German car shares dip on Trump tariff tweet

Shares in European carmakers took a hit on Friday, after US President Donald Trump redoubled his threats of tariffs against their cars.

Mr Trump tweeted that the US would place a 20% import tax on European cars, if the EU's "tariffs and barriers are not broken down soon and removed".

Shares in BMW, Daimler, Porsche and Volkswagen each dropped more than 1%, before regaining ground.

Mr Trump's comment came amid a US national security probe of car imports.

Mr Trump launched the investigation last month, ordering the Commerce Department to determine if car imports are a risk to national security.

The US followed a similar process for the steel and aluminium industry, which led it to impose tariffs on the foreign metals this spring.

The EU, China, Mexico, Canada and India are among the places that have plans to retaliate or have already done so.

Image Copyright @realDonaldTrump@REALDONALDTRUMP

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The decision to expand the Trump administration's trade disputes to foreign car manufacturers has come under fire from some in the US Congress, as well as many business lobby groups.

At a hearing this week, Senator Orrin Hatch, a Republican from Utah, said he was "stunned" that the Trump administration was investigating the national security risk of vehicle imports, which is estimated to affect about $200bn worth of imports.

He said the probe alienates allies and tariffs would lead to job losses and increased costs in the US.

US Commerce Secretary Wilbur Ross assured the congressional panel that there has been "no decision" made about whether to recommend tariffs.

"We're in the early stages of the process," he said.

He said Thursday that the Commerce Department hopes to complete the investigation by the end of July or August.

Job losses

The EU sent almost $50bn in vehicles and auto parts to the US last year, with roughly half coming from Germany.

Cars from the UK accounted for about $9bn, according to the Peterson Institute for International Economics, a Washington think tank.

The organisation estimates that a 25% tariff on foreign vehicles and parts for them, assuming the US does not grant exemptions to some countries, would lead to the loss of about 195,000 jobs in the US.

Shares in major European car companies were already on edge due to trade tensions.

Daimler earlier this week warned that it expects lower sales of Mercedes-Benz cars due to a tax on the import of US vehicles into China.

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Gold Prices Sink to Chart Support, Crude Oil Focused on OPEC

Gold prices fell for a fourth day, hitting a six-monthlow. The move tracked inversely of a rise in US Treasury bond yields as the priced-in rate hike path implied in Fed Funds futures steepened. Hawkish comments from Fed Chair Jerome Powell at the ECB Forum as well as a broader recovery in risk appetite that bolstered confidence in the US central bank’s ability to proceed with tightening likely drove the move.

Meanwhile, crude oil prices failed to make good on an upswing after EIA data showed inventories fell more than expected last week as all eyes remain on Friday’s OPEC+ meeting in Vienna. That will update the group’s strategy on its coordinated production cut scheme. Russia and Saudi Arabia are pushing to relax output curbs, a move opposed by some top exporters (such as Iraq).

GOLD EYES TRADE WAR NEWS, OPEC SEMINAR CONTINUES

Looking ahead, a lull in top tier scheduled event risk may give gold prices some room to digest losses before the next trend move. Still, markets remain highly sensitive to headlines informing how the US-China trade war might progress. A stray soundbite from either Washington or Beijing may yet engage sentiment trends, translating into a volatility for the yellow metal.

Background - A Brief History of Trade Wars, 1900-Present

Meanwhile, crude oil is likely to be focused on the second day of the OPEC International Seminar. The gathering may offer a preview of what is to happen when the cartel’s ministers are joined by representatives of like-minded producers – notably Russia – for a strategy session later in the week. The API monthly statistical report is also due to cross the wires.buy/sell decisions say about the price trend!

GOLD TECHNICAL ANALYSIS

Gold prices are pressuring support in the 1260.80-66.44 area, with breakdown confirmed on a daily closing basis exposing the December 2017 low at 1236.66. Alternatively, a move back above support-turned-resistance marked by the May 21 low at 1282.27 paves the way for another test of the $1300/oz figure.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices remain in digestion mode above support in the 63.96-64.26 area. A daily close below this barrier opens the door for a test of the April 6 low at 61.84. Trend-defining resistance establishing a broadly bearish bias remains in the 66.22-67.36 zone.

