Wednesday, October 16, 2019

BBC News - Brexit: Pound and shares jump on optimism over talks

Pounds and eurosImage copyrightGETTY IMAGES
The pound has jumped to its highest level in five months on reports the two sides in the Brexit talks are inching towards a draft deal.
Shares in banks and housebuilders also soared as optimism about a breakthrough buoyed companies with a UK focus.
It was hoped that a preliminary deal might be reached on Tuesday, ready to go before a summit on Thursday.
Sterling rose 1.5% on the dollar to $1.28, and by a similar amount against the euro to 86.3 pence.
On the FTSE 100, shares with a big exposure to the health of the UK economy rose sharply. Builders Barratt Developments and British Land were up about 6%, and Lloyds Banking Group and Royal Bank of Scotland rose more than 5%. Next, ITV and Ocado were also big risers.
"A deal between the UK and EU was 60% in the price [of sterling] and now we stand to see if the remaining 40% come into play," said Stephen Gallo, European head of foreign exchange at BMO.
Morten Lund, a senior forex strategist at Nordea, added: "The reaction from the markets shows they want to get this deal over and they are ready to push the button at the slightest sign of a deal."
But he said he was "a bit more sceptical about the outcome" given how little time remained to negotiate and the difficulties of getting a deal through the British Parliament. The UK is due to leave the EU on 31 October.
Shares and the pound jumped last week on growing optimism of a deal, only to slip amid signals from Brussels that the negotiations still had a long way to go.

'Right direction'

But on Tuesday, Brussels' chief Brexit negotiator Michel Barnier sparked another rise on the markets when he said it was "high time to turn good intentions [into] a legal text".
Irish PM Leo Varadkar said talks were "moving in the right direction". Boris Johnson has spoken to France's Emmanuel Macron and the BBC understands the two men agreed there was "positive momentum", although "many hurdles" must still be overcome.
The FTSE 250 of UK mid-cap stocks rose and European equity benchmarks extended their gains on the news.
"The more uncertainty you remove, the better for investors. If the [UK] prime minister and the EU were now to agree a deal, then the market would take that positively," said Edmund Shing, global head of equity derivatives strategy at BNP Paribas.

Tuesday, October 15, 2019

Reuters News - Exclusive: Deutsche Bank took years to flag suspect Danske money flows - source

FRANKFURT/TALLINN (Reuters) - Deutsche Bank did not disclose more than one million suspect money transfers with Danske Bank until February, a person with direct knowledge of the matter said, about five years after a whistleblower flagged suspicious transactions at Danske.
Deutsche sent alerts about the suspect money flows involving the Danish bank to Germany’s money laundering data authority and state prosecutors, the person said, prompting investigators to seek more information from Deutsche.
Prosecutors are now investigating whether staff or management at Deutsche sanctioned the transactions, and whether they subsequently tried to cover them up, the person said, speaking on condition of anonymity.
Deutsche did not comment on the time taken to flag the transactions to authorities, which has previously not been reported, but said it ended its relationship with Danske in 2015 and had strengthened its anti-money laundering controls.
Danske Bank was ejected from Estonia this year after admitting 200 billion euros ($220 billion) of suspicious money flowed through its branch there between 2007 and 2015.
Deutsche was dragged into the scandal because it processed the bulk of the transactions for the Danish bank, leading German prosecutors to visit Deutsche’s headquarters last month with police and a search warrant.
Asked about the case, Deutsche said in an emailed statement that it “remains committed to providing appropriate information to all authorized investigations.”
“We have considerably increased staff numbers in Anti-Financial Crime and more than tripled our staff since 2015. We invested since 2016 700 million euros in upgrading our key control functions there.”
Following the information from Deutsche, German prosecutors visited their counterparts in Estonia in recent weeks to investigate the suspect money flows further, the person said.
Prosecutors are now investigating a small fraction of the 1.1 million transfers flagged by Deutsche, involving Russia and former Soviet states in 2014 and 2015, the person added.
If investigators find that Deutsche staff or management sanctioned and covered up its involvement in the suspicious transactions, those bankers or the group itself could face criminal prosecution, the person said.
That would deal another blow to Deutsche’s reputation and a setback to Chief Executive Christian Sewing’s drive to turn around Germany’s biggest lender.

