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Oil: Global shares, oil drop after Trump tariff threat

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Equity markets, which have been largely expecting the two sides to reach a trade agreement soon, fell sharply as further talks to end their bruising trade war were thrown into doubt.

The trade war has resulted in billions of dollars of losses for both sides, while inflicting collateral damage on export-reliant economies and companies from Japan to Germany.

Chinese shares plunged more than 6 percent, while U.S. stock market futures fell 1.6 percent. Oil prices sank and the Chinese yuan weakened sharply.[.N]

The rout is set to continue in Europe. Financial spreadbetters expect Frankfurt’s DAX to open 1.7 percent lower at 12,207, and Paris’ CAC to open down 1.6 percent at 5,462. London is closed for a bank holiday.

Trump sharply escalated tensions between the world’s two largest economies with tweeted comments on Sunday that trade talks with China were proceeding “too slowly”, and that he would raise tariffs on $200 billion of Chinese goods to 25 percent on Friday from 10 percent.

He also said he would target a further $325 billion of Chinese goods with 25 percent tariffs “shortly”.

The tweets upended the previously calm market mood that had benefited from signs of improving economic growth in China and the United States, and from comments from Trump and other senior U.S. officials that trade talks were going well.

The Wall Street Journal reported on Monday that China was considering cancelling trade talks scheduled for this week following Trump’s threats. Conflicting later reports on Chinese Vice Premier Liu He’s travel plans added to market confusion.

“I think this has got the potential to be a real game-changer,” said Nick Twidale, Sydney-based analyst at Rakuten Securities Australia.

“There is still a question of whether this is one of the famous Trump negotiation tactics, or are we really going to see some drastic increase in tariffs. If it’s the latter, we’ll see massive downside pressure across all markets,” he said.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1.9 percent in afternoon trade as markets across the region fell deep into the red.

Chinese blue-chips were down more than 6 percent, having closed higher before a three-day national holiday amid expectations that pressures on China’s economy were easing.

The drop in Chinese shares came despite a move on Monday by China’s central bank to cut reserve requirements for small banks to help boost lending to small and private firms.

Australian shares were off 0.8 percent.

Japanese financial markets remain closed until Tuesday for a national holiday, but Nikkei 225 futures were down 1.9 percent at 22,075, off the day’s lows.

E-Mini futures for the S&P 500 slid 1.6 percent, erasing memories of gains on Friday after the U.S. payroll data had helped to lift Wall Street, and signaling a rough open for U.S. stocks on Monday.

“The risk for (Trump) is that the Chinese don’t play ball and don’t go ahead with the negotiation,” said Shane Oliver, head of investment strategy at AMP in Sydney.

“It’s not in his interest for shares to go down as it would hit U.S. business confidence and investment, and that would shoot up unemployment. And that would be a risk for his re-election, too,” he said.

But economists at Citi painted a brighter picture of the outlook for Chinese markets following the recent stabilization of the Chinese economy.

“Should trade tensions resume, we expect a speedy reaction by China’s policy-makers, with policy implementation made more effective. Given the scope for fiscal and monetary stimulus is large in the near term, we believe the negative impact from additional tariffs will likely be managed better this time,” they said in a note.

 

MORE EASING ON THE WAY?

The flight from riskier assets boosted interest in safe havens, pushing U.S. Treasury futures up 16 ticks. Data from CME Group showed the market now sees a nearly 56 percent chance of a Federal Reserve rate cut by the end of the year.

Chinese 10-year treasury futures also jumped, with the most-traded contract, for June delivery rising as much as 0.5 percent. They were last up 0.27 percent at 96.855.

“The intensified trade and geopolitical risks are likely to prompt the regional central banks for more stimulatory policies,” analysts at ING said in a note. “We expect the majority of Asian central banks meeting this week to cut their policy rates.”

As investors flocked to the safe-haven yen, the dollar dropped 0.3 percent against the Japanese currency to 110.78.

But China’s yuan plunged, with the offshore unit weakening to 6.8215 per dollar, its weakest level since January 10, before paring some losses.

The onshore yuan weakened nearly 1 percent to 6.7980 per dollar before bouncing back to 6.7805.

In contrast to the sharp moves in Asian currencies, the euro was down less than 0.1 percent on the day at $1.1193, and the dollar index, which tracks the greenback against a basket of six major rivals, was up 0.06 percent at 97.579.

In commodity markets, Trump’s tweets sparked a plunge in oil prices. U.S. crude at one point dropped as much as 3.1 percent to a more-than-five-week low, before bouncing to $60.51 per barrel – still off 2.3 percent on the day.

Brent crude was 2.2 percent lower at $69.28 per barrel.

The tweets have compounded pressure on prices amid signs of a rise in U.S. output, which has surged by more than 2 million barrels per day since early 2018.

Spot gold jumped 0.25 percent to trade at $1,282.20 per ounce.

