Mon, Apr 22, 2019 @ 04:12 GMT

EU MEP Verhofstadt meeting UK Brexit Secretary Davids in 9 Downing Street

    European Parliament’s Brexit representative Guy Verhofstadt is meeting UK Brexit Secretary David Davids in 9 Downing Street today. Verhofstadt will also meet Cabinet Office minister David Lidington and Home Secretary Amber Rudd at 10 Downing Street where Prime Minister Theresa May would stop by. Verhofstadt urged May to move beyond “vague aspirations” and give “credible proposals” after her Mansion House speech last Friday

    May called for a system of “mutual recognition ” on the trade deal with EU after Brexit. That is, the two trading partners should recognize each other rule, yet they’re free to adopt their own ways. The system is to be overseen by a joint UK-EU court. EU negotiator Michel Barnier’s chief adviser Stefaan de Rynck blasted it as a “failed” system. He said “there was a time we thought it would lead to market efficiency, but with the financial crisis we have gone for an approach of more harmonization and centralization and more EU bodies overseeing that and stronger powers for those bodies.” And, “if you are in a very integrated market with a third country but you don’t have the joint enforcement structures, then you can see the potential for all kinds of difficult situations.

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    Rees-Mogg could back May’s Brexit deal with reasonably effective time limit on Irish backstop.

      Jacob Rees-Mogg, a high profile Brexiteer Conservative, said that the could back Prime Minister Theresa May’s Brexit deal if there is a reasonably effective time limit on the Irish backstop.

      Rees-Mogg told BBC ratio that “I can live with the de facto removal of the backstop…. I mean that if there is a clear date that says the backstop ends, and that is in the text of the treaty or equivalent of the text of the treaty”.

      But he also insisted that the time limit should be “a short date, not a long date, then that would remove the backstop in the lifetime of parliament and that would have a reasonable effect from my point of view.”

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      UK PM May repeated her warnings over no-deal Brexit

        UK Prime Minister Theresa May repeated her warning that voting down her Brexit agreement in the parliament will put the UK into “uncharted territory”. And she added, “I don’t think anybody can say exactly what will happen in terms of the reaction that we’ll see in Parliament.”

        She also reiterated that the Irish backstop “is not intended to be used in the first place, and if it is, it’s only temporary”. And, “ensuring that we actually get the future relationship in place to replace the backstop if it’s used is actually a crucial element of this.”

        May also reiterated her opposition to a second referendum as that would “divide our country” and require a delay to Brexit.

        Separately, a cross party group of Conservative and Labour MPs are seeking to amend the government’s Finance Bill to ensure the “no deal” provisions in it can only be implemented if Parliament votes to allow it.

        Debate on the Brexit agreement will resume this Wednesday, with the vote due in the week beginning January 14.

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        St. Louis Fed Bullard would stand pat on rate if it’s just him

          St. Louis Fed President James Bullard said in a CNBC interview that he doesn’t see much inflation in the economy. And, he went further saying that it’s not a situation where Fed has to be “pre-emptive”. And “if it was just me, I’d stand pat where we are and I’d try to react to data as it comes in.”

          Regarding growth, he said “it’s going to be a good year, and part of that is fiscal stimulus”. However, the economy is “going to slow in 2019 and 2020” and “that’s the standard forecast that’s out there”.

          Separately, Bullard told Bloomberg TV that Fed should not do anything that knowingly invert the yield curve. This sort of echoes comments of Atlanta Fed President Raphael Bostic.

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          US factory orders rose 0.7%, initial jobless claims rose 1k to 218k

            Released from US, factory orders rose 0.7% in June, in line with expectation.

            US initial jobless claims rose 1k to 218k in the week ended July 28. Four-week moving average of initial claims dropped -3.5k to 214.5k.

            Continuing claims dropped -23k to 1.724m in the week ended July 21. Four-week moving average of continuing claims dropped -4.5k to 1.74175m.


            Full release here.

