration photo of a China yuan note
A China yuan note is seen in this illustration photo May 31, 2017. REUTERS/Thomas White/Illustration

May 25, 2019

BEIJING (Reuters) – China’s banking and insurance regulator on Saturday said it did not expect a persistent decline in the yuan and warned speculative short sellers they would suffer “heavy losses” if they bet against the currency.

Xiao Yuanqi, the spokesman for the China Banking and Insurance Regulatory Commission (CBIRC), also said Beijing must look out for hot money moving in and out of the country, as well as large amounts of capital flowing into the frothy real estate market.

The yuan has lost more than 2.5% against the dollar since the festering China-U.S. trade dispute intensified earlier this month. It is now less than 0.1 yuan away from the 7-per-dollar level authorities have in the past indicated as a floor.

Xiao was speaking on behalf of Guo Shuqing, CBIRC’s chairman, at a finance forum in Beijing.

(Reporting by Cheng Leng and Ryan Woo; Writing by Yawen Chen; Editing by Sam Holmes)

Source: OANN

FILE PHOTO: Smoke rises from a fire burning at the Intercontinental Terminals Company in Deer Park, east of Houston
FILE PHOTO: Smoke rises from a fire burning at the Intercontinental Terminals Company in Deer Park, east of Houston, Texas, U.S., March 18, 2019. REUTERS/Loren Elliott/File Photo

May 24, 2019

HOUSTON (Reuters) – Mitsui & Co Ltd’s Intercontinental Terminals Co (ITC) has begun evaluating and paying claims to Houston area residents who missed work or incurred medical expenses following a March fire at its petrochemical storage facility, the company said on Friday.

A three-day blaze at ITC’s tank farm in Deer Park, Texas, released toxic chemicals into the air and the nearby waterway that connects Houston to the Gulf of Mexico, halting traffic in the nation’s busiest oil port.

Houston area residents with health claims could receive up to $750 and those who missed work because of travel restrictions related to the fire could receive up to $500, ITC said.

The process requires claimants to provide medical records or a signed letter from their employer, among other documentation, including a “sworn statement that they were present in Deer Park during the incident,” ITC said.

ITC did not immediately respond to a request for comment.

(Reporting by Collin Eaton in Houston; Editing by Sonya Hepinstall)

Source: OANN

FILE PHOTO: An Airbus A318 airplane of Avianca Brazil flies over the Guanabara Bay as it prepares to land at Santos Dumont airport in Rio de Janeiro
FILE PHOTO: An Airbus A318-100 airplane of Avianca Brazil flies over the Guanabara Bay as it prepares to land at Santos Dumont airport in Rio de Janeiro, Brazil, April 3, 2019. REUTERS/Sergio Moraes/File Photo

May 24, 2019

SAO PAULO (Reuters) – Brazil’s civil aviation regulator ANAC said on Friday it had suspended the operations of carrier Avianca Brasil in the country, including all remaining flights, as a precautionary measure.

“All the flights are suspended until the company proves it has the capacity to maintain operations safely,” ANAC said in a statement.

Avianca Brasil has filed for bankruptcy protection and lost most of its fleet after lessors obtained favorable court decisions to take aircraft back for lack of payments. It is still trying to reach a deal to sell remaining assets.

The carrier was operating around 30 flights per day using the planes it had left.

ANAC said, without elaborating, that it took the decision after receiving information regarding the operational safety of Avianca Brasil flights.

Avianca Brasil’s press office said the company would comment on the ANAC measure later on Friday.

The regulator said passengers who had flights booked with Avianca Brasil in the coming days should not go to airports, and should instead contact the company about arranging refunds or flights from other carriers.

(Reporting by Marcelo Teixeira; Editing by Tom Brown)

Source: OANN

Mexico's President Andres Manuel Lopez Obrador attends a news conference, in Mexico City
Mexico’s President Andres Manuel Lopez Obrador attends a news conference, at the National Palace in Mexico City, Mexico, May 21, 2019. REUTERS/Henry Romero

May 24, 2019

By Anthony Esposito

MEXICO CITY (Reuters) – Mexico’s economy shrank in the first quarter of 2019 from the previous three-month period, data showed on Friday, dealing a blow to the new government’s drive to convince investors it can boost growth in Latin America’s second-largest economy.

President Andres Manuel Lopez Obrador took office in December pledging to ramp up lackluster growth and job creation.

But the economy shrank 0.2% compared with the October-December period as services and industrial activity dipped, the first contraction since the second quarter of 2018, according to data from national statistics agency INEGI. The contraction was particularly sharp in March.

“March was a very bad month for economic activity, clocking a 0.6% contraction,” Mexican central bank board member Jonathan Heath said on Twitter, citing monthly economic activity data also published on Friday.

Goldman Sachs economist Alberto Ramos said strikes and fuel supply disruptions earlier in the year had contributed to the slump.

After the data was published, Mexico’s benchmark stock index <.MXX> fell more than 1% to a two-month low, the peso currency <MXN=> dipped into negative territory, and economic research consultancy Capital Economics cut its Mexican growth forecast to 1.8% for 2019.

“The weak Q1 GDP figure means the economy won’t, barring a major surprise, grow by the 2.5% that we had projected … The next few years will be underwhelming for Mexico’s economy,” said William Jackson, Chief Emerging Markets Economist at Capital Economics.

Lopez Obrador brushed aside concerns about the data at his daily morning press conference.

“Investment is growing, I said it yesterday, our currency is strong, it is appreciating more than other currencies around the globe and inflation is stable. And there will be growth, much more growth. So we’re going to wait,” said Lopez Obrador.

Mexico received some $10 billion in foreign direct investment in the first quarter, up 7% from the same quarter last year, and inflation was slightly lower than expected in the first half of May at 4.43%.

The peso has appreciated over 6% since Lopez Obrador took office.

Still, some of the president’s decisions have rattled investors, prompting concern among private sector analysts.

The International Monetary Fund on April 9 lowered Mexico’s 2019 growth outlook to 1.6% from 2.1%, citing shifts in perception about policy.

In a note, Goldman Sachs’ Ramos said high interest rates would weigh on consumer spending, adding that the investment outlook was lackluster, partly due to uncertainty over the ratification of a new trade deal with Mexico’s top export market the United States.

The U.S. economy expanded 3.2 percent in the first quarter in annual terms, but some economists believe that growth rate will be short lived, bringing more gloom to Mexico.

“The projected deceleration of the U.S. economy may also weaken the thrust to activity from exports and foreign direct investment,” Ramos said.

In annual terms, Mexico’s economy expanded just 1.2%, slightly lower than the 1.3% growth preliminary data published last month showed. It was the weakest quarterly annual growth in a year.

(Reporting by Anthony Esposito; Additional reporting by Miguel Angel Gutierrez and David Alire Garcia; Editing by Susan Thomas and James Dalgleish)

Source: OANN

FILE PHOTO: The Carige bank logo is seen in Rome
FILE PHOTO: The Carige bank logo is seen in Rome, Italy, April 16, 2016. REUTERS/Stefano Rellandini/File Photo

May 24, 2019

MILAN (Reuters) – A junior minister from Italy’s ruling 5-Star Movement said on Friday he favored a market solution for troubled bank Carige, adding the government had to put in place the right conditions to ease it.

“The government should work to create right conditions for a market solution for Carige,” Cabinet Undersecretary for Regional Affairs Stefano Buffagni said on the sidelines of an event.

Deputy Prime Minister and League leader Matteo Salvini has said that his party was ready to back a state rescue of Carige in the absence of private investors willing to plug in a capital shortfall at the ailing bank.

(Adds dropped word in lead)

(Reporting by Elvira Pollina, writing by Giulio Piovaccari)

Source: OANN

Men work on a production line manufacturing robotic arms at a factory in Huzhou, Zhejiang
FILE PHOTO: Men work on a production line manufacturing robotic arms at a factory in Huzhou, Zhejiang province, China January 8, 2019. REUTERS/Stringer .

May 24, 2019

BEIJING (Reuters) – Premier Li Keqiang said on Friday China aimed to keep value-added taxes for the manufacturing industry at low levels and encourage companies to innovate, in comments coming at a time of a bitter trade dispute with the United States.

Despite a good start in the first quarter, rising external challenges may still destabilize the Chinese economy, the second largest in the world, Li said in a statement on a government website.

While addressing a tax symposium, Li said although cuts in taxes and fees would reduce fiscal revenue, they would boost companies’ investment and confidence, which would in turn create employment and maintain sustainable economic growth.

“Local governments have adequate conditions to overcome difficulties and strike a balance between tax breaks and fiscal balances,” Li said.

Earlier this year, Li said China would cut taxes and fees for companies by nearly 2 trillion yuan ($290 billion) this year to boost slowing economic growth.

On Friday he said China’s economy had been resilient so far and that ample policy tools were available for macroeconomic adjustments.

(Reporting by Min Zhang in Beijing and Lee Chyen Yee in Singapore; Editing by Kevin Liffey)

Source: OANN

FILE PHOTO: A car carrier trailer carries Tesla Model 3 electric sedans, is seen outside the Tesla factory in Fremont
FILE PHOTO: A car carrier trailer carries Tesla Model 3 electric sedans, is seen outside the Tesla factory in Fremont, California, U.S. June 22, 2018. REUTERS/Stephen Lam/File Photo

May 24, 2019

By Lucia Mutikani

WASHINGTON (Reuters) – New orders for U.S.-made capital goods fell more than expected in April, further evidence that manufacturing and the broader economy were slowing after a growth spurt in the first quarter that was driven by exports and a buildup of inventories.

The report from the Commerce Department on Friday also showed orders for these goods were not as strong as previously thought in March and shipments were weak over the last two months. Manufacturing is easing as businesses work off stockpiles of unsold goods, leading to fewer orders being placed with factories. Industrial production dropped in April and a measure of factory activity declined to a near 10-year low in May.

Activity is also being weighed down by an escalation in the trade war between the United States and China, which has sparked a sell-off on Wall Street, as well as tepid global growth. The renewed trade tensions are expected to weigh on exports, which earlier this year had benefited from increased Chinese purchases of American goods.

Non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, dropped 0.9% last month as demand softened almost across the board.

Data for March was revised down to show these so-called core capital goods orders rising 0.3% instead of increasing 1.0% as previously reported. Economists polled by Reuters had forecast core capital goods orders falling 0.3% in April. Core capital goods orders increased 2.6% on a year-on-year basis.

Shipments of core capital goods were unchanged last month after a downwardly revised 0.6% decline in the prior month. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement.

They were previously reported to have slipped 0.1% in March.

The downward revision to March shipments suggests business spending was even weaker than initially estimated in the first quarter and could result in GDP growth for the quarter being trimmed when the government publishes its revision next week.

The government estimated last month that the economy expanded at a 3.2% pace in the first quarter. Second-quarter GDP growth estimates are below a 2% annualized rate.

The dollar slipped against a basket on currencies following Friday’s data. U.S. Treasury prices were little changed.

INVENTORIES RISE

In April, orders for machinery edged up 0.1% after dropping 2.0% in March. Orders for computers and electronic products fell 0.4%. There were also decreases in orders for primary metals. Orders for electrical equipment, appliances and components gained 0.9%.

Overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, tumbled 2.1% in April after increasing 1.7% in the prior month. Orders for transportation equipment dropped 5.9% after rising 5.9% in March.

Orders for motor vehicles and parts decreased 3.4% last month, the most since May 2018. Orders for non-defense aircraft plunged 25.1% after rising 7.8% in March. Boeing reported on its website that it had only four aircraft orders in April, down from 44 in March.

All of the orders last month were for the troubled 737 MAX aircraft. Boeing’s fastest-selling MAX 737 jetliner was grounded in March after two fatal plane crashes in five months.

Boeing has cut back production and suspended deliveries of the aircraft, which is also contributing to the weakness in manufacturing.

Overall durable goods shipments fell 1.6% in April, the most since December 2015. There was a 3.4% drop in shipments of motor vehicles and parts. Shipments of civilian aircraft tumbled 16.0% last month.

Durable goods inventories rose 0.4% last month, with motor vehicle stocks rising 0.8%. Civilian aircraft inventories increased 1.3% last month.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Source: OANN

FILE PHOTO: An oil refinery located on a branch of the Druzhba oil pipeline, which moves crude through the pipeline westwards to Europe, is seen near Mozyr
FILE PHOTO: An oil refinery located on a branch of the Druzhba oil pipeline, which moves crude through the pipeline westwards to Europe, is seen near Mozyr, some 300 km (186 miles) southeast of Minsk, September 11, 2013. REUTERS/Vasily Fedosenko/File Photo

May 24, 2019

By Olga Yagova, Agnieszka Barteczko and Olesya Astakhova

MOSCOW/WARSAW (Reuters) – Russia plans to take back around 1 million tonnes of contaminated oil from Belarus, cleaning up the Druzhba export pipeline section leading to Poland and Germany, four industry sources familiar with the plan told Reuters.

An estimated 5 million tonnes of contaminated oil – which is being removed using pipelines, storage, railcars and by the sea – got into in the Druzhba pipeline last month, forcing Russia to stop flows to customers in Belarus, Ukraine, Poland, Germany and a number of central European countries.

A month ago, Russia had to stop exports via the Druzhba pipeline to Poland and Germany via the northern branch of the line and to Ukraine, Hungary, Slovakia and the Czech Republic in the south. The routes split at the Mozyr refinery in Belarus.

The plan was discussed at talks in Warsaw on Thursday between Russian, Belarussian and European companies. Another roughly 1 million tonnes stuck in Poland and Germany will be left there to be dealt with by the countries, the sources said.

