Reuters News - Rethink on Trump hits dollar and world stocks

By John Geddie | LONDON

The U.S. dollar headed for its worst start to a year since 2008 on Tuesday while world stock losses, already the biggest in six weeks, grew after widespread protests against President Donald Trump's stringent curbs on travel to the United States.

Investors' hopes for a fiscal boost to the world's largest economy under Trump have been tempered by controversial and protectionist policies that have seen him suspend travel to the United States from seven Muslim-majority countries.

Thousands took to the streets of major U.S. cities to oppose the travel ban, which also halts refugee arrivals, while marches in Britain added to pressure on Prime Minister Theresa May to cancel a planned state visit by Trump.

A stream of U.S. policymakers and business executives have also slammed Trump's stance.

The dollar edged down against a basket of six major currencies .DXY, on track for a 1.9 percent fall this month - its worst start to the year since the financial crisis.

MSCI's gauge of the world's 46 stock markets .MIWD00000PUS lost a further 0.1 percent on Tuesday, adding to a 0.6 percent fall on Monday which was its largest loss in a month and a half.

"His actions over the last few days is another reminder that there were two sides to his campaign and Trump is just as adamant to follow through on those measures that will likely weigh on market sentiment in the coming months," said Craig Erlam, senior market analyst at OANDA.

Euro zone government bond yields edged higher as better-than-expected French and Spanish January inflation data set the tone for a bloc-wide reading due at 1000 GMT.

Economists polled by Reuters expect an annualized 1.6 percent rise in consumer prices for the euro zone as a whole. Preliminary economic growth data also due at 1000 GMT is expected to come in at 1.7 percent.

European bourses clawed back some ground after big losses on Monday after strong results from the likes of British online supermarket Ocado (OCDO.L).

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.6 percent while Japan's Nikkei .N225 dropped 1.7 percent, its biggest fall in almost three months.

On Monday, the U.S. S&P 500 Index .SPX fell 0.6 percent, its biggest fall in a month, though it remained well above levels seen before the Nov. 8 presidential election.

Most stock markets remained up on the month, supported by signs of accelerating momentum in the global economy and lingering hopes of large fiscal stimulus from Trump.

MSCI's ex-Japan Asian shares index was up 5.7 percent this month while its index of world markets was up 2.5 percent. They were also higher than their levels before the U.S. election.

But the mood has soured in recent sessions, especially on Monday when Trump fired the federal government's top lawyer after she took the extraordinarily rare step of defying the White House over the travel ban.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets

DOLLAR DOOM

Against the yen, the dollar fell a further 0.3 percent to 113.49 yen JPY=. It is down 3.1 percent so far this month, after three straight months of sizable gains.

The Japanese currency showed no reaction after the Bank of Japan kept policy on hold, as expected. A string of recent data has suggested the economy is slowly regaining traction.

The euro EUR= edged up to $1.0725, consolidating after a rebound this month from a 14-year low of $1.0340 set on Jan. 3.

In a possible sign of increased anxiety among investors, the safe-haven Swiss franc strengthened to a seven-month high of 1.0637 franc per euro EURCHF= on Monday.

Elevated uncertainty about Trump's policies, including a lack of detail so far on his plans for tax cuts and fiscal spending, offset optimism on the U.S. economy.

Data on Monday showed U.S. consumer spending accelerated in December while inflation showed some signs of picking up last month.

The core PCE price index, the Federal Reserve's preferred inflation measure, rose 1.7 percent on a year-on-year basis after a similar gain in November.

"We've seen a jump in U.S. economic sentiment after Trump's victory. But the improvement in hard economic data remains moderate," said Haruka Kazama, senior economist at Mizuho Research Institute.

"And if Trump takes more steps to limit permits for immigrants, that would surely boost inflation as the U.S. is now near a full employment."

The Federal Reserve, which starts its two-day policy meeting on Tuesday, is widely expected to keep interest rates unchanged as it awaits greater clarity on Trump's economic policies.

Oil prices dipped as rising U.S. drilling activity offset efforts by OPEC and other producers to cut output in a move to prop up the market.

