(Reuters) – U.S. stock index futures were flat on Monday as investors assessed the impact of an escalating trade conflict between the United States and China on corporate results in an earnings-heavy week.
A trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S., July 18, 2018. REUTERS/Brendan McDermid
While the threats and rhetoric between the countries intensify, some U.S. manufacturers have said the uncertainty related to tariffs was already hitting them and the effects have started showing in early quarterly reports.
Investors will be watching out for further signs of the fallout this week in earnings reports from 180 S&P 500 companies including Ford Motor (F.N), 3M Co (MMM.N) and Boeing (BA.N). The planemaker’s shares have fallen nearly 2 percent since the start of March.
Investors are also concerned that the U.S.-Sino trade war is spilling over to currency markets. The dollar hit a one-year high last week, which can eat into U.S. companies’ overseas revenue.
President Donald Trump has criticized the greenback’s strength, while accusing China of manipulating the yuan, which Beijing has denied.
“What started as a war on trade now appears to have grown a new set of roots with the seeds of a potential currency war now seemingly sown and threatening to break out,” Craig Nicol, a macro strategist at Deutsche Bank, said in a note.
Still, second-quarter earnings season has been healthy, with analysts’ profit growth forecast now at 22 percent, up from 20.7 percent on July 1, according to Thomson Reuters I/B/E/S.
About 84 percent of the 87 S&P 500 companies that have reported so far have topped profit expectations, compared with the average of 75 percent over the past four quarters.
At 7:26 a.m. ET, Dow e-minis 1YMc1 were down 15 points, or 0.06 percent. S&P 500 e-minis ESc1 were down 2 points, or 0.07 percent and Nasdaq 100 e-minis NQc1 were down 25.25 points, or 0.34 percent.
Investors will also keep an eye on the bond market, where the yield on the U.S. 10-year Treasury note US10YT=RR hit a one-month high of 2.90 percent after Reuters reported that the Bank of Japan was discussing modifying its huge easing program.
Among stocks, shares of Hasbro (HAS.O) rose 8.6 percent in premarket trading after the toymaker’s quarterly revenue and profit topped analysts’ estimates.
Tesla’s shares (TSLA.O) fell 3.7 percent after the Wall Street Journal reported that the electric car maker has asked some suppliers to return a “meaningful” amount of what it has spent since 2016 to help it become profitable.
Hospital operator LifePoint Health (LPNT.O) surged 33.6 percent on agreeing to be bought by Apollo Global Management LLC (APO.N) in a deal valued at about $5.6 billion.
Syntel (SYNT.O) gained 3.6 percent after French IT services company Atos (ATOS.PA) said it would buy the U.S. IT services provider in a $3.4 billion cash deal.
On the macro front, economic data at 10 a.m. ET is expected to show existing home sales rose to 5.44 million units in June, after slipping 0.4 percent to a seasonally adjusted annual rate of 5.43 million units in May
Reporting by Amy Caren Daniel in Bengaluru; Editing by Sriraj Kalluvila
(Reuters) – Toymaker Hasbro Inc (HAS.O) topped Wall Street estimates for profit and revenue in the second quarter as it emerged from the worst effects of last year’s Toys ‘R’ Us bankruptcy, sending its shares up nearly 7 percent in premarket trading.
FILE PHOTO: A Monopoly board game by Hasbro Gaming is seen in this illustration photo August 13, 2017. REUTERS/Thomas White/Illustration/File Photo
Hasbro, like other U.S. toymakers, was hit hard by the sooner-than-expected collapse of Toys ‘R’ Us and had said it would get through the worst by the latter half of the year.
“We are focused on moving beyond the near-term disruption of losing a major customer, with a clear path forward including new retailer activations to meet the consumer demand made available by the Toys ‘R’ Us departure,” Chief Executive Officer Brian Goldner said in a statement.
Net earnings fell to $60.3 million, or 48 cents per share, in the second quarter ended July 1, from $67.7 million, or 53 cents per share, a year earlier.
Analysts had expected earnings of 29 cents per share, according to Thomson Reuters I/B/E/S.
The company’s revenue fell 7 percent to $904.5 million in the quarter, but was nearly half the drop that analysts were expecting. Analysts on an average were estimating revenue of $833.1 million.
Reporting by Uday Sampath and Nivedita Balu in Bengaluru; Editing by Arun Koyyur
DUBAI (Reuters) – A proposed reshuffle of state assets would allow Saudi Arabia to delay the listing of national oil giant Aramco until 2020 or beyond while still spending on economic development projects, according to three sources familiar with the matter.