“The Russians are open to agreeing to take back the polluted oil from the Belarus section which has not come to Poland yet, but there is no agreement on compensation,” a source who was attending the Warsaw meeting told Reuters. 

Three other people present at the Warsaw talks or briefed on what was discussed there also said the plan was for Russia to take back the oil from the Belarus section.

“This is a bit under 1 million tonnes. They plan to take it back to Russia,” one of four sources familiar with the plan said.

The plan for contaminated crude in the pipeline further west, in Poland and Germany, is that it will be taken off by local refiners, three of the four sources said.

The Russian energy ministry and Transneft, the Russian state pipeline operator, did not reply to requests from Reuters for comment.

Belarus state energy company Belneftekhim, which manages the country’s two refineries and is part of the talks on the tainted oil issue, declined to comment.

Polish oil refiners PKN Orlen and Lotos as well as pipelines operator PERN were not immediately available to comment.

The tainted oil will be removed from the Belarus section by reversing the flow of crude along that section, sources said.

It remained unclear on where exactly the contaminated crude removed from the Belarus section will be sent or stored by Russia, the four sources said.

A total of around 5 million tonnes could have been contaminated by organic chloride, which is used to boost oil extraction, according to the Belarusian operator of a section of the Druzhba pipeline.

The Baltic Sea port of Ust-Luga was affected by the contamination, too. Russia is also exporting oil via other ports on the Baltics, as well in the south and east of the country. These supplies were not affected by the issue.

So far, Russia has managed to remove around 2 million tonnes, using rail, storage tanks and ships, restoring, at least partially, clean flows to the Ust-Luga port and to Slovakia.

Separately from the Warsaw meeting, Russian Deputy Prime Minister Dmitry Kozak and his Belarusian counterpart Igor Lyashenko met in Moscow on Thursday, approving a plan for cleaning up the Druzhba network.

Kozak’s spokesman said after the talks that Russia and Belarus will clean the pipeline all the way through to Belarus’s border with Poland.

Supplies of clean oil to Poland are set to resume no later than in the middle of June, according to the statement after that meeting. The prime ministers of Russia and Belarus are meeting on Friday to discuss the issue.

(Additional reporting by Vladimir Soldatkin and Gleb Gorodyankin in MOSCOW, Anna Koper in WARSAW and Andrei Makhovsky in MINSK; Writing by Katya Golubkova; Editing by Christian Lowe and David Evans)

Source: OANN

FILE PHOTO: An investor looks at an electronic board showing stock information at a brokerage house in Shanghai
FILE PHOTO: An investor looks at an electronic board showing stock information at a brokerage house in Shanghai, China July 6, 2018. REUTERS/Aly Song/File Photo

May 24, 2019

(Reuters) – 1/THE MONTH OF MAY

Theresa May stepped into 10 Downing Street in July 2016 with the express aim of taking Britain out of the European Union. She will depart as prime minister this summer having failed in that ambition. No one can say she didn’t try — after three attempts to get her EU withdrawal bill through parliament, she finally had to admit it was dead in the water.

Speculation about her departure has been rife all month. Now it’s wait and see if her successor will fare any better with the withdrawal deal, or if he or she steers Britain towards a no-deal Brexit. What’s clear is that risks of crashing out of the EU without a transition period have risen, given the eurosceptic Boris Johnson is favorite to succeed May. The other risk is a new election, and possibly, a hung parliament. That means sterling could suffer more losses; it has fallen almost 3% this month against the dollar and euro.

May will remain in charge as the Conservatives elect a new leader. Her last task as prime minister — welcoming U.S. President Donald Trump to Britain — will hopefully be easier than trying to deliver Brexit.

Trade-weighted sterling interactive http://tmsnrt.rs/2hwV9Hv

Graphic on Brexit and sterling: https://tmsnrt.rs/2WW8QBb

2/GAME OF PHONES

The Sino-U.S. trade war has morphed from a tariff spat into a battle over who controls global tech. Washington has banned U.S. firms from doing business with Chinese telecommunications giant Huawei. Essentially that cripples the company’s ability to make new chips for its future smartphones.

As chipmakers and companies including Panasonic and ARM fell into line behind the U.S. ban and others like Toshiba scrambled to check their exposure, the widespread impact of the move on complex global supply chains is becoming clear.

Accordingly, shares have tumbled worldwide. Among others, the potential loss of business from the Chinese smartphone giant has hit Europe’s AMS and STMicroelectronics. Taiwan Semiconductor, which Bernstein analysts calculate makes around 11% of revenues from Huawei, sank too.

The Philadelphia semiconductor index, widely seen as a bellwether for world chipmakers, has lost around 18% in just a month since hitting a record high on April 24.

However, some telecoms equipment firms such as Nokia and Ericsson could benefit if the Huawei clampdown diverts business to them.

Trump’s latest claim that Huawei could be part of a trade deal has injected some hope into markets, but unless further talks are announced investors will remain unconvinced.

(For a graphic on ‘Chips tank worldwide as trade tensions return’ click https://tmsnrt.rs/2X6l0Yq)

3/EM TANTRUM WITHOUT THE TAPER?

Markets have a funny way of repeating themselves and exactly six years on from the ‘taper tantrum’, when investors freaked at the sudden realization the U.S. Fed wanted to end money printing, some are wondering whether something similar is brewing again.

A conviction the U.S.-China trade war will force the Fed to cut interest rates have pushed benchmark government bond yields that drive global borrowing costs to the lowest in years. But just like in 2013, the Fed is flagging something different.

It has signaled it may sit on its hands “for some time”. So if yields do start to spring back up, things could get scary.

Emerging markets in particular have painful memories of the taper tantrum. Economic surprises in the developing world are the most negative now in six years, according to an index compiled by Citi. And nearly $4 billion fled EM equities last week, EM equities have dropped around 10% so far this month and the premiums investors demand to hold EM bonds have spiked.

Clearly, many investors are not hanging around to find out what happens next.

(For a graphic on ‘EM stocks having a tantrum without the taper’ click https://tmsnrt.rs/2EtdQG4)

(For a graphic on ‘EM economic surprises most negative in six years’ click https://tmsnrt.rs/2YEM2q6)

4/MODI-NOMICS TO THE TEST After a stunning win in the world’s biggest election, Indian Prime Minister Narendra Modi begins to put together a new cabinet and a 100-day action plan. Focus is on who becomes finance minister — Arun Jaitley, a key troubleshooter for years — is said to be out of the race due to ill-health.

Modi’s re-election reinforces a global trend of right-wing populists sweeping to victory, from the United States to Brazil and Italy. Energised by his brand of Hindu nationalism, voters gave less weight to his failure to create jobs — a key campaign promise at the last election. In fact, a complex tax reform and a flash demonetization pushed millions out of work.

Credibility issues aside, upcoming growth data will be a reminder that while investors gave Modi a big thumbs up and pushed Indian stocks to record highs, the economy is less cheerful. Corporate earnings have in fact disappointed in the years Modi has been in office. And small businesses, low-income farmers, jobseekers and liquidity-starved banks will demand more of him in his second mandate.

(For a graphic on ‘Corporate India Earnings’ click https://tmsnrt.rs/2D7eato)

5/ON THE ROAD AGAIN

The U.S. summer vacation season begins, unofficially, with the Memorial Day weekend, and travel volumes across the United States should be the second-highest on record this year, according to the American Automobile Association (AAA). Despite high fuel prices, nearly 43 million Americans will be traveling over the long weekend, and 37.6 million will be driving, making this holiday travel season the busiest since 2005, the AAA predicts.

But gasoline supplies are tight on the U.S. East and West Coasts, leaving both regions vulnerable to potential price spikes at the pump, just as the peak summer driving season kicks off. High fuel prices cut into people’s discretionary spending though, so the question is what impact there will be on the U.S. consumer.

Consumer spending — which includes spending on services such as travel — jumped in March by the most in nearly a decade, following small increases in the previous two months. But even though first-quarter U.S. growth was a healthy 3.2% on an annual basis, consumer spending grew less. In coming months, the economy is widely seen decelerating; the question is what role consumer and travel spending will play.

(For a graphic on ‘Summer Gas Season’ click https://tmsnrt.rs/2EuvqcP https://tmsnrt.rs/2EuvqcP)

(Reporting by Sujata Rao, Helen Reid and Marc Jones in London; Marius Zaharia in Hong Kong and Jennifer Ablan in New York)

Source: OANN

Containers are seen at a port in Huaian
Containers are seen at a port in Huaian, Jiangsu province, China May 5, 2019. Picture taken May 5, 2019. REUTERS/Stringer

May 24, 2019

BEIJING (Reuters) – China can maintain healthy, sustainable economic growth even as it suffers some impact from trade friction with the United States, a senior official from China’s state planner was quoted as saying on Friday.

“China’s healthy, steady and sustainable growth can be maintained in the medium- and long-term,” Ning Jizhe, vice chairman of the National Development and Reform Commission, told state television in an interview.

(Reporting by Beijing Monitoring Desk; Writing by Yawen Chen)

Source: OANN

FILE PHOTO: Cranes are pictured against sunset at a construction site in Tokyo
FILE PHOTO: Cranes are pictured against the sunset at construction site in the Toyosu district in Tokyo, February 12, 2015. REUTERS/Thomas Peter/File Photo

May 24, 2019

By Leika Kihara and Yoshifumi Takemoto

TOKYO (Reuters) – Japan’s government downgraded its assessment of the economy on Friday but maintained the view it was recovering, suggesting that escalating U.S.-China trade tensions have yet to hit growth enough to put off this year’s scheduled sales tax hike.

The fallout from the trade war and slowing global demand have clouded the outlook for the export-reliant economy, keeping alive market expectations that Prime Minister Shinzo Abe may postpone a twice-delayed increase in the sales tax in October.

But Economy Minister Toshimitsu Motegi shrugged off such speculation, saying Japan should proceed with the tax hike.

Japan needs revenues to pay for bulging welfare costs to support a fast-ageing population and curb the industrial world’s heaviest public debt burden, which is twice the size of its $5 trillion economy.

“There’s no change to our plan to raise the sales tax as scheduled,” he told reporters after the report was issued.

“I don’t think things are that bad. Manufacturing is affected by the U.S.-China trade dispute. But if you look at the supply side of our economy, manufacturing accounts for only 21%,” he said, adding that the service sector that makes up a bulk of the economy is doing well, with consumption “holding up”.

A senior ruling party lawmaker close to Abe was more cautious.

The tax hike should go ahead if the economy remains in the present state, but the government must scrutinise developments in U.S.-China trade talks and their impact on Japan’s economy, Katsunobu Kato, head of the general council at Abe’s ruling Liberal Democratic Party (LDP), told Reuters.

“The biggest factor to look out for is the U.S.-China trade friction,” Kato said. “Global economic developments change all the time, so we need to watch out for them.”

If the tax increase deals too much of a blow to the economy, the government can take steps to prop up growth and the central bank could be called upon to help revive the economy, Kato added.

OUTLOOK SLIGHTLY BLEAKER

In its economic report for May, the government described the world’s third-largest economy as “recovering at a moderate pace, while weakness in exports and industrial production continues.”

That was a slightly bleaker view than last month, when it said the economy was recovering moderately despite “some” weakness in exports and output.

Some analysts had previously expected the report could drop the view the economy was recovering, to signal that growth was too weak to weather the hit from the higher levy.

Abe has repeatedly said he would proceed with an increase in the sales tax rate to 10% from 8% in October unless the economy was hit by a severe shock.

But some lawmakers have called for a postponement on concerns it could tip Japan into recession. The previous hike to 8% from 5% hit consumers hard and triggered a deep downturn.

A government index measuring current economic conditions showed Japan may already be in recession, while first-quarter gross domestic product (GDP) data showed weakness in consumption and capital expenditure.

In the monthly report, the government also cut its view on output and capital expenditure, nodding to the growing pain from U.S.-Sino trade tensions and slowing Chinese demand.

But it stuck to the view that domestic demand remains strong enough to moderate some of the pain from overseas headwinds, helping keep Japan’s recovery intact.

“Export growth is moderating due to China’s slowdown, which is keeping output weak,” a government official told a briefing, adding that some manufacturers were putting off capital spending plans.

“But consumption and capital expenditure continue to grow as a trend. The fundamentals supporting domestic demand remain firm,” he said.

(Additional reporting by Stanley White; Editing by Sam Holmes and Jacqueline Wong)

Source: OANN

Office lights are on at dusk in the Canary Wharf financial district, London
Office lights are on at dusk in the Canary Wharf financial district, London, Britain, January 9, 2017. REUTERS/Dylan Martinez

May 24, 2019

By Susanna Twidale

LONDON (Reuters) – Britons could see a 6 billion pound ($7.6 billion) cut in energy bills over five years from 2021, saving the average household 40 pounds per year, under plans to curb what gas and electricity network firms can pay shareholders.

Regulator Ofgem, which introduced a price cap on standard energy bills in January after lawmakers said customers were being overcharged, is now targeting the operators whose network fees make up around a quarter of British household energy bills.

Energy firms are under intense scrutiny, with Britain’s opposition Labour party last week announcing a plan to nationalize the sector if it comes into power.

Ofgem said it plans to cut the amount network firms pay their shareholders, known as the “cost of equity range” by almost 50% for the next regulatory period starting in 2021.

The regulator said the package of measures it proposed could result in savings averaging 40 pounds per customer from 2021.

“Our proposals are on track to deliver a tough, fair settlement that strikes a better deal for consumers,” Ofgem executive director for systems and networks Jonathan Brearley said as the regulator announced its plan on Friday.

(What costs make up a British duel fuel energy bill? https://tmsnrt.rs/2TDnSKs)

Under Ofgem’s framework, energy network operators set out their plans for investment and how much they expect this to cost over the period. Ofgem sets the return the companies can make.