Brent crude futures LCOc1, the international benchmark for oil prices, were trading at $55.14 per barrel, down 0.2 percent from Monday's settlement price.

(Additional reporting by Hideyuki Sano in Tokyo; Editing by Catherine Evans)

BBC News - UK economy grows by 0.6% in fourth quarter

Strong consumer spending helped the UK's economy to grow faster than expected at the end of last year.

The economy grew by 0.6% in the October-to-December period, the same rate as in the previous two quarters, according to an initial estimate from the Office for National Statistics.

The figure indicates that the feared economic slowdown following the Brexit vote has not materialised.

For 2016 as whole, the economy grew by 2%, down from 2.2% in 2015.

"Strong consumer spending supported the expansion of the dominant services sector," said ONS statistician Darren Morgan.

"Although manufacturing bounced back from a weaker third quarter - both it and construction remained broadly unchanged over the year as a whole."

The quarterly growth figure was slightly better than the 0.5% rate most economists had expected.

The dominant services sector - which accounts for about three-quarters of the UK economy - grew by by 0.8% in the quarter, helped by growth in the distribution, hotels and restaurant industry.

Retail sales and travel agencies also supported growth in this sector, the ONS said.

The figures also showed that the construction industry grew by 0.1% and agriculture by 0.4%, while industrial production was unchanged.

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Kamal Ahmed, BBC economics editor

After another set of economic figures stronger than expected, is this economic pain cancelled, or simply postponed?

On that central issue rests the fate of the government's economic policy.

If it is pain cancelled that means better real incomes for voters.

It means higher tax receipts for the government, lower levels of borrowing and more leeway to spend money on public services.

And, of course, confidence tends to beget confidence.

'Challenges' ahead

This is the first estimate of the size of the economy in the fourth quarter of the year. At least two more will follow.

The ONS points out that the data on which the first estimate is based is less than half the total amount it has access to by the time of the third estimate.

Lee Hopley, chief economist of the manufacturers' lobby group, EEF, said: "While services continued to drive the economy forward at the end of last year, manufacturing output also made a small positive contribution, as growth ended the year on a solid note."

However, she added that "challenges abound for forecasters in 2017"

"Consumers won't be ramping up spending thanks to rising inflation and sluggish wage growth, and businesses' appetite to sign off big investments will depend on how they view the progress of Brexit negotiations.

"There's every chance that this rate of expansion is the high point for the next couple of years."

That view was echoed by Rain Newton-Smith, chief economist at the CBI business lobby group.

"2017 will see headwinds to growth building, as higher inflation eats into households' buying power and investment wanes," he said.

BBC News - US GDP misses forecast with final quarter rise of 1.9%

The US economy grew at an annual pace of 1.9% in the fourth quarter of last year, according to official figures.

That was slower than the 2.2% growth rate economists had been expecting and below third quarter growth of 3.5%.

For the year, GDP rose by 1.6%, the slowest since 2011 and down on 2015 when the world's largest economy expanded by 2.6%.

President Donald Trump has promised to lift GDP growth to 4%, through tax cuts and infrastructure spending.

The last time that America's economy grew at that rate was in 2000, the year of the dotcom boom, when it expanded by 4.1%.

While consumer spending rose in the quarter between October to December, the US Commerce Department said there had been a slowdown in exports and an increase in imports.

Friday's figure is the first estimate of economic growth and is based on incomplete data. An updated estimate will be released on 26 February.

A fall in soybean exports hit fourth quarter growth

Nancy Curtin, chief investment officer at Close Brothers Asset Management, said the data highlighted how the heightened political climate in the US and Europe had "put a pinch on US growth".

She added: "Growth in jobs and the economy are the primary concerns of the new US administration and the levels of growth which have been talked about are very optimistic.

Although she cautioned: "With the president less than one week in office and with key global trade agreements, including with the UK, still yet to be decided, it will be a while before we start to see the true impact of Trumponomics."

Market optimism

However, Paul Ashworth, chief US economist at Capital Economics, said the slowdown was not a cause for alarm because the final half of the year was heavily influenced by a temporary swing in exports.

