CHINESE
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A man walks past a flower installation set up for the upcoming Belt and Road Forum in front of the Chinese Foreign Ministry in Beijing, China April 18, 2019. Picture taken April 18, 2019. Jia Tianyong/CNS via REUTERS
April 19, 2019
By Ben Blanchard
BEIJING (Reuters) – China’s Belt and Road project is not a “geopolitical tool” or a debt crisis for participating nations, but Beijing welcomes constructive suggestions on how to address concerns over the initiative, the government’s top diplomat said on Friday.
Beijing will host a Belt and Road summit next week which 37 foreign leaders will attend, including some of China’s closest allies, though the United States which has been critical of the project is only sending low level representatives.
The Belt and Road Initiative, as it is formally called, is a key initiative of President Xi Jinping, and envisions rebuilding the old Silk Road to connect China with Asia, Europe and beyond with massive infrastructure spending.
But it has proved controversial in many Western capitals, particularly Washington, which views it as merely a means to spread Chinese influence abroad and saddle countries with unsustainable debt through nontransparent projects.
The United States has been particularly critical of Italy’s decision to sign up to the plan last month, during Xi’s visit to Rome, the first for a G7 nation.
Chinese State Councillor Wang Yi, the government’s top diplomat, told reporters that the Belt and Road scheme had brought real benefits to participating countries.
“This partnership relationship is not a geopolitical tool, but a platform for cooperation,” he said.
“You can’t put hats like ‘debt crises’ onto the head of the Belt and Road, and this is not something any participating country would recognize,” Wang added.
“Of course, there is a development process for the Belt and Road. You can’t get there in one step, and it’s unavoidable it will cause some worries during its development. So we welcome all sides to come up with constructive suggestions,” he said.
CLOSE ALLIES COMING
The number of foreign leaders at the April 25-27 summit is up from 29 last time, mainly from China’s closest allies like Pakistan and Russia but also Italy, Switzerland and Austria.
The United States will not send high-level officials, a U.S. State Department spokesman said earlier this month, citing concerns about financing practices for the initiative.
Wang said there would be Americans at the summit, made up of diplomats, state-level officials, executives and academics, though he did not give details.
“We welcome any country that is interested to take part. When the United States participates, or whether it participates, is up to them to decide,” he added.
While the United States and China are currently working to end a bitter trade war, they have numerous other areas of disagreement, including human rights and U.S. support for self-ruled Taiwan.
China on Monday condemned as “slanderous” criticism U.S. Secretary of State Mike Pompeo made of Beijing’s policies in South America last week.
“The United States has no plans to send high-level officials from Washington to the Belt and Road Forum,” a U.S. Embassy in Beijing spokesman said.
“We call upon all countries to ensure that their economic diplomacy initiatives adhere to internationally-accepted norms and standards, promote sustainable, inclusive development, and advance good governance and strong economic institutions.”
At the first Belt and Road summit two years ago, the United States submitted a diplomatic note to China complaining about North Korea’s participation, though since then Washington and Pyongyang have sought to re-set ties, including with two summits between their leaders.
Wang said North Korea would also take part in this year’s summit, but gave no further details.
“I think this is normal as it’s an economic cooperation initiative. All countries have the freedom to attend, but I think they don’t have the right to prevent any other country from participating. This is an open, inclusive platform.”
More than 150 countries are sending delegations, and there will be some 5,000 guests, Wang said.
(Reporting by Ben Blanchard; Additional reporting by Michael Martina; Editing by Michael Perry)
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The HNA Group logo is seen on the gate of HNA Plaza building in Beijing, China July 4, 2018. REUTERS/Elias Glenn
April 19, 2019
By Jennifer Hughes
HONG KONG (Reuters) – Embattled Chinese conglomerate HNA Group has denied accusations of embezzlement and financial irregularity made by a rival group of shareholders in Hong Kong Airlines (HKA) as the two sides fight for control of the struggling carrier.
The allegations were made by Zhong Guosong and Frontier Investment Partner who between them control 61 percent of HKA’s shares. On Tuesday, they declared they had taken control of the carrier and made Zhong, a former HKA director, chairman after an extraordinary shareholder meeting.
