市场消息

GLOBAL MARKETS-Pound jumps, Asian shares rise after changes to Brexit deal

SHANGHAI, March 12 (Reuters) – The pound jumped on Tuesday and Asian shares rose after the European Commission agreed to changes in a Brexit deal ahead of a vote in the British parliament on a divorce agreement.

European Commission head Jean-Claude Juncker agreed to additional assurances in an updated Brexit deal with British Prime Minister Theresa May on Monday, but warned UK lawmakers would not get a third chance to endorse it.

Sterling, which had risen ahead of the talks between May and Juncker, extended gains in hopes the changes may be enough to sway rebellious British lawmakers who have threatened to vote down May’s plan again on Tuesday.

The pound was up 0.7 percent, buying $1.3239 and taking its gains for two days to more than 1.6 percent.

In early trade, MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.3 percent, following on from a rally on Wall Street overnight.

Australian shares were up 0.4 percent, while Japan’s Nikkei stock index jumped 1.6 percent.

The amended Brexit deal gave a further boost to investors’ appetite for riskier assets, after global equity indexes climbed overnight on gains in technology stocks and expectations of more stimulus from China.

U.S. shares rebounded from a week-long losing streak, with news that U.S. chip supplier Nvidia Corp has agreed to buy Israeli chip designer Mellanox Technologies Ltd for $6.8 billion helping to boost tech shares.

A nearly 7 percent gain in Nvidia shares helped to propel the Nasdaq Composite 2.02 percent higher, to 7,558.06 points.

The Dow Jones Industrial Average rose 0.79 percent, with gains tempered by a 5.3 percent drop in Boeing shares after some airlines grounded the company’s new 737 MAX 8 passenger jet following a second deadly crash of the airliner in five months.

The S&P 500 gained 1.47 percent to 2,783.3.

In a morning note, analysts at ANZ said comments from U.S. Federal Reserve Chairman Jerome Powell on the weekend that the central bank is in no hurry to raise rates had helped to boost riskier assets.

U.S. retail sales data from January, which came in above expectations, also helped to support shares despite downward revisions to December data, National Australia Bank analysts said in a note.

Yields on U.S. Treasury bonds rose, with benchmark 10-year Treasury notes at 2.6591 percent compared with its U.S. close of 2.641 percent on Monday.

The two-year yield was at 2.4957 percent compared with a U.S. close of 2.477 percent.

The dollar index, which measures the greenback against a basket of rivals, shed 0.18 percent to 97.034. But the dollar gained against the yen, adding 0.12 percent to 111.31.

The euro was up 0.1 percent on the day at $1.1259.

U.S. crude ticked up 0.3 percent at $56.96 a barrel. Brent crude was also 0.3 percent higher to $66.77.

Spot gold was 0.1 percent less precious at $1,292.77 per ounce.

Mueller navigates dangerous currents in probing Trump-Russia nexus

WASHINGTON (Reuters) – Robert Mueller brought an enviable reputation as the architect of the modern FBI and a force behind major criminal prosecutions to his job as special counsel investigating Russia’s role in the 2016 U.S. election but has encountered a relentless campaign by President Donald Trump to discredit the probe.

Mueller, a longtime Republican, received bipartisan praise when he was named as special counsel in May 2017 to take over the Russia investigation after Trump fired FBI Director James Comey, whose agency had led the probe.

Trump and allies in the Republican Party and conservative media have sought to disparage Mueller, a 74-year-old former U.S. Marine Corps officer, and paint the entire Russia investigation as illegitimate and politically motivated.

Mueller, known for a tough, no-nonsense managerial style, has remained silent throughout the investigation that threatens Trump’s presidency, letting his team’s court filings and indictments do the talking. Several Trump aides and advisers already have been convicted or pleaded guilty as a result of the investigation.

The big question is whether Mueller will present evidence of criminal conduct by the president himself. Such findings could prompt the Democratic-controlled U.S. House of Representatives to begin the impeachment process laid out in the Constitution for removing a president from office for “treason, bribery, or other high crimes and misdemeanors.”

Mueller was appointed director of the Federal Bureau of Investigation by Republican President George W. Bush in 2001 and, after unanimous Senate confirmation, started the job a week before the Sept. 11, 2001, attacks on the United States by al Qaeda militants using hijacked airliners that killed about 3,000 people.

Democratic President Barack Obama extended Mueller’s service. By the time Mueller left the position in 2013, his tenure was exceeded in length only by J. Edgar Hoover’s 48-year stint.

Mueller was credited with transforming the premier U.S. law enforcement agency after Congress and an independent government commission found that the FBI and CIA had failed to share information before the Sept. 11 attacks that could have helped prevent them. Mueller revamped the FBI into an agency centered on protecting national security in addition to law enforcement, putting more resources into counterterrorism investigations and improving cooperation with other U.S. agencies.

He put his career on the line in 2004 when he and Comey, then the deputy attorney general, threatened to resign when White House officials sought to reauthorize a domestic eavesdropping program that the Justice Department had deemed unconstitutional.

The two rushed to a Washington hospital room and prevented top Bush aides from persuading an ailing Attorney General John Ashcroft, recovering from gall bladder surgery, to reauthorize the surveillance program.

Comey succeeded Mueller as FBI director in 2013.

‘HIGH IDEALS’

In nominating Mueller in 2001, Bush said, “As a lawyer, prosecutor and government official, he has shown high ideals, a clear sense of purpose and a tested devotion to his country.”

When Mueller stepped down as FBI chief, Obama called him “one of the most admired public servants of our time,” adding, “I know very few people in public life who have shown more integrity more consistently under more pressure than Bob Mueller.”

Trump has given a darker assessment, accusing Mueller of pursuing a “rigged witch hunt” while declining to sit for an interview with the special counsel’s team.

The president in November 2018 wrote on Twitter: “Mueller is a conflicted prosecutor gone rogue. The Fake News Media builds Bob Mueller up as a Saint, when in actuality he is the exact opposite. … Heroes will come of this, and it won’t be Mueller and his terrible Gang of Angry Democrats.”

He also has faulted Mueller for not investigating Hillary Clinton, the defeated 2016 Democratic presidential candidate.

Trump’s attacks on Mueller appeal to his conservative political base as shown when he won cheers denigrating the special counsel during a March 2 speech to the Conservative Political Action Conference in Maryland.

After graduating from Princeton University, Mueller served in the Marine Corps during the Vietnam War, leading a rifle platoon and receiving commendations including the Bronze Star.

He became a U.S. assistant attorney general in 1991 and was a key player on high-profile federal prosecutions such as the 1992 convictions of former Panamanian leader Manuel Antonio Noriega and organized crime boss John Gotti and the investigation into the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland.

Mueller’s investigation has resulted in charges against 34 people and three Russian entities. Trump’s former campaign chairman Paul Manafort was convicted on a series of charges and pleaded guilty to others. Trump’s former national security adviser Michael Flynn, former personal lawyer Michael Cohen and former campaign aides Rick Gates and George Papadopoulos have entered guilty pleads. Longtime Trump adviser Roger Stone has pleaded not guilty to charges.

After months of negotiations about a presidential interview with the special counsel’s team, Mueller let Trump give written responses to questions about whether his campaign conspired with what U.S. intelligence agencies have described as Russian hacking and propaganda aimed at causing division in the United States and boosting Trump’s candidacy. Trump provided the written answers in November 2018.

During his career Mueller had stints in private law practice but preferred government work. In the 1990s, he left a major law firm to take a low-level job in the U.S. Attorney’s office in the District of Columbia, specializing in homicide cases at a time when the capital city had a high murder rate.

“I’ve always loved investigations,” Mueller told Washingtonian magazine in 2008.

Brexit crunch looms for May as EU talks stall

LONDON/BRUSSELS (Reuters) – British Prime Minister Theresa May’s Brexit strategy was in meltdown on Monday after her failure to win last-minute concessions from the European Union set the stage for another humiliating defeat of her divorce deal in parliament.

Just 18 days before the United Kingdom is due to leave the EU on March 29, there is still no ratified divorce deal and talks with the bloc have stalled as May tries to break the political deadlock in London.

May’s spokesman said a “meaningful” parliamentary vote on her deal would go ahead on Tuesday, even though talks with the EU are deadlocked, and the motion would be published later on Monday. The exact vote format was not immediately clear.

European officials said there had been no breakthrough in talks over the weekend and expressed frustration with May’s attempts to secure concessions just weeks before Britain’s exit.

“May has boxed herself even deeper into a corner, it seems the second meaningful vote will go ahead on Tuesday but it also seems like it won’t be the last meaningful vote on this,” one EU official said.

“We really want to be over with it now. It’s not going anywhere so even an extension is unlikely to break the impasse. There is not much patience or goodwill left on our side.”

European Commission spokesman Margaritis Schinas said it was up to the British parliament to take important decisions on Brexit this week.

Sterling fell in early trade on Monday but later erased most of its losses, trading at $1.2999 at 1145 GMT.

The United Kingdom’s tortuous crisis over EU membership is approaching its finale with an extraordinary array of options including a delay, a last-minute deal, a no-deal Brexit, a snap election or even another referendum.

The ultimate outcome remains unclear, though most diplomats and investors say Brexit will define the United Kingdom’s prosperity for generations to come.

BREXIT IN PERIL

The deadlocked talks effectively open up the prospect of either a last-minute deal, probably around the time of an EU summit on March 21-22, or a delay to Brexit.

Parliament rejected May’s deal by 230 votes on Jan. 15, prompting her to return to Brussels in search of changes to the so-called Irish backstop – an insurance policy to prevent the return of a hard border between Ireland and Northern Ireland.

Many British lawmakers object to the policy on the grounds that it could leave Britain subject to EU rules indefinitely and cleave Northern Ireland away from the rest of the United Kingdom.

But the EU has repeatedly said it does not want to reopen the divorce deal, officially known as the Withdrawal Agreement, and the British government’s top lawyer has failed to find a legal fix.

May offered members of parliament a “meaningful” vote on what she had hoped would be a revised deal on Tuesday but with no major changes yet secured, Brexit-supporting MPs warned it would be defeated again.

Nigel Dodds, deputy leader of the Democratic Unionist Party (DUP) which props up May’s minority government, and Steve Baker, a leading figure in the large eurosceptic faction of her Conservative Party, said she was heading for defeat.

If her deal is defeated, May has pledged to give MPs a vote on Wednesday on leaving without a deal on March 29 and, if they reject that, then they will vote on Thursday on delaying Brexit.

May’s spokesman said she was focused on making progress on a deal that parliament could approve and was committed to holding three Brexit votes this week.

But Yvette Cooper, an opposition party lawmaker who has led efforts to hand parliament more control over Brexit, said parliament would try to take control of the exit process if May was unable to build a consensus.

Michael Gove, who campaigned for Brexit in 2016, said if May lost Tuesday’s vote the government would effectively lose control of Brexit.

In Brussels, diplomats and officials said Britain would face EU demands for billions of euros in cash if it fails to strike a Brexit deal.

Trump budget seeks 5 percent cut in non-defense spending: OMB

WASHINGTON (Reuters) – President Donald Trump will propose in his fiscal 2020 budget on Monday that the U.S. Congress cut non-defense spending by 5 percent while boosting spending on the military, veterans’ healthcare and border security, the White House budget office said on Sunday.

The Republican president’s proposal, slated for release at 11:30 a.m. (1530 GMT) on the Office of Management and Budget’s website, is expected to be the first volley in this year’s bitter funding fight with Congress, which has control over federal purse strings.

His budget blueprint is expected to be rejected by Congress, where Democrats control the House of Representatives. Spending bills typically need 60 votes to get through the 100-member Senate, where Trump’s fellow Republicans hold 53 seats.

Democratic leaders in both the House and Senate immediately panned Trump’s request for $8.6 billion to build a wall on the southern border with Mexico, reported by Reuters earlier on Sunday.

Last year, a protracted battle over Trump’s demand for more than $5 billion in wall funding led to a five-week partial shutdown of the government. Congress’ refusal to grant him the funds led Trump to declare a national emergency so he could redirect funds approved for other purposes to the project.

The White House and Congress must agree on funding by Oct. 1 to keep the government funded and open – which coincides with the deadline to lift the debt limit, or risk a default, which would have severe economic repercussions.

At the same time, Trump and congressional leaders also face a deadline from a 2011 fiscal belt-tightening law that would see all discretionary spending slashed by $126 billion or 10 percent, unless they agree to lift spending caps.

Tax cuts have been a priority for the Republican White House and Congress in recent years, rather than fiscal restraint. The deficit ran to $900 billion in 2019, and the national debt has ballooned to $22 trillion.

Trump wants to cut non-defense program spending by an average of 5 percent below caps that Congress had set for fiscal 2019, the OMB said in a release.

“President Trump added nearly $2 trillion to our deficits with tax cuts for the wealthy and large corporations, and now it appears his budget asks the American people to pay the price,” said John Yarmuth, Democratic chairman of the House Budget Committee, who added: “It has no chance in the House.”