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            US-Canada NAFTA negotiations continue to drag on

              NAFTA negotiation between US and Canada continued to drag on with no concrete results after yesterday’s meeting. Canadian Foreign Minister Chrystia Freeland just repeated her words that “we are making good progress,” discussions were “constructive and productive” with “goodwill on both sides.” But the key issues were unresolved and expectation is low for a deal to be made this week.

              The Chapter 19 dispute resolution mechanism remained a sticky point. Canadian Prime Minister Justin Trudeau insisted on having the mechanism as Trump is a president “who doesn’t always follow the rules as they’re laid out.” Another deadlock is diary quota which Canada might concede some ground, but based on condition that others issues are satisfactorily resolved. The third issue is the cultural exemptions to protect Canadian media company, which Trudeau said they’re important to Canada’s national sovereignty and identity.

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              DOW correcting fall from 25800

                DOW sees some solid buying today, up 200 pts at the time of writing. But it’s more like a recovery that corrects the fall from 25800.35 to 24217.47. For now, the recovery could extend to 55 H EMA an or above. but strong resistance is likely between 25000/25200. Another fall to 23360.29 is still in favor for the near term.

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                New York Fed Williams: Overall strong economy, great time for businesses to step up

                  New York Fed President John Williams said yesterday that the US is now in a state of “overall strong economy”. And, “employers are now struggling to fill job openings.” He called it a “great time for businesses to set up” with internships, training programs and school partnerships.

                  And he’s not concerned with the rise in housing and stock prices. He pointed out that “we’re not seeing the kind of build-up in leverage in the financial system that was pretty obvious in the mid-2000s.” Also, “we’re not seeing that kind of risk-taking in the financial system right now, but we are watching very carefully.”

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                  US PPI posted first monthly decline since Feb 2017

                    In August, US headline PPI dropped -0.1% mom versus expectation of 0.2% mom rise. Year-over-year rate also slowed from 3.3% yoy to 2.8% yoy, below expectation of 3.2% yoy.

                    Core PPI dropped -0.1% mom versus expectation of 0.2% mom. Year-over-year rate also slowed from 2.7% yoy to 2.3% yoy, below expectation of 2.8% yoy.

                    That’s also the first monthly decline in 1.5 years February 2017. Decline in food prices and trade serves offset the increase in energy costs.

                    Dollar trades mildly lower against Yen after the remains, but stays range-bound against others.

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                    BoJ: Inappropriate to adopt policy that forcibly push up demand in a short time

                      In the summary of opinions at the June 14/15 BoJ monetary policy meeting, the central noted that the economy is “expanding moderately”. But it also cautioned that the effect of US “protectionist trade policy” warrant “close attention”. In addition to that, other concerns include “political situation in southern Europe and volatile
                      movements in some emerging markets. Though, the latter have “limited” effects on the global economy at this point.

                      Regarding inflation, BoJ noted that “upward pressure on wages has been weak despite the increased tightness in the labor market”. And, “if wages do not rise in line with inflation, this would pose a burden on people.” BoJ said “close attention should be paid to developments in labor productivity and real wages, while taking into account mainly the effects of a reduction in overtime work hours under working-style reforms.”

                      On monetary policy, since there is “still a long way” to meet 2% inflation target, it is “appropriate to pursue powerful monetary easing with persistence under the current guideline”. But BoJ also noted that “the reason for the sluggishness in prices is unlikely to be merely a shortage of demand”. Therefore, “it is not appropriate to adopt a policy that would forcibly push up demand in a short period of time.

                      Full summary of opinions here.

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                      Sterling jumps after stronger than expected wage growth, upside limited

                        UK unemployment rate was unchanged at 4.0% in August, matched expectations. Wage growth, on the other hand, is an upside surprise. Average weekly earnings including bonus rose 3.7% 3moy in August, above expectation of 2.4% 3moy. Average weekly earnings excluding bonus rose 3.1% 3moy, above expectation of 2.8% 3moy. In September, claimant counts rose 18.5k, above expectation of 4.5k. Full release here.