The pair said on Wednesday, via a spokesperson, that an investigation had been launched into “the embezzlement of HKA assets and serious financial misappropriation by HNA Group parties.”
In an emailed statement to Reuters on Friday, HNA said that the allegations “are false”.
“HNA Group is committed to the highest standards of integrity in all of its activities and expects the same of all of its representatives,” it added.
HKA’s website still lists Hou Wei as chairman.
Hou joined HKA in September last year after more than four years with HNA-controlled Hainan Airlines, according to his LinkedIn profile.
HNA holds about 29 percent of HKA, having cut its majority holding two years ago.
This week’s battle comes as HKA is struggling to survive. Earlier this month, airline executives told shareholders the company needed at least HK$2 billion ($254.95 million) to avoid the risk of losing its operating license – and that it swung to a loss of about HK$3 billion last year.
Zhong and Frontier representatives at that meeting, however, demanded details of the 2018 accounts and questioned the close ties between HKA and HNA affiliates, which include loans and equity investments by HKA to HNA groups, according to HKA’s 2017 accounts seen by Reuters.
On Thursday this week, the two sides clashed again when Zhong and Frontier accused HNA of storming HKA’s head offices and removing documents – claims denied by an HKA spokesperson.
HKA said later that day that the extra security staff visible in the lobby and foyer of HKA’s offices were to preserve order that had been disrupted by the shareholder dispute.
On Thursday evening, Hong Kong’s Transport and Housing Bureau said it had met with representatives for both sides and was monitoring the situation.
It added that the Civil Aviation Department had stepped up its oversight of HKA’s flight operations to ensure no disruption over the holiday weekend.
(Reporting by Jennifer Hughes, Kane Wu and Julie Zhu; Editing by Himani Sarkar)
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An employee counts U.S dollar bills at a money exchange office in central Cairo, Egypt, March 20, 2019. REUTERS/Mohamed Abd El Ghany
April 19, 2019
By Tomo Uetake
TOKYO (Reuters) – The dollar steadied against a basket of currencies on Friday after hitting a 2-1/2-week high overnight as data pointed to a sturdy U.S. economy, while the euro was dented by weak manufacturing activity in Europe.
Many financial markets were closed for the Good Friday Easter holiday. Currency markets remain open but volume is expected to be light.
The dollar index, which measures the greenback against a basket of six other major currencies, rose to as high as 97.485 overnight, its highest level since April 2. It last traded at 97.392 on Friday, down 0.1 percent on the day.
U.S. retail sales increased by the most in 1-1/2-years in March as households boosted purchases of motor vehicles and a range of other goods, the latest indication that economic growth picked up in the first quarter after a false start.
The economy’s strength was reinforced by other data on Thursday showing the number of Americans filing applications for unemployment benefits dropped to the lowest in nearly 50 years last week.
“In addition to the recent upticks in Chinese data, the latest U.S. retail sales numbers have helped to ease investor worries about the global economy. It’s pretty quiet trading due to the Easter holiday, though,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.
The picture was less bullish in the euro zone as data on Thursday showed that activity in Germany’s manufacturing sector shrank for a fourth straight month in April.
The euro fell against the dollar to as low as 1.1226, its lowest level in 1-1/2 weeks, after the worse-than-expected data from the Europe’s largest economy.
The single currency was last up 0.1 percent against the U.S. dollar at $1.1242, up 0.1 percent on the day.
In contrast, the weak European data pushed the yen higher to its one-week high of 111.765 yen at one point on late Thursday. The yen last stood at 111.935 yen to the dollar, within the recent narrow range.
The release of Special Counsel Robert Mueller’s report on Russia’s role in the 2016 U.S. election had little impact on markets.
(Reporting by Tomo Uetake; Editing by Kim Coghill)
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FILE PHOTO – The Nintendo booth is shown at the E3 2017 Electronic Entertainment Expo in Los Angeles, California, U.S. June 13, 2017. REUTERS/ Mike Blake
April 19, 2019
By Sam Nussey
TOKYO (Reuters) – Nintendo shares jumped 13 percent in early Tokyo trade on Friday, a day after China’s Tencent won a key approval to begin selling Nintendo’s Switch console in China, the world’s largest games market.
