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Asia’s surging fuel exports depress refining industry profits

FILE PHOTO: FILE PHOTO: Men fish near an oil refinery in Kawasaki, near Tokyo
FILE PHOTO: Men fish near an oil refinery in Kawasaki, near Tokyo July 5, 2012 REUTERS/Toru Hanai/File Photo/File Photo

February 22, 2019

By Henning Gloystein

SINGAPORE (Reuters) – Asia’s biggest oil consumers are flooding the region with fuel as refining output is exceeding consumption amid a slowdown in demand growth, pressuring industry profits.

Since 2006, the Asia-Pacific has been the world’s biggest oil consuming region, led by traditional industrial users South Korea and Japan along with rising economic powerhouses China and India.

Yet overbuilding of refineries and currently sluggish demand growth have caused a jump in fuel exports from these demand hubs.

Car sales in China, the world’s second-biggest oil user, fell for the first time on record last year, and early 2019 sales also remain weak, implying a slowdown in gasoline demand.

For diesel, China National Petroleum Corp in January said it expected demand to fall by 1.1 percent in 2019. That would be China’s first annual demand decline for a major fuel since its industrial ascent started in 1990.

The surge in fuel exports combined with a 25 percent jump in crude oil prices so far this year has collapsed Singapore refinery margins, the Asian benchmark, from more than $11 per barrel in mid-2017 to just over $2.

Combine the slumping margins with labor costs and taxes and many Asian refineries now struggle to make money.

The squeezed margins have pummeled the stocks of most major Asian petroleum companies, such as Japan’s refiners JXTG Holdings Inc or Idemitsu Kosan, South Korea’s top oil processor SK Innovation, Asia’s top oil refiner China Petroleum & Chemical Corp and Indian Oil Corp., with some companies dropping by about 40 percent over the past year.

Jeff Brown, the president of energy consultancy FGE, said the surge in exports and resulting oversupply were a “big problem” for the industry.

“The pressure on refinery margins is a case of death by a thousand cuts… Refinery upgrades throughout the region are bumping up against softening demand growth,” he said.

GRAPHIC: Asia refining industry – https://tmsnrt.rs/2EkfMBa

GRAPHIC: Asia refined oil product exports – https://tmsnrt.rs/2EiUTq1

SUPPLY WAVE

The profit slump follows a surge in fuel exports from China, India, Japan, South Korea and Taiwan. Refinitiv shipping data shows fuel exports from those countries have risen three-fold since 2014, to a record of around 15 million tonnes in January.

The biggest jump in exports has come from China, where refiners are selling off record amounts of excess fuel into Asia.

“There is a risk for Asian market turmoil if (China’s fuel) export capacity remains at the current level or grows further,” said Noriaki Sakai, chief executive officer at Idemitsu Kosan during a news conference last week.

But Japan’s and South Korea’s fuel exports have also risen as demand at home falls amid mature industry and a shrinking population. Japan’s 2019 oil demand will drop by 0.1 percent from 2018 while South Korea’s will remain flat, according to forecasts from Energy Aspects.

In Japan, oil imports have been falling steadily for years, yet its refiners produce more fuel than its industry can absorb.

The situation is similar in South Korea, the world’s fifth-biggest refiner by capacity, according to data from BP Plc.

Cho Sang-bum, an official at the Korea Petroleum Association, which represents South Korean refiners, said the surging exports had “triggered a gasoline glut”.

That glut caused negative gasoline margins in January.

Compounding the supply overhang in Asia, fuel exports from the Middle East, which the BP data shows added more than 1 million barrels per day (bpd) of refining capacity from 2013 to 2017, have doubled since 2014 to around 55 million tonnes, according to Refinitiv estimates.

Even more fuel is set to come. Malaysia’s state-owned Petroliam Nasional Bhd is starting up its RAPID refinery, capable of processing 300,000 bpd of crude, while China and India also have several projects coming online this year and next.

“Asia is expected to lead the global refining industry, both in terms of capacity as well as capital expenditure, between 2019 and 2023,” data analytics firm GlobalData said in a report published this week.