In the third quarter there had been a spike in soybean exports which was not repeated in the final three months of the year. He said: "We would be wary of reading too much into the slowdown in GDP growth."

Optimism about Mr Trump's economic policies has fuelled a rise on the stock market, which this week sent the Dow Jones Industrial Average through 20,000 for the first time.

Full year growth of 1.6% places the US behind the UK, which this week reported that GDP rose by 2% last year. UK output also grew ahead of Germany, the so-called engine room of the European economy, which expanded by 1.9% last year.

UK Prime Minister Theresa May is meeting Mr Trump on Friday, where post-Brexit trade opportunities are expected to be discussed.

The UK cannot negotiate trade deals with other countries until it leaves the European Union, but Mr Trump has said he wants a "quick" deal after that.

Bloomberg News - Israeli Cybersecurity Industry Grows as Global Threats Multiply

Investments in Israel’s cybersecurity industry jumped 9 percent in 2016, a year when the world suffered a successful cyberattack on a national power grid, a massive e-mail leak that may have altered U.S. elections, and an $81 million central bank heist, according to a new report from Start-Up Nation Central.

According to figures based on the non-profit’s data platform and tech industry database PitchBook, 365 Israeli cybersecurity companies raised a total of $581 million in 2016, about 15 percent of all capital raised by the industry globally. About a quarter of the 65 Israeli cyber start-ups founded last year have already succeeded in raising funds, the report said. The report was released ahead of next week’s Cybertech Tel Aviv 2017 conference.

Prime Minister Benjamin Netanyahu often touts cyber tech as a growth engine for the Israeli economy. The new research suggests the country’s cyber industry is maintaining its status as a global leader, drawing on expertise and experience gleaned from the country’s elite military intelligence forces.  

“Israel is at the forefront of innovation in cybersecurity” as entrepreneurs who completed their mandatory military service “uniquely bring their cyberwarfare and cyberintelligence expertise to the commercial sector,” said Avivah Litan, a vice president and analyst at Gartner Research.

Joint Research

Check Point Software Technologies Ltd., a pioneer of network firewalls, is a leader in its field, as is CyberArk Software Ltd., which focuses on privileged-account security within corporate networks. Both companies are Israeli.

Last month, the U.S. approved legislation that will expand joint cyber research with Israel. The stakes are high: The global cyber security market will grow to more than $200 billion by 2021 from $122 billion last year, according to the MarketsandMarkets research firm. 

Multinationals also are expanding their presence in Israel, as Huawei Technologies Co.acquired HexaTier Ltd. and Volkswagen AG started Cymotive, a security solution for connected cars, in a joint venture with a former head of Israel’s General Security Service. 

More than one-third of funding for Israeli cyber companies came from corporations last year, up from one quarter in 2015, according to the report. Investors included Deutsche Telecom Capital Partners and Singtel Innov8 Pte., as well as the venture arm of Israeli military security company Raphael Advanced Defense Systems Ltd.

Global Player

Israel needs to capitalize on that advantage to make the local industry into a significant global player, said Yoav Tzurya, a partner at Jerusalem Venture Partners.

“There’s no doubt that Israel’s competitive advantage in cyber stems from the military, but the question is if this advantage is being exploited to its fullest,” Tzurya said in a phone interview. “The answer is no.”

He said the country should develop and pursue some sort of framework that would allow soldiers to build their own companies while contributing to national security.

“To build an industry that will draw more money and grow, we need to create a wide pipeline,” said Tzurya, who runs Jerusalem Venture Partners’s Cyber Labs in the southern city of Beersheba.

Fewer Exits

Even as investment grew last year, exits fell by one quarter in number and about 50 percent in value terms. The report says that shows companies are choosing to take more time to grow rather than allowing themselves to be acquired for relatively small amounts.

As more start-ups exit innovation hubs, their products are seen as safer investments and they’re able to skip seed rounds. As a result, the industry saw an unprecedented 32 A rounds last year, and average funding at that stage grew 44 percent to $9 million, from $6.3 million in 2015, the report said.