Fixed returns have prompted investors to scoop up network assets. Abu Dhabi Investment Authority bought a 16.7 percent stake of the Scotia Gas Networks business from SSE for 621 million pounds in 2016.

Other investors in Britain’s energy network include National Grid, Iberdrola’s Scottish Power, Australian investment bank Macquarie and Hong Kong’s Cheung Kong Group.

National Grid and SSE both said they were disappointed by the equity proposals.

“We believe this is not in the long-term interests of consumers,” National Grid said in a statement.

(Reporting by Susanna Twidale; Editing by Alexander Smith)

Source: OANN

FILE PHOTO: Japan's Health, Labour and Welfare Minister Katsunobu Kato speaks at a news conference in Tokyo
FILE PHOTO: Japan’s Health, Labour and Welfare Minister Katsunobu Kato speaks at a news conference in Tokyo, Japan August 3, 2017. REUTERS/Kim Kyung-Hoon

May 24, 2019

By Leika Kihara and Yoshifumi Takemoto

TOKYO (Reuters) – The fallout from the U.S.-China trade war on Japan’s economy will be a key factor in deciding whether to proceed with a scheduled sales tax hike this year, a senior Japanese ruling party official said on Friday.

Prime Minister Shinzo Abe has repeatedly said he will go ahead with a twice-delayed increase in the sales tax in October unless the economy is hit by a shock on the scale of the collapse of Lehman Brothers in 2008.

Katsunobu Kato, head of the Liberal Democratic Party’s general council and a close aide of Abe, said such a crisis was hard to predict, and global growth was likely to rebound later this year.

“If the economy remains in a state it is now, the government will proceed with the tax hike as scheduled,” he told Reuters.

But Kato said the government must scrutinize developments in U.S.-China trade talks and their impact on Japan’s economy, warning that it was “unclear” whether the two countries could narrow differences at a summit scheduled to be held on the sidelines of a Group of 20 leaders’ meeting next month.

“The biggest factor to look out for is the U.S.-China trade friction,” Kato said. “Global economic developments change all the time, so we need to watch out for them.”

A recent mixed batch of economic data has kept alive speculation that Abe could put off the increase in the tax rate to 10 percent from 8 percent, despite repeated assurances by senior government officials.

If the higher levy hurts the economy too much, the government can take steps to prop up growth, Kato said, while adding that in terms of policy tools “unfortunately Japan doesn’t have that many options left.”

The Bank of Japan could be called upon to help revive the economy depending on how severe the shock is, though it was up to the central bank to decide what steps it takes, he added.

“Any policy step would come at a cost, so it will be a decision the central bank makes” balancing the merits and demerits, Kato said.

Kato also said there was no change to the government’s endorsement of the BOJ’s efforts to achieve its elusive 2 percent inflation target.

“We’re not in a stage where the government needs to ask the BOJ to drop its 2 percent inflation target,” Kato said.

Years of heavy money printing have failed to drive up inflation to the BOJ’s target. Prolonged easing, instead, has drawn criticism from financial institutions for narrowing margins, raising calls from some lawmakers to drop the target or make it a less rigid one with room for some allowances.

(Reporting by Leika Kihara; Editing by Simon Cameron-Moore)

Source: OANN

FILE PHOTO: A man walks past the Bank of England in the City of London
FILE PHOTO: A man walks past the Bank of England in the City of London, Britain, February 7, 2019. REUTERS/Hannah McKay/File Photo

May 24, 2019

LONDON (Reuters) – Regulators are watching a price war in mortgages like a “hawk” and may need to slap stricter minimum capital requirements on lenders, Bank of England Deputy Governor Sam Woods said on Friday.

The price war may be good news for consumers wanting to buy their first home, but it was less good for a bank concentrated in mortgages, Woods told the Building Societies Association.

High loan-to-value ratios and higher loan-to-income home loans can be well captured by the BoE’s capital requirements.

“But we should be watching them like a hawk,” Woods said.

Falling capital levels have been seen at lenders who use their own computer models to work out the riskiness of loans on their books and therefore how much capital to hold.

“The amount of capital being set aside to cover mortgages has been falling,” Woods said.

The BoE’s supervisors were making strenuous efforts to check on how models are being used.

“Still, I think we should approach this trend with a very skeptical eye and need to consider whether there is a case to impose more floors in firms’ models, particularly given the current stretch in some measures of house price valuation,” Woods said

(Reporting by Huw Jones)

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Nomura Holdings' CEO Nagai attends an interview with Reuters in Tokyo
FILE PHOTO: Nomura Holdings’ Chief Executive Officer Koji Nagai attends an interview with Reuters in Tokyo, Japan, December 27, 2017. Picture taken December 27, 2017. REUTERS/Toru Hanai

May 24, 2019

By Taro Fuse and Takashi Umekawa

TOKYO (Reuters) – The chief executive of Nomura Holdings will take a 30 percent pay cut for three months after accepting responsibility for an improper handling of market information by Japan’s top brokerage.

CEO Koji Nagai told a news conference on Friday that he would take responsibility for the information leak by the company but would not step down.

“Management itself has to implement the reform measures, that is the duty of management,” he said.

Nomura confirmed late on Thursday that information related to listing and delisting criteria now under review by the Tokyo Stock Exchange had been “handled improperly”.

“We take this matter very seriously,” Nomura said in a statement.

Two sources told Reuters that a Nomura employee leaked information about the exchange’s criteria review to investors. The sources also said Japan’s Financial Services Agency is planning to slap the company with a business improvement order – a formal warning from the regulator to improve business practices.

(Reporting by Taro Fuse and Takashi Umekawa; Writing by David Dolan; Editing by Anshuman Daga)

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The German share price index DAX graph at the stock exchange in Frankfurt
FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, May 15, 2019. REUTERS/Staff

May 24, 2019

By Medha Singh and Agamoni Ghosh

(Reuters) – European shares recovered some ground on Friday after a bruising session a day earlier, as President Donald Trump predicted a swift end to the damaging U.S. trade war with China.

The pan-European STOXX 600 was up 0.6% by 0744 GMT but remained on track to post a weekly loss and its first monthly decline since a steep sell-off at the end of last year.

Trump said late on Thursday that U.S. complaints against Huawei Technologies could be resolved within the broader trade framework, though no high-level bilateral talks have been scheduled yet.

Deutsche Bank Research analysts said Trump’s comments on Huawei showed the issues were linked “and that he remains amenable to a broad deal”.

China-focused semiconductors stocks rose, in turn pushing the European tech sector 0.8% higher.

Auto and mining stocks were the top sectoral performers, while Germany’s trade-sensitive DAX, up 0.7%, led the way among country indexes while

A slight recovery in the pound kept a lid on advances in London’s blue-chip FTSE 100, which tends to underperform when Britain’s currency rises.

Prime Minister Theresa May is expected on Friday to announce the date of her departure, triggering a contest that will bring a new leader to power who is likely to push for a more decisive Brexit divorce deal. Ministers expect May to make a statement by mid-morning.

On a relatively quiet day for company news, France’s Casino shares jumped 11% after the retailer said its parent company Rallye’s filing for protection from creditors had no impact on the execution of its strategy.

Danske Bank shares rose after Bank Of America Merrill Lynch double-upgraded its shares while a Goldman Sachs rating raise lifted Royal Mail.

(Reporting by Medha Singh and Agamoni Ghosh in Bengaluru; editing by Patrick Graham and John Stonestreet)

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Wads of British Pound Sterling banknotes are stacked in piles at the Money Service Austria company's headquarters in Vienna
Wads of British Pound Sterling banknotes are stacked in piles at the Money Service Austria company’s headquarters in Vienna, Austria, November 16, 2017. REUTERS/Leonhard Foeger

May 24, 2019

By Ritvik Carvalho

LONDON (Reuters) – Sterling has been the focus for global investors rattled by Britain’s planned departure from the European Union, plunging immediately after the vote to leave and then moving wildly ever since on Brexit-related headlines.

Click https://tmsnrt.rs/2WW8QBb for an interactive Reuters graphic on Brexit and the moves in sterling.

   

Investors have largely been positioned for the pound to weaken — adding to those bets as Britain first struggled to agree a withdrawal plan with Brussels, and then as lawmakers in London this year rejected the deal three times.

Recent falls in the pound have been pronounced because investors had cut back on short positions, hoping Prime Minister Theresa May would reach a compromise with the opposition Labour Party over her Brexit deal.

But the failure of those talks, and the prospect of a new eurosceptic prime minister ahead of an Oct. 31 Brexit deadline, has renewed investor jitters that the UK could leave without any agreement to smooth economic disruption.

Such a no-deal Brexit, investors warn, would send sterling reeling to multi-decade lows.

(Graphic by Prasanta Kumar Dutta; Writing by Tommy Reggiori Wilkes; Editing by Catherine Evans)

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Steam is emitted from factories at Keihin industrial zone in Kawasaki
FILE PHOTO: Steam is emitted from factories at Keihin industrial zone in Kawasaki, Japan February 28, 2017. REUTERS/Issei Kato

May 24, 2019

TOKYO (Reuters) – Japan’s factory output likely picked up in April, reversing the decline seen in the previous month, a Reuters’ poll found on Friday, although the U.S.-China trade war is expected to prevent a more meaningful recovery in months ahead.

Industrial production was forecast to rise 0.2% in April from the previous month after a 0.6% fall in March, the poll of 16 economists showed.

The expected small gains in the data were supported by firms’ front-loading some production ahead of Japan’s 10-day holiday from late April to early May to celebrate the accession of the new emperor, analysts said.

But falls in demand for IT-related products such as electronics parts and devices weighed on the factory output, they also said.

“Firms may cut their production or draw down an inventory in May, so it requires to examine manufacturers’ production forecasts to see the trend,” said Koya Miyamae, senior economist at SMBC Nikko Securities.

“Also we expect an adverse impact from an escalating U.S.-China trade war will appear in the data.”

The most recent trade data showed Japan’s exports contracted for the fifth month in April due to a slump in shipments of chip-making equipment to China.

The trade ministry will publish April factory output and manufacturers’ production forecasts for May and June at 8:50 a.m. May 31, Japan time (2350 GMT May 30).

Retail sales data, also due 8:50 a.m. May 31, will likely show sales grew 0.8% in April from a year earlier, helped by a recovery in auto sales, from a 1.0% gain in March, the poll showed.

The poll also showed Tokyo’s core consumer prices (CPI) index, which includes oil products but excludes fresh food prices, was expected to have risen 1.2% in May from a year earlier, compared with a 1.3% increase in April.

A slowdown in electricity and gas price rises capped gains in the index, while an increase in package tour fee and accommodation expenses due to the nation’s long holiday helped Tokyo’s core CPI, analysts said.

The jobless rate likely improved to 2.4% in April from 2.5%in March, and the jobs-to-applicants ratio was seen steady at 1.63.

Tokyo’s core CPI and jobs data will be released at 8:30 a.m. on May 31 (2330 GMT on May 30).

The economy in the first quarter grew unexpectedly accelerated but the surprise expansion was mostly caused by imports declining faster than exports, showing both external and domestic demand were weak.

(Reporting by Kaori Kaneko; Editing by Sam Holmes)

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A container is transported into a logistics center near Tianjin Port
FILE PHOTO: A container is transported into a logistics center near Tianjin Port, in northern China, May 16, 2019. REUTERS/Jason Lee

May 24, 2019

BEIJING (Reuters) – China’s commerce ministry said on Friday that more efforts should be made to achieve the goal of stabilizing trade while improving its quality, adding that the trade environment is growing more uncertain and challenging.

The domestic economy still faces downward pressure and some structural issues remain to be resolved, the ministry said in a statement summarizing the foreign trade trends for this year.

The statement made no mention of the United States or China’s trade disputes with it.

(Reporting by Beijing Monitoring Desk; Editing by Richard Borsuk)

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FILE PHOTO: An aerial photo shows Boeing 737 MAX airplanes parked on the tarmac at the Boeing Factory in Renton
FILE PHOTO: An aerial photo shows Boeing 737 MAX airplanes parked on the tarmac at the Boeing Factory in Renton, Washington, U.S. March 21, 2019. REUTERS/Lindsey Wasson/File Photo

May 24, 2019

MONTREAL (Reuters) – Simulator training remains a “possible option” for Canadian Boeing 737 MAX pilots, but it’s too early to say whether it would be mandatory, a Transport Canada official said on Thursday night, further distancing the regulator from previous remarks by the country’s transport minister.

“It would be premature not seeing what Boeing has fully proposed yet to determine if simulator training will in fact be included,” said Nicholas Robinson, the regulator’s director general, civil aviation, told reporters on a conference call following a meeting of global regulators in Texas.

Canada’s Transport Minister Marc Garneau called in April for pilots to received simulator training for Boeing’s software fix. Garneau told Reuters on Wednesday that while “there’s a very strong argument for simulators, let’s see what the final package is proposed that has the agreement of the FAA and that is the result of them certifying it.”

(Reporting By Allison Lampert; Editing by Sandra Maler)

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FILE PHOTO: An employee of a bank counts US dollar notes at a branch in Hanoi
FILE PHOTO: An employee of a bank counts US dollar notes at a branch in Hanoi, Vietnam May 16, 2016. REUTERS/Kham/File Photo

May 24, 2019

By Daniel Leussink

TOKYO (Reuters) – The dollar held steady on Friday, having come off two-year highs on lower U.S. yields in the previous session amid fears that a trade war with China will hurt the U.S. economy more than previously thought.

The greenback was not helped by rising expectations for an interest rate cut by the U.S. Federal Reserve later this year to help boost the world’s biggest economy.