“Between 2019 and 2023, 45 new refineries are expected to become operational in Asia,” said the report, adding that this would “increase petroleum products exports” from Asia.

Despite so many refineries coming to the market, the outlook is not entirely bleak.

FGE’s Brown said new regulations by the International Maritime Organization (IMO) that will require shippers to reduce the sulfur content in their fuel from next year meant demand for products like diesel and low-sulfur fuel oil (LSFO) would rise and improve refinery profits.

“The main relief will come as the market shifts into IMO2020 mode in the fourth quarter,” said Brown. “Margins will recover, restoring order to the market.”

GRAPHIC: Middle East refined product exports to Asia – https://tmsnrt.rs/2VbZArc

(Reporting by Henning Gloystein in SINGAPORE; additional reporting by Jane Chung in SEOUL and Yuka Obayashi in TOKYO; editing by Christian Schmollinger)

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Arizona police release graphic video of deadly officer-involved shooting

Arizona police released a video Wednesday that showed a man throwing a wrench at deputies before they shot him to death while responding to a call from family members concerned for the man’s mental health on Friday.

Juan Torres, 39, could be seen wielding a wrench in one hand and a hammer in another in a body camera video released by the Maricopa County Sheriff's Office.

Officers, who were called to the home by the man’s sister, told him to drop his weapons before Torres threw a wrench at one of them. Officers then open fired at Torres who was rushed to a nearby hospital where he died from his injuries.

PHOENIX MAN WHO SUSPECTED WIFE OF AN AFFAIR KILLS HER AND 2 KIDS, SPARES YOUNGEST: POLICE

Maricopa County Sheriff Paul Penzone defended the actions of his officers who he said were forced to deploy deadly force when Torres escalated the situation. Penzone refuted claims that officers could have used tasers instead of drawing their guns.

“What you don’t want is one of the deputies actually leaving their partners behind knowing that an escalation and the likelihood of an engagement is high,” Penzone said.

Torres’ sister, Irma, said the family called 911 so that officers could take their brother to an institution to be evaluated for his mental health issues. The family claims deputies could have used other methods to stop Torres and plans to file a lawsuit against the sheriff’s department, CBS 5 reported.

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"I just wish the sheriff's department, and all police, get more training in situations like this to help people instead of going to this extreme," Rick Torres, Juan Torres' father, told CBS 5. "It just shouldn't have happened, plain and simple, overkill, too much. My son didn't have to die like that."

Source: Fox News National

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The Latest: Ship taken back from migrants arrives in Malta

The Latest on a ship seized by migrants in the Mediterranean (all times local):

8:45 a.m.

A tanker that had been hijacked by migrants it had rescued at sea has arrived in a Maltese port after armed forces restored control to the captain.

Several military personnel with weapons could be seen on board the Turkish oil tanker El Hiblu 1 when it arrived at port in the capital, Valletta, Thursday morning. Armed forces said that the migrants would be turned over to police for investigation.

A Maltese special operations team had earlier boarded the ship, returning control to the captain, who sailed to Malta under military escort.

Authorities in Italy and Malta said that the migrants had hijacked the ship on Wednesday after it rescued them in the Mediterranean Sea, and forced the crew to put the Libya-bound vessel on a course north toward Europe.

___

7:35 a.m.

Malta armed forces say a special operations team has seized a tanker that was hijacked by migrants and it is now heading to a Maltese port with the migrants and crew.

Malta armed forces said Thursday that control of the vessel was returned to the captain and it was being escorted and monitored to Malta, where the migrants will be handed over to police for investigation.

Authorities in Malta and Italy said the migrants had hijacked the cargo ship after it rescued them in the Mediterranean Sea and forced the crew to put the Libya-bound vessel on a course north toward Europe. The tanker had rescued about 120 people before it was taken over in what Italy's interior minister described as "the first piracy on the high seas with migrants."