That is the biggest percentage gain since July 2016, when enthusiasm for hit mobile game Pokemon Go sent Nintendo shares rocketing. Friday’s jump sent the stock to its highest level since October and pushed its year-to-date gain to 32 percent.
Nintendo’s U.S.-listed shares rose 12 percent overnight after the Chinese province of Guangdong approved Tencent to distribute the Switch console with a test version of the “New Super Mario Bros. U Deluxe” game.
The Kyoto-based games maker has been hampered by Japanese regulations and the search for a partner in its efforts to bring its hybrid home-portable Switch console to China, holding back the development of console gaming there.
Nintendo shares sold off toward the end of last year over concerns about weakness in its Switch games pipeline. Media reports saying Nintendo will launch a low-price Switch version have helped bolster sentiment in recent weeks.
It remains unclear when the console may go on sale in China, with games needing to clear a separate approval process.
Chinese gaming industry leader Tencent is trying to recover from a lengthy video game approval freeze in China last year. It is listed in Hong Kong, where financial markets are closed on Friday for a national holiday.
(Reporting by Sam Nussey; Editing by Paul Tait and Christopher Cushing)
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FILE PHOTO – A view shows a helmet with the logo of Rosneft company in Vung Tau, Vietnam April 27, 2018. Picture taken April 27, 2018. REUTERS/Maxim Shemetov
April 18, 2019
By Marianna Parraga
MEXICO CITY (Reuters) – President Nicolas Maduro is funneling cashflow from Venezuelan oil sales through Russian state energy giant Rosneft as he seeks to evade U.S. sanctions designed to oust him from power, according to sources and documents reviewed by Reuters.
The sales are the latest sign of the growing dependence of Venezuela’s cash-strapped government on Russia as the United States tightens a financial noose around Maduro, who it describes as a dictator.
With its economy reeling from years of recession and a sharp decline in oil production, Venezuela was already struggling to finance imports and government spending before Washington imposed tough restrictions on state oil company PDVSA in January.
Oil accounts for more than 90 percent of exports from the OPEC nation and the lion’s share of government revenues. Maduro has accused U.S. President Donald Trump of waging economic war against Venezuela.
Since January, Maduro’s administration has been in talks with allies in Moscow about ways to circumvent a ban on clients paying PDVSA in dollars, the sources said. Russia has publicly said the U.S. sanctions are illegal and it would work with Venezuela to weather them.
Under the scheme uncovered by Reuters, Venezuelan state oil company PDVSA has started passing invoices from its oil sales to Rosneft.
The Russian energy giant pays PDVSA immediately at a discount to the sale price – avoiding the usual 30-to-90 day timeframe for completing oil transactions – and collects the full amount later from the buyer, according to the documents and sources.
“PDVSA is delivering its accounts receivable to Rosneft,” said a source at the Venezuelan state firm with knowledge of the deals, who spoke on condition of anonymity for fear of retaliation.
Major energy companies such as India’s Reliance Industries Ltd – PDVSA’s largest cash-paying client – have been asked to participate in the scheme by paying Rosneft for Venezuelan oil, the documents show.
Rosneft, which has heavily invested in Venezuela under President Vladimir Putin, did not immediately respond to a request for comment.
Venezuela’s oil ministry, its information ministry, which handles media for the government, and PDVSA did not respond to questions.
Asked about the transactions, a spokesperson for Reliance said it had made payments to Russia and Chinese companies for Venezuelan oil. The spokesperson said the payments were deducted from money owed by Venezuela to those countries, but did not provide further details.
“We are in active dialogue with the U.S. Department of State on our dealings on Venezuelan oil to remain compliant with U.S. sanctions,” the spokesperson said.
