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TOKYO (Reuters) – Asian shares stepped back on Tuesday, weighed by U.S. economic concerns and as China cut its growth target in the face of intensifying challenges from rising debt and a dispute over trade and technology with the United States.

Beijing lowered the growth target for this year to 6.0 to 6.5 percent, as expected, from around 6.5 percent last year and offered more stimulus, including cuts in taxes and social security fees, increases in infrastructure investment and lending to small firms.

European shares are seen steady to slightly lower, with spread-betters expecting Britain’s FTSE and France’s CAC to open flat and Germany’s DAX to dip 0.2 percent.

MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.15 percent and Japan’s Nikkei lost 0.4 percent.

While Asian shares were broadly weaker, China’s spending plans gave mainland markets some support with the blue-chip CSI300 index briefly gaining as much as 0.5 percent to extend Monday’s nine-month high. It later gave up most of the gains to stand 0.1 percent higher.

“As further details of the economic package will be rolled out in coming days, Chinese share markets could extend gains further near-term,” said Wang Shenshen, strategist at Tokai Tokyo Research Center.

Reflecting lower tax revenue and higher government spending, Beijing has set a budget deficit target of 2.8 percent of GDP, up from last year’s 2.6 percent.

The Finance Ministry set the quota for local government’s special bond issues at 2.15 trillion yuan ($320 billion), 0.8 trillion yuan above last year’s quota.

“The increase in local governments’ special bond is fairly large,” said Naoto Saito, chief researcher at Daiwa Institute of Research.

“Since those funds will be solely used for infrastructure investments, you cannot avoid the impression that the government is relying on investments to support the economy in the short-term rather than de-leveraging. This could cause problems in the longer term.”

BACK TO OCTOBER
Wall Street’s major indexes fell on Monday, with the Dow Jones Industrial Average shedding 0.79 percent and the S&P 500 losing 0.39 percent.

An unexpected fall in U.S. construction spending, data that normally attracts little attention, was cited as a factor.

But others saw the retreat as a long overdue correction after a rally since late last year.

MSCI’s ACWI,, a gauge of 47 markets in the world, has risen 16 percent from its near two-year low set on Dec. 26 low, even as the earnings outlook stagnated, driven by hopes of a dovish Federal Reserve and a compromise between Beijing and Washington on trade.

The index is now trading at 14.6 times expected earnings, on par with levels last seen in early October, when a bear market began globally.

Thus a media report on Monday that U.S. President Donald Trump and Chinese President Xi Jinping could reach a formal trade deal at a summit around March 27 prompted profit-taking rather than follow-through buying.

“If you’re a trader, you’re taking profit now. You buy on the rumour, sell on the news, wait till it goes down, and buy again,” said Sean Taylor, chief investment officer for the Asia Pacific at Deutsche Bank’s asset management arm DWS.

Taylor said he expects the two economic superpowers to reach a trade deal soon but cautioned that it would not end the tensions.

“It is the Trade War One which will be finished soon. That’s to do with China buying agricultural goods from the U.S. and China opening up more to international markets. But we still see there’ll be the Trade War Two, which will be about intellectual property and about technology,” he said.

The 10-year U.S. Treasuries yield dropped to 2.724 percent after touching from six-week highs of 2.768 percent in the past two sessions.

In currency markets, the dollar held an upper hand against many of its rivals as other major central banks are seen tilting to a more dovish stance than the Federal Reserve.

The euro dipped 0.1 percent to $1.1330 , amid expectations the European Central Bank is preparing to give banks more cheap, long-term funding at its policy meeting on Thursday.

The dollar rose 0.2 percent to 111.93 yen, near a 10-week high of 112.08 on Friday.

The Australian dollar dipped 0.20 percent to $0.7072 after weak net exports reading suggested Australia’s economy came close to stalling last quarter.

The Reserve Bank of Australia (RBA) stuck with its upbeat outlook for the economy, though investors still suspect it will have to cut rates eventually.

Gold stayed under pressure after having fallen for four days in a row by Monday to as low as $1,283.10 per ounce, its lowest level since Jan. 25. It last stood at $1,288.2

Oil prices were little changed, hovering below their recently-hit three-month peaks.

