Oil prices rebound after Trump trade tariffs trigger plunge

TOKYO: Oil prices rose more than $1 on Friday, rebounding from their biggest falls in years after U.S. President Donald Trump imposed more tariffs on Chinese imports, intensifying the trade war between the world's two biggest economies and crude consumers.

Brent crude futures slumped more than 7% on Thursday, their steepest drop in more than three years. U.S. West Texas Intermediate (WTI) crude futures fell nearly 8%, posting its worst day in more than four years.

The collapse ended a fragile rally built on steady drawdowns in U.S. inventories, even as global demand looked shaky because of the trade dispute.

Brent futures rose $1.53, or 2.6%, to $62.03 a barrel by 0220 GMT, while WTI futures gained $1.02, or 1.9%, to $54.97 a barrel.

Trump said on Thursday he would impose a 10% tariff on $300 billion of Chinese imports from Sept. 1 and could raise tariffs further if China's President Xi Jinping fails to move more quickly to strike a trade deal.

The announcement extends Trump's tariffs to nearly all of China's imports into the United States and marks an abrupt end to a temporary truce in a trade war that has disrupted global supply chains and roiled financial markets.

Brent and U.S. crude are heading for their first weekly declines in three, on track for falls of more than 2%.

"Global growth estimates have been under pressure from the tariff war and the move by the U.S. erases all the goodwill gained earlier in the week when U.S. negotiators were in Shanghai to kickstart trade talks," Alfonso Esparza, market analyst at OANDA said in a note.

There have been mounting signs this week of the economic toll of the trade dispute between the United States and China, which reported this week slowing manufacturing activity in July.

U.S. manufacturing activity also slipped last month, dropping to a near three-year low, and construction spending fell in June as investment in private construction projects tumbled to its lowest level in 1-1/2 years.

The economic slowdown has translated into falling oil demand in the United States, the world's biggest oil consumer.

The amount of crude processed at U.S. oil refineries averaged 17.4 million barrels per day over the past four weeks, down 1.3% from the same time a year ago, U.S. government data showed this week. - Reuters

source https://www.thesundaily.my/business/oil-prices-rebound-after-trump-trade-tariffs-trigger-plunge-BC1206021

Disunited Kingdom: hard Brexit threat tests historic ties

LONDON: New British Prime Minister Boris Johnson's big tour of Britain saw him booed by EU supporters in Wales and heckled by nationalists in Scotland. Northern Ireland's fractious parties then told him that his Brexit plans were reopening old wounds.

The Conservative party leader's swing across the four UK countries in his first week in office was designed to drum up support for his high-risk pledge to leave the EU on October 31 at any cost.

But he found a less than united kingdom that -- while not quite coming apart at the seams -- is becoming increasingly open about deep-seated suspicions of London.

Welsh sheep farmers are worried that the 27 remaining members of the European Union will throw up barriers to their lamb exports in case of a messy "no-deal" divorce.

Scottish nationalists say that they never voted to leave the bloc in first place and might now try to become an independent state in order to rejoin.

And the prospect of a hard border splitting EU member Ireland from British Northern Ireland has revived memories of late 20th century sectarian unrest.

"It was perfectly foreseeable that the hardest of hard Brexit would put huge strains on the union," Centre for European Reform's deputy director John Springford said.

"It's clear that Brexit, which is an English nationalist project, really... matters much more to him than the future of the union," Springford told AFP.

Opportune gift

Some in London doubt that Johnson is a man of true conviction and believe he simply rides the political tides.

But his three-year devotion to Brexit has put him on a collision course with Scottish First Minister Nicola Sturgeon and her separatist Scottish National Party.

Sturgeon hopes that discontