Phase one trade deal with China is in good shape: U.S. Commerce Secretary

Phase one trade deal with China is in good shape: U.S. Commerce Secretary
WASHINGTON (Reuters) – The initial “phase one” trade pact with China appears to be in good shape and is likely to be signed around mid-November, although a finite date is still in question, U.S. Commerce Secretary Wilbur Ross said on Friday.

“We’re pretty comfortable that the phase one is in good shape,” he told Fox Business Network in an interview.

U.S. President Donald Trump and other administration officials had looked toward the Nov. 11-17 Asia Pacific Economic Cooperation summit as a possible venue to sign the deal with Chinese President Xi Jinping before Chile this week canceled its plan to host the international summit.

“Hopefully we can resurrect a date right in that range,” Ross told the television network, adding that the question of a new location remained.

Lead trade negotiators from both the United States and Chine are expected to speak by telephone on Friday as Ross prepared separately to travel to Asia for a three-day summit of Southeast Asian nations in Thailand.

“There will some transactions announced — some very good-sized transactions — announced while I’m on this trip,” he said, but gave no other details.

(Reporting by Susan Heavey; Editing by Catherine Evans and Louise Heavens)

Global protests gaining attention in financial markets

Global protests gaining attention in financial markets
By Marc Jones and Mike Dolan

LONDON (Reuters) – An alarming spread of street protests and civil unrest across the world in recent weeks looms large on the radar of financial markets, with investors wary the resulting pressures on stretched government finances will be one of many consequences.

Money managers and risk analysts seeking a common thread between often unconnected sources of popular anger – in Hong Kong, Beirut, Cairo, Santiago and beyond – reckon the unrest is particularly worrying following years of modest global economic growth and relatively low joblessness.

If, as many fear, the world is slipping back into its first recession in more than a decade, then the root causes of restive streets will only deepen and force embattled governments to loosen purse strings further to fund better employment, education, healthcare and other services to placate them.

Forced fiscal loosening in a world already swamped with debt and heading into another downturn may unnerve creditors and bond holders, especially those holding government debt as an insurance against recession and a haven from volatility.

“Protests per se are unpredictable for investors by definition and fit a pattern of rising political risks that have affected market perceptions in almost all geographies,” said Standard Chartered Bank strategist Philippe Dauba-Pantanacce.

“Investors will get more nervous when they see that a country’s IMF package or investment promises are conditioned on fiscal consolidation and that the first austerity measures are followed by massive protests.”

More broadly popular pushback against debt reduction and austerity raises serious questions about how still-mushrooming debt loads can be sustained, even after the massive central bank intervention to underwrite it in recent years.

Many also fear the feedback loop.

According to the International Monetary Fund this month, a global downturn half as severe as the one spurred by the last financial crisis in 2007-9 would result in $19 trillion of corporate debt being considered “at risk” – defined as debt from firms whose earnings would not cover the cost of their interest payments let alone pay off the original debt.

Rising bankruptcies at so-called “zombie” firms would, in turn, risk spurring rising job losses and yet more unrest.

Marc Ostwald, global strategist at ADM Investor Services, said he saw many of the protests as ‘straws that break the camel’s back’ – tipping points in a broad swathe of long-standing complaints about inequality, corruption and oppression, variations on the broader themes of populism and anti-globalization.

But Ostwald said there was a worry for financial markets who have surfed rising debt piles for years thanks to central bank money printing and bond buying.

“At some point the smothering impact of QE (quantitative easing) will run its course,” Ostwald said.

“And as many of the zombie companies then go to the wall, so governments will face rising unemployment and desperately need to borrow money to prop up their economies – particularly as social unrest rises, as we are witnessing.”

Of the dozens of protest movements that have emerged in recent years, here are some of the most prominent ones.

HONG KONG

Hong Kong has been battered by five months of often violent protests after the city state tried to bring in legislation that would have allowed extraditions to mainland China. The plan has been formally withdrawn but it is unlikely to end the unrest as it meets only one of five demands pro-democracy protesters have.

On Tuesday, authorities announced HK$2 billion ($255 million) relief measures for the city’s economy, particularly in its transport, tourism and retail industries. It followed a more sizeable HK$19.1 billion ($2.4 billion) package in August to support the underprivileged and businesses. Hong Kong’s Financial Secretary has also said more assistance will be given if needed.

The Hang Seng, one of Asia’s most prominent share markets, is down 12% since the protests started and although it has been recovered some ground over the last two months, it has continued to lag other major markets.

