Market news

(Reuters) – European shares edged higher in quiet trading on Monday, with bank stocks leading the gains, as Sino-U.S. trade optimism and strong Chinese economic data eased some worries over the global economy.

By 0932 GMT, the pan-European STOXX 600 index was up 0.1 percent, hovering near eight-month highs. The banks-heavy Italian and Spanish indices led the gains.

Mark Taylor, sales trader at Mirabaud Global Thematic Group in London, said banking stocks could be rising due to “U.S. and German yield curves starting to move off their lows”.

JPMorgan handily beating quarterly profit estimates on Friday and kickstarting the U.S. corporate earnings season on a strong note could be another factor helping banks, Taylor said.

“It’s very quiet Monday. Apart from a few earnings catalysts through the week, it looks like people are just largely sitting on the sidelines,” he said.

Asian shares began the week with a positive tone after U.S. Treasury Secretary Steven Mnuchin said on Saturday he hoped that the United States and China were close to the final round of negotiations.

Adding to trade relief, Reuters reported that U.S. negotiators had tempered demands that China curb industrial subsidies as a condition for a deal after strong resistance from Beijing.

Compass Group was among the biggest weights on London’s blue-chip index after Barclays downgraded shares of the world’s largest caterer to “equal-weight”.

Dragging down the euro zone blue chips index was pressured by Finland’s Nokia, down about 3 percent, after Goldman Sachs downgraded the stock to “sell”.

Nestle, trading without entitlement to its latest dividend pay-out, dragged down the food & beverages index down 0.4 percent and pulled the Swiss SMI index into the red.

EXPANDING OUTPUT
London-listed shares of Rio Tinto weighed down basic resources sector. The mining major announced plans to invest an extra $302 million to develop its Resolution copper project in the U.S. state of Arizona, as it looks to expands output to meet the lucrative market for new energy vehicles.

Rio Tinto is due to release its production data for the March quarter later in the week.

Publicis gained 3.4 percent even as the French advertising group said it would pay $4.4 billion to acquire Alliance Data’s Epsilon marketing unit, expanding its digital business and North American footprint.

Among top performers was Norsk Hydro up 4.7 percent as the company’s alumina refinery in Brazil, Alunorte, and Brazilian public prosecutors jointly petitioned a federal court to lift a production embargo.

Daimler slipped on a report that Germany’s motor vehicle authority KBA was investigating the carmaker on suspicion that 60,000 Mercedes cars were fitted with software aimed at tricking emissions tests. A spokesman for Daimler, owner of Mercedes-Benz, said the carmaker was reviewing the facts and fully cooperating with the KBA.

Italian media group Mediaset and its German rival ProSiebenSat.1 Media rose on merger speculation, even after both companies denied they were in talks.

Vivendi gained after the French media conglomerate posted higher first-quarter revenue and said it was making progress on the planned sale of up to 50 percent of its UMG music arm.

LONDON (Reuters) – Talks between the British government and the opposition Labour Party to find consensus over a Brexit plan are more constructive than people think, Britain’s Foreign Secretary Jeremy Hunt said on Monday.

“Talks we are having with Labour are detailed and I think more constructive than people have thought,” Hunt told BBC radio. “They are more detailed and more constructive than people had been expecting on both sides. But we don’t know if they are going to work.”

Meetings between ministers and their opposite numbers from Labour are due to continue this week, Cabinet Office minister David Lidington said on Sunday.

WASHINGTON (Reuters) – President Donald Trump said on Sunday that actions by the U.S. Federal Reserve have nicked U.S. economic growth and stock market gains by perhaps 30 percent, and that it should begin pumping money into the economy as it did during the 2007-2009 recession.

Trump’s latest broadside against the central bank, delivered by Twitter and without citing any evidence, came as European Central Bank head Mario Draghi and other international officials worried that a Fed politicized by potential Trump nominees would rattle a dollar-based global system.

“If the Fed had done its job properly, which it has not, the Stock Market would have been up 5000 to 10,000 additional points, and GDP would have been well over 4 percent instead of 3 percent…with almost no inflation,” Trump said.

