Asian shares stumble as China extends declines amid trade tensions

Asian Stock Markets

Asian stocks traded mostly lower on Tuesday, with greater China markets extending their declines as investor worries over Beijing's trade relations with the U.S. soured sentiment in the region.

China markets pulled back, extending the last session's sharp declines. The Shanghai composite sank 1.27 percent after touching two-year lows in the last session and the Shenzhen composite pulled back by 1.36 percent.

Hong Kong's Hang Seng Index plunged 3.08 percent as markets there reopened for trade after a holiday, with the energy and services sectors leading losses. Heavily weighted financials also slumped, with HSBC down 2.79 percent, while technology blue chip Tencent dropped 2.74 percent.

Asian stocks traded mostly lower on Tuesday, with greater China markets extending their declines as investor worries over Beijing's trade relations with the U.S. soured sentiment in the region.

China markets pulled back, extending the last session's sharp declines. The Shanghai composite sank 1.27 percent after touching two-year lows in the last session and the Shenzhen composite pulled back by 1.36 percent.

Hong Kong's Hang Seng Index plunged 3.08 percent as markets there reopened for trade after a holiday, with the energy and services sectors leading losses. Heavily weighted financials also slumped, with HSBC down 2.79 percent, while technology blue chip Tencent dropped 2.74 percent.
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Elsewhere, Japan's Nikkei 225 turned lower, declining 0.65 percent after earlier retracing some of the sharp declines seen in the overnight session. Airlines and oil producers clung to gains, while most other sectors eased.

In South Korea, the Kospi edged down by 0.37 percent. Manufacturers and technology plays were mixed, with Samsung Electronics gaining 0.99 percent while steelmaker Posco lost 2.06 percent. The S&P/ASX 200, however, bucked the broader trend to rise 0.51 percent.

Meanwhile, MSCI's index of stocks in Asia Pacific outside of Japan sank 1.22 percent in Asia morning trade.

Investors were cautious as markets continued to watch developments on the trade front. A looming July 6 deadline is set to see the U.S. impose a 25 percent tariff on $34 billion worth of Chinese goods from more than 800 product categories. China has also announced that it will retaliate with duties on the same value of U.S. products.

"While we still think that a full-blown trade war is unlikely, the harsh rhetoric and punitive measures have reached a point that warrants serious consideration of such eventualities," Tamur Baig, chief economist at DBS Bank, said in a note. He added that the U.S. would likely be hurt more than China if a trade war ensues, given how China's retaliation can be on multiple fronts and the U.S. is involved in more than one trade spat.

The U.S. is also engaged in disputes on trade issues with other key trading partners, including Canada and the European Union. The U.S. could face tariffs from the European Union on as much as $300 billion in U.S. goods if the Trump administration proceeds with imposing duties on European cars, the Financial Times reported.

Markets in Europe and Asia closed lower in the previous session amid the concerns over trade, with the pan-European Stoxx 600 declining 0.84 percent. Asian stock indexes saw steeper losses as China markets resumed their slide after getting some reprieve at the end of last week, with the Shanghai composite dropping 2.52 percent on Monday.

Amid the market moves ahead of that July 6 deadline for tariffs, U.S. Commerce Secretary Wilbur Ross told CNBC there was no "bright line level of the stock market" that would change U.S. President Donald Trump's mind on trade policy.

Those jitters also overshadowed the moderate gains made on Wall Street overnight, with U.S. stocks closing in positive territory after dipping early in the overnight session on trade concerns. The Dow Jones Industrial Average rose 0.15 percent, or 35.77 points, to close at 24,307.18.

Investor jitters over trade concerns, meanwhile, supported the greenback. The dollar index, which tracks the dollar against a basket of currencies, traded at 94.925 at 11:24 a.m. HK/SIN after rising above the 95 handle in the overnight session. Against the yen, the dollar traded at 110.86.

China stocks hit turbulence with Asian shares sinking

Asian Stock Markets

Chinese stocks went into a tail spin on Tuesday as turbulence gripped equity markets in Asia, which sank to nine-month lows as investors feared the Sino-U.S. trade row could derail a rare period of synchronized global growth. 

Speculation was rife the central bank in China was intervening in the currency market to staunch losses and prevent a potentially destabilising sell-off in the yuan.

Chinese financial markets have been jittery ahead of a July 6 deadline, when the U.S. is set to slap tariffs on $34 billion worth of Chinese goods that Beijing has vowed to match with tariffs on U.S. products.

The trade row between the United States and major economies has rattled financial markets in the past several weeks, with no sign U.S. President Donald Trump is about to back down from his ‘America First’ protectionism policies that many fear will harm the global economy.

The Asia Pacific MSCI index ex-Japan .MIAPJ0000PUS tumbled 1.4 percent to its lowest since September 29, while Japan's Nikkei average .N225 was down 0.86 percent to a near three-month low.

Chinese stocks were hit the most, with Hong Kong's Hang Seng index .HSI diving 3.3 percent to its lowest level in ten months, the Shanghai Composite Index .SSEC shedding 1.9 percent to hit a fresh 28 month low.


The Chinese yuan CNY=CFXS, on a downward spiral since mid-June, slipped past 6.7 per dollar in early trading on Tuesday for the first time since Aug. 9, 2017 before paring losses on talk of intervention by the Chinese central bank.

The central bank put the midpoint CNY=PBOC roughly in line with market expectations at 6.6497 yuan per dollar, its weakest level in about 10 months, setting the stage for the day's drop.

The yuan was last traded at 6.6998 per dollar.

Trump told the World Trade Organization on Monday that “we’ll be doing something” if the United States is not treated properly, just hours after the European Union said that U.S. automotive tariffs would hurt its own vehicle industry and prompt retaliation.

Officials in China, the epicentre of the international trade row, have warned the United States that the ti-for-tat tariffs on each others goods will ultimately prove detrimental for American businesses and jobs. L4N1TN1RH

Elsewhere in currency markets, the euro EUR=, which had been pressured by political uncertainty in Germany, pared losses after Chancellor Angela Merkel's conservatives settled a row over migration that threatened to topple her governing coalition after interior minister Horst Seehofer dropped his threat to quit.

The euro last traded at $1.1632 EUR=, after shedding 0.45 percent overnight.

The dollar last stood at 110.82 yen, giving up gains following sharp falls in Chinese shares.

Investors are also keeping an eye on the Reserve Bank of Australia’s (RBA) policy meeting later on Tuesday for any mention of the U.S.-China trade tensions. The central bank is considered certain to maintain rates at 1.5 percent, where they have been since mid-2016.

China is Australia’s major export market and its currency, the Australia dollar, is considered a liquid proxy for China-related risk.

The Aussie dollar was not far off a 1-1/2-year low of $0.7311 AUD=D4 plumbed on Monday, fetching $0.7328.

Oil prices climbed on Tuesday after Libya declared force majeure on some of its supplies, with Brent crude LCOc1 rising 0.83 percent to $77.94 per barrel and West Texas Intermediate (WTI) crude CLc1 was up 0.87 percent to $74.58 a barrel.

Yen slides from 2-week high after North Korea says still open to talks with U.S.

Asian Stock Markets

The yen stepped back from a two-week high against the dollar on Friday when North Korea said it was open to resolving issues with the United States after President Donald Trump called off a June summit with its leader, Kim Jong Un.

Although the yen and the safe-haven Swiss franc had gained on Thursday in response to heightened worries over global politics, traders were quick to lock in gains ahead of a long weekend in the United States and Britain.

The yen fell 0.3 percent to 109.59 yen in Asian trade following conciliatory comments from North Korean Vice Foreign Minister Kim Kye Gwan.

It had hit a two-week high of 108.955 per dollar overnight in a knee-jerk reaction after President Donald Trump called off the planned summit with Kim.

Trump blamed the cancellation on what he said was Pyongyang’s “open hostility,” and warned that the U.S. military was ready in the event of any reckless acts by North Korea.

The dollar index, which measures the greenback against a basket of six other currencies, was up 0.2 percent at 93.912 and not far from the five-month high it hit on Wednesday.