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Asian Stocks Mixed As Trade Worries Endure, OPEC In Focus

Global trade’s prospects- or lack thereof- continue to dominate market sentiment, although there was little new information on that score beyond International Monetary Fund calling trade tensions the biggest economic threat to the Eurozone.

The equity outlook appears more cautious in the region, too. Morgan Stanley is among those to downgrade its index targets, with a stronger US Dollar prominent among reasons why. There was also some focus on OPEC, which meets later Friday in Vienna. The expectation is that last year’s enduring production cuts may be rolled back. Reuters reported that Saudi Arabia’s energy minister had spoken of a consensus being around a one million barrel/day increase in output.

The Nikkei slipped nearly 1% with the Hang Seng and ASX 200 joining it in the red, if not to the same extent. Shanghai and Seoul saw their mainboards rise.

The session was short of economic numbers. Of what there was, the most important was Japanese consumer price inflation. This came in very modestly above expectations but pricing power remains extremely weak, doubtless to the consternation of the Bank of Japan, which has made long, strenuous attempts to stoke it.

The Japanese Yen gained nonetheless against a broadly weaker US Dollar. On its daily chart USD/JPY remains within the secondary uptrend channel which has bounded trade since late May, but only just.

Double Uptrend. US Dollar Vs Japanese Yen, Daily Chart.
The greenback took a knock from some weaker US economic numbers, while the British Pound continued to gain after Thursday’s more hawkish voting split on the Bank of England’s Monetary Policy Committee.

Crude oil prices gained as that OPEC meeting approached, while gold prices were steady in Asia around six-month lows. The prospect of higher US rates has dimmed demand for non-yielding gold.

Still to come on Friday are numerous Purchasing Managers Index releases from around Europe and the US. Official Canadian Consumer Price Index data are coming too.

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EUR/USD testing highs near 1.1620 ahead of PMIs

The buying interest around the shared currency is now lifting EUR/USD to fresh tops in the 1.1620/25 band on Friday.

EUR/USD looks to PMIs

Spot managed to regain some lasting upside traction so far, advancing for the second session in a row and backed by the renewed offered bias surrounding the greenback.

In fact, diminishing tensions on the US-China trade front appear to have removed some tailwinds from the recent up move in the buck, allowing spot to prolong the rebound from yesterday’s lows in the boundaries of 1.1500 the figure.

Looking ahead, advanced PMI figures for the current month are next on tap in Euroland, while flash Manufacturing/Services PMI is also due across the pond.

EUR/USD levels to watch

At the moment, the pair is gaining 0.21% at 1.1627 facing the next hurdle at 1.1644 (high Jun.19) seconded by 1.1651 (21-day sma) and finally 1.1671 (10-day sma). On the downside, a breakdown of 1.1509 (low Jun.21) would target 1.1508 (2018 low May 29) en route to 1.1479 (low Jul.20 2017).

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CBI cuts forecast for UK economic growth as Brexit concerns linger

Growth rate expected to slow amid uncertainty over single market and customs union

Britain’s leading employers’ organisation, the Confederation of British Industry, has warned the UK economy will shift down a gear this year and risks remaining in the slow lane because of Brexit.

Cutting its growth forecasts for the year, owing to heavy snowfall in the opening months of 2018 and lingering fears over Brexit, the CBI said it expected the growth rate for the British economy to slow to 1.4%, from 1.8% last year.

The rate of GDP growth is then forecast to fall further still, to 1.3% next year, as the UK leaves the EU.

The downgrade comes as business groups become increasingly worried about the lack of progress being made by ministers in talks with Brussels, amid divisions between senior cabinet members. Business leaders fear there will be little progress made before parliament breaks for its summer recess next month.


Rain Newton-Smith, chief economist at the CBI, said companies needed to know how they would access the single market and customs union after Brexit. The summer recess is seen as an important cut-off point because ministers will need to go to Brussels with a clear plan for crunch talks in the autumn.