(Reporting by Marianna Parraga in Mexico City; Additional reporting by Luc Cohen in Caracas, Nidhi Verma in New Delhi, Julia Payne in London; Editing by Daniel Flynn, Simon Webb,David Gaffen and Marguerita Choy)
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FILE PHOTO: The logo of Huawei Technologies is pictured in front of the German headquarters of the Chinese telecommunications giant in Duesseldorf, Germany, February 18, 2019. REUTERS/Wolfgang Rattay
April 18, 2019
By Gabriela Mello
SAO PAULO (Reuters) – China’s Huawei Technologies Co Ltd is making a second attempt at cracking the Brazilian smartphone market, the fourth-largest in the world, with the launch of two high-end handsets this month, after its cheaper offerings failed to catch on earlier in the decade.
The move will take Huawei beyond its current role in Brazil as a supplier of cellular network equipment to challenge Samsung Electronics Co and Lenovo Group’s Motorola brand which dominate the local smartphone market.
“Brazil is a market with very significant opportunities for Huawei and we have a competitive portfolio to satisfy consumers’ expectations,” said Ketrina Dunagan, Huawei’s vice president of marketing for the Americas, in a statement emailed to Reuters.
Huawei’s plans for Brazil underscore the rise of Chinese companies expanding in Latin America’s technology and consumer sectors, moving beyond a traditional focus on commodities and infrastructure.
Brazil is a rare Latin American market where Huawei’s phones are still absent from store shelves. The company currently sells handsets in more than a dozen countries in the region, often with a double-digit market share.
Huawei, the world’s third largest smartphone manufacturer, first launched a smartphone in Brazil in 2014, but the Ascend P7 handset met with weak demand and the project was discontinued.
Now, Huawei is planning to import two premium devices from the new P30 Series equipped with high-resolution cameras, the company said, withholding details ahead of the April 30 launch.
“The commercial strategy is completely different this time because the brand is still not well-known by Brazilians,” said a person familiar with the matter, requesting anonymity to speak openly about plans that have not been made public.
Whereas five years ago, Huawei set up as a supplier to mobile carriers, which sell just a tenth of new smartphones in Brazil, this time the company is looking to partner with retail chains that sell more than two-thirds of handsets, the source said.
More cutting-edge models should also help Huawei lure the attention of increasingly sophisticated buyers.
“The Brazilian market has reached a maturity level and manufacturers must bring novelties to convince consumers to replace their smartphones for new ones,” said Renato Meireles, a research analyst at IDC Brasil.
Smartphone sales in Brazil are expected to fall 4.3 percent this year, Meireles added, after a 6.8 percent drop in 2018.
“The first semester is still affected by economic and political turbulences, but sales should improve in the second semester with the arrival of new players”, he said.
(Reporting by Gabriela Mello; Editing by Brad Haynes and Bernadette Baum)
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Terry Gou, founder and chairman of Foxconn, looks on during an announcement of seeking the nomination of Taiwan’s opposition Kuomintang party to run for the island’s presidency, in Taipei, Taiwan April 17, 2019. REUTERS/Tyrone Siu
April 18, 2019
By Yimou Lee
TAIPEI (Reuters) – While Foxconn chairman Terry Gou enters Taiwan’s rancorous political arena free of any political baggage, he could yet find himself weighed down by connections to Beijing forged during his pragmatic commercial rise.
Gou, 68, announced on Wednesday that he would contest Taiwan’s 2020 presidential election, seeking to represent the opposition Kuomintang (KMT) party – a vote that comes after a period of increasing tension between Beijing and the self-ruled island.
After building the world’s largest contract manufacturer from scratch over the past 40 years, Gou’s connections reach as high as Chinese President Xi Jinping and other senior officials. His $40 billion empire has an extensive Chinese footprint of factories producing components for Apple.
The network of Gou, Taiwan’s richest person, also includes extensive U.S. connections, including a friendship with President Donald Trump.
But ties with Taiwan’s key political and security backer are likely to be overshadowed by his ties to a Chinese leadership that refuses to renounce the use of force to unify with an island it considers a wayward province, some analysts and political figures say.
“Because he has a lot of wealth in China … China has some control over him,” said Shane Lee, a political scientist at Chang Jung University in Taiwan.
“So I think the U.S. government would have to be very cautious about him running for political office.”
Gou was not available for comment. Foxconn did not immediately respond to a request for comment.
Many ordinary Taiwanese are fearful of the intentions of Beijing’s Communist Party towards the staunchly democratic island.
