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U.S. Government Posts $209 Billion Deficit in March
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The U.S. government ran a $209 billion budget deficit in March as outlays grew and receipts fell, the Treasury Department said. That compared with a budget deficit of $176 billion in the same month last year, according to Treasury's monthly budget statement.
When accounting for calendar adjustments, the deficit was $165 billion in March compared with an adjusted deficit of $134 billion in the same month the previous year.
The deficit for the fiscal year, which started in October, was $600 billion, compared to a deficit of $527 billion in the same period of fiscal 2017.
Unadjusted receipts last month totaled $211 billion, down three percent from March 2017, while unadjusted outlays increased to $420 billion, which is seven percent higher from the same month the previous year.
The Congressional Budget Office had expected a $207 billion deficit for March. The nonpartisan agency said this March had one less business day than March 2017, and a smaller share of wage income is being withheld this year for taxes.
The CBO recently forecast that the federal deficit will reach $804 billion in fiscal 2018, up from $665 billion in fiscal 2017. It increased its estimate for this year's deficit mostly due to recent legislation that cut taxes and increased spending on the military and domestic programs. It had already expected widening deficits in the coming years as outlays, including spending on programs like Social Security and Medicare, rise faster than revenue.
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Trump Administration Weighs U.S. Options on Syria
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U.S. President Donald Trump along with his administration's security aides mulled U.S. options on Syria, where he has threatened missile attacks in reaction to an alleged poison gas attack.
Concerns regarding a confrontation between Russia and the Western allies have been escalated since Trump said on Wednesday that missiles will be launched in response to a chemical gas attack in the Syrian town of Douma on April 7, and criciticized Moscow for siding with Syrian President Bashar al-Assad.
The U.S. leader cooled his heated remarks on Thursday and while he discussed his military options with allies such as Britain and France, who could participate in any U.S.-led strikes on Syria, there were indications of efforts to stop the crisis from going out of control. Trump has spoken to British Prime Minister Theresa May on Thursday, while he is due to speak with French President Emmanuel Macron.
Trump denied on Twitter that he said when an attack on Syria would occur, stating that it could happen 'very soon or not so soon at all'.
Later in the day, Trump convened with his national security team on the Syrian crisis. In a statement, the White House said that “no final decision” has been made and that they are continuing to evaluate intelligence and are in talks with partners and allies. But such statement did not necessarily indicate that Trump was pulling away from the idea of military action.
Global stock markets showed signs of recovery after Trump's hint that a military attack might not be imminent.
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Inflation and Trade Disputes to Weigh on Prospects for Global Economy
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Momentum in the global economy has peaked and risks ranging from higher inflation to trade disputes and debt appear likely to weigh on prospects for 2018, according to the tracking index compiled by the Brookings Institution think-tank and the Financial Times.
The latest update to the index shows that forces contributing to growth remain strong but have levelled off below 2017's peak, while financial markets suggest more difficult times ahead.
The findings follow a series of unsatisfactory business surveys across the world and weak industrial data, which have reduced confidence among economists that 2018 would be the most successful year of the decade so far.
Christine Lagarde, managing director of the IMF, recently warned of an “inexcusable, collective policy failure” if trade tension undermined the world economy. She suggested the fund would not downgrade its 3.9 percent global growth forecast on Tuesday, when it releases its latest economic outlook.
The more up-to-date Brookings-FT Tracking Index for the Global Economic Recovery (Tiger) shows the latest data suggest that momentum is fading.
According to Eswar Prasad of the Brookings Institution, “the world economy's growth momentum remains strong but is levelling off as the winds of trade war, geopolitical risks, domestic political fractures, and debt-related risks loom, with financial markets already reflecting mounting vulnerabilities.”
The index compares many indicators of real activity, financial markets and investor confidence with their historical averages for the global economy and for individual countries.
In advanced economies, the composite index has fallen in 2018 on the back of slightly weaker hard data on output and jobs and a sharp decline in financial market prices.
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China Makes Biggest Treasury Purchase in Six Months in February
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China increased its Treasury holdings in February by $5.8 billion, its biggest purchase in six months. On the other hand, Japan's Treasury holdings fell.
According to the Treasury, China's Treasury holdings increased to just under $1.18 trillion. Foreign net buying of Treasurys was $43.2 billion for the month.
As trade tensions between the U.S. and China escalates, so has rumors that the Chinese government could reduce purchases of Treasuries or even sell some of its holdings. The Trump administration on March 1 announced tariffs on aluminum and steel, which affect China. The U.S. also announced its intention to put tariffs on $50 billion in Chinese goods, and Trump has since threatened to add tariffs to another $100 billion of goods.
In December, China's holdings of Treasuries stood at $1.18 trillion before falling to $1.17 trillion in January.
China is the biggest holder of U.S. Treasuries, with Japan coming in at second place. Japan's holdings declined by $3.6 billion, to a total of $1.06 trillion.
Buyers abroad also purchased $11.8 billion in agency debt and $4.1 billion of corporate debt. They reduced equity holdings by $1.2 billion
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Twitter Shares Jump After Morgan Stanley Upgrade
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Shares of Twitter Inc. soared almost 11 percent on Tuesday and were bound for their best session in two months after Wall Street firm Morgan Stanley raised its recommendation on the social network company to “equal-weight” from “underweight”.
In a report, Morgan Stanley analyst Brian Nowak said that investors are likely to continue to pay a premium for the company's stock due to projections of accelerated revenue growth in 2018 and indications of progress in the firm's turnaround.
The analyst raised his target price for Twitter from $28 to $29. At midday trading, Twitter traded at $31.69 on the New York Stock Exchange.
Nowak cited the company's constructive advertiser conversations, improving user growth and positive revisions for the upgrade.
An unexpected swing to revenue growth caused the stock of the company to rise 12 percent following its last quarter report on February 8 and to date, the stock is up 32 percent.
Despite the increasing popularity of the social network, it has struggled to book a profit and consistently grow its revenue.
In general, analysts are cautions. Nine has a 'sell' recommendation on the stock, 21 have neutral ratings and seven recommend buying, according to data from Thomson Reuters. Overall, they anticipate Twitter's stock to fall to $27.58.
The stock is trading at 45 times projected ratings, against Facebook's valuation of 21 times earnings, Thomson Reuters data showed.