FILE PHOTO: The logo of Saudi Aramco is seen at Aramco headquarters in Dhahran, Saudi Arabia May 23, 2018. REUTERS/Ahmed Jadallah/File Photo
Late last week Aramco confirmed a Reuters report that it was working on a possible purchase of a “strategic stake” in local petrochemicals maker Saudi Basic Industries Corp 2010.SE from the Public Investment Fund (PIF), the kingdom’s top sovereign wealth fund.
The deal could inject tens of billions of dollars into the PIF, giving it resources to proceed with its plans to create jobs and diversify the economy beyond oil exports, including a $500 billion business zone in the northwest of the country.
A major goal of the planned Aramco listing – which was initially slated for the end of 2018 and could prove the biggest IPO in history – was to raise money for the PIF, making the fund an engine for transforming the Saudi economy.
A SABIC deal would allow the government to buy time for the initial public offer of shares in Aramco, according to industry and international banking sources, who declined to be named due to the sensitivity of the matter.
It could raise roughly as much money for the PIF as an Aramco IPO, while giving the government more time to reach decisions on contentious aspects of the flotation such as whether Aramco shares should be listed on a foreign market as well as in Riyadh.
“The PIF will have more cash to invest and there is no need to IPO now,” one of the sources said.
Aramco declined to comment on its IPO plans, and a Saudi government official did not respond to a request for comment.
Aramco’s Chief Executive Amin Nasser said on Friday in an interview with Saudi-owned Al Arabiya TV that the SABIC acquisition was a complex deal and would need a certain timeframe to be completed, delaying the Aramco IPO.
“There is no doubt that the potential acquisition of a strategic stake in SABIC … will delay the IPO,” he said.
Final decisions on the listing rest with Prince Mohammed, the sources said.
The planned IPO is the centerpiece of an ambitious plan championed by the crown prince to diversify Saudi Arabia’s economy beyond oil. When he announced the plan to sell about 5 percent of Aramco in 2016, he predicted the sale would value the whole company at $2 trillion or more.
Since then, however, many estimates by oil and gas industry analysts have been far lower, around $1.0-1.5 trillion, implying the PIF would receive a $50-75 billion windfall from the IPO.
The fund owns 70 percent of SABIC, which has a market capitalization of $104 billion. Aramco has not said exactly how much of SABIC it might buy but two sources told Reuters on Monday that Aramco aims to become a “majority” owner; buying the PIF’s entire stake could give the fund over $70 billion.
The PIF has officially reported assets of over $220 billion but most of that is believed to be tied up in real estate or stakes in big Saudi companies, which could not be sold without undermining the local property and stock markets.
The SABIC deal would put temporary pressure on the finances of Aramco, the government’s main source of revenue. But higher oil prices this year have given Riyadh more money to play with.
Investment bank Jadwa forecasts state oil revenues of $154 billion this year instead of the $131 billion budgeted by Riyadh last December.
If the Aramco IPO eventually goes ahead, at least two problems will need to be resolved, according to several sources. One is the company’s valuation.
Prince Mohammed’s declaration of a $2 trillion valuation created a potential political headache. If the IPO produces a valuation much below $2 trillion, the Saudi public may conclude he is selling the country’s crown jewel too cheaply.
This might be finessed by selling part of the Aramco stake in a private placement, probably to deep-pocketed strategic investors in oil-consuming states such as China. A placement is being considered, one industry source said, but that would take many months to finalize.
The SABIC deal would boost Aramco’s valuation giving it access to petrochemicals assets domestically and abroad, the sources said.
The other major issue is whether some Aramco shares will be listed on a foreign exchange such as New York, London or Hong Kong. Prince Mohammed initially proposed an overseas listing to attract foreign capital and lift Saudi Arabia’s profile.
But some officials oppose the idea on the grounds it would dilute the benefits to Riyadh’s bourse of hosting Aramco. And an overseas exchange could impose tougher governance, disclosure requirements and legal risks for Aramco.
These risks may have strengthened the case for a Riyadh-only listing. But an IPO in Riyadh alone might have to be smaller than 5 percent because the market’s capitalization of just $535 billion would struggle to absorb a listing of Aramco’s size.
That may encourage authorities to delay listing Aramco until after Riyadh’s market enters emerging market equity indexes next year, making it more liquid. Entry could attract around $30-45 billion of fresh foreign money, funds estimate.