U.S. crude futures stood at $56.38 per barrel, down 0.4 percent in early Asia but still up almost 1 percent on the week.

International benchmark Brent futures were down 0.4 percent at $65.41 per barrel.

BEIJING (Reuters) – In a bright red office in south Beijing, some of China’s most studious Communist Party members are gathered around their smartphones.

The focus of their attention is a range of mobile apps and websites which allow them to study the speeches of Chinese President Xi Jinping, including one developed by their own employer, Beijing-based conglomerate Tidal Star Group.

Tidal Star is among a rising number of Chinese firms working for, or taking inspiration from, the country’s ruling Communist Party to develop high-tech propaganda tools aimed at spreading the party’s message among a tech-savvy younger generation.

The party’s mass propaganda toolkit has been upgraded from strident posters and Mao Zedong’s “Little Red Book” to include artificially intelligent news readers, viral social media campaigns and “compulsory” quiz apps.

“Of course we study the spirit of Xi Jinping’s speeches in the traditional way, but now that we have the app, party members can basically learn the excellent ideas of the national leaders every day,” said Cheng Hong, who heads Tidal Star’s party committee.

Staff who don’t perform well on app quizzes will be “encouraged to improve their enthusiasm” while high scores are rewarded with praise and awards, Cheng added.

Much of the new tech has been rolled out and upgraded ahead of the National People’s Congress (NPC), China’s top political meeting, which kicked-off on Tuesday.

The annual parliamentary meeting typically sees a ramping-up of propaganda in Chinese state media.

“It’s a massive revolution and at the same time a huge challenge for the propaganda department, to keep relevant and have a stake, when everything propaganda-wise is now in cyberspace,” said Graeme Smith, a Fellow at the Department of Pacific Affairs at the Australian National University.

RED MILLENNIALS
Last month, an app called “Xuexi Qiangguo” which tracks how much time users spend learning Communist Party teachings and how they are progressing with their study, became the most downloaded app on Apple’s China app store.

The app, developed by Alibaba Group Holding Ltd, has since chalked up around 75 million downloads, according to estimates by Beijing-based consultancy Qimai.

It is just one of dozens of Chinese Communist Party apps available on Android app stores and Apple’s China App Store, including “Party Member eHome”, “Wisely Build the Party”, “Party Member’s Little Backpack”.

“Since 2016, one central publicity purpose for the Party is to make ‘red millennials’,” said a Beijing-based manager at a major U.S.-listed Chinese news feed app.

His company had collaborated with the Chinese Communist Party to promote stories written by state media outlets higher up in search results.

“Official news is always the top priority. There is no news until official news,” said the person, who declined to be named because he was not authorised to speak to media.

On Sunday, state news agency Xinhua and U.S.-listed search firm Sogou Inc, also released the first official performance of a female AI news anchor called “Xin Xiaomeng”, whose first job was to present a story about delegates attending China’s largely rubber-stamp parliament meeting.

China will get even better at telling its story to the world due to its “innovative application of communication means and technology,” said Guo Weimin, a spokesman for parliament’s largely ceremonial advisory body. “I believe that our voice will spread farther and farther.”

The Communist Party Propaganda Department did not respond to a request for comment.

‘ALL HOURS OF THE DAY’
The shift in the Party’s propaganda outreach stretches to other areas such as media and popular culture.

State media outlet Xinhua on Sunday released a patriotic English language rap song by Chinese musician Su Han.

The fast-paced song lauds China’s recent moon-landing, powerful supercomputers and ability to clone monkeys, alongside sometimes clumsy English references to kidney stones and cartoon character Popeye.

Xinhua also released videos of foreigners praising China’s political system, calling NPC press conferences “a journalist’s dream” and laying out the benefits of a Chinese-style democracy, using footage of Chinese basketball star Yao Ming.

Party members said the new propaganda push means political study now consumes more of their time than ever before.

Universities, provincial party units and companies have recently issued public notices urging staff and officials to download Xuexi Qiangguo.

Three sources from different Party units say online study scores now factor into their performance reviews.

One staff member at a university in southern China told Reuters they are required to complete at least 160 hours of official study online per year.

“It’s not too boring, but the Party used to be a part of my work,” said a 35-year old researcher surnamed Liu at a Beijing university, who declined to give her full name due to the sensitivity of the topic.

“Now it is part of my life at all hours of the day.”

WASHINGTON/NEW DELHI (Reuters) – U.S. President Donald Trump looked set to open a new front in his trade wars on Monday with a plan to end preferential trade treatment for India that allows duty-free entry for up to $5.6 billion worth of its exports to the United States.

India played down the impact of the move, saying it was keeping retaliatory tariffs out of its talks with the United States, but the opposition could seize on the issue to embarrass Prime Minister Narendra Modi ahead of general elections this year.

Trump, who has vowed to cut U.S. trade deficits, has repeatedly called out India for its high tariffs, and U.S. trade officials said scrapping the concessions would take at least 60 days after notifications to Congress and the Indian government.

“I am taking this step because, after intensive engagement between the United States and the government of India, I have determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India,” Trump said in a letter to congressional leaders.

India is the world’s largest beneficiary of the GSP program, which dates from the 1970s, and ending its participation would be the strongest punitive action for the South Asian nation since Trump took office in 2017.

Reuters last month reported the planned U.S. action, which comes as the United States and China appear close to a deal that would roll back U.S. tariffs on at least $200 billion worth of Chinese goods.

The U.S. Trade Representative’s Office said removing India from the Generalized System of Preferences (GSP) program would not take effect for at least 60 days after the notifications, and would be done through a presidential proclamation.

Farm, marine and handicraft products were among India’s exports most likely to be hit by the move, Ajay Sahai, the director general of the Federation of Indian Export Organisations, told Reuters.

The preferential trade treatment brought India an annual “actual benefit” of just $190 million, Commerce Secretary Anup Wadhawan said.

“Discussions are on with the United States, and given cordial and strong ties, (we are) keeping retaliatory tariffs out of it,” he added.

Of the 3,700 products it covers, India made use of the concession for just 1,784, Wadhawan told reporters in the Indian capital. Countries not covered by the GSP face U.S. tariffs of 2 percent and upwards.

“The benefit to industry is low, U.S. tariffs are already low,” said another government official, who spoke on condition of anonymity. “GSP is more symbolic of the strategic relationship, not in value terms.”

Last week, India delayed until April 1 higher tariffs on some U.S. imports announced earlier, in response to the Trump administration’s refusal to exempt it from new steel and aluminum tariffs.

POLITICAL PRICE
While impact from the GSP withdrawal will be limited, it could hurt Modi’s Hindu nationalist ruling party ahead of the election expected in the next couple of months.

Modi has pointed to India’s growing diplomatic heft and strategic ties with big powers such as the United States to underline his foreign policy successes.

But his own relationship with Trump has been limited, with their meetings less frequent than those of Chinese President Xi Jinping with Trump, for example. Trump was cool to an Indian invitation to attend its annual Republic Day parade this year.

India’s opposition, fighting a bitter election battle with Modi, could seize on the U.S. setback to embarrass the prime minister, the official who declined to be named said.

“It can become a political issue in an election year.”

Trade ties with the United States suffered after India unveiled new rules on e-commerce limiting the way internet retail giants Amazon.com Inc and Walmart Inc-backed Flipkart do business.

That followed a drive by New Delhi to force global card payments companies such as Mastercard Inc and Visa Inc to move their data to India and higher tariffs on electronic products and smartphones.

In 2017, the United States protested against India’s decision to cap prices of medical devices, which upset American firms.

“India has implemented a wide array of trade barriers that create serious negative effects on United States commerce,” said the USTR, which estimates the United States ran a goods and services trade deficit of $27.3 billion with India in 2017.

“Despite intensive engagement, India has failed to take the necessary steps to meet the GSP criterion,” it added.

India’s top GSP exports to the United States in 2017 included motor vehicle parts, ferro alloys, precious metal jewelry, building stone, insulated cables and wires, said business grouping the Confederation of Indian Industry, which had lobbied against the withdrawal.