Tensions were highlighted on Monday again as Chinese bombers and warships conducted drills around the island, prompting Taiwan to scramble jets and ships to monitor the Chinese forces.
Some analysts believe that Gou’s ties with Beijing could turn off ordinary voters, who are likely to have to choose between incumbent President Tsai Ing-wen of the independence-leaning Democratic Progressive Party and a KMT candidate.
“He’s one of the smartest businessmen in Taiwan,” said John Brebeck, a senior adviser at Quantum International, a capital markets advisory firm.
“The problem is though is that with so much of his business enterprise in China, it may prove a liability for him with the voters, as they may not be sure where his priorities lie.”
‘TENSIONS WILL EASE’
While most Taiwanese trace their ancestry to China, there remains a clear distinction in society between those who consider themselves “native” Taiwanese, and those whose ancestors came over more recently, most in a wave of refugees who fled to Taiwan at the end of a civil war in 1949, when nationalist forces lost to the communists.
Gou’s parents were born in China and are part of that generation, though he was born in Taiwan.
The Chinese government has not commented on Gou’s decision, which has been widely reported in Chinese state media, though mostly citing Taiwanese press reports.
However, on Thursday Global Times tabloid, published by the Communist Party’s official People’s Daily, welcomed Gou’s bid for power.
“If Terry Gou becomes the leader of the Taiwan region next year, tensions between the two sides will ease, and the situation in the Taiwan Strait, in the short term, is likely to reach a turning point,” it said in an editorial.
The KMT developed closer ties with Beijing when it last held power, focusing on developing business ties. Under Tsai, who came to power in 2016, ties have deteriorated sharply.
China suspects Tsai is pushing for the island’s formal independence – a red line for Beijing. Tsai says she wants to maintain the status quo with China but will defend Taiwan’s security and democracy.
Gou met Xi in 2014 in Beijing, and he was quoted by Taiwan media in 2017 describing Xi as a great leader.
In an interview with the People’s Daily to mark China’s 40th anniversary of reforms last year, Gou said he was happy to have witnessed the changes.
He talked about how his father was from Shanxi province and mother from Guangdong, and how he had first visited China in 1987 to trace his family’s roots, the “first time I had stepped foot on the soil of the motherland”.
“While on the road I saw the scene of reforms and opening up, which made me extremely excited,” he said.
Gou also cited Xi in his interview.
“Xi Jinping has pointed out that it is necessary to promote the deep integration of information technology and the real economy … I think the general secretary’s point of view is very far-sighted.”
Some in Tsai’s DPP are already eyeing Gou’s China links as a weak spot.
Yao Chia-wen, a senior adviser to Tsai, told Reuters he thought Gou’s bid could create problems, given his business.
“He’s very pro-China and he represents the class of the wealthy people. Will that gain support from Taiwanese?” Yao said.
(Reporting By Yimou Lee in TAIPEI, additional reporting by Josh Horwitz in SHANGHAI, Ben Blanchard and Cate Cadell in BEIJING; Writing by Greg Torode and Ben Blanchard; Editing by Robert Birsel)
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WASHINGTON — In the rebalancing of Sino-American relations that’s underway, the usual roles are reversed: China’s normally deft President Xi Jinping appears to have badly overreached in seeking advantage. And President Trump, who often seems tone-deaf on foreign policy, is riding a bipartisan consensus that it’s time to push back against Beijing.
The two nations will probably make a trade deal soon, patching together a working relationship that has been frayed by a year of tariffs and economic brinksmanship. Experts predict an agreement that will boost U.S. exports to China, improve market access for American firms and reduce the power of Chinese state-owned enterprises — and offer some modest new legal protections for American companies whose commercial secrets have been plundered by Beijing for a half-century.
But as Xi jockeyed for position against America, many U.S. experts argue that he misplayed his hand. After decades of what was known as a “hide and bide” strategy of cautious cooperation, the Chinese leader moved to directly challenge American primacy in technology. This eventually triggered a sharp, bipartisan American response, which Trump has harvested.