“There’s a real danger” no progress would be made before the recess, she said. “The transition deal in March was a huge step forward but a lot of businesses are now saying they still need to know what’s happening after 2020 … We just haven’t had enough clarity on the customs arrangements and access to the single market.”

Official figures show investment by businesses fell by 0.2% in the first quarter of 2018, which is thought to have been triggered by the lack of clarity over Brexit, making companies wary about spending on major projects.


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Although the CBI forecast a return to growth in spending in the months to come, fuelled by investment in new technologies such as artificial intelligence, it warned uncertainty would continue to bite hard.

Alpesh Paleja, principal economist at the CBI, said: “While many companies are turning their attention to AI, automation and streamlining operations to stay competitive, there is only so much that they can do when Brexit uncertainty continues to loom large.”

While the outcome of the referendum has triggered a damaging slowdown in consumer spending and business investment, the employers’ body warned there would be little to cheer struggling retailers.

Dozens of high street chains have announced plans to cut jobs and close stores across the country, including Marks & Spencer and House of Fraser.

Hard-pressed Britons reined in their spending amid weak wage growth and high levels of inflation, triggered by the sudden drop in the value of the pound immediately after the Brexit vote.

But although the CBI said the worst of the squeeze was over, it expected spending growth to remain subdued.

The business body forecast the contribution of consumer spending to GDP growth would fall by a third in 2018, and by a further 40% next year.

Despite the sluggish growth rate, the CBI said the economy was probably still strong enough to withstand a rate rise from the Bank of England. Pointing to the return of real wage growth earlier this year, it forecast a rate rise from as early as August, with another two hikes for the cost of borrowing next year to reach 1.25%.

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UK growth forecast raised by British Chambers of Commerce

The British Chambers of Commerce (BCC) has raised its UK growth forecast, but warns it will be among the worst performing G7 economies until 2020.

The BCC has raised its GDP forecast for 2018 from 1.1% to 1.4% and in 2019 from 1.3% to 1.5%. Its first forecast for 2020 is for 1.6% growth.

The hike is driven by slightly stronger than expected consumer spending.

And it says the UK's export performance is expected to remain robust on the back of strong global growth.

But it says with imports also likely to continue to grow, the contribution of net trade to the UK's GDP growth over the near term is to be limited, "particularly with little evidence of a sterling boost to the UK's overall net trade position".

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And despite the upgrades, UK GDP growth is set to remain well below the historical average throughout the forecast period.

Skills shortages
"While many individual businesses are doing well, the inescapable conclusion from our forecast is that the UK economy as a whole should be performing better than it is, given robust and sustained global growth," said Dr Adam Marshall, Director General of the British Chambers of Commerce.

"Although strong global conditions have given the UK a bit of a boost through higher export demand in recent months, we have serious concerns about the potential for further growth here at home when the performance of key trading partners slows.

"Sustained skills and labour shortages are also a real issue, with businesses reporting significant difficulties recruiting and retaining the people they need.

"Political uncertainty aside, the biggest brake on higher UK growth is a lack of concerted action to 'fix the fundamentals' here at home, with government attention distracted by Brexit."

The BCC says productivity is expected to improve marginally over its forecast period but will remain subdued, "hampered by deep rooted problems in the economy, including skills shortages and chronic underinvestment in the UK's infrastructure".

The business body says inflation is now expected to have peaked, and will begin easing in the near term as the impact of the post-EU referendum slide in sterling fades.

It also predicts that the next increase in UK official interest rates, to 0.75%, will occur in the second quarter of 2018, followed by another rise in the first quarter of 2019.

The BCC also expects UK public sector borrowing to be £13.4bn higher over the next three years than forecast at last week's Spring Statement by the Office for Budget Responsibility.

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PublicInvest lowers CPO price forecast

KUALA LUMPUR: PublicInvest Research said European negotiators' softer stance on palm oil regulation give more time for major palm-oil producing nations like Malaysian and Indonesia to seek further negotiations.

Europe has withdrawn its earlier demand for restrictions on the use of palm oil by 2020 as a complete phase out of biofuels only occurs by 2030, it said.