The dollar had been rising for weeks on its widening yield advantage but lost some of its momentum after minutes of the Federal Reserve’s last policy meeting published on Wednesday were seen as more dovish than markets had expected.

Asian stocks steadies amid caution over U.S.-China trade talks

Asian Stock Markets

Asian stocks were steady on Friday amid caution over developments in U.S.-China trade negotiations, while the dollar perched near a five-month peak after the benchmark U.S. Treasury yield hit its highest in seven years. 

Spreadbetters expected European stocks to open mixed, with Britain’s FTSE dipping 0.1 percent, Germany’s DAX rising 0.13 percent and France’s CAC little changed.

MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed. The index was headed for a 1 percent loss this week.

Hong Kong’s Hang Seng rose 0.17 percent and Shanghai climbed 0.3 percent as some investors bet Beijing and Washington will reach a deal in the latest round of trade talks. [.SS]

Japan’s Nikkei rose 0.35 percent, South Korea’s KOSPI was up 0.3 percent and Australian stocks dipped 0.2 percent.

Wall Street ended slightly lower on Thursday as investors grappled with U.S.-China trade tensions after U.S. President Donald Trump said that China “has become very spoiled on trade”.

But helping ease some of the tension, Beijing has offered Trump a package of proposed purchases of American goods and other measures aimed at reducing the U.S. trade deficit with China by some $200 billion a year, U.S. officials familiar with the proposal said.

A second round of talks between senior Trump administration officials and their Chinese counterparts started on Thursday, focused on cutting China’s U.S. trade surplus and improving intellectual property protections.



In currencies, the dollar index against a basket of six major currencies was steady at 93.471 after rising to a five-month peak of 93.632 on Thursday.

The index has gained about 1 percent this week, buoyed by the surge in U.S. Treasury yields, with the 10-year U.S. Treasury note yield hitting a seven-year peak of 3.128 percent.

The euro was up 0.1 percent at $1.1805, but not far off a five-month trough of $1.1763 brushed on Wednesday. The currency has fallen nearly 1.2 percent this week, largely pressured by Italian political uncertainty.

Reports this week that Italian populist parties likely to form the country’s next government may ask the European Central Bank for debt forgiveness have raised concerns about Italy abandoning fiscal discipline.

The dollar extended an overnight rally and rose to 111.005 yen, its highest since late January. The greenback has gained about 1.4 percent against its Japanese peer this week.

Emerging market currencies have also lost ground against the dollar this week as the rise in U.S. yields showed little signs of slowing.

The Turkish lira fell to a record low against the dollar this week, the Brazilian real plumbed a two-year low while Mexico’s peso has shed more than 5 percent this month.

A retreat by Indonesia’s rupiah to a 2-1/2-year low prompted the central bank to tighten monetary policy on Thursday for the first time since 2014 to support the currency.

In commodities, Brent crude oil futures were 16 cents higher at $79.46 a barrel after rising to $80.50 on Thursday, their highest since November 2014.

Brent has risen 3 percent this week and is headed for a sixth week of gains.

A rapid slide in oil supply from Venezuela, concern that U.S. sanctions will disrupt exports from Iran, and falling global inventories have all combined to push oil prices up nearly 20 percent in 2018. [O/R]

Inflation concerns, strong U.S. economic indicators and worries over increasing debt supply have pushed Treasury yields higher this week.

Meteoric Singapore Stock Comes Crashing Back to Earth

Asian Stock Markets

After a spectacular rise for two years, Singapore’s biggest technology company is suddenly returning to earth.

All eyes in the country’s financial community have been on Venture Corp., an electronics stock that more than tripled since April 2016 to become -- at one point -- a $6.5 billion firm. So meteoric was its advance that Venture became the only technology company listed on Singapore’s blue-chip 30-member Straits Times Index.

Venture Chief Executive Officer Wong Ngit Liong boosted his stake in 2016 -- for the first time in many years -- ahead of the stock rally. Beyond that, analysts say, he has largely kept quiet about Venture’s business.

The investors were impressed by Venture’s profit, which jumped amid the good times for technology companies last year. There were rumors of a big contract with Philip Morris International Inc. for its heat-not-burn tobacco device IQOS. (Venture hasn’t confirmed or denied a relationship with the cigarette giant.) Analysts also talked about how Venture was evolving into something bigger -- in areas from product design to research and development.

All the while, an air of mystery surrounded the company, partly because Wong gave little away about its customers. Then came the fall.

The first blow was Philip Morris’s earnings; the second, a short-seller attack. Venture is too exposed to the tobacco company, which had reported disappointing sales growth.

Venture has “consistently reported favourable financial performance every quarter,” and “keeps its ‘trade secrets’ very close to its heart” for the benefit of all stakeholders, the company said in a statement to the Singapore Exchange after market close on Tuesday.

During Venture’s first-quarter results briefing a day after the short report, CEO Wong told analysts to consider the source and intention of the note, while the company’s chief financial officer said the short sellers had “a clear hidden agenda.”

The company reported a 72 percent year-on-year increase in first-quarter net income, but its results fell short of analyst expectations because sales were almost flat. That, coupled with the short report and Philip Morris signaling that IQOS adoption in Japan has slowed, was enough to rattle the market.

At least seven brokerages lowered their price targets for the stock, according to data compiled by Bloomberg. Credit Suisse Group AG downgraded its rating to neutral from buy. And the shares plunged 33 percent over eight days.

Investors were jittery after local technology firms reported weak earnings, because they saw that as a signal that the sector was slowing down. But Hugh Young of Aberdeen Standard Investments says he’s not that worried about Venture’s decline. Young’s firm, which tends to be a long-term shareholder, has an almost 5 percent stake, according to data compiled by Bloomberg.

As if to back up the veteran investor, Venture staged a comeback this week with an 11 percent advance. That came, once again, after anonymous bloggers swayed the stock. This time, a group calling themselves the “True Valiant Warriors” came out in defense of the company. Their report and the blog it was published on have since been taken down. The company also stepped up its buybacks: Venture repurchased 109,000 shares from the market on Monday and 20,000 on Tuesday, according to filings to the Singapore Exchange. The shares rose as much as 3.7 percent on Wednesday.

Despite all the drama, Nicholas Teo, a trading strategist at KGI Securities (Singapore) Pte., sounds a note of caution about being too caught up in the stock’s movements. It’s important to look beyond the daily swings, he said.

Asian shares fell as U.S. yields rises with cost worries

Asian Stock Markets

Asian shares fell on Wednesday as a rise in U.S. bond yields above 3 percent and warnings from bellwether U.S. companies of higher costs drove fears that a boom in corporate earnings may be near its peak. 

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS dropped 0.3 percent, hitting their weakest in almost three weeks, with tech-heavy Taiwan shares .TWII slipping to two-month lows on worries about slowing semi-conductor demand. Japan's Nikkei .N225 dropped 0.2 percent.

European shares are expected to fall, with spread-betters calling a 0.7 to 0.9 percent drop in Britain's FTSE .FTSE, Germany's Dax .GDAXI and France's Cac .FCHI.

S&P E-mini futures ESc1 slipped 0.2 percent. Wall Street shares skidded overnight, with the S&P 500 .SPX slumping 1.34 percent, the most in two-and-a-half weeks.[.N]

Industrial heavyweight Caterpillar (CAT.N) beat earnings estimates due to strong global demand but its shares tumbled 6.2 percent after management said first-quarter earnings would be the “high water mark” for the year and warned of increasing steel prices.

Fujito noted major financial shares such as Goldman Sachs (GS.N) and Citigroup (C.N) as well as Google parent Alphabet GOOG.N, the first major tech firm to report earnings, have followed a similar pattern.

Corporate earnings are in solid shape, with analysts estimating 21.1 percent growth in the Jan-March quarter among U.S. S&P500 firms, according to Thomson Reuters data. A similar trend is expected globally.

Creeping gains in U.S. Treasury yields are fuelling fears that portfolio managers may move money into safer fixed-income securities at the expense of riskier assets like stocks and emerging markets.

