Friday, February 15, 2019

BBC News - US-China trade talks break up without deal

This photo taken on July 19, 2018 shows a worker monitoring a soybean oil production line at the Hopeful Grain and Oil Group factory in Sanhe, in China's northern Hebei province.Image copyrightGETTY IMAGES
Trade talks between the US and China have broken up without a deal, with the US warning that "very difficult issues" remain unresolved.
The talks in China this week were aimed at securing a new deal before further US tariffs are imposed on 1 March.
China said negotiations would now continue in the US next week.
"We feel that we have to make headway on some very, very important and very difficult issues," said top US trade negotiator Robert Lighthizer.
However, he said he was "hopeful" of progress.
President Xi Jinping said he hoped talks next week would "continue to work hard to promote a mutually beneficial and win-win agreement."
The two countries have been locked in an escalating trade war, imposing duties on billions of dollars worth of one another's goods.
In December, both countries agreed to halt new tariffs for 90 days to allow for talks.
The US has said it will increase tariff rates on $200bn worth of Chinese imports from 10% to 25% if the two sides do not strike a deal by 1 March.
But President Trump recently hinted that this deadline could be extended if they are making good progress in negotiations with China.

Could a trade deal be imminent?

By Andrew Walker, BBC World Service economics correspondent
It's a relatively optimistic tone from officials on both sides and at very senior levels too: President Xi himself for China and two US Cabinet level figures, in the shape of the Treasury Secretary and the US Trade Representative.
Talks to continue in Washington next week. So is (trade) peace imminent?
That would be a rash assumption to make. We have had warm words before and the big ask from the US side is difficult for China.
The next stage in China's economic development really does need technology and they will not easily agree to give up the practice of expecting foreign investors to share theirs.
That said, a willingness to continue talking as soon as next week, does suggest some reason for hope.

What has caused the fallout between the US and China?

Washington is pressing Beijing to make changes to its economic policies, which it says unfairly favour domestic companies through subsidies and other support.
The US has also accused the government of supporting technology theft as part of its broader development strategy. It wants to bring down its large trade deficit with the Asian powerhouse and wants China to buy more US goods.
China has proposed to increase purchases of US goods, such as semiconductors and soybeans, but is unlikely to let up on its economic development model, according to media reports.
There is also a sense among some in China that the US is using the trade war to contain its rise, as the two superpowers jostle for global leadership.
Countries elsewhere have also become wary of China's rise. Several governments have blocked telecoms companies from using equipment made by Huawei, the Chinese telecoms giant, in next-generation 5G mobile networks due to security concerns.

What has happened in the trade war so far?

The US has imposed tariffs on $250bn worth of Chinese goods, and China has retaliated by imposing duties on $110bn of US products.

Mr Trump has also threatened further tariffs on an additional $267bn worth of Chinese products - which would see virtually all of Chinese imports into the US become subject to these tariffs.
US and China's tariffs against each other

Thursday, February 14, 2019

Bloomberg News - U.S. Stock Futures Erase Gain, Dollar Dips on Data: Markets Wrap