Riyadh will join FTSE Russell’s index in stages between March and December 2019, and MSCI’s index between May and August 2019. One banking source said some bankers had advised Prince Mohammed to wait until the arrival of foreign funds directly benchmarked to those indexes, since the funds could be counted on to buy Aramco shares as an index component.
Additional reporting by Hadeel Al Sayegh and Tom Arnold in Dubai, Clara Denina and Dasha Afanasieva in London and Jennifer Hughes in Hong Kong; Editing by Pravin Char
SHANGHAI/HONG KONG (Reuters) – China’s biggest manager of bad debts is trying to exit early from at least three loans and investments as it wrestles with a liquidity crunch triggered by an anti-corruption probe into its chairman, people with knowledge of the matter said.
FILE PHOTO: Logos of China Huarong Asset Management Co are seen during a finance expo in Beijing, in this October 30, 2014 file photo. REUTERS/China Daily/File Photo
China Huarong Asset Management (2799.HK), one of four state-backed so-called “bad banks” formed in 1999, has been trying to raise cash since Lai Xiaomin resigned as chairman in April amid a graft probe, the sources said.
Huarong’s attempts to call back loans shows the extent of its liquidity woes. It has already begun divesting equity stakes that were bought as part of a diversification push and has also forced employees to take pay cuts.
Huarong did not respond to calls, emails and faxed requests for comment.
The asset manager is the latest major Chinese company to struggle in the wake of allegations of misconduct by its leader. Others include CEFC China Energy and Anbang Insurance, both of which are now undergoing government restructuring.
The exact nature of the allegations against Lai remain unknown, but sources with knowledge of the matter said the investigation had slowed down operations at China’s largest asset management firm and forced it to be cautious about taking on new business.
When a firm comes under investigation, “it’s possible that the efficiency of business will fall, which leads to a liquidity squeeze,” said Meng Shen, director of Chanson & Co, a boutique investment bank.
Shortly after the investigation became public, Huarong asked one fund to return millions of dollars it invested only a few months earlier, citing liquidity issues, one person with knowledge of the matter said. The fund is trying to negotiate early payment of management fees in return for the early termination, the source said.
And a multi-year loan of just under 2 billion yuan ($296 million) to a medium-sized developer made by Huarong via a Shanghai branch of a trust firm this year is another deal the bad debt manager is trying to exit, said a second person with direct knowledge.
Huarong has approached the developer directly and is currently trying to negotiate an early exit, citing liquidity issues, said the person. Since the investigation, the trust firm, which usually receives regular business from Huarong, has received no new deals from the asset manager, he added.
In another instance, Huarong has been trying to offload some loans in Hong Kong, including its portion in a two-year HK$5.81 billion syndicated loan to Huge Group Holdings Limited, a major shareholder of China Grand Auto’s (600297.SS), again citing liquidity concerns, said two separate people with direct knowledge who have been approached as buyers.
The loan was drawn down in August last year, the people added.
Two other people have also been informed of Huarong’s liquidity concerns.
Huge Group did not respond to requests for comment. The sources declined to be named because they were not authorized to speak to the media.
The investigation by China’s anti-corruption watchdog into Huarong’s ex-chairman Lai is expected to finish this month, two people said. Senior bank regulatory official Wang Zhanfeng was confirmed as Huarong’s new chairman last month.
At least two Huarong units in Hong Kong are seeking to reduce staff costs by cutting some employees’ pay by between 20 percent and 65 percent and not paying bonuses, said two people.
And many mainland employees have been asked to take an 18 to 20 percent pay hit and what was a monthly bonus will become a quarterly one, said two other people with knowledge of the issue.
In June, Huarong said it would refocus on its core bad-debt business in a shift after years of overseas acquisitions ranging from a Hong Kong broker to a Chicago hotel.
Divestments have already begun. In May, Chinese firm Northeast Pharmaceutical Group (000597.SZ) said that Huarong planned to unload a stake of up to 6 percent in the firm within six months.
Earlier this month, Chinese media reported that Huarong had sold a 36.2 per cent stake in a unit of CEFC China Energy which it had bought only in March.