Against a basket of key rival currencies, the dollar was largely unchanged at 97.906, having fallen from a two-year high of 98.371 overnight. The index is still up 1.8% for the year.

“Global risk aversion stemming from the intensifying U.S.-China trade tension is causing the stronger yen,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

“Markets are pricing in the potential negative impact on the U.S. economy and the U.S. equity markets,” he said, referring to U.S.-China trade tensions.

On Thursday, President Donald Trump said U.S. complaints against Huawei Technologies Co Ltd might be resolved within the framework of a U.S.-China trade deal, while at the same time calling the Chinese telecommunications giant “very dangerous.”

The benchmark 10-year U.S. Treasury note yield was last up slightly at 2.3309%.

Overnight, it fell to its lowest since October 2017 after an early read on U.S. manufacturing activity for May posted its weakest pace of growth in almost a decade, suggesting a sharp slowdown in economic growth was underway.

There was only a 38.2% expectation on Thursday that U.S. interest rates will be at current levels in October of this year, compared to 58.3% a month ago, according to the CME Group’s FedWatch tool.

Against the yen, the dollar edged up to 109.695 yen, having giving up two-thirds of a percent overnight to record its steepest drop in a single session in two months.

The greenback is still 0.6% above a three-month trough of 109.02 yen touched on May 13.

The Australian dollar held steady at $0.6904, putting it on track to finish the week with a 0.5% gain, its first positive weekly performance in six weeks.

Elsewhere in the foreign exchange market, the euro was flat at $1.1183, having bounced from a two-year low of $1.11055 during the previous session.

The single currency came under pressure after a private survey showed activity in Germany’s services and manufacturing sectors fell in May, aggravating fears about the effect of unresolved trade disputes on Europe’s largest economy.

Compounding these worries, European parliamentary elections began on Thursday with eurosceptic parties expected to do well, raising concerns about the single currency’s stability.

(Graphic: World FX rates in 2019 – http://tmsnrt.rs/2egbfVh)

(Reporting by Daniel Leussink; editing by Darren Schuettler)

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FILE PHOTO: A sign is pictured outside the Bank of Canada building in Ottawa
FILE PHOTO: A sign is pictured outside the Bank of Canada building in Ottawa, Ontario, Canada, May 23, 2017. REUTERS/Chris Wattie/File Photo

May 24, 2019

By Mumal Rathore

BENGALURU (Reuters) – The Bank of Canada is done raising interest rates until at least the end of next year, with a serious risk of a cut by then as policymakers become more wary of slowing growth and global trade tensions, a Reuters poll showed on Friday.

The central bank, which last raised its overnight rate in October, abandoned its tightening bias last month, putting it more in line with peers like the U.S. Federal Reserve and the European Central Bank.

All 40 economists in the latest poll taken May 21-23 said Governor Stephen Poloz and fellow policymakers would hold rates at 1.75% at the May 29 meeting.

While median forecasts show rates unchanged from here on, forecasters were split in three directions starting from the fourth quarter of this year. By end-2020, about two-thirds who provided a view said rates would be either unchanged or lower.

While the BoC cut its near-term growth outlook in last month’s quarterly monetary policy review, it expects the economy to rebound in the second half of this year.

But not everyone is convinced that is about to happen.

“We see little impetus for policymakers to resume rate hikes over our forecast horizon, as sluggish growth and lingering slack in the economy will continue to warrant leaving some policy accommodation in place,” wrote Morgan Stanley economists in a note.

“If growth fails to show any convincing signs of a rebound in 2H19, we think the risks of rate cuts will increase, and given our sluggish outlook, we place a subjective 40% probability that the BoC will deliver at least one 25 basis point rate cut over the next 12 months.”

Asked about the probability of a cut by the end of this year, the median from a smaller sample of economists in the Reuters poll put it at 23%. But that rose to 40% by the end of 2020, with nearly a third predicting more than 50% chance of a cut by then.

Chances of a rate cut this year are a little less than 20 percent, according to market speculators.

One major concern is the U.S.-China trade war, which has heated up over the past month. A Reuters poll taken earlier in May found the risk of recession in the U.S., Canada’s largest trading partner, had risen this month. [ECILT/US]

“If they (the BoC) cut, it is more likely to be on global weakness – generated by U.S.-China tensions most likely – than weakness specifically in Canada,” said David Sloan, senior economist at Continuum Economics, a consultancy.

But there are still some forecasters who expect the BoC to raise rates again. Out of the 30 contributors who provided an end-2020 view, 11 forecast a hike by the end of next year, including four respondents who expect two.

“The Canadian economy faces tail risks, but its labor market is historically tight and the Bank of Canada’s policy rate sits below trend real GDP growth,” said William Adams, senior economist at PNC Financial Services.

“The Bank of Canada’s next move will be a hike unless the U.S. or Canada fall into recession in the next 12 months.”

Chances of a recession in Canada in 12 months were 20%, rising to 27.5% in the next two years, a Reuters poll taken in April found. [ECILT/CA]

Separately, a Reuters survey of property market experts published earlier this week showed Canada’s housing market will stay stuck in the doldrums, with average prices stagnating this year and then rising 1.7% next year. [CA/HOMES]

(Polling by Sujith Pai and Indradip Ghosh; Editing by Ross Finley)

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FILE PHOTO: A clerk arranges shoes at a shop in Tokyo
FILE PHOTO: A clerk arranges shoes at a shop in Tokyo, Japan, January 23, 2017. REUTERS/Kim Kyung-Hoon/File Photo

May 23, 2019

By Leika Kihara

TOKYO (Reuters) – Japan’s core consumer prices rose 0.9 % in April from a year earlier, accelerating slightly from the previous month but remaining distant from the central bank’s 2% target, underscoring the challenges it faces in ending deflation.

The data adds to worries for policymakers concerned about the damage escalating U.S.-China trade tensions could have on the export-reliant economy.

The increase in the nationwide core consumer price index (CPI), which includes oil products but excludes fresh food prices, matched a median market forecast and followed a 0.8 percent gain in March.

The so-called core-core CPI, which strips away the effects of volatile food and energy costs and is the main policy focus for the central bank, rose 0.6% in April, government data showed on Friday. It was the biggest increase since June 2016.

Japan’s economy grew at an annualized 2.1% in the first quarter, defying forecasts for a contraction due to net contributions from exports.

But the expansion was overshadowed by weaknesses in capital expenditure and private consumption, casting doubt over the BOJ’s argument that robust domestic demand will moderate the pain from slowing global demand.

Weak consumption would hamper the BOJ’s attempts to boost inflation as companies would be discouraged from raising prices for fear of scaring away cost-sensitive shoppers.

Years of heavy money printing have failed to drive up inflation to the BOJ’s elusive 2% target, forcing the central bank to sustain a massive stimulus despite the damage ultra-low interest rates is inflicting on financial institutions’ profits.

(Reporting by Leika Kihara; Editing by Sam Holmes)

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FILE PHOTO: Colombian Ministry of Finance and Public Credit building in Bogota
FILE PHOTO: Colombian Ministry of Finance and Public Credit building in Bogota, Colombia April 10, 2019. REUTERS/Luisa Gonzalez/File Photo

May 23, 2019

BOGOTA (Reuters) – Colombia received mixed messages from ratings agencies on Thursday, with Moody’s revising the country’s sovereign outlook to stable from negative, while Fitch went the other way and adjusted the outlook to negative from stable.

Moody’s said a recovering economy and the government’s fiscal consolidation efforts prompted its improvement in the nation’s sovereign outlook.

Fitch said risks to fiscal consolidation and the trajectory of government debt, the weakening of fiscal policy credibility, and increasing risk from external imbalances in Latin America’s fourth-largest economy brought on the change.

The ratings agencies’ comments came a week after the government said the economy expanded 2.8% in the first quarter, a figure that disappointed markets and the central bank which had projected growth of 3.2% for the period.

Following Moody’s and Fitch’s outlook decisions, Finance Minister Alberto Carrasquilla said in a statement the government is committed to policies that allow the economy to improve, to reduce the fiscal deficit, stabilize public debt and maintain an environment conducive to investment.

“The international financial markets have confidence in the Colombian economy that is already showing recovery results,” he said.

Moody’s said in a statement it had seen an improvement in the economy after a slowdown caused by falling oil prices and a decrease in investment.

“The stable outlook reflects Moody’s view that downside and upside risks are broadly balanced now that medium-term growth prospects and commitment to fiscal consolidation will prevent an erosion in the country’s fiscal strength. The latter was a key concern for the decision to assign a negative outlook in February 2018,” it said.

The economy is expected to recover from 2019 to 2021 with growth in the 3.0% to 3.5% range, converging toward Colombia’s potential growth rate of 3.5%, Moody’s said.

Moody’s also said it expects the government to meet its 2019 fiscal deficit target of 2.7% of GDP. An increase in government revenues after last year’s fiscal reform and a spending freeze in part of the 2019 budget will support that goal, it said.

Fitch, however, said revenue losses from the fiscal bill will hamper fiscal consolidation and be difficult to make up with planned tax administration and anti-evasion efforts alone.

“The ratings are constrained by high commodity dependence, limited fiscal flexibility and structural weaknesses in terms of low GDP per capita and weaker governance indicators relative to peers,” Fitch said.

Moody’s rates Colombia’s long-term foreign debt at Baa2. Fitch rates its long-term foreign debt at BBB.

(Reporting by Helen Murphy; Editing by Phil Berlowitz)

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FILE PHOTO: The Federal Reserve building is pictured in Washington, DC
FILE PHOTO: The Federal Reserve building is pictured in Washington, DC, U.S., August 22, 2018. REUTERS/Chris Wattie/File Photo

May 23, 2019

By Trevor Hunnicutt

NEW YORK (Reuters) – The Federal Reserve wants the banking system flush with cash to keep the economy humming, but there may be bottlenecks that undermine the U.S. central bank’s credibility to influence interest rates.

Major U.S. banks stashed $1.2 trillion with the Fed as of January, even though they estimate they only need $700 billion in reserves, the central bank said https://www.federalreserve.gov/data/sfos/files/senior-financial-officer-survey-201902.pdf on Thursday, based on survey data covering much of the market.

Yet specific banks sometimes need more reserves than they have, pushing them to borrow. Strong demand for that funding could push the Fed’s target federal funds rate up more than it wants, undermining its credibility.

Big banks required to meet strict liquidity requirements have been holding more reserves than regional banks that do not, Fed research https://www.stlouisfed.org/on-the-economy/2019/april/bank-shedding-reserves? earlier this year has found.

Since the aftermath of the 2008 financial crisis, when it flooded the banking system with funds, the Fed has controlled rates primarily by paying banks interest on those funds. In theory, rates should not trade much below what banks and other traders can earn risk-free. By controlling short-term rates, the Fed hopes to influence the broader economy to maximize employment and keep inflation at its target.

“One of the ways you determine whether there is abundant reserves is whether changes in supply and demand of reserves causes the interest rate to vary, and there’s some evidence that we’re getting closer to that part where the demand for reserves is going to be responsive to changes,” Boston Fed President Eric Rosengren told Reuters.

“Once we’re worried that we no longer have an abundance of reserves we will have to actually increase our balance sheet, and I think, until we get further down the road, we’re not going to know exactly where that is.”

After its May meeting, the Fed tweaked the interest on excess reserves (IOER) for a third time since June 2018 without changing the fed funds target in a bid to hold down borrowing rates. The Fed now pays banks 2.35% interest on excess reserves.

(Graphic: U.S. Federal Reserve policy rate – https://tmsnrt.rs/2IzOkma)

Records from that meeting, released on Wednesday, showed the Fed was concerned that some “banks were operating with reserve balances closer” to the least amount they reported would be comfortable.

That “may have contributed to somewhat more sustained upward pressure on the federal funds rate than had been experienced in recent years around tax-payment dates,” the Fed’s records showed. “In addition, some market participants pointed to heightened demand for federal funds at month end by some banks” to meet regulatory requirements on liquidity.

In recent weeks, the fed funds rate has edged down to 2.38% from a high of 2.45%. At all points it has stayed within the Fed’s target range, which is currently 2.25-2.50%.

But further pressure on borrowing costs could force additional IOER cuts, or even adjusting the Fed’s scheduled timetable for ending the runoff of assets from its balance sheet.

In March the Fed announced the runoff would likely end by September, depending on market conditions, to slow how quickly reserves would decline.

(Reporting by Trevor Hunnicutt; Additional reporting by Howard Schneider in Washington and Richard Leong in New York; Graphic by Richard Leong; Editing by Jennifer Ablan and Lisa Shumaker)

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U.S. House Speaker Nancy Pelosi (D-CA) holds her weekly news conference with Capitol Hill reporters in Washington
U.S. House Speaker Nancy Pelosi (D-CA) holds her weekly news conference with Capitol Hill reporters in Washington, U.S., May 23, 2019. REUTERS/James Lawler Duggan

May 23, 2019

WASHINGTON (Reuters) – President Donald Trump said on Thursday that House Speaker Nancy Pelosi does not understand the U.S.-Mexico-Canada trade deal and had told the U.S. trade representative, Robert Lighthizer, she wanted two weeks to get to know the agreement.

“Pelosi does not understand the bill, she doesn’t understand it … so she’s got to get up to snuff, learn the bill,” Trump said at a White House event.

“She’s a mess. Look, let’s face it, she doesn’t understand it,” Trump said.

Pelosi, responding to Trump’s remarks, tweeted: “When the ‘extremely stable genius’ starts acting more presidential, I’ll be happy to work with him on infrastructure, trade and other issues.”

Pelosi was invoking a comment made by Trump earlier on Thursday, when he called himself “an extremely stable genius” as the two engaged in a heated war of words.