“Quantitative tightening was a killer, should have done the exact opposite,” he said, referring to the Fed’s monthly withdrawal last year of up to $50 billion of the bonds it acquired during the worst economic downturn since the 1930s Great Depression.

Trump’s suggestion the Fed return to quantitative easing would put the central bank in the position of adding monetary stimulus and expanding its presence in debt markets in an economy growing solidly and with historically low unemployment.

No one at the Fed, including three Trump appointees on the board of governors and Trump’s handpicked chairman, Jerome Powell, has suggested the U.S. needs the sort of central bank help launched when the economy was in freefall a decade ago, according to minutes of recent Fed meetings.

The Fed has already decided to halt the drawdown of its security holdings as of September after concluding that the size of its asset holdings, likely around $3.5 trillion by that point, would be adequate given the demand by commercial banks to hold central bank reserves, the public demand for cash, and the other uses to which its assets are put.

The Fed raised interest rates four times in 2018, but also has put that process on hold, leaving the target policy rate at a range of between 2.25 and 2.5 percent, still below historical averages.

Trump was angered last fall when a variety of economic risks, which analysts say included slowing growth abroad, Trump’s own trade policies, and communications missteps by Powell, contributed to a more than 20 percent drop in the Dow Jones Industrial Average from October through December.

That loss has been almost completely erased as the Fed shifted gears, and the Dow is now just about 1.5 percent below the record it set on Oct. 3.

Trump remains peeved with Powell, and indicated he wants to name two political allies, economics commentator Stephen Moore and businessman Herman Cain, to fill two open seats on the Fed’s board of governors.

WASHINGTON/BEIJING (Reuters) – U.S. negotiators have tempered demands that China curb industrial subsidies as a condition for a trade deal after strong resistance from Beijing, according to two sources briefed on discussions, marking a retreat on a core U.S. objective for the trade talks.

The world’s two biggest economies are nine months into a trade war that has cost billions of dollars, roiled financial markets and upended supply chains.

U.S. President Donald Trump’s administration has slapped tariffs on $250 billion worth of imports of Chinese goods to press demands for an end to policies – including industrial subsidies – that Washington says hurt U.S. companies competing with Chinese firms. China responded with its own tit-for-tat tariffs on U.S. goods.

The issue of industrial subsidies is thorny because they are intertwined with the Chinese government’s industrial policy. Beijing grants subsidies and tax breaks to state-owned firms and to sectors seen as strategic for long-term development. Chinese President Xi Jinping has strengthened the state’s role in parts of the economy.

In the push to secure a deal in the next month or so, U.S. negotiators have become resigned to securing less than they would like on curbing those subsidies and are focused instead on other areas where they consider demands are more achievable, the sources said.

Those include ending forced technology transfers, improving intellectual property protection and widening access to China’s markets, the sources said. China has already given ground on those issues.

“It’s not that there won’t be some language on it, but it is not going to be very detailed or specific,” one source familiar with the talks said in reference to the subsidies issue.

A representative for the White House referred Reuters to the U.S. Trade Representative’s Office, which did not respond to a request for comment.

“If U.S. negotiators define success as changing the way China’s economy operates, that will never happen,” said the other source with knowledge of the trade talks.

“A deal that makes Xi look weak is not a worthwhile deal for Xi. Whatever deal we get, it’s going to be better than what we’ve had, and it’s not going to be sufficient for some people. But that’s politics,” that source said.

China pledged earlier this year to end market-distorting subsidies for its domestic industries but offered no details on how it would achieve that goal, three people familiar with the trade talks told Reuters in February.

MIXED MESSAGES
One of the key sticking points in the negotiations is the removal of the $250 billion in U.S. tariffs. It is broadly expected in the trade community that U.S. negotiators want to keep some tariffs on Chinese goods, which Washington sees as retaliation for the years of damage done to its economy by Beijing’s unfair trade practices.

The role of the state firms may benefit the United States in another part of the trade deal. The Trump administration wants China to make big-ticket purchases of over a trillion dollars of U.S. goods in the next six years to reduce its trade surplus. The companies likely to make the purchases are the state-run firms, both sources said.