                        GBP/USD edged higher after the release. But upside is limited so far..

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                        USTR: China has not fundamentally altered its unfair practices

                          The US Trade Representative released an update on Section 301 IP investigation on China yesterday. Less than two weeks ahead of the Trump-Xi meeting as sideline of G20 summit in Argentina, USTR is piling more pressure on China for reforms. In short, the report complained that “China has not fundamentally altered its unfair, unreasonable, and market-distorting practices that were the subject of the March 2018 report on our Section 301 investigation.”

                          The report also noted that “despite repeated U.S. engagement efforts and international admonishments of its trade technology transfer policies, China did not respond constructively and failed to take any substantive actions to address U.S. concerns.” And, China, “made clear – both in public statements and in government-to-government communications – that it would not change its policies in response to the initial Section 301 action.” The report also said “China largely denied there were problems with respect to its policies involving technology transfer and intellectual property”.

                          Full report here.

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                          Canada Freeland repeats no deal is better than a bad deal ahead of NAFTA talk restart

                            High level NAFTA talks between Foreign Minister Chrystia Freeland and US Trade Representative Robert Lighthizer will resume on Wednesday, working towards a US imposed deadline of October 1. head of the meeting, Freeland reiterated the government’s position that “no deal is better than a bad deal.” And she explained that “any negotiator who goes into a negotiation believing that he or she must get a deal at any price … (will) be forced to pay the maximum price for that deal.”

                            On the other hand, Trump continued to attack Canada. He told reporters “we love Canada, we love the people of Canada, but they are in a position that’s not a good trade position for Canada.” And, “they cannot continue to charge us 300 per cent tariff on dairy products, and that’s what they’re doing.”

                            Trump close ally House Republican Steve Scalise also warned that “there is a growing frustration with many in Congress regarding Canada’s negotiating tactics.” And, “members are concerned that Canada does not seem to be ready or willing to make the concessions that are necessary for a fair and high-standard agreement.” But it’s unsure how much this such a view is shared among congressmen.

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                            UK May: Change of leadership risk delaying Brexit negotiations

                              UK Prime Minister Theresa May warned yesterday that “a change of leadership at this point isn’t going to make the negotiations any easier “. Instead she added “what it will do is mean that there is a risk that actually we delay the negotiations and that is a risk that Brexit gets delayed or frustrated.” May also emphasized that “these next seven days are going to be critical, they are about the future of this country”. And she pledged not to be “distracted from the important job.”

                              May is also expected to reiterate the same message in a speech to the CBI’s annual conference today. According to advance extracts, May would say “We now have an intense week of negotiations ahead of us in the run-up to the special European Council on Sunday (Nov 25).” And, “during that time I expect us to hammer out the full and final details of the framework that will underpin our future relationship and I am confident that we can strike a deal at the council that I can take back to the House of Commons.”

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                              BoJ Harada: There’s room for employment expansion and few signs of financial imbalances

                                BoJ board member Yutaka Harada said in a speech that the central bank’s quantitative and qualitative monetary easing program delivered improvements to production, employment, investment, exports, and fiscal conditions. And, “further indicators are perceptions that the economy is recovering, improvements in income distribution, and women’s entry into the labor market.” He also hit back at the critics of BoJ’s policy as their arguments are “not supported by empirical evidence.”

                                Harada reiterated the BoJ’s stance that “it should continue with the current monetary easing with a view to achieving the price stability target of 2 percent, given that, for now, there is still room for an expansion in employment and that there are few signs of financial imbalances.”

                                Full 23-page speech of Yutaka Harada on Economic Activity, Prices, and Monetary Policy in Japan.

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                                UK PM May said to mull hypothetical vote to break Brexit deadlock

                                  UK Prime Minister Theresa May’s office said UK Prime Minister Theresa May and European Commission Jean-Claude Juncker held phone conversation at Sunday night. But talks remained “deadlocked” and thus, there is no plan for May to travel to Brussels again today. Cabinet minister Andrea Leadsom, urged fellow Tories to support May’s deal. And, that would mean “that we can move on” while leaving open the possibility to “potentially amend how we do this.”