“If you look at the number of later rounds, it shows companies are going for another cycle of maturity and not running off to be bought,” said Guy Hilton, chief marketing officer at Start-Up Nation Central.

by 

Gwen Ackerman

BBC News - Government borrowing falls in December

Government borrowing fell by £0.4bn in December to £6.9bn, compared with 2015.

The figures, from the Office for National Statistics, means borrowing for the year is £63.8bn, £10.6bn lower than for the same period a year ago.

The last Autumn Statement indicated that the government would borrow £68bn over the full financial year to the end of April.

The government typically receives more money than it spends in January, when a high number of tax bills are paid.

The ONS revised the borrowing figure for November down from £12.6bn to £11.3bn, which will help the Chancellor, Phillip Hammond, to keep to the Autumn Statement target.

However, even if he meets it, the total will still represent about 3.5% of economic output.

Budget balancing

A spokesman for the Treasury said the government had made "significant progress in repairing the public finances" by pushing down the deficit from 10% of GDP six years ago to 4%.

Later on Tuesday, Mr Hammond will present an updated Charter for Budget Responsibility, setting out his new fiscal rules to bring the public finances back to balance.

The government has abandoned the previous chancellor's aim of balancing the budget by 2020.

"The continued, albeit modest, monthly declines in public sector borrowing are encouraging and mean that the government remains on course to meet the [Office for Budget Responsibility]'s forecast for 2016-17, as set out in the Autumn Statement," said Suren Thiru, head of economics at the British Chambers of Commerce.

"The UK's fiscal position, which was weakened significantly by the financial crisis, is likely to come under increasing pressure in the near term if UK economic growth weakens as expected.

"A slowing economy would further restrict the UK's capacity to collect enough tax revenue to consistently achieve deficit reduction in the coming years."

Reuters News - After U.S. exit, Asian nations try to save TPP trade deal

Australia and New Zealand said on Tuesday they hope to salvage the Trans-Pacific Partnership (TPP) by encouraging China and other Asian countries to join the trade pact after U.S. President Donald Trump kept a promise to abandon the accord.

The TPP, which the United States had signed but not ratified, was a pillar of former U.S. President Barack Obama's policy to pivot to Asia.

Japanese Prime Minister Shinzo Abe has touted it as an engine of economic reform, as well as a counter-weight to a rising China, which is not a TPP member.

Fulfilling a campaign pledge, Trump signed an executive order in the Oval Office on Monday pulling the United States out of the 2015 TPP agreement and distancing the United States from its Asian allies.

Australian Prime Minister Malcolm Turnbull said he had held discussions with Abe, New Zealand Prime Minister Bill English and Singapore Prime Minister Lee Hsien Loong overnight about the possibility of proceeding without the United States.

"Losing the United States from the TPP is a big loss, there is no question about that," Turnbull told reporters in Canberra on Tuesday. "But we are not about to walk away ... certainly there is potential for China to join the TPP."

In Beijing, Foreign Ministry spokeswoman Hua Chunying did not say directly whether China would be interested in joining the TPP but that at a time of economic uncertainly the Asia-Pacific should make its own contributions to growth with openness.

"We think that in the present situation, no matter what happens, all should keep going down the path of open, inclusive, continuous development, seeking cooperation and win-win," Hua told a daily news briefing.

Obama had framed the TPP without China in an effort to write Asia's trade rules before Beijing could, establishing U.S. economic leadership in the region as part of his "pivot to Asia".

China has proposed a counter pact, the Free Trade Area of the Asia Pacific (FTAAP) and has championed the Southeast Asian-backed Regional Comprehensive Economic Partnership (RCEP).

Hua said efforts on FTAAP should be stepped up, adding China hoped talks on RCEP could be concluded at an early date.

MEETINGS PLANNED

New Zealand's English said the United States was ceding influence to China and the region's focus could switch to alternative trade deals.

"We've got this RCEP agreement with Southeast Asia, which up until now has been on a bit of a slow burn, but we might find the political will for that to pick up if TPP isn't going to proceed," English said.

Malaysia's trade minister said negotiators from the remaining TPP countries would be in "constant communication" to decide the best way forward.

