Asian markets rally, yuan edges up after US gains

Asian markets rose on Monday after a healthy lead from Wall Street as positive US jobs data trumped fresh trade war threats, while the yuan extended a recovery after the Chinese central bank moved to support the unit.

Hong Kong led gains as the week got off to an upbeat start, with dealers tracking their New York and European counterparts following recent painful losses.

Data on Friday showed that while the US economy saw a slowdown in jobs creation in July, the pace of hiring remained strong over the past three months.


The report also showed wage growth remained tepid, helping temper worries about an overheating economy.

The result provided some much-needed cheer to markets, which managed to brush off a warning from Beijing that it would impose new tariffs on $60 billion worth of US goods if Washington pushes ahead with levies on $200 billion of Chinese imports.


Despite reports that unofficial talks have been held between the two sides, trade tensions continue to rise with a top White House advisor calling China a bad bet and saying its economy — the world’s second biggest — was struggling.

Still, equity traders were in a buying mood Monday. Hong Kong piled on more than one percent while Shanghai added 0.2 percent and Tokyo went into the break 0.5 percent higher.

Sydney rose 0.7 percent, Singapore jumped more than one percent and Taipei was 0.3 percent stronger. Jakarta climbed 0.7 percent despite an earthquake that rattled the island of Lombok, killing dozens of people.

– Pound struggles –
Support also came from the People’s Bank of China decision late Friday to unveil measures making it harder to bet against the yuan, which has suffered steep losses the past two months.

The currency, which is around lows not seen for more than a year, bounced back soon after the announcement and it extended the gains Monday.

The bank’s measure was similar to a move when the currency went into freefall following a devaluation three years ago that rattled global markets.

However, analysts were lukewarm on the move with some saying it indicated Chinese leaders were growing increasingly worried about the unit’s depreciation.

“The yuan kept falling when China did this last time in 2015, so I don’t think the PBoC’s move will significantly change the market tone,” Hao Hong, chief strategist at Bocom International Holdings, told Bloomberg News.

“No matter what happened over the weekend, the weakness in Chinese stocks may continue. The trade war is nowhere near its end and China’s economy is slowing down, so why would the trend reverse?”

In another forex trading, the pound was fighting to recover from Friday’s sell-off that came after Bank of England boss Mark Carney warned the chances of leaving the EU without a proper deal was “uncomfortably high” and “highly undesirable”.

While he said such a situation was still “unlikely” compared with other outcomes, the comments come as leaders on both sides are struggling to reach a compromise with just months to go before Britain is due to formally exit.

The remarks sent sterling tumbling, with an interest rate hike last week unable to provide any support.

Key figures at 0300 GMT

Tokyo – Nikkei 225: UP 0.5 percent at 22,626.56 (break)

Hong Kong – Hang Seng: UP 1.2 percent at 28,008.62

Shanghai – Composite: UP 0.2 percent at 2,745.04

Euro/dollar: DOWN at $1.1563 from $1.1567 at 2100 GMT on Friday

Pound/dollar: DOWN at $1.2996 from $1.3005

Dollar/yen: DOWN at 111.20 yen from 111.25 yen

Oil – West Texas Intermediate: UP 18 cents at $68.67

Oil – Brent Crude: UP 15 cents at $73.36 per barrel

New York – Dow Jones: UP 0.6 percent to 25,462.58 (close)

London – FTSE 100: UP 1.1 percent at 7,659.10 (close)

source: business.inquirer.net

Dollar retreats as Trump takes over; most global stocks fall

NEW YORK—The dollar retreated Monday, with warnings of wild volatility ahead, as Donald Trump began his presidency by attacking global trade deals and promising to put America first.

Most large global equity markets also fell amid uncertainty over the new US leader’s plans. Wall Street, London, Frankfurt, Paris and Tokyo all closed lower.

“America first, markets second,” said LCG analyst Jasper Lawler of the day’s sentiment on trading floors.

