Dow Jones Newswires , 18 May 2017 05:05
European Morning Briefing: Trump Agenda Fears Continue to Damp Sentiment
Stocks to extend losses; EUR/USD 1.1159-62; Bund yield 0.378%; Brent crude $52.07; gold $1258.90
-EU Remains Skeptical of Laptop Flight Ban
-EU to Fine Facebook Over WhatsApp Acquisition
-Japan's Economy Extends Growth Sequence; Economy Minister Says Country Not Yet Out of Deflation
-BOJ's Iwata Says Central Bank Hasn't Decided on Stimulus Exit Plan
-Irish Prime Minister Kenny to Step Down
Watch For: Greek MPs vote on new austerity measures; France ILO unemployment; U.K. retail sales; earnings from 3i Group, Investec, Merck KGaA
The U.S. government made its case to European officials on Wednesday on why it may expand a ban on laptops in airplane cabins to flights to the U.S. from Europe, despite strong opposition from the airline industry.
Washington has been weighing whether to include flights arriving from Europe in an existing ban on passengers taking laptops, tablets and other larger electronic devices on flights originating from 10 Middle East and North Africa airports. The Trump administration imposed the ban in March, citing security concerns.
European officials have expressed frustration over U.S. reluctance to share specific details about why it imposed the existing ban. President Donald Trump last week shared information on the threat to planes with Russian officials. The information had been collected by Israeli intelligence and was meant for U.S. eyes only, U.S. officials familiar with the matter said.
No decision was taken on whether to expand the ban to other countries including Europe, a U.S. administration official said, adding Washington was still considering the possibility in light of threats and "innovative methods" terrorists are devising to smuggle explosives aboard planes in consumer devices.
The European Union's antitrust watchdog is poised to fine Facebook on Thursday for giving "incorrect or misleading information" to investigators who were probing its purchase of chat app WhatsApp in 2014, according to people familiar with the matter.
The European Commission's fine is expected to be "significant" to set an example for other companies registering their mergers for review with EU authorities, according to one of the people familiar with the matter.
The commission could fine the company up to 1% of its world-wide revenue. That could work out to as much as $276 million based on Facebook's 2016 revenue.
Japan's economy picked up speed in the first three months of 2017, extending its most recent stretch of growth under Prime Minister Shinzo Abe to five quarters, the longest expansion in Japan since 2006.
Stronger global demand especially for tech-related items and an improvement in household spending in the first quarter helped push up gross domestic product by 2.2% on an annualized basis from the previous three months. The pace of expansion was faster than a growth rate of 1.8% forecast by economists polled by The Wall Street Journal.
Bank of Japan Deputy Gov. Kikuo Iwata said Thursday that the central bank hasn't decided on how it would unwind stimulus policies.
"When we face the need for a stimulus exit in the future, raising interest rates on banks' deposits at the BOJ can be one option of raising short-term interest rates," Mr. Iwata said.
European stocks face further losses Thursday, extending a global selloff as doubts have increased that the Trump administration would be able to deliver on its policy goals due to mounting political problems.
At 0341 GMT, DAX futures were down 50 points and FTSE 100 futures were down 31 points.
The latest political developments have put President Donald Trump's administration on the defensive and investors world-wide are more worried about his ability to push through proposals on tax cuts, deregulation and infrastructure spending.
"It appears the market has come alive with the dynamic of volatility, which will no doubt be welcomed by many of the shorter-term traders out there," wrote IG's Chris Weston.
"That being said when so many global markets were at multi-year, if not all-time highs, you know there would be some pain being felt out on the floors today," Mr. Weston noted.
Asian equity markets were broadly lower, with Japan's Nikkei Stock Average down 1.4% and Australia's S&P/ASX 200 down 1.2%.
"Markets have begun to price in a substantial delay in enacting Trump's signature tax reforms legislation," said Zhu Huani, an economist at Mizuho Bank in Singapore.
Meanwhile, stocks in China were more resilient, as expectations for more infrastructure spending--particularly focused on a new economic region near Beijing--boosted construction and property stocks.
The Shanghai Composite Index and Shenzhen Composite Index were both down 0.3%, while Hong Kong's Hang Seng Index was 0.2% lower.
U.S. stocks slid Wednesday, with the Dow Jones Industrial Average closing down 373 points, or 1.8%, to 20607. The S&P 500 fell 1.8% and Nasdaq lost 2.6%.
The dollar steadied somewhat in Asian trade having sank Wednesday, giving back its postelection rally as confidence in the Trump administration's ability to deliver on its economic proposals waned.
"The administration's ability to push some of these things through over a reasonable time frame may well be compromised," said Shaun Osborne, chief foreign-exchange strategist at Scotiabank. "It's certainly conceivable..that the dollar rally has topped out."
The dollar slid 1.5% against the Japanese yen, which investors often flock to during times of market uncertainty. Hedge funds and other speculative investors cut bullish bets on the dollar to $11.8 billion in the week through May 9, the lowest level since early October, according to the Commodity Futures Trading Commission. Bets on a stronger dollar had swelled above $28 billion in December.