“In an incredibly divided Washington, one of the only areas of agreement is that China policy needs to be less accommodating and more resolute toward Beijing,” says Kurt Campbell, who oversaw Asia policy in the Obama administration. He credits Trump for recognizing Xi’s weakness: “China is not yet ready to take on the U.S., and Trump recognizes this.”
The Chinese-American confrontation is partly a spy story, but very different than the cloak-and-dagger escapades of the Cold War: China operates its espionage net partly through universities, research institutes and benign-sounding recruitment plans. Until recently, American companies often didn’t realize that their pockets had been picked until it was too late.
China’s over-aggressive strategy dates back to the 2008 financial crisis, which Beijing saw as “a strategic window of opportunity for China to become a global superpower,” according to Greg Levesque, managing director of Pointe Bello consultants. Using internal Chinese documents, he recently explained to a congressional commission how China targeted “key core technologies” in the West.
An innovative early feature was the “Thousand Talents Plan,” established by Beijing in 2008. The program sought to recruit “global experts,” in particular those with Chinese ancestry, to join what the plan’s website called “National Key Scientific and Technological Projects.” By 2014, says the website, more than 4,180 overseas experts had been recruited.
The strategy was formalized in a 2017 speech by Xi. “Made in China 2025” is a roadmap for dominating key technologies such as artificial intelligence, quantum computing and biopharmaceuticals. Xi mobilized China’s nominally private companies through an approach known as “Military-Civil Fusion.”
The system for recruiting overseas talent was explained by an article posted April 16, 2018, by a Communist Party organization at Wuhan University People’s Hospital, describing how cadres there created an “Overseas Talent Recruitment Station” at a gathering in Dallas of Chinese-American medical researchers.
A Wuhan party official told the Dallas group that he “hoped that more overseas talent would return to the motherland and develop” high-tech projects. (The article was shared with me by a U.S. security-consulting firm.)
Bill Priestap, the FBI’s former head of counterintelligence, described the “Thousand Talents Program” in congressional testimony last December as an example of “non-traditional espionage.” He said the goal was “luring both Chinese overseas talent and foreign experts alike to bring their knowledge and experience to China, even if that means stealing proprietary information.”
The problem for the Chinese is that this so-called “brain gain” effort was so aggressive that it backfired. The New York Times reported this week that the FBI has recommended denying visas to some Chinese academics suspected of having ties to Chinese intelligence. The Energy Department recently banned anyone involved in China’s talent-recruiting programs from working in DOE laboratories.
There’s blowback in the trade negotiations, too. Lorand Laskai of the Council on Foreign Relations noted last year that the Trump administration mentioned “Made in China 2025” more than 100 times in its Section 301 trade complaint against Beijing. A newly wary China has stopped referring to the Thousand Talents Plan or mentioning award recipients, according to recent reports by Bloomberg News and Nature, respectively.
The Trump administration still doesn’t have a consistent, comprehensive strategy for dealing with China. Among other things, it lacks a coherent regional economic framework, like the Trans-Pacific Partnership agreement that Trump scuttled. But now is the right time to confront China’s bad behavior, before Beijing gets any stronger, and Trump has the political wind at his back.
(c) 2019, Washington Post Writers Group
FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., April 9, 2019. REUTERS/Brendan McDermid
April 18, 2019
(Reuters) – Following are five big themes likely to dominate thinking of investors and traders in the coming week and the Reuters stories related to them.
1/CENTRAL PLANNING
The 100 years since the Fed’s creation in 1913 is said to be the century of central banking. Well, since the 2008-2009 crisis, we’ve certainly lived through a decade of central banking. But with monetary policy taken to the limit to lift growth and inflation, can central banks do any more?
Of late, some of the economic and business confidence data is giving rise to hopes rate-setters might just be able to hold fire on further action for now. German and Japanese PMIs ticked modestly higher from March, and from China to the United States, the hope is that spring will bring some green shoots on the economic front. Central banks in Japan, Canada and Sweden hold meetings in coming days so we may get some clues on what they are thinking.
