Mick Mulvaney, Assistant to the President and Acting Chief of Staff, The White House, speaks during the Milken Institute’s 22nd annual Global Conference in Beverly Hills, California, U.S., April 30, 2019. REUTERS/Mike Blake
BEVERLY HILLS, Calif. (Reuters) – Talks between the United States and China aimed at resolving their trade dispute will likely be resolved “one way or the other” in the next two weeks, White House chief of staff Mick Mulvaney said on Tuesday.
“It won’t go on forever. I think, at some point, in any negotiation you realize we’re close to getting something done so we’re going to keep going,” Mulvaney said at the Milken Institute Global Conference. “On the other hand, at some point, you can think this is not going to get anywhere. I think you will know, one way or the other, in the next couple of weeks.”
Mulvaney spoke only days after data came out showing that the United States economy grew a stronger than expected 3.2 percent during the first three months of the year and said that strong growth is going to help support President Donald Trump as he prepares for the 2020 election.
“We think the economy has been good for everyone,” Mulvaney said. “We can ride that to the 2020 election. People know what is good for them.”
Mulvaney said policy makers are focusing on solving wage inequality.
He said the White House plans to make strong economic growth, at a time the expansion is well into its 10th year, healthcare and trade into key topics for the campaign. He also said Trump, a Republican, will benefit from the fact that Democrats have more than a dozen candidates running for president and “we have weak competitors.”
Mulvaney currently is acting chief of staff but he said he expects to keep the job permanently and that he has improved morale in the White House since replacing John Kelly in the job in January.
He said he does not expect a lot of change in top administration positions before the election. The Trump administration has had an especially high rate of turnover with his homeland security secretary being among the most recent to leave.
Reporting by Matt Scuffham and Svea Herbst-Bayliss; Editing by Bill Trott
(Reuters) – U.S. stocks edged higher on Monday, with the S&P 500 and the Nasdaq hitting record highs, as consumer spending rose in March and a benign inflation data underscored the Federal Reserve’s dovish stance on interest rates.
FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., April 24, 2019. REUTERS/Brendan McDermid
Hopes of a trade resolution and upbeat earnings were have been powering a rally in the benchmark index this year. The index crossed its record high of 2,940.91 hit on Sept. 21 for the first time this year, restoring investors’ faith in the decade-long bull run.
A Commerce Department report showed that U.S. consumer spending increased by the most in more than 9-1/2 years in March, but price pressures remained muted, with a key inflation measure posting its smallest annual gain in 14 months.
“The record highs shows us that investors are paying attention to better-than-expected earnings, stabilizing economic data and the expectations that the Fed is going to stay on the sidelines,” said Ryan Nauman, market strategist at Informa Financial Intelligence in Zephyr Cove, Nevada.
“If we look deeper into earnings numbers, its not that great, but we now know that the economy is expanding and the Fed is continuing to stay on the sidelines.”
The Federal Open Market Committee will announce its interest rate decision at the end of a two-day meeting, starting Tuesday.
The rate sensitive financial companies rose 1.11%, the most among the 11 major sectors. While the banking sector gained 1.73%.
In yet another busy week for earnings, about 160 S&P 500 companies, including Google-parent Alphabet Inc and Apple Inc, are set to report their quarterly results.
Analysts now expect profits of S&P 500 companies to fall just 0.2%, a sharp improvement from a 2% fall estimated at the beginning of the month, according to Refinitiv data.
As trade talks enter their last leg, U.S. negotiators head to China on Tuesday to try to hammer out details to end the protracted tariff spat between the two countries.
At 11:14 a.m. ET the Dow Jones Industrial Average was up 5.79 points, or 0.02%, at 26,549.12. The S&P 500 was up 3.53 points, or 0.12%, at 2,943.41 and the Nasdaq Composite was up 14.38 points, or 0.18%, at 8,160.77.
The defensive utilities and real estate, led the declines among the seven major S&P sectors trading in the red.
Among other stocks, Ingersoll-Rand jumped 6.30%, the most among S&P companies, after the Wall Street Journal reported Gardner Denver Holdings Inc is nearing a deal to acquire a unit of the air conditioner maker.