"Notwithstanding the current position of the new U.S. administration on (TPP), we will continue to engage with our American colleagues to strengthen our bilateral trade and economic relations, given the U.S.’s importance as our third-largest trading partner and a major source of investment," Mustapa Mohamed said in a statement.

The TTP, which has been five years in the making, requires ratification by at least six countries accounting for 85 percent of the combined gross domestic product of the member nations.

Australia held open the possibility of China, the world's top exporter, joining a revised deal.

"The original architecture was to enable other countries to join," Australian Trade Minister Steven Ciobo told the Australian Broadcasting Corporation on Tuesday.

"Certainly I know that Indonesia has expressed interest and there would be scope for China if we are able to reformulate it."

Japan has led the push for the partnership, which includes Brunei, Canada, Chile, Malaysia, Mexico, Peru and Vietnam.

"There is no change to our view that free trade is the source of economic growth," Japanese Economy Minister Nobuteru Ishihara told reporters.

When asked whether Japan would be open to negotiating a bilateral trade pact with the United States, Ishihara said it was uncertain whether U.S. trade officials would start such negotiations.

Japanese Deputy Chief Cabinet Secretary Koichi Hagiuda said separately that Japan was not considering moves with other TPP members based on a lack of U.S. involvement.

"As Prime Minister Abe has made clear, TPP without the United States is meaningless and the balance of interests would crumble," he told a news conference, adding Japan would keep explaining the benefits of the pact for America.

Abe had made TPP a core of his economic growth policies and along with the Obama administration, viewed it as strategically vital in the face of a rising China

Trump took office on Friday and pledged to end what he called an "American carnage" of rusted factories and crime. He vowed to bring jobs back by renegotiating what he called bad multilateral trade deals in favor of bilateral ones.

New Zealand Trade Minister Todd McClay said he had talked with a number of TPP-member ministers at the World Economic Forum in Davos last week and he expected they would meet in coming months.

"The agreement still has value as a FTA (Free Trade Agreement) with the other countries involved," McClay said in an emailed statement to Reuters.

(Additional reporting by Swati Pandey in SYDNEY, Ami Miyazaki and Linda Sieg in TOKYO, Liz Lee in KUALA LUMPUR and Ben Blanchard in BEIJING; Editing by Lincoln Feast, Robert Birsel)

BBC News - Theresa May to promise to take action for British industry

Prime Minister Theresa May is to unveil a new, more interventionist, industrial strategy on Monday, designed to boost the post-Brexit UK economy.

The government will be "stepping up to a new, active role", Mrs May said.

She will launch the new strategy at her first regional cabinet meeting, to be held in the north-west of England.

Broadband, transport and energy are highlighted in a bid to "align central government infrastructure investment with local growth priorities".

The 10-point plan involves:

• Investing in science, research and innovation
• Developing skills
• Upgrading infrastructure
• Supporting business to start and grow
• Improving government procurement
• Encouraging trade and inward investment
• Delivering affordable energy and clean growth
• Cultivating world-leading sectors
• Driving growth across the whole country
• Creating the right institutions to bring together sectors and places

A green paper will set out ways the government can provide support to businesses by addressing regulatory barriers, agreeing trade deals and helping to establish institutions that encourage innovation and skills development.

Mrs May also plans to boost STEM (science, technology, engineering and maths) skills, digital skills and numeracy, including extending specialist maths schools, while £170m will be invested in creating new institutes of technology.

Business leaders welcomed the plan, which also aims to boost life sciences and low-emission vehicles.

'Landmark opportunity'

Smart energy, robotics, artificial intelligence and 5G mobile network technology are some of the areas that could receive support through a new Industrial Strategy Challenge Fund, according to Downing Street.

The fund is part of £4.7bn in additional funding for research and development first announced in November.

Business Secretary Greg Clark told the BBC that the government was staging a "consultation on what should be our priorities for a long-term industrial strategy".

He said the UK had some of the best universities in the world, but people had not had the alternative to learn practical skills.

"For many years, we have not been as good on technical education as our competitors," he said.

Welcoming the new strategy, the director-general of the CBI, Carolyn Fairbairn, said: "It must help fix the country's productivity problems and remove the regional inequalities that have dogged our country for generations, having a positive impact on living standards, wages and the future opportunities of many people."