Republicans in Congress are pushing for ratification of the USMCA, which would replace the 25-year-old North American Free Trade Agreement, before lawmakers leave Washington for their August recess. As the House of Representatives speaker, Pelosi, a Democrat, controls when any initial vote could take place.

Text of the agreement has been published since October 2018, but some Democratic lawmakers have demanded stronger enforcement provisions for USMCA’s new labor and environmental standards and it is unclear whether this can be achieved through the USMCA’s implementing legislation.

A two-week study period would eat up a dwindling number of legislative days before Congress starts its break on Aug. 3. “I think that’s a long time,” said Trump, who has been feuding with Democrats over the probe into Russian meddling in the 2016 election.

Senate Republicans said on Tuesday that Lighthizer believes that negotiations with Pelosi over passage of the trade deal were making progress and being handled “in good faith.”

Legislatures from Canada and Mexico, as well as the United States, need to approve the new trade pact before it can take effect.

(Reporting by David Alexander; editing by Grant McCool and Leslie Adler)

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San Francisco Federal Reserve President Mary Daly poses for a photo after a speech at the Commonwealth Club in San Franciso
San Francisco Federal Reserve President Mary Daly poses for a photo after a speech at the Commonwealth Club in San Franciso, California, U.S., March 26, 2019. REUTERS/Ann Saphir

May 23, 2019

(Reuters) – A series of U.S. tariff hikes on Chinese imports could help the Federal Reserve get inflation closer to its 2% target, San Francisco Federal Reserve President Mary Daly said on Thursday.

“It will affect it in the way we hope which is to move it back up to 2% … but not above,” Daly said in an interview with Fox Business Network.

(The story corrects name of network to Fox Business Network, not Fox Business News.)

(Reporting by Jason Lange in Washington; Editing by Chizu Nomiyama and Susan Thomas)

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FILE PHOTO: Duomo's cathedral and Porta Nuova's financial district are seen in Milan
FILE PHOTO: Duomo’s cathedral and Porta Nuova’s financial district are seen in Milan, Italy, May 16, 2018. REUTERS/Stefano Rellandini/File Photo

May 23, 2019

By Pamela Barbaglia and Stephen Jewkes

LONDON/MILAN(Reuters) – Investment firms, including buyout fund EQT, are flocking to Milan to develop closer ties with Italy Inc, where cash-starved family-owned companies are increasingly seeking foreign capital to boost growth.

The search for real estate in the financial capital of the euro zone’s third largest economy comes as uncertainty around Britain’s departure from the European Union and lucrative tax incentives tempt Italian dealmakers living abroad to pack up and head home.

EQT, the Nordic region’s biggest private equity firm, will open an office in June in the heart of Milan, near the Duomo cathedral, sources familiar with the matter told Reuters.

Similarly, London-based private equity firm THCP, which manages more than 1 billion euros of assets, is finalising plans to open a base in the city after the summer, to be led by partner Michele Prencipe, the sources said.

Alternative asset manager Hayfin Capital Management has also agreed to lease an office from June in the Brera district, boosting its European network which already includes London, Frankfurt and Paris among others, another source said.

EQT declined to comment while spokesmen at THCP and Hayfin confirmed the plans.

Milan started to emerge as a destination of choice for major private equity firms in the late Nineties, but after the boom years of 2005-2007 local teams were dramatically downsized, under pressure to cut costs during the financial crisis and with scarce opportunities for multi-billion euro deals.

“Italy is one of our leading markets thanks to its large number of family-owned companies,” said Astorg partner Lorenzo Zamboni who launched the fund’s Italian office in September.

Paris-based Astorg – which focuses on mid-market investments and manages more than 8 billion euros of assets – clinched its first Italian deal in 2014 when it bought power transmission belts manufacturer Megadyne.

THCP – another mid-market investment firm which provides growth capital in exchange for minority stakes – has so far invested about 300 million euros in Italy and wants to use its Milan base to deploy more capital in the country.

Founder and managing partner Mauro Moretti pointed to the large number of Italian companies which generate the bulk of their revenues abroad as a sweetspot for international investors.

“Their export-driven strategy is a unique and attractive feature,” he said.

SILICON VALLEY OF BAD LOANS

Despite being active in Italy since 2015 when it announced plans to buy medical device firm Lima, EQT has so far managed its investments in the country from its Zurich and Munich offices.

Now the Swedish firm, which is backed by the Wallenberg family via Investor AB, is looking to move three of its dealmakers to Milan this year, including managing director Federico Quitadamo who will oversee the Italian rollout, the sources said.

Credit-focused investors are also circling the Italian market, where local banks hold about 189 billion euros of soured loans.

“There is growing appetite for distressed deals in the country and no wonder investors are flocking to Milan,” said a banker based in the city. “Italy is the Silicon Valley of bad loans.”

Founded in 2009, Hayfin is one of Europe’s leading alternative asset managers, investing in anything from non-performing loans and structured credit to real estate debt. It is actively growing its presence in Italy, eyeing a wide range of deals.

“We see attractive investment opportunities in both primary and secondary transactions and a growing role for private credit investors with patient and flexible capital,” said managing director Stefano Questa.

“Our focus on Italy is not driven by near-term considerations, but instead is part of Hayfin’s approach of building a sustainable, long-term presence in the major European markets.”

Italian banks have accelerated the sale of bad loans in the past two years, offloading debt with a gross value of 140 billion euros since 2017. Their focus is now shifting to ‘unlikely to pay loans’, which had a gross value of 83 billion euros in December.

Most credit investors in Italy tend to partner or take control of local debt servicing firms. U.S. hedge fund Elliott, for example, relies on its majority-owned Italian bank Credito Fondiario to manage the recovery of the non-performing loans it has bought.

But competition is fierce and investors want to stay close to local clients to prevail in auctions.

TAX PERKS

Generous tax incentives are also encouraging Italian investors to return to their homeland.

An annual flat tax of 100,000 euros on all income from foreign investments, known as the non-domiciled tax regime, appeals to general partners of private equity and hedge funds whose compensation includes so-called carried interest (carry), which is a share of the funds’ profits.

Algebris Chief Executive Davide Serra, who founded the London-based hedge fund in 2006, is among those who took advantage of the flat tax rate and moved back to Milan, a source familiar with the matter said.

Serra did not respond to requests for comment.

An existing 50% tax break for Italian workers returning from abroad has been hiked to 70% as part of the government’s Growth Bill or Decreto Crescita.

The bill, which Parliament needs to approve by June 29, grants a more generous 90% tax break for five years to those moving to some Southern regions. All incentives will be extended for a total of 10 years to those who buy properties in Italy or have children.

“If it goes through, this will be Europe’s most attractive tax bill for country nationals living abroad,” said Marco Cerrato, a partner at law firm Maisto e Associati which specialises in tax law from offices in Milan and London.

“Most people relocating from cities like London are highly-skilled professionals who tend to bring business to Italy, open offices and recruit locally.”

(Reporting By Pamela Barbaglia and Stephen Jewkes; Editing by Kirsten Donovan)

Source: OANN

U.S. Agriculture Secretary Perdue and Rep. Davis of Illinois take farmers' questions at a farm in Champaign Illinois
FILE PHOTO: U.S. Agriculture Secretary Sonny Perdue (L) and U.S. Representative Rodney Davis of Illinois take farmers’ questions at a farm in Champaign, Illinois, U.S., October 24, 2018. REUTERS/Mark Weinraub

May 23, 2019

By Humeyra Pamuk

WASHINGTON (Reuters) – The Trump administration on Thursday unveiled a $16 billion farm aid package to offset losses from a 10-month trade war with China and said payment rates to farmers would be determined by where they farm rather than what crops they grow.

The package, the bulk of which will be spent on direct payments, surprised growers and traders who had expected to learn separate payment rates for soybeans, hogs, corn and other crops in the Department of Agriculture (USDA) briefing.

Farmers, a key constituency that helped carry U.S. President Donald Trump to his 2016 electoral win, have been among the hardest hit from a trade dispute with China, once a destination for more than 60 percent of U.S. soybean exports.

The trade dispute, which escalated this month after Washington and Beijing hiked tariffs on imports of each other’s goods, has left U.S. farmers sitting on record volumes of soybeans with China halting purchases.

USDA officials said on Thursday they will roll out $14.5 billion in direct payments in three separate tranches with the first one planned for late July.

“The package we are announcing today ensures that farmers will not bear the brunt of those trade practices by China or any other nations,” Secretary of Agriculture Sonny Perdue said. “While farmers would tell you they’d rather have trade not aid, without the trade … they’re going to need some support.”

China, the world’s top soybean importer, curbed purchases of U.S. soy last year when Trump imposed tariffs on Chinese goods, prompting China to retaliate with tariffs on U.S. soy, pork, corn and other products.

An imminent trade deal between Washington and Beijing seems unlikely as the trade tensions between the world’s top two economies rose after U.S. placed China’s Huawei Technologies on a trade blacklist last week, triggering sharp protest from China.

Perdue also said the second and third tranches, with exact amounts yet to be decided, will be dependant on the progress in the trade talks and whether the U.S. will get a deal with China. The total package also includes $1.4 billion of support through food purchases and $100 million allocated to development of foreign markets.

PLANTING DECISIONS

Perdue said the USDA has redesigned last year’s aid program of up to $12 billion based on feedback. The new package therefore will have a single payment rate per county, calculated by the damages in that area, instead of a rate for every commodity across the nation.

“Those per acre payments are not dependent on which of those crops are planted in 2019, and therefore will not distort planting decisions,” USDA said in a statement.

Chicago Board of Trade corn futures turned lower and soybean futures extended earlier losses after the announcement. Some analysts said the trade aid package could encourage farmers to try to seed their crops in order to qualify for the relief despite overly wet fields that have stalled planting this spring.

Jim Hefner, an Ohio farmer who has not been able to start planting due to heavy rain, said the plan could cause him to alter his initial acreage plans, however.

“I guess we would make more of an effort to get something planted,” Hefner said. “We may forgo corn and plant soybeans.”

Trump is expected to deliver remarks on the farm aid package on Thursday afternoon after a meeting at the White House with farmers and ranchers. 

Some farmers remain skeptical.

Dan Henebry, a corn and soybean farmer in Buffalo, Illinois, said the payments are directed at rural areas that helped propel Trump into office. Henebry, who voted for a third-party candidate in 2016, said he wants the president to end the trade war with China.

“If we solve the issue, we wouldn’t need this,” he said about the aid package.

(Additional reporting by Susan Heavey and Tom Polansek, Mark Weinraub, P.J. Huffstutter, Karl Plume in Chicago, Editing by Chizu Nomiyama, Jeffrey Benkoe and Susan Thomas)

Source: OANN

Mexico's President Andres Manuel Lopez Obrador attends a news conference, in Mexico City
Mexico’s President Andres Manuel Lopez Obrador attends a news conference, at the National Palace in Mexico City, Mexico, May 21, 2019. REUTERS/Henry Romero

May 23, 2019

MEXICO CITY (Reuters) – Mexico’s President Andres Manuel Lopez Obrador said on Thursday he was confident the United States-Mexico-Canada-Agreement would be ratified, increasing trade in the North American region.

The USMCA deal, negotiated last year, faces opposition by some Democrats in the U.S. Congress who want assurances that labor and environmental rules will be enforceable. It must be passed in the three countries’ legislatures before becoming law.

(Reporting by Diego Ore; Editing by Frank Jack Daniel)

Source: OANN

FILE PHOTO: A Russian-made Sukhoi Su-30MKV fighter jet of the Venezuelan Air Force flies over a Venezuelan flag tied to missile launchers, during the
FILE PHOTO: A Russian-made Sukhoi Su-30MKV fighter jet of the Venezuelan Air Force flies over a Venezuelan flag tied to missile launchers, during the “Escudo Soberano 2015” (Sovereign Shield 2015) military exercise in San Carlos del Meta in the state of Apure April 15, 2015. REUTERS/Marco Bello/File Photo

May 23, 2019

By Julia Payne and Dmitry Zhdannikov

LONDON (Reuters) – The United States told some large trading houses this week they should stop trading jet fuel with Venezuela or face sanctions, ratcheting up pressure aimed at removing Venezuelan President Nicolas Maduro from power, according to two industry sources.

According to the two sources familiar with the calls to several large Swiss- and British-based trading houses, which were made by U.S. State Department officials, the move is aimed at restraining commercial and military flights in Venezuela.

The U.S. officials told them that diesel trade with Venezuela was still considered legal for humanitarian reasons.

The U.S. Department of State did not immediately respond to a request for comment.

The pressure, part of Washington’s effort to oust Maduro in favor of opposition leader Juan Guaido, follows similar requests made in March. U.S. officials told global trading houses and oil refiners then to reduce dealing with Venezuela or face sanctions themselves, even if the traders were not prohibited by U.S. sanctions.

U.S. officials have been trying to end deliveries of gasoline and refined products used to dilute Venezuela’s heavy crude oil to make it suitable for export.

The United States, along with nearly 50 countries around the world, calls Guaido Venezuela’s legitimate leader and has thrown its support behind him in efforts to push Maduro from power, but the effort has stalled in recent weeks.

Venezuela’s economy has long relied on oil, which prior to sanctions accounted for more than 90 percent of the country’s export revenues. The OPEC member has among the world’s largest reserves, but production has declined from more than 3 million barrels per day two decades ago to less than 800,000 bpd as of April, according to OPEC figures based on secondary sources.

Venezuela state oil company PDVSA’s crude and fuel exports have dropped to around 800,000 bpd so far in May, down from 1.4 million bpd just before sanctions, according to PDVSA’s trade documents and Refinitiv Eikon data.