“The purchasing, for example, reinforces the role of the state sector because the purchasing is all being done through state enterprises,” one of the sources said.

Another point of contention between the two countries, telecommunications, may drive China to increase the state’s role rather than reduce it, the source said.

Pressure from the United States on allies to reduce cooperation with Chinese telecommunications champions such as Huawei Technologies could push the government into raising state support to develop technology at home.

DECADES OF FRICTION
Subsidies and tax breaks have been a source of friction between the two countries for years.

Washington says Beijing has failed to comply with its World Trade Organization obligations on subsidies that affect both imports and exports.

China has taken steps to address some U.S. concerns in cases brought before the WTO. It has also begun to publicly downplay its push to dominate the future of high-tech industries under its “Made in China 2025” policy, although few expect it to jettison those ambitions.

But the USTR complains of a catalog of other subsidies and supports, including preferential access to capital and land.

The United States says China has failed to disclose subsidies as required by the WTO. Washington has detailed more than 500 different subsidies it says China applies in notifications to the WTO.

The scope of China’s local government subsidy programs is largely unknown, and even the Chinese negotiators have said in recent discussions they do not know the details of all those programs.

“China continues to shield massive sub-central government subsidies from the scrutiny of WTO members,” the USTR said in a February 2019 report to Congress on China’s WTO compliance.

(Reuters) – The United States approved nearly 40 percent more oil and gas drilling permits on public lands in 2018 than it did the previous year thanks to an automated online system introduced in the waning days of the Obama administration, helping reduce a big backlog of applications.

President Donald Trump has made it a priority to speed permitting and reduce regulation as a way to boost production of oil, gas and coal from public lands – an agenda that has pleased the energy and mining industries but outraged environmentalists concerned about pollution and climate change.

The Department of Interior’s Bureau of Land Management approved 3,991 drilling permits in fiscal 2018, up from 2,887 in 2017, the agency said, an increase of 38 percent. The average time to process an application to drill with BLM was cut nearly in half to 63 days from 120 days in 2017.

A BLM spokesman, Derrick Henry, attributed the permit approval increase in 2018 to “using increased automation and flexible staffing to make decisions more quickly.”

The numbers were first revealed by Brian Steed, deputy director for policy and programs at BLM, in Congressional testimony earlier this month. BLM said the figures were not yet finalized and could still change.

BLM in 2017 set a goal of eliminating its backlog of permit applications that have been pending for three or more years by October of this year, and in the first nine months of 2018 slashed it by 47 percent from 551 to 288, according to a BLM document reviewed by Reuters.

Under the Obama administration, BLM undertook a major effort to improve its system for processing permits to address long delays and inefficiency. In 2016 it shifted to all electronic filing. Permit approval times were around 200 days prior to the introduction of the new system, according to BLM data.

The Western Energy Alliance, an oil and gas industry trade group, said speedier permit approvals were due to both increased automation and a more supportive administration.

“The improvements in automation were started under President Obama, but having an administration which wants to move forward is even more important,” said Kathleen Sgamma, WEA’s president.

Environmentalists say the increased speed has come at the expense of allowing the public to provide input on the drilling applications, which are posted publicly on the permitting web site for 30 days and then removed.

“BLM is cutting corners on environmental reviews of drilling permits by shutting out the public from commenting on those reviews,” said Kelly Fuller, energy and mining campaigns director for Western Watersheds Project.

The group argues that the 30-day posting falls short of the BLM’s obligation to seek public input under federal environmental law.

BEIJING (Reuters) – China’s economic growth is expected to slow to a near 30-year low of 6.2 percent this year, a Reuters poll showed on Friday, as sluggish demand at home and abroad weigh on activity despite a flurry of policy support measures.

The median forecast was slightly lower than the 6.3 percent economists had predicted in the last poll in January.

While the world’s second-largest economy has shown some signs of steadying recently, analysts caution it is too early to tell if the newfound momentum can be sustained.

Policy stimulus thus far has also been more restrained by Chinese standards than in past downturns, which could mean a more gradual recovery.