 

 


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24 Hours Across Africa

Jamie Oliver restaurant to leave 1.300 jobs at risk.

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Source: BBC

Celebrity chef Jamie Oliver has said he is “saddened” after his restaurant group went into administration, putting up to 1,300 jobs at risk.

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The group, which includes the Jamie’s Italian chain, Barbecoa and Fifteen, has appointed KPMG as administrators.

In total, 25 restaurants are affected by the move, 23 of which are from the Jamie’s Italian chain.

Mr Oliver said: “I appreciate how difficult this is for everyone affected.”

Jamie Oliver’s Fifteen Cornwall at Watergate Bay, which operates under a franchise, is unaffected, as are overseas branches of Jamie’s Italian.

Mr Oliver added: “I would also like to thank all the customers who have enjoyed and supported us over the last decade, it’s been a real pleasure serving you.

We launched Jamie’s Italian in 2008 with the intention of positively disrupting mid-market dining in the UK High Street, with great value and much higher quality ingredients, best-in-class animal welfare standards and an amazing team who shared my passion for great food and service. And we did exactly that.

Restaurant closures had not been officially announced on Tuesday afternoon, but notices in the windows of some branches said they had already closed.

The Unite union said the development was a “devastating blow for the chain’s hardworking and loyal workforce”.

“Restaurants are not being helped by the current economic uncertainty, although those businesses like Jamie Oliver’s that dashed for expansion in recent years seem particularly precarious. As ever, it is the workers at the restaurant and in the supply chain who bear the heavy cost of boardroom decisions.”

The union also asked for assurances assurances that staff will be “protected and paid all the money they’re owed, including wages, holiday and redundancy”.

“Faced with higher rent, rising food prices and increased competition, restaurants need a point of difference – it’s no coincidence that smaller brands with the freedom and flexibility to keep things fresh are currently the ones performing well.”


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24 Hours Across Africa

Trump to end America’s IT threats.

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Source :BBC

President Donald Trump has declared a national emergency to protect US computer networks from “foreign adversaries”.

He signed an executive order which effectively bars US companies from using foreign telecoms believed to pose national security risks.

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The order does not name any company, but is believed to target Huawei.

The Chinese tech giant said restricting its business in the US would only hurt American consumers and companies. Media captionOne potential problem with 5G tech may have more to do with castles than you’d expect

Several countries, led by the US, have raised concerns in recent months that Huawei products could be used by China for surveillance, allegations the company has vehemently denied.

The US has been pressuring allies to shun Huawei in their next generation 5G mobile networks.

In a separate development, the US commerce department added Huawei to its “entity list”, a move that bans the company from acquiring technology from US firms without government approval.

The moves are likely to worsen tensions between the US and China, which had already escalated this week with tariff hikes in a trade war.

Huawei has been at the epicentre of the US-China power struggle that has dominated global politics over the past year.

What does the order say?

According to a White House statement, Mr Trump’s order aims to “protect America from foreign adversaries who are actively and increasingly creating and exploiting vulnerabilities in information and communications technology infrastructure and services”.

It gives the secretary of commerce the power to “prohibit transactions posing an unacceptable risk to the national security”, the statement adds.

The move was instantly welcomed by Federal Communications Commission Chairman Ajit Pai, who called it “a significant step toward securing America’s networks”.

The US had already restricted federal agencies from using Huawei products and has encouraged allies to shun them, while Australia and New Zealand have both blocked the use of Huawei gear in 5G networks.

In April 2018 another Chinese tech company, ZTE, was barred from buying US parts after it was placed on the same “entity list”. It resumed business after reaching a deal with the US in July.

How has Huawei responded?

Huawei has said its work does not pose any threats and that it is independent from the Chinese government.

“Restricting Huawei from doing business in the US will not make the US more secure or stronger,” the company said in a statement.

“Instead, this will only serve to limit the US to inferior yet more expensive alternatives, leaving the US lagging behind in 5G deployment, and eventually harming the interests of US companies and consumers.”

Huawei grown rapidly over a decade

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The company also said “unreasonable restrictions” on Huawei raised “other serious legal issues”.

During a meeting in London on Tuesday, Huawei chairman Liang Hua said it was “willing to sign no-spy agreements with governments” as concerns over the security of its products used in mobile networks continued to grow.

What does the national emergency mean?

By declaring a national emergency President Trump can effectively bypass other branches of government and gains access to a raft of special powers.

The Brennan Center for Justice, a non-partisan public policy institute, has compiled a list of more than 120 legal powers the president can use in such an event – they range from taking over farmland to calling up military reservists or seizing property with few or no restrictions.

President Trump has now declared five national emergencies, including most recently over the southern US border.

A rolling list of national emergencies compiled by the centre shows there are now 33 active national emergencies in the US.

The oldest emergency still in place was signed by President Jimmy Carter in November 1979 as a response to the Iran hostage crisis. Others signed by Presidents Bill Clinton, George W Bush and Barack Obama also remain in effect.


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