On average, Twitter is expected by analysts to report a 10 percent increase in revenue to $605 million and non-GAAP EPS of 12 cents when it reports its March quarter results on April 25.
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UK Inflation Drops to 2.5%, its Lowest in a Year
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UK inflation dropped in March to its lowest level in a year, raising questions over whether the Bank of England will raise interest rates in May.
The consumer price index (CPI) dropped to 2.5 percent in March from 2.7 percent in February, according to the Office for National Statistics. Economists had expected the annual rate of growth in prices to remain unchanged at 2.7 percent.
A smaller increase than is usual in the price of women's clothing was mainly responsible for the sharp decline, as well as the abolition of the Spring Budget, which meant there was no increase in alcohol and tobacco duty.
The decline in the headline inflation rate came from a fall in the rate of goods inflation from three percent in February to 2.4 percent in March. Goods prices are thought to be more sensitive to the exchange rate.
The sudden drop in inflation will lead investors to question whether the BoE will hike interest rates at its May meeting. However, many economists still expect the Bank of England, which had been forecasting CPI to average 2.9 percent over the first three months of 2018, to raise rates in May.
According to the most recent figures, UK wages increased by 2.8 percent in February.
Inflation has dropped in recent months as the impact of the sudden fall in the value of the pound after the EU referendum begins to fade. Having pushed up the cost of imported goods, the slide for sterling damaged the economy as squeezed consumers reined in their spending.
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Australia Unemployment Rate Steady in March
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Australian employment barely increased in March while a sharp downward revision to February stopped a record-breaking run of gains, a disappointing outcome that hurt the local dollar and reinforced the case against a rate hike.
The country's jobless rate stood at 5.5 percent in seasonally adjusted terms in March, according to the Australian Bureau of Statistics, from a revised figure of 5.5 percent for February (previously 5.6 percent).
Data showed only 4,900 net new jobs were added in March, short of forecasts for 21,000. February was revised to show a 6,300 drop instead of the initial 17,500 increase, ruining what had been 17 consecutive month of growth.
The Australian economy shed 19,900 full-time jobs in March, from 20,100 increase in February (previously 64,900) while 24,800 part time roles were added. March was significantly worse with full-time positions dropping 19,900.
The news was not all bad with annual job growth of 3.0 percent still twice the pace of U.S. job creation.
The participation rate fell to 65.5 percent, having peaked at 65.7 percent in January as more women entered the labour force.
The strength of employment has been one of the brightest parts of economy, so the recent report would likely cause some unease at the Reserve Bank of Australia (RBA). Growth in the resource-rich economy slowed in the fourth quarter of last year as bad weather hit exports.
The RBA noted in its April policy meeting minutes released that monthly increases in employment had moderated in the first few months of 2018. It said levels of underemployment remained “at relatively high levels”, adding that “leading indicators continued to point to above-average growth in employment in the period ahead”.
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Protectionism, Debt are Huge Threats to World Economy - EU
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The largest threats to global economic expansion are government debt and protectionist tendencies, according to European Union economy commissioner Pierre Moscovici.
“The two main risks for growth, which is now very solid all over the world, are on the one hand protectionism and trade tensions, and on the other hand debt,” Moscovici said. “There is no trade war for the time being, so that's good.”
The IMF recently cautioned that the world's debt has swelled to a record $164 trillion, a trend that could make it more difficult for countries to respond to the next recession. Global public and private debt increased to 225 percent of worldwide economic output in 2016, the fund said on Wednesday in its semi-annual Fiscal Monitor report. The fund also cautioned that the global commercial order risked being “torn apart” by trade wars.
The global debt burden clouded the IMF's otherwise upbeat outlook of the world economy, which is in its strongest upswing since 2011. The fund expects growth of 3.9 percent in 2018 and 2019.
U.S. President Donald Trump is pushing for a crackdown on China and has announced tariffs on imports of steel and aluminum. The EU is seeking a permanent exemption from the metals levies after Trump granted a waiver to the bloc until May 1 and left open the possibility of a longer exclusion. The European Commission, the EU's executive branch in Brussels, has said that failure to gain a longer exemption from the U.S. metal-import duties would lead to a tit-for-tat response by the bloc.
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Australia Inflation Gains 0.4% In Q1
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Consumer prices in Australia were up 0.4 percent on quarter in the first quarter of 2018, the Australian Bureau of Statistics said on Tuesday.
That was shy of expectations for 0.5 percent and down from 0.6 percent in the three months prior.
On a yearly basis, inflation advanced 1.9 percent - unchanged from Q4 but beneath forecasts for 2.0 percent.
The Reserve Bank of Australia's weighted median was up 0.5 percent on quarter and 1.9 percent on year, while the trimmed mean added 0.5 percent on quarter and 1.8 percent on year.
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Odds of Fourth Interest Rate Hike in 2018 Surges to Almost 50 Percent
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Chances of the Federal Reserve raising interest rates this year four times rose to almost 50 percent on the CME's FedWatch tracking tool, indicating that the market is finally coming around to the idea that the central bank will be raising interest at a faster pace than initially expected.
While some big forecasting Wall Street firms for months have been forecasting that the Fed will step up the pace of its monetary policy tightening, traders had been expecting three moves this year. The first increase has been approved in March, plus two more, potentially in June and September.
But fed fund futures market on Monday gave almost a 50 percent chance that the U.S. central bank would move one more time in December.
The CME's FedWatch tool, considered to be a reliable gauge of Federal Open Market Committee's actions, indicated 48.2 percent change of four rate hikes in early trade. The shift towards a more aggressive Fed came as the 10-year Treasury note yield hovered around 3 percent, which bond analysts have estimated would be a psychologically important level.
The odds had had been just 33 percent a month ago and less than 40 percent as of late last week.
In their latest forecast in March, FOMC members still indicated that there would be three increases in the funds rate this year. But with increasing indications of inflations accelerating and as the market starts to price in more moves, the committee could start to set its target higher.
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German Business Sentiment Drops - Ifo
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Sentiment among German businesses fell in April, according to a closely watched survey, with economists raising questions whether the eurozone's biggest economy is slowing down.
The Ifo Institute's business climate gauge slipped to 102.1 in April from 103.3 in March, recording the fifth straight month of declines.
Economists said the results pointed to a mixed picture for the German economy, a key pillar of the euro zone's economic health.