“Attempts to break out into new highs for the year have been temporarily shelved after Donald Trump opted for a protectionist, anti-establishment inauguration address,” his note to clients added.

In foreign exchange, the euro jumped to $1.0763 from $1.0697 on Friday.

‘Apocalyptic tone’

“The greenback … seems to have been shaken both by the apocalyptic tone set by Trump at his inauguration, and the global protests that greeted the former Apprentice host’s ascension to the highest office in the land,” said Spreadex analyst Connor Campbell.

Trump followed up an inauguration speech seen as angry and protectionist by making his first official act the withdrawal from the 12-nation Trans-Pacific Partnership. Trump also said he would renegotiate the North America Free Trade Agreement, threaten to impose border taxes, and his chief spokesman said the new president would not hesitate to confront China over the South China Sea.

READ: Trump torpedoes Pacific trade pact

Investors greeted Trump’s surprise election win in the hopes he would win pro-growth measures such as public works spending, lower taxes and regulatory reforms. Trump confirmed on Monday he plans to pursue those priorities, but markets have been worried the tough talk will lead to a trade war.

Doubts about his spending promises also took their toll on the US currency.

“Sellers swiftly exploited the lack of clarity in the (inauguration) speech regarding the proposed fiscal stimulus measures,” said Lukman Otunuga, an analyst at FXTM, predicting more trouble ahead for the greenback.

“The growing threat of Donald Trump’s proposed fiscal stimulus failing to keep up with market expectations may ensure dollar weakness becomes a recurrent theme in the short term,” he said.

The US unit was down more than four percent on the yen from the highs touched late in December. It was also well down against the euro and even against the pound despite concerns about Britain’s exit from the European Union.

“I suspect we’re entering extremely volatile times for the dollar,” Stephen Innes, senior trader at OANDA, said in a note.

Trump last week said the greenback was too strong against China’s yuan and claimed this was “killing” the US economy.

Key figures at 2200 GMT

New York – Dow: DOWN 0.1 percent at 19,799.85 (close)

New York – S&P 500: DOWN 0.3 percent at 2,265.20 (close)

New York – Nasdaq: DOWN less than 0.1 percent at 5,552.94 (close)

London – FTSE 100: DOWN 0.7 percent at 7,151.18 points (close)

Frankfurt – DAX 30: DOWN 0.7 percent at 11,545.75 (close)

Paris – CAC 40: DOWN 0.6 percent at 4,821.41 (close)

EURO STOXX 50: DOWN 0.9 percent at 3,271.41 (close)

Tokyo – Nikkei 225: DOWN 1.3 percent at 18,891.03 (close)

Shanghai – Composite: UP 0.4 percent at 3,136.77 (close)

Hong Kong – Hang Seng: UP 0.1 percent at 22,898.52 (close)

Euro/dollar: UP at $1.0763 from $1.0697

Pound/dollar: UP at $1.2524 from $1.2365

Dollar/yen: DOWN at 112.73 yen from 114.58 yen

Oil – West Texas Intermediate: DOWN 47 cents at $52.75 per barrel

Oil – Brent North Sea: DOWN 26 cents at $55.23 per barrel

source: business.inquirer.net

What it means if Trump names China a currency manipulator

WASHINGTON  — President-elect Donald Trump has vowed to name China a currency manipulator on his first day in the White House.

There’s only one problem—it’s not true anymore. China, the world’s second-biggest economy behind the United States, hasn’t been pushing down its currency to benefit Chinese exporters in years. And even if it were, the law targeting manipulators requires the U.S. spend a year negotiating a solution before it can retaliate.

Trump spent much of the campaign blaming China’s for America’s economic woes. And it’s true that the U.S-China trade relationship is lopsided. China sells a lot more to the United States than it buys. The resulting trade deficit in goods amounted to a staggering $289 billion through the first 10 months of 2016.