Trump’s budget would boost funding for some of his priorities. For example, Trump will propose a 5 percent increase for the Department of Homeland Security to help pay for his border wall and hire more immigration and border enforcement officials.

The budget also includes an increase of almost 10 percent for veterans’ healthcare programs from last year, and investments in opioid addiction programs, the OMB said.

That means some departments and programs may see steeper proposed cuts than 5 percent.

BOOST FOR DEFENSE

Some programs will be targeted for cancellation altogether to push total non-defense discretionary spending below a cap of $542 billion established in the 2011 Budget Control Act, an administration official told Reuters, speaking on condition of anonymity. The official did not specify which programs would be targeted.

“This budget shows that we can return to fiscal sanity without halting our economic resurgence while continuing to invest in critical priorities,” Russ Vought, the acting OMB director, said in a statement.

The budget was expected to boost defense spending, although details were not immediately available.

Vought said last month that new defense spending would be included in the Overseas Contingency Operations (OCO) fund, more traditionally used for emergencies.

Fiscal hawks have characterized OCO as a slush fund or budget gimmick to get around spending caps.

Also unclear is how the budget will handle mandatory spending on programs for seniors like Medicare and Social Security, which account for the largest portion of the budget. The programs are popular with older voters.

The OMB said the budget would propose $2.7 trillion in spending cuts over a decade, which it said would be more than any other administration had ever planned.

But the cuts would not be enough to balance the budget in that timeframe. The OMB said the budget was designed to balance by 2034, exceeding the traditional 10-year period that previous administrations targeted.

Chinese carriers, Ethiopian Airlines suspend use of Boeing 737 MAX 8 aircraft after crash

BEIJING/SHANGHAI (Reuters) – China’s aviation regulator on Monday grounded nearly 100 Boeing Co 737 MAX 8 aircraft operated by its airlines, more than a quarter of the global fleet of the jets, after a deadly crash of one of the planes in Ethiopia.

An Ethiopian Airlines 737 MAX 8 bound for Nairobi crashed minutes after take-off on Sunday, killing all 157 people on board and prompting the carrier to ground the rest of its fleet of the jets.

It was the second crash of the 737 MAX 8, the latest version of Boeing’s workhorse narrowbody jet that first entered service in 2017.

In October, a 737 MAX 8 operated by Indonesian budget carrier Lion Air crashed 13 minutes after take-off from Jakarta on a domestic flight, killing all 189 passengers and crew on board.

The Civil Aviation Administration of China (CAAC) said all Chinese airlines had to suspend their use of the 737 MAX 8 by 6 p.m. (1000 GMT).

The aircraft is the latest version of Boeing’s workhorse narrowbody that entered service in 2017.

The CAAC said it would notify airlines as to when they could resume flying the jets after contacting Boeing and the U.S. Federal Aviation Administration (FAA) to ensure flight safety.

“Given that two accidents both involved newly delivered Boeing 737-8 planes and happened during take-off phase, they have some degree of similarity,” the CAAC said, adding that the order was in line with its principle of zero-tolerance on safety hazards. The 737 MAX 8 is sometimes referred to as the 737-8.

A Boeing spokesman declined to comment.

Chinese airlines have 96 737 MAX 8 jets in service, the state company regulator said on Weibo, including Air China, China Eastern Airlines, China Southern Airlines and Hainan Airlines.

Chinese aviation data firm Variflight said at least 29 international and domestic flights on Monday had been canceled and that airlines had swapped out the plane on 256 other flights that had been scheduled to use it.

China Eastern’s chairman, Liu Shaoyong, told financial publication Caixin on the sidelines of a parliament meeting in Beijing that it would only consider resuming 737 MAX 8 flights once Boeing issued a safety commitment for the jets and proved that there was no aircraft design link between the two crashes.

The cause of the Indonesian crash is still being investigated. A preliminary report in November, before the cockpit voice recorder was recovered, focused on airline maintenance and training and the response of a Boeing anti-stall system to a recently replaced sensor but did not give a reason for the crash.

Ethiopian Airlines said it had grounded its 737 MAX 8 fleet until further notice as an “extra safety precaution” even though it did not know the cause of Sunday’s crash.

The airline has a remaining fleet of four of the aircraft, according to flight tracking website FlightRadar24.

Cayman Airways said it had grounded both of its new 737 MAX 8 jets until it got more information.

But no other airlines or regulators said they were grounding the aircraft. By the end of January, Boeing had delivered 350 of the 737 MAX family jets to customers, with another 4,661 on order.