LEBANON

Hundreds of thousands of people have been flooding the streets for nearly two weeks, furious at a political class they accuse of pushing the economy to the point of collapse.

Prime Minister Saad al-Hariri announced on Monday a symbolic halving of the salaries of ministers and lawmakers, as well as steps toward implementing long-delayed measures vital to fixing the finances of the heavily indebted state.

Markets are increasingly worried it will all end in default. The government’s bonds are now selling at a 40% discount and Credit Default Swaps, which investor use as insurance against those risks, have soared.

IRAQ

Similar factors were behind deadly civil unrest in Iraq which flared in early October. More than 100 people died in violent protests across a country where many Iraqis, especially young people, felt they had seen few economic benefits since Islamic State militants were defeated in 2017.

The government responded with a 17-point plan to increase subsidized housing for the poor, stipends for the unemployed and training programs and small loans initiatives for unemployed youth.

 

EXTINCTION REBELLION

This London-bred movement is pushing for political, economic and social changes to avert the worst devastation of climate change. XR protesters began blockading streets and occupying prominent public spaces late last year, and following 11 days of back-to-back protests in April the UK government symbolically declared a climate “emergency”.

The movement is developing alongside the growing FridaysForFuture led by Swedish teenager Greta Thunberg which sees school children boycott lessons on Fridays.

It has been particularly strong in Germany and the government there recently launched the ‘Gruene Null’ or ‘Green Zero’ policy which specifies that any spending that pushes the government’s budget into deficit must be on climate-focused investments.

Incoming European Commission chief, Ursula von der Leyen, has also introduced an ambitious “European Green Deal” which would include the support of 1 trillion euros ($1.11 trillion) in sustainable investments across the bloc.

Amazon <AMZN.O> Chief Executive Officer Jeff Bezos last month pledged to make the largest U.S. e-commerce company net carbon neutral by 2040.

CHILE

At least 15 people have died in Chile’s protests which started over a hike in public transport costs but have grown to reflect simmering anger over intense economic inequality as well as costly health, education and pension systems seen by many as inadequate.

Chile’s President Sebastian Pinera announced an ambitious raft of measures on Tuesday aimed at quelling the unrest, including with a guaranteed minimum wage, a hike in the state pension offering and the stabilization of electricity costs.

ECUADOR

Violent protests at the start of October forced Ecuadorean President Lenin Moreno to scrap his own law to cut expensive fuel subsidies that have been in place for four decades.

The government had estimated the cuts would have freed up nearly $1.5 billion per year in the government budget, helping to shrink the fiscal deficit as part of a $4.2 billion IMF loan deal Moreno had signed.

BOLIVIA

Mass protests and marches broke out in Bolivia this week after the opposition said counting in the country’s presidential election at the weekend was rigged in favor of current leader Evo Morales.

The unrest – already the severest test of Morales’ rule since he came to power in 2006 – could spread if his declaration of outright victory is confirmed, after monitors, foreign governments and the opposition called for a second-round vote.

EGYPT

Protests against President Abdel Fattah al-Sisi broke out in Cairo and other cities in September following online calls for demonstrations against alleged government corruption, as well as recent austerity-focused measures.

Protests are rare under the former army chief and about 3,400 people have been arrested since the protests began, including about 300 who have since been released, according to the Egyptian Commission for Rights and Freedoms, an independent body.

The country’s main stock market <.EGX30> dropped 10% over three days as the protests kicked off although it has since recovered over half of that ground.

FRANCE

The Gilets Jaunes movement named after the fluorescent yellow safety vests that all French motorists must carry began a year ago to oppose fuel tax increases, but quickly morphed into a broader backlash against President Emmanuel Macron’s government, rising economic inequality and climate change.

Macron swiftly reversed the tax hikes and announced a swathe of other measures worth more than 10 billion euros ($11.3 billion) to boost the purchasing power of lower-income voters. That was followed up with another 5 billion euro package of tax cuts in April.

ARAB SPRING

Beginning in late 2010, anti-government protests roiled Tunisia. By early 2011 they had spread into what became known as the Arab Spring wave of protests and uprisings which ended up toppling not only Tunisia’s leader but Egypt, Libya, and Yemen’s too. The Arab Spring uprisings in Syria developed into a civil war that continues to be waged today.

ETHIOPIA

A total of 16 people have been killed in at least four cities since fierce clashes broke out on Wednesday against the reformist policies of Nobel Prize-winning Prime Minister Abiy Ahmed.