Boeing Co reversed course to trade 0.4% higher after Chief Executive Officer Dennis Muilenburg tried to bolster shareholder confidence in the company in his first general meeting since two fatal crashes of the 737 MAX.
Advancing issues outnumbered decliners by a 1.72-to-1 ratio on the NYSE and by a 1.78-to-1 ratio on the Nasdaq.
The S&P index recorded 34 new 52-week highs and no new low, while the Nasdaq recorded 65 new highs and 12 new lows.
Reporting by Shreyashi Sanyal and Amy Caren Daniel in Bengaluru; Editing by Anil D’Silva and Arun Koyyur
BEIJING (Reuters) – President Xi Jinping on Saturday hailed deals worth more than $64 billion signed during China’s Belt and Road Initiative (BRI) this week as he sought to reassure skeptics the project will deliver sustainable growth for all involved.
FILE PHOTO – Chinese President Xi Jinping gives a speech during the Tsinghua University’s ceremony at Friendship Palace in Beijing, China April 26, 2019. Kenzaburo Fukuhara/Pool via REUTERS
Xi said market principles will apply in all Belt and Road cooperation projects and that his signature initiative to recreate the old Silk Road joining China with Asia and Europe will deliver green and high-quality development.
“More and more friends and partners will join in Belt and Road cooperation,” he said in his closing remarks. “The cooperation will enjoy higher quality and brighter prospects.”
Xi and other top Chinese officials repeatedly sought to reassure partners and potential participants this week that Beijing does not intend to saddle them with high debts and wants BRI to benefit all parties involved.
A joint communique issued at the conclusion of the summit said that leaders had agreed to project financing that respects global debt goals and promotes green growth, in line with a draft seen by Reuters last week.
In a separate statement China said it signed a memorandum of understanding with various countries including Italy, Peru, Barbados, Luxembourg, Peru and Jamaica.
“All of this shows that Belt and Road cooperation is in synch with the times, widely supported, people centered and beneficial to all,” Xi said on Saturday.
Data from Refinitiv shows the total value of projects in the scheme stands at $3.67 trillion, spanning countries in Asia, Europe, Africa, Oceania and South America.
Some partner nations have complained about the high cost of projects of BRI, which was launched in 2013, while some western governments view it as a means to spread Chinese influence abroad, leaving poor countries with unsustainable debt.
China said this week it would establish a framework on debt sustainability to “prevent and resolve debt risks” as part of its efforts to allay such fears.
While most Belt and Road projects are continuing as planned, some have been caught up by changes in government in countries such as Malaysia and the Maldives.
Xi did not elaborate on the types of deals signed this week. But on Friday China’s state asset regulator said that at least 17 central government-owned firms, including companies such as China Railway Construction Corp and Mengniu Dairy, signed deals at the Belt and Road summit.
These deals totaled more than $20 billion in value, according to Reuters calculations.
Reporting by Ben Blanchard; additional reporting by Min Zhang; Writing by Se Young Lee; Editing by Joseph Radford, Alexander Smith and Clelia Oziel
(Reuters) – Slack Technologies, operator of the popular workplace instant-messaging app, reported an annual loss of $140.7 million, the company said on Friday ahead of its planned public market debut.
FILE PHOTO: The Slack app logo is seen on a smartphone in this picture illustration taken September 15, 2017. REUTERS/Dado Ruvic/Illustration
Slack’s daily active users exceeded 10 million in the three months ended Jan. 31, 2019, with its paid users at about 88,000, the company’s regulatory filing bit.ly/2vp05DG showed.
The San Francisco-based company is seeking to go public via a direct listing, making it the second big technology company after Spotify Technology SA to bypass the traditional route of listing its shares through an initial public offering.
A direct listing is a cheaper way of becoming a public company as the process requires fewer investment banks and therefore lower fees.
In a direct listing, however, a company does not sell any new shares to raise money. Instead, it gives existing shareholders the opportunity to cash out.
