The Goldman Sachs company logo is seen in the company’s space on the floor of the New York Stock Exchange, (NYSE) in New York, U.S., April 17, 2018. REUTERS/Brendan McDermid
March 18, 2019
KUALA LUMPUR (Reuters) – Malaysian prosecutors on Monday said they would issue summonses to units of U.S. investment bank Goldman Sachs in London and Hong Kong, requiring them to respond by June to criminal charges filed against them last year.
Soon after being elected in May, 2018, a new government charged three units of Goldman Sachs for misleading investors by making untrue statements and omitting key facts in relation to bond issues totaling $6.5 billion for state fund 1Malaysia Development Berhad (1MDB).
On Monday, only the Singapore unit of Goldman Sachs appeared at a pre-trial hearing in a Kuala Lumpur court as a respondent.
“Fresh summonses will be served on the United Kingdom and Hong Kong offices of Goldman Sachs ahead of the next court hearing on June 24,” prosecutor Aaron Paul Chelliah told reporters.
The 1MDB scandal played a major role in the electoral defeat that ended Najib Razak’s near decade in power, and a new government led by Prime Minister Mahathir Mohamad promptly re-opened corruption investigations.
Najib, who has consistently denied wrongdoing, is facing multiple criminal charges, mostly linked to 1MDB, and has been barred from leaving the country.
The U.S. Department of Justice (DoJ) has estimated that a total of $4.5 billion was misappropriated by high-level 1MDB fund officials and their associates between 2009 and 2014, including some of the funds that Goldman Sachs helped raise.
Malaysia has said it was seeking up to $7.5 billion in reparations from Goldman Sachs, including $600 million in fees paid to the bank for the bond issues.
Goldman Sachs has consistently denied wrongdoing and said certain members of the former Malaysian government and 1MDB lied to it about how proceeds from the bond sales would be used.
A separate Kuala Lumpur court also set April 15 for prosecutors to serve documents to the defense for former Goldman Sachs banker Roger Ng.
Ng, a Malaysian, was charged on Dec. 19 last year with abetting the bank to provide misleading statements in the offering prospectus for the 1MDB bond sales.
Prosecutor Zaki Arsyad told the court he needed more time to obtain documents as most of them were overseas.
Ng was originally set to be extradited to the United States to face money laundering charges filed against him by the DoJ.
Malaysia, however, has said it may postpone the extradition until Ng can face a domestic trial first.
Tim Leissner, another former Goldman Sachs official, and Malaysian financier Low Taek Jho have also been charged in the United States over the alleged theft of billions of dollars from 1MDB. Leissner has pleaded guilty.
Low, whose whereabouts is unknown, has issued denials of any wrongdoing and has refused to return to Malaysia, saying that the case against him is politically motivated.
(Reporting by Rozanna Latiff; Editing by Simon Cameron-Moore)
FILE PHOTO: Euro, Hong Kong dollar, U.S. dollar, Japanese yen, pound and Chinese 100 yuan banknotes are seen in this picture illustration, January 21, 2016. REUTERS/Jason Lee/Illustration/File Photo
March 18, 2019
By Tommy Wilkes
LONDON (Reuters) – Collapsing asset price volatility has turned ‘carry trading’ into one of investors’ top plays of 2019. Many reckon the run is far from over.
This strategy sees investors borrow in currencies where interest rates are low to invest in countries where yields are high, such as in emerging markets. Investors can pocket the difference, or ‘carry’.
For the trade to work liquidity needs to be plentiful, the global economic backdrop benign and, importantly, currency volatility next to nothing. Broadly, all those conditions seem to be in place.
Volatility, or vol, had been crushed this year by central banks’ decisions to hit the pause button on interest rate rises. Societe Generale analyst Kit Juckes says markets’ “outright boredom” so far in 2019 has been the perfect recipe for carry trade success – FX volatility is near multi-year lows.