Deteriorating sentiment was seen in both the manufacturing and services sectors, with the index integrating the latter sector for the first time this month.
Clemens Fuest, president of the Ifo Institute, said that the numbers were disappointing and pointed to a number of challenges for the German economy. Fuest said that the index showed a "cooling down" rather than a "slowing down" in the economy and a degree of "normalization." "It's possible we've seen the peak of the upswing," he added.
Ifo's gauge underwent a significant revamp in April. The large German services sector was added to the main index, which previously focused on industries like manufacturing and construction, and the base year was swapped from 2005 to 2015.
The changes in methodology affect the levels of the index. The March reading, for instance, was changed from 114.7. Ifo noted when it announced its decision that the lower reading “is purely a base-year effect and not a plunge in the business cycle.”
Still, the decline in April highlights how the eurozone's biggest economy has got off to a bumpy start this year after a sharp acceleration in 2017.
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South Korea Consumer Confidence Weakens Further
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South Korea's consumer confidence weakened for the fifth successive month in April, survey data from Bank of Korea showed Wednesday.
The consumer sentiment index fell to 107.1 in April from 108.1 in March.
Consumer sentiments regarding current living standards and their future outlook remained the same as in March, at 95 and 102 respectively. Consumer sentiment as to future household income and spending were dropped marginally in April.
The expected inflation rate over the following year was 2.6 percent.
The survey was conducted among 2,200 households between April 10 and 17.
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Wall Street Closed Mostly Higher as Boeing Lifts Dow
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U.S. stocks advanced on Wednesday as the Dow Jones industrial average ended higher for the first time in six sessions, rebounding from sharp losses seen earlier in the day, as Boeing jumped on solid earnings.
Boeing climbed 4.2 percent after posting quarterly results that easily surpassed analyst expectations. The stock's rise helped the Dow rebound from a 201.05-point deficit and snap a five-day losing streak. The Dow closed at 24,083.83, up 59.70 points.
The S&P 500 also pared earlier losses, closing 0.2 percent higher at 2,639.40. The Nasdaq composite fell 0.1 percent to 7,003.74.
All three major U.S. indexes fluctuated in choppy trading and the Dow flirted with its sixth consecutive decline during much of the session, which would continue its longest losing streak since an 8-day slide in March 2017.
Twitter posted stronger-than-forecast earnings on Wednesday, but the stock dropped 2.4 percent. Comcast, NBCUniversal's parent company, also released better-than-expected earnings Wednesday.
Facebook was up slightly ahead of its earnings, expected after the bell. The social media company has recently come under fire over its use of consumer data.
Comcast was up 2.1 percent after the largest U.S.cable company confirmed its $31 billion bid for Sky on the heels of its better-than-expected earnings report.
So far, 31 percent of S&P 500 companies have posted earnings, 81.2 percent of which came in above consensus estimates. Analysts now expect first-quarter earnings growth of 22 percent, according to Thomson Reuters data.
Of the 11 major S&P 500 sector indexes, 7 were in negative territory, led by Real Estate, Technology and Financials.
The CBOE Volatility index .VIX , an indicator of short-term stock market volatility, jumped to 18.67 points, its highest level in more than a week.
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Australia Q1 Import Prices Rise More Than Expected
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Australia's import prices increased at a faster-than-expected pace in the three months ended March, figures from the Australian Bureau of Statistics showed Thursday.
The import price index climbed 2.1 percent sequentially in the first quarter, following a 2.0 percent slight rise in the fourth quarter of 2017. It was the second consecutive quarterly increase.
That was above the 1.2 percent rise economists had forecast. The increase was driven by higher prices paid for petroleum, petroleum products and related materials, road vehicles, inorganic chemicals and plastics in primary forms.
On a yearly basis, imports prices grew at a faster rate of 2.3 percent in the March quarter, after a 1.4 percent gain in the December quarter.
Data also revealed that export prices rose 4.9 percent quarterly in the first quarter, following a 2.8 increase in the prior month. As compared to the corresponding period last year, the index dropped by 1.4 percent.
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Japan Industrial Production Jumps 1.2% In March
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Industrial output in Japan gained 1.2 percent on month in March, the Ministry of Economy, Trade and Industry said on Friday.
That topped forecasts for an increase of 0.5 percent following the 2.0 percent gain in February.
On a yearly basis, industrial production jumped 2.2 percent - exceeding forecasts for 2.0 percent and up from 1.6 percent in the previous month.
Upon the release of the data, the METI maintained its assessment of industrial production, saying that it is picking up slowly. Also on Friday: .
Retail sales in Japan were down a seasonally adjusted 0.7 percent on month in March, the Ministry of Economy, Trade and Industry said.
That was shy of forecasts for a flat reading following the 0.5 percent increase in February.
On a yearly basis, retail sales gained 1.0 percent - also missing forecasts for 1.5 percent and down from 1.7 percent in the previous month.
Large retailer sales added 0.1 percent on year, missing expectations for 0.8 percent and down from 0.6 percent a month earlier. .
The unemployment rate in Japan came in at a seasonally adjusted 2.5 percent in March, the Ministry of Internal Affairs and Communications said - in line with expectations and unchanged from the previous month.
The job-to-applicant ratio was 1.59 - also matching forecasts and up from 1.58 in February. The participation rate was 61.2 percent.
The number of employed persons in March was 66.20 million, an increase of 1.87 million or 2.9 percent on year. .
Consumer prices in Tokyo were up 0.5 percent on year in April, the Ministry of Internal Affairs and Communications said. That was well shy of forecasts for 0.8 percent and down from 1.0 percent in March.
Core CPI, which excludes volatile food prices, was up an annual 0.6 percent. That also missed forecasts for 0.8 percent, which would have been unchanged.
On a monthly basis, overall Tokyo CPI fell 0.4 percent and core inflation eased 0.1 percent.
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U.S. Business Investment Cools; Labor Market Remains Strong
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New orders for key U.S.-made capital goods dropped in March, pulled down by the biggest decline in demand for machinery in almost two years, and a fall in shipments implies that business spending on equipment cooled in the first quarter.
Separate data recently showed that the economy remains strong. The number of Americans filing for unemployment benefits dropped to the lowest level in over 48 years last week and the goods trade deficit narrowed sharply in March amid strong export growth.