Few of the items are produced in the United States as they are low in the manufacturing value chain, it added.

India’s trade ministry said in a statement that the trade deficit with the United States was falling and in 2018 it is estimated to have narrowed by over $4 billion. It would fall further because of India’s rising demand for energy and civilian aircraft, it said.

LONDON (Reuters) – British Prime Minister Theresa May will on Monday set out plans for a 1.6 billion pound ($2.11 billion) fund to help to boost economic growth in Brexit-supporting communities with ministers denying it was a bribe to win support for her EU exit deal.

The “Stronger Towns Fund”, details of which appeared in newspapers last month, is seen by many as part of May’s efforts to win support for her Brexit deal from opposition Labour lawmakers who represent areas, particularly in northern England that voted strongly in favor of leaving the European Union.

Britain is due to leave the bloc at the end of the month and May, whose exit deal with Brussels was rejected by a large majority of lawmakers in January, has promised parliament will get to vote on a revised deal by March 12.

The government said the fund would be targeted at places that had not shared fairly in the country’s prosperity and would be used to create new jobs, help to train people and boost economic activity.

“Communities across the country voted for Brexit as an expression of their desire to see change; that must be a change for the better, with more opportunity and greater control,” May said in a statement.

“These towns have a glorious heritage, huge potential and, with the right help, a bright future ahead of them.”

The opposition Labour Party’s finance spokesman, John McDonnell, said the fund was “Brexit bribery”.

“This towns fund smacks of desperation from a government reduced to bribing Members of Parliament to vote for their damaging flagship Brexit legislation,” he said in a statement.

However, Communities Secretary James Brokenshire said the money was not linked to support for the withdrawal agreement.

“This is funding is there regardless of the outcome,” he told BBC radio when asked if the money was a bribe. Obviously we want to see a deal happening. But no, there is no conditionality in that sense.”

One billion pounds has already been allocated, with more than half going to towns across the north of England. A further 600 million pounds will be available for communities around the country to bid for, the government said.

Critics said that the fund, when divided between a large of areas, would not provide individual towns with that much money, nor make up for what they had lost as a result of government cuts in recent years.

Brokenshire did not say how many towns would benefit but said the money could be “transformative”.

“It can make that difference on creating the jobs, actually putting the skills in place and changing people’s lives in a modern positive economy,” he said.

BEIRUT (Reuters) – U.S.-backed forces are slowing down their offensive against the last Islamic State pocket in eastern Syria to protect civilians who remain there, a spokesman for a militia force said on Monday, adding that the battle would still “be over soon”.

The Syrian Democratic Forces (SDF) faced landmines, car bombs, tunnel ambushes and suicide attacks on Sunday as they attempted to overrun the last area in the village of Baghouz held by the jihadists.

Over the past few weeks its assault has been held up as tens of thousands of people fled Baghouz, all that remained to the group of its main territory in Iraq and Syria after years of retreats including a series of major defeats in 2017.

The SDF resumed the attack on Friday evening after saying it had extracted the remaining civilians. However, the head of the SDF media office, Mustafa Bali, said on Twitter early on Monday that some civilians were still there.

“We’re slowing down the offensive in Baghouz due to a small number of civilians held as human shields by Daesh,” he said, referring to Islamic State.

While the capture of Baghouz would mark a milestone in the fight against Islamic State, the group is expected to remain a security threat as an insurgent force with sleeper cells and some pockets of remote territory.

CARACAS (Reuters) – Venezuelan opposition leader Juan Guaido plans to run the risk of arrest by returning home on Monday, after he ignored a court-imposed travel ban and toured Latin American allies to boost support for his campaign to oust President Nicolas Maduro.

Guaido’s return, details of which his team have kept under wraps, could become the next flashpoint in his duel with Maduro as he seeks to keep up momentum and spur his international backers to further isolate the socialist government.

His arrest could allow the opposition to highlight how the Maduro administration represses political foes and prompt the United States to impose even harsher sanctions. But it could also strip the opposition of a public figurehead who has brought unity after years of infighting.