Reporting by Engen Tham in SHANGHAI, Clare Jim, Julie Zhu and Kane Wu in HONG KONG; Additional reporting by Shanghai newsroom; Editing by Jennifer Hughes, Stephen Coates and Muralikumar Anantharaman
TOKYO (Reuters) – Oil prices fell on Monday amid increasing concerns about fuel demand after finance ministers and central bank governors from the G20 warned that global economic growth risks have increased amid rising trade and geopolitical tensions.
file photo: Oil barrels are pictured at the site of Canadian group Vermilion Energy in Parentis-en-Born, France, October 13, 2017. REUTERS/Regis Duvignau
Brent crude LCOc1 dropped 9 cents, or 0.1 percent, to $72.98 a barrel by 0647 GMT. U.S. West Texas Intermediate (WTI) futures CLc1 declined 13 cents, or 0.2 percent, to $68.13 a barrel.
Finance ministers and central bank governors from the world’s 20 biggest economies ended a meeting in Buenos Aires over the weekend calling for more dialogue to prevent trade and geopolitical tensions from hurting growth.
“Global economic growth remains robust and unemployment is at a decade low,” the finance leaders said in a statement. “However, growth has been less synchronized recently, and downside risks over the short and medium term have increased.”
The talks occurred amid escalating rhetoric in the trade conflict between the United States and China, the world’s largest economies, which have so far slapped tariffs on $34 billion worth of each other’s goods.
U.S. President Donald Trump threatened on Friday to impose tariffs on all $500 billion of Chinese exports to the United States unless Beijing agrees to major structural changes to its technology transfer, industrial subsidy and joint venture policies.
“The impact of the trade war and the recognition that President Trump and his administration are serious about going to the mat on this issue is finally starting to register in the consciousness of traders and investors in oil and other financial markets,” said Greg McKenna, chief market strategist at AxiTrader.
Economic growth and oil demand growth are closely correlated as expanding economies support fuel consumption for trade and travel, as well as for automobiles.
U.S. energy companies last week cut the number of oil rigs by the most since March as the rate of growth has slowed over the past month or so with recent declines in crude prices.
Drillers cut 5 oil rigs in the week to July 20, bringing the total count down to 858, General Electric Co’s (GE.N) Baker Hughes energy services firm said in its closely followed report on Friday. RIG-OL-USA-BHI
The U.S. rig count, an early indicator of future output, is higher than a year ago when 764 rigs were active as energy companies have been ramping up production in anticipation of higher prices in 2018 than previous years.
Hedge funds and money managers cut their bullish wagers on U.S. crude for the first time in nearly a month, a further sign of weaker sentiment for the market. They cut their combined futures and options positions by 34,067 contracts to 423,650 in the week to July 17, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.
Most of the reduction occurred as money managers reduced their long position, or bets that oil prices would rise.
The market seemed unperturbed after Trump warned Iran not to threaten the U.S. or face consequences, with the market little changed after he sent a tweet – written all in uppercase – directed at Iranian president Hassan Rouhani.
Reporting by Aaron Sheldrick; Additional reporting by Jane Chung in SEOUL; editing by Richard Pullin and Christian Schmollinger
MILAN (Reuters) – Fiat Chrysler’s (FCHA.MI) new boss, Mike Manley, faces the task of executing his predecessor’s plan to ramp up production of SUVs and catch up on electric cars to keep the world’s seventh-largest carmaker competitive in the absence of a merger.
FILE PHOTO: Mike Manley, head of the Jeep brand, speaks the Los Angeles Auto Show in Los Angeles, California U.S. November 29, 2017. REUTERS/Lucy Nicholson/File photo
Jeep division head Manley was named on Saturday to succeed longtime Chief Executive Sergio Marchionne, one of the auto industry’s most tenacious and respected auto chiefs, who fell seriously ill after suffering complications following surgery.
Marchionne was already due to step down next April, but shares are likely to react to the news of his health crisis on Monday. The stock closed at 16.42 euros on Friday.
Fiat Chrysler Automobiles NV (FCA) said British-born Manley would pursue the strategy that Marchionne outlined last month.
FCA has pledged to increase production of sport utility vehicles and invest in electric and hybrid cars to double operating profit by 2022. It also unveiled bold targets for Jeep, which has become FCA’s ticket to creating a high-margin brand with global appeal.
Analysts said that choosing the 54-year-old Manley, under whose watch Jeep’s sales surged fourfold, sent a clear message that FCA was staying on course and would keep the Jeep brand at the heart of its growth plan.
“Manley knows that his primary focus is on execution and that, already, he has a strategy into which his team has bought,” said George Galliers, an analyst at Evercore ISI.
“There is no reason the 2022 plan cannot be executed.”