by Todd White
U.S. equity futures erased a gain, Treasuries extended their advance and the dollar turned lower after American data including retail sales and jobless claims disappointed. European stocks were flat as investors digested a slew of company earnings.
Contracts on the Dow Jones Industrial Index, S&P 500 and Nasdaq all traded little changed after poor data, including the worst drop for retail sales in nine years, added to signs that U.S. economic growth is cooling from prior quarters. Coca-Cola fell in pre-market trading after results showed it sold fewer drinks in the Americas in the fourth quarter.
Food and industrial-goods shares had spurred the Stoxx Europe 600 Index amid a slew of company news, but it tracked the move of U.S. futures. Equity benchmarks drifted in Japan, China and Australia, and ticked lower in Hong Kong. European core sovereign bonds rose and the single currency strengthened after data showed the euro region’s biggest economy stagnated in the fourth quarter, but dodged recession.
GermanyĆ¢€™s economy stagnated in the fourth quarter of 2018
Germany’s economy stagnated in the fourth quarter of 2018
Earlier shares had gained on reports President Donald Trump is considering pushing back the deadline for imposition of higher tariffs on Chinese imports by 60 days, as the world’s two-biggest economies try to negotiate a solution to their trade dispute. Trump also told reporters that trade talks are making good progress, helping to steady investor sentiment.
Elsewhere, emerging-market shares and currencies fell. Russia’s 10-year bonds dropped the most since since November after the U.S. Senate introduced sanctions legislation targeting the country’s banks and state debt.
Oil continued its rebound as falling shipments from Saudi Arabia and Venezuela outweighed gains in U.S. crude stockpiles. And the pound weakened while gilts advanced ahead of Parliament’s latest set of voteson Theresa May’s Brexit strategy, and after dovish remarks from a Bank of England policy maker.
Here are some key events coming up:
  • Steven Mnuchin and Robert Lighthizer are in Beijing for high-level talks, and will meet China President Xi Jinping on Friday, the South China Morning Post reported.
  • The U.K. Parliament, with less than two months before its deadline to leave the European Union, votes on alternatives to Prime Minister Theresa May’s defeated Brexit legislation.
  • U.S. Congress is close to voting on legislation to avert another partial government shutdown, with the Friday deadline quickly approaching.
These are the main moves in markets:

Stocks

  • The Stoxx Europe 600 Index rose 0.1 percent as of 8:46 a.m. New York time.
  • Futures on the S&P 500 Index fell less than 0.05 percent.
  • The MSCI World Index of developed countries increased less than 0.05 percent to the highest in more than 10 weeks.
  • The MSCI Asia Pacific Index fell less than 0.05 percent.

Currencies

  • The Bloomberg Dollar Spot Index fell 0.1 percent.
  • The euro rose 0.3 percent to $1.13.
  • The British pound fell 0.2 percent to $1.2816.
  • The Australian dollar rose 0.3 percent to the strongest in more than a week.
  • The MSCI Emerging Markets Currency Index sank 0.4 percent to the lowest in three weeks on the largest decrease in two months.

Bonds

  • The yield on 10-year Treasuries sank five basis points to 2.65 percent.
  • Germany’s 10-year yield fell three basis points to 0.09 percent.
  • Japan’s 10-year yield fell one basis point to -0.014 percent.

Commodities

  • Gold climbed 0.4 percent to $1,311.40 an ounce, the largest increase in more than two weeks.
  • West Texas Intermediate crude rose 0.2 percent to $54.00 a barrel.
  • Arabica coffee fell 0.8 percent to $1.01 a pound.
  • LME copper increased 0.6 percent to $6,160.50 per metric ton.
— With assistance by Andrew Dunn, April Ma, and Adam Haigh
(An earlier version corrected direction of share move in first paragraph.)

Wednesday, February 13, 2019

BBC News - Brexit doubts leave firms 'hung out to dry'

Payment in a coffee shopImage copyrightGETTY IMAGES
UK firms have accused the government of leaving them "hung out to dry" in the event of a no-deal Brexit.
With less than 50 days until 29 March when the UK is due to leave the EU, the British Chambers of Commerce (BCC) says 20 key questions remain unresolved.
How to move skilled staff between the UK and EU, which rules to follow, and what trade deals will be in place are all still unknown, the BCC says.
The government said it was focused on getting approval for its Brexit deal.
"The best way to support our economy, protect jobs and provide certainty for businesses and individuals as we leave is to back the deal we have agreed with the EU.
"We are focused on securing the necessary changes to ensure the deal passes through Parliament," a government spokesman said,
Theresa May is currently seeking changes to her Brexit deal with the EU after it was emphatically rejected last month, in the largest defeat ever for a sitting government.
The prime minister needs to get a deal approved by Parliament by 29 March to avoid a no-deal Brexit. In that case, in the countries where the UK had no formal trade agreement, both would have to trade under the rules overseen by the World Trade Organization (WTO).
Under this system, every WTO member is free to negotiate its own tariffs - or taxes - on different goods. But under the rules, members have to offer the same tariff to every other WTO country.
The UK has signed "continuity agreements", which mean there will be no disruption to trade, with Switzerland, Chile, The Faroe Islands and Eastern and Southern Africa. That means free trade agreements currently in place between the EU and those countries will apply to the UK after Brexit.
Mutual recognition agreements - where a product lawfully sold in one country can be sold in another - have also been signed with Australia and New Zealand.
Labour has accused Mrs May of "cynically" running down the clock. It claims the prime minister is planning to delay the final, binding vote on the withdrawal deal she has agreed with the EU until the last possible moment, so that MPs will be faced with a stark choice between her deal and no deal.