INVESTIGATIONS

Once Germany’s flagship bank on Wall Street, Deutsche has been shrinking to try to return to sustainable profitability and has been hit by a string of penalties, including a $7.2 billion fine in 2017 for selling toxic U.S. mortgages before the financial crash.
Now, it faces a series of investigations, including one over sham trades to move hundreds of billions of roubles out of Russia, as it struggles to regain the trust of investors, staff and politicians in Germany.
Deutsche is one of a number of large international banks to become embroiled in a money laundering scandal in the Baltics, former Soviet satellite states on the edge of Europe that often acted as a staging post for money leaving Russia for the west.
A spokesman for Deutsche said it ended the relationship with Danske in 2015 after identifying “an increase in suspicious transactions from Danske clients over an extended period of time.”
But it is unclear why Deutsche did not report the suspicious fund transfers until earlier this year.
Germany’s Financial Intelligence Unit, which gathers the so-called suspicious activity reports, declined to comment.
A person familiar with the matter said the time taken to report the transactions was unlikely to lead to a penalty from German financial regulator BaFin because Deutsche’s role as a so-called correspondent bank was secondary to Danske.
Editing by Rachel Armstrong and Mark Potter

Monday, October 14, 2019

BBC News - Brexit: Pound surges on renewed hopes of a deal

SterlingImage copyrightPA MEDIA
Sterling surged on Friday to a three-month high amid investor optimism about a last-minute Brexit deal between Britain and the European Union.
Against the dollar the pound rose 1.9% to $1.2682, and against the euro was up 1.67% at €1.1489.
The currency has rallied more than 3% since Thursday, its biggest two-day gain since before the June 2016 referendum on leaving the EU.
Many UK-focused shares also surged, with Royal Bank of Scotland up 11.6%.
On Friday, EU Brexit negotiator Michel Barnier said he had had a "constructive" meeting with UK Brexit secretary, Stephen Barclay. That followed talks between the Irish and British prime ministers on Thursday, after which a joint statement spoke of "a pathway to a possible deal"
Deutsche Bank's foreign exchange strategist George Saravelos said he was "turning more optimistic on Brexit" and no longer negative on the pound, while JPMorgan said the Anglo-Irish statement may have "changed everything".
"The chances of a deal seem to have improved and the pound has moved accordingly but hurdles still remain," said Dean Turner, economist at UBS Wealth Management. "Time to thrash out the details of the deal are tight, and then there is the question of parliamentary approval."
Other analysts cautioned that trading on the financial markets was thin, leading to higher volatility and a sharp jump in some share prices. Meanwhile, another analyst said the price surges were probably due to algorithms driving the market.
Following the more confident noises coming from Brussels, London and Dublin, there were hopes that a meeting between British and EU negotiators will pave the way for a Brexit transition deal at a summit on 17-18 October.
The rally in sterling undermined the UK's export-heavy FTSE 100 stocks, and the blue chip index itself was up under 0.9%.
But shares exposed to UK growth and consumers soared. Housebuilders Persimmon, Barratt and Taylor Wimpey rose more than 10%. Next rose nearly 8.5%, and ITV more than 6%. The more UK-focussed FTSE 250 index was up more than 4%.
The yield on 10-year British government bonds was on track for its biggest three-day rise since 2017.

Friday, October 11, 2019

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

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

Thursday, October 10, 2019

BBC News - IMF boss Kristalina Georgieva warns of 'painful' Brexit

International Monetary Fund (IMF) Managing Director Kristalina GeorgievaImage copyrightAFP
Image captionBrexit will have 'spillover' effects on other economies, says IMF managing director Kristalina Georgieva
The new head of the International Monetary Fund has warned that Brexit in whatever form will be "painful", adding to the effects of a global slowdown.
Kristalina Georgieva said the split will hurt not only the UK and European Union, but also low income countries with economic ties to them.
IMF data show that growth has already slowed in almost 90% of the world.
"It is very obvious that this [Brexit] is going to be painful," she told the BBC.
Ms Georgieva said UK politicians will have to figure out how to shield people hurt by Brexit - but the options available to fund those measures are limited.
"The choices are not that many - you either borrow or you look at the [tax] increase," she said.
Ms Georgieva, who spoke to the BBC ahead of the IMF's annual meeting in Washington next week, said the IMF is also concerned about the effect of Brexit outside of the UK.
"I particularly worry about low-income countries that are in a significant way dependent on the European Union and the UK," she said.
"Unfortunately this is not great news," she said of Brexit. "And it comes at a time of compounded other factors that slow down growth."

Trade war

The US and China are locked in a trade war over state subsidies and technology theft that has led the two sides to impose tariffs on billions of dollars worth of each other's goods.
US President Donald Trump has also picked fights with allies such as Europe and Canada over cars, steel and aluminium.
The disputes have brought trade growth to a "near standstill" and hurt manufacturing and business investment, Ms Georgieva said.
In 2020, the IMF predicts that they will knock almost 1% off of global growth in 2020 - or roughly $700bn.
Goods hit by new tariffs since 2018
Image captionSince 2018, tariffs on billions of dollars worth of annual trade have been imposed
"What is most significant is that it is not the direct impacts of tariffs that are most harmful. Most harmful is the loss of confidence," Ms Georgieva said.