Under Manley, the company is expected to sharpen its focus on revamping individual brands, including ailing Fiat in Europe, Chrysler in the United States and Alfa Romeo, which has yet to turn a profit despite multibillion-euro investments.
Marchionne, widely credited with rescuing both Fiat and Chrysler from the brink of bankruptcy, had focused on fixing FCA’s finances first, notably erasing all debt.
He was a gift to investors, including Italy’s Agnelli family, through 14 years of canny dealmaking, growing Fiat’s value 11 times, helped by spinoffs of tractor maker CNH Industrial NV (CNHI.MI) and Ferrari NV (RACE.MI). The Agnellis still have a controlling interest in all three companies.
But his track record at fixing some of FCA’s brands was mixed, with investments and product launches repeatedly delayed.
Profitability in Europe is only gradually recovering, FCA has yet to make significant inroads in China, and the company relies on North America for three-fourths of profits just as that market is expected to come off its peaks.
“FCA needs to fix the volume brands before it’s too late and make them appealing again. … Manley is the right man for that job,” said Felipe Munoz, an automotive analyst at JATO.
Marchionne had advocated industry mergers to share the cost of building electric, hybrid and self-driving cars, but gave up the quest when his preferred target, General Motors Co (GM.N), rejected his advances.
FCA said on Saturday that Manley would execute the new strategy to ensure a “strong and independent” future for the group.
But without a partner in sight, Manley needs to show FCA can keep churning out profits on its own, even as emissions rules tighten, SUV competition intensifies and worries over potential U.S. emissions fines abound.
While FCA had a succession plan, the future appears less clear at Ferrari, the luxury brand that Marchionne was due to lead until 2021.
Ferrari announced some midterm targets earlier this year – pledging to double core earnings and churn out hybrids and an SUV – but a detailed strategy was due in September.
Marchionne made some bold choices in recent years, notably raising production, but was always careful to not dilute the brand’s exclusivity.
Analysts questioned whether new CEO Louis Camilleri would be able to do the same and grow Ferrari beyond what it is today while keeping dealers, racing fans, owners and collectors on board.
“(Ferrari) will always be like a fine race car. Marchionne increasingly had it tuned to perfection,” Galliers said. “It has to be seen if it can remain so without him.”
Reporting by Agnieszka Flak; Editing by Peter Cooney
PHILADELPHIA (Reuters) – By almost every measure, the U.S. economy is booming. But a look behind the headlines of roaring job growth and consumer spending reveals how the boom continues in large part by the poorer half of Americans fleecing their savings and piling up debt.
FILE PHOTO: A Walmart employee helps a customer load a 50″ TV he bought on sale in Broomfield, Colorado, U.S., November 28, 2014. REUTERS/Rick Wilking/File Photo
A Reuters analysis of U.S. household data shows that the bottom 60 percent of income-earners have accounted for most of the rise in spending over the past two years even as the their finances worsened – a break with a decades-old trend where the top 40 percent had primarily fueled consumption growth.
With borrowing costs on the rise, inflation picking up and the effects of President Donald Trump’s tax cuts set to wear off, a negative shock – a further rise in gasoline prices or a jump in the cost of goods due to tariffs – could push those most vulnerable over the edge, some economists warn.
That in turn could threaten the second-longest U.S. expansion given consumption makes up 70 percent of the U.S. economy’s output.
To be sure, the housing market is far from the dangerous leverage reached in 2007 before the crash. With unemployment near its lowest since 2000 and job openings at record highs, people may also choose to work even more hours or take extra jobs rather than cut back on spending if the money gets tight.
In fact, a growing majority of Americans says they are comfortable financially, according to the Federal Reserve’s report on the economic well-being of U.S. households published in May and based on a 2017 survey.
Yet by filtering data on household finances and wages by income brackets, the Reuters analysis reveals growing financial stress among lower-income households even as their contribution to consumption and the broad economy grows.
The data shows the rise in median expenditures has outpaced before-tax income for the lower 40 percent of earners in the five years to mid-2017 while the upper half has increased its financial cushion, deepening income disparities. (Graphic: tmsnrt.rs/2LdUMBa )
It is this recovery’s paradox.
A hot job market and other signs of economic health encourage rich and poor alike to spend more, but tepid wage growth for many middle-class and lower-income Americans means they need to dip into their savings and borrow more to do that.
As a result, over the past year signs of financial fragility have been multiplying, with credit card and auto loan delinquencies on the rise and savings plumbing their lowest since 2005.