As the United States boosts oil and natural gas output, it has increasingly been using its energy clout in foreign policy. At an energy conference in Houston in March, U.S. Secretary of State Mike Pompeo laid out a vision of working with energy firms to isolate Iran and Venezuela.

(Reporting by Dmitry Zhdannikov and Julia Payne; additional reporting by Timothy Gardner in Washington and Marianna Parraga in Mexico City; Editing by Alexandra Hudson and Marguerita Choy)

Source: OANN

FILE PHOTO: A Russian-made Sukhoi Su-30MKV fighter jet of the Venezuelan Air Force flies over a Venezuelan flag tied to missile launchers, during the
FILE PHOTO: A Russian-made Sukhoi Su-30MKV fighter jet of the Venezuelan Air Force flies over a Venezuelan flag tied to missile launchers, during the “Escudo Soberano 2015” (Sovereign Shield 2015) military exercise in San Carlos del Meta in the state of Apure April 15, 2015. REUTERS/Marco Bello/File Photo

May 23, 2019

By Julia Payne and Dmitry Zhdannikov

LONDON (Reuters) – The United States told some large trading houses this week they should stop trading jet fuel with Venezuela or face sanctions, ratcheting up pressure aimed at removing Venezuelan President Nicolas Maduro from power, according to two industry sources.

According to the two sources familiar with the calls to several large Swiss- and British-based trading houses, which were made by U.S. State Department officials, the move is aimed at restraining commercial and military flights in Venezuela.

The U.S. officials told them that diesel trade with Venezuela was still considered legal for humanitarian reasons.

The U.S. Department of State did not immediately respond to a request for comment.

The pressure, part of Washington’s effort to oust Maduro in favor of opposition leader Juan Guaido, follows similar requests made in March. U.S. officials told global trading houses and oil refiners then to reduce dealing with Venezuela or face sanctions themselves, even if the traders were not prohibited by U.S. sanctions.

U.S. officials have been trying to end deliveries of gasoline and refined products used to dilute Venezuela’s heavy crude oil to make it suitable for export.

The United States, along with nearly 50 countries around the world, calls Guaido Venezuela’s legitimate leader and has thrown its support behind him in efforts to push Maduro from power, but the effort has stalled in recent weeks.

Venezuela’s economy has long relied on oil, which prior to sanctions accounted for more than 90 percent of the country’s export revenues. The OPEC member has among the world’s largest reserves, but production has declined from more than 3 million barrels per day two decades ago to less than 800,000 bpd as of April, according to OPEC figures based on secondary sources.

Venezuela state oil company PDVSA’s crude and fuel exports have dropped to around 800,000 bpd so far in May, down from 1.4 million bpd just before sanctions, according to PDVSA’s trade documents and Refinitiv Eikon data.

As the United States boosts oil and natural gas output, it has increasingly been using its energy clout in foreign policy. At an energy conference in Houston in March, U.S. Secretary of State Mike Pompeo laid out a vision of working with energy firms to isolate Iran and Venezuela.

(Reporting by Dmitry Zhdannikov and Julia Payne; additional reporting by Timothy Gardner in Washington and Marianna Parraga in Mexico City; Editing by Alexandra Hudson and Marguerita Choy)

Source: OANN

FILE PHOTO: A British Steel works sign is seen in Scunthorpe
FILE PHOTO: A British Steel works sign is seen in Scunthorpe, northern England, Britain, May 21, 2019. REUTERS/Scott Heppell/File Photo

May 23, 2019

By Maytaal Angel and Sangameswaran S

LONDON A(Reuters) – Time is of the essence if the UK authorities are to broker a rescue of British Steel after it collapsed into liquidation, putting 25,000 jobs at risk.

British industrialist Sanjeev Gupta’s Liberty House has emerged as one potential bidder for the country’s second largest steel producer, two sources told Reuters on Thursday.

The Financial Times reported that Chinese state-owned group Hesteel, which owns a steel plant in Serbia, and private equity fund Endless could also be bidders.

A buyer would need to be in place within 2-3 months at most as the business needs access to 400 to 500 million pounds of working capital and a cash injection in excess of 75 million pounds ($95 million), one of the sources said.

Business minister Greg Clark said the government had been in talks with potential buyers of British Steel while the opposition Labour Party and trade unions have called for the steelmaker to be nationalized.

Based in Scunthorpe, northern England, British Steel employs around 5,000 people directly, while 20,000 more depend on its supply chain. It is owned by investment firm Greybull Capital, former owners of collapsed airline Monarch.

Despite going into forced liquidation on Wednesday, staff have been kept on and operations maintained, with the UK’s Official Receiver granted an indemnity which allows it access to government funds to keep the business running for now.

There are practical reasons for this as it would facilitate a rescue but the cash crunch could be felt by suppliers as all of British Steel’s lenders are in the process of pulling out, the source said.

British Steel produces steel from scratch in its blast furnace in Scunthorpe. Blast furnaces cannot easily be turned on or off, but need to be continually supplied with raw materials to keep their temperature steady.

“Electricity, gas and oxygen, these things you don’t stock, if suppliers decide to stop they (British Steel) close. Some suppliers need to be paid every day, its a very difficult situation,” the source said.

“We’re going to see announcements from these companies explaining that they have to make people redundant,” he said, adding the government would be looking to find a solution within weeks.

Hargreaves Services, a materials services firm, has warned it could take a pretax profit hit of 1.3 million pounds in its next full year if British Steel ceases to trade. Around 170 jobs at the firm would be at risk.

On the customer side, Network Rail, which buys about 100,000 tonnes of rail a year from British Steel, told Reuters its contingency plans include stockpiling rail, reallocating stock and servicing rail to re-use it.

Another British Steel customer said it was looking into new supply sources should the steelmaker fail.

TRICKY OPERATION

Liberty House, one of the world’s largest privately owned industrial groups and Europe’s third largest steel producer, has expanded rapidly in recent years, snapping up distressed steel and aluminum assets around the world since.

“Gupta is showing interest (but) to make it feasible you need a pool of banks supporting the business,” said the source.

He explained the government was keen to put money into the business so long as the funds were structured in such a way that a private buyer does not benefit from them should the steelmaker fold for good.

Liberty House declined comment.

According to pollster YouGov, 46 percent of Britons say British Steel should be nationalized, 18 percent say it should not, while 36 percent say they do not know.

Greybull Capital, which specializes in trying to turn around distressed businesses, paid former British Steel owners Tata Steel a nominal one pound for the business three years ago.

Jon Bolton, director of global steel development at Liberty House, was formerly director at Tata Steel Long Products Europe – the business sold to Greybull and renamed British Steel.

British Steel had asked the government for a 75 million pound loan this month, later reducing its demand to 30 million pounds. It had already secured a government loan of around 120 million pounds ($154 million) to cover its carbon taxes.

Having turned a profit in 2017, British Steel cut around 400 jobs last year, blaming factors such as the weak pound and uncertainties surrounding Brexit, which it said hammered its order book.

Making a profit in steel is particularly difficult in Britain, where steelmakers pay some of the highest green taxes and energy costs in the world, as well as facing high labor costs and business rates.

The collapse of British Steel has put Greybull in the spotlight. Known for buying up distressed assets on the cheap, its record has been patchy, with four of the 10 companies it bought since 2010 placed into administration.

British Steel also operates a business in France producing rail, and a wire and processing unit in the Netherlands.

(For a graphic on ‘UK steel production since 1970’ click https://tmsnrt.rs/2LX989V)

(Reporting by Maytaal Angel. Additional reporting by Sangameswaran S and Pratima Desai; Graphic by Andy Bruce; Editing by Keith Weir and David Evans)

Source: OANN

FILE PHOTO: Hungarian Foreign Minister Szijjarto attends a news conference with U.S. Secretary of State Pompeo in Budapest.
FILE PHOTO: Hungarian Foreign Minister Peter Szijjarto attends a news conference with U.S. Secretary of State Mike Pompeo in Budapest, Hungary, February 11, 2019. REUTERS/Tamas Kaszas

May 23, 2019

By John Irish

PARIS (Reuters) – Hungary’s foreign minister on Thursday accused major Western European nations of “hypocrisy” and “hysteria” for criticizing central European countries’ business dealings with China, and defended Hungary’s use of Huawei 5G mobile phone technology.

Sixteen central and eastern European countries, including 11 European Union members, held a summit with China in April during which it pledged to increase trade and provide more support for big cross-border infrastructure projects.

The area is part of China’s Belt and Road Initiative, which aims to link China by sea and land with Southeast and Central Asia, the Middle East, Europe and Africa.

France and Germany oppose such independent moves, which they fear might make Europe appear disunited at a time when the EU is trying to forge a more defensive strategy towards China.

On Tuesday, speaking to reporters in Paris, France’s Finance Minister Bruno Le Maire criticized “negotiations of 16 states from the east with China in parallel to negotiations that the EU is leading with China”.

But Hungarian Foreign Minister Peter Szijjarto rejected such criticism, saying Germany and France do far more business with China than the central European states, and often negotiate directly with Beijing.

“There is such a bad hypocrisy in the European Union when it comes to China,” Szijjarto told Reuters on the sidelines of an OECD meeting in Paris. “The 11 central and eastern European member states … represent 9.9 percent of EU trade with China.”

“When the German chancellor and French president meet China’s leadership nobody thinks that’s a problem,” he said. “Nobody raises a question about how it is possible that they sell 300 aircraft to China, which is a bigger deal than the (entire) trade represented by the 11 central European countries.”

He said it was also unfair for Western European states to criticize Hungary for using technology from Chinese firm Huawei in its 5G mobile phone networks, when those networks were being built under license by German and British companies, Deutsche Telekom and Vodafone.

The United States and some of its European allies are pushing countries to exclude Huawei technology from their infrastructure, arguing that the world’s biggest telecoms equipment maker could pose a security threat. Huawei denies that its technology could be misused by the Chinese state.

The Hungarian mobile phone licenses were “signed by the biggest German and British telecommunications companies, and then the Germans, British and French accuse us of opening up our market to Huawei,” Szijjarto said.

“When it comes to China it’s a matter of competition. Instead of crying, instead of making hysteria and accusing central European countries, we should strengthen ourselves and be ready for the competition.”

(Reporting by John Irish; Editing by Leigh Thomas)

Source: OANN

FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington
FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 19, 2019. REUTERS/Leah Millis – RC17BAD28DD0/File Photo

May 23, 2019

By Howard Schneider

WASHINGTON (Reuters) – Three quarters of Americans surveyed by the Federal Reserve last year said they were living comfortably or doing OK in 2018, roughly unchanged from the year before but continuing a six-year trend that has reflected the ongoing economic recovery and falling unemployment, the Fed reported on Thursday.

“This generally positive assessment of economic well-being is consistent with the continued economic expansion and the low national unemployment rate,” the Fed said, noting the steady upward trend in the survey results since 2013, the first year it was conducted. At that point just 62% of households felt they were OK or living comfortably.

The change over last year, however, was not considered statistically significant, evidence that a round of tax cuts, wage hikes and strong 2018 growth had not registered deeply in household sentiment that may have plateaued.

The central bank’s latest Survey of Household Economics and Decisionmaking also pointed to some continuing gaps in the recovery.

Around 12% of respondents still said they could not cover an unexpected $400 expense, similar to last year, and 30% reported they were “either unable to pay their bills or are one modest financial setback away from hardship.”

That was a decline from 33% in the year before, but still evidence of financial fragility.

In addition, “another year of economic expansion and the low national unemployment rates did little to narrow the persistent economic disparities by race, education, and geography,” the Fed reported.

Among those without a high school degree, around 68% of whites still reported doing at least OK, compared to 61% of blacks and 58% of Hispanics. For each race, the number was about 20 percentage points higher among those with a college degree, with nearly 90% of college-educated whites saying they were financially alright.

The online survey, covering 11,440 adults in October and November and weighted to be nationally representative, captured the mood of households across a broad set of issues as the U.S. economic recovery approached the decade mark.

Its 19 sections included questions not just about income and employment but neighborhood satisfaction and the prevalence of gig work. The survey found 30% of respondents had done some sort of temporary work over the year – including things like dog walking alongside tasks like driving for a ridesharing company – and were slightly more likely to have trouble meeting emergency expenses.

Surprisingly, at a time when housing costs in “superstar” cities like San Francisco have become a focus of discussion, the survey found that even those with lower incomes for those cities reported being more satisfied with their housing and neighborhoods than those in less-expensive places.

“Adults with relatively low income for their city are slightly more satisfied with their housing and neighborhoods in more expensive cities,” the Fed concluded, a finding that may counter theories that high housing costs are dissuading people from moving to those places.

(Reporting by Howard Schneider; Editing by Andrea Ricci)

Source: OANN

To match Special Report SEC/INVESTIGATIONS
The U.S. Securities and Exchange Commission logo adorns an office door at the SEC headquarters in Washington, June 24, 2011. REUTERS/Jonathan Ernst

May 23, 2019

By Katanga Johnson

WASHINGTON (Reuters) – The U.S. Securities and Exchange Commission (SEC) filed a complaint against a real-estate developer and two affiliated firms for “siphoning and misusing investor funds” to the tune of over $91 million, the agency said in a statement on Thursday.

The regulator’s emergency action, filed on Wednesday in the federal district court of Buffalo, New York, alleges that the real-estate developer raised more than $80 million from over 200 investors with the aim of improving a multi-family home complex, but rather diverted the funds to “facilitate Ponzi scheme-like payments to earlier investors” via his companies Morgan Acquisitions, LLC and Morgan Mezzanine Fund Manager, LLC.

Developer chief, Robert Morgan, is also being charged with improper use of more than $11 million in investor funds to repay an inflated loan Morgan “fraudulently obtained for an unrelated apartment complex,” the SEC statement said.