At 0350 GMT USD/JPY was 111.03-04, EUR/USD was 1.1159-62 and GBP/USD was 1.2965-67.
U.S. government bonds posted the biggest one-day rally in nearly a year Wednesday as U.S. political jitters drove investors into the bunker of haven assets.
The 10-year Treasury yield settled at 2.216%, the lowest close since April 19, down from 2.329% Tuesday. It was the yield's biggest one-day slide since June 27, 2016 when investors rushed into the bunker of Treasury debt following the U.K.'s referendum to leave the European Union.
The yield premium investors demanded to hold the 10-year Treasury note relative to the two-year note fell to 0.96 percentage point, the lowest since late October. Other haven assets also gained ground, including German bunds and U.K. gilts.
Japanese super-long government-bond yields were lower Thursday, with the 20-year yield down 0.02 percentage point at 0.57% while the 40-year dropped 2.5 basis points to 1.035%.
Oil eased back slightly in Asian trading following gains in the U.S. after data showed that stockpiles of oil and fuel continued to drop and oil production fell for the first time since February.
U.S. oil stocks fell by 1.75 million barrels last week-the sixth consecutive weekly decline-as refiners ramped up their purchases of crude, according to the U.S. Energy Information Administration.
The decline fell short of the 2.2-million-barrel decline forecast by analysts and traders surveyed by The Wall Street Journal, but was a more bullish figure than the 882,000-barrel-increase reported Tuesday by the American Petroleum Institute.
CBA's Vivek Dhar is upbeat about oil's near-term direction ahead of next week's OPEC meeting, adding that recent dollar weakness is good for the commodity.
At 0341 GMT, June WTI futures were 0.3% lower at $48.93/barrel and July Brent was down 0.2% at $52.07.
Following gold futures' biggest gain in 2 months during the U.S. session, prices edged lower in Asia Thursday.
"Gold is likely to remain a sought-after asset," said ANZ. The dollar has fallen to 7-month lows, good for the safe-haven asset, as is the selloff in equities.
At 0211 GMT, spot gold was down 0.2% at $1,258.90/troy ounce.
(MORE TO FOLLOW) Dow Jones Newswires
May 18, 2017 00:05 ET (04:05 GMT)
2017 Dow Jones & Company, Inc.
Dow Jones Newswires , 18 May 2017 05:05
European Morning Briefing: Other Top Stories
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President Donald Trump is meeting on Wednesday with four candidates to lead the Federal Bureau of Investigation, including Acting Director Andrew McCabe and former Sen. Joe Lieberman, the White House said Wednesday. Donald Trump Meets With Four Candidates to Lead FBI
THE next financial crisis will be worse than the collapse seen in 2008, and investors should seek shelter from the storm in precious metals and crypto currencies, according to an analyst who has predicted a triple market burst.
Dow Jones Newswires , 19 May 2017 12:03
European Morning Briefing: Stocks to Steady But Doubts Remain
Stocks to post modest rebound; EUR/USD 1.1108-11; Bund yield 0.347%; Brent crude $52.86; gold $1249.55
-Greece’s Parliament Approves New Cuts, Austerity Measures
-Mester Says Fed Should Press Forward With Rate Rises
-Trump Denies He Asked Comey to End Flynn Probe
Watch For: Eurozone current account, flash consumer confidence indicator; Italy balance of payments; earnings from Euronext
Greece’s Parliament approved late Thursday a raft of fresh austerity measures and economic reforms that the country must implement in the next four years to unlock a much-needed cash payment to meet upcoming debt obligations.
Meanwhile, Greece’s most influential creditors — Germany and the International Monetary Fund — remain deadlocked over debt restructuring.
The measures, totaling more than EUR4 billion, were passed by a vote of 153 lawmakers from the ruling left-wing Syriza party and its junior coalition partner, the Independent Greeks, securing a majority in the 300-seat parliament.
The approval paves the way for eurozone finance ministers to clear the next disbursement of funds to Greece when they meet Monday. At that Eurogroup meeting, they will also discuss ways to lighten the country’s crushing debt burden.
Optimism is growing for a breakthrough at the meeting, but many obstacles remain. Officials involved in the talks warn existing disagreements could delay any deal to mid-June.
The IMF and Germany have argued over how tight a budget Athens must maintain in future years to receive debt relief. However, according to several EU officials, the creditors have now agreed that Greece needs to maintain high primary surpluses of 3.5% of its gross domestic product for the next five years.
Federal Reserve Bank of Cleveland President Loretta Mester offered an upbeat economic outlook Thursday and said more rate rises lie ahead for the central bank.
“I don’t believe that removing accommodation calls for an increase in the fed-funds rate at each meeting, but I do anticipate more than the one increase per year seen in the past two years,” Ms. Mester said. A steady course of rate rises “will help prolong the expansion, not curtail it,” and “it will help avoid a buildup of risks to macroeconomic stability that could arise if the economy is allowed to overheat.”
But the policy maker declined to say when she would like the Fed to boost the cost of borrowing. She said, “I don’t usually give a date, because we are dependent on how the economy evolves.”