FILE PHOTO: Shoppers ride escalators at the Beverly Center mall in Los Angeles, California, U.S., November 8, 2013. REUTERS/David McNew/File Photo
Myna Whitney, 27, a certified medical assistant at Drexel University’s gastroenterology unit in Philadelphia, experienced that firsthand.
Three years ago, confident that a steady full-time job offered enough financial security, she took out loans to buy a Honda Odyssey and a $119,000 house, where she lives with her mother and aunt.
Since then she has learned that making $16.47 an hour – more than about 40 percent of U.S. workers – was not enough.
“I was dipping into my savings account every month to just make all of the payments.” Whitney says. With her savings now down to $900 from $10,000 she budgets down to toilet paper and electricity. Cable TV and the occasional $5 Groupon movie outings are her indulgences, she says, but laughs off a question whether she dines out.
“God forbid I get a ticket, or something breaks on the car. Then it’s just more to recover from.”
Stephen Gallagher, economist at Societe Generale, says stretched finances of those in the middle dimmed the economy’s otherwise positive outlook.
“They are taking on debt that they can’t repay. A drop in savings and rise in delinquencies means you can’t support the (overall) spending,” he said. An oil or trade shock could lead to “a rather dramatic scaling back of consumption,” he added.
Some economists say that without the $1.5 trillion in tax cuts enacted in January spending, which has grown by around 3 percent a year over the past few years, could already be stalling now.
In the past, rising incomes of the upper 40 percent of earners have driven most of the consumption growth, but since 2016 consumer spending has been primarily fueled by a run-down in savings, mainly by the bottom 60 percent of earners, according to Oxford Economics.
This reflects in part better access to credit for low-income borrowers late in the economic cycle.
Yet it is the first time in two decades that lower earners made a greater contribution to spending growth for two years in a row.
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“It’s generally really hard for people to cut back on expenses, or on a certain lifestyle, especially when the context of the economy is actually really positive,” said Gregory Daco, Oxford’s chief U.S. economist. “It’s essentially a weak core that makes the back of the economy a bit more susceptible to strains and potentially to breaking.”
JOBS NOT RAISES
While the Fed expects the labor market to get even hotter this year and next, policymakers have been perplexed that wages do not reflect that.
With inflation factored in, average hourly earnings dropped by a penny in May from a year ago for 80 percent of the country’s private sector workers, including those in the vast healthcare, fast food and manufacturing industries, Bureau of Labor Statistics figures show.
“It stinks,” says Jennifer Delauder, 44, who runs a medical lab at Huttonsville Correctional Center in West Virginia. In seven years her hourly wage has risen by about $2 to $14.
She took on two part-time jobs to help pay rent, utilities and a student loan. But she still sometimes trims her weekly $15 grocery budget to make ends meet, or even gathers broken fans, car parts, and lanterns to sell as scrap metal. A $2,000 hospital bill early this year wiped out her savings.
Even so, Delauder, a grandmother, recently signed papers for a mortgage of up to $150,000 on a house. “I’m paying rent for a house. I might as well pay for a house that I own,” she said.
Hourly wages for lower- and middle-income workers rose just over 2 percent in the year to March 2017, compared with about 4 percent for those near the top and bottom, while spending jumped by roughly 8 percent.
That reflects both higher costs of essentials such as rent, prescription drugs and college tuition but also some increased discretionary spending, for example at restaurants.
Economists say one symptom of financial strain was last year’s spike in serious delinquencies on U.S. credit card debt, which many poorer households use as a stop-gap measure. The $815-billion market is not big enough to rattle Wall Street, but could be an early sign of stress that might spread to other debt as the Fed continues its gradual policy tightening.
More borrowers have also been falling behind on auto loans, which helped bring leverage on non-mortgage household debt to a record high in the first quarter of this year.
While painting a broadly positive picture, the Fed’s well-being survey also noted that one in four adults feared they could not cover an emergency $400 expense and one in five struggled with monthly bills. This month the central bank reported to Congress that rising delinquencies among riskier borrowers represented “pockets of stress.”
That many Americans lack any financial safety net remains a concern, New York Fed President John Williams told Reuters in an interview last month. “Even though the overall picture is pretty good, pretty solid, or strong,” he said, “this is a problem that continues to hang over half of our country.”
BEIJING (Reuters) – China on Monday launched an anti-dumping probe into stainless steel imports worth $1.3 billion, including from a privately owned Chinese mill with operations offshore, after complaints that a flood of product has damaged the local industry.
