Market news

Japan’s leading index fell to the lowest level in nearly a decade in August, preliminary data from the Cabinet Office showed on Monday.

The leading index, which measures the future economic activity, fell to 91.7 in August from 93.7 in July. That was in line with economists’ expectations.

The latest index was the lowest since November 2009, when the reading was 90.5.

The coincident index that reflects the current economic activity decreased to 99.3 in August from 99.7 in the preceding month. Economists had forecast a score of 99.4.

The lagging index rose to 104.7 in August, same as seen in the prior month. […]

China has added more than 100 tons of gold to its reserves since it resumed buying in December, reinforcing its standing as one of the major official accumulators as central banks stock up on the precious metal.

The People’s Bank of China picked up more gold last month, raising holdings to 62.64 million ounces in September from 62.45 million in August, according to data on its website. In tonnage terms, the latest inflow totals 5.9 tons, and follows the addition of about 99.8 tons over the prior nine months.

Bullion hit the highest level in more than six years in early September as slower global growth, the trade war and interest rate cuts spurred investor demand. Central banks have been major buyers this year, too, especially in emerging markets. Those official purchases will likely continue as protectionist policies and geopolitical concerns add to demand, according Suki Cooper, precious metals analyst at Standard Chartered Bank.

While a 10th straight month of accumulation marks a steady buying pattern for the PBOC, China has in the past gone for long periods without disclosing moves in gold holdings. When the central bank announced a 57% jump in reserves to 53.3 million ounces in mid-2015, it was the first update in six years.

Spot gold rose as much as 0.4% to $1,511.31 an ounce on Monday and traded at $1,507.58 in early Asian trade. While prices dropped 3.2% in September, they are still up nearly 18% this year. […]

SHANGHAI (Reuters) – Asian shares rose on Tuesday, lifted by gains in China and as auto firms climbed on merger news, but broad uncertainties over trade and economic growth kept investor enthusiasm in check.

European equity markets were expected to open higher. In early European trade, pan-region Euro Stoxx 50 futures were up 0.39% at 3,365, German DAX futures were up 0.39% at 12,112, FTSE futures were up 0.5% at 7,299.5, and France’s CAC 40 futures were up 0.41% at 5,319.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.38%, and U.S. S&P 500 e-mini futures rose 0.22% to 2,837.25, pointing to gains when U.S. markets reopen on Tuesday after a holiday.

Despite the day’s gains, Joanne Goh, Asia equity strategist at DBS in Singapore, said broad market sentiment remained uncertain ahead of a possible meeting between the Chinese and U.S. presidents at the G20 summit next month.

“There’s still a lack of direction in the markets in terms of all the different asset classes,” she said.

“You actually see Chinese bond yields are ticking up, but that shouldn’t be the case because we are expecting stimulus and bond yields should start to come off…there’s quite a lot of uncertainty in the markets right now.”

Chinese blue-chips climbed 0.61% a day after data showed Chinese industrial firms’ profits shrank in April, which could prompt more government stimulus to support the slowing economy.

A planned increase in the weighting of Chinese A-shares in MSCI indexes after the market close later on Tuesday also boosted shares.Seoul’s KOSPI added 0.37%, while Australian shares gained 0.45%. Japan’s Nikkei stock index finished 0.37% higher.

In China’s debt markets, 10-year government bond futures for September delivery, the most-traded contract, rebounded 0.34% on Tuesday having dropped as much as 0.71% the day before, after China’s takeover of a troubled bank sparked concerns of wider financial risks.

“With economic indicators mixed and trade war risks lingering, the bias is still tilted towards loose monetary policy to cushion growth. We think that the rise in longer-term (Chinese) govvie…yields is probably not warranted,” DBS analysts said in a note.

The equity market gains in Asia followed a relatively light session in Europe on Monday, with UK and U.S. financial markets closed for holidays.

European auto shares had rallied after Italian-American carmaker Fiat Chrysler confirmed it had made a “transformative merger” proposal to French peer Renault in a deal that would create the world’s third-biggest carmaker. That sector rally spilled into Asia with Mitsubishi Motors Corp in Japan adding 5.95% and Nissan Motor Co gaining 2.31%.

Shares in Hong Kong-listed Geely Automobile Holdings Ltd jumped 5.47%.​ Provisional results from EU elections also buoyed markets after pro-union parties kept a firm grip on power in elections to the European Parliament. The pan-European STOXX 600 added 0.22%.

“Although Eurosceptic and anti-establishment parties didn’t win as many seats as expected, their influence has increased significantly. This could have implications for the political color of key EU positions,” said Rodrigo Catril, senior FX strategist at National Australia Bank.

“The Parliament composition is also likely to have implications on the priority agenda for future EU reform, particularly with respect to things like immigration, fiscal spending and fiscal union,” he added, noting a decrease in bond yields pointed to continued risk aversion.

The yield on benchmark 10-year German Bunds fell to -0.147% on Monday, its lowest since September 2016.

On Tuesday, U.S. yields were also lower. Benchmark 10-year Treasury notes yielded 2.3097%. The two-year yield touched 2.1724%.

Trade worries remain high on investors’ list of concerns. U.S. President Donald Trump said on Monday that Washington was not ready to make a deal with Beijing but he expected one in the future, while at the same time pressing Japanese Prime Minister Shinzo Abe to even out a trade imbalance with the United States.

The dollar was flat against the yen at 109.50, and fell 0.13% against the euro, with the common currency buying $1.1182.

The dollar index, which tracks the greenback against a basket of six major rivals, was 0.17% higher at 97.782.

In commodity markets, oil prices extended gains after rising more than 1% on Monday on tensions in the Middle East and OPEC-led supply cuts, as well as continuing Russian supply disruptions after a contamination problem discovered last month.

Brent crude 0.29% higher at $70.31 per barrel, having earlier dipped below the $70 mark, and U.S. West Texas Intermediate crude added 1.16% to $59.31 per barrel.

Spot gold was down 0.12% at $1,283.30 per ounce.

Bitcoin, which on Monday touched $8,939.18, its highest in more than a year, was down 0.55% at $8,722.61. The cryptocurrency topped $8,000 for the first time since July 2018 on May 13.

TOKYO (Reuters) – Japan rolled out the red carpet for U.S. President Donald Trump this week, winning Tokyo a brief respite in its trade battle with Washington, but Prime Minister Shinzo Abe faces pressure to deliver concessions after a summer election.

Trump on Tuesday wound up a four-day state visit featuring golf, sumo, a state dinner with Emperor Naruhito and inspections of U.S. and Japanese warships meant to showcase the alliance, but shadowed by a feud over the two-way trade gap.

After his Monday summit with Abe, Trump had said he expected the allies to be “announcing some things, probably in August, that will be very good for both countries” on trade.

On Tuesday, however, Japanese Economy Minister Toshimitsu Motegi said the U.S. leader’s comment probably reflected his hope for quick progress in the trade talks.

“When you look at the exact wording of his comments, you can see that the president was voicing his hopes of swift progress in talks toward something that is mutually beneficial,” Motegi told reporters at a regular cabinet meeting.

Concessions on trade before an upper house election in July could upset Japanese voters, especially farmers, who are important backers of Abe’s Liberal Democratic Party, although consumers might welcome cheaper food products.

Japanese officials have denied that the two countries had agreed to reach a trade deal by August.

Opposition parties said Japanese farmers would be in the line of fire after the poll, adding that Trump had said “agriculture and beef were heavily in play” on Twitter on Sunday.

“Trump’s comments can only be taken to mean that Japan has in fact made major concessions on agriculture and livestock,” Yukio Edano, head of the opposition Constitutional Democratic Party of Japan (CDPJ) told a news conference this week.

“We cannot allow them to fight the upper house election by hiding this,” Japanese media quoted Edano as saying.

NO TIMETABLE FOR TALKS
Washington wants Tokyo to cut tariffs on U.S. farm products to restore their competitiveness after Trump shunned an 11-nation Pacific trade pact. Japan has signaled it might cut the levies to levels in the Trans-Pacific Trade Partnership (TPP).

Some experts saw Trump’s remark that he had “nothing to do” with TPP as suggesting he wanted deeper cuts, while Motegi stressed the two countries had agreed in a September deal that market access steps, or tariff cuts, for farm goods would not exceed those of Japan’s other deals, such as TPP.