Ms. Mester added: “The exact timing of when and where is not the way I like to view policy. I like to view policy in terms of a path, and whether it’s consistent with my…outlook, and the progress we’ve made.”
President Donald Trump flatly denied that he asked former FBI Director James Comey to end his investigation of former National Security adviser Mike Flynn.
At a press conference Thursday alongside Colombia’s president, Mr. Trump was asked whether he had asked Mr. Comey to end his probe. Mr. Trump responded: “No. No. Next question.”
On Thursday, Mr. Trump also reiterated his position that he never colluded with Russia during last year’s election, although he left open the possibility that others may have done so.
“Believe me, there’s no collusion,” the president said, before adding a qualification: “I can only speak for myself.”
European stocks should start Friday’s session in positive territory following Wall Street’s rebound, with DAX futures up 9 points and FTSE 100 futures up 26 points.
Stock markets in the Asia-Pacific region were mostly steady but caution dominated as investors continue to take a wait-and-see approach amid the week’s developments, which were centered on U.S. politics but also included troubles in Brazil after asset prices there plunged on Thursday amid a scandal involving that country’s president.
After two days of selling, Asian stocks appear to be consolidating.
“However, I think that a lot of traders are probably yet to be convinced that we have seen the end of this turmoil, and that I think this accounts for the steady market action with no real signs of any bargain-hunting” early Friday, said Ric Spooner, chief market analyst at CMC Markets.
Australia again underperformed the region as stocks continue to be pressured by a proposed bank tax on the nation’s biggest lenders. The headline stock index was down 0.5%, putting the week’s decline above 2% and on pace for its worst week since October.
Other markets were more muted, with the Nikkei Stock Average down 0.2% ahead of the midday break and the Hang Seng up 0.1%.
U.S. stocks jumped Thursday as investors piled into shares of financial and technology companies.
The Dow industrials rose 0.3%, the S&P 500 added 0.4%, and the Nasdaq Composite rose 0.7%.
Several traders said they couldn’t point to any specific news behind the moves, which intensified in afternoon trade. Some said buyers were likely stepping in to take advantage of Wednesday’s selloff, which sent the Dow industrials on its steepest one-day decline since September.
“A one-day move didn’t cause any panic,” said Mohit Bajaj, director of ETF trading solutions at brokerage WallachBeth Capital.
The dollar edged slightly lower in Asia, having rebounded Thursday.
The WSJ Dollar Index, which measures the U.S. currency against 16 others, was recently down 0.1% at 89.17. The index had gained 0.2% during the U.S. session.
Markets have been rattled by reports that President Donald Trump shared sensitive information with Russian officials and asked then-FBI Director James Comey to back off an investigation of former national security adviser Michael Flynn.
Brad Bechtel, a currency strategist at Jefferies Group, said the political unease “detracts from the economic policies the administration was trying to put into place.” Still, he thinks the dollar could rise in the months ahead as the Federal Reserve moves to raise interest rates.
“You cant ignore the fact that the Fed is tightening, that the U.S. economy is trucking along,” he said. “In the end, the dollar will continue to rise.”
At 0350 GMT, USD/JPY was 111.25-26, EUR/USD was 1.1108-11 and GBP/USD was 1.2954-56.
U.S. government bonds pulled back Thursday after the biggest one-day price rally in nearly a year.
Demand for haven bonds retreated as upbeat labor market and manufacturing data deflated some worries over the U.S. growth outlook, offsetting political uncertainty surrounding the Trump administration and a brewing political crisis in Brazil.
“The economic fundamentals remain solid,” said Eric Souza, senior portfolio manager at SVB Asset Management. “We are monitoring the (political) developments. I don’t think anybody dramatically changes their asset allocation strategy at this point.”
The yield on the benchmark 10-year Treasury note closed at 2.233%, compared with 2.216% Wednesday. Demand for a $11 billion sale of 10-year Treasury inflation-protected securities soared, another sign the calmer tone in financial markets encouraged some investors to embrace risks.
Oil futures extended gains in Asia Friday as optimism about production cuts being extended next week outweighed ongoing concerns about abundant supply.
OPEC members such as Algeria voiced support for extending the agreement until next March. There is a possibility that participants may look at deeper cuts, although chances of that look slim, analysts said.
At 0359 GMT, June WTI futures rose 0.8% to $49.73/barrel and July Brent was up 0.7% at $52.86/barrel.
London spot-gold prices ticked up in Asia following a pullback in the U.S. amid dollar strength and some easing to midweek risk-off sentiment.
With expectations of a June rate hike, which is liable to weigh on prices, “we see downside pressure building on gold,” said CBA, adding that safe-haven demand due to political tensions may continue to support the metal depending on how events unfold.
At 0254 GMT, gold was up 0.3% at $1,249.55/troy ounce.
Yes, fiscal union will be the icing on the clown cake. Bankrupt countries like Ireland and Greece, and countries will huge trade deficits like France and Italy, having the same tax regime as a country with a 30 billion euro a month trade surplus like Germany.