Labourers work at a steel market in Shanghai January 9, 2013. C REUTERS/Aly Song
The Commerce Ministry said on Monday the investigation will target imports of stainless steel billet and hot-rolled stainless steel sheet and plate from the European Union, Japan, South Korea and Indonesia, which nearly tripled last year.
The move follows a complaint by Shanxi Taigang Stainless Steel (000825.SZ), with backing from four other state-owned mills including Baosteel’s stainless steel division, which blamed cheap imports on falling prices, it said.
China makes and consumes around half of the world’s stainless steel, which is used to protect against corrosion in buildings, transportation and packaging.
While the complaint targets eight foreign producers, it also lists a number Chinese companies, including the Indonesian unit of one of the world’s top producers, Tsingshan Stainless Steel, and 19 traders who import product.
Some private Chinese companies have opened or started building plants in Indonesia in recent years, drawing on its plentiful nickel resources and lower-cost of production.
A significant portion of the new production has been sold in China, analysts say.
The rapid increase in imports damaged the Chinese market, according to the complaint filed by Shanxi Taigang and released with the commerce ministry document.
Almost two-thirds of China’s stainless imports came from Indonesia last year, up from 5 percent in 2016 and zero in 2015, the complaint said. That rose to as high as 86 percent in the first quarter, it said.
Imported prices of the stainless steel products fell 23 percent to $1,867 a ton in 2017 from $2,436 a year earlier.
“If we allow these products to continue to enter the Chinese market with low prices and take more market share, sales of China’s domestic products will continue to decrease,” the complaint said.
Peter Peng, senior consultant at CRU in Beijing, said the investigation was “totally driven by an industrial dispute between SOEs (state-owned enterprises) and the fast-growing private mills.”
“Due to their cheap production costs, it’s more competitive than Chinese products,” he said.
Tsingshan opened a mill there last year with annual capacity of 3 million tonnes while Delong Holdings (DELO.SI) plans to start production there next year.
Anti-dumping duties would force mills to find new markets for their product, adding to a global glut, Peng said.
The European companies targeted by the probe include Spain’s Acerinox (ACX.MC), Finland’s Outokumpu Oyj (OUT1V.HE) and Luxembourg-based Aperam (APAM.AS).
Among the Japanese companies are Nisshin Steel Co Ltd (5413.T), Nippon Steel & Sumitomo Metal Corp (5401.T) and JFE Steel Corp [JFEST.UL]. Indonesia’s PT Jindal Stainless and South Korean steelmaker Posco (005490.KS) are also listed.
China imported 703,000 tonnes of those products in 2017, up almost 200 percent from a year earlier, with 98 percent coming from the regions targeted by the investigation.
Shanxi Taigang accounts for 25-35 percent of China’s stainless production.
Reporting by Muyu Xu and Josephine Mason; editing by Richard Pullin
SYDNEY (Reuters) – Asian shares dipped on Monday on fears of more protectionist measures from the United States while the dollar declined against major currencies after U.S. President Donald Trump criticized the Federal Reserve’s tightening policy.
People walk past an electronic board showing Japan’s Nikkei average outside a brokerage at a business district in Tokyo, Japan August 9, 2017. REUTERS/Kim Kyung-Hoon
Trump, on Friday, lamented the recent strength of the U.S. dollar and accused the European Union and China of manipulating their currencies.
The dollar index .DXY is so far up 2.4 percent this year led largely by Fed rate rises, strong macro-economic data and nervousness about a full-blown tariff war. It was last down 0.2 percent at 94.27, the lowest in more than two weeks.
Trump’s remarks on Friday, coupled with new threats to slap duties on all U.S. imports from China, triggered sell-offs in Wall Street and European stocks on Friday, despite good corporate earnings. [nL1N1UG076]
Asian stocks took Wall Street’s cue on Monday with MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS falling 0.2 percent. Japan’s Nikkei .N225 stumbled 1.4 percent, Australian shares and South Korea’s KOSPI index .KS11 fell 0.9 percent each.
Chinese shares also opened lower but quickly reversed their losses, with both the blue-chip index .CSI300 and Shanghai’s SSE Composite .SSEC up a touch.
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“Although U.S. equities edged lower on Friday and the yen strengthened, most cross-asset moves are supportive of APAC equities – particularly dollar weakness, strength in emerging markets FX, and a dramatic bear steepening of global yield curves. Commodities are also mostly trading higher,” analysts at JPMorgan said in a note to clients.