According to the Commerce Department, orders for nondefense capital goods excluding aircraft, a closely watched proxy for business spending plans, fell 0.1 percent in March. Data for February was revised to show these so-called core capital goods rising 0.9 percent instead of the initially posted 1.4 percent jump.
In March, orders for machinery dropped 1.7 percent, the biggest decline since April 2016, after a gain of 0.3 percent in February. There were, however, increases in orders of primary metals, computers and electronic products, fabricated metals and electrical equipment, appliances and components.
Overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, rose 2.6 percent in March as demand for transportation equipment rose 7.6 percent. That followed a 3.5 percent surge in durable goods orders in February.
Business spending on equipment likely cooled in the first quarter after double-digit growth in the second half of 2017. The moderation in investment in equipment is expected to have combined with a sharp slowdown in consumer spending to restrain economic growth in the first quarter.
Gross domestic product is likely to come in at 2 percent or less in the first quarter.
Nonetheless, signs are emerging that growth is likely to speed up in the spring, with GDP perhaps returns close to 3%. Companies are raising production and hiring at a rapid clip despite the lowest jobless rate since 2000. The rate of layoffs in April fell to the lowest level since 1969.
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Bitcoin Starts May with Slide Below $9,000
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The cryptocurrency traded 3.9 percent lower at around $8, 880. The decline came after an increase of around 33.5 percent for April. There was no immediately apparent reason for bitcoin's decline, which started overnight. Bitcoin has struggled to climb back to $10, 000 in the last several weeks and continues to be almost 36 lower for the year.
Japanese yen represented around 41 percent to bitcoin trading volume, according to CryptoCompare. U.S. dollar-bitcoin trading accounted for around 25 percent and ether represented around 20 percent of trading volume.
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Eurozone Economy Slowed in the 1st Quarter
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The eurozone economy slowed in the first three months of 2018, heightening fears the currency union's post-crisis recovery is petering out.
Data from Eurostat showed a sharp slowing in economic activity. Having surpassed all expectations in 2017, the growth rate of the EU's currency area dropped to just 0.4 percent during the first three months of 2018, down from 0.7 percent for the final quarter of 2017.
On a year-on-year basis, the eurozone's GDP growth slowed from a rate of 2.8 percent to 2.5 percent.
The last time the region's growth was this slow was in the summer of 2016, returning the eurozone to its post-crisis state of nervousness over whether it could sustain healthy growth rates for a long period.
Measures of output in industry and construction, as well as figures for retail sales, had recently pointed toward slower growth.
Economists believe that an unusually cold and snowbound March in Northern Europe had some impact on growth, as did strikes in Germany and France. There was no breakdown yet from Eurostat on what caused the slowdown.
European Central Bank president Mario Draghi said last week that the bank would watch the data in the months ahead with “caution”. Draghi stressed, however, that policymakers remained optimistic that the region's economy would stay strong enough to support a rise in inflation closer to the ECB's goal of less than 2 percent.
Uncertainty about the economy is likely to weigh on the ECB's next big decision over when and how to end its bond-buying stimulus program.
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Nestle, Starbucks Ink $7.15 billion Coffee Licensing Tie-Up
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Nestle, the world's biggest food and beverage firm, has struck $71.5 billion cash deal with Starbucks Corp. for exclusive rights to sell the coffee chain's packaged coffees and teas globally.
The deal announced on Monday could boost Starbucks' business selling packaged Starbucks coffee, Teavana tea and other products via grocery stores and other retailers.
The partnership, which quantifies to a licensing deal, makes it possible for Starbucks to focus on enhancing its mainstay U.S. cafe business, where traffic growth has flattened amid competition from fast-food chains and upscale coffee houses, while rapidly expanding shops in China.
Starbucks will use the money raised from the deal to boost planned stock buybacks to $20 billion from $15 billion through fiscal 2020. It said the agreement would add to earnings per share by 2021.
The agreement also includes Starbucks-branded capsules for Nestle's Nespresso and Dolce Gusto single-serve brewers, which should help Nestle limit sales of alternatives from other providers.
Nestle anticipates the partnership will add to its earnings by 2019. It did not announce changes to its buyback plans.
Aside from cash payment, Starbucks will get revenue from product sales and royalties.
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Trump Withdraws US from Iran Nuclear Deal, Renews Sanctions
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President Donald Trump on Tuesday pulled the United States out of an international nuclear deal with Iran, raising the risk of conflict in the Middle East, upsetting European allies and casting uncertainty over global oil supplies.
Trump said in a televised address from the White House that he would reimpose U.S. economic sanctions on Iran to undermine “a horrible one-sided deal that should have never, ever been made."
The United States will now reinstate all the sanctions it had waived as part of the nuclear accord, and it will impose additional economic penalties that are now being drawn up by the Treasury Department. Treasury Secretary Steven Mnuchin declined to specify what additional sanctions the United States might impose, but he expressed confidence that they would still be powerful even if other American allies did not follow suit.
The US president's decision intensifies the strain on the trans-Atlantic alliance, especially after European leaders made trips to Washington and repeatedly appealed to Trump to preserve the deal.
The leaders of Britain, Germany and France, which were signatories to the deal along with China and Russia, said in a joint statement that Trump's decision was a cause for “regret and concern."
The response from Iran itself, however, was muted. President Hassan Rouhani said he believed the agreement could still survive – but warned that he had instructed the country's atomic energy agency to prepare to restart uranium enrichment should the deal collapse completely.
Rouhani said Iran would remain committed to the deal agreed in 2015 between Iran and the US, UK, France, Germany, Russia and China.
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Gold Prices Steady, Buoyed by Iran Tensions
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Gold prices steadied on Thursday as the dollar remained near its 2018 high on strong U.S. bond yields, with investors also keeping an eye out for any further impact from U.S. President Donald Trump's decision to withdraw from the nuclear deal with Iran.
Spot gold edged up 0.1 percent to $1,313.94 per ounce.
U.S. gold futures for June delivery gained 0.1 percent at $1,314.10 per ounce.
Dismayed European allies sought on Wednesday to salvage the deal with Iran after Trump ordered sanctions be re-imposed on Tehran.
The dollar held firm on Thursday after the 10-year U.S. bond yield rose back to the psychologically important 3 percent mark and investors looked to U.S. consumer price (CPI) data due later to show a acceleration in inflation.