The greater freedoms that those policies bring have unleashed long-repressed tensions between Ethiopia’s many ethnic groups as local politicians claim more resources, power and land for their own regions. Ethiopia is due to hold elections next year.

(Reporting by Marc Jones and Mike Dolan, additional reporting by Karin Strohecker in London and Mitra Taj in La Paz; Editing by Sonya Hepinstall)

China wants more talks before signing Trump’s ‘Phase 1’ deal: Bloomberg

(Reuters) – China wants more talks as soon as the end of October to hammer out the details of the “phase one” trade deal outlined by U.S. President Donald Trump before Chinese President Xi Jinping agrees to sign it, Bloomberg reported on Monday, citing people familiar with the matter.

Beijing may send a delegation led by Chinese Vice Premier Liu He to finalize a written deal that could be signed by the two leaders at the Asia-Pacific Cooperation summit next month in Chile, Bloomberg said.

China wants Trump to also scrap a planned tariff hike in December in addition to the hike scheduled for this week, the report added.

(Reporting by Rama Venkat in Bengaluru; Editing by Alex Richardson)

With U.S. tariffs looming, China drums up hope for a partial trade deal

By Yawen Chen and Michael Martina

BEIJING (Reuters) – A Chinese state newspaper said on Friday that a “partial” trade deal would benefit China and the United States, and Washington should take the offer on the table, reflecting Beijing’s aim of cooling the row before more U.S. tariffs kick in.

Both sides have slapped duties on hundreds of billions of dollars of goods during the 15-month trade dispute, which has shaken financial markets and uprooted global supply chains as companies move production elsewhere.

As top U.S. and Chinese negotiators wrapped up a first day of trade talks in more than two months on Thursday, business groups expressed optimism the two sides might be able to ease the conflict and delay a U.S. tariff hike scheduled for next week.

China’s top trade negotiator, Vice Premier Liu He, said on Thursday that China is willing to reach agreement with the United States on matters that both sides care about so as to prevent friction from leading to any further escalation.

He stressed that “the Chinese side came with great sincerity”.

Adding to that, the official China Daily newspaper said in an editorial in English: “A partial deal is a more feasible objective”.

“Not only would it be of tangible benefit by breaking the impasse, but it would also create badly needed breathing space for both sides to reflect on the bigger picture,” the paper said.

Hours ahead of an expected meeting between China’s Liu and U.S. President Donald Trump at the White House, China’s securities regulator unveiled a firm timetable for scrapping foreign ownership limits in futures, securities and mutual fund companies for the first time.

China previously said it would further open up its financial sector on its own terms and at its own pace, but the timing of Friday’s announcement suggests Beijing is keen to show progress in its plan to increase foreigners’ access to the sector, which is among a host of demands from Washington in the trade talks.

Chinese officials are offering to increase annual purchases of U.S. agricultural products as the two countries seek to resolve their trade dispute, the Financial Times reported on Wednesday, citing unidentified sources.

The U.S. Department of Agriculture (USDA) on Thursday confirmed net sales of 142,172 tonnes of U.S. pork to China in the week ended Oct. 3, the largest weekly sale to the world’s top pork market on record.

A U.S.-China currency agreement is also being floated as a symbol of progress in talks between the world’s two largest economies, although that would largely repeat past pledges by China, currency experts say, and will not change the dollar-yuan relationship that has been a thorn in the side of Trump.

PESSIMISM ‘STILL JUSTIFIED’

Analysts have noted China sent a larger-than-normal delegation of senior Chinese officials to Washington, with commerce minister Zhong Shan and deputy ministers on agriculture and technology also present.

The sudden optimism about a potential de-escalation is in stark contrast to much more gloomy predictions in business circles just days ago on the heels of a series of threatened crackdowns on China by the Trump administration.

On Tuesday, the U.S. government widened its trade blacklist to include Chinese public security bureaus and some of China’s top artificial intelligence startups, punishing Beijing for its treatment of Muslim minorities.

Surprised by the move, Chinese government officials told Reuters on the eve of talks that they had lowered expectations for significant progress.

Friday’s China Daily editorial also warned that “pessimism is still justified”, noting that the talks would finish just three days before Washington is due to raise tariffs on $250 billion worth of Chinese imports.

The negotiations were the “only window” to end deteriorating relations, it added.

Trump, said on Thursday that the talks had so far gone very well. But he has previously insisted he would not be satisfied with a partial deal to resolve his two-year effort to change China’s trade, intellectual property and industrial policy practices, which he argues cost millions of U.S. jobs.

There have also been reports that the Trump administration is readying additional measures aimed at China, with unknown consequences for trade negotiations.

Such wildly shifting expectations have been a persistent feature of the trade war, and observers remained cautious over what might emerge from this week’s talks.

“China wants peace, but I don’t think China will give more,” one Chinese trade expert said on condition of anonymity.

(Reporting by Yawen Chen and Michael Martina; Editing by Simon Cameron-Moore & Kim Coghill)

U.S., China resume high-level talks to end grueling trade war

By David Lawder

WASHINGTON (Reuters) – Top U.S. and Chinese negotiators met on Thursday for the first time since late July to try to find a way out of a 15-month trade war as new irritants between the world’s two largest economies threatened hopes for progress.

U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer greeted Chinese Vice Premier Liu He on the steps of the USTR office before a meeting in which they will seek to narrow differences enough to avoid an escalation of tit-for-tat tariffs that have roiled financial markets and stoked fears of a global recession.

The mood surrounding the talks soured this week when the U.S. government blacklisted 28 Chinese public security bureaus, technology and surveillance firms and imposed visa restrictions on Chinese officials over allegations of abuses of Muslim minorities in China.

Beijing is planning to tighten visa restrictions for U.S. nationals with ties to anti-China groups, sources said.

U.S. President Donald Trump has threatened to raise tariffs on $250 billion worth of Chinese goods on Oct. 15 if no progress is made in the on-again, off-again negotiations.

That would make nearly all Chinese goods imports into the United States – more than $500 billion – subject to tariffs.

“Big day of negotiations with China,” Trump said on Twitter. “They want to make a deal, but do I?” He added that he would be meeting with Liu at the White House on Friday.

Chinese officials indicated more willingness to negotiate. “The Chinese side came with great sincerity, willing to cooperate with the U.S. on the trade balance, market access and investor protection,” Xinhua quoted Liu as saying on Thursday.

A U.S. Chamber of Commerce official said there was a possibility U.S. and Chinese negotiators would reach a currency agreement in exchange for a delay of the tariff hikes.

Major U.S. stock exchanges were trading higher on hopes of progress in the talks.

Although some media reports suggested both sides are considering an “interim” deal that would suspend the planned further U.S. tariffs in exchange for additional purchases of American farm products, Trump has repeatedly dismissed this idea, insisting he wants a “big deal” with Beijing that addresses core intellectual property issues.

The U.S. Agriculture Department said on Thursday that private exporters reported a snap sale of 398,000 tonnes of soybeans to China, part of a flurry of purchases the top buyer of the oilseed has made since granting waivers to some importers to buy U.S. soy exempt from tariffs as a goodwill gesture.

Chinese firms have bought more than 3.5 million tonnes of U.S. soybeans since the beginning of September. Soybeans, the most valuable U.S. agricultural export, have been among the products hardest hit by China’s retaliatory tariffs.

LOWERED EXPECTATIONS

The two sides have been at loggerheads over U.S. demands that China improve protections of American intellectual property, end cyber theft and the forced transfer of technology to Chinese firms, curb industrial subsidies and increase U.S. companies’ access to largely closed Chinese markets.

But Chinese officials, surprised by the U.S. blacklisting of Chinese companies, including video surveillance gear maker Hikvision, along with the suspension of U.S. visas for some Chinese officials, told Reuters that Beijing had lowered expectations for significant progress from the talks.

“I’ve never seen China respond with concessions to someone throwing down the gauntlet in this manner,” said Scott Kennedy, a China trade expert at the Center for Strategic and International Studies in Washington. “It suggests to me that the U.S. may have determined that progress was impossible, so everyone is just going through the motions.”

Other flashpoints that have cropped up in recent days include China’s swift action to cut corporate ties to the National Basketball Association over a team official’s tweet in support of Hong Kong pro-democracy protesters.

U.S. Commerce Secretary Wilbur Ross said in Sydney on Thursday that the tariffs were working, forcing Beijing to pay attention to American concerns about its trade practices.

“We do not love tariffs – in fact we would prefer not to use them – but after years of discussions and no action, tariffs are finally forcing China to pay attention to our concerns,” Ross said in remarks prepared for delivery on an official visit to Australia.

(Reporting by David Lawder; Editing by Simon Cameron-Moore and Paul Simao)

China’s top diplomat says Beijing willing to buy more U.S. products

By Michelle Nichols

NEW YORK (Reuters) – China’s top diplomat said on Thursday that China was willing to buy more U.S. products and said trade talks would yield results if both sides “take more enthusiastic measures” to show goodwill and reduce “pessimistic language” in the trade dispute.

Wang Yi, China’s state councilor and foreign minister, said in response to questions from Reuters that the Trump administration had shown goodwill by waiving tariffs on many Chinese products.

“And so, (on) the Chinese side, we are willing to buy more products that are needed by the Chinese market,” Wang said on the sidelines of the United Nations General Assembly. “We hope both sides can take more enthusiastic measures, reduce pessimistic language and actions. If everyone does this, talks will not only resume, but will proceed and yield results.”

(Reporting by David Lawder, Koh Gui Qing and Michelle Nichols; editing by Grant McCool)

Trump threatens new tariffs as U.S.-China trade tensions spike again

FILE PHOTO: Farmer Dave Walton holds soybeans in Wilton, Iowa, U.S. May 22, 2019. Picture taken May 22, 2019. REUTERS/Kia Johnson

By David Lawder and Andrea Shalal

WASHINGTON (Reuters) – U.S. President Donald Trump on Thursday moved to impose a 10% tariff on a remaining $300 billion list of Chinese imports starting Sept. 1, after U.S. and Chinese negotiators failed to kickstart trade talks between the world’s two largest economies.

The levies – which would hit a wide swath of consumer goods from cell phones and laptop computers to toys and footwear – ratchet up tensions in a war of tit-for-tat tariffs that have disrupted global supply chains and roiled financial markets for more than a year.

U.S. stocks fell after the news and oil prices plummeted, and further fallout was expected. The IMF has warned that tariffs already in place will shave 0.2% off global economic output in 2020.

The benchmark S&P 500, which had been in solidly positive territory on Thursday afternoon, lost significant ground after Trump tweeted about the tariffs, and was last down 0.6% on the day. Benchmark U.S. Treasury yields also fell.

“Trade talks are continuing, and during the talks the U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country. This does not include the 250 Billion Dollars already Tariffed at 25%,” Trump tweeted.

Trump also faulted China for not making good on promises to buy more American agricultural products and criticized China’s President Xi Jinping for failing to do more to stem sales of the synthetic opioid fentanyl.

The president’s tweets followed a briefing by Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on their talks in Shanghai, their first face-to-face meeting with Chinese officials since Trump and Xi agreed to a trade ceasefire at a G20 summit in June.

The talks ended on Wednesday with little sign of progress, although both countries described the negotiations as constructive. Another round of meetings between the negotiators has been scheduled for September.

Trump had been pressing Xi to crack down on a flood of fentanyl and fentanyl-related substances from China, which U.S. officials say is the main source of a drug blamed for most of more than 28,000 synthetic opioid-related overdose deaths in the United States in 2017.

Xi promised Trump at a summit in Argentina in December that Beijing would take action. China had pledged that from May 1 it would expand the list of narcotics subject to state control to include the more than 1,400 known fentanyl analogs, which have a slightly different chemical makeup but are addictive and potentially deadly, as well as any new ones developed in the future.

Talks between the United States and China collapsed in May after U.S. officials accused China of pulling back from earlier commitments. Washington sharply hiked tariffs on $200 billion worth of Chinese goods and Beijing retaliated, escalating the trade dispute.

Trump subsequently threatened to impose 25% sanctions on the remaining $300 billion in Chinese imports, prompting warnings from Walmart and other major U.S. retailers of a sharp spike in consumer prices. Thursday’s tweets indicated those goods would face a lower tariff rate than initially threatened.

While the United States bemoans the lack of larger Chinese agricultural purchases, Beijing has been pressing Washington to relax restrictions on sales to Chinese telecommunications giant Huawei as it had promised.

The U.S. Department of Agriculture on Thursday confirmed private sales to China of 68,000 tonnes of soybeans in the week ended July 25.

The sale was the first to a private buyer since Beijing offered to exempt five crushers from the 25% import tariffs imposed more than a year ago. Soybean futures opened lower on Thursday as traders shrugged off the small amount, and losses accelerated after Trump’s tweets.

(Additional reporting by Stella Qiu and Beijing Monitoring Desk; additional reporting by David Lawder, Jonathan Landay and Andrea Shalal in Washington and Mark Weinraub and Karl Plume in Chicago; Editing by Sonya Hepinstall)

Trump says no hurry to sign China deal as trade war escalates

A general view of Kwai Tsing Container Terminals for transporting shipping containers in Hong Kong, China July 25, 2018. REUTERS/Bobby Yip

By Susan Heavey and Yawen Chen

WASHINGTON/BEIJING (Reuters) – U.S. President Donald Trump on Friday said he was in no hurry to sign a trade deal with China as Washington imposed a new set of tariffs on Chinese goods and negotiators entered a second day of last-ditch talks to try to salvage an agreement.

The United States early on Friday increased its tariffs on $200 billion in Chinese goods to 25% from 10%, rattling financial markets already worried the 10-month trade war between the world’s two largest economies could spiral out of control.

The move, which is expected to lead China to retaliate, went into effect just hours after U.S. Trade Representative Robert Lighthizer, U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He ended a first day of talks in Washington without a deal.

They resumed negotiations on Friday morning.

In a series of morning tweets, Trump defended the tariff hike and said he was in “absolutely no rush” to finalize a deal, adding that the U.S. economy would gain more from the levies than any agreement.

“Tariffs will bring in FAR MORE wealth to our country than even a phenomenal deal of the traditional kind,” Trump said in one of the tweets.

Despite Trump’s insistence that China will absorb the cost of the tariffs, U.S. businesses will pay them and likely pass them on to consumers.

Global equities sagged after his comments. MSCI’s All-Country World Index, which tracks stocks across 47 countries, was down 0.8% in London. U.S. stock indexes, which have fallen sharply this week, opened lower again

Trump, who has adopted protectionist policies as part of his “America First” agenda and railed against China for trade practices he labels unfair, said the trade talks, originally due to last two days, could drag on beyond this week.

“We will continue to negotiate with China in the hopes that they do not again try to redo deal!” said Trump, who has accused Beijing of reneging on commitments it made during months of negotiations.

Following the U.S. tariff hike, China’s Commerce Ministry said it would take countermeasures but did not elaborate.

The ministry said it “hopes the United States can meet China halfway, make joint efforts, and resolve the issue through cooperation and consultation.”

‘RUSSIAN ROULETTE’

Under the latest U.S. action, U.S. Customs and Border Protection imposed a 25% duty on more than 5,700 categories of products leaving China after 12:01 a.m. EDT (0401 GMT) on Friday.

Seaborne cargoes shipped from China before midnight were not subject to the new tax as long as they arrived in the United States prior to June 1. Those cargoes will be charged the original 10% rate.

“This delay might create an unofficial window during which the U.S. and China can continue to negotiate,” investment bank Goldman Sachs wrote in a note, adding that it was a “somewhat positive sign” that talks were continuing.

Trump gave U.S. importers less than five days notice about his decision to increase the rate on $200 billion worth of goods, which now matches the rate on a prior $50 billion category of Chinese machinery and technology goods.

He has also threatened to impose new tariffs on another $325 billion in Chinese imports.

Investors worry that an escalating trade war could further damage a slowing global economy. The higher tariffs could reduce U.S. gross domestic product (GDP) by 0.3% and China’s by 0.8% in 2020, consultancy Oxford Economics said.

“There is no greater threat to world growth,” French Finance Minister Bruno Le Maire said on Friday.

Many business groups have opposed the tariffs, saying they will be disastrous for companies and lead to higher prices for consumers across a range of products.

Gary Shapiro, chief executive of the Consumer Technology Association, said the tariffs would be paid by American consumers and businesses, not China, as Trump has claimed.

“Our industry supports more than 18 million U.S. jobs, but raising tariffs will be disastrous,” Shapiro said in a statement.

It may take three or four months for American shoppers to feel the pinch but retailers will have little choice but to raise prices to cover the rising cost of imports before too long, economists and industry consultants say.

Mats Harborn, president of the European Union Chamber of Commerce in China, said: “European companies are watching aghast as the U.S. and China play Russian roulette with the world economy.”

RETALIATE HOW?

The biggest Chinese sector affected by the latest tariff increase is a $20 billion-plus category of internet modems, routers and other data transmission devices, followed by about $12 billion worth of printed circuit boards used in a vast array of U.S.-made products.

Furniture, lighting products, auto parts, vacuum cleaners and building materials also are high on the list of products subject to increased duties.