‘REASONABLE, JUSTIFIED’

A U.S. official told Reuters the United States was unsure what information China was acting on.

Speaking on condition of anonymity due to the sensitivity of the matter, the officials said there were no plans to follow, given the 737 MAX 8 had a stellar safety record in the United States and there was a lack of information about the cause of the Ethiopian crash.

Western industry sources say China has been at pains in recent years to assert its independence as a safety regulator as it negotiates mutual safety standard recognition with regulators in the United States and Europe.

In 2017, it signed a mutual recognition deal with the FAA, but industry sources say it has struggled to gain approval from the FAA that would allow it to sell its self-developed C919 airliner to Western airlines.

Chinese aviation expert Li Xiaojin said the grounding was “reasonable and justified” but that some disruptions to passengers’ travel plans could be expected.

But he said he did not anticipate a major problem since Chinese airlines operated fewer than 100 of the aircraft, compared with a combined fleet of more than 2,000 planes.

GLOBAL FLEET

Indonesia said it would monitor its airlines operating the 737 MAX 8, which include Lion Air and Garuda Indonesia but did not mention any plan to ground them.

Garuda Chief Executive Ari Ashkhara said the national carrier was operating its one 737 MAX 8 with extra inspection procedures on the airspeed and altitude, flight control and stall management systems. Lion Air declined to comment.

U.S. operators Southwest Airlines Co and American Airlines Group Inc said they remained fully confident in the aircraft and were closely monitoring the investigation.

Singapore Airlines Ltd, whose regional arm SilkAir operates the 737 MAX 8, said it was monitoring the situation closely, but its planes would operate as scheduled.

South Korea is conducting an emergency inspection on Eastar Jet’s two 737 MAX 8 jets, a transport ministry official said. The airline could not be reached immediately for comment.

Fiji Airways and flydubai said they were confident in the airworthiness of their 737 MAX 8 fleets.

Korean Air Lines said there were no changes to its plans to order 30 737 MAX 8 jets, with the first expected to arrive in April.

Virgin Australia Holdings Ltd said it was too early to comment on the Ethiopian accident or its effect on the 30 737 MAX 8 jets it has on order, while Air Niugini, which has ordered four, said it had “full confidence” in the Boeing product.

Growth fears, China equity plunge haunts world stocks

LONDON (Reuters) – Deepening fears for the health of the global economy pushed world stocks to three week lows on Friday after China exports contracted by a fifth, sending shares in some of the country’s key indexes more than 4 percent lower.

The February data out of Beijing came in well below expectations of a 4.8 percent drop and worsened the already brittle mood on world markets, after European Central Bank slashed growth forecasts and unveiled a new round of policy stimulus on Thursday.

While the timing of the Lunar New Year made it difficult to draw a true signal from the China data noise, the scale of the drop was alarming, especially when coupled with sombre new data from Germany and Norway.

The data knocked Chinese stocks off the 20-month highs hit earlier in the week, with mainland equity indexes plunging more than 4 percent in their worst day in five months. Japan’s Nikkei. closed 2 percent lower.

The dark mood spilled into European stock markets where the STOXX 600 index slipped 0.7 percent, poised for the first weekly drop in a month.

“The trade data from China is a big part of it,” said Fiera Capital’s co-chief Investment Officer Julian Mayo.

“Our own view is that the Chinese economy is slower than people generally think, but I think the world economy is probably slower than people think. So you put those two together and it is not surprising that the trade data was weaker than expected.”

European auto and financial stocks were at the forefront, both sectors slipping nearly 2 percent. A surprise decline in German industrial orders added concerns over the health of China’s economy, while financials nursed losses for a second day after the European Central Bank cut its growth forecasts and pushed out an interest rate hike.

ECB President Mario Draghi said the economy was in “a period of continued weakness and pervasive uncertainty” as he pushed out a planned rate hike and instead offered banks a new round of cheap loans.

MSCI’s 47-country benchmark world index dropped for a fifth straight session – its longest losing streak since December’s rout. The pressure looked to continue on Wall Street, with S&P 500 E-Mini futures easing 0.4 percent.

Yet the cocktail of growth woes and dovish central banks proved a boon for bonds. Germany’s benchmark 10-year bond yield took a step closer to zero percent and both German and French benchmark yields were at their lowest level since 2016 – the year that saw the ECB ramp up stimulus and cut rates to fight deflation and weak economic growth.