The U.S. CPI data will also be scoured for outlook on the Federal Reserve's interest rate hike path after softer-than-expected data earlier this month did little to reduce expectations of a June interest rate hike.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, dropped 0.14 percent to 862.95 tonnes on Wednesday.
Among other precious metals, silver climbed 0.1 percent higher to $16.50 an ounce, after notching a two-week peak at $16.62 in the previous session.
Platinum added 0.3 percent at $912.50 an ounce while palladium was up 0.1 percent at $976.30.
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UK Factory Output Fell in March
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Britain's manufacturing sector contracted during March, according to figures released by the Office for National Statistics, which emphasizes the “sluggish” economic performance in the first quarter.
While heavy snow storms swept through Britain in early March, the ONS reiterated its earlier statement that this had little overall impact on the economy's performance in the first three months of 2018.
Manufacturing output dropped 0.1 percent compared to the previous month as both domestic and export orders fell, the ONS said. Overall industrial output, which includes utilities and the UK's North Sea oil and gas fields, increased by 0.1 percent.
“Manufacturing was broadly flat throughout the first quarter following several months of strong growth, with no evidence that the bad weather hampered UK factories as both domestic and international sales stalled. Machinery, transport and computer manufacturers all saw their output grow. This was largely offset by falling production of electrical equipment and oil refining”, according to ONS head of national accounts Rob Kent-Smith.
A lack of clarity around Britain's terms of departure from the European Union in less than a year, as well as a slowing eurozone economy, are among reasons cited for Britain's disappointing performance of late.
The ONS said the impact from the recent data on its preliminary estimate of first quarter economic growth, which showed only a 0.1 percent quarter-on-quarter increase, was negligible.
Separate ONS data showed Britain's goods trade deficit with the rest of the world grew to 12.287 billion pounds in March from 10.414 billion pounds in February. Nonetheless, the ONS indicated that net trade was likely make a very small positive contribution to economic growth in the first quarter.
The ONS also published figures for construction output, which fell 2.3 percent on the month in March, after a fall of 1.0 percent in February.
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Fed's Mester Reaffirms Support for Gradual Rate Hike Path
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The U.S. central bank should continue its gradual strategy to lifting federal fund rates given that inflation has not yet hit the Federal Reserve's 2 percent target in a sustained manner, according to Cleveland Fed President Loretta Mester.
In her prepared address for a speech in Paris, the Fed official expressed her view that the medium-run outlook supports the continued gradual withdrawal of policy accommodation. She said that it seems to be the best strategy for striking a balance between the threats to both the Fed's policy goals and preventing a build-up financial stability risks.
Mester, who has a vote on monetary policy this year, said that she does not see inflation significantly picking up, adding that while it is near the Fed's 2 percent goal, it will only hit that level on a sustainable basis over the next one to two years.
She said that she wants to give inflation sufficient time to return to its goal, a point against a steep rate hike path.
The Fed official reiterated her stance that the central bank should start to review whether its inflation framework is suitable for the future and could make monetary policy more effective in achieving the central bank's achievements.
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10-Year U.S. Yield Surge to Highest Level since 2011
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The yield on the 10-year Treasury note rose on early Tuesday to reach levels since 2011 after a solid retail sales figures underlined the economy's stable momentum.
The rally in yield comes amid resurgent concerns that negotiations between the U.S. and China continue to be challenged, stoking concerns that a potential trade war could drive up prices and inflation higher- which has negative implication for bonds.
Yield on the 10-year Treasury note yield surged 7.5 basis points to 3.070 percent, the highest since July 2011, and notching its biggest single-day increase March 1, according to WSJ Market Data Group. The yield reached an intrasession high at 3.093 percent, according to FactSet data.
The 30-year bond yield rose 8.1 basis points to 3.210 percent, the biggest one-day increase since February 2. The short-dated two-year note yield rose 3.9 basis points to 2.585 percent, extending a yield move close to a decade peak.
The day's trading helped to increase the yield gap between two-year and the 10-year rate to 48.5 basis points.
The threat of increasing borrowing rates have given investors in risky assets a reason to pause, with the benchmark 10-year note again tested the yield level above 3 percent, which have previously caused friction in markets, challenging investors' appetite for assets perceived as risky against safe haven assets such as bonds.
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Benchmark U.S. Yield Extends Rally to Almost Seven-Year High
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U.S. government bonds experienced renewed selling pressure, allowing the yield on the benchmark 10-year Treasury note to continue a rally that a day prior brought it to its highest level since 2011.
The 10-year Treasury note yield edged up 1.1 basis points to 3.093 percent, after recording the biggest one-day gain since March 1, according to WSJ Market Data Group. The move left the yield at its highest level since July 7, 2011.
The 30-year bond yield increased 0.4 basis points to 3.214 percent, after the long bond market marked its biggest daily yield increase since February 2 in the prior session. Yield on the short-dated two-year note yield, on the other hand, pared an earlier loss to rise 0.4 basis points to 2.589 percent.
The yield curve, which measures the spread between the two-year and 10-year yields, continued to reverse some of its recent flattening.
Markets are now monitoring developments in Asia, with North Korea's threat to withdraw from a summit planned for next month with the U.S., stoking concerns that a brief easing of hostilities between the two nations may be coming to an end.
Meanwhile, Italian government bond yields surged following a report said anti-establishment parties in discussion to establish a government would ask the European Central bank to write off 250 billion euros in debt and ask to renegotiate Rome's contribution to the European Union budget. The yield on the 10-year Italian government bond rose16.2 basis points to 2.113 percent.
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U.S. Labor Market Continues to Tighten
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New applications for U.S. jobless benefits increased more than expected last week, but the number of people continuing to collect unemployment benefits fell to 1.71 million in the week ended May 5, the lowest since December 1973, which points to diminishing labor market slack.
Separate data also showed a pickup in mid-Atlantic factory activity this month, with manufacturers saying they were boosting employment and asking for higher prices for their products. The combination of a tightening labor market and firming inflation bolsters expectations the Federal Reserve will hike interest rates in June.
Initial claims for state unemployment benefits rose 11,000 to a seasonally adjusted 222,000 for the week ended May 12, the Labor Department said.
The labor market is viewed as being close to or at full employment, with the unemployment rate near a 17-½ -year low of 3.9 percent and within striking distance of the Fed's forecast of 3.8 percent by the end of this year. The U.S. central bank increased rates in March and forecast at least two more hikes for this year.