Just hours after the U.S. move, which will add pressure on an already slowing Chinese economy, China’s central bank said it was fully able to cope with any external uncertainty.

On Monday, the People’s Bank of China cut the amount of reserves that some small and medium-sized banks need to hold, freeing up funds for lending to cash-strapped businesses.

James Green, a senior adviser at McLarty Associates who until August was the top USTR official at the embassy in Beijing, said he expected China would increase non-tariff barriers on U.S. firms, such as delaying regulatory approvals.

“I think the Chinese, in the end, will want to keep negotiations going. The question is: ‘where do they go for retaliation?'” he said.

Even without the trade war, China-U.S. relations have continued to deteriorate, with an uptick in tensions over the South China Sea, Taiwan, human rights and China’s plan to re-create the old Silk Road, called the Belt and Road Initiative.

(Reporting by David Lawder in Washington, and Yawen Chen, Michael Martina, Ryan Woo, Ben Blanchard and Kevin Yao in Beijing, and Xihao Jiang in Shanghai; Writing by Paul Simao; Editing by Simon Cameron-Moore, Kim Coghill and Bill Trott)

Dramatic stock market rally runs out of steam

A screen displays the Dow Jones Industrial Average after the close of trading on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., December 26, 2018. REUTERS/Jeenah Moon

By Trevor Hunnicutt

(Reuters) – A dramatic global stock rally faded on Thursday after a fall in Chinese industrial profits offered a reminder of the pressures on the world economy.

Still, an index of world stocks stayed off near two-year lows hit earlier this week before Wednesday’s 1,000 point-plus surge on the U.S. Dow Jones index, which was attributed to the strongest holiday sales in years.

“Yesterday was a blowout day for U.S. equity markets which triggered optimism that this could be a key reversal day but the upward momentum has not really followed through,” said Lee Hardman, an analyst at MUFG in London.

“One reason is that maybe the sharp move higher was driven by year-end rebalancing, which exaggerated the scale of the rebound, and now we have reverted to the trend which has been in place most of this month.”

That trend is toward weaker stocks, U.S. dollar and oil prices along with stronger demand for safe-haven government bonds, gold and Japanese yen.

MSCI’s gauge of stocks across the globe shed 0.95 percent and U.S. crude fell 2.01 percent to $45.29 per barrel after each staged big rallies the day prior. [O/R]

Markets in mainland China, as well as Hong Kong, closed weaker after data showed earnings at China’s industrial firms dropped in November for the first time in nearly three years.

A Reuters report added to the gloom around the world’s second-biggest economy, saying the White House was considering barring U.S. firms from buying telecoms equipment from China’s Huawei and ZTE.

That and an ongoing partial U.S. government shutdown overshadowed positive noises from the U.S. government on trade talks with Beijing, its efforts to temper the White House’s recent broadsides against the Federal Reserve and a report showing the number of Americans filing applications for jobless benefits fell marginally last week in a sign of labor market strength.

The Dow Jones Industrial Average fell 394.04 points, or 1.72 percent, to 22,484.41, the S&amp;P 500 lost 42.07 points, or 1.70 percent, to 2,425.63 and the Nasdaq Composite dropped 134.06 points, or 2.05 percent, to 6,420.29. [.N]

“So far, we don’t see a shift in fundamentals. Trade tensions between the U.S. and China remain the biggest unknown factor for 2019,” said Hussein Sayed, a strategist at online brokerage FXTM.

There were also renewed concerns in Italy, where troubled lender Banca Carige was denied a cash call by its largest shareholder, pushing its shares down 12.5 percent.

The concerns over a faltering global economy and signs of an oil glut pressured crude prices a day after their 8 percent rally. U.S. Treasury prices also reversed direction after falling sharply on Wednesday, with the 10-year note last rising 15/32 in price to yield 2.7452 percent. [US/]

Another safe-haven, gold, was up 0.6 percent to $1,274.52 an ounce, remaining just below a six-month peak hit earlier this week. [GOL/]

Investors also bought yen, strengthening that currency 0.56 percent against the greenback at 110.74 per dollar. Against a basket of trading partners’ currencies, the dollar was down 0.35 percent. [FRX/]

“We have started to see the yen regain its place as the safe haven of choice,” MUFG’s Hardman said.

(Additional reporting by Abhinav Ramnarayan and Sujata Rao in London; Editing by Chizu Nomiyama)

World stocks reach new peak in world full of surprises

Traders work in front of the German share price index, DAX board, at the stock exchange in Frankfurt, Germany, August 4, 2017.