The 10-year yield, a benchmark for global borrowing costs, has been driven steadily higher by a combination of concerns over inflation, growing debt supply, and rising Federal Reserve borrowing costs.

The 10-year U.S. Treasuries yield US10YT=RR rose to as high as 3.009 percent. A break of its January 2014 high of 3.041 percent could turn investors even more bearish.

Fed Funds rate futures prices <0#FF:> have been constantly falling this month, pricing in a considerable chance of three more rate hikes by the end of this year.

The impact is already reverberating in many emerging markets, with JPMorgan’s emerging market bond index .JPMEPR hitting a two-month low.

Japan says trade talks with U.S. under new framework won't start until June

Asian Stock Markets

Japan’s Economy Minister Toshimitsu Motegi said on Tuesday that bilateral talks on trade under a new framework led by him and U.S. Trade Representative Robert Lighthizer won’t begin until mid-June at the earliest. 

In a summit last week, Japanese Prime Minister Shinzo Abe and U.S. President Donald Trump agreed to set up a new framework focusing on bilateral trade led by Motegi and Lighthizer.

The move could put Japan under direct U.S. pressure to enter talks for a bilateral free trade agreement (FTA). Japan is wary of entering such talks and wants to convince Washington to rejoin the multilateral Trans-Pacific Partnership (TPP) pact

Trump pulled the United States out of TPP in early 2017 and has said he won’t consider rejoining unless conditions provided under the pact were far better than before.

Since the United States withdrew from TPP, the other 11 nations have forged ahead with their own agreement. Japan, which signed up for the pact, wants to pass relevant legislation through parliament in the current session running until June 20.

Japan hopes to put off full-fledged trade negotiations with the United States until TPP-related bills clear parliament, given the priority it puts on having TPP enter into force, government officials say.

Japan and the United States remain at loggerheads on how to frame trade talks. Japan is opposed to a two-way trade deal for fear of coming under pressure to open up politically sensitive markets like agriculture.

But U.S. Treasury Secretary Steven Mnuchin kept up heat on Japan, saying last week Washington wants a bilateral FTA.

Although Japan still hopes Trump will change his mind on TPP, it is hedging its bets by being more open to other forms of trade deals with Washington, say government officials with knowledge of the negotiations.

FOREX-Dollar near 2-week high as U.S. bond yields edge up

Asian Stock Markets

* Rising U.S. bond yields help underpin the dollar
* U.S. 10-year bond yield hits highest since Jan. 2014
* Dollar index trades near Friday’s two-week high
* Against the yen, dollar touches 2-month high (Updates prices, adds comments)
By Masayuki Kitano 

 The dollar traded near a two-week high against a basket of major currencies on Monday, bolstered by rising U.S. bond yields, while easing concerns over global political risks weighed on the safe haven yen.

The dollar’s index against a basket of six major peers edged up 0.1 percent to 90.401, staying within sight of a two-week high of 90.477 set on Friday.

Rising U.S. bond yields helped underpin the greenback, with the U.S. 10-year Treasury yield touching a peak of 2.979 percent in Asian trade, the highest since January 2014.

Concerns that recent rises in global oil prices could add to inflationary pressures, as well as increases in U.S. debt issuance, are likely contributing to the rise in Treasury yields, said Teppei Ino, a Singapore-based analyst for MUFG Bank.

The dollar index has traded in a range of about 88.25 to 91.00 since around the middle of January.
The rise in U.S. bond yields pressured emerging Asian currencies, with the Indonesian rupiah hitting a two-year low of 13,895 per dollar.

Against the yen, the dollar hit a two-month high of 107.89 yen, and last changed hands at 107.80 yen, up 0.2 percent on the day.

Easing concerns over global political risks weighed on the Japanese currency, market participants said.

The yen tends to attract demand in times of economic uncertainty and market turmoil, and sell off when confidence returns.

North Korea said on Saturday it would immediately suspend nuclear and missile tests, scrap its nuclear test site and pursue economic growth and peace instead. It made these comments ahead of planned summits with South Korea and the United States

Even traders who had been bearish on the dollar seem to be looking for opportunities to take long positions, with the greenback seen underpinned for now by higher U.S. bond yields.

The euro eased 0.1 percent to $1.2274, having set a two-week low of $1.2250 on Friday.

The common currency had slipped last week as investors trimmed long positions in the euro ahead of this week’s European Central Bank policy meeting at which policymakers are largely expected to signal no change in policy.

Sterling last changed hands at $1.4016, up 0.1 percent on the day. Last week, it fell 1.7 percent, its biggest weekly drop since early February.

The pound fell last week on weaker-than-expected inflation and retail sales data and comments from Bank of England (BOE) Governor Mark Carney on Thursday, which traders interpreted as the BOE being less committed to raising rates in May due to recent “mixed” data.

Whiskey sour? China importers fret over U.S. trade battle

Asian Stock Markets

When spirits dealer Daniel Taytslin brought his first pallet of American Ragtime Rye whiskey into Shanghai in early April, the 672 bottles faced a 5 percent import tariff at China’s customs

His next shipment from New York could be a lot more expensive as China prepares to slap a 25 percent additional tariff on hundreds of American products, including whiskey, because of a deepening trade dispute with the United States.

Taytslin and other U.S. whiskey importers say the worsening row is making small traders, as well as big business, very anxious. Some are accelerating shipments through customs to avoid potential tariff hikes. Others report unusual delays at customs they worry are linked to trade tensions.

The uncertainty gripping the niche market - U.S. whiskey imports to China were worth only $8.9 million last year - reflects the wider concern in the U.S. business community in China that the trade standoff could spark major disruption for American products in the world’s second largest economy.

China’s overall market was worth $611.5 million (£427.7 million) in 2016, according to the latest data from wine and spirits analytics firm IWSR, with Scottish whisky imports taking up virtually all of that. U.S. whiskey imports are in second place but growing rapidly.

Beijing last week said it would not back out of a fight with Washington, dashing hopes for an easing of tensions after Chinese President Xi Jinping vowed to open China’s economy further and lower import duties on some goods.

The U.S. is planning 25 percent tariffs on some 1,300 Chinese industrial, technology, transport and medical products. Chinese metal parts manufacturers have warned of factory closures or extra costs passed to U.S. customers.

China has fired back with a planned 25 percent tariff on whiskey and around 100 other U.S. products, but has not yet said when it will take effect. It has already raised tariffs on some other U.S. products, including fruits and wine, in response to Washington’s imposition of duties on imports of aluminium and steel.

Taytslin is already looking to take some of his goods out of a bonded warehouse in Shanghai, paying import taxes on them ahead of schedule to avoid being hit by increased tariffs.

He is also debating whether to pass on the higher prices for his future U.S. whiskey shipments to customers.

“We now have a potential tariff increase, and I either have to eat into my margin to keep pricing consistent so it’s competitive, or we’re going to... have to release a higher price.”

The hikes could hit a growing industry of smaller craft U.S. whiskies, as well as bigger names like Brown-Forman Corp (BFb.N), the Louisville, Kentucky-based maker of Jack Daniels and Woodford Reserve.

Beam Suntory, controlled by Japan’s Suntory Group, and which owns U.S. whiskey Jim Beam, did not have an immediate comment.

The U.S. Distilled Spirits Council said in a statement this month that it hoped for a quick solution to the trade dispute to avoid a tariff hike that would “harm Chinese consumers, its hospitality sector and U.S. whiskey exporters”

Two industry sources told Reuters that some containers of U.S. whiskey were taking longer than expected to pass through Chinese customs, fuelling concerns among importers that this could be linked to the tariff standoff.

James Leung, business director at Zhuhai Independent Wine & Spirit Ltd, which imports U.S. bourbon whiskey brand Heaven Hill, said he had been told a container of at least one major U.S. whiskey brand was being held at a Chinese port.

This had prompted him to notify China customers that he may have to ration supplies, due to concern that his own container shipments could be held up.

Several other people in the industry said they had not seen their goods held up at customs.
One U.S.-based whiskey industry source said he had heard reports from China colleagues about delays, but it was not clear if this was real or just talk for now. The person asked not to be named because of the sensitivity of the matter.