'Stifling investment'

The BCC - which represents thousands of firms - says its members are "hugely concerned" that the UK is not prepared for all eventualities.
The business lobby group also warned that the lack of clarity over what will happen had already "stifled investment and growth".
"There is a very real risk that a lack of clear, actionable information from government will leave firms, their people and their communities hung out to dry," said BCC director general Adam Marshall.
Mr Marshall said firms remained "in the dark" over crucial issues including contracts and customs tariffs.
"Businesses need answers they can base decisions on, no matter the outcome," he added.
Mark CarneyImage copyrightPA
Image captionThe Bank of England governor has urged MPs to solve the current Brexit impasse
The BCC has published the list of 20 questions firms want answered. They include whether firms will be able to fly people and goods between the UK and EU after the end of March and whether there will be any import tariffs.
The business group's warning comes after Bank of England governor Mark Carney earlier urged MPs to solve the current Brexit impasse.
Mr Carney warned a no-deal Brexit would create an "economic shock" at a time when China's economy is slowing and trade tensions are rising.
"It is in the interests of everyone, arguably everywhere" that a Brexit solution is found, he said.
Earlier this week, official figures showed that the UK economy had expanded at its lowest annual rate in six years last year, with many economists blaming Brexit for the slowdown.

Tuesday, February 12, 2019

Reuters News - Stocks buoyed by deal to avert U.S. government shutdown

by Hideyuki Sano
TOKYO (Reuters) - Asian shares gained on Tuesday as investors hoped a new round of U.S.-China trade talks would help to resolve a dispute that has dented global growth and some corporate earnings.

Market sentiment also got a boost on news U.S. lawmakers had reached a tentative deal on border security funding that could help avert another partial government shutdown due to start on Saturday. Congressional aides, however, said it did not contain the $5.7 billion President Donald Trump wants for a border wall.
S&P 500 e-mini futures were up nearly 0.5 percent.
Spreadbetters expected European stocks to track Asia and open higher, with Britain’s FTSE gaining 0.25 percent and Germany’s DAX and France’s CAC each adding 0.5 percent.
MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.3 percent.
The Shanghai Composite Index rose 0.35 percent, South Korea’s KOSPI climbed 0.6 percent and Australian shares were up 0.3 percent.
Japan’s Nikkei advanced 2.6 percent after a market holiday on Monday, lifted by a weaker yen.
U.S. and Chinese officials expressed hopes the new round of talks, which began in Beijing on Monday, would bring them closer to easing their months-long trade war.
Beijing and Washington are trying to hammer out a deal before a March 1 deadline, without which U.S. tariffs on $200 billion worth of Chinese imports are scheduled to increase to 25 percent from 10 percent.
“There will be no winner in a trade war. So at some point they will likely strike a deal,” said Mutsumi Kagawa, chief global strategist at Rakuten Securities in Tokyo.
The trade dispute has already started to impact global growth, hitting businesses confidence, factory activity and disrupting supply chains. The worry is that a protracted Sino-U.S. tariff row could severely hurt corporate earnings globally.
Analysts are now expecting U.S. corporate earnings for the current quarter to drop 0.2 percent from last year, which would be the first contraction since the second quarter of 2016.
In the currency market, the dollar held firm, having gained for eight straight sessions against a basket of six major currencies until Monday, its longest rally in two years.
Although the Federal Reserve’s dovish turn dented the dollar earlier this year, some analysts noted the U.S. currency still has the highest yield among major peers and that the Fed continues to shrink its balance sheet.
“We see the dollar’s strength essentially stemming from the Fed’s balance sheet reduction,” said Makoto Noji, chief currency and foreign bond strategist at SMBC Nikko Securities.
Growing evidence of a loss of momentum in the global economy has also lifted the U.S. currency, most recently led by the European Commission’s downgrade of growth in Europe, making the dollar a better investment option by default.
The dollar index rose to its highest in almost three months, at 97.123, on Monday. It last stood at 97.055.
In contrast, the euro dropped to as low as $1.1267, its weakest in 2-1/2 months, and last traded at $1.1277.
The dollar popped up to a six-week high of 110.65 yen.
Oil prices ticked up after falls on Monday as traders weighed support from OPEC-led supply restraint and a slowdown in the global economy.
U.S. crude futures traded at $52.68 per barrel, up 0.5 percent. Brent crude rose 0.6 percent to $61.89 per barrel.
Additional reporting by Shinichi Saoshiro in Tokyo; Editing by Richard Borsuk and Jacqueline Wong