As a result, carry trading has returned 5.5 percent in 2019, according to HSBC’s Global FX Carry Index. That follows a fall of 1.4 percent in 2018, when rising U.S. interest rates caused a stampede out of emerging markets, the favored place to earn carry.
The current environment for carry is “textbook”, says Andreas Koenig, head of foreign exchange at Amundi Asset Management.
(GRAPHIC: Speculators long on Mexican peso – https://tmsnrt.rs/2Cg2cxu)
SELL AND BUY
Koenig has been betting on the Turkish lira and Brazilian real, both of which offer yields well into the double digits.
Investors buying 10-year Russian government bonds can earn yields of 8.5 percent, or 8 percent in Mexico. Those returns have been further burnished by currency appreciation — some emerging currencies such as the rouble have firmed as much as six percent against the dollar and euro.
On the other hand, the Japanese yen, Swiss franc and euro tend to be carry traders’ funding currencies of choice, as their low yields make them attractive to sell.
Yields in Switzerland on the benchmark bond return -0.35 percent; in Germany barely 0.07 percent. But the euro has been particularly popular this year as the struggling economy has further delayed policy tightening plans in the bloc.
(GRAPHIC: Comeback for carry – https://tmsnrt.rs/2O2a6iz)
But can the good times last?
Analysts say the carry trade is here for a while, or at least as long as rates remain low and economic data is strong, but not so strong it forces a central bank rethink.
BNP Paribas predicts near-term growth in major economies will be “not too cold, but certainly not hot.
“The tepid economic outlook means we are positive on long carry and short volatility trades,” the bank’s economists wrote last week.
As history shows, the hunt for carry is not without risks.
Should U.S. growth deteriorate, international trade conflicts escalate or the end of the decade-long bull run crystallize, the resulting volatility spike can send “safe” currencies such as the yen, euro and Swiss franc shooting higher, while inflicting losses on riskier emerging markets.
But even in a good carry environment, some high-yield trades may not work. For instance, MSCI’s emerging currency index is up 1.6 percent in 2019 after last year’s 3.8 percent drop, but the gains mask individual poor performances.
Robin Brooks, economist at the Institute for International Finance, notes that since the Federal Reserve’s surprise policy U-turn in January, high-yielders such as South Africa’s rand and Turkey’s lira have actually weakened.
Asian currencies including India’s rupee and the Malaysian Ringgit have gained – a “puzzle” Brooks attributes to expectations of a U.S.-China trade deal rather than investors responding to the Fed’s dovish shift.
(GRAPHIC: Emerging markets currency performance in 2019 png – https://tmsnrt.rs/2Cg2cxu)
Investors have also loaded up their carry trade positions already: speculators are $2.3 billion net long in Mexico’s peso against the U.S. dollar, against a neutral stance in January, according to CFTC positioning data.
(GRAPHIC: Speculators long on Mexican peso – https://tmsnrt.rs/2FbJ996)
Amundi’s Koenig said that following the strong recovery in high-yielding currencies in 2019 “the risk is not only in terms of volatility but in underlying levels.
“Carry from here is not my favorite strategy,” he said. “In a late-cycle stage, it’s not very likely that it holds forever.”
(Graphics by Ritvik Carvalho; Editing by Toby Chopra)
Asparagus ready for picking is seen in a growing tunnel at Cobrey Farm in Ross-on-Wye, Britain, March 11, 2019. Picture taken March 11, 2019. REUTERS/Peter Nicholls
March 18, 2019
By James Davey and Kate Holton
ROSS-ON-WYE, England (Reuters) – For almost 100 years, Chris Chinn’s family has farmed asparagus in the rolling hills of the Wye Valley in western England.
This year, he fears uncertainty around Britain’s departure from the European Union will keep his eastern European workers away and the asparagus will stay in the ground.
Asparagus grown in Britain is feted by chefs as among the world’s best but the seasonal worker shortage threatens the country’s asparagus industry and the viability of Chinn’s Cobrey Farms business.