Trump has also declared that some imported vehicles and parts posed a national security threat but delayed a decision on imposing tariffs for as long as six months, allowing more time for trade talks with Japan and the European Union.

Japan opposes any limits on its exports, which would violate World Trade Organization rules.

Motegi, who is in charge of trade talks, said his meeting in Tokyo last week with U.S. Trade Representative Robert Lighthizer made clear differences remain, but no timetable has been set for further talks.

Some diplomatic experts said Abe had probably got the best results he could hope for, despite worries over trade and other policies, such as North Korea’s nuclear and missile programs.

“You cannot embrace this President with nuance. If you are going to do it, you might as well embrace him fully,” said Toshihiro Nakayama, a Japan fellow at the Wilson Center in Washington.

“Overall, I would say that it was a successful ceremonial event. What more can you expect?”

SINGAPORE/BEIJING (Reuters) – A tanker carrying Iranian fuel oil in violation of U.S. sanctions has unloaded the cargo into storage tanks near the Chinese city of Zhoushan, according to ship tracking data on Refinitiv Eikon.

The discharging of the nearly 130,000 tonnes of Iranian fuel oil onboard the tanker, the Marshal Z, confirmed by a representative of the oil storage terminal, marks the end of an odyssey for the cargo that began four months ago.

Reuters reported on March 20 that some Iranian fuel oil had managed to evade the United States’ sanctions on petroleum exports by using ship-to-ship transfers involving four different ships, including the Marshal Z, and by using forged documents that masked the cargoes as originating from Iraq.

A second representative from the terminal operator, Zhoushan Jinrun Petroleum Transfer Co, said the cargo could not be Iranian oil, as the terminal had not received official shipments from Iran in at least the past four years. Both Jinrun representatives declined to be identified because of the sensitivity of the matter.

The unloading of the fuel oil comes less than two weeks after U.S. President Donald Trump’s administration stepped up moves to choke off Iran’s oil exports by scrapping waivers it had granted to big buyers of the country’s crude oil including China.

Refined products like fuel oil, mainly used to power ship engines and generate electricity, were not covered by the temporary waivers granted on the sanctions reintroduced in November 2018 as Washington seeks to pressure Iran into abandoning its nuclear and missile programs.

Reuters followed the movements of the Marshal Z since January using ship-tracking data available daily except when the ship was in deep waters and out of range of satellites.

From March 22 until arriving at the Jinrun terminal on the island of Liuheng on May 8, the vessel maintained a constant draught – how deep the ship sits in the water – of 15.9 meters (52 feet), according to the tracking data. That indicated the cargo was not discharged before reaching the terminal, about 30 km (18 miles) south of Zhoushan, near Shanghai.

Jinrun, owned by Herun Group, offers bonded storage at the terminal, according to its website, meaning that fuel can be stored there without clearing Chinese customs and officially entering the country. Herun officials referred questions back to Jinrun.

On May 12, the ship finished unloading the fuel oil as indicated by a change in its draught to 9 meters, and left the terminal, the tracking data showed. The vessel is headed for the waters just outside Singapore, set to arrive on May 21, the data showed.

FROM MALAYSIA TO CHINA
The Marshal Z took on the cargo from a larger tanker off the coast of the United Arab Emirates in January. It transferred the fuel oil to a second tanker, the Libya, off the Malaysian port of Malacca later that month, the ship-tracking data showed.

But potential buyers wary of the U.S. sanctions steered clear of the Marshal Z’s cargo. By March 22, the Marshal Z took the fuel oil back from the Libya and anchored off the Malaysian and Singaporean coasts.

The vessel lingered off Singapore and Malaysia in March and April, the ship tracking data shows, before sailing to Hong Kong and finally to Liuheng island, off the eastern Chinese province of Zhejiang.

“Transparency has been the thorn in the Marshal Z’s hull for quite some time now and owing to the issues regarding the alleged origin of her cargo nobody has been able to touch it,” said Matt Stanley, an oil broker at StarFuels in Dubai.

Reuters was unable to determine the financial terms surrounding the cargo’s unloading, but industry participants said it would likely have been on offer at a lower price to ensure a sale.

“Somebody in China decided that the steep discount this cargo most likely availed … was a bargain too good to miss,” said StarFuels broker Stanley.