Monday, February 11, 2019

BBC News - Austerity to continue unless Hammond spends, says IFS

Philip HammondImage copyrightREUTERS
Image captionChancellor Philip Hammond is due to unveil his Spring Statement next month
Philip Hammond must spend billions extra to end austerity, says think tank the Institute for Fiscal Studies (IFS).
To maintain per capita spending across government departments that do not have ring-fenced budgets, he must find an extra £5bn a year by 2023, it adds.
And maintaining spending on unprotected services as a share of national income would require £11bn on top of spending plans set out in the 2018 Budget.
The Treasury says long-term funding decisions will be made later this year.

Population growth

In its analysis, the IFS said spending increases already promised by the chancellor would be swallowed up by commitments to fund the NHS, defence and international aid.
That could mean cuts in other areas, IFS director Paul Johnson told the BBC's Today programme.
"[Unless he finds the money] we will continue to see cuts in some departments at least as a fraction of national income, and don't forget the scale of the cuts up to now really has been extraordinary historically.
"We've had £40bn of cuts to department spending and cuts of 30% and 40% to some budget items. So even if he even if he stops cutting, it's still not going to feel great in a lot of areas."
NHS hospitalImage copyrightGETTY IMAGES
Image captionThe Treasury says health is the "number one spending priority"
But a Treasury spokesman said public investment would hit peaks not seen since 1979.
"The chancellor has said that the Spending Review will take place in 2019, and that is the right moment for government to make long term funding decisions," he said.
"We have made clear that health is our number one spending priority by announcing a five-year settlement which will provide an extra £34bn a year for the NHS by 2023-24.
"Outside the NHS, total day-to-day departmental spending is now set to grow in line with inflation, and public investment will reach levels not sustained in 40 years in this parliament. "

Stimulus package?

Meanwhile, the IFS said a no-deal Brexit would mean lower growth, requiring either spending cuts or higher taxes.
And it said in the short term the government might need to borrow more to fund a stimulus package to mitigate the impacts for the hardest-hit areas of the economy.
But Mr Johnson said any spending boost to spending would be temporary.
"Obviously if there is some kind of no-deal Brexit that is going to be bad for the economy both in the short run and in the long run, there will be less money around.
"[The chancellor] can probably put a bit more money in [in the short run], but in the long run that is going to mean several more years of austerity to row back from that initial expansion."