Most of the 88 institutions covered in the survey do not expect growth to bottom out until later in the year as looser monetary condition and fiscal stimulus take time to percolate through the economy and revive domestic demand.

“We expect the economy will slow further in second quarter as exports likely remain under pressure as global demand deteriorates and the property market stays in a downward cycle, while stubbornly weak consumption for durable goods caps demand,” said Ting Lu, chief China economist at Nomura.

The full-year forecast of 6.2 percent would still fall within the government’s target of 6.0-6.5 percent, but it would mark the weakest pace of growth China has seen in 29 years, and spell a further deceleration from 6.6 percent in 2018 and 6.8 percent in 2017.

Growth next year will likely cool further to 6.0 percent, the poll showed.

Multi-year regulatory campaigns to curb debt risks and pollution have deterred fresh investment, while a year-long trade war with the United States has hurt China’s exporters.

First-quarter growth was seen cooling to 6.3 percent from a year earlier, the same as in the previous poll, from 6.4 percent in the fourth-quarter of 2018, the weakest pace since the global financial crisis.

China will post its first-quarter gross domestic product (GDP) and March activity data on April 17.

SUPPORT MEASURES
Beijing has stepped up fiscal stimulus this year, announcing more spending on roads, railways and ports, along with trillions of yuan of tax cuts to ease pressure on corporate balance sheets.

It has also pressed banks to keep lending to struggling smaller, private companies, and on more affordable terms, even though they are considered higher credit risks than state-backed firms.

Investors are hoping for more signs of economic recovery in China to cushion worries about slowing global growth, after the IMF this week downgraded its 2019 world outlook for the third time citing U.S.-China trade tensions.

Optimism has increased that Washington could reach a deal with Beijing soon. The two sides have largely agreed on a mechanism to police any trade agreement they reach, including establishing new “enforcement offices,” U.S. Treasury Secretary Steven Mnuchin said on Wednesday.

President Donald Trump said last week that a deal could be ready around the end of April.

But economists warn that even if a trade deal is reached, and tit-for-tat tariffs are removed, Chinese exporters will still have to contend with weakening demand globally.

POLICY EASING SEEN ON CARDS
Analysts expect the central bank will ease policy further this year to spur lending and reduce the risk off a sharper slowdown. But they do not expect a cut in the benchmark lending rate, which would risk adding to a mountain of debt left over from past stimulus campaigns.

The People’s Bank of China has slashed bank’s reserve requirement ratio (RRR) five times over the past year and analysts forecast three more cuts of 50 basis points each in this quarter and the next two.

The finding was the same as in January.

China will step up its policy of targeted cuts to banks’ reserve ratios to encourage financing for small and medium-sized businesses that play a key role in economic growth, the cabinet said on Sunday.

The economists expect the PBOC to keep its benchmark lending rate unchanged at 4.35 percent through at least the end of 2020, the Reuters poll showed.

The central bank has been guiding money market rates lower in various ways since last year, which is reducing corporate financing costs, while banks have been lowering mortgage rates in some areas.

The poll also predicted annual consumer inflation to be more muted at 2.1 percent in 2019, cooling from the 2.3 percent estimated in the January survey.

Data this week showed China’s producer prices in March picked up for the first time in nine months while consumer inflation also quickened.

“Despite the rise in inflation, we believe it will not change the easing bias of the People’s Bank of China, as the CPI inflation comes mainly from pork prices rather than a general rise in prices,” Lu said.

LONDON (Reuters) – British Prime Minister Theresa May defended her decision to delay Brexit and seek a compromise exit plan with the opposition Labour Party as one angry lawmaker from her own party stood up in parliament on Thursday and asked her to resign.

The European Union has agreed to delay Brexit by up to six months to Oct. 31 while May seeks an agreement with Labour that she hopes will help get her three-times rejected exit deal approved by parliament.

“This is not the normal way of British politics … Reaching an agreement will not be easy, because to be successful it will require both sides to make compromises,” May told parliament.

May agreed the delay in the early hours of the morning at an EU summit in Brussels, ending the risk that Britain would leave the bloc without a deal on Friday but providing little new information on how she will resolve the country’s biggest political crisis in more than 70 years.