Trump’s comments against Fed rate hikes helped steepen the Treasury yield curve.
Also playing a role in the global tick-up in yields was a Reuters report that the Bank of Japan was in unusually active discussions to modify its massive easing program. [nL4N1UG3OJ]
The BOJ, in turn, offered to buy an unlimited amount of five- to- 10-year Japanese government bonds on Monday. [nL4N1PS23K]
Benchmark 10-year JGB futures 2JGBv1, which had started lower on Monday, pared some of their losses on the announcement.
The Reuters report and the dollar’s weakness together added to the yen’s strength JPY=, which was last up 0.5 percent at 110.91 per dollar.
“Trade tensions remain a risk, but with an extended period until implementation (of the tariffs) and the next round of escalation, APAC equities are unlikely to respond much to Trump repeating threats already known,” JPMorgan added.
Investors are now looking ahead to an important meeting between Trump and European Commission President Jean-Claude Juncker.
“Trade tensions are likely to remain in the headlines as Juncker meets President Trump in Washington to discuss potential U.S. tariffs on European autos,” asset manager Insight Investment, which is owned by BNY Mellon, said in a note.
“It’s probably a little too early for the indirect impact of the U.S.-China trade issue to be showing up in the data. Nonetheless, the trade numbers that were released for Singapore and Japan were worse than expected.”
In Singapore, for example, exports rose 1.1 percent in the year to June compared with expectations of a 7.6 percent increase, while electronic exports slipped 7.9 percent. [nL4N1U900W]
Elsewhere, the euro EUR=EBS climbed for a third straight day to a two-week top of $1.1746. It was last up 0.1 percent at $1.1741.
In commodities, oil prices were held back by concerns over U.S.-China trade tensions and increased supply. [O/R]
U.S. crude CLcv1 was last off 16 cents at $68.1 a barrel after posting its third straight weekly loss. Brent LCOcv1 eased 17 cents to $72.90.
Spot gold was barely changed at $1,231.8 an ounce XAU=.
SYDNEY (Reuters) – The dollar declined on Monday against major currencies to its lowest in more than two weeks after U.S. President Donald Trump criticized the Federal Reserve’s tightening policy, while stocks slipped on fears of further trade protectionist measures.
FILE PHOTO: Bundles of banknotes of U.S. Dollar are pictured at a currency exchange shop in Ciudad Juarez, Mexico January 15, 2018. REUTERS/Jose Luis Gonzalez/File Photo
Trump, on Friday, lamented the recent strength of the U.S. dollar and accused the European Union and China of manipulating their currencies.
The remarks, coupled with Trump’s threats to impose tariffs on all U.S. imports from China, triggered a bout of sell-offs in Wall Street and European stocks on Friday, despite good corporate earnings.
Asian stocks followed that lead on Monday with Japan’s Nikkei .N225 stumbling 0.9 percent. Australian shares were off 0.1 percent while the New Zealand market .NZ50 was down 0.4 percent.
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MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up a touch waiting for other markets to open.
Trump’s comments also hit the greenback .DXY, which was last down 0.2 percent at 94.25 against a basket of six major peers, and steepened long-term Treasury yields.
“The President’s remarks also make it very clear he has a distaste for a stronger dollar, effectively limiting the greenback’s ability to perform, at least near term,” said Rodrigo Catril, senior forex strategist at National Australia Bank.
The dollar index is so far up 2.4 percent this year.
A Reuters report on Friday that the Bank of Japan was in unusually active discussions to modify its massive easing also played a role in the tick-up in yields globally.
Benchmark 10-year Japanese Government Bond futures opened weaker on Monday, sending yields to six-month highs. The Reuters report also added to the yen’s strength JPY=, which was last up 0.3 percent at 111.07 per dollar.
“The market took the news as a possible sign the anchor at the long end may allow for some natural drift higher,” ANZ said in a note to clients.
Investors are now looking ahead to an important meeting on trade between Trump and European Commission President Jean-Claude Juncker at the White House. A breakdown in talks could hit risk sentiment, hurting global equities, analysts said.
The euro EUR=EBS climbed for a third straight day to a two-week top of $1.1746.
In commodities, oil prices were caught between a weakening dollar which supported the market and concerns about U.S.-China trade tensions and supply increases which undermined sentiment.
U.S. crude CLcv1 was last off 3 cents at $68.24 a barrel after posting its third straight weekly loss. Brent LCOcv1 settled at $73.18, up 11 cents.