Source: Fox News World

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Spain’s socialists lead with 31.5 percent ahead of April 28 election: poll

A man walks past an electoral poster of Spain's Socialist (PSOE) leader and current PM Sanchez outside the PSOE headquarters in Madrid
FILE PHOTO - A man walks past an electoral poster of Spain's Socialist (PSOE) leader and current Prime Minister Pedro Sanchez outside the PSOE headquarters in Madrid, Spain, April 12, 2019. REUTERS/Susana Vera

April 21, 2019

MADRID (Reuters) – Spain’s Socialists led in a poll published on Monday in newspaper ABC with 31.5 percent of votes, equivalent to between 134 and 139 seats in the 350-seat parliament, but short of a majority ahead of a general election on April 28.

A coalition of three right-wing parties – People’s Party (PP), Ciudadanos and far-right Vox – would get 45.4 percent of votes, equivalent to between 153 and 162 seats, also be short of the 176 seats needed to secure a parliamentary majority, according to the poll conducted by GAD3.

Socialist Pedro Sanchez could be re-elected as prime minister if he manages to form a parliamentary majority with the support of at least two of an array of parties – far-left Podemos and a Catalan pro-independence group – that backed him last June when he won a vote of confidence against PP’s government at the time.

(Reporting by Joan Faus; Editing by Susan Thomas)

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Out of the police cell and into the polling station: Ukraine’s election monitors

FILE PHOTO: Activists hold a rally in support of foreign citizens, who took part in a military conflict in eastern Ukraine, in Kiev
FILE PHOTO: Members and supporters of the National Corps political movement hold a rally in support of foreign citizens, who joined Ukrainian armed forces and military self-defence battalions and took part in a military conflict in eastern Ukraine, outside the building of parliament in Kiev, Ukraine October 2, 2018. REUTERS/Gleb Garanich/File Photo

March 29, 2019

By Polina Ivanova

KIEV (Reuters) – Andriy Verbetskiy is not a typical election observer. Just days before Sunday’s presidential vote in Ukraine, he was leading several hundred members of an ultra-nationalist group called the National Militia in a protest that ended in clashes with police.

He is one of 363 members of the National Militia movement, a camouflage-clad group known for its appeals to patriotism and promise “to use force to establish order”, who have officially registered to monitor the vote.

Their planned presence in polling stations across the country has caused concern about the prospect of violence during a close election that will decide who leads a country at the hard edge of a standoff between Russia and the West.

The movement, which has repeatedly collided with police, says its members may take control of ballot boxes and close polling stations pending the arrival of police if they detect cheating, setting up possible confrontations.

But it also stresses it aims to work hand-in-hand with police and election officials and the Central Election Commission, asked why it had registered them, said it had no reason to refuse them.

The group is focused on criticizing corruption and the government, although it does not formally support any candidate in the contest, in which President Petro Poroshenko is trailing comic actor Volodymyr Zelenskiy, with former prime minister Yulia Tymoshenko a close third, setting the scene for a runoff vote next month.

Photographs from Wednesday’s protest, outside a Poroshenko campaign rally, showed hundreds of young men carrying anti-corruption banners, many wearing balaclavas, clashing with a cordon of riot police. Some protesters threw flaming flares. Verbetskiy was photographed handcuffed on the ground.

“This happens regularly. Police squeeze us out,” he told Reuters the following day. “They hit me with batons and put restraints on my arms, twisted me up, kicked me in the head,” he said, denying what he said were police accusations of hooliganism and possession of pepper spray and pyrotechnics.

Police in the western Ukrainian town, Vinnytsia, said they had plenty of video evidence proving the protesters were violent, and that the detainees did not lodge any formal complaints about receiving injuries during detention, and refused routine offers of legal and medical aid.

Verbetskiy, asked whether the incident would interfere with his role as an election observer in Vinnytsia, his home town, said no. “The court case is just for a small administrative violation,” he said.

He and three other National Militia members on the election observer register said their main aim was to tackle corruption.

“The challenge is very simple… Our job is to record and to bring any violation to the attention of the police,” said Verbetskiy, who added he has been detained by police several times.

LOCKDOWN

Oleksandr Alfyorov, spokesman for the group’s political party National Corps, which has two members of parliament but is not fielding a presidential candidate, said the National Militia observers had been trained by independent experts.