“In seeking this emergency relief, the SEC is acting to protect current and potential future victims of this elaborate scheme by halting Morgan’s fraud,” said Daniel Michael, who leads the SEC’s enforcement team that focuses on complex financial instruments.

The SEC is requesting an order freezing Morgan’s assets and appointing a temporary receiver over the relevant funds on the grounds that Morgan violated the anti-fraud provisions of federal securities laws.

Morgan, and the development companies, did not immediately respond to a request for comment.

(Reporting by Katanga Johnson; Editing by Susan Thomas)

Source: OANN

The German share price index DAX graph at the stock exchange in Frankfurt
FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, May 21, 2019. REUTERS/Staff

May 23, 2019

By Medha Singh

(Reuters) – European shares sank on Thursday as the latest round of U.S.-China trade friction and a soft set of business surveys sapped investors’ risk appetite, while British Prime Minister Theresa May faced growing pressure to quit.

By 0811 GMT, the pan-European STOXX 600 had dropped 0.8%, with Germany’s traditionally trade-sensitive DAX down 1.11%.

That tracked a slide in Asian shares to four-month lows, as investors worried the U.S.-China trade feud was fast turning into a technology-focused cold war.

The latest evidence of the impact the conflict is having on Europe’s largest economy came in the flash purchasing managers surveys, which showed activity in Germany’s services and manufacturing sectors fell in May.

Euro zone business growth was also weaker than expected in May while Germany’s closely-watched Ifo business sentiment survey indicated that morale fell more than expected.

“With both Brexit uncertainties and US-China trade tensions threatening to inflict more damage on the EU economy, any post-election reprieve … would likely prove short-lived,” said Jameel Ahmad, global head of currency strategy and market research at online trading platform FXTM.

The European auto sector index, among the most exposed to the trade tensions, led losses with a 2.7% fall to a three-month low, while mining shed 1%.

British chip designer ARM was the latest to suspend ties with net gear and phone maker Huawei, joining a list of companies that are complying with a U.S. blockade of the Chinese firm. The technology sector also slipped 1.35%.

Investor angst over the intensifying trade spat between the world’s two biggest economies, which threatens to dent growth worldwide, has knocked around 4% off the benchmark index this month.

In London, the blue-chip FTSE 100 slipped 0.6% and its exporter-heavy components shrugged off the benefit of a slide in the pound to four-month lows.

The failure of May’s final Brexit gambit, added to polls predicting a trouncing for her Conservatives in European elections on Thursday, have drawn new moves from within the party to force her out. A report from The Times said May is expected to announce her departure from office on Friday.

“Although the large-cap FTSE 100 index has benefited from the recent weakness of sterling, we believe the risk-return outlook for UK stocks has become less favorable,” said Mark Haefele, chief investment officer at UBS Global Wealth Management, in a note.

Top of the STOXX 600 index was Merlin Entertainments, up 4.5% after activist shareholder ValueAct urged the Madame Tussauds owner to go private and said the company could be valued about 20% more than its current price.

Among all European sectors, only the healthcare index, considered a defensive play in time of political or economic uncertainty, eked out a small gain.

Shares of Daimler, Commerzbank, trading ex-dividend, were down sharply.

(Reporting by Medha Singh and Agamoni Ghosh in Bengaluru; Editing by Andrew Cawthorne)

Source: OANN

FILE PHOTO: Gavin Patterson, when Chief Executiv of BT Group, attends the World Economic Forum (WEF) annual meeting in Davos
FILE PHOTO: Gavin Patterson, when Chief Executive of BT Group, attends the World Economic Forum (WEF) annual meeting in Davos, Switzerland, January 23, 2018. REUTERS/Denis Balibouse/File Photo

May 23, 2019

(Reuters) – Britain’s biggest broadband and mobile provider BT Group said on Thursday former Chief Executive Officer Gavin Patterson had agreed to a halving of his annual bonus.

BT had said in December it planned to make changes to the way it decides management pay after some of its shareholders questioned Patterson’s bonus for 2018-19.

Investors had also complained after BT gave a more than 1 million pound ($1.3 million) bonus to Patterson in 2017-18, during which time the company’s stock tumbled 30%.

“The (pay) committee and Gavin agreed that a reduction of the total bonus outcome by 50% would be the right thing to do and in the best interests of all stakeholders,” BT said.

Patterson’s bonus for 2018-19 will now be 572,000 pounds compared with 1.3 million pounds a year earlier. His total salary for the year was 1.72 million pounds, BT’s annual report showed.

Patterson left BT at the end of January, handing over to Philip Jansen, a former Worldpay chief executive.

The telecoms giant had said a new leader was needed to restructure the company.

Patterson, who ran BT for almost five years, announced 13,000 job cuts last year in an attempt to get to grips with a host of problems including intense competition, an underperforming IT services unit, a huge pension deficit and criticism of its broadband plans.

But a failure to hit a revenue target and a forecast for no growth in profit for the next couple of years sent its shares to six-year lows.

(For a graphic on ‘BT Group Underperforms European Rivals’ click https://tmsnrt.rs/2X1JkKX)

(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Mark Potter)

Source: OANN

Men work on the construction site of the Zhangjiakou South railway station in Hebei
Men work on the construction site of the Zhangjiakou South railway station in Hebei province, China May 22, 2019. Picture taken May 22, 2019. REUTERS/Stringer

May 23, 2019

BEIJING (Reuters) – China should tolerate a rebound in the overall debt level amid trade shocks and a slumping economy, and focus instead on curbing risks from more pressing issues such as the rapid build-up in household debt, a senior policy adviser said on Thursday.

Chen Changsheng, director general of the Macroeconomic Research Department of the Development Research Center (DRC) of China’s State Council, said the macro leverage ratio had rebounded this year and was set to rise further.

“I want to tell you that this year’s macro leverage ratio is definitely going to rise,” Chen told a real estate forum in Beijing.

China’s macro leverage ratio hit 250.3 percent in 2017 but had been steadily falling since the second quarter last year, Chen said, which was hailed by the government as a major policy success amid a drive to deleverage the debt-laden economy.

It dropped 1.5 percentage points in 2018, Chen Yulu, vice governor at the People’s Bank of China (PBOC), said in March.

But a prolonged trade war with the United States has dealt a much bigger blow to the economy this year, and policymakers must approach macro policy on the basis that it will be a long-haul battle full of uncertainties, Chen Changsheng said.

“We have seen that it is impossible for China and the United States to reach a deal at once; it would be punches and kicks with talks ongoing at the same time. And basically you can’t see any logic on the U.S. side in this battle,” he said.

Instead of being too caught up about the absolute level of the macro leverage ratio, Chen said he had advised authorities to take a targeted approach focusing on containing the biggest debt risks, especially in the household sector.

“From my perspective, the current risks in the household sector, which has seen its macro leverage rising rapidly, is even bigger than the highly leveraged corporate sector,” he said.

The government should address the risks of a rebound of disguised loans flowing to the real estate sector.

“If the overall risk is smaller, even if the macro leverage ratio is at 255%, it would be better than when it was 250%,” he said.

(Reporting by Yawen Chen and Ryan Woo; Editing by Robert Birsel)

Source: OANN

FILE PHOTO: Sign of the European central Bank (ECB) is seen outside the ECB headquarters in Frankfurt
FILE PHOTO: Sign of the European central Bank (ECB) is seen outside the ECB headquarters in Frankfurt, Germany, March 7, 2019. REUTERS/Kai Pfaffenbach

May 23, 2019

By Dhara Ranasinghe and Ritvik Carvalho

LONDON (Reuters) – With euro zone growth faltering again, markets are debating what else the European Central Bank can do to shore up the economy.

After pushing borrowing costs to record lows and taking 2.6 trillion euros ($2.9 trillion) worth of bonds out of the market to revive inflation, its toolkit is limited.

But as outlined below, options do exist.

1/CHANGE GUIDANCE, OFFER TLTROs

Changing guidance on its plans for interest rates is widely seen as an easy first step.

In March, the ECB pushed out the timing of its first post-crisis rate hike to 2020 at the earliest.

This is expected to be delayed further, but doing so could have a limited impact as markets no longer expect a rate hike over the next two years. In fact, rate cut bets have been building.

So, a change in guidance would likely be combined with a very generous package of cheap multi-year loans – or targeted longer-term refinancing operations (TLTRO) – aimed at banks.

The ECB is set to launch a fresh TLTRO in September, but as details are not yet finalised it has time to assess whether more generous terms are needed.

(For a graphic on ‘Will the ECB’s next move be a rate cut?’ click https://tmsnrt.rs/2ElFVza)

2/ CUT RATES, TIER RATES

The ECB is studying whether to grant relief to banks from some of the burden of its -0.4% deposit rate, worried that weak bank profitability could impair transmission of monetary policy.

For markets, tiered rates are only likely as part of a bigger easing that involves rate cuts.

Economists say a cut would require significantly weaker economic conditions, while one source told Reuters this was nowhere near to being discussed by the ECB.

But don’t rule it out: New Zealand and Iceland cut rates in May, Australia may follow in June and markets anticipate a U.S. rate cut this year.

(For an interactive version of this chart: https://tmsnrt.rs/2EdOcoU)

3/BRING BACK QE!

The ECB says it is will use all tools available to boost growth and inflation, including resuming the asset-purchase scheme it ended just five months ago.

Capital Economics expects QE to return next year and ABN AMRO believes any new stimulus is likely to take this form.

But first, the ECB would need to raise the limit on how much sovereign debt it can hold from a single issuer, given it was already approaching the current 33% limit when QE ended.

That ceiling was introduced to ensure the ECB did not have a deciding vote in case of a debt restructuring, and changing it could expose the ECB to legal challenges.

(For an interactive version of the chart below: https://tmsnrt.rs/2EgAulf)

“Although raising the limit would likely be an uncomfortable situation for the ECB, it would be willing to do this in our view given the lack of other alternatives,” said ABN AMRO’s head of financial market research Nick Kounis.

4/BUY STOCKS, BONDS, SOURED LOANS

With government bonds getting scarce, the ECB added corporate debt to QE asset purchases in 2016. A new QE round could include shares.

Switzerland’s central bank buys stocks to diversify its currency reserves and the Bank of Japan buys equity exchange traded funds (ETFs) as part of its QE.

ECB Vice President Luis de Guindos said in April the ECB had not discussed buying stocks, and many question the effectiveness of equity purchases.

“It’s doable and sensible but it would be complicated,” said Marchel Alexandrovich, European financial economist at Jefferies. The European stock market is relatively small and buying stocks could leave the ECB open to criticism that it is picking companies that don’t apply best business practices, he said.

Buying bank bonds would be a game changer, said TS Lombard senior economist Shweta Singh. “This would release a lot of assets for the ECB to buy but it is next to impossible, as it would complicate the ECB’s role as bank supervisor,” she said.

Buying banks’ non-performing loans would also have a more powerful impact than buying equities but conflicts with the ECB’s supervisory role.

(For a graphic on ‘Size of major world equity markets’ click https://tmsnrt.rs/2WlhJHn)

5/YIELD CURVE CONTROL

One way to add more economic stimulus could be to target explicit levels for long-term interest rates.

The BOJ has targeted long-term yields around zero since 2016, and the idea is gaining traction. Federal Reserve official Lael Brainard has said she wanted to explore whether the Fed, in a future downturn, should consider this step.

It would be more complicated for the ECB, said Mohammed Kazmi, portfolio manager for UBP in Geneva. “The natural answer is to target Germany because the other countries’ bonds are priced against Germany,” he said.

But German bonds are in short supply. The ECB could change its capital key rule, where it buys bonds relative to a member state’s contribution to the ECB working capital. That would allow it to target another bond market though this in turn would leave it open to charges of financing spending by weaker states.

(For a graphic on ‘Yield curve control: a leaf out of the BoJ’s book?’ click https://tmsnrt.rs/2Wljl3V)

(Reporting by Dhara Ranasinghe; Graphics by Ritvik Carvalho; Additional reporting by Balazs Koranyi in Frankfurt; editing by John Stonestreet)

Source: OANN

Illustration photo of a Thomas Cook logo
FILE PHOTO: The Thomas Cook logo is seen in this illustration photo January 22, 2018. REUTERS/Thomas White/Illustration

May 23, 2019

LONDON (Reuters) – Credit rating agencies Fitch and S&P have downgraded Thomas Cook after the travel firm’s latest profit warning, saying the indebted company could struggle this summer in the face of weak demand.

Thomas Cook issued its third profit warning in less than a year last week, saying subdued demand had led to increased promotions and earlier discounting than usual. The profit warning led Citi to cut its price target for the stock to zero.

The company has put its airline up for sale and also agreed a 300 million pound ($379 million) bank facility to provide more liquidity for the 2019/20 winter season.

“The downgrade reflects the tight liquidity we expect TCG (Thomas Cook Group) to face toward the end of 2019 should it not sell its airline division or be able to draw on the planned GBP300 million senior secured facility,” Fitch said as it cut Thomas Cook’s rating to CCC+ from B.

“We expect EBIT (earnings before interest and tax) and profitability to be lower than our previous forecasts as the company faces lower bookings in its main markets, continuing fierce competition and Brexit uncertainty.”

S&P downgraded its rating on Thomas Cook to CCC+ from B-, citing risks from the soft market conditions and uncertainty over the sale price of the airline unit.

Last week Thomas Cook said it had received multiple bids to take over all or parts of its airline business. The company declined to comment on the credit ratings downgrades.

Shares in Thomas Cook were down 6% at 0854 GMT, with other travel and leisure stocks also lower.

The yield on Thomas Cook euro-denominated bonds that mature in 2022 rose <, but remained below Monday’s all-time high.