The number of people receiving benefits after an initial week of aid decreased 87,000 to 1.71 million in the week ended May 5, the lowest level since December 1973. Declining continuing claims underscore tightening labor market conditions and support economists' expectations that wage growth will accelerate in the second half of the year.
The labor market and regional factory data added to upbeat reports this week on consumer spending and industrial production in suggesting that economic growth was picking up early in the second quarter after slowing at the start of the year.
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Japan Exports Increased in April
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The value of Japan's exports grew at fastest pace in three months in April partly due to a boost in shipments to the US but still ended up missing economist expectations.
Exports in April increased 7.8 percent year on year, according to figures from the Ministry of Finance, accelerating from a rise of 2.1 percent in March but still fell short of a median estimate of 8.1 percent from economists polled by Reuters.
The value of outbound shipments to Asia accelerated to a year-on-year growth of six percent as exports to Hong Kong exited contraction with a rise of 1.3 percent and growth in direct shipments to China edged up 0.1 percentage points to 10.9 percent.
Exports to the US accelerated from March's rise of just 0.2 percent to mark an increase of 4.3 percent in April.
Imports were up 5.9 percent from the previous year, rebounding from a 0.6 percent contraction in the previous month, the first decline since 2016, but also missing economist expectations of a 9.6 percent growth.
Those trade flows unraveled a ¥626 billion (about $5.6 billion) trade surplus that easily surpassed a forecast of ¥405.6 billion and marked only a moderate decline from March's surplus of ¥797 billion.
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Wall Street Gains as US-China Trade War Fears Ease
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Stocks ended higher on Monday as trade tensions between the U.S. and China eased for the moment, while investor sentiment was also lifted by news of dealmaking activity.
The Dow Jones industrial average soared 298.20 points to 25,013.29. Boeing, Caterpillar and United Technologies, big exporters likely to benefit from easing trade tensions, were the best-performing stocks in the index. Monday also marked the first time since mid-March that the Dow closed above 25,000.
The S&P 500 rose 0.7 percent to 2,733.01 as industrials were up 1.5 percent. The Nasdaq composite gained 0.5 percent as 7,394.04 as semiconductors pushed tech higher.
U.S. Treasury Secretary Steven Mnuchin said on Sunday the United States and China had agreed to drop their tariff threats on billions of dollars worth of each country's goods, while China on Monday praised a significant dialing back of tensions.
Nine of the 11 major S&P sectors were higher, led by the technology sector's 1.21 percent gain. Apple, which counts China as major growth market, rose 1.4 percent, giving the biggest boost to the S&P 500 and the Nasdaq.
The industrial sector gained 1.20 percent, led by a 2.4 percent jump in Boeing, which sells about a fourth of its commercial aircraft to Chinese customers. Caterpillar gained 2.3 percent.
Wall Street also got a boost on Monday amid a slew of dealmaking news.
General Electric will merge its transportation business with Wabtec — a rail equipment maker — in a deal worth $11.1 billion. GE shares rose 2 percent.
Meanwhile, Fifth Third Bancorp agreed to buy MB Financial for $4.7 billion in cash and stock. MB Financial shares soared 12.9 percent.
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Oil Slides after Rally, OPEC May Relax Production Curbs
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Oil prices fell on Wednesday as the market experienced a respite on expectations that OPEC may lift production as early as June, despite geopolitical risks providing support for the market.
Brent futures slipped 4 percent to $79.53 per barrel, after rising 35 cents on Tuesday. In the previous week, the global benchmark reached $80.50 per barrel, the highest since November 2014.
U.S. WTI crude futures fell 2 cents to $72.18 per barrel, having risen on Tuesday to $72.83 per barrel, its highest level since November 2014.
In a note, ANZ said that geopolitical risks have kept investors on edge. U.S. Secretary of State Pompeo had laid out demands for Iran to stop all uranium enrichment and give nuclear inspectors access to their entire nation. But the lender sid that investors are also focused on the upcoming talks between Russia and Saudi about whether they should consider a controlled easing of over-compliance with their output cut agreement.
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Fed Minutes Support Rate Hike in June
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Federal Reserve officials at their meeting earlier this month signaled they were likely to raise their benchmark short-term interest rate at their June meeting, and they debated how to characterize an evolving policy strategy that soon would no longer try to stimulate economic growth.
Minutes from the meeting, which ended May 2, reveal Fed officials are on track to raise rates again in June. The minutes also indicate officials are less worried about inflation rising above 2 percent, its current level and the Fed's target rate, than they are about the rate of inflation dipping again.
“Most participants judged that if incoming information broadly confirmed their economic outlook, it would likely soon be appropriate for the FOMC to take another step in removing policy accommodation,” the minutes said.
The readout of the meeting included a call by some policymakers to revise the Fed's monetary policy statement soon to reflect that rates would be close or above long-run estimates before too long.
A number of Fed policymakers, including Chairman Jerome Powell, have been keen to stress they will tolerate inflation rising above the Fed's goal for a time without undue concern. This was reflected in the policy statement earlier this month, with explicit reference made to the 2 percent target being “symmetric.”
Fed policymakers at the meeting decided, as expected, to keep the benchmark overnight lending rate unchanged in a target range of between 1.50 percent and 1.75 percent.
Traders in the federal funds futures market currently see more than a 90 percent chance of a June rate hike.
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Trump Cancels Nuclear Summit with North Korean Leader Kim Jong Un
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President Donald Trump canceled his historic nuclear summit with Kim Jong Un on Thursday, accusing North Korea of "tremendous anger and open hostility."
The meeting, which would have marked the first face-to-face encounter between a sitting U.S. president and a North Korean leader, was set for June 12 in Singapore. The summit aimed to rid the Korean peninsula of nuclear weapons.
"Sadly, based on the tremendous anger and open hostility displayed in your most recent statement, I feel it is inappropriate, at this time, to have this long-planned meeting," Trump wrote in a letter to Kim, which was released Thursday morning. The president dictated every word of the letter himself, a senior White House official told reporters.
The news came as North Korea made a show of dismantling a nuclear test site, but also on the heels of some sharp words from the North Korean government about America denuclearization demands. Trump's decision also comes more than two weeks after he withdrew the U.S. from the Obama-era Iran nuclear deal, which had lifted sanctions on the Middle Eastern country as long as it limited its nuclear program.