Their first response to any violation will be to film and report it, he said. However, if they deem it necessary, they will also have the option of imposing a lockdown, closing the polling station and taking the ballot box into their custody until police arrive, Alfyorov added.

Allegations of electoral fraud are already flying around, with Poroshenko and Tymoshenko trading accusations and Zelenskiy implying wrongdoing by his rivals via his jokes.

A recent letter by ambassadors from the G7 group of nations, leaked to RFE/RL, called on Ukraine’s interior minister, Arsen Avakov, to take action to curb the power of what it called “extreme political movements”.

“They intimidate Ukrainian citizens, attempt to usurp the role of the National Police in safeguarding elections, and damage the Ukrainian government’s national and international reputation,” French Ambassador Isabelle Dumont was cited as saying in the letter.

Avakov said the police were in control and critics were perpetuating what he said were two myths.

“The first myth is that radical groups will sabotage the elections… This myth does not reflect reality, since we have enough power to prevent this situation wherever it may occur,” he was cited by Interfax as saying at a meeting of international election monitors on Thursday.

“The second myth is that ‘radical groups are governed by the interior ministry and are Avakov’s personal army’. This myth is more to do with emotions and politics.”

LEGITIMACY

Verbetskiy, 25, has been a member of nationalist movements since he was 15 years old, and met his wife in the movement. He joined the relatively new National Militia a few months ago.

The group is a successor to the ultra-nationalist Azov Battalion which fought pro-Russian separatists in eastern Ukraine in a still-simmering conflict which broke out after Moscow annexed Crimea and the West imposed sanctions on Russia.

Another Western diplomat expressed concern over the impact hundreds of ultranationalist observers may have on the perceived legitimacy of the election’s outcome, in particular that it may feed into Russian attempts to discredit the result.

“Russia paints you as a fascist state. Think about how this looks,” the diplomat said, while stressing that Ukraine did not have a more serious problem with such groups than many other European countries.

In a speech on Thursday, Poroshenko made clear his government was aware of the perception and legitimacy issue.

“I am absolutely confident that we have enough power not to allow any pro-(Russian President Vladimir) Putin, or nationalistic, or small Nazi groups to try to block or to cancel or to attack our election,” he said.

“We are responsible, we understand how important this election is for democracy in Ukraine.”

(Writing by Polina Ivanova; editing by Philippa Fletcher)

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Schumer, Pelosi: Hope Trump Has 'Learned His Lesson' on Border Funding

The Democrats’ leaders in the House and Senate bluntly warned they hoped President Donald Trump “learned his lesson” ahead of an expected request for $8.6 billion to build a long-promised border wall.

In a joint statement, House Speaker Nancy Pelosi, D-Calif., and Senate Minority Leader Charles Schumer, D-N.Y., reminded Trump of his prior defeat in the funding war with Congress.

“Congress refused to fund his wall and he was forced to admit defeat and reopen the government,” the pair wrote about a chaotic month-long government shutdown from late 2018 into 2019.  “The same thing will repeat itself if he tries this again. We hope he learned his lesson.

"President Trump hurt millions of Americans and caused widespread chaos when he recklessly shut down the government to try to get his expensive and ineffective wall, which he promised would be paid for by Mexico," the Democratic leaders said, adding:

“At a time when our country faces challenges about jobs for the future, this money would better be spent on rebuilding America, and on education and workforce development for jobs for the 21st Century.”

The statement positions Congress for a contentious negotiation on the president's fiscal 2020 budget proposal, which is set to be released Monday, The Hill reported.

Trump will request $8.6 billion for barriers along the U.S.-Mexico border, pulling $5 billion from the Department of Homeland Security budget and $3.6 billion from the military construction budget at the Pentagon. The budget proposal also would include $3.6 million in military construction funding to help fund projects affected by the wall.

Related Stories:

Source: NewsMax Politics

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Top Dems want report, now submitted, made public ASAP

Special Counsel Robert Mueller submitted his long-awaited report on the investigation into Russian meddling in the 2016 presidential race and possible collusion with Trump associates on Friday, March 22.

Almost immediately, Democratic leaders reiterated their calls for the report to be made public as soon as possible.