The company is hoping for a valuation of more than $10 billion in the listing, Reuters had previously reported. Some early investors and employees have been selling the stock at around $28, valuing the company close to $17 billion, Kelly Rodriques, CEO of Forge, a brokerage company, told CNBC on Thursday.
The company expects to trade on the New York Stock Exchange under the symbol “SK”,
Slack’s revenue jumped 82 percent to $400.6 million in its latest fiscal year and its loss narrowed to $140.7 million from $181 million a year earlier.
The company, whose competitors include Microsoft Teams, a free chat add-on for Microsoft’s Office365 users, said it expects to incur losses for the foreseeable future and may not achieve or maintain profitability in the future.
Slack is the latest in a string of high-profile technology companies looking to go public this year. Lyft Inc, Pinterest and Zoom Video Communications have completed IPOs so far in 2019.
Reporting By Aparajita Saxena and Joshua Franklin in New York; Editing by Leslie Adler and Anil D’Silva
FRANKFURT (Reuters) – German hopes of creating a national banking champion able to challenge global competitors were dashed on Thursday when Deutsche Bank and Commerzbank ended merger talks due to the risks of doing a deal, restructuring costs and capital demands.
Germany’s two largest banks announced that nearly six weeks of high-level negotiations about a tie-up had ended in failure, confirming an earlier Reuters report and immediately raising questions about the future of the Frankfurt-based rivals.
The decision to ditch the talks followed a final early morning meeting between Deutsche Bank Chief Executive Christian Sewing and his Commerzbank counterpart Martin Zielke, two sources told Reuters.
Both CEOs said a deal would not have created sufficient benefits to offset the risks and costs of a merger, which had been opposed by unions fearing 30,000 job losses, and raised concerns among investors and regulators.
While the talks are over, investors doubt either bank can go it alone for long under their current strategies given their low levels of profitability.
German government officials, led by Finance Minister Olaf Scholz, had pushed for a tie-up to create a national banking champion and end questions over the future of both banks, which have struggled to recover since the financial crisis.
Deutsche Bank’s 2018 return on equity was just 0.4 percent, trailing far behind rival U.S., and increasingly other European, investment banks, while Zielke said this month that Commerzbank does not have the market share for costly investments, fuelling speculation of an alternative tie-up if talks fell through.
Shares in Commerzbank were 2.1 percent lower at 1235 GMT. Deutsche Bank traded 0.3 percent lower, erasing earlier gains.
Deutsche Bank will now face pressure to make more radical changes, such as cuts to its U.S. investment bank as advocated by regulators and some major investors. It is already looking at a deal for its asset management unit DWS.
“Deutsche Bank will continue to review all alternatives,” Germany’s largest bank said.
BIDDERS IN THE WINGS
Employees of both banks immediately welcomed the news, although a senior Commerzbank manager acknowledged it opened the door to further uncertainty as foreign competitors circle.
“It is clear that others will now come out of the woodwork with offers and ideas,” the manager told Reuters.
Doing nothing is “not an option”, Zielke has told his staff, 82 percent of whom were against a merger in an internal survey.
FILE PHOTO: Outside view of Deutsche Bank and Commerzbank headquarters in Frankfurt, Germany, March 18, 2019. REUTERS/Ralph Orlowski/File Photo
Both UniCredit and ING Groep have expressed interest in Commerzbank, which is Germany’s No. 2 lender and 15 percent owned by the government, sources have said.
UniCredit and ING declined to comment after news that talks between Deutsche Bank and Commerzbank had failed.
Some major Deutsche Bank investors had questioned the deal’s logic and were unwilling to stump up any extra cash to get it done, while credit ratings agencies had warned of risks.
The European Central Bank would have asked Deutsche Bank to raise fresh funds before it gave the go-ahead for a merger, a person with direct knowledge of the matter said. .
The German central bank, which helps oversee the banks, stressed their individual health, calling them sound and stable.
“This was the case prior to discussions, during discussions and now – without qualification,” Bundesbank executive board member Joachim Wuermeling said.
Deutsche Bank also published preliminary earnings in which it said it expects to post a first-quarter net profit of about 200 million euros ($223 million), beating analysts’ expectations of 29 million.