“The ECB has had a bullish impact on bond markets and that is set to continue,” said Ciaran O’Hagan, rates strategist at Societe Generale in Paris. “We were not expecting something so clear, so soon, and markets were not either, so bond yields are likely to stay low for longer.”

U.S. 10-year Treasury yields touched a fresh two week low 2.627 percent.

On currency markets, the euro inched up to $1.1216 after tumbling 1 percent on Thursday to touch $1.1176 – its lowest since June 2017.

The dollar weakened 0.2 percent after reaching a new 2019 high against a basket of currencies that includes the euro as traders bet the United States would fare better than Europe in the coming months, despite some soft patches in the U.S. economy.

Investors will be scouring U.S. payrolls data for February due out later in the day, with analysts uncertain how much payback there might be for January’s outsized jump. There was also a chance the jobless rate could fall by more than forecast, given the recent strength in employment.

In commodity markets, oil prices eased as U.S. crude output and exports climbed to record highs, undermining efforts by producer club OPEC to tighten global markets.

Oil futures fell around $1 with U.S. crude at $55.75 a barrel, while Brent crude fell to $65.14.

China February exports tumble the most in three years, spur fears of ‘trade recession’

BEIJING (Reuters) – China’s exports tumbled the most in three years in February while imports fell for a third straight month, pointing to a further slowdown in the economy and stirring talk of a “trade recession”, despite a spate of support measures.

While seasonal factors may have been at play, the shockingly weak readings from the world’s largest trading nation added to worries about a global slowdown, a day after the European Central Bank slashed growth forecasts for the region.

Asian stock markets and U.S. futures extended losses after the data. Chinese stocks sank over 4 percent in their worst day in five months.[MKTS/GLOB]

Global investors and China’s major trading partners are closely watching Beijing’s policy reactions as economic growth cools from last year’s 28-year low. But the government has vowed it will not resort to massive stimulus like in the past, which helped revive demand worldwide.

February exports fell 20.7 percent from a year earlier, the largest decline since February 2016, customs data showed. Economists polled by Reuters had expected a 4.8 percent drop after January’s unexpected 9.1 percent jump.

“Today’s trade figures reinforce our view that China’s trade recession has started to emerge,” Raymond Yeung, Greater China chief economist at ANZ, wrote in a note.

Imports fell 5.2 percent from a year earlier, worse than analysts’ forecasts for a 1.4 percent fall and widening from January’s 1.5 percent drop. Imports of major commodities fell across the board.

That left the country with a trade surplus of $4.12 billion for the month, much smaller than forecasts of $26.38 billion.

Analysts warn that data from China in the first two months of the year should be read with caution due to business disruptions caused by the long Lunar New Year holidays, which came in mid-February in 2018 but started on Feb. 4 this year.

But many China watchers had expected a weak start to the year as factory surveys showed dwindling domestic and export orders and the Sino-U.S. trade war dragged on.

“Seasonal distortions around the Chinese New Year holiday has added noise to the export data in the past two months, and in our view explain most of the surprise (relative to consensus),” said analysts at Goldman Sachs, whose estimate for a 20 percent export drop was the most pessimistic in the Reuters poll.

But they noted that export momentum on a three-month basis has moderated significantly since the third quarter last year and said “growth is likely to remain soft in the near future.”

TRADE WAR
The increasingly weak China data comes amid months of intense negotiations between Washington and Beijing aimed at ending their trade dispute.

On Wednesday, the U.S. reported its goods trade deficit with China surged to an all-time high last year, underlining one of the key sticking points.

China’s data on Friday showed its surplus with the United States narrowed to $14.72 billion in February from $27.3 billion in January, and it has promised to buy more U.S. goods such as agricultural products as part of the trade discussions.

U.S President Donald Trump said on Wednesday that trade talks were moving along well and predicted either a “good deal” or no deal between the world’s two largest economies.

Trump postponed a sharp U.S. tariff hike slated for early March as the talks progressed, but both Washington and Beijing have kept previous duties in place.

The Chinese government’s top diplomat, State Councillor Wang Yi, said on Friday that talks had made substantive progress, and that the two countries’ relations should not descend into confrontation.

But the New York Times reported that Chinese officials are leery of continued discussions and don’t want to commit China to structural changes in its economy.

WORLD’S GROWTH ENGINE SLOWING
China’s economy was already slowing last year before trade tensions escalated, due in part to a regulatory clampdown on riskier lending that starved smaller, private companies of financing and stifled investment.

Even if a trade deal is reached, its exporters will have to contend with weakening demand globally, particularly in Europe. China’s exports to all of its major markets fell across the board last month.