Reuters was unable to confirm who purchased the fuel oil cargo carried by the Marshal Z.

Reuters has not been able to determine the owners of the Marshal Z. According to a shipbroker report dated Jan. 28, the tanker was sold to an undisclosed buyer and intended for use as floating storage.

MCALLEN, Texas (Reuters) – Reuters photos taken on Wednesday show adults and children outside the U.S. Border Patrol station for migrants in McAllen, Texas, sleeping on the ground and rigging up makeshift awnings with reflective blankets to shelter from the sun.

The photos, taken from a helicopter, also show people sleeping in a shaded area of a parking lot and crowded around a military tent.

The ground temperature was about 89 Fahrenheit (32 Celsius) when the pictures were taken around midday.

U.S. Customs and Border Protection (CBP) spokesman Richard Pauza referred to testimony by U.S. Border Patrol chief Carla Provost when asked for comment. The Border Patrol is the law enforcement arm of the CBP.

During her May 8 testimony to a U.S. Senate committee, Provost said the agency faced an “unprecedented border security and humanitarian crisis” as Central American migrant families headed north and apprehension numbers went “off the charts.”

U.S. border officers apprehended nearly 99,000 people crossing the U.S. southern border in April, the highest monthly figure since 2007, Provost said.

EMERGENCY FUNDING
According to the Border Patrol website, McAllen Station is responsible for patrolling a 53-mile (85 km) section of the Rio Grande that runs along the U.S.-Mexican border.

“From what we’ve seen at McAllen, people are sleeping on rocks and stones, and without shelter,” said Erika Andiola, chief advocacy officer at the Refugee and Immigrant Center for Education and Legal Services (RAICES), which provides legal services to migrants.

The Border Patrol did not immediately respond to a specific question on why migrants were being held in makeshift conditions by the McAllen Border Patrol station.

The Trump administration on May 1 asked Congress for $4.5 billion in immediate emergency funding, saying a surge in Central American children and families claiming asylum at the U.S. southern border had drained government resources.

The money would come on top of the funding President Donald Trump has redirected to make good on a central pledge of his 2016 election campaign – to build a border wall – ahead of his looming 2020 presidential race.

The emergency funding request would represent a 44% increase in spending for programs that house, feed, transport and oversee record numbers of Central American families seeking asylum, fleeing poverty and violence in their home countries, and straining capacity at migrant shelters in border cities.

This month, the federal government spent $37 million erecting two new temporary shelters in El Paso and Donna, Texas to deal with the crisis.

A number of small border towns have declared emergencies in hopes of receiving government assistance to deal with migrants being diverted to their communities.

BEIJING (Reuters) – China is running out of options to hit back at the United States without hurting its own interests, as Washington intensifies pressure on Beijing to correct trade imbalances in a challenge to China’s state-led economic model.

China said this week it would impose higher tariffs on most U.S. imports on a revised $60 billion target list. That’s a much shorter list compared with the $200 billion of Chinese products on which Washington has hiked tariffs.

Washington has also turned up the heat on other fronts, from targeting China’s tech firms such as Huawei and ZTE to sending warships through the strategic Taiwan Strait.

As the pressure mounts, Chinese leaders are pressing ahead to seal a deal and avoid a drawn-out trade war that risks stalling China’s long-term economic development, according to people familiar with their thinking.

But Beijing is mindful of a possible nationalistic backlash if it is seen as conceding too much to Washington.

Agreeing to U.S. demands to end subsidies and tax breaks for state-owned firms and strategic sectors would also overturn China’s state-led economic model and weaken the Communist Party’s grip on the economy, they said.

“We still have ammunition but we may not use all of it,” said a policy insider, declining to be identified due to the sensitivity of the matter.

“The purpose is to reach a deal acceptable to both sides.”

The State Council Information Office, finance ministry and commerce ministry did not immediately respond to Reuters’ requests for comment.

Of the retaliatory options available to China, none come without potential risks.

RESTRICTING U.S. IMPORTS
Since July last year, China has cumulatively imposed additional retaliatory tariffs of up to 25 percent on about $110 billion of U.S. goods.