Trump said it was possible a meeting could still take place but warned North Korea against committing "foolish" acts.
The "unexpected" decision, Pyongyang said, was "extremely regrettable".
Kim Kye Gwan, a top official at North Korea's Foreign Ministry, said in comments published Friday by the country's state-run news agency KCNA that Trump's decision runs counter to the global community's wishes for peace on the Korean Peninsula. "We reiterate to the US that we are willing to sit face to face at any time and in any way," said Kim, who has negotiated with US counterparts for years.
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Energy Stocks Tumble as OPEC Considers Production Increase
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Energy stocks in the Asia-Pacific region slid on Monday after news that producer cartel OPEC was mulling to increase production triggered oil prices to tank on Friday.
The S&P/ASX 200 Energy Index was last down 2 percent, at its lowest since April 26. Among the large producers, Beach Energy edged down 4.7 percent, Woodside Petroleum fell 2.7 percent, Santos edged down 2.4 percent and Origin Energy fell 1.9 percent. The decline in energy stocks weighed down the broader S&P/ASX 200 index by 0.4 percent.
In early trading in Tokyo, the energy sector of the Topix index was the underperformer, falling 3 percent, countering gains from the majority of other sectors and pulling the index into negative territory.
The pressure on energy stocks came after oil prices ended a gaining streak on Friday, with the Brent crude closing down almost 3 percent on the day after OPEC's de-facto leader, Saudi Arabia, and Russia said that they were mulling to ease curbs on production.
The option comes amid potential supply disruption risks from Venezuela and Iran, which are both under threat by U.S. sanctions.
Oil prices also continued to slide on Monday. The international benchmark Brent was off 0.5 percent at $76.04 per barrel and the U.S. WTI, the U.S. benchmark, fell 0.8 percent at $67.34. In recent weeks, both prices have been trading near their highest since late 2014 as the tension over Iran and Venezuela, as well as continued OPEC-led production cuts, propped up prices.
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Record U.S. Crude Volumes Affect Russia, OPEC Market Share in Asia
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Record crude oil volumes will be exported by the U.S. to Asia in the following months to bite into Russia and OPEC's market share in the region.
The U.S. is slated to export 2.3 million bpd in June, 1.3 million bpd of which will be exported to Asia, according to an estimate by a senior executive with a key U.S. oil exporters.
Data from the EIA show U.S. oil exports reached 2.6 million bpd last two weeks.
The historically high level of outbounds volumes come as U.S. crude production reached all-time highs, weighing down U.S. prices to discounts of over $9 per barrel below crude futures on Monday, the widest in over three years and opening an arbitrage for surplus supplies to other markets.
The spread between the key benchmarks gave a change for Asian refiners to lower light crude imports from the Middle East and Russia after Brent and Gulf prices hit multi-year highs, according to traders in Asia.
In Asia, China is the biggest importer of U.S. crude. The imports are led by Sinopec, the region's biggest refiner. The firm, after cutting Saudi imports, has purchased a record 16 million barrels of U.S. crude, to load in June, according to sources.
India and South Korea are the next biggest lifters in Asia, importing 6 million to 7 million barrels in June respectively , sources monitoring U.S. crude sales to Asia said. Indian Oil Corp purchased 3 million barrels earlier this month via a tender, while Reliance Industries bought up to 8 million barrels, the sources said.
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U.S. Consumer Confidence Bounces Back, House Prices Rise
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Consumer confidence bounced back in May, but households were a bit pessimistic regarding their short-term income prospects even as they expected strong job growth to persist, which could restrain consumer spending.
The Conference Board said its consumer confidence index increased 2.4 points to a reading of 128.0 this month from a downwardly revised 125.6 in April. The index was previously posted at 128.7 in April.
U.S. financial markets were little moved by the data amid a deepening political crisis in Italy. The dollar climbed to a 10-month high versus the euro, while U.S. Treasury yields dropped. Stocks on Wall Street fell, with the S&P 500 and Dow Jones Industrial Average hitting near three-week lows.
The Conference Board's so-called labor market differential, derived from data on respondents' views on whether jobs are plentiful or difficult to get, rose to 26.6 in May, the best reading since May 2001, from 22.7 in April.
That measure, which closely correlates to the unemployment rate in the Labor Department's employment report, suggests that labor market slack continues to shrink.
However, consumers were less upbeat about their short-term income prospects. The share of consumers expecting an improvement in their income dropped to 21.3 percent in May from 21.8 percent in April. The proportion expecting a decline rose to 8.2 percent in May from 7.9 percent in the previous month.
A separate report showed the S&P CoreLogic Case-Shiller composite index of home prices in 20 metropolitan areas rose 0.5 percent in March after climbing 0.8 percent in February. House prices were up 6.8 percent in the 12 months to March after rising by the same margin in February.
The strong gains are at odds with recent data which had suggested a cooling in house prices. The Federal Housing Finance Agency reported last week that house prices were slightly higher by 0.1 percent in March from February.
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German Inflation Rebounds in May on Higher Energy Prices
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German consumer price inflation jumped in May to reach the highest level in over a year, data showed, surpassing the European Central Bank's rate target of just under 2 percent for the eurozone as a whole.
German consumer prices, harmonised to make them comparable with inflation data from other European Union countries, increased by 2.2 percent year-on-year after a rise of 1.4 percent in the previous month, the Federal Statistics Office said.
Energy prices increased at an annual rate of 5.2 percent, driven by a sharp rise in the price of crude oil. “A major reason for the increase in the inflation rate is the price development for liquid fuels (heating oil and motor fuels),” Destatis said.
Food prices were also up markedly, to a year on year pace of 3.5 percent.
“German headline inflation won't surge from here, but it could nudge a bit higher in coming months, before easing into year-end,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics.
The stronger-than-expected inflation figures are likely to play into the hands of policy hawks, including Bundesbank head Jens Weidmann, who want the ECB to end its asset purchases this year and see room for a rate hike towards the middle of 2019.
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U.S. to Move Forward with Tariffs on Steel, Aluminum Imports from Canada, EU, Mexico
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The U.S. on Thursday said it was moving forward with tariffs on aluminum and steel imports from Canada, Mexico and the European Union, concluding a two-month exemption and potentially paving the way for a trade war with some of America's top allies.