ECB Vice President Luis de Guindos and Olli Rehn, widely tipped to succeed ECB Governor Mario Draghi, will also be quizzed on the subject at upcoming speeches, especially since sources tell Reuters “a significant minority” of ECB rate-setters doubt any recovery is underway. Central bankers in Australia and New Zealand have sounded similarly gloomy. A decade of central banking and planning is not over yet
(GRAPHIC: ECB balance sheet – https://tmsnrt.rs/2Hz4sUC)
(GRAPHIC: The Federal Reserve’s balance sheet – https://tmsnrt.rs/2ULcay0)
2/GDP NOW!
The working thesis through the early months of 2019 was that U.S. economic growth would continue to tail off as tailwinds faded from last year’s $1.5 trillion tax cut and headwinds picked up from a weaker global economy, partial federal government shutdown and trade wars. Indeed, that looked to be the case as most economic data through the first quarter fell short of forecasts. As a result, Citigroup’s U.S. economic surprise index came to near the most negative in around two years.
But one closely tracked gauge of quarterly gross domestic product, the Federal Reserve Bank of Atlanta’s GDPNow model, has rebounded sharply in recent weeks and may be signaling that the advance reading of first quarter GDP may not be quite so grim.
A month ago, GDPNow estimated an annualized 0.2 percent growth, which would have been the lowest since a one-off GDP contraction in the first 2014 quarter. Now the model forecasts quarterly growth will come in at 2.4 percent. That would not only top current estimates of 1.8 percent but would mean growth actually accelerated from the fourth quarter’s 2.2 percent.
One factor behind the turnaround was a surprise narrowing in the U.S. trade deficit as Chinese imports plunged in the face of President Donald Trump’s tariffs. By some estimates, trade could now contribute as much as one percentage point to first quarter GDP after being a washout in the fourth quarter.
(GRAPHIC: U.S. GDP – in for a surprise? – https://tmsnrt.rs/2VPQsJN)
3/CORNER KICK
As we said above, central banks don’t have much ammunition left in their arsenal. The toolbox is probably lightest at the Bank of Japan.
At the G20 meeting in Washington, BOJ Governor Haruhiko Kuroda said he was ready to expand monetary stimulus if needed. But he also said he had no plans to change the central bank’s forward guidance, or the message it sends to signal policy intentions to financial markets. To many, that sounded like a man backed into a corner.
Kuroda has a chance to prove otherwise at the upcoming BOJ meeting. Expectations are thin though, given the BOJ’s balance sheet is already bigger than the country’s economy and Japanese financial institutions are suffering immense pain from the prolonged monetary easing.
The world’s No. 3 economy may have contracted in the first quarter, and whether it recovers depends much on first, whether China recovers too and second, on whether the trade conflict between the other two powers sharing the podium reaches a resolution.
(GRAPHIC: BOJ’s bloated balance sheet limits further easing – https://tmsnrt.rs/2DjVE16)
3/TAKING A DIP IN EUROPE
The United States is widely seen as heading into an earnings recession (defined as two straight quarters of negative year-on-year earnings growth) but Europe might, at least for now, escape one.
European firms are expected to deliver their first quarter of negative earnings growth since 2016 – the latest I/B/E/S Refinitiv analysis predicts Q1 earnings to fall 3.4 percent year-on-year. But it expects results to pick up again in Q2.
So despite this quarter’s poor outcome, hopes for a bounce-back could keep equities buoyant. After all, sentiment is already rock bottom – investors surveyed by Bank of America Merrill Lynch named “short European equities” the most crowded trade for the second month running.
The auto sector will be in focus in coming days with a flurry of earnings from Michelin, Continental, Daimler, Peugeot, and Renault. These stocks are particularly sensitive to growth in China and will be watched as the stirrings of a recovery were felt in recent Chinese GDP data .
(GRAPHIC: Earnings chart latest April 17 – https://tmsnrt.rs/2Ip8LCj)
5/ RUSSIAN ROULETTE
The past two years have seen an increasingly bitter rift open up between President Donald Trump’s Republican supporters and his Democrat critics over the alleged collusion between Russia and Trump’s campaign in the 2016 U.S. election.