Guaido, who is recognized as Venezuela’s legitimate head of state by most Western countries, said on Sunday he would undertake the “historic challenge” of returning in time to lead protests on Monday and Tuesday during the Carnival holiday period, an unusual time for demonstrations.

“If the regime dares, of course, to kidnap us, it will be the last mistake they make,” Guaido said during a broadcast on Twitter, without disclosing his location. Guaido said they had prepared “the steps to follow” in case he was detained.

Guaido secretly left Venezuela for Colombia, in violation of a Supreme Court order, to coordinate efforts there on Feb 23 to send humanitarian aid into Venezuela to alleviate widespread shortages of food and medicine.

But troops loyal to Maduro blocked convoys of aid trucks sent from Colombia and Brazil, leading to clashes that killed at least six people along the Brazilian border, rights groups say.

From Colombia, he then traveled to Argentina, Brazil, Ecuador and Paraguay to shore up Latin American support for a transition government that would precede free and fair elections.

On Sunday, he departed by plane from the Ecuadorean coastal town of Salinas but has not appeared publicly since, beyond the Twitter broadcast. To arrive in Caracas by Monday morning, he could take commercial flights from Bogota or Panama City.

Maduro, who labels Guaido a coupmongering U.S. puppet, has said his arrest depends on the justice system.

“He can’t just come and go. He will have to face justice, and justice prohibited him from leaving the country,” he told ABC News last week.

The United States has warned Maduro of the consequences of arresting Guaido and the Treasury imposed new sanctions on Friday targeting Venezuelan military officials.

“If Maduro took that step, I think it would just hasten the day that he leaves,” U.S. National Security Adviser John Bolton told Fox News on Sunday.

After the military blocked the aid convoys, Guaido proposed that “all options be kept open” to topple Maduro, but foreign military intervention is seen as unlikely and his international backers are instead using a mix of sanctions and diplomacy.

WASHINGTON (Reuters) – Republican U.S. Senator Rand Paul said he would vote in favor of a resolution to end President Donald Trump’s U.S.-Mexico border emergency declaration, according to a media report, likely giving Democrats the votes to pass the measure in the Senate.

Trump, who has promised to issue his first veto if the Senate approves the resolution, declared an emergency last month in a bid to fund a wall along the border without congressional approval.

While the Senate appears unlikely to muster the two-thirds majority needed to override a veto, passage in the Republican-controlled chamber would be an embarrassment for the president, who has failed over more than two years in office to persuade Congress to fund his wall, a central promise of his presidential campaign.

“I can’t vote to give the president the power to spend money that hasn’t been appropriated by Congress,” Paul said in a speech on Saturday at Western Kentucky University, according to the Bowling Green Daily News.

“We may want more money for border security, but Congress didn’t authorize it. If we take away those checks and balances, it’s a dangerous thing,” he added.

Paul’s office did not immediately respond to a request for comment on the report.

Trump’s demand for $5.7 billion in funding for his “great, great wall” triggered the longest-ever partial U.S. government shutdown in December and January. The government reopened but Trump later declared a national emergency in an effort to obtain funds Congress had approved for other purposes.

Rand became the fourth Republican senator to publicly back the resolution. Assuming all Democrats and the two independents who caucus with them vote in favor of the resolution, it would clear the Senate and end up on the president’s desk. Republicans hold 53 of the 100 Senate seats.

An identical version of the measure has already been approved in the Democratic-controlled House of Representatives.

Democrats argue there is no border emergency and that Trump is overreaching with his declaration given that the Constitution grants Congress the power of the purse strings.

The declaration is already being challenged in the courts.

Trump has warned Senate Republicans not to vote for the resolution, saying that doing so would put them in “great jeopardy” politically with voters.

MILAN/LONDON (Reuters) – European shares scored a second straight month of gains in February after a choppy session on Thursday when optimism about European banks offset caution over U.S.-China trade.

After spending much of the day in the red, the pan-regional STOXX 600 index closed up 0.1 percent, in touching distance of four-month highs.

On a monthly basis, European shares rose 3.9 percent after a 6.2 percent increase in January.

Traders blamed the uncertainty over the outcome of the Sino-U.S. talks for the lack of a decisive directional trend.