The government is targeting economic growth of 6.0 to 6.5 percent in 2019, Premier Li Keqiang said at Tuesday’s opening of the annual meeting of parliament, a lower target than set for 2018.

Actual growth last year slowed to 6.6 percent, and is expected to cool further to 6.2 percent this year. Many analysts expect a rocky first half before a flurry of stimulus measures start to stabilize activity around mid-year.

China’s slowdown and the trade war are having an increasing impact on other trade-reliant countries and businesses worldwide.

Imports from Japan sank 19.3 percent in February compared with a month earlier, Chinese customs data showed.

On Thursday, automotive chipmaker Renesas Electronics Corp said it plans to halt production at six plants in Japan for up to two months this year as it braces for a further slowdown in Chinese demand.

Taiwan reported its biggest export drop in over 2-1/2 years on Friday, with shipments to China down 10.4 percent. Like China, Japan and South Korea, its hi-tech manufacturers are also being hurt by a global downturn in demand for electronics from memory chips to smartphones.

Venezuela hit by major blackout, government blames ‘sabotage’

CARACAS (Reuters) – A major power outage hit crisis-stricken Venezuela on Thursday, according to Reuters witnesses, a problem the government of President Nicolas Maduro quickly blamed on “sabotage” at a hydroelectric dam that provides much of the country’s power.

Electricity outages are frequent in Venezuela, where the economy is collapsing under hyperinflation, with chronic shortages of food and medicine and a mass emigration of more than 3 million citizens.

Critics say corruption and under investment have left the country’s power grid unable to function, while Maduro says the problems are intentionally created by political adversaries.

Crowds flooded a main avenue of Caracas. Many people said they expected they would have to walk several hours to their homes because the few buses on the streets were full and the city’s metro system was shut down.

“The person responsible for this is named Nicolas Maduro,” said Pedro Fernandez, 44, a systems engineer in the Altamira neighborhood of Caracas, on his way by foot to the other side of town.

“This is just the tip of the iceberg given all the things we’re suffering.”

Local media and Twitter users reported that the outage was affecting the capital of Caracas as well as 15 of the country’s 23 states. A reporter for state television described it as a “national blackout.”

“They’ve attacked the generation and transmission at the Guri (hydroelectric dam), the backbone of the electricity system,” said Electricity Minister Luis Motta via state television, without offering evidence.

He said service would be restored within around three hours.

As trade wars rage, Emerson plots new U.S. expansion

Ferguson, Mo. (Reuters) – In 2009, the chief executive of Emerson Electric Co. bluntly told investors at a Chicago conference what many of his counterparts at other manufacturing firms would only say privately.

“I’m not going to hire anybody in the United States. I’m moving,” David Farr said as he blasted U.S. taxes and regulations and called it an easy decision to expand in India and China.

Farr’s flash of candor was emblematic of an era of free trade, globalization and offshoring of U.S. jobs – one that has now come under attack in the trade wars launched by U.S. President Donald Trump.

A decade later, Farr has made a stunning reversal: Emerson now plans to build at least three new U.S. plants and is already expanding existing domestic operations. Farr saw a new era of U.S. protectionism coming before Trump’s election – and started planning accordingly, he said in an interview with Reuters at the company’s sprawling headquarters near St. Louis, Missouri.

“For the first time now, I’m looking for best-cost U.S. locations” to build factories, he said.

Trump’s election, Farr said, accelerated a political shift against free trade policy that is now transforming many U.S. firms’ domestic investment strategy. Protectionist policies — especially toward China — are now a rare point on which many Democrats and Trump agree, relegating formerly bold Republican free traders to the sidelines.

Emerson has committed $250 million for new U.S. facilities through 2021, part of a larger domestic investment in existing operations, including a new headquarters and a factory renovation at its Wisconsin garbage-disposal business. Emerson spent $407 million on U.S. capital projects last year, a 38 percent jump from the year before, and plans to spend $425 million this year.

Those investments have added 2,500 employees, Farr said. Emerson declined to say how many jobs the new factories would create.

Emerson, a diversified manufacturer with $17.4 billion in sales last year, provides dozens of industries with thousands of products, from tools and large industrial valves to refrigeration, lighting and climate control systems. Its best-known consumer brand may be the InSinkErator garbage disposal.