Based on 2018 U.S. Census Bureau trade data, China would only have about $10 billion of U.S. products, such as crude oil and big aircraft, left to levy duties on in retaliation for any future U.S. tariffs.

In contrast, U.S. President Donald Trump is threatening tariffs on a further $300 billion of Chinese goods.

The only other items Beijing could tax would be imports of U.S. services. The United States had a services trade surplus with China of $40.5 billion in 2018.

But China does not have as much leverage over the United States as it might seem because large parts of that surplus are in tourism and education, areas that would be more difficult for the Chinese government to significantly roll back, James Green, a senior adviser at McLarty Associates, told Reuters.

China is more likely to further erect non-tariff barriers on U.S. goods, such as delaying regulatory approvals for agricultural products, said Green, who until August was the top U.S. Trade Representative official at the embassy in Beijing.

HURTING U.S. FIRMS
Trade analysts say China could reward other global companies at the expense of U.S. firms, replacing for example Boeing planes with Airbus jets where possible.

But there is considerable risk for China in transitioning its retaliation from tariffs to non-tariffs barriers on U.S. companies because doing so would intensify perceptions of an uneven playing field in China and incentivise some firms to shift sourcing or investment outside the country, they say.

Trump has called for U.S. firms to move production back to the United States.

“The medium- to long-term ramifications on supply chains are being deeply underestimated. I would be severely concerned if I was China,” Robert Lawrence, a nonresident senior fellow at the Peterson Institute for International Economics, recently told journalists in Beijing, where a group from the think-tank met with senior Chinese officials.

After trade negotiations hit a wall last week and led to the imposition of new tariffs, Chinese state media has stepped up nationalist rhetoric, vowing that China won’t be bullied.

But analysts say Beijing, at least for the time being, is trying to keep the trade war from seeping into the larger political arena.

“I don’t think they see that as in their interests, and are worried that anti-Americanism becomes anti-regime very quickly,” said Green.

DEVALUING THE YUAN
A weaker yuan could help mitigate the impact on China’s exports from higher U.S. tariffs, but any sharp yuan depreciation could spur capital flight, analysts say.

Chinese leaders have repeatedly said they will not resort to yuan depreciation to boost exports, and the central bank has said it will not use the currency as a tool to cope with trade frictions.

The yuan has lost just over 2 percent against the dollar so far this month as the trade war intensifies, but analysts said the depreciation is likely to be market-driven.

DUMPING U.S. TREASURIES
Investors are concerned that China, which is the largest foreign U.S. creditor, may dump Treasury bonds and send U.S. borrowing costs higher to punish the Trump administration.

But most analysts say such an action by China is unlikely as it risks starting a fire sale that would burn its own portfolio too.

China’s massive Treasury holdings totaled $1.131 trillion in February, according to the latest U.S. data.

CIRCUMVENTING THE U.S.
The near-term shock to China’s economy from higher U.S. tariffs could be mitigated by increased policy stimulus to spur domestic demand.

Chinese exporters are diversifying overseas sales, helped in part by Beijing’s Belt and Road initiative to recreate the old Silk Road.

To meet its demand for raw materials, China is also seeking alternative overseas suppliers.

Chinese purchases of U.S. soybeans – once China’s biggest import item from the United States – came to a virtual halt after Beijing slapped 25% tariffs on U.S. shipments last year.

Beijing has since scooped up soybeans from Brazil.

LONDON (Reuters) – Iran has officially stopped some commitments under a 2015 nuclear deal with world powers following an order from its national security council, an informed official in the country’s atomic energy body told the ISNA news agency on Wednesday.

Last week, Iran notified China, France, Germany, Russia and the United Kingdom of its decision to halt some commitments under the nuclear deal, a year after the United States unilaterally withdrew from the accord and re-imposed sanctions.

Under the nuclear deal, Tehran was allowed to produce low-enriched uranium with a 300-kg limit, and produce heavy water with a stock capped around 130 tonnes. Tehran could ship the excess amounts out of the country for storage or sale.

The official said Iran has no limit from now for production of enriched uranium and heavy water.

Iran’s initial moves do not appear to violate the nuclear deal yet. But Iran has warned that unless the world powers protect Iran’s economy from U.S. sanctions within 60 days, Iran would start enriching uranium at higher level.