Sterling traders were left scratching their heads about whether the British currency should rise or fall.

But her statement on the decision to delay Britain’s EU exit for a second time brought angry reaction from hardliners who want to leave the EU as soon as possible.

Arch eurosceptic Bill Cash described it as “abject surrender”.

“Does she also accept that the Withdrawal Agreement undermines our democracy, the constitutional basis of Northern Ireland, our right to govern ourselves, control over our laws and undermines our national interest? Will she resign?” he said.

May retorted: “I think you know the answer to that.”

TAKE A BREAK
May said nothing was more pressing or vital than delivering Brexit, and emphasized that she wanted Britain to ratify an exit deal as quickly as possible to avoid taking part in European Parliament elections on May 23.

Opposition Labour Party leader Jeremy Corbyn, with whom May is trying to negotiate a compromise on the shape of Britain’s long-term relationship with the EU, was critical of the need for further delay.

“This second extension in the space of a fortnight represents not only a diplomatic failure, but is another milestone in the government’s mishandling of the entire Brexit process,” he said.

Despite trading barbs, both May and Corbyn said they wanted to continue talks.

After months of late-night votes and bitter infighting, May urged lawmakers to take advantage of a break in parliamentary business until April 23rd – announced earlier in the day to cheers – and reflect upon the country’s situation.

“Let us then resolve to find a way through this impasse, so that we can leave the European Union with a deal as soon as possible,” she said.

But the eurosceptics in her party were in less reflective mood, warning May that if the result of negotiations with Labour was that they were asked to vote again on an unchanged deal, they would be ready to reject it for a fourth time.

“Perseverance is a virtue but sheer obstinacy is not,” said eurosceptic Conservative Member of Parliament Mark Francois.

SHANGHAI (Reuters) – Asian shares weakened on Friday as trepidation ahead of the start of the U.S. corporate earnings season and underlying anxiety over the global growth outlook eclipsed some reassuring U.S. economic data.

Shares in Europe are expected to open fractionally higher, with pan-region Euro Stoxx 50 futures up 0.03 percent at 3,366 in early European trades. German DAX futures were 0.02 percent lower at 11,971.5 and FTSE futures were up 0.2 percent at 7,377.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.1 percent, having earlier see-sawed within a tight range.

Despite broad weakness in the region, with Chinese blue-chips down 0.4 percent ahead of the release of March trade data, higher Chinese iron ore prices helped to push Australia’s S&P/ASX 200 index up 0.85 percent.

Japan’s Nikkei stock index gained 0.7 percent.

Michael McCarthy, chief market strategist at CMC Markets and Stockbroking in Sydney, said markets were in a “holding pattern” as they awaited Chinese trade data and the U.S. earnings season.

Matt Simpson, senior market analyst at GAIN Capital in Singapore, said a dovish shift by central banks, together with possible progress on a U.S.-China trade deal and U.S. President Donald Trump’s talking up of the markets could help to support equities in the coming weeks.

“Consumer discretionary and information technology are more than outperforming the S&P 500 rebound, and that generally is what you see in the start of an upswing, not near the end of a cycle,” he said.

The tepid performance of Asian markets Friday followed a choppy session on Wall Street that left major indexes treading water, hemmed in by anxiety ahead of corporate earnings and worries about a global economic slowdown, which capped gains stemming from upbeat U.S. economic data.

The Dow Jones Industrial Average fell 0.05 percent to 26,143.05, the S&P 500 closed flat at 2,888.32 and the Nasdaq Composite dropped 0.21 percent to 7,947.36.

Tempering expectations for a sharp slowdown in U.S. growth was data that showed the number of Americans filing applications for unemployment benefits dropped to a 49-1/2-year low last week

Comments from Federal Reserve Vice Chairman Richard Clarida that the U.S. economy is in a “good place” but re-emphasising the Fed’s patience on rate hikes, also helped to reassure investors.

“One of the big takeaways from the past few days has been the broad decline in volatility across markets,” National Australia Bank (NAB) analysts said in a morning note.

NAB attributed the muted reaction to recent events to dovish policy shifts by central banks, signs that China’s stimulus measures are having an effect, continued U.S.-China trade talks and the Brexit delay.