"Parliament’s new proposal suggests that contribution from biofuels produced from unsustainable food or crops for transportation usage should not exceed its average from 2014-2018, with maximum of 7% of total transport consumption. 

"In our view, this implies a cap of biodiesel blend at B7 level. It short, the use of palm oil in biodiesel would be capped at B7 level until 2023 and gradually reduce to zero by 2030. The proposal initiated by the EU negotiators would need approval by EU ministers and the European Parliament plenary," said the research house.

image: https://content.thestar.com.my/smg/settag/name=lotame/tags=

PublicInvest added that CPO prices, which fell to a 22-month low recently before recovering to RM2,336 per metric tonne, could continuously come under pressure in 2H due to stronger production.

Inventories are likely to rebound after five straight months of declines, it said.

PublicInvest maintained its neutral outlook on the sector following its downwards revision in CPO price outlook from RM2,500 per metric tonne to RM2,350 per metric tonne.

Read more at https://www.thestar.com.my/business/business-news/2018/06/18/publicinvest-lowers-cpo-price-forecast/#KvQo1PcXkzDjAaAh.99

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Mahathir seeks to recover RM18bil of 1MDB funds, Goldman Sachs fees

KUALA LUMPUR: Malaysia will seek to recoup US$4.5bil (RM18bil) of funds that were potentially lost through 1MDB, as well as fees paid to Goldman Sachs Group Inc., according to Prime Minister Tun Dr Mahathir Mohamad.

“We have to prove ownership of the money,” Mahathir, 92, said in an interview with Bloomberg Television’s Haslinda Amin on Friday.

“The previous government, in order to avoid accusation of some wrongdoing, decided that the money was not theirs, so they’re not making any claims. But we know the money is ours. It’s from 1MDB.”

The scandal surrounding the troubled investment company has spawned worldwide investigations, with U.S. officials saying that more than US$4.5bil flowed from 1Malaysia Development Bhd. through a web of opaque transactions and shell companies.

image: https://content.thestar.com.my/smg/settag/name=lotame/tags=all

The allegations of corruption helped propel Mahathir’s coalition to a surprise election win in May to oust former Prime Minister Najib Razak, whose coalition had ruled for about six decades.

In the interview, Mahathir raised concern over the large commission paid to Goldman Sachs, which made $593 million for arranging three bond sales for 1MDB. The state fund paid a 10% fee to the bank for its role and accepted a 6% interest rate, he said, adding that the borrowing cost for the government should be closer to 3%.

‘Not Relevant’
“What we earned from the debt transactions reflected the risks we assumed at the time, specifically movement in credit spreads tied to the specific bonds, hedging costs and underlying market conditions,” said Edward Naylor, a Hong Kong-based spokesman for Goldman Sachs.

“Comparisons to ‘fees’ from plain vanilla underwritings, which involve far less risk, are not relevant.”

The government would pursue legal action against Goldman Sachs “if there’s a case,” Mahathir said, adding that the attorney general would make a decision on whether to proceed. Finance Minister Lim Guan Eng told the New York Times last week that he would seek restitution from the bank.

Mahathir previously said that Najib would be charged with bribery and embezzlement of public funds. Najib has repeatedly denied wrongdoing, and told Reuters this week that he knows nothing about money from 1MDB appearing in his personal account. Najib’s spokesman couldn’t immediately be reached for comment on Friday.

Charges may be imminent in the renewed probe into 1MDB after Attorney-General Tommy Thomas began reviewing documents submitted by the Malaysian Anti-Corruption Commission. He has set up teams to study possible criminal prosecution and civil proceedings.

The scope of the new investigation includes potential abuse of power by Najib. That includes a probe into fraudulent investments made by 1MDB, funds flowing into his personal account, and criminal breach of trust in a letter of support from the Ministry of Finance, a post that Najib held.
Read more at https://www.thestar.com.my/business/business-news/2018/06/22/mahathir-seeks-to-recover-usd4-5bil-1mdb-funds-goldman-fees/#k5hxYsSD80eljTyD.99

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