'Bigger loser'

The White House has said the tariffs are meant to force China to change its policies and dismissed concerns about growth, arguing that any harm to the US pales in comparison to the damage on China.
"That is not a good excuse if you can say, you know what, I'm a loser, but you're a bigger loser than me," Ms Georgieva said.
"I don't think that this is what people expect from leadership."

Wednesday, October 9, 2019

BBC News - No-deal Brexit would push UK debt to 50-year high, says think tank


Media captionGloomy post-Brexit forecasts 'accurate'
Even a "relatively benign" no-deal Brexit would push UK debt to its highest since the 1960s, the Institute for Fiscal Studies (IFS) has said.
The think tank said borrowing was likely to rise to £100bn and total debt would soar to 90% of national income.
"The government is now adrift without any effective fiscal anchor," said IFS director Paul Johnson.
The Treasury said any decisions would be made "with a view to the long-term sustainability of the public finances".

Spending rules

The gloomy forecasts are part of the IFS Green Budget, looking at the challenges facing Chancellor Sajid Javid as he prepares for his first Budget.
The IFS's Mr Johnson said: "Given the extraordinary level of uncertainty and risks facing the economy and public finances, it [the government] should not be looking to offer further permanent overall tax giveaways in any forthcoming Budget.
"In the case of a no-deal Brexit, though, it should be implementing carefully targeted and temporary tax cuts and spending increases where it can effectively support the economy."
debt chart
But even before the cost of a possible no-deal Brexit is factored in, the think tank said the government was set to break its own spending rules.
The IFS forecasts that annual borrowing - the difference between what the government spends and what it receives through, for example, taxation - will top £50bn next year.
That will be about 2.3% of gross domestic product (GDP), a measure of national income. Under current spending rules the government can only borrow up to 2% of national income.
The think tank said the government's current plans for day-to-day spending next year are closer to the levels proposed by Labour's 2017 manifesto than plans laid out by the Conservative party at the time.
An HM Treasury spokesperson said: "September's spending round supported the people's priorities of health, education and the police within the existing fiscal rules, as we said it would be.
"Beyond that, the chancellor has already said that we will be reviewing the fiscal framework as we turn the page on austerity. In so doing, we will retain a fiscal anchor to public spending so that decisions are taken with a view to the long-term sustainability of the public finances."

Growth warning

In the case of a no-deal Brexit, the IFS said a temporary government spending spree could help to smooth the path for growth, although it would also add to government debt.
The think tank forecasts that the debt stock - the total amount of money owed by the government - would climb to almost 90% of national income. It currently stands at about 80%.
Even with "substantial" government spending, the IFS expects the UK economy to flatline for two years following a no-deal Brexit.
It warned that a rise in public spending in 2020 would likely be followed by "another bust" as the government would have to deal with "the consequences of a smaller economy and higher debt for funding public services".
Mr Johnson said that it would be "crucial" that government spending programmes were temporary.
"An economy that turns out smaller than expected can, in the long run, support less public spending than expected, not more," he said.
Christian Schulz, the chief UK economist at Citi, which contributed to the report, said: "The UK economy is already around £60bn smaller than it would have been without a vote to leave the European Union, with the UK missing out on a bout of global growth.
"Business investment is up to 20% lower than it would otherwise have been, hurting productivity and wage growth," he said.
However, Mr Schulz added that a further Brexit delay would create more uncertainty, denting investment and leaving growth at around 1% a year.
"From a growth perspective, a Brexit deal is a little better, leaving growth at 1.5%, but it would leave no chance of Brexit being cancelled," he said.
"A no-deal Brexit - even with a substantial stimulus - could mean no growth at all for the next two years. Remaining in the EU would be the best scenario for economic growth in the next few years."