Commerce Secretary Wilbur Ross told media on a telephone briefing on Thursday that a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports from the EU, Canada and Mexico would become effective at midnight on Friday.
He said that the U.S. looks forward to continue negotiations with Canada and Mexico, as well as the European Commission with regards to other issues that needs to be resolved.
Ross told reporters that talks with Canada and Mexico over overhauling the NAFTA were taking longer than they had expected. Negotiations with Europe had made some headway but not sufficient for additional exemptions, he said.
European Commission President Jean Claude-Juncker reacted to the announcement, stating that the EU will impose countermeasures on the U.S. He added that the European Commission will immediately introduce a settlement dispute with the World Trade Organization.
The newly announced tariffs are also seen to hinder negotiations between the US, Canada and Mexico on NAFTA. Both Mexico and Canada promised retaliatory tariffs in response to U.S. levies.
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U.S. Allies Retaliate Against Trump Administration’s Steel, Aluminum Tariffs
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Canada and Mexico retaliated against America's move to impose additional duties on steel and aluminum imports and the European Union had its own countermeasures prepared, reviving concerns of a global trade war.
U.S. Commerce Secretary Wilbur Ross announced the tariffs in a telephone briefing on Thursday. The move ends months of uncertainty regarding possible exemptions and indicated a toughening of the Trump administration's stance on trade negotiations.
Ross told reporters that a 25 percent tariff on steel imports and 10 percent tariff on aluminum imports will be imposed on the EU, Canada and Mexico from midnight on Friday.
The measures, which were first announced by President Donald Trump in March, received criticism from Republican lawmakers and the nation's top lobbying group. It also affected global financial markets.
Canada and Mexico, currently engaged in talks with the US to overhaul the North American Free Trade Agreement immediately responded to the announcement. Canada, the biggest supplier of steel to America, said it will impose tariffs covering C$16.6 billion on imports from the U.S. It will include whiskey, orange juice, steel, aluminum and other products, according to Canadian Foreign Minister Chrystia Freeland.
In a news conference, Prime Minister Justin Trudeau criticized the decision made by the Trump administration and was clearly going to result in retaliatory measures.
Mexico announced what it called an “equivalent” measures on a wide range of U.S. farm and industrial products. The measures target pork legs, apples, grapes and cheese as well as steel and other products, which will be implemented until the U.S. government removes the tariffs, according to Mexico's Economy Ministry.
The EU threatened tariffs on Harley Davidson motorcycles and bourbon, measures aimed at the political bases of U.S. Republican lawmakers.
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Tech Rally Powers Wall Street Higher, Nasdaq Notches Record Close
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Wall Street's three benchmark indexes rallied on Monday, led by broad gains in tech stocks, driving the Nasdaq to a record closing high as investors wager on the retention of solid economic growth, while declining oil prices affected the energy sector.
The Dow Jones Industrial Average edged up 178.48 points, or 0.72 percent, to 24,813.69. The S&P 500 rose by 12.25 points, or 0.45 percent, to 2,746.87.The Nasdaq Composite jumped 52.13 points, or 0.69 percent, to hit 7,606.46, a record closing high.
Apple shares climbed to their highest level in history due to investor expectations on its annual developers conference and Microsoft received nods for its latest acquisition, driving the S&P 500 technology index to a record high. Meanwhile, Amazon.com outperformed among consumer stocks. The S&P 500's technology sector was the benchmark index's biggest gainer, 0.8 percent higher.
According to traders, better-than-expected U.S. jobs data for ay was still a main factor to investor optimism as traders looked past recent trade war concerns.
Despite the impressive jobs report, markets are worried about the U.S. government's announcement last week of steel and aluminum tariffs for Europe, Canada and Mexico, which concluded a two-month exemption.
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Mexico Hits Back against Steel Duties with Tariffs on U.S. Imports
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Mexico has announced new levies on U.S. imports in response to U.S. President Donald Trump's decision to impose hefty tariffs on imports of steel and aluminum.
The peso fell on Tuesday after Mexico imposed tariffs on U.S. products including bourbon, apples, potatoes, cheese, and pork in retaliation to the steel duties.
Mexico's peso was down 1.4 percent at 20.35 to the dollar in early trade.
The announcement of tariffs ranging from 15 percent to 25 percent came as the future of the NAFTA trade deal came under new pressure from the White house. The list of U.S. products subject to fresh tariffs did not include the top two US agricultural exports to Mexico: Corn and soybeans. This would enable the animal feed products to continue to enter Mexico's domestic livestock and poultry industries.
The new tariffs came after the Trump administration restated its desire to push for bilateral talks on NAFTA with Mexico and Canada. According to Larry Kudlow, economic adviser to Trump, Washington was now inclined towards such change, saying that countries that are different potentially deserves varying deals. Mexico has opposed such attempts to split the NAFTA allies.
Jaime Zabludovsky, one of Mexico's original Nafta negotiators, said Trump's desire to negotiate separately was senseless and also put the interests of US private sector at risk.
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Oil Prices Rally on Venezuelan Supply Disruptions
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Oil prices rallied on Thursday to pare some of the prior session's losses, propped up by declining exports by OPEC-member Venezuela.
Brent crude futures traded up 33 cents or 0.4 percent, to $75.69 per barrel. Meanwhile, U.S. WTI crude rose 33 cents or 0.6 percent at $65.11 per barrel. It finished the prior session 1.2 percent lower at $64.73 per barrel.
Venezuela, a member of the OPEC,is lagging in shipping crude to clients from its main oil export port for almost a month, according to Reuters data, as chronic postponements threaten to breach state-run PDVSA's crude supply contracts if they are not quickly delivered.
Tankers waiting to load over 24 million barrels of crude,almost as much as PDVSA sippined in April, are waiting in the country's main oil port. Reuters data showed that the backlog is so serious, PDVSA advised some customers it may announce force majeure, allowing it to temporarily stop contracts if they do not take on new delivery terms.
Venezuela's supply troubles come amid voluntary production cuts by OPEC which have been implemented since 2017 in order to rebalance the market and drive up prices. The cartel is slated to meet at its headquarters in Vienna, along with top producer but non-OPEC member Russia, on June 22 to talk about production policy.
Iran, a member of OPEC, said on Wednesday that a production boost was not up for consideration as the market was steady and prices were good.
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