'Brutal'

Shadow chancellor John McDonnell said: "The evidence is mounting that despite Theresa May's rhetoric, austerity is not over.
"Unless Philip Hammond, at the very least, finds another £5bn at the Spring Statement, departments will be planning for yet more cuts next year.
"Nine years of brutal Tory austerity have wounded our public services and the whole country which relies on them."

Friday, February 8, 2019

BBC News - Bank forecasts worst year for UK since 2009

By Ben Morris
The Bank of England expects growth this year to be the slowest since 2009 when the economy was in recession.
It is forecasting growth of 1.2% this year, down from its previous forecast of 1.7% made in November.
The Bank said it had seen further evidence that businesses were being cautious in the run-up to Brexit, including evidence from its own survey of firms.
As expected the Bank kept interest rates on hold at 0.75%.
The Bank put the fall in growth down to a decline in business investment and housebuilding, as well as a halving of the growth rate in exports.
The UK was also being hit by slower-than-expected growth in the eurozone and China, the Bank said in its Quarterly Inflation Report.
"Growth appears to have slowed at the end of 2018 and is expected to remain subdued in the near term," it said.
The Bank even sees a one-in-four chance of the economy slipping into recession in the second half of this year.

What did the Bank say about Brexit?

There has been an "intensification" of Brexit uncertainties, the Bank said.
Its survey of 208 firms showed that half had started putting plans in place for a no-deal Brexit. The survey also showed that a fifth had taken on extra warehouse space
It also noted a sharp fall in business investment at the end of last year.
"Uncertainty appears to have risen recently, and may have weighed on investment by more than had been expected in August," the Bank said.
Bank of England Governor Mark Carney said: "The fog of Brexit is causing short term volatility in the economic data, and more fundamentally, it is creating a series of tensions in the economy, tensions for business."
GDP growth graphic

When will interest rates rise?

Interest rates remain at 0.75%, where they have been since the Bank of England last raised in interest rates in August.
Many economists think that once the uncertainty over Brexit is lifted then the economy will accelerate and the Bank will have to raise interest rates to stop it overheating.
However, recent economic data has indicated weakness in the UK economy. Growth in the service sector, the biggest part of the economy, appeared to have stalled in January, according to closely-watched survey of purchasing managers.
Interest rates
Samuel Tombs, an economist at Pantheon Macroeconomics, predicts that the Bank will raise rates once this year and twice in 2020.
Paul Dales, chief UK economist at Capital Economics, said: "We still think that a decent rebound in GDP growth, should a Brexit deal be reached, will result in interest rates rising further than the Bank and the financial markets assume."

What effect is all this having on mortgage rates?

Moves in interest rates are important to the 3.5 million people with variable or tracker mortgages. Even a small rise of 0.25% can add hundreds of pounds to their annual mortgage costs.
"It's a very good time for people looking to borrow," said Andrew Montlake, a director at Coreco, a mortgage broker.
He said there had been a lot of competition among lenders in January, with some very good deals for five-year fixed mortgage deals. Some lenders are offering five-year fixed deals at below 2%, he said.
Concern over Brexit has held back some people from borrowing. "There is a lot of pent-up demand," said Mr Montlake.
Savers who depend on higher interest rates to boost their incomes will be disappointed that rates have stayed on hold for a sixth consecutive month.

Is the Brexit uncertainty hitting jobs?

While the Bank cut its growth forecast it also noted the strength of the labour market, where the unemployment rate is currently 4%.
The rate at which people are switching to new jobs is only slightly below the level hit before the financial crisis of 2007.
That switching suggests that employers are having to compete to attract staff, the Bank said.
It also noted a pick-up in the average number of hours worked at the end of last year and firmer wage growth.

What does it all mean for our wages?

The Bank thinks that wage growth will increase in the coming years as the UK's unemployment rate continues to fall.
The main reason the Bank thinks underlying inflation pressures will grow is that wage growth will rise.
Britain's unemployment rate has hit its lowest level in more than 40 years.
The Bank predicts that earnings will rise by more than 3% a year over the next three years.