“A merger would have been an enormously complicated and protracted undertaking. In the end, reason has won,” said Ingo Speich, head of sustainability and corporate governance at Deka Investment, a shareholder in both banks, adding they urgently need to address their strategies.
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Alexandra Annecke, portfolio manager at Union Investment, which also holds shares in Deutsche Bank, said it needs to focus on increasing profitability, especially at its investment bank.
Deutsche Bank’s finance chief James von Moltke told CNBC that the U.S. investment bank is “a core part of our strategy”.
Gerhard Schick, finance activist at Finanzwende and a former member of the German parliament, welcomed the end of talks but cautioned that Deutsche Bank remains “too great a risk”.
“The bank is still far too large and would probably have to be rescued in an emergency,” he said, with reference to the likelihood of Deutsche Bank needing to turn to the state to keep it afloat if it ran into difficulty.
Reporting by Hans Seidenstuecker, Andreas Framke, Arno Schuetze, Tom Sims, Francesco Canepa, Frank Siebelt; Additional reporting by Toby Sterling in Amsterdam and Gianluca Semeraro in Milan; Editing by Sabine Wollrab, Tassilo Hummel, Michelle Martin and Alexander Smith
(Reuters) – Britain’s plan to allow Chinese telecom giant Huawei Technologies a restricted role in its next generation mobile networks is part of a heated international debate over the security risks so-called 5G technology presents.
FILE PHOTO: Small toy figures are seen in front of a displayed Huawei and 5G network logo in this illustration picture, March 30, 2019. REUTERS/Dado Ruvic/Illustration/File Photo
Britain plans to allow Huawei access to non-core parts of fifth-generation, or 5G, networks on a restricted basis and block it from all so-called core parts, sources told Reuters.
The core is where the network’s most critical controls are located and the most sensitive information is stored, while the periphery includes masts, antennas and other passive equipment.
The move comes despite calls from Britain’s close ally, the United States, for countries to ban Huawei altogether from 5G networks because of concerns that its equipment could be used by Beijing for spying or sabotage.
5G promises super-fast connections which tech evangelists say will transform the way we live our lives, enabling everything from self-driving cars to remote surgery and automated manufacturing.
But that dramatically increases the security risk, U.S. officials say, because of the increasingly central role that telecommunications will play in our lives and the expected dramatic increase in connected devices in the network.
As 5G becomes embedded in everything from hospitals to transport systems and power plants it will rapidly become a part of each country’s critical national infrastructure.
This makes the consequences of the networks failing or being deliberately sabotaged in a cyber attack significantly more serious.
“5G will really start touching all parts of our lives because it will be the underlying infrastructure for so much of the critical services that are provided to the public,” said Robert Strayer, the U.S. State Department’s lead cyber policy diplomat.
“So if a 5G network fails, there would be significant ramifications for all parts of society,” Strayer said.
With much faster data speeds, experts predict there will be billions of connected devices.
These will include traditional mobile and broadband connections, but also internet-enabled devices from dishwashers through to advanced medical equipment. Industry association GSMA forecasts the number of internet-enabled devices will triple to 25 billion by 2025.
The larger the network, the more opportunities there are for hackers to attack, meaning there is an increasingly complex system with more parts that need protecting.
One of the biggest changes between 4G and 5G is the ability to take the advanced computing power usually kept in the protected “core” of a network and distribute it to other parts of the system. This will provide more reliable high-speed connections.
But it also means engineers will no longer be able to clearly ring-fence the most sensitive parts of the system, U.S. officials say.
Some British lawmakers agree.
“Allowing Huawei into the UK’s 5G infrastructure would cause allies to doubt our ability to keep data secure and erode the trust essential to Five Eyes cooperation,” said Tom Tugendhat, the chairman of Britain’s Foreign Affairs Committee.
The Five Eyes alliance is an intelligence sharing group that comprises the United States, Canada, Britain, Australia and New Zealand.
“The definition of core and non-core is a very difficult one with 5G,” he added.