The report was submitted to Attorney General Bill Barr, but the specific contents have not yet been revealed. Mueller is, however, not expected to recommend any further indictments.

House Speaker Nancy Pelosi, D-Calif., and Senate Minority Leader Chuck Schumer, D-N.Y., released a joint statement on the report after the early-evening disclosure on the submission.

“Now that Special Counsel Mueller has submitted his report to the Attorney General, it is imperative for Mr. Barr to make the full report public and provide its underlying documentation and findings to Congress," the statement said. "Attorney General Barr must not give President Trump, his lawyers or his staff any ‘sneak preview’ of Special Counsel Mueller's findings or evidence, and the White House must not be allowed to interfere in decisions about what parts of those findings or evidence are made public."

“The Special Counsel’s investigation focused on questions that go to the integrity of our democracy itself: whether foreign powers corruptly interfered in our elections, and whether unlawful means were used to hinder that investigation," the statement continued. "The American people have a right to the truth. The watchword is transparency.”

Presidential candidates Senator Cory Booker, D-N.J. and Senator Kamala Harris, D-Cal. also joined in on Twitter with similar insistent demands that the report be public.

This is a developing story. Please check back for updates.

Fox News' Elizabeth Zwirz, Alex Pappas and Jake Gibson contributed to this report.

Source: Fox News Politics

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FILE PHOTO: An aerial photo looking north shows shipping containers at the Port of Seattle and the Elliott Bay waterfront in Seattle
FILE PHOTO: An aerial photo looking north shows shipping containers at the Port of Seattle and the Elliott Bay waterfront in Seattle, Washington, U.S. March 21, 2019. REUTERS/Lindsey Wasson/File Photo

April 26, 2019

NEW YORK (Reuters) – U.S. economic growth is running at a 1.1% pace in the second quarter as the gains in exports and inventories recorded in the first quarter are expected to reverse, Morgan Stanley economists said on Friday.

“Our preliminary expectations for growth in the second quarter sees large drags from net exports and inventories after their contributions in 1Q,” they wrote in a research note.

Gross domestic product increased at a 3.2% annualized rate in the first three months of the year, driven by a smaller trade deficit and the largest accumulation of unsold merchandise since 2015, the Commerce Department said earlier Friday.

(Reporting by Richard Leong)

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FILE PHOTO: The Deutsche Bank headquarters are pictured in Frankfurt
FILE PHOTO: The Deutsche Bank headquarters are pictured in Frankfurt, Germany, April 25, 2019. REUTERS/Ralph Orlowski/File Photo

April 26, 2019

By Tom Sims

FRANKFURT (Reuters) – Within hours of the collapse of merger talks with Commerzbank, Christian Sewing scrambled to convince investors and employees that Deutsche Bank can stand on its own two feet.

The Deutsche Bank chief executive told staff, many of whom opposed a merger because of significant job losses, that while he had not been “skeptical” about the Commerzbank talks, he was cautious about the chances of success from the start.

And another top Deutsche Bank executive said on Friday that it had been Commerzbank that initiated the talks, suggesting there was no desperation on their part for a deal.

Commerzbank denied that version of events, ending the apparent truce between the normally highly competitive cross-town Frankfurt rivals over the past six weeks.

German hopes of creating a national banking champion able to challenge global competitors were finally dashed on Thursday when Deutsche Bank and Commerzbank ended their talks due to the risks of doing a deal, restructuring costs and capital demands.

For Sewing, the failure to clinch a deal has left the 49-year-old chief executive of Germany’s largest bank, who took over just over a year ago, with his back to the wall.

Credit ratings agency Standard & Poor’s, which downgraded Deutsche Bank last year, said on Friday that Deutsche Bank “will remain under strain”, adding that it “seems to have acknowledged the need to adjust its strategy”.

Under Sewing, a new leadership has tried to revive Deutsche Bank’s fortunes, but it has faced money laundering allegations and failed stress tests, as well as ratings downgrades.

At the heart of the debate over its future is whether it should focus its business on Germany and draw a line under its costly global ambitions to take on Wall Street’s big guns.