That may not be defused even after Special Counsel Robert Mueller’s 400-page report on the subject is unveiled by Atttorney General William Barr. He has already told lawmakers the investigation “did not establish that members of the Trump campaign conspired or coordinated with the Russian government in its election interference activities.”
But that is unlikely to stop U.S. politicians from continuing their clamor for sanctions against Russia. As for investors, their appetite for Russian assets has not so far been dented. After plummeting last year, foreign buying of rouble-denominated government bonds has recovered sharply so it remains to be seen whether that bullishness continues.
Meanwhile, Ukraine — the reason behind the original 2014 sanctions on Russia — looks set to elect comedian Volodymyr Zelenskiy as president. Could the election of a new leader bring about some rapprochement between Kiev and Moscow? Watch this space.
(GRAPHIC: Foreign investors dipping their toes back in OFZs – https://tmsnrt.rs/2XiDZyC)
(Reporting by Dan Burns in New York, Marius Zaharia in Hong Kong; Sujata Rao, Helen Reid and Tom Arnold in London; Editing by Andrew Cawthorne)
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FILE PHOTO: A Hong Kong Airlines Airbus A330-300 passenger plane taxies on the tarmac at the Hong Kong Airport September 11, 2013. REUTERS/Tyrone Siu/File Photo
April 18, 2019
By Julie Zhu and Kane Wu
HONG KONG (Reuters) – A power struggle at Hong Kong Airlines (HKA) intensified on Thursday as a group of shareholders accused a rival group representing indebted Chinese conglomerate HNA of storming the troubled airline’s head office and taking away documents.
Both groups also again staked claim to the chairmanship of the carrier.
Former HKA director Zhong Guosong and Chinese private equity firm Frontier Investment Partner, who together control about 61 percent of the airline, said in a statement that “HNA Group representatives stormed” the carrier’s office early on Thursday morning.
“It is believed that HKA’s key financial information and hard disks were taken away or destroyed, with the specific losses still unknown,” they said, adding the move took place in spite of an agreement between the two sides reached late on Wednesday to not remove documents.
However, HKA said via a spokesman: “No one broke into our headquarters or took away any company document this morning.”
HNA, which holds about 29 percent of HKA, did not immediately respond to a request for comment.
Around eight security guards were visible in the lift lobby outside HKA’s head office, and in reception, when Reuters visited on Thursday afternoon. They declined to say who they worked for.
Multiple HKA staff approached by Reuters outside the head office declined to comment. Two, however, said that “all is normal” at the airline.
In a statement, HKA said: “The recent dispute among the company’s shareholders has seriously disrupted the order and operation of our office. As a result, we had to hire third-party security personnel and lawyers to assist us in dealing with the situation.”
The power struggle first went public on Tuesday when Frontier and Zhong, who hold 34 and 27 percent of HKA, respectively, said they had held an extraordinary shareholder meeting where they removed the existing directors and installed Zhong, already chairman of sister airline Hong Kong Express, as chairman.
This was disputed on Wednesday by Hou Wei, who is still listed on HKA’s website as chairman and who said in a memo to staff that he was still in charge of the airline.
Hou joined Hong Kong Airlines in September last year following more than four years with HNA’s Hainan Airlines, according to his LinkedIn profile. Hainan Airlines is China’s fourth largest carrier.
The fight comes as HKA is struggling to survive. Earlier this month, executives warned shareholders the company needed at least HK$2 billion ($255 million) or risk losing its operating license – and that it swung to a loss of about HK$3 billion last year.
Zhong and Frontier representatives at that meeting, however, demanded details of the 2018 accounts and questioned the close ties between HKA and HNA, which cut its controlling stake in the Hong Kong carrier in 2017.
Zhong and Frontier said on Thursday that the two sides had agreed that security personnel appointed by them could remain in the offices to safeguard documents and that executives promised to not destroy or remove information or data, or remove it from the office.
The two shareholders, who maintained that Zhong is chairman, added that they were “fully committed to exercising every possible legal means they have to act” to protect the interests of the airline’s employees, customers and business partners.
(Reporting by Julie Zhu, Kane Wu, Alun John and Shellin Li; Additional reporting by Jennifer Hughes; Editing by Muralikumar Anantharaman)
Source: OANN
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