LONDON (Reuters) – Oil prices jumped to near six-month highs on Tuesday as the United States tightened sanctions on Iran, giving energy company shares their best day since January but doing surprisingly little for the main petrocurrencies.
FILE PHOTO: The London Stock Exchange Group offices are seen in the City of London, Britain, December 29, 2017. REUTERS/Toby Melville
News that the U.S. had told buyers of Iranian oil to stop purchases by May 1 or face sanctions was pushing Brent toward $75 a barrel and made for a lively return from the four-day Easter break for Europe’s main markets.
Oil and gas shares jumped more than 2 percent though the threat of higher energy costs hit almost every other sector as well as bonds as investors cast a wary eye at rising inflation expectations.
Wall Street was looking set for subdued start too with traders looking through a fresh batch of earnings from Coca-Cola, Twitter and Harley Davidson as President Donald Trump also threatened Europe with trade tariffs again.
Foreign-exchange market volatility was still in short supply but there were a few stirrings.
The Swiss franc burrowed to a new 16-month low as the SNB’s chief talked about even more negative interest rates, while two of the usual beneficiaries of higher oil prices, the Canadian dollar and Norwegian crown, both struggled despite the crude rally and a flat U.S. dollar.
“Oil is interesting, but the interesting thing for FX is that we are not getting the usual feed-through in the petrocurrencies,” said Saxo bank’s head of FX strategy, John Hardy, adding that might be caused by questions about Chinese stimulus.
Both the Canadian dollar and the crown had gained on Monday, and the Russian rouble, another petrocurrency, hit its highest against the euro in more than a year its highest against the dollar in a month.
Overnight, MSCI’s index of Asia-Pacific shares ended 0.1 percent higher and Japan’s Nikkei closed up 0.2 percent. Oil and gas gains were offset by losses for airlines and other transport shares facing higher fuel costs.
The White House said after its Iran move it was working with Saudi Arabia and the United Arab Emirates to ensure oil markets were “adequately supplied,” but traders had already been worried about tight supplies.
Oil prices are up nearly 50 percent since late December, and before the re-imposition of sanctions last year Iran was the fourth-largest producer among the Organization of the Petroleum Exporting Countries, at around 3 million barrels per day.
Oil prices are “not so high that it crushes manufacturing by putting energy-price inputs up, but it is producing a nice boost to oil-producing nations,” said Robert Carnell, Singapore-based chief economist and head of research for Asia Pacific at ING.
Carnell sees Brent crude’s sweet spot at between $65 and $75 per barrel: “Above this, you may see some negative impact.”
Sri Lanka’s stock market and government bonds both fell as trading resumed after bombings that killed more than 300 people on Sunday. Tourism is likely to collapse, which would deal a serious blow to the island’s economy and financial markets.
The International Monetary Fund last month extended a $1.5 billion loan to Sri Lanka into 2020, a key step in keeping foreign investors involved in what so far this year has been a top-performing frontier debt market.
In China, major benchmarks had dipped in and out of negative territory amid concern that Beijing will slow the pace of policy easing after unexpectedly strong first-quarter economic data last week.
China’s blue-chip stocks have surged over 30 percent so far this year on expectations of more stimulus and hopes Beijing and Washington will reach an agreement to end their nine-month trade dispute.
“We’ve had a fantastic run in Chinese equities year-to-date. Some profit taking is completely normal. I don’t think China is changing its policy that quickly,” said Stefan Hofer, chief investment strategist at LGT Bank Asia in Hong Kong.
Wall Street hasn’t done badly either, with the S&P 500, Dow Jones and Nasdaq galloping up roughly 16 percent, 21 percent and 14 percent this year respectively.
About a third of the S&P 500 companies including planemaker Boeing and social media giant Facebook are scheduled to report this week, making it the busiest period this reporting season.
Profits at S&P companies are expected to have dropped 1.7 percent, in what could be the first earnings contraction since 2016. However, the forecasts have improved slightly since the start of April.