By John Geddie

LONDON (Reuters) – World stocks breached record highs on Monday as better-than-expected company earnings and economic data from the United States stole the focus from rising geopolitical tension over North Korea’s nuclear program.

The U.S. dollar  dipped slightly but held on to most of Friday’s gains – its biggest daily rise this year – made after data showed the United States created more jobs than forecast last month.

For those watching second quarter corporate results in recent weeks, there have been many such surprises. Of the nearly 1000 companies in the MSCI world index that have reported, 67 percent have beaten expectations, according to Reuters data.

These two factors helped nudge the flagship share index above a peak breached late last month, setting a new all-time high of 480.09 on Monday.

The Dow Jones, which recorded its eighth consecutive record high on Friday, was set to open up slightly on Monday.

“Global equities remain the preferred asset class for investors and this can be clearly seen in the new highs hit by world indices today,” said Edward Park, investment director at Brooks Macdonald.

“Whilst the headline beat in non-farm payrolls was the primary positive for the market … equity prices are supported by a strong earnings season and relatively low event risk over the next few months.”

Aside from a slight weakening in the Korean won, there was little financial market reaction to the news over the weekend that the U.N. Security Council unanimously imposed new sanctions on North Korea aimed at pressuring Pyongyang to end its nuclear program.

South Korean President Moon Jae-in and his U.S. counterpart, Donald Trump, agreed in a telephone call on Monday to apply maximum pressure and sanctions on North Korea, while China expressed hope that North and South Korea could resume contact soon.

Yields on U.S. and German government bonds – seen as a safe haven in times of stress – held above one-month lows hit at the tail end of last week.

 

ASIAN GAINS

A strong rise in U.S. and Asian stocks propelled the world index to a new high, with the strength of the euro providing a bit of a headache for European markets.

Earlier in Asian trading, MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.5 percent while Japan’s Nikkei added 0.5 percent.

Chinese blue chips were bolstered by data showing the country’s foreign exchange reserves rose twice as much as expected in July.

A dramatic reduction in capital outflows – which are seen as one of China’s biggest risks – has helped boost confidence in the world’s second largest economy ahead of a key political leadership reshuffle in coming months.

The euro zone’s main stock index edged lower, however, as the single currency headed back towards 20-month high, a trend which appears to be denting profitability in certain sectors.

Of the MSCI Europe companies having reported, 61 percent have either met or beat expectations. But focusing on industrial firms – of which many depend on exports, and are sensitive to a stronger euro – the beat ratio is just 37 percent.

“The euro is likely to have an impact in the third quarter, with a 10 percent appreciation of the euro lowering earnings per share by around 5 percent,” said Valentin Bissat, senior strategist at Mirabaud Asset Management.

DOLLAR DOUBTS

The upbeat U.S. jobs data offers policymakers some assurance that inflation will gradually rise to the central bank’s 2 percent target, and likely clear the way for a plan to start shrinking its massive bond portfolio later this year.

But market pricing shows investors are still about evenly divided over whether the Fed will also opt to raise rates again in December.

For some analysts, Monday’s pull back in the dollar backs some views in markets that Friday’s rally may not have legs.

The dollar index, which tracks the greenback against a basket of six global peers, inched back 0.2 percent to 93.361. It rallied 0.76 percent on Friday, its biggest one-day gain this year.

The dollar slipped 0.2 percent against the euro to $1.1796 per euro, after surging 0.8 percent on Friday.

“The most logical view here is the moves on Friday were clearly just a sizeable covering of USD shorts, from what was one of the biggest net short positions held against the USD for many years,” Chris Weston, chief market strategist at IG in Melbourne, wrote in a note.

For the dollar rally to gain momentum, the market needs to change its interest rate pricing, Weston added.

In commodities, oil prices slid back from nine-week highs hit on Aug. 4 as worries lingered over high production from OPEC and the United States.

Global benchmark Brent crude futures were down 60 cents, or 1.14 percent, at $51.82 a barrel. They traded as low as $51.56 a barrel earlier in the day.

Gold  steadied as the dollar surrendered some of its gains, but remained under pressure. The precious metal was marginally lower at $1,257.41 an ounce, extending Friday’s 0.8 percent loss.

 

(Reporting by John Geddie in London and Nichola Saminather in Singapore Additional reporting by Helen Reid in London; Editing by Richard Balmforth)