Christine Lagarde, International Monetary Fund managing director, said on Thursday that the six-month delay of Britain’s exit from the European Union avoids the “terrible outcome” of a “no-deal” Brexit, but does nothing to lift uncertainty over the final outcome.

Underscoring threats to the global economy, IMF Deputy Managing Director Mitsuhiro Furusawa warned that a bigger-than-expected slowdown in China’s economy remains a key risk.

U.S. Treasury yields inched lower amid the cautious retreat in shares, after earlier rising on the U.S. jobless claims data, stronger producer prices and a weak 30-year bond auction.

On Friday, the yield on benchmark 10-year Treasury notes fell to 2.4969 percent compared with its U.S. close of 2.504 percent on Thursday.

In currency markets, the dollar was up 0.13 percent against the yen at 111.79, but a strong gain in the euro, which jumped 0.32 percent on the day to buy $1.1286, pushed the dollar index down 0.17 percent to 97.011.

Traders said demand for the euro jumped on speculation of increased demand for it from a Japanese bank’s plans to buy a multi-billion dollar aviation finance business from a German bank.

U.S. crude ticked up 0.42 percent at $63.85 a barrel, while Brent crude was up 0.37 percent at $71.09 per barrel.

Gold crept higher after falling more than 1 percent on Thursday to break below the key $1,300 level following solid U.S. data. Spot gold traded at $1,293.24 per ounce.

WASHINGTON (Reuters) – The United States and China have largely agreed on a mechanism to police any trade agreement they reach, including establishing new “enforcement offices,” U.S. Treasury Secretary Steven Mnuchin said on Wednesday.

Mnuchin, speaking on CNBC television, said that progress continues to be made in the talks, including a “productive” call with China’s Vice Premier Liu He on Tuesday night. The discussions would be resumed early on Thursday, Washington time, he added.

“We’ve pretty much agreed on an enforcement mechanism, we’ve agreed that both sides will establish enforcement offices that will deal with the ongoing matters,” Mnuchin said, adding that there were still important issues for the countries to address.

Mnuchin declined to comment on when or if U.S. tariffs on $250 billion worth of Chinese goods would be removed. Although President Donald Trump said recently that a deal could be ready around the end of April, Mnuchin declined to put a timeframe on the negotiations, adding that Trump was focused on getting the “right deal.”

“As soon as we’re ready and we have this done, he’s ready and willing to meet with President Xi (Jinping) and it’s important for the two leaders to meet and we’re hopeful we can do this quickly, but we’re not going to set an arbitrary deadline,” Mnuchin added.

The United States is demanding that China implement significant reforms to curb the theft of U.S. intellectual property and end forced transfers of technology from American companies to Chinese firms.

Washington also wants Beijing to curb industrial subsidies, open its markets more widely to U.S. firms and vastly increase purchases of American agricultural, energy and manufactured goods.

The Chinese commerce ministry on Thursday confirmed that senior trade negotiators from both countries discussed the remaining issues in a phone call following the last round of talks in Washington.

“In the next step, both trade teams will keep in close communication, and work at full speed via all sorts of effective channels to proceed with negotiations,” Gao Feng, the ministry’s spokesman told reporters in a regular briefing in Beijing.

Mnuchin did not address whether the enforcement structure would allow the United States a unilateral right to reimpose tariffs without retaliation if China fails to follow through on its commitments.

People familiar with the discussions have said that U.S. negotiators are seeking that right, but that China is reluctant to agree to such a concession. Alternatively, the United States may seek to keep tariffs in place, only removing them when China meets certain benchmarks in implementing its reforms.

Mnuchin said he and U.S. Trade Representative Robert Lighthizer, who is leading the negotiations, are focused on “execution” of drafting the documents in the trade agreement.

The two sides are working on broad agreements covering six areas: forced technology transfer and cyber theft, intellectual property rights, services, currency, agriculture and non-tariff barriers to trade, according to two sources familiar with the progress of the talks.

“Some of the chapters are close to finished, some of the chapters still have technical issues,” Mnuchin said.