“What we’re really waiting for, is more concrete news on trade”, said Mikael Jacoby, head of continental European Equity sales trading at Oddo Securities.

“We are in a status quo at the moment,” he added.

Miners were the biggest sectoral fallers, down 2.1 percent, as copper prices fell after surveys showed that factory activity in China shrank for the third straight month in February.

Milan scored the best performance among regional bourses with a 0.8 percent rise, helped by the weight of Italian banks in Italy’s FTSE MIB index.

The European banking index rose 0.95 percent amid hopes the European Central Bank (ECB) may embark in a new program to ease refinancing in the sector.

“The (ECB) March meeting will be the first to discuss this formally and we expect some signaling, if not a full announcement, of a TLTRO3 (Targeted Longer-Term Refinancing Operations) to be implemented by June,” analysts at Societe Generale wrote in a note.

Other winners of the day included media stocks which rose 1.4 percent.

Vivendi shares led rivals higher, up 5.4 percent, after sources told Reuters that U.S. buyout fund KKR and China’s Tencent Music Entertainment Group were exploring rival bids for up to half of its Universal Music division.

A promising outlook from Zalando drove shares in Europe’s biggest online-only fashion retailer to the top of the STOXX 600, up close to 24 percent.

AB InBev rose 4.1 percent, after the world’s largest brewer forecast strong revenue and profit growth in 2019, with a focus on increasing beer sales rather than just prices.

Sunrise was the biggest faller, down 8.5 percent after it agreed to buy Liberty Global’s Swiss unit in a 6.3 billion Swiss francs deal to create a bigger challenger to Swisscom.

European shares are up a bit more than 10 percent so far this year as global equities have recovered from a brutal sell-off in the last three months of 2018.

European shares could however quickly run out of steam and are expected to end 2019 roughly at their current level, a Reuters poll showed as some investor remain cautious.

“We’re carrying a bit of cash… I think things are still fragile, Q4 is still very fresh in people’s memories,” said Ian Ormiston, manager of the Europe ex-UK smaller companies fund at Merian Global Investors.

OTTAWA (Reuters) – Canada is likely to announce on Friday that an extradition hearing against a Huawei Technologies Co Ltd executive can proceed, legal experts said, worsening already icy relations with Beijing.

Police arrested Meng Wanzhou, the telecommunication giant’s chief financial officer, in Vancouver in December at Washington’s request. In late January the U.S. Justice Department charged Huawei and Meng with conspiring to violate U.S. sanctions on Iran.

Ottawa has until midnight on Friday (0500 GMT Saturday) to announce whether it will issue an authority to proceed, which would allow a court in the Pacific province of British Columbia to start a formal extradition hearing.

Joanna Harrington, a law professor at the University of Alberta in Edmonton, said officials were most likely to give the green light.

“I have no reason to see why they wouldn’t. We have an ongoing long-standing extradition relationship between the United States and Canada,” she said by phone.

“The United States is a country with which we share a legal culture” and which Canada trusts, said Harrington, an international human rights law specialist.

After Meng’s arrest Canadian officials said that the vast majority of U.S. requests for extradition were approved.

It could be years though before she is ever sent to the United States, since Canada’s slow-moving justice system allows many decisions to be appealed.

Meng, under house arrest, is due to appear in a Vancouver court on March 6 to show authorities she is sticking to the terms of the December deal that allowed her to stay out of prison.

U.S. President Donald Trump told Reuters in December he would intervene if it served national security interests or helped close a trade deal with China, prompting Ottawa to stress the extradition process should not be politicized. Last week Trump played down the idea of dropping the charges.

Beijing is demanding Meng be released. After her detention, China arrested two Canadians on national security grounds, and a Chinese court later sentenced to death a Canadian man who previously had only been jailed for drug smuggling.

Vancouver criminal defense lawyer Gary Botting, an expert in extradition law, also predicted officials would issue the authority to proceed.

“I have little doubt that they probably will but it would be very foolish,” he said by phone, saying that an approval would “invite a whole pile of grief” and possible economic retaliation from China.

A spokesman for the Canadian justice ministry declined to comment. David Martin, a lawyer for Meng, did not reply to a request for comment.