It is a predicament shared by many British fruit and vegetable farmers, almost totally reliant on seasonal migrant workers from EU member states Romania and Bulgaria taking short-term jobs that British workers do not want.
At Chinn’s farm, which turns over more than 10 million pounds ($13 million) a year, the workers pick the premium asparagus spears that can grow up to 20 cm a day by hand. Sometimes they pick them twice a day before dispatching them to customers such as Marks and Spencer. and Britain’s biggest supermarket, Tesco.
“It is incredibly clear cut – there is no UK asparagus on your supermarket shelves without seasonal migrant workers,” Chinn, whose great grandfather started as a tenant farmer in 1925, told Reuters.
“We’re really at the point where we either import the workers or we import the asparagus.”
Britain’s asparagus season is short and early – traditionally running from April 23, known as Saint George’s Day, to Midsummer’s Day in mid-June. It will be the first big test of the 2019 seasonal labor crisis.
This year Chinn’s team has had to work much harder to recruit Romanians and Bulgarians who are perplexed by the long Brexit process as Prime Minister Theresa May seeks parliament’s approval for a divorce deal with the EU. They are also wary of the welcome they will receive from Britons, who voted in 2016 to leave the EU.
Though Cobrey Farms has signed up 1,200 workers who are due to start arriving at the end of this month, Chinn fears many will not turn up. He does not think he will be able to harvest the entire crop, meaning valuable asparagus will be left in the fields.
“If we’re 20 percent short of people then we will harvest 20 percent less asparagus,” said Chinn. “UK agriculture’s not a high-margin game, so 20 percent less means we’re in loss-making territory. Fifty percent could sink us.”
Chinn’s concern grew after 20 of the 100 or so workers due to help cultivate the crops in January failed to turn up.
Of 247 workers due to arrive between March 31 and April 6, 125 are yet to book flights, he said. They include 38 who have worked at Cobrey Farms before and stayed in the dozens of static caravans that stand at the foot of the hills on the farm.
Chinn, who voted Remain in the 2016 Brexit referendum, said uncertainty over eastern Europeans’ employment rights and how long they can stay, combined with a fall in the value of the pound, meant Germany and the Netherlands were now considered more attractive destinations.
“They go somewhere which is most straightforward and any, even minor, hurdles you put in their way is just nudging them ever closer to going somewhere else,” he said.
With just 11 days to go until Britain is due to leave the EU, the government is yet to agree a withdrawal arrangement or an extension, meaning the risk of a disorderly “no-deal” Brexit cannot be ruled out.
If Britain agrees on a divorce deal, a transition period will kick in, maintaining freedom of movement until the end of 2020. In the event of no deal, EU citizens arriving after March 29 would need to register to work for more than three months.
Elina Kostadinova, a 28 year-old harvest manager at Cobrey Farms who is from Varna on Bulgaria’s Black Sea, said many workers were worried about coming to Britain because of Brexit.
“They don’t know if they will be welcomed in the country, how long they may be able to stay, how they may be able to travel and what the future may hold,” she said. “It would be wonderful if the UK government could make a decision, so we can relay this message.”
British farms typically pay workers the national minimum wage of 7.83 pounds an hour plus performance-related bonuses.
Chinn said the idea of British workers plugging the gap was fanciful. He does not expect much help from the supermarkets, where sales volumes have already been negotiated for the season and prices have been fixed, barring exceptional circumstances.
Britain’s fruit and vegetable sector relies on up to 80,000 seasonal workers from the EU each year. Having previously been inundated with applications, labor agencies say interest dropped off in 2017 and 2018 as workers from Romania and Bulgaria opted to go elsewhere in the EU.
For the last two seasons, Britain has been short by around 10,000 workers, threatening the food supply and forcing farms to pay higher wages and bonuses. At the end of the summer as workers want to leave, farms will offer free accommodation and to pay the cost of flights to try to persuade them to stay on.
Concordia, a labor agency charity that finds EU pickers for British farms, said it now has to work much harder to recruit.