Additional reporting by Noah Sin in Hong Kong and Tomo Uetake in Tokyo; editing by Larry King/Keith Weir
WASHINGTON (Reuters) – U.S. President Donald Trump has decided not to reissue waivers in May allowing importers to buy Iranian oil without facing U.S. sanctions, the White House said in a statement on Monday.
The United States, Saudi Arabia and the United Arab Emirates “have agreed to take timely action to assure that global demand is met as all Iranian oil is removed from the market,” the White House said.
Reporting by Makini Brice and Humeyra Pamuk; Editing by Bill Trott
WASHINGTON/NEW YORK (Reuters) – Risk-taking has been the rage since the Federal Reserve quit hiking interest rates at the end of last year. U.S. stocks are back near record highs and investors are stockpiling the lowest-grade corporate bonds with only a smidgen of extra compensation for the added risk.
Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., April 18, 2019. REUTERS/Brendan McDermid
That rebounding mood on Wall Street may be welcomed by a president that has been demanding the Fed cut rates after markets fell sharply last year, and complaining that even pausing at the current level is the wrong call.
But if anything the ‘pause party’ on Wall Street makes it even less likely that the U.S. central bank will cut rates. Recent positive news on retail sales and exports, which have eased concerns of a sharply slowing economy, makes the case for a rate cut even weaker.
Investors at least have gotten the message, and shifted from projecting a rate cut later this year to now putting the odds at only 50-50 that the Fed will move lower by early 2020.
Wall Street celebrates the Fed’s ‘pause here.jpg
The state of financial markets, say some analysts, is evidence the Fed’s rate increases last year were on point, allowing the economy to continue growing while keeping risks in check. A rate cut at this stage would only be courting problems.
“The argument for why they should keep the possibility of a rate hike on the table is because of financial stability,” Citi chief economist Catherine Mann said in remarks on Wednesday to a conference on financial stability at the Levy Economics Institute of Bard College.
After a decade of near zero interest rates, “moving toward a constellation of asset prices that embodies risks is critical for getting us to a more stable financial market,” she said, noting that both equity prices and low-grade bond yields show a market that remains too sanguine.
In their critiques of the Fed, U.S. President Donald Trump, White House chief economic adviser Larry Kudlow, and possible Fed nominee Stephen Moore have argued that lower rates would allow faster growth and be in line with Trump’s economic plans. They contend that, with the risk of inflation low, the central bank does not need to maintain ‘insurance’ against it by keeping rates where they are.
Overlooked in that analysis are the financial stability concerns steadily integrated into Fed policymaking since the 2007 to 2009 financial crisis. Mann spoke at a conference named in honor of economist Hyman Minsky, who explored how financial excess can build during good times, and unwind in catastrophic fashion. The downturn a decade ago showed just how deeply that dynamic can scar the real economy.
Financial stability isn’t a formal mandate for the Fed, which under congressional legislation is supposed to maintain the twin goals of maximum employment and stable prices. But since the crisis the central bank has concluded that keeping financial markets on an even keel is a necessary condition for achieving the other two aims.
That doesn’t mean an end of volatility or a guarantee of profits, but rather that risks are properly priced and that the use of leverage – investments made with borrowed money – is kept within safe limits.
Keeping an eye on stock valuations here.jpg
That’s a key reason why even policymakers focused on maintaining high levels of employment, like Boston Fed president Eric Rosengren, at times have taken on a hawkish tone in favor of rate increases. The worse outcome for workers, Rosengren and others have said, would be to let markets inflate too much, and crash again, even if that means risking a bit higher unemployment in the interim.
Markets are currently “a little rich,” Rosengren said in recent remarks at Davidson College in North Carolina.
Though not enough to warrant a rate increase, he said, it does argue against a rate reduction. Overall, Fed officials including Chairman Jerome Powell say they feel financial risks are within a manageable range, something policymakers feel has been helped along by the rate increases to date.
The state of financial markets is “something that the Fed has to wrestle with,” Rosengren said. “It’s appropriate for interest rates to be paused right now.”
Corporate bond valuations look frothy here.jpg
Reporting by Howard Schneider and Trevor Hunnicut; Editing by Dan Burns and Andrea Ricci