In the low light of wood-panelled speakeasy Senator Saloon in central Shanghai, bartenders Elephant Zhang and Jeremy Yang told Reuters they expected consumers to shake off any price hikes as they mixed classic whiskey cocktails like Manhattans and Sazeracs to the sound of Glenn Miller and Artie Shaw.

China first-quarter GDP growth seen easing only slightly as trade tensions mount

Asian Stock Markets

China likely carried most of its strong economic momentum from last year into the first quarter of 2018, with government crackdowns on financial risks and industrial pollution dragging less on activity than earlier expected, a Reuters poll showed. 

Beijing is looking to keep the economic balancing act intact even as it faces rising trade tensions with its largest trading partner, the United States, that could impact billions of dollars in cross-border trade.

A poll of 60 economists showed growth in gross domestic product likely eased marginally to 6.7 percent in the first quarter from a year earlier, compared with the 6.8 percent clip in the previous two quarters.

At the start of the year, analysts were pencilling in a first-quarter slowdown to 6.6 percent.

The consensus forecast indicates growth remained comfortably above the government’s target of around 6.5 percent for the full year, which could give policymakers more confidence to step up efforts to reduce risks in the financial system and clean up the environment.

China’s economic data so far this year has pointed to steady if slightly slower growth from 2017, with factory output holding up despite smog controls and consumer spending still relatively resilient.

Central bank governor Yi Gang said on Thursday that first quarter economic data has so far been slightly better than expected.

China will release first quarter GDP on Tuesday, along with March industrial output, retail sales, property sales and investment, and fixed asset investment data.

Economists in the poll estimated GDP grew 1.5 percent quarter-on-quarter, easing from 1.6 percent in the fourth quarter, though only 15 analysts gave sequential forecasts.

Data on Friday showed export growth slowed in the first quarter in yuan terms, indicating overseas demand may not provide the same boost to overall GDP as it did last year, when the economy posted its first pick-up in growth since 2010.

Analysts say the main risk to China’s economy is now centred on the escalating trade dispute with the United States.

Washington and Beijing have threatened tit-for-tat tariffs in recent weeks, stemming from U.S. accusations of unfair Chinese trade practices.

But no hard timeline has been set by either side for implementation, offering hope of a compromise that would reduce the fallout for both sides and collateral damage for other trade-reliant Asian economies plugged into China’s supply chains.

“Both the choice of Section 301 and the number of products included in the list under investigation point to the U.S. protectionist wind against China being very different, and frankly much more worrisome, than past ones,” Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis, said in a note on Monday.

A researcher with China’s state planning agency said last week that China’s economy will see little impact from the trade dispute, as the country’s vast domestic market can compensate for any external impact.

Separate data on Friday showed China is making solid progress in reining in off-balance sheet lending that largely prompted the sweeping crackdown by regulators.

Total credit in the economy in the first quarter fell nearly 20 percent on-year, though some economists think Beijing will not tap the brakes too hard and risk a sharper economic slowdown.

While economic growth could bounce back in spring due to seasonal factors such as a pick-up in construction, analysts still maintain that activity in China will start to cool eventually, weighed down by a cooling property market and rising borrowing costs.

Trump says U.S. will only rejoin Pacific trade pact if terms are improved

Asian Stock Markets

U.S. President Donald Trump said the United States would only join the Trans Pacific Partnership, a multinational trade deal his administration walked away from last year, if it offered “substantially better” terms than those provided under previous negotiations. 

His comments, made on Twitter late Thursday, came only hours after he had unexpectedly indicated the United States might rejoin the landmark pact, and amid heightened volatility in financial markets as Washington locked horns with China in a bitter trade dispute.

Trump had told Republican senators earlier in the day that he had asked United States Trade Representative Robert Lighthizer and White House economic adviser Larry Kudlow to re-open negotiations.

Policymakers in the Asia-Pacific region on Friday responded to the possibility of the U.S. rejoining the trade deal with scepticism.

Australian Prime Minister Malcolm Turnbull, commenting after Trump’s tweet, said it would be “great” to have the U.S. back in the pact though doubted it would happen.
“We’re certainly not counting on it,” Turnbull told reporters in Adelaide in South Australia.

The TPP, which now comprises 11 nations, was designed to cut trade barriers in some of the fastest-growing economies of the Asia-Pacific region and to counter China’s rising economic and diplomatic clout.

Trump, who opposed multilateral trade pacts in his election campaign in 2016 and criticized the TPP as a “horrible deal”, pulled the U.S. out of the pact in early 2017. He argued bilateral deals offered better terms for U.S. businesses and workers, and signaled an intention to raise trade barriers.

But Trump is struggling to get support from other countries for his recent threat to impose import tariffs on China and the U.S. farm lobby is arguing that retaliation by China would hit American agricultural exports.

Trade experts believe Trump is probably trying to placate his political base in the wake of criticism over the U.S.-China China tariff standoff.

“Well I think you have to take it seriously but I think there is an enormous chance that this is simply posturing or a tactical decision taken to placate concerned governors and senators from agricultural states that could be affected by China imposing tariffs,” said Charles Finny, a Wellington-based trade consultant and a former New Zealand government trade negotiator.

“I think it’s very important for people to realize, particularly given this most recent tweet, if there is a negotiation it will not be an easy one. It will take a long time and also there is huge risk around ratification.”

Even before Trump’s official withdrawal last year, U.S. participation in the pact was seen as increasingly unlikely due to opposition in the U.S. Congress.

The United States entered TPP negotiations in 2008. In 2016, then President Barack Obama’s administration abandoned attempts to push the pact through Congress.

The other 11 countries forged ahead with their own agreement without U.S. participation, and in the process eliminated chapters on investment, government procurement and intellectual property that were key planks of Washington’s demands.

New Zealand Prime Minister Jacinda Ardern, noting the progress made by the 11 countries after Trump abandoned the deal, also flagged challenges to the Untied States rejoining the pact.

The 11-member pact includes Mexico and Canada, which are in the process of re-negotiating the terms of the North American Free Trade Agreement with the United States.

A Canadian government official said on Thursday there had not been any formal outreach from the United States about the pact.

Japanese Prime Minister Shinzo Abe will meet Trump next week. Japan, a close U.S. ally, is a member of the TPP.

China March exports unexpectedly fall but first-quarter trade surplus with U.S. soars

Asian Stock Markets

China’s exports growth unexpectedly fell in March, the first drop since February last year, raising questions about the health of one of the economy’s key growth drivers even as trade tensions rapidly escalate with the United States. 

March import growth beat expectations, however, suggesting its domestic demand may still be solid enough to cushion the blow from any trade shocks. That left China with a rare trade deficit for the month, also the first drop since last February.

The latest readings on the health of China’s trade sector follow weeks of tit-for-tat tariff threats by Washington and Beijing, sparked by U.S. frustration with China’s massive bilateral trade surplus and intellectual property policies, that have fuelled fears of a global trade war.

China’s March exports fell 2.7 percent from a year earlier, lagging analysts’ forecasts for a 10.0 percent increase, and down from a sharper-than-expected 44.5 percent jump in February, which economists believe was heavily distorted by seasonal factors.

For the first quarter as a whole, however, exports still grew a hearty 14.1 percent.

Some analysts had expected a pullback in March exports following an unusually strong start to the year, when firms stepped up shipments before the long Lunar New Year holiday in mid-February.

That scenario did not alter their view that global demand remains robust.

But a stronger currency could also be starting to erode Chinese exporters' competitiveness. The yuan CNY=CFXS appreciated around 3.7 percent against the U.S. dollar in the first quarter this year, on top of a 6.6 percent gain last year.

No hard timeline has been set by either Washington or Beijing for the actual imposition of tariffs, which leaves the door open to negotiations and a possible compromise which could limit the damage to both sides and other trade-reliant economies.

But analysts said the trade threats may already be having an impact on exporters’ activity.
With the threat of tariffs hanging over nearly a third of China’s exports to the United States,
economists at Nomura say its companies may have front-loaded shipments early this year before any measures kick in.

China’s exports to the U.S. rose 14.8 percent in the first quarter from a year earlier, while imports rose 8.9 percent.

That sent its quarterly trade surplus with the U.S. surging 19.4 percent to $58.25 billion (£40.9 billion), though the March reading narrowed to $15.43 billion from $20.96 billion in February.

China’s total aluminium exports in March rose to their highest since June, just as the United States imposed tariffs on imports of the metal and steel on March 23.

China’s overall March imports grew 14.4 percent from a year ago, beating analysts’ forecast for 10.0 percent growth, and compared with 6.3 percent growth in February.

That produced a trade deficit of $4.98 billion for the month, but such shortfalls are not uncommon for China early in the year, likely due to seasonal factors.

For Jan-March, imports rose a strong 18.9 percent on-year.

Analysts expected China would record a trade surplus of $27.21 billion for last month, from February’s surplus of $33.75 billion.

Imports of commodities continued to lead the way in March, with shipments of copper, crude oil, iron ore and soybeans all rising from the previous month.

China’s exports rode a global trade boom last year, expanding at the fastest pace since 2013 and serving as one of the key drivers behind the economy’s forecast-beating expansion.

But the sudden spike in trade tensions with the United States is clouding the outlook for both China’s “old economy” heavy industries and “new economy” tech firms.

Washington says China’s $375 billion trade surplus with the United States is unacceptable, and has demanded Beijing reduce it by $100 billion immediately.

In a move to further force China to lower the billions of goods trade surplus running with the U.S., Trump unveiled tariff representing about $50 billion of technology, transport and medical products early this month, drawing an immediate threat of retaliatory action from Beijing.

China’s tech sector, which is key part of Beijing’s longer-term “Made in China 2025” strategy to move from cheap goods to higher-value manufacturing, may be particularly vulnerable.

Hi-tech products have been among its fastest growing export segments. China exported $137.8 billion worth of high-tech products in the first quarter, up 20.5 percent on-year.

Oil prices edged lower on Friday after U.S. President Donald Trump tempered remarks warning of an imminent missile attack on Syria, but were still set for their biggest weekly gains in more than 8 months. NYMEX crude for May delivery CLc1 was down 21 cents, or 0.3 percent, at $66.86 a barrel at 0329 GMT. For the week, the contract is set to post a gain of nearly 8 percent, following two weeks of declines, Reuters said. Read alsoReuters: Oil dips on rising U.S. supplies, market still tense on conflict in Syria London Brent crude LCOc1 was down 24 cents, or 0.3 percent, at $71.78, and is up about 7 percent for the week. Both benchmarks are set for their biggest weekly gains since last July after surging to a more than three-year high earlier in the week on tensions over Syria and shrinking global oil inventories. "This last jump of $5 or so is because of the geopolitical situation caused by the situation in Syria," said Tony Nunan, senior oil risk manager at Mitsubishi Corp in Tokyo. "It looks like Trump backed off a little bit and wants to build a coalition, sending a signal to the broader market that he is going to be much more careful than people thought." Oil prices hit their highest level since late 2014 on Wednesday after Trump warned that missiles "will be coming" in response to the attack in Syria and Saudi Arabia said it intercepted missiles over Riyadh, both of which raised concerns about possible supply disruptions. Trump tempered his comments on Thursday and even as he consulted allies such as Britain and France, who could join in any U.S.-led strikes on Syria, there were signs of efforts to prevent the crisis from spiraling out of control. Trump tweeted an attack on Syria "could be very soon or not so soon at all" raising the prospect that an attack might not be as imminent as he seemed to suggest the day before. On fundamentals, OPEC said on Thursday a global oil stocks surplus is close to evaporating, citing healthy energy demand and its own supply cuts, while revising up its forecast for production from rivals who have benefited from higher oil prices. OPEC and its oil producer allies are poised to extend their supply-cutting pact into 2019 even as a global glut of crude is set to evaporate by September, OPEC Secretary-General Mohammad Barkindo told Reuters. China's crude oil imports rose to 9.2 million barrels per day in March, the second highest on record, according to Reuters calculations based on official customs data.

Read more on UNIAN: https://economics.unian.info/10079402-reuters-oil-eases-as-trump-backtracks-on-imminent-syria-strike.html

Oil prices edged lower on Friday after U.S. President Donald Trump tempered remarks warning of an imminent missile attack on Syria, but were still set for their biggest weekly gains in more than 8 months. NYMEX crude for May delivery CLc1 was down 21 cents, or 0.3 percent, at $66.86 a barrel at 0329 GMT. For the week, the contract is set to post a gain of nearly 8 percent, following two weeks of declines, Reuters said. Read alsoReuters: Oil dips on rising U.S. supplies, market still tense on conflict in Syria London Brent crude LCOc1 was down 24 cents, or 0.3 percent, at $71.78, and is up about 7 percent for the week. Both benchmarks are set for their biggest weekly gains since last July after surging to a more than three-year high earlier in the week on tensions over Syria and shrinking global oil inventories. "This last jump of $5 or so is because of the geopolitical situation caused by the situation in Syria," said Tony Nunan, senior oil risk manager at Mitsubishi Corp in Tokyo. "It looks like Trump backed off a little bit and wants to build a coalition, sending a signal to the broader market that he is going to be much more careful than people thought." Oil prices hit their highest level since late 2014 on Wednesday after Trump warned that missiles "will be coming" in response to the attack in Syria and Saudi Arabia said it intercepted missiles over Riyadh, both of which raised concerns about possible supply disruptions. Trump tempered his comments on Thursday and even as he consulted allies such as Britain and France, who could join in any U.S.-led strikes on Syria, there were signs of efforts to prevent the crisis from spiraling out of control. Trump tweeted an attack on Syria "could be very soon or not so soon at all" raising the prospect that an attack might not be as imminent as he seemed to suggest the day before. On fundamentals, OPEC said on Thursday a global oil stocks surplus is close to evaporating, citing healthy energy demand and its own supply cuts, while revising up its forecast for production from rivals who have benefited from higher oil prices. OPEC and its oil producer allies are poised to extend their supply-cutting pact into 2019 even as a global glut of crude is set to evaporate by September, OPEC Secretary-General Mohammad Barkindo told Reuters. China's crude oil imports rose to 9.2 million barrels per day in March, the second highest on record, according to Reuters calculations based on official customs data.

Read more on UNIAN: https://economics.unian.info/10079402-reuters-oil-eases-as-trump-backtracks-on-imminent-syria-strike.html

Oil prices edged lower on Friday after U.S. President Donald Trump tempered remarks warning of an imminent missile attack on Syria, but were still set for their biggest weekly gains in more than 8 months. NYMEX crude for May delivery CLc1 was down 21 cents, or 0.3 percent, at $66.86 a barrel at 0329 GMT. For the week, the contract is set to post a gain of nearly 8 percent, following two weeks of declines, Reuters said. Read alsoReuters: Oil dips on rising U.S. supplies, market still tense on conflict in Syria London Brent crude LCOc1 was down 24 cents, or 0.3 percent, at $71.78, and is up about 7 percent for the week. Both benchmarks are set for their biggest weekly gains since last July after surging to a more than three-year high earlier in the week on tensions over Syria and shrinking global oil inventories. "This last jump of $5 or so is because of the geopolitical situation caused by the situation in Syria," said Tony Nunan, senior oil risk manager at Mitsubishi Corp in Tokyo. "It looks like Trump backed off a little bit and wants to build a coalition, sending a signal to the broader market that he is going to be much more careful than people thought." Oil prices hit their highest level since late 2014 on Wednesday after Trump warned that missiles "will be coming" in response to the attack in Syria and Saudi Arabia said it intercepted missiles over Riyadh, both of which raised concerns about possible supply disruptions. Trump tempered his comments on Thursday and even as he consulted allies such as Britain and France, who could join in any U.S.-led strikes on Syria, there were signs of efforts to prevent the crisis from spiraling out of control. Trump tweeted an attack on Syria "could be very soon or not so soon at all" raising the prospect that an attack might not be as imminent as he seemed to suggest the day before. On fundamentals, OPEC said on Thursday a global oil stocks surplus is close to evaporating, citing healthy energy demand and its own supply cuts, while revising up its forecast for production from rivals who have benefited from higher oil prices. OPEC and its oil producer allies are poised to extend their supply-cutting pact into 2019 even as a global glut of crude is set to evaporate by September, OPEC Secretary-General Mohammad Barkindo told Reuters. China's crude oil imports rose to 9.2 million barrels per day in March, the second highest on record, according to Reuters calculations based on official customs data.

Read more on UNIAN: https://economics.unian.info/10079402-reuters-oil-eases-as-trump-backtracks-on-imminent-syria-strike.html

Oil prices edged lower on Friday after U.S. President Donald Trump tempered remarks warning of an imminent missile attack on Syria, but were still set for their biggest weekly gains in more than 8 months. NYMEX crude for May delivery CLc1 was down 21 cents, or 0.3 percent, at $66.86 a barrel at 0329 GMT. For the week, the contract is set to post a gain of nearly 8 percent, following two weeks of declines, Reuters said. Read alsoReuters: Oil dips on rising U.S. supplies, market still tense on conflict in Syria London Brent crude LCOc1 was down 24 cents, or 0.3 percent, at $71.78, and is up about 7 percent for the week. Both benchmarks are set for their biggest weekly gains since last July after surging to a more than three-year high earlier in the week on tensions over Syria and shrinking global oil inventories. "This last jump of $5 or so is because of the geopolitical situation caused by the situation in Syria," said Tony Nunan, senior oil risk manager at Mitsubishi Corp in Tokyo. "It looks like Trump backed off a little bit and wants to build a coalition, sending a signal to the broader market that he is going to be much more careful than people thought." Oil prices hit their highest level since late 2014 on Wednesday after Trump warned that missiles "will be coming" in response to the attack in Syria and Saudi Arabia said it intercepted missiles over Riyadh, both of which raised concerns about possible supply disruptions. Trump tempered his comments on Thursday and even as he consulted allies such as Britain and France, who could join in any U.S.-led strikes on Syria, there were signs of efforts to prevent the crisis from spiraling out of control. Trump tweeted an attack on Syria "could be very soon or not so soon at all" raising the prospect that an attack might not be as imminent as he seemed to suggest the day before. On fundamentals, OPEC said on Thursday a global oil stocks surplus is close to evaporating, citing healthy energy demand and its own supply cuts, while revising up its forecast for production from rivals who have benefited from higher oil prices. OPEC and its oil producer allies are poised to extend their supply-cutting pact into 2019 even as a global glut of crude is set to evaporate by September, OPEC Secretary-General Mohammad Barkindo told Reuters. China's crude oil imports rose to 9.2 million barrels per day in March, the second highest on record, according to Reuters calculations based on official customs data.

Read more on UNIAN: https://economics.unian.info/10079402-reuters-oil-eases-as-trump-backtracks-on-imminent-syria-strike.html

Oil prices edged lower on Friday after U.S. President Donald Trump tempered remarks warning of an imminent missile attack on Syria, but were still set for their biggest weekly gains in more than 8 months. NYMEX crude for May delivery CLc1 was down 21 cents, or 0.3 percent, at $66.86 a barrel at 0329 GMT. For the week, the contract is set to post a gain of nearly 8 percent, following two weeks of declines, Reuters said. Read alsoReuters: Oil dips on rising U.S. supplies, market still tense on conflict in Syria London Brent crude LCOc1 was down 24 cents, or 0.3 percent, at $71.78, and is up about 7 percent for the week. Both benchmarks are set for their biggest weekly gains since last July after surging to a more than three-year high earlier in the week on tensions over Syria and shrinking global oil inventories. "This last jump of $5 or so is because of the geopolitical situation caused by the situation in Syria," said Tony Nunan, senior oil risk manager at Mitsubishi Corp in Tokyo. "It looks like Trump backed off a little bit and wants to build a coalition, sending a signal to the broader market that he is going to be much more careful than people thought." Oil prices hit their highest level since late 2014 on Wednesday after Trump warned that missiles "will be coming" in response to the attack in Syria and Saudi Arabia said it intercepted missiles over Riyadh, both of which raised concerns about possible supply disruptions. Trump tempered his comments on Thursday and even as he consulted allies such as Britain and France, who could join in any U.S.-led strikes on Syria, there were signs of efforts to prevent the crisis from spiraling out of control. Trump tweeted an attack on Syria "could be very soon or not so soon at all" raising the prospect that an attack might not be as imminent as he seemed to suggest the day before. On fundamentals, OPEC said on Thursday a global oil stocks surplus is close to evaporating, citing healthy energy demand and its own supply cuts, while revising up its forecast for production from rivals who have benefited from higher oil prices. OPEC and its oil producer allies are poised to extend their supply-cutting pact into 2019 even as a global glut of crude is set to evaporate by September, OPEC Secretary-General Mohammad Barkindo told Reuters. China's crude oil imports rose to 9.2 million barrels per day in March, the second highest on record, according to Reuters calculations based on official customs data.

Read more on UNIAN: https://economics.unian.info/10079402-reuters-oil-eases-as-trump-backtracks-on-imminent-syria-strike.html

China says it will fight back if U.S. escalates trade spat

Asian Stock Markets

China’s commerce ministry said on Thursday trade negotiations with the United States would be impossible as Washington’s attempts at dialogue were not sincere, and vowed to retaliate should U.S. President Donald Trump escalate current tensions.

China President Xi Jinping on Tuesday vowed to open China’s economy further and lower import duties on goods such as cars, which had boosted hopes for a compromise. Trump responded in a tweet saying he was “thankful” for Xi’s remarks on tariffs and access for U.S. automakers, and said both countries would “make great progress together”.

Commerce Ministry spokesman Gao Feng told reporters during a regular briefing, however, that Xi’s remarks had nothing to do with the trade row and should not be mischaracterized as a concession to Washington.

The world’s two largest economies have threatened each other with tens of billions of dollars’ worth of tariffs in recent weeks, leading to worries that Washington and Beijing may engage in a full-scale trade war that could damage global growth and roil markets.

Some U.S. officials and analysts have said they believe the dispute could eventually be resolved via dialogue, but Beijing reiterated on Thursday that no formal talks have taken place.

China’s Global Times tabloid wrote in a commentary that Washington can either respond sincerely to China’s determination of opening up and launching goodwill interactions or keep pressuring China with unreasonable demands and escalate trade frictions.

Washington accuses Chinese firms of stealing the trade secrets of U.S. companies and forcing them into joint ventures to acquire their technology - the crux of Trump’s current tariff threats against China. Beijing denies this charge.

Trump on Monday also criticized China for maintaining 25 percent import tariffs on autos compared to 2.5 percent duties of the U.S., calling the relationship not free trade but “stupid trade.” But Gao said WTO rules do not require equal tariffs and demand for such parity is unreasonable.

He said China will continue opening its markets based on its own plans and implement lower tariffs pledged by Xi as soon as possible.

China's Xi renews vow to open economy, cut tariffs as U.S. trade row deepens

Asian Stock Markets

Chinese President Xi Jinping promised on Tuesday to open the country’s economy further and lower import tariffs on products like cars, in a speech seen as an attempt to defuse an escalating trade dispute with the United States.

While much of his pledges were reiterations of previously announced reforms that foreign businesses say are long overdue, Xi’s comments sent stock markets and the U.S. dollar higher on hopes of a compromise that could avert a trade war.

Xi said China will widen market access for foreign investors, addressing a chief complaint of its trading partners and a point of contention for U.S. President Donald Trump’s administration, which has threatened billions of dollars in tariffs on Chinese goods.

Trump struck a conciliatory tone in response to Xi’s speech, saying in a post on Twitter that he was “thankful” for the Chinese leader’s kind words on tariffs and access for U.S. automakers, as well as his “enlightenment” on the issue of intellectual property.

“We will make great progress together!” Trump tweeted.

Washington charges that Chinese companies steal the trade secrets of American companies and force them into joint ventures to get hold of their technology, an issue that is at the center of Trump’s current tariff threats.

The latest comments from both leaders appear to reinforce a view that a full-scale trade war can be averted, although there have been no talks between the world’s two economic superpowers since the U.S. tariffs were announced.

“But of course actions speak louder than words. We will keep an eye on the progress of those opening-up measures.”

The speech at the Boao Forum for Asia in the southern province of Hainan had been widely anticipated as one of Xi’s first major addresses in a year in which the ruling Communist Party marks the 40th anniversary of its landmark economic reforms and opening up under former leader Deng Xiaoping.

Xi said China would raise the foreign ownership limit in the automobile, shipbuilding and aircraft sectors “as soon as possible” and push previously announced measures to open the financial sector.
“This year, we will considerably reduce auto import tariffs, and at the same time reduce import tariffs on some other products,” Xi said.

He said “Cold War mentality” and arrogance had become obsolete and would be repudiated. His speech did not specifically mention the United States or its trade policies, which have been assailed by Chinese state media in recent days.

Vice Premier Liu He had already vowed at the World Economic Forum in January that China would roll out fresh market opening moves this year, and that it would lower auto import tariffs in an “orderly way”.

Chinese officials have promised since at least 2013 to ease restrictions on foreign joint ventures in the auto industry, which would allow foreign firms to take a majority stake. They currently are limited to a 50 percent stake in joint ventures and cannot establish their own wholly owned factories.

Tesla’s Chief Executive Elon Musk has railed against an unequal playing field in China and wants to retain full ownership over a manufacturing facility the company is in talks to build there.

Foreign business groups welcomed Xi’s commitment to reforms, including promises to strengthen legal deterrence on intellectual property violators, but said the speech fell short on specifics.

“China is opening sectors where they already have a distinct advantage, or a stranglehold over the sector,” Short said, citing its banking industry, which is dominated by domestic players.

Xi’s renewed pledges to open up the auto sector come after Trump on Monday criticized China on Twitter for maintaining 25 percent auto import tariffs compared to the United States’ 2.5 percent duties, calling such a relationship with China not free trade but “stupid trade.”

Analysts have cautioned that any Chinese concessions on autos, while welcome, would be a relatively easy win for China to offer the United States, as plans for opening that sector had been under way well before Trump took office.

But Vice Commerce Minister Qian Keming said at the forum on Tuesday that China’s economic reforms were driven by domestic factors and not due to external pressures.

Xi said China would accelerate opening up its insurance industry, with Shanghai Securities News citing a government researcher after the speech saying foreign investors should be able to hold a controlling stake or even full ownership of an insurance company in the future.

Trump’s move last week to threaten China with tariffs on $50 billion in Chinese goods was aimed at forcing Beijing to address what Washington says is deeply entrenched theft of U.S. intellectual property and forced technology transfers from U.S. companies.

Chinese officials deny such charges, and responded within hours of Trump’s announcement of tariffs with their own proposed commensurate duties.

The move prompted Trump last week to threaten tariffs on an additional $100 billion in Chinese goods, which have yet to be identified. None of the announced duties have been implemented yet, offering room for negotiation.

Beijing charges that Washington is the aggressor and spurring global protectionism, although China’s trading partners have complained for years that it abuses World Trade Organization rules and practices unfair industrial policies that lock foreign companies out of crucial sectors with the intent of creating domestic champions.

While U.S. officials, including Trump, have recently expressed optimism that the two sides would hammer out a trade deal, Chinese officials in recent days have said negotiations would be impossible under “current circumstances”.

Dallas Federal Reserve Bank President Robert Kaplan, on a visit to Beijing, said he was optimistic that very few if any of the proposed tariffs by the United States and China announced in recent weeks will actually be implemented.

“I think it’s so clearly in the interest of both countries that we have a constructive trading relationship and that we have substantive talks to redress these issues."

Chinese government advisers expect limited economic hit from U.S. trade rift

Asian Stock Markets

Chinese state researchers and media have talked down the likely impact of U.S. trade measures on the world’s second largest economy and described the Trump administration’s posturing on trade as the product of an “anxiety disorder”. 

The comments from various government advisers came as U.S. President Donald Trump predicted on Sunday that China would make concessions in the face of rising trade tensions, though China has vowed to not back down in any trade war.

The various statements referred to the trade spat between the world’s two largest economies as Washington’s reaction to China’s fast economic growth.

On Monday, a researcher with China’s state planning agency said China’s economy will see little impact from the trade dispute, as the country’s vast domestic market can compensate for any external impact.

Even with the U.S. tariffs, China can still reach its 2018 GDP growth target of around 6.5 percent and the impact on employment will be limited, Wang wrote.

Fan Gang, an influential economist and adviser to China’s central bank, on Sunday flagged the possibility of a U.S. trade war as the U.S. economy faces pressure from China’s rapid development.

The Chinese Communist Party’s official newspaper on Monday described U.S. trade policies as a populist tilt by Trump ahead of the U.S. mid-term elections but that the steps would ultimately end up hurting U.S. households through higher consumer prices.

Focus this week will be on high level comments at the Boao Forum for Asia, an economic conference in Hainan province, with President Xi Jinping and International Monetary Fund Managing Director Christine Lagarde delivering speeches on Tuesday.

Discussion of the trade dispute also touched on the possibility of China leveraging its massive holdings of U.S. government debt, which has been dubbed the “nuclear option”.

Zhang Yuyan, a researcher at the Chinese Academy of Social Sciences, a government think-tank, said China was unlikely to sell off its holdings of U.S. Treasury bonds as a tactic in its trade dispute with the United States.

However, in separate comments, central bank adviser Fan on Monday said China should make better use of its capital reserves by investing in real assets, rather than U.S. debt, reiterating a long-standing call from economists for China to diversify its holdings.

China held around $1.17 trillion (£829.4 billion) of Treasuries as of the end of January, making it the largest of America’s foreign creditors and the No. 2 overall owner of U.S. government bonds after the Federal Reserve.

A Chinese vice finance minister said last week that China is a responsible investor of its foreign exchange reserves and that it follows market rules in investing its reserves.

China ready for proportionate response to U.S. tariffs: envoy

Asian Stock markets

China will take counter-measures of the “same proportion” and scale if the United States imposes further tariffs on Chinese goods, China’s ambassador to Washington said, amid growing fears of an impending trade war. 

Cui Tiankai made the comments ahead of what is expected to be the announcement this week of U.S. tariffs on $50 billion to $60 billion in Chinese imports following an investigation under Section 301 of the 1974 U.S. Trade Act.

The U.S. tariffs are expected to target products benefiting from Beijing’s “Made in China 2025” industrial development program, although it may be more than two months before the import curbs take effect, U.S. officials have said.

China on Sunday announced tariffs on $3 billion in imports of U.S. food and other goods in response to U.S. tariffs on imports of aluminum and steel, a skirmish that investors fear is a prelude to a broader trade war.

The Section 301 investigation initiated by U.S. President Donald Trump is focused on accusations of theft of intellectual property and forced technology transfer by China, charges Beijing denies.

China hammers U.S. goods with tariffs as 'sparks' of trade war fly

Asian Stock Markets

China has increased tariffs by up to 25 percent on 128 U.S. products including frozen pork, wine and certain fruits and nuts, escalating a spat between the world’s biggest economies in response to U.S. duties on imports of aluminium and steel. 

The tariffs, to take effect on Monday, were announced late on Sunday by China’s finance ministry and matched a list of potential tariffs on up to $3 billion (£2.1 billion) in U.S. goods published by China on March 23

Soon after the announcement, an editorial in the widely read Chinese tabloid Global Times warned that if the U.S. had thought China would not retaliate or would only take symbolic counter-measures, it can now “say goodbye to that delusion.”

China’s Ministry of Commerce said it was suspending its obligations to the World Trade Organization (WTO) to reduce tariffs on 120 U.S. goods, including fruit and ethanol. The tariffs on those products will be raised by an extra 15 percent.

Eight other products, including pork and scrap aluminium, will now be subject to additional tariffs of 25 percent, it said, with the measures effective from April 2.

The retaliatory tariffs came amid escalating trade tensions between Beijing and Washington, which have rocked global financial markets in the past week as investors feared a full-blown trade spat between two countries will be damaging for world growth.

U.S. President Donald Trump is separately preparing to impose tariffs of more than $50 billion on Chinese goods intended to punish Beijing over U.S. accusations that China systematically misappropriated American intellectual property - allegations Beijing denies.

China has repeatedly promised to open its economy further, but many foreign companies continue to complain of unfair treatment. China warned the United States on Thursday not to open a Pandora’s Box and spark a flurry of protectionist practices across the globe.

The Global Times is run by the ruling Communist Party’s official People’s Daily, although its stance does not necessarily reflect Chinese government policy.

In a statement published on Monday morning, the Chinese commerce ministry said the United States had “seriously violated” the principles of non-discrimination enshrined in World Trade Organization rules, and had also damaged China’s interests.

“China’s suspension of some of its obligations to the United States is its legitimate right as a member of the World Trade Organization,” it said, adding that differences between the world’s two largest economies should be resolved through dialogue and negotiation.

China's manufacturing growth seen picking up slightly in March

Asian Stock Markets

Growth in China’s manufacturing sector likely picked up slightly in March as authorities lifted winter industrial pollution restrictions and steel mills cranked up production as construction activity swings back into high gear. 

The official manufacturing Purchasing Managers’ Index (PMI) is expected to have risen to 50.5 in March, from February’s 50.3, according to a median forecast of 29 economists in a Reuters poll. The 50-mark divides expansion from contraction on a monthly basis.

That would mark the 20th straight month of expansion for China’s vast manufacturing sector, and reinforce consensus views that the world’s second-largest economy will see only a modest slowdown in growth this year.

Defying expectations for a winter lull, Chinese steel companies continued to ramp up output in the first quarter in response to strong sales, and also boosted borrowing, capital expenditures and hiring, a survey from the China Beige Book showed on Wednesday.

But steel prices have tumbled in recent sessions as inventories swelled to multi-year highs.

Overall, China’s economic data so far this year suggest the economy has carried solid growth momentum into the first quarter from last year, with a government think tank forecasting the economy will grow 6.9 percent in the first half.

That would keep global growth on track. But economists are sticking to forecasts that China’s pace will slow later in the year, weighed down by a cooling property markets and rising borrowing costs.

A sharp escalation in trade tensions with the United States has also clouded the outlook and may have started to dampen exporters’ confidence. U.S. President Donald Trump last week imposed tariffs on steel and aluminum imports and targeted China by announcing plans for tariffs on up to $60 billion of Chinese goods.

Economists expect a private survey on China’s factory activity next week will show a similar firming trend as in the official survey, after growth in February picked up to a six-month high.

They predict the private Caixin/Markit Manufacturing Purchasing Managers’ index (PMI) will be 51.7 in March versus 51.6 the previous month.

The private survey tends to focus on small and mid-sized firms, which have not benefited as much from a year-long, state-led construction boom as large, government-owned industrial heavyweights.

The official PMI survey will be published on March 31, along with a similar official survey covering the services sector.

The private Caixin manufacturing PMI will be published on April 2, with the Caixin services PMI to be released on April 4.

Yen slips as easing trade fears revive risk appetite

Asian Stock Markets

The safe haven Japanese yen sagged on Tuesday as optimism that the United States and China could begin negotiations on trade helped ease concerns about a trade war, reviving demand for riskier assets.

Global markets were shaken last week after U.S. President Donald Trump moved to impose tariffs on Chinese goods and Beijing threatened similar measures, sparking fears of a trade war between the world’s two largest economies.

But reports of behind-the-scenes talks between the United States and China have eased concerns for now that global trade frictions could escalate out of control, with traders hoping any actual U.S. measures will be much more modest than first announced.

Chinese Premier Li Keqiang said on Monday it and the United States should maintain negotiations, reiterating pledges to ease access for American businesses.

The receding concerns over U.S.-China trade tensions whetted investor appetite for riskier assets. Wall Street scored its best day in 2-1/2 years and the Dow Jones Industrial Average saw its third-biggest point gain ever on Monday.

The yen, often viewed as a safe haven currency in times of market turbulence and economic uncertainty, partly because of the resilience provided by Japan’s current account surplus, retreated due to the revival in investor risk appetite.

With the yen on the defensive, the dollar rose 0.2 percent to 105.62 yen. The greenback has bounced back after hitting a 16-month low of 104.56 yen on Monday.

Market participants said the yen showed limited reaction to testimony in Japan’s parliament by a former finance ministry official, who said Japanese Prime Minister Shinzo Abe, his wife, Finance Minister Taro Aso and their top aides did not give instructions to change documents about a land deal at the heart of a suspected cronyism scandal.

The simmering controversy has slashed Abe’s support ratings and clouded his chances of a third three-year term as ruling Liberal Democratic Party (LDP) leader in a September party vote.

The political scandal has been seen as a factor that could spur yen-buying, as it has cast some doubt over the future of Abe’s reflationary economic policy agenda, including monetary stimulus.

The euro rose 0.2 percent against the yen to 131.53 yen, after surging 1.4 percent on Monday for its biggest one-day percentage gain since June 2017.

Against the dollar, the euro rose 0.1 percent to $1.2454, clinging near Monday’s high of $1.24615, which was the euro’s strongest level since mid-February.

The firmness of some of its major rivals as well as emerging market currencies helped weigh on the greenback.

The dollar’s index against a basket of six major peers held steady at 89.042, languishing near Monday’s five-week low of 88.979.

Emerging Asian currencies rose, with the Malaysian rinngit hitting a two-month high of 3.8700 per U.S. dollar.

Brent crude oil futures have risen 6.9 percent in March, supporting the currencies of commodities exporters.

China’s yuan extended its gains against the U.S. dollar to a seven-week high on Tuesday after the central bank set its official fixing at the strongest level in more than two-and-a-half years.[CNY/]

Stocks rebound as report of U.S.-China trade talks improves mood

 Asian Stock Markets

U.S. stock futures led global shares higher on Monday after reports that the United States and China have quietly started negotiations to improve U.S. access to Chinese markets eased fears of a trade war between the two economic giants. 

E-Mini futures ESc1 for the S&P 500 .SPX leaped more than 1 percent while Japan's Nikkei .N225 erased earlier losses of 1.3 percent to end 0.7 percent higher. 

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.4 percent, flipping back to positive territory from a 0.5 percent fall. 

European shares ticked up on opening, with Germany's Dax .GDAXI, France's Cac .FCHI and Britain's FTSE .FTSE all about 0.3 percent higher. 

The Wall Street Journal reported U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer listed steps that Washington wants China to take in a letter to Liu He, a newly appointed vice premier who oversees China’s economy. 

Signs of talk between the two economic giants allayed fear of an escalating trade war, sparked after U.S. President Donald Trump moved to slap tariffs on Chinese goods, on top of import duties on steel and aluminum, prompting a defiant response from Beijing. 

The United States also agreed to exempt South Korea from steel tariffs, imposing instead a quota on steel imports as the two countries renegotiate their trade deal. 

South Korea's benchmark share index .KS11 rose 0.8 percent. 

Still many investors remained cautious given the high level of uncertainty on where any bilateral negotiations may lead.

In the uncertain global economic climate, investors looked to pile into the Japanese yen JPY=, traditionally a safe haven asset thanks to the country's massive current account surplus. 

Speculators added short dollar bets to their portfolios, taking the net short position to its highest in more than a year, according to calculations by Reuters and the Commodity Futures Trading Commission for the week to March 20.Short yen positions were cut to the smallest since November 2016. 

By late Asian trade, the yen had eased slightly from near 16-month highs to 105.08 per dollar while the Australian and New Zealand dollars, a liquid proxy for China plays, staged a welcome rebound.

The Aussie AUD= was up 0.5 percent while the kiwi NZD= gained 0.8 percent. 

The dollar index .DXY tracking the greenback against six other major currencies was near a one-month low at 89.423. 

In commodities, international Brent crude futures LCOcv1 opened above $70 per barrel for the first time since January but the gains could not be sustained as the ongoing trade disputes weighed on global markets. [O/R]