                                  Some Conservative MPs are reported to ask May to pull the Brexit meaningful vote on Tuesday, because it’s rather meaningless to hold a vote that will certainly be defeated. But there were also talks that May is planning to push for a vote on a “hypothetical” deal on Tuesday. It could be with a certain Irish backstop arrangement with Attorney General Geoffrey Cox’ input. Then EU could be forced to concede should there be a Commons majority.

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                                  Mexico and Canada targeting to speed up NAFTA negotiations

                                    Canadian Dollar seemed to be benefited from the EU-US trade talks too. Trump’s softened stance on auto tariffs is a positive to Canada, as well as NAFTA talks too. Canadian Foreign Minister Chrystia Freeland said after meeting with Mexican Economy Minister Ildefonso Guajardo that “Canada’s very clear desire is to move the NAFTA negotiations back into higher gear now that we are past the Mexican election”

                                    Guajardo said that “in the next few months and definitely before the election process in the United States, we are trying to constructively advance this negotiation.” He is also optimistic that “there is the possibility of finding a safe landing zone.”

                                    Nonetheless, it should be noted that while the US would want to pursue bilateral agreements with Canada and Mexico, the latter two insist on trilateral agreement. Guajardo said “the essence of this agreement is trilateral, and it will continue being trilateral.” Incoming Mexican Foreign Minister Marcelo Ebrard also said NAFTA “can be modernized but we’re not thinking about it having a different nature to that of today.”

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                                    BoJ Kuroda: Negative rate still necessary but no need to take extra easing

                                      BoJ Governor Haruhiko Kuroda ruled out the need to ramp up stimulus today. He said that “there’s no need to take additional steps. What’s important is to ensure our policy is sustainable, with an eye on balancing its pros and cons.”

                                      But at the same time, he also ruled out an early end to the negative interest rate policy. He noted “I know there is various debate on the BOJ’s negative rate policy”, “but for the time being, it’s a necessary step that is part of our large-scale monetary easing program.”

                                      Kuroda remained optimistic that “wage and price growth will likely accelerate” and lift inflation to 2% target eventually. But that change of doing that any time during fiscal 2020 is “slim”.

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                                      China Shanghai SSE breaches 2800 as tech stocks boosted by government focus

                                        Chinese stocks are enjoying a strong rally today. The Shanghai SSE breaches 2800 handle and is holding 2% gain. Tech stocks led the way higher as the government indicated strong focus in development in the sector. Yesterday, the State Council renewed the ” National Science, Technology and Education Leading Group” to “National Science and Technology Leading Group”, showing the dedication in science and technology.

                                        The group is headed by Premier Li Keqiang with Vice-Premier Liu He as deputy. Fourteen high level officials from National Development and Reform Commission, the Ministry of Education, and the Ministry of Science and Technology are also part of the group.

                                        The major responsibilities of the group include studying and reviewing national strategies, plans and major policies for sci-tech development; deliberating major national scientific tasks and projects, and coordinating major sci-tech affairs among ministries, departments and local authorities.

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                                        UK PM May to EU: It’s your interest that we leave with a deal

                                          According to the pre-released extracts, UK Prime Minister Theresa May is expected to tell EU in a speech today that “it is in the European interest for the UK to leave with a deal”. And, “just as MPs will face a big choice next week, the EU has to make a choice, too.”

                                          May is still seeking legally binding assurances from EU that the Irish backstop, if triggered, will be temporary. May will say “we are working with them but the decisions that the European Union makes over the next few days will have a big impact on the outcome of the vote.”

                                          Without any fundamental change regarding Irish backstop, there is practically no chance for May to get her Brexit deal through the Parliament on March 12, next Tuesday. A vote on no-deal Brexit will then be held on March 13 to see if there is explicit consent on this path. If not, there will be another vote on Article 50 extension on March 14.

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