Tuesday, October 8, 2019

Reuters News - U.S.-China strains over Hong Kong and minority rights hinder chance of trade deal

WASHINGTON (Reuters) - Prospects for progress in U.S.-China trade talks dimmed on Monday after Washington blacklisted Chinese companies over Beijing’s treatment of predominantly Muslim ethnic minorities, and President Donald Trump said a quick trade deal was unlikely.
The move by the U.S. Commerce Department could deepen divisions between Washington and Beijing at a critical juncture in their 15-month trade war that has roiled financial markets and triggered a slowdown in the global economy.
Another flashpoint has been a widening controversy over a tweet from a U.S. National Basketball Association official. His backing of Hong Kong democracy protests was rebuked by the NBA, sparking a backlash.
Trump and his top economic adviser, Larry Kudlow, spoke in generally upbeat terms about this week’s discussions with China, the first such high-level talks in more than two months, but Trump insisted he would not be satisfied with a partial deal.
“We think there’s a chance we could do something very substantial,” Trump said, referring to minister-level talks scheduled for the end of the week. “I would much prefer a big deal and I think that’s what we’re shooting for.”
Pressed to elaborate on the chances of progress this week, Trump sounded more skeptical. “Can something happen? I guess, maybe. Who knows. But I think it’s probably unlikely,” he said.
The Chinese Communist Party’s official newspaper, People’s Daily, on Tuesday said the talks could go three ways, namely both sides reaching a “fair” deal; the talks completely falling apart; or maintaining the state of “talking while retaliating”.
“We will strive for a good outcome, but will also not force it,” the newspaper said on its official WeChat account.
The post noted recent developments showed the U.S. side has yet to give up its “maximum pressure” negotiating tactics.
It added China has made “sufficient and appropriate” response plans if the talks completely collapse, without elaborating.
Trump also said he hoped China found a humane and peaceful resolution to the protests in Hong Kong, and warned the situation had the potential to hurt trade talks.
“If anything happened bad, I think that would be a very bad thing for the negotiation. I think politically it would be very tough,” he told reporters at the White House.
Police in Hong Kong have used rubber bullets, tear gas and water cannons against pro-democracy demonstrators in the former British colony, which has been plunged into its worst political crisis in decades.
Beijing views U.S. support for pro-democracy protests in Hong Kong as interfering with its sovereignty.
FIRST HIGH-LEVEL TRADE TALKS IN MONTHS
U.S. and Chinese deputy trade negotiators on Monday launched two days of talks aimed at paving the way for the first minister-level negotiations in months.
The White House officially confirmed that the high-level talks, involving Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, would begin on Thursday.
China’s commerce ministry said Vice Premier Liu He would travel to Washington for trade talks with the United States on Thursday and Friday.
In a brief statement posted on the ministry’s website, it also said Commerce Minister Zhong Shan, central bank Governor Yi Gang, and the National Development and Reform Commission’s deputy head Ning Jizhe would attend the talks.
The talks are getting underway about a week before U.S. tariffs on $250 billion worth of Chinese goods are scheduled to rise to 30% from 25%. Trump has said the tariff increase will take effect on Oct. 15 if no progress is made in the negotiations.
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.
Trump launched a new round of tariffs after the last high-level talks in late July failed to result in agricultural purchases or yield progress on substantive issues. China quickly responded with tariff increases of its own.
As Monday’s talks got underway, the U.S. Agriculture Department reported more soybean exports to China, the latest in a recent flurry of buying by Beijing. China has booked deals for about 3.5 million tonnes of U.S. soybeans since early September.
Despite his skepticism about a likely agreement in the short term, Trump lauded what he called Beijing’s “very, very strong” purchases of U.S. agricultural products.
Kudlow told reporters the White House had formed a “study group” to examine investment issues, but said the idea of delisting Chinese firms, reported by Reuters and other media outlets last month, was “not on the table.”

TRADE BLACKLIST

Beijing had no immediate response on Monday to the Commerce Department’s addition of 28 Chinese public security bureaus and companies to the so-called Entity List, but Chinese officials have railed at previous listings of other Chinese firms such as telecommunications giant Huawei Technologies Co.
The department filing said the “entities have been implicated in human rights violations and abuses in the implementation of China’s campaign of repression, mass arbitrary detention, and high-technology surveillance against Uighurs, Kazakhs, and other members of Muslim minority groups.”
U.S. officials said the announcement was not tied to this week’s resumption of trade talks with China. Those listed are barred from buying parts and components from U.S. companies without U.S. government approval.
Meanwhile, China’s state broadcaster dropped the games of the Houston Rockets, and two Chinese corporate sponsors suspended ties, after the U.S. basketball team’s General Manager Daryl Morey tweeted: “Fight for Freedom, Stand With Hong Kong.”
He swiftly deleted the tweet and apologized to fans in China, where the Rockets have a large following.
U.S. lawmakers expressed anger at the NBA for calling the remarks “inappropriate”, and blasted the league for what they saw as a willingness to allow China to censor free speech for the sake of profit.
Additional reporting by Makini Brice; Additional reporting by Munsif Vengattil; Yawen Chen in Beijing; Editing by Dan Grebler, Rosalba O'Brien & Simon Cameron-Moore