Business will get a chance to consult on the industrial strategy proposals. The Institute of Directors said the strategy must concentrate on skills and infrastructure, not cash injections.

"It is painful to watch established businesses fail, but the government should be very sceptical of its power to keep struggling companies going through cash payments," said James Sproule, director of policy at the IoD.

"Instead, the focus should be on retraining anyone who becomes unemployed, so that communities can adapt to changes in the economy."

'Too little'

But Labour's shadow business secretary, Clive Lewis, questioned how much money the government was investing in the strategy: "We await further detail, but what's been announced so far will fall far short of getting us back to where we were in 2010, let alone equip our economy for the challenges of the 21st Century."

The government has stated its aim of reducing the UK economy's reliance on the services sector, especially financial services, over the past few years, leading to former Chancellor George Osborne's plans to create a Northern Powerhouse.

The challenge has come into greater focus as the UK faces negotiating a new economic relationship with the European Union.

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Analysis: Simon Jack, BBC business editor

If we have learnt anything about "Mayism" it's that she doesn't think the benefits of business success will percolate through the country without a bit of a push from government.

Her business minister, Greg Clark, is also no believer in total freedom of the market. Today's industrial strategy is an attempt to lend a helping hand without having both on the steering wheel.

The best way to do that, thinks the government, is to provide something that just about everyone agrees is needed and provide it in a location-appropriate way to sectors where we are already pretty successful.

Bloomberg News - S. Africa Scrambles as $10.3 Billion in Welfare Threatened

South Africa’s government, set to miss a deadline to appoint a new distributor of welfare grants worth about $10.3 billion a year to more than 17 million people, asked aspirant bidders to an information session as the end of a contract with Net 1 UEPS Technologies Inc. looms.

The South African Social Security Agency, which oversees the monthly payment system, took the first step toward appointing a new distributor at the session in Pretoria on Jan. 13. It’s likely to take several more months to choose a winner, which will then have to put the necessary payment systems in place. The South African Post Office said it plans to bid.

“The tender briefing was about a request for information,” Kgomotso Diseko, a spokesman for the agency, said by by phone. “Some of the content we are just finalizing and then we will issue a statement. We are not ready yet” to select a bidder.

While the Constitutional Court ruled in November 2013 that the process of awarding the contract to Net 1, which expires at the end of March, was flawed and the tender should be issued afresh, the process was delayed by legal wrangling. The welfare system has helped bolster support for the ruling African National Congress and interrupting the payment of the grants -- the only form of income for many poor families -- could spark protests and wouldn’t be politically palatable.

Sassa has said it won’t be ready to take over the distribution itself.

Barclays Africa Group Ltd. declined to comment on whether it was bidding for the contract, while Standard Bank Group Ltd., Nedbank Group Ltd. and FirstRand Ltd.’s First National Bank, the country’s other biggest lenders, didn’t immediately respond to questions. The Post Office said it’s best-placed to distribute grants.

“We have the largest footprint by far and the reach in rural areas,” said Mark Barnes, the Post Office’s chief executive officer, who attended the Jan 13 briefing. “There will be a transition period for a new service provider to take over. I think July or August would be a realistic timeline. It could even be awarded to multiple service providers, but it should include the Post Office.”

Net 1 Chief Executive Officer Serge Belamant wasn’t available to comment and didn’t immediately respond to e-mailed questions. Lumka Oliphant, a spokeswoman for Social Development Minister Bathabile Dlamini, didn’t answer her mobile phone. If need be, the Net 1 contract will be extended, the Social Development Department said in December.

The Democratic Alliance, the main opposition party, said Dlamini had intentionally stalled the bid process and that the livelihood of some of the country’s poorest people was being placed at risk.

“There is still no clarity as to who will perform this crucial task,” Lindy Wilson, the DA’s shadow deputy minister for social development, said in an e-mailed statement. The minister “should stop the pretense, come clean and admit that her department and the South African Social Security Agency have already renewed their invalid multi-billion rand contract with Net 1.”