MTS Economic News 20190612

MTS News

MTS Economic News 20190612

12 Jun 2019

· The U.S. dollar index was flat on Tuesday as investors focused on the U.S.-China trade war and economic data for signals of growth and whether the U.S. Federal Reserve is likely to cut rates in the coming months.

Risk sentiment improved on Monday, after the United States reached a deal with Mexico on Friday to avoid imposing tariffs on the country.

Ongoing tensions between the U.S. and China and the prospect that U.S. President Trump will look to impose tariffs on Japan and Europe, however, continues to weigh on risk sentiment.

Investors are concerned that trade wars are harming global growth, and increasing the likelihood that the U.S. central bank will need to cut rates to stimulate growth.

The dollar index versus a basket of six major currencies was flat at 96.698, trading just above the 96.459 level it hit on Monday, its lowest since March 25.

Investor focus is now on the Fed’s next policy meeting on June 18-19 and what kind of signals the central bank could offer on the direction of monetary policy.

The euro was steady at $1.1328 and in close reach of a three-month peak of $1.1348 scaled on Friday.

· Trump on Monday said he was ready to impose another round of punitive tariffs on Chinese imports if he cannot make progress in trade talks.

Trump on Tuesday accused Europe of devaluing the euro zone’s single currency in a series of tweets that also targeted U.S. monetary policy with renewed attacks on the U.S. central bank.

“The Euro and other currencies are devalued against the dollar, putting the U.S. at a big disadvantage,” Trump tweeted without offering any evidence.

He also slammed U.S. interest rates for being too high. Interest rate futures traders are pricing in an almost 80 percent chance of a rate decrease at the Fed’s July meeting, according to the CME Group’s FedWatch Tool.

· President Donald Trump said Tuesday that the U.S. dollar is at a disadvantage compared with other major currencies like the euro as central banks keep interest rates low while the Federal Reserve’s rates are higher by comparison.

“The Euro and other currencies are devalued against the dollar, putting the U.S. at a big disadvantage,” Trump tweeted, adding the Fed doesn’t have “a clue.”

Trump also said in a separate tweet that the U.S. has low inflation, calling it “a beautiful thing.”

The dollar fell slightly against the euro following Trump’s tweets.

· President Donald Trump on Tuesday was expected to sign an executive order meant to streamline regulations and cut costs associated with biotechnology, the White House announced.

The order would pressure international trading partners — including China — to lift barriers in the biotech industry, which creates products such as pesticides and genetically engineered plants bred to resist diseases, three sources told CNBC.

The order was viewed as a way to bolster the bottom line of farmers caught in the crosshairs of Trump’s trade war with China, the sources said.

· Chinese tech giants Huawei and ZTE both present national security risks to the United States but for different reasons, Commerce Secretary Wilbur Ross told CNBC on Tuesday.

“Both are doing practices that we think are potentially injurious to our national security,” Ross said in a “Squawk Box” interview, defending the actions that the Trump administration took against each company.

· The U.S. claims that Huawei has close ties to China’s communist government, and that the company’s smartphones and online networking gear could facilitate Beijing spying. Huawei denies these allegations.

“What we actually did with Huawei is a different situation from what we did with ZTE,” said Ross. “The ZTE situation was the result of their violating an agreed upon, a court agreed upon, settlement.”

On the trade issue, Ross predicted Washington and Beijing would eventually cut a deal, but it would have to address all the concerns of the Trump administration or it would not make sense.

· President Donald Trump’s restrictions on Chinese telecom giant Huawei are comparable to “murder,” the president of the U.S.-China Business Council said Tuesday.

“If we want to keep it out of our network, it’s easy to do. Let’s just ban them. But putting them on the entity list and prohibiting U.S. companies from dealing with them, it’s more like murder. It’s trying to put an end to them,” said Craig Allen, president of the council, at CNBC’s Capital Exchange summit. The council represents about 200 American companies that do business with China.

“We are paying a short-term cost but the long-term cost would be yet greater,” Allen said. “Will China not invest in soybeans in Brazil, Argentina and Ukraine? Of course they will. Not everything is a transaction. We have to consider this over the long term. ... At the end of the day, we have to deal with the Chinese if we want to get there.”

· On the same panel, Thea Lee, president of the Economic Policy Institute, strongly condemned Trump’s use of tariffs in negotiating a trade deal.

“Trump is using that tool (tariffs) too haphazardly, and in a way he’s not sending clear messages to either business communities or to trading partners,” Lee said at the summit. She added, “He’s burning bridges with a lot of trading partners, which is going to cost us over the long run.”

“If a tariff is used strategically and surgically to address an unfair trade practice, you have this short-term disruption and short-term inconvenience and higher prices along the way, but ultimately in service of addressing a problem. That’s what I don’t see this current administration doing … it’s more like a battle of egos and a battle of wills,” she added.

· Oil prices were little changed on Tuesday, weighed by concerns about a global economic slowdown that could dent crude demand, but supported by expectations that OPEC and its allies will extend their supply curbs.

U.S. West Texas Intermediate settled just a penny higher at $53.27. Brent crude, the global benchmark, settled unchanged from Monday’s settlement at $62.29 a barrel.

Brent is down 17.5% from its 2019 peak reached in April, while WTI is down 20% over the same period.

Concern about slowing demand and economic growth has had a large impact on sentiment amid a trade war between the United States and China.

The U.S. Energy Information Administration cut its 2019 world oil demand growth forecast by 160,000 barrels per day to 1.22 million bpd.

Reference: CNBC

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