Farr’s new take on U.S. investment reflects a broader questioning of overseas expansions, especially in China, for both political and operational reasons. A survey of top managers at 500 U.S. companies conducted in December by investment bank UBS AG found that 31 percent have moved or are moving production facilities to avoid tariffs. Fifty-eight percent said they expect tariffs to “have a positive impact on domestic investment.”

It remains unclear, however, whether and how much the trade policy upheaval will benefit U.S. workers. Many firms fleeing China to avoid U.S. tariffs are not moving to the United States, often choosing locations in Southeast Asia. Those that are expanding U.S. operations are trying to maximize automation to minimize labor costs, and some U.S. industries – such as consumers of steel – have said they plan to cut jobs because tariffs have raised their costs.

The renewed domestic focus by Emerson, a major employer of high-skilled workers, nonetheless stands out as a victory for Trump’s protectionism. Emerson has been a poster child for globalization, and its CEO is among the nation’s most influential manufacturing executives. Farr just completed a two-year term as chairman of the National Association of Manufacturers, the sector’s main lobbying organization.

Emerson once had an overwhelming U.S. and European focus. But that changed as it joined the stampede of manufacturers moving to emerging markets. When Farr became CEO in 2000, 8 percent of Emerson’s sales were in Asia. Last year, that hit 22 percent, and Emerson now has 26,000 employees in the region, slightly more than in the U.S. and Canada. Most of the company’s 215 factories sprinkled around the globe are now outside the U.S.

But one of Farr’s first moves after Trump’s election was to assign a task force of top managers to adapt the firm’s investment plans to a less certain trade environment. The group has produced a top-ten list of potential U.S. locations for new plants.

TURNING AGAINST TRADE
Free trade deals once had almost universal support among Republicans and broad support among Democrats. Farr noted that it was Democratic President Barack Obama who negotiated the Trans-Pacific Partnership (TPP), which Democratic presidential candidate Hillary Clinton once called the “gold standard” of trade agreements. But Clinton turned against the deal during the campaign as Trump’s attacks on trade deals drew applause across the industrial Midwest.

Trump withdrew the United States from the sweeping Pacific accord immediately after his election, and many Republican free-traders have since gone silent on the issue or adopted variations of the president’s rhetoric.

“You have a growing number in the Republican party aligned with what the President calls ‘America first’ – what others call isolationism,” said Andrew Downs, director of the Mike Downs Center for Indiana Politics at Purdue University Fort Wayne.

The tax reform passed by Republicans has also made the U.S. a better place to invest by slashing taxes on businesses, Farr said, saving Emerson $189 million last year. The tax cuts enabled Emerson to grant a 2.9 percent general wage increase worth $42 million and better benefits.

Some decisions remain in flux as trade disputes simmer. Emerson had long planned a new factory in Mexico to serve North America, but broke construction into two phases pending the outcome of a revised U.S. trade agreement with Canada and Mexico that awaits congressional approval. The first phase is underway, but the second will only be built if the trade deal goes forward.

Forces beyond politics are pushing manufacturers like Emerson to reconsider investments in China, including rising labor and logistics costs there; worries about transferring intellectual property to state-run Chinese firms; and emerging technology to automate factories in high-wage countries.

Farr said his meetings with candidate Trump during the campaign convinced him he was serious about overhauling U.S. trade relationships. But Emerson’s renewed commitment to U.S. manufacturing is also part of a larger move by global manufacturers to produce more goods in the regions where they are consumed to save on transportation costs.

Foreign companies are also recalibrating, including Dutch multinational Koninklijke Philips NV, one of the world’s largest electronics companies, which last year relied on the United States for 35 percent of its sales. CEO Frans van Houten told investors on a call in January that he is stepping up efforts — like Emerson — to produce more goods where they sell them, moving away from a model of factories specializing in products that are then shipped globally.

The push is visible in trade data, said Susan Lund, a partner at McKinsey & Company who studies trade flows. In 2007, 28 percent of global production of goods was traded — moving from one country to another. That share has dropped to 22.5 percent.

Emerson’s industrial valve and controls business is one area where Farr plans to move factory capacity to the United States to serve customers there. Emerson produces valves used in everything from fracking to oil refineries and has sprawling research and production facilities in Marshalltown, Iowa, which this fiscal year will receive a $22 million capital investment and three dozen new jobs.

U.S. valve factories produced only about half the goods it sold domestically in 2017. Emerson plans to push that to 90 percent by 2021.

“We’re looking at two new facilities in Texas,” Farr said. “That will mean taking capacity, and jobs – out of Europe and some out of China – and bringing it to Texas.”