The European Union and the foreign ministers of Germany, France and Britain said they were still committed to the deal but would not accept ultimatums from Tehran.

The deal also caps the level of purity to which Iran can enrich uranium at 3.67 percent, far below the 90 percent of weapons grade. It is also well below the 20 percent level to which Iran enriched uranium before the deal.

Iranian Supreme Leader Ayatollah Ali Khamenei said on Tuesday that Tehran does not seek war with the United States despite mounting tensions between the two arch-enemies over Iranian nuclear capabilities and its missile program.

Khamenei also said Tehran would not negotiate with the United States on another nuclear deal.

LONDON (Reuters) – British Prime Minister Theresa May will launch another push next month to approve Britain’s exit from the European Union before the summer break, setting a new deadline for her Brexit plan and a potential timetable for her own departure.

Nearly three years after the United Kingdom voted 52% to 48% to leave the EU, politicians still disagree about when, how or even if the divorce will take place.

Brexit had been due to take place on March 29, but May was unable to get her divorce deal ratified by parliament, which rejected the so-called Withdrawal Agreement three times, and now the date is set for Oct. 31.

In a change of tack, her spokesman said she was now planning to put forward a Withdrawal Agreement Bill, which implements the terms of Britain’s departure, in the week beginning June 3 to try to secure Brexit before lawmakers go on summer holiday.

“It is imperative we do so then if the UK is to leave the EU before the summer parliamentary recess,” the spokesman said after May met opposition Labour leader Jeremy Corbyn as part of talks to secure his party’s support for the bill.

“We will therefore be bringing forward the Withdrawal Agreement Bill in the week beginning the 3rd June,” he said, citing the same week as U.S. President Donald Trump’s state visit to Britain.

But Corbyn, whose negotiating team has been holding talks with government ministers for more than four weeks to find a way to break the deadlock in parliament, raised doubts over whether Labour could back the Withdrawal Bill.

“In particular he raised doubts over the credibility of government commitments, following statements by Conservative MPs (members of parliament) and cabinet ministers seeking to replace the prime minister,” his spokesman said.

By restarting the process to get parliamentary approval for a deal she agreed with the EU in November, May is also trying to signal to her own party that she will honour her promise to step down as leader when the agreement is passed.

May, who secured the Conservative Party leadership and the premiership in the chaos that followed Britain’s 2016 vote to leave the EU, is under pressure from some of her own lawmakers to set a date for her departure.

U.S. investment bank JP Morgan said on Tuesday it was difficult to see May surviving beyond the end of June.

DELAYS
As positions harden in parliament, with many wanting to either leave the EU without a deal or to stop Brexit altogether, May has turned to Labour, led by Corbyn, a veteran socialist, to negotiate a way to break the impasse.

Despite opposition from some in her party, senior ministers agreed at a cabinet meeting earlier to press ahead with the talks, May’s spokesman said.

“Ministers involved in the negotiations set out details of the compromises which the government was prepared to consider in order to consider an agreement which would allow the UK to leave the EU with a deal as soon as possible,” the spokesman said.

“However, it was agreed that it is imperative to bring forward the Withdrawal Agreement Bill in time for it to receive royal assent by the summer parliamentary recess.”

Parliament usually breaks for the summer in the second half of July, although the exact date has not been set.

But both May and Corbyn are under pressure from their own parties not to give too much away in the talks.

On Monday, Labour lawmakers demanded that Corbyn clarify his Brexit stance at a meeting with Labour lawmakers on Monday, with backers of a second Brexit referendum and others who want a deal to leave arguing their case, sources told Reuters.

May is under pressure not to give in to Corbyn’s demand to agree to a customs union with the EU after Brexit.

Thirteen of May’s former cabinet colleagues as well as Graham Brady, chairman of the 1922 Committee of Conservative lawmakers, wrote to May on Tuesday to ask her not to agree to Labour’s demand for a post-Brexit customs union with the EU.

“You would have lost the loyal middle of the Conservative Party, split our party and with likely nothing to show for it,” the letter said. “We urge you to think again.”

“No leader can bind his or her successor so the deal would likely be at best temporary, at worst illusory,” said the letter, whose signatories included Gavin Williamson, who was sacked as defence minister this month, and former Foreign Minister Boris Johnson.