“U.K. agriculture is definitely entering into a crisis. No labor means no harvesting, which means no fruit and no vegetables on shelves in British supermarkets,” Chief Executive Stephanie Maurel told Reuters.
She was speaking in Moscow after the British government sanctioned a pilot trial for 2,500 workers to enter the country from Russia, Ukraine and Moldova for up to six months over the next two years.
Chinn, who has 3,500 acres of land, wants the government to increase the numbers to 10,000 this summer and over 50,000 in the next couple of years.
“We can’t change this natural cycle of the crop … the crop will come out the ground when it warms up,” he said. “So the key is about not waiting for a total disaster that wipes out large swathes of UK horticulture.”
(Editing by Guy Faulconbridge and Timothy Heritage)
FILE PHOTO – Birds fly in front of Mt. Fuji and a crane at a port in Tokyo, Japan January 25, 2016. REUTERS/Toru Hanai/File Photo
March 18, 2019
By Tetsushi Kajimoto
TOKYO (Reuters) – Japan’s exports fell for a third straight month in February in a sign of growing strain on the trade-reliant economy from slowing external demand and a Sino-U.S. tariff war.
Ministry of Finance data showed on Monday exports fell 1.2 percent year-on-year in February, more than a 0.9 percent decrease expected by economists in a Reuters poll.
It followed a sharp 8.4 percent year-on-year drop in January, marking a third straight month of falls due to declines in shipments of semiconductor production equipment and cars.
The trade data comes on top of a recent batch of weak indicators, such as factory output and a key gauge of capital spending, which have raised worries that a record run of postwar growth may come to an end. Some analysts say a recession cannot be ruled out.
The Bank of Japan last week cut its view on exports and output, while keeping policy unchanged. Yet, extended weakness in exports could put it under pressure to deliver more easing, especially as inflation remains well off its 2 percent target and pressure on businesses and consumers continues to rise.
Slowing global growth, the Sino-U.S. trade war and complications over Britain’s exit from the European Union have forced policy makers around the world to shift to an easing stance over recent months.
The trade war between the United States and China – Japan’s largest export markets – has already curbed global trade.
Monday’s trade data showed exports to China, Japan’s biggest trading partner, rose 5.5 percent year-on-year, rebounding from a 17.4 percent drop in January. However, overall trade to the Asian giant remained weak, as even after averaging effects of the Lunar New Year holiday, China-bound shipments declined 6.3 percent in the January-February period from a year earlier.
Japan’s shipments to Asia, which account for more than half of overall exports, fell 1.8 percent, down for a fourth straight month.
U.S.-bound exports rose 2.0 percent, but imports from the United States grew 4.9 percent, resulting in Japan’s trade surplus with the country declining 0.9 percent year-on-year to 624.9 billion yen in February.
Japan’s still-large surplus with the United States raises concerns among Japanese policymakers and auto exporters that Washington may impose hefty duties on its imports, analysts say.
Imports of Japanese cars make up about two-thirds of Japan’s $69 billion annual trade surplus with the United States, making Tokyo and Beijing targets of criticism by Trump.
(Reporting by Tetsushi Kajimoto; Editing by Chris Gallagher)
A U.S. Dollar note is seen in this June 22, 2017 illustration photo. REUTERS/Thomas White/Illustration
March 18, 2019
By Hideyuki Sano
TOKYO (Reuters) – The dollar licked its wounds on Monday after soft U.S. data increased bets the Federal Reserve will cut rates later this year while the pound hovered near nine-months high on hopes for a delay in Britain’s exit from the European Union.
The dollar’s index against a basket of six major currencies stood at 96.564, having shed 0.81 percent last week, the biggest loss since late August.
Weaker-than-forecast U.S. economic data on Friday cemented expectations the Fed could strike a dovish stance this week, sending U.S. bond yields down to 10-week lows.
U.S. manufacturing output fell 0.4 percent in February, weakening for a second straight month, while factory activity in New York state was softer than expected this month with an index reading of 3.7.
The 10-year Treasuries yield fell to as low as 2.580 percent, its lowest since Jan. 4, while Fed funds futures priced in about 40 percent chance of a rate cut this year, compared to almost zero percent seen earlier this month.
“The 10-year yield closed below 2.6 percent, for the second time this year after closing below that level only on one day at the beginning of year,” said Chotarto Morita, chief strategist at SMBC Nikko Securities.
“If it stays below that level sustainably, it will be the first time since January 2018, when yields started rising on expectations of accelerating growth and inflation following tax cuts. Yields are slipping back as U.S. economic sentiment is cooling down,” he said.
Against this background, many investors expect the Fed to suggest rates will be on hold in the near future and to unveil a plan to end its balance sheet runoff later this year in its meeting ending on Wednesday.
“The focus is on how dovish the Fed will be. I got the impression that markets have gone a bit too far in expecting rate cuts. There’s a risk such views will be rolled back if the Fed’s dot plots show the board members still expect a rate hike this year,” said Ayako Sera, market economist at Sumitomo Mitsui Trust Bank.
As the dollar loses steam, other major currencies rose by default. The euro traded at $1.1328, flat in early Monday trade having gained 0.86 percent, the biggest weekly gain since late September.
The dollar fetched 111.50 yen, slipping from Friday’s nine-day high of 111.90.
The British pound stood not far from last week’s nine-month high of $1.3380, supported by relief that a no-deal Brexit will likely be averted. It last stood at $1.3292.
It is not clear if British Prime Minister Theresa May can secure a support for her Brexit deal in the parliament, which has twice rejected her offer by a wide margin.
May has only three days to win approval for her deal to leave the European Union if she wants to go to a summit with the bloc’s leaders on Thursday.
May is warning hard-line Brexiteers that unless they approved her Brexit divorce deal, Britain’s exit from the European Union could face a long delay and could involve taking part in European parliament elections.
(Editing by Sam Holmes)
FILE PHOTO: The logo of the Organization of the Petroleum Exporting Countries (OPEC) is seen outside their headquarters in Vienna, Austria December 7, 2018. REUTERS/Leonhard Foeger/File Photo
March 17, 2019
By Rania El Gamal, Vladimir Soldatkin and Nailia Bagirova
BAKU (Reuters) – Saudi Arabia said on Sunday OPEC’s job in rebalancing the oil market was far from done as global inventories were still rising despite harsh U.S. sanctions on Iran and Venezuela, signaling it may need to expand output cuts into the second half of 2019.
Russia, which is cutting oil output in tandem with OPEC, also said production cuts would stay in place at least until June, when Washington’s next steps on reducing Iran’s and Venezuela’s oil exports become clearer.
The United States has been increasing its own oil exports steeply in recent months while imposing sanctions on Venezuela and Iran to reduce their shipments to global markets.
Washington’s policies have introduced a new level of uncertainty for OPEC as it struggles to predict the balance of global supply and demand.
“My assessment is that the job still remains ahead of us… We are still seeing inventory builds… We need to stay the course certainly until June,” Saudi energy minister Khalid al Falih said on Sunday.
“We like to remain ready to continue monitoring supply and demand and do what we have to do in the second half,” said Falih as some OPEC ministers met in the Azeri capital of Baku for the monitoring committee of OPEC and its allies like Russia.
OPEC and its allies have cut output by 1.2 million barrels per day – or 1.2 percent of global demand – since January to help rebalance the global oil market and prop up prices.
OPEC is due to meet in April and then again in June to decide its output policies.
The United States has imposed stiff sanctions on OPEC’s third largest oil producer, Iran, but has given some waivers to buyers of its crude until May.
Washington is also trying to oust Venezuela’s current president, Nicolas Maduro, and has imposed sanctions on that country’s oil.
Russian Energy Minister Alexander Novak said it was hard for Moscow and OPEC to plan due to the U.S. sanctions. He said they would have little additional information by their next meeting in April, given that Washington will not yet have announced its new waivers on Iran and that more talks would be needed in May.