“MARKET PLAY”

Without a deal, Deutsche Bank now finds itself back at the mercy of equity and debt markets, with UBS analysts warning that in a “stress scenario” it could again “be forced into a ‘debt-driven capital increase’ even with solid capital ratios”.

“Deutsche remains a levered market play vulnerable to external events,” the UBS analysts said in a note.

Sewing, along with many analysts, believes Deutsche Bank can go it alone in the short-term, but will be counting on a turnaround in market conditions to do so in the long-run given its dependence on volatile investment bank earnings.

“To reach our return objective, we also need to see a revenue recovery in our more market-sensitive business,” Sewing said on Friday after reporting results.

“These revenues are available to us in better market conditions given our leading positions in many of these businesses, but we need to capture them,” he added.

Revenue at Deutsche Bank’s bond trading division fell 19 percent in the first quarter, it said on Friday, underscoring weakness at its investment bank.

If those earnings do not improve, Berlin’s desire to keep its biggest bank out of foreign hands may start to wane.

“Germany’s globally active companies need competitive financial institutions that can support them around the world,” German finance minister Olaf Scholz said on Thursday.

(Writing by Alexander Smith; Editing by Keith Weir)

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Panama's former president Ricardo Martinelli yells to the media while arriving to the Electoral Court in Panama City
Panama’s former president Ricardo Martinelli reacts to the media while arriving to the Electoral Court in Panama City, Panama April 26, 2019. REUTERS/Erick Marciscano

April 26, 2019

PANAMA CITY (Reuters) – Panama’s electoral tribunal has ruled that former President Ricardo Martinelli, who is awaiting trial on wiretapping charges, cannot take part in elections on May 5 in which he was running for mayor of Panama City and a seat in Congress, a spokesman for Martinelli said on Friday.

“The ruling of the electoral tribunal has disqualified him as candidate,” said the spokesman, Eduardo Camacho, calling the court’s ruling a “political decision.”

Officials at the tribunal did not immediately confirm the ruling, which also was reported in local media in Panama.

Martinelli, a supermarket tycoon who ran the Central American country from 2009 to 2014, was extradited to Panama last June from the United States and charged with spying on 150 people, including politicians, union leaders and journalists.

A judge had previously cleared Martinelli to run for mayor of the capital. His critics vowed to appeal that decision.

(Reporting by Elida Moreno and Stefanie Eschenbacher; Editing by Bill Trott)

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FILE PHOTO: Amazon boxes are seen stacked for delivery in the Manhattan borough of New York City
FILE PHOTO: Amazon boxes are seen stacked for delivery in the Manhattan borough of New York City, January 29, 2016. REUTERS/Mike Segar/File Photo

April 26, 2019

(Reuters) – Shares of Walmart, Target and other U.S. retailers fell on Friday as Amazon.com Inc unveiled a one-day delivery plan for its Prime members in a move to further disrupt the fiercely competitive retail landscape.

The e-commerce giant’s announcement on Thursday could cause other brands, manufacturers, retailers, and logistics companies to have to invest more aggressively to compete with Amazon and its delivery, analysts said.

Retailers in recent years have poured billions into ecommerce and faster shipping options and are trying to close the gap with Amazon.

“This is about making it more expensive to catch up and affirms our world view that only the largest and smartest will survive,” Bernstein analyst Brandon Fletcher said.

The move is expected to heighten consumer expectations on e-commerce delivery just like Amazon did with its two-day shipping option for members of its loyalty club Prime, noted analysts.

“The faster you ship, the more people buy,” RBC Capital Markets analyst Mark Mahaney said.

The challenge for non-Amazon players was that very few of the existing logistics and parcel delivery players now have the ability to do nationwide one-day delivery, Morgan Stanley analyst Brian Nowak said.

“And even fewer can do it at the vast scale and reasonable cost that AMZN would need for Prime delivery,” Nowak said in a note.

Walmart Inc’s shares fell about 3 percent, while Target Corp dropped about 5 percent in morning trade.