The stock is up 37% since hitting 8.33 pence on Monday, its lowest since November 2011, as the company has sought to reassure travelers that their holidays are safe in the wake of the profit warning.

(Reporting by Alistair Smout; Additional reporting by Josephine Mason and Helen Reid; Editing by Mark Potter)

Source: OANN

Pound coins are seen in the photo illustration taken in Manchester, Britain
FILE PHOTO: Pound coins are seen in the photo illustration taken in Manchester, Britain September 6, 2017. REUTERS/Phil Noble/Illustration

May 23, 2019

LONDON (Reuters) – A no-deal exit by the United Kingdom from the European Union would push sterling to its lowest against the euro since the global financial crisis a decade ago, UBS Wealth Management said on Thursday as uncertainty over the chaotic process deepens.

The asset management division of UBS said in a note the UK currency would hit 97 pence, just short of parity against the euro. That would be its weakest since December 2008.

It also predicted it would fall to $1.15, its lowest since a flash crash in October 2016.

“Investors should not be complacent about the threat of a no-deal exit,” said Dean Turner, UK economist at UBS Wealth Management.

In turn, a decision to remain in the bloc would likely cause a swift rebound in sterling. Turner said he believes the pound is undervalued relative to its purchasing power parity level of around $1.58.

Sterling was trading at 88.25 pence against the euro and $1.26 by 0907 GMT.

(Reporting by Josephine Mason, Helen Reid and Abhinav Ramnarayan; writing by Josephine Mason, Editing by Helen Reid)

Source: OANN

FILE PHOTO: Illustration photo of a China yuan note
FILE PHOTO: A China yuan note is seen in this illustration photo May 31, 2017. REUTERS/Thomas White/Illustration/File Photo GLOBAL BUSINESS WEEK AHEAD

May 23, 2019

BEIJING (Reuters) – China has ample policy tools to cope with yuan fluctuations and the country is able to keep the currency basically stable, Liu Guoqiang, a vice central bank governor, said in remarks published on Thursday.

China’s foreign exchange market remained steady, despite some overshooting in the yuan exchange rate, Liu was quoted by Financial News, a newspaper run by the central bank, as saying.

Liu also said China’s foreign exchange reserves remained ample, while its macro leverage ratio was basically stable and fiscal and financial risks were under control.

(Reporting by China Monitoring Desk and Kevin Yao; Editing by Richard Borsuk)

Source: OANN

FILE PHOTO: An Embraer ERJ-190AR airplane of Azul Brazilian Airlines prepares to land at Santos Dumont airport in Rio de Janeiro
FILE PHOTO: An Embraer ERJ-190AR airplane of Azul Brazilian Airlines prepares to land at Santos Dumont airport in Rio de Janeiro, Brazil March 21, 2019. Picture taken March 21, 2019. REUTERS/Sergio Moraes/File Photo

May 23, 2019

By Maria Carolina Marcello

BRASILIA (Reuters) – Brazil’s Senate on Wednesday passed legislation allowing foreign-controlled airlines to operate domestic flights, opening up Latin America’s largest air travel market after years of debate.

The measure passed Brazil’s Senate on Wednesday following approval by the lower chamber on Tuesday. Because Congress added a provision barring airlines from charging passengers for their first checked bag, the bill will require the signature of President Jair Bolsonaro before becoming law.

The new rules could soon boost competition in Brazil’s increasingly concentrated airline market. But the change in baggage fees will face pushback from airlines, including industry group Latin American and Caribbean Air Transport Association.

Luis Felipe de Oliveira, the trade group’s president, said the rule change could make it harder for low cost airlines to enter the Brazilian market and lead to pricier tickets.

Earlier on Wednesday, the country’s air travel regulator ANAC granted its first preliminary permit to a foreign airline to explore setting up a domestic subsidiary, which went to Spain’s Air Europa. The carrier’s interest had been announced on Saturday by Brazil’s infrastructure minister.

Lifting restrictions on foreign airline ownership in Brazil had been on the agenda for years before former President Michel Temer signed a temporary decree in December, which would have expired without congressional approval.

Foreign ownership was previously capped at 20%, but once signed into law by Bolsonaro it will be lifted permanently to 100%.

That may shake up Brazil’s air travel market, which is dominated by three airlines controlling 92% of the domestic flights, according to ANAC.

Foreign airlines will now be able start domestic operations in Brazil and global players will be able increase their stakes in local carriers. Brazil’s three largest airlines – Gol Linhas Aereas Inteligentes, LATAM Airlines Group and Azul SA – have already received minority investments from foreign carriers.

Currently, Delta Air Lines Inc owns 9.4% of Gol, the leader in domestic flights in Brazil and United Airlines owns 8% of third-place Azul. Qatar Airways owns 10% of LATAM, Brazil’s No. 2 domestic airline.

Santiago-listed LATAM was born out of the merger of Brazil’s Tam and Chile’s Lan in 2012, which at the time required a sophisticated corporate structure to avoid Brazil’s limits on foreign ownership.

Brazil’s No. 4 airline, Avianca Brasil, is going through a bankruptcy reorganization, and is selling its most profitable domestic routes, which could help a foreign player jumpstart operations in Brazil.

(Reporting by Marcelo Rochabrun; Editing by Sandra Maler)

Source: OANN

Logo of PrivatBank, the Ukraine's biggest lender, is seen on a bank's branch in Kiev
FILE PHOTO: Logo of PrivatBank, the Ukraine’s biggest lender, is seen on a bank’s branch in Kiev, Ukraine April 18, 2019. REUTERS/Vasily Fedosenko

May 23, 2019

KIEV (Reuters) – Ukraine’s largest lender PrivatBank has launched a lawsuit against its former owner Ihor Kolomoisky in the Delaware Court of Chancery in the United States, Interfax Ukraine said on Thursday.

PrivatBank declined immediate comment on the report.

(Reporting by Pavel Polityuk; Writing by Matthias Williams; Editing by Mark Potter)

Source: OANN

FILE PHOTO: Sign of the European central Bank (ECB) is seen ahead of the news conference on the outcome of the Governing Council meeting, outside the ECB headquarters in Frankfurt
FILE PHOTO: Sign of the European central Bank (ECB) is seen ahead of the news conference on the outcome of the Governing Council meeting, outside the ECB headquarters in Frankfurt, Germany, March 7, 2019. REUTERS/Kai Pfaffenbach/File Photo

May 23, 2019

LUXEMBOURG (Reuters) – The General Court of the European Union said on Thursday the European Central Bank does not have to compensate private holders of Greece’s sovereign debt who were forced to take losses during the 2012 international bailout of the country.

Some investors were seeking compensation for the haircut they were forced to accept during Greece’s second bailout, which was accepted by most holders of Greek bonds.

They wanted the ECB to reimburse them because the central bank had not opposed the Greek law that authorized the haircut, but the EU court said the ECB had acted lawfully and rejected their claims.

(Reporting by Francois Aulner; writing by Francesco Guarascio @fraguarascio; Editing by Gareth Jones)

Source: OANN

A worker of German steel manufacturer Salzgitter AG stands in front of a furnace at a plant in Salzgitter
FILE PHOTO: A worker of German steel manufacturer Salzgitter AG stands in front of a furnace at a plant in Salzgitter, Germany, March 1, 2018. REUTERS/Fabian Bimmer

May 23, 2019

BERLIN, (Reuters) – Activity in Germany’s services and manufacturing sectors fell in May, a survey showed on Thursday, reflecting the toll that unresolved trade disputes are having on Europe’s largest economy.

IHS Markit’s flash Purchasing Managers’ Index for manufacturing fell to 44.3 from 44.4 in April, the fifth monthly reading in a row below the 50 mark that separates growth from contraction.

Markit economist Chris Williamson said the slight fall suggested that a recession in the sector, which is more vulnerable to trade frictions than services, was bottoming out.

Markit’s flash services PMI fell to 55.0 from 55.7 in the previous month. The first fall after four straight rises indicates that the sector, which has been providing the economy with growth impetus as manufacturing cools, was showing signs of stress.

“It looks like the manufacturing downturn has passed its peak and is moving toward a period of stabilization but there is still a long way before we return to growth in the manufacturing economy,” Williamson said.

Signs that the worst may be over for German manufacturers were evident in a slower contraction in output, new orders and export sales, the survey showed.

As a result, IHS Markit’s flash composite Purchasing Managers’ Index (PMI), measuring activity in the services and manufacturing sectors that together account for more than two-thirds of the economy, rebounded to 52.4, a three-month high.

After nine successive years of growth, the German economy is facing headwinds from trade disputes between major trading blocks that manufacturers rely on for export growth.

This has prompted the German government to slash its growth forecast for this year for the second time in three months. It has halved its 2019 growth estimate to 0.5 percent.

The economy grew by 0.4 percent in the first quarter after stagnating in the last three month of last year. Private spending and construction were the main drivers of growth.

Williamson said the PMI data pointed to a growth rate of 0.2 percent in the second quarter.

But the survey showed that both manufacturers and services providers were pessimistic about their business outlook.

“It is manufacturers who remain the most downbeat about the outlook amid lingering global trade tensions, though the survey highlights that fears of a slowdown may have started to spread to services, where confidence is now at its joint-lowest since 2014,” said Phil Smith, principal economist at IHS Markit.

(Reporting by Joseph Nasr; Editing by Catherine Evans)

Source: OANN

A construction site is pictured in Berlin
FILE PHOTO: A construction site is pictured in Berlin, Germany May 31, 2018. REUTERS/Axel Schmidt

May 23, 2019

BERLIN (Reuters) – German household spending rose at its strongest pace in eight years, driving a rebound in the first quarter, while a pick up in construction activity and surprisingly solid exports also helped Europe’s largest economy to get back on track.

The Federal Statistics Office on Thursday confirmed preliminary gross domestic product growth of 0.4% quarter-on-quarter and 0.7% year-on-year seasonally adjusted.

Private consumption rose 1.2% on the quarter, which was the biggest increase since 2011, contributing 0.6 percentage points to the expansion.

Investments in construction increased 1.9% on the quarter which resulted in a contribution of 0.2 percentage points.

Despite increased trade tensions and business uncertainty, exports rose more strongly than imports in the first three months of the year which meant that net trade contributed 0.2 percentage points to the overall expansion.

The German economy avoided a technical recession by a whisker at the end of last year after a 0.2% contraction in the third quarter and a stagnation in the fourth.

The growth outlook for the German economy remains clouded, however, by rising trade barriers such as tariffs and business uncertainty linked to Britain’s chaotic departure from the European Union.

The government has slashed its growth forecast to 0.5% this year.

(Reporting by Michael Nienaber; Editing by Raissa Kasolowsky)

Source: OANN

An employee of a money changer holds a stack of Indonesia rupiah notes before giving it to a customer in Jakarta
FILE PHOTO: An employee of a money changer holds a stack of Indonesia rupiah notes before giving it to a customer in Jakarta, October 8, 2015. REUTERS/Beawiharta

May 23, 2019

By Nikhil Nainan

(Reuters) – Investors bet most Asian currencies will come under further pressure, a Reuters poll showed, with trade tensions between the United States and China firmly dominating headlines once again.

With diminishing hopes of a long-awaited trade deal between the world’s top two economies, the mood across markets have been apprehensive with investors shifting money to safer bets.

Investors, who were bullish on China’s yuan for much of this year until April end, have since raised their short positions to their highest in six months, the poll of 12 respondents showed.

Trade tensions have taken a toll on the Chinese economy, but measures promised by Beijing, including massive stimulus, have started to filter through. However, with tensions escalating again, the yuan has lost about 2.5% since U.S. President Donald Trump said on May 5 he was going to raise tariffs on $200 billion of Chinese imports.

Trade reliant economies, such as Taiwan and South Korea, are among the most exposed to a deterioration in trade relations.

The poll showed market participants raise their short positions on both country’s currencies over the last two weeks with bets on South Korea’s won at their highest in more than a decade, with a slew of weak domestic data adding to the unit’s woes.

It is the region’s worst performing currency, shedding over 6% against the dollar so far this year. A state-run think tank on Wednesday called on monetary policy in the country to be substantially accommodative.

Short bets on Taiwan’s dollar climbed to their highest since January 2016.

In India, the seven-phase general election process that lasted for more than a month culminates on Thursday with vote-counting set to show whether Prime Minister Narendra Modi will win a second straight term. Exit polls have predicted a clear win for Modi, and markets have cheered them.

Long positions on the Indian rupee were marginally higher from two weeks ago. The unit is just one of two currencies in the green this year among its peers covered in this poll.

Investors turned bullish on the rupee in March for the first time in nearly a year, after Modi turned the campaign into a fight about national security, shifting the narrative away from criticism he faced on weak job growth and farm prices that saw the opposition build momentum.

Elsewhere, market participants flipped their bets on the Philippine peso, with short positions now at their highest since December last year.

Uncertainty over the political future of Thailand and Indonesia has clouded outlook due to recent disputed elections.

Accordingly, investors raised bearish bets on Thailand’s baht and Indonesia’s rupiah to their highest since November.

Protests have engulfed central Jakarta, Indonesia’s capital city, this week while the Thai central bank cautioned that the economy faces potential hazards from political uncertainty.

The Asian currency positioning poll is focused on what analysts and fund managers believe are the current market positions in nine Asian emerging market currencies: the Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit and the Thai baht.

The poll uses estimates of net long or short positions on a scale of minus 3 to plus 3. A score of plus 3 indicates the market is significantly long U.S. dollars.

The figures include positions held through non-deliverable forwards (NDFs).

(Reporting by Nikhil Kurian Nainan in Bengaluru; Editing by Rashmi Aich)

Source: OANN


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