“Those sanctions are creating negative trends in the market and are completely distorting the supply and demand picture… They are imposed to help sell goods of the country that is imposing the sanctions, and they create uncertainty,” he said.
Russia has been slow to cut its oil output in line with January targets, saying it is difficult to do so in winter.
Saudi Arabia has therefore cut its own oil output to well below its targets to compensate for other producers but Falih said this would not “continue indefinitely”.
Novak said Russia was now approaching full compliance and was close to cutting 140,000 bpd. Falih said Saudi exports would remain below 7 million bpd in April and March.
(Writing by Dmitry Zhdannikov; Editing by Gareth Jones)
Russian Energy Minister Alexander Novak attends a session of the Russian Energy Week international forum in Moscow, Russia October 3, 2018. REUTERS/Sergei Karpukhin
March 17, 2019
MOSCOW (Reuters) – Russian Energy Minister Alexander Novak said on Sunday that talks need to be held in May to decide on the future steps of an oil output pact between OPEC members and other major oil exporters known as OPEC+.
Novak’s comment was cited in a statement published by the energy ministry of Azerbaijan, ahead of a meeting of OPEC and non-OPEC oil-producing countries scheduled for Monday in Baku.
(Reporting by Nailia Bagirova and Vladimir Soldatkin; Writing by Polina Ivanova; Editing by)
Iranian President Hassan Rouhani gestures to the crowd at a public speech in Bandar Kangan, Iran March 17, 2019. Official Iranian President website/Handout via REUTERS
March 17, 2019
GENEVA (Reuters) – Iranian President Hassan Rouhani formally inaugurated four new phases of South Pars, the world’s largest gas field, on Sunday, according to a statement posted by the Iranian oil ministry on Twitter.
Iran has invested $11 billion to complete the four phases and they will increase the country’s gas production capacity by up to 110 million cubic meters per day, the statement said.
Iranian Oil Minister Bijan Zanganeh said on Saturday that Iran, which share South Pars with Qatar, expects to operate 27 phases by next March.
France’s Total and China National Petroleum Corp (CNPC) suspended investment in phase 11 of South Pars last year after the United States threatened to impose sanctions on companies that do business in Iran.
Zanganeh said on Saturday that talks are continuing with CNPC.
(Reporting By Babak Dehghanpisheh; Editing by Toby Chopra)
FILE PHOTO: Iran’s Oil Minister Bijan Zanganeh talks to journalists at the beginning of an OPEC meeting in Vienna, Austria, November 30, 2017. REUTERS/Heinz-Peter Bader/File Photo
March 16, 2019
(Reuters) – Iranian Oil Minister Bijan Zanganeh said on Saturday frequent U.S. comments about oil prices had created market tensions, the ministry’s news website SHANA reported.
U.S. President Donald Trump, who has made the U.S. economy one of his top issues, has repeatedly tweeted about oil prices and the Organization of the Petroleum Producing Countries. He has expressed concern about higher prices, including last month and ahead of OPEC’s meeting in December.
“Americans talk a lot and I advise them to talk less. They (have) caused tensions in the oil market for over a year now and they are responsible for it, and if this trend continues, the market will be more tense,” SHANA quoted Zanganeh as saying.
U.S. crude futures briefly hit a 2019 high on Friday but later retreated along with benchmark Brent oil as worries about the global economy and robust U.S. production put a brake on prices.
OPEC and its allies including Russia, an alliance known as OPEC+, agreed last year to cut production, partly in response to increased U.S. shale output.
“We do not know whether U.S. waivers would be extended or not, we will do our job but they (the U.S.) say something new every single day,” Zanganeh said.
Washington granted waivers to eight major buyers of Iranian oil after reimposing sanctions on Iran’s oil sector in November, after withdrawing from the 2015 Iran nuclear deal.
(Reporting by Dubai newsroom; Editing by Marie-Louise Gumuchian)