Shares of Kohl’s Corp, Macy’s Inc and Nordstrom Inc fell about 1 percent. Grocer Kroger Co was nearly 3 percent lower, while consumer electronics retailer Best Buy Inc dropped 2.1 percent.

(Reporting by Soundarya J and Akanksha Rana in Bengaluru; Editing by Maju Samuel)

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A Chinese woman adjusts a Chinese national flag next to U.S. national flags before a Strategic Dialogue expanded meeting, part of the U.S.-China Strategic and Economic Dialogue (S&ED) in Beijing
A Chinese woman adjusts a Chinese national flag next to U.S. national flags before a Strategic Dialogue expanded meeting, part of the U.S.-China Strategic and Economic Dialogue (S&ED) held at the Diaoyutai State Guesthouse in Beijing, July 10, 2014. REUTERS/Ng Han Guan/Pool (CHINA – Tags: POLITICS BUSINESS)

April 26, 2019

By April Joyner

NEW YORK (Reuters) – Even as the lift from optimism over prospects for U.S.-China trade detente shows signs of wearing off for the wider U.S. stock market, upbeat sentiment around China’s economy could bolster shares of materials companies.

Shares of S&P 500 industrial and technology companies, which were buffeted by last year’s tit-for-tat tariffs as well as slowing global demand, have been very responsive to progress in U.S.-China trade relations and a strengthening Chinese economy. This year, those sectors have outpaced the ascent in the S&P 500, which reached a record closing high on Tuesday.

Materials stocks have not been as sensitive, however, even though they also stand to benefit as a stronger Chinese economy lifts global consumption and industrial output. As China has taken measures to stimulate its economy, its economic data have turned more upbeat. That in turn could aid global growth, which has flagged as a result of China’s cooldown.

“What we’re seeing is China spending more on stimulus: fiscal stimulus and monetary stimulus,” said Kristina Hooper, chief global market strategist at Invesco in New York. “That’s likely to be a positive for materials.”

The People’s Bank of China has cut banks’ reserve requirement ratio five times over the past year and is widely expected to ease policy further to spur lending and reduce borrowing costs. The stimulus appears to have boosted Chinese economic data, with factory activity growing in March for the first time in four months.

Yet so far in 2019, the S&P 500 materials index has underperformed the S&P 500 at large, rising just 11.9% compared with 16.7% for the benchmark index. Moreover, it is among the biggest decliners in the period since the S&P’s previous record closing level on Sept. 20. The materials index has fallen 7% over those seven months, versus a 5.2% gain for technology and a 3% loss for industrials. Only the energy index has dropped more over that period.

A trade agreement could serve as a catalyst for a bump in materials shares as a drag on China’s economy is lifted, some market strategists say. Some commodity prices, including those for copper and oil, have ascended this year as the prospects for the global economy have somewhat brightened.

“It all goes back to the global growth outlook,” said Andrea DiCenso, portfolio manager for alpha strategies at Loomis Sayles in Boston. “With the front run in hard data, we’re beginning to see a pretty significant rally.”

Additionally, a trade agreement is expected to include commitments from China to purchase higher quantities of U.S. products such as soybeans, which could benefit companies that make agricultural chemicals, including DowDuPont Inc and CF Industries Holdings Inc.

CF Industries is scheduled to report quarterly results after the bell on Wednesday, and DowDuPont is scheduled to report before the market open on Thursday.

To be sure, even with a trade agreement, some materials companies could face price pressures. Shares of Freeport-McMoRan Inc fell 10.1% on Thursday after the copper mining company posted a lower-than-expected profit as its production slipped and its costs rose.

A rollback of tariffs on Chinese imports, particularly aluminum and steel, would likely prompt a fall in some commodity prices, which could hurt prospects for certain materials companies, said Gene Goldman, chief investment officer at Cetera Investment Management in El Segundo, California.

Even so, those drawbacks may be outweighed by the support for global demand fostered by a U.S.-China trade agreement.

“You could see a number of companies with lowered expectations bring them back up as they talk favorably about the impact that a trade deal would have on them,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

(Reporting by April Joyner; additional reporting by Sinéad Carew; editing by Jonathan Oatis)

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