But in fact, for the past couple of years China has been intervening in markets to prop up its currency, the yuan, not push it lower.

What does currency have to do with the trade gap?

When China’s yuan falls against the U.S. dollar, Chinese products become cheaper in the U.S. market and American products become more costly in China.

So the U.S. Treasury Department monitors China for signs it is manipulating the yuan lower. Treasury has guidelines for putting countries on its currency blacklist. They must, for example, have spent the equivalent of 2 percent of their economic output over a year buying foreign currencies in an attempt to drive those currencies up and their own currencies down.

Treasury hasn’t declared China a currency manipulator since 1994.

What would happen if the US declared China a currency manipulator?

Probably not much, at least initially.

If Treasury designates China a currency manipulator under a 2015 law, it is supposed to spend a year trying to resolve the problem through negotiations.

Should those talks fail, the U.S. can take a number of small steps in retaliation, including stopping the U.S. Overseas Private Investment Corp., a government development agency, from financing any programs in China. Trouble is, the United States already suspended OPIC operations in China years ago — to punish Beijing in the aftermath of the bloody 1989 crackdown in Tiananmen Square.

So naming China a currency manipulator is mostly “just a jaw-boning exercise,” said Amanda DeBusk, chair of the international trade department at the law firm of Hughes Hubbard & Reed and a former Commerce Department official. “There’s no immediate consequence.”



Is China guilty of using currency to help its exporters?

For years, China pretty clearly manipulated its currency to gain an advantage over global competitors. It bought foreign currencies, the U.S. dollar in particular, to push them higher against the yuan. As it did, it accumulated vast foreign currency reserves — nearly $4 trillion worth by mid-2014.

But now the Chinese economy is slowing, and Chinese companies and individuals have begun to invest more heavily outside the country. As their money leaves China, it puts downward pressure on the yuan.

The yuan has dropped nearly 7 percent against the dollar so far this year. The Chinese government has responded by draining its foreign exchange reserves to buy yuan, hoping to slow the currency’s fall. China’s reserves have dropped by $279 billion this year to $3.05 trillion.

If Beijing stepped back and let market forces determine the yuan’s level, it likely would fall even faster, giving Chinese exporters even more of a competitive edge.

So Beijing is doing the opposite of what Trump says it’s doing. Cornell University economist Eswar Prasad earlier this month called Trump’s plans to name China a currency manipulator “unmoored from reality.”

“The whole discussion is ironic,” said David Dollar, senior fellow at the Brookings Institution and a former official at the World Bank and U.S. Treasury Department. “It’s out of date.”

Could Trump do anything on his own?

Gary Hufbauer, an expert on trade law at the Peterson Institute for International Economics, notes that as president, Trump could nonetheless escalate any dispute over the currency on his own. Over the years, Congress has ceded the president broad authority to impose trade sanctions. Trump has threatened to slap a 45 percent tax, or tariff, on Chinese imports to punish it for unfair trade practices, including alleged currency manipulation.

Brookings’ Dollar said China likely would bring a case to the World Trade Organization “against any protectionist measures that are a violation of U.S. commitments to the WTO,” which oversees the rules of global commerce and rules on trade disputes.

Some trade analysts wonder if Trump is using the tariff threat as a negotiating tool to win concessions from China.

Whatever the U.S. motive, China has a consistent record of retaliating against trade sanctions. When the Obama administration slapped tariffs on Chinese tire imports in 2009, for instance, China lashed back by imposing a tax on U.S. chicken parts.

China’s Global Times newspaper, published by the ruling Communist Party’s People’s Daily, has already speculated that “China will take a tit-for-tat approach” if Trump’s tariffs are enacted. The paper suggested that Beijing might limit sales of Apple iPhones and Boeing jetliners in China.

“The Chinese are predictable and reliable,” DeBusk said. “If they get punched, they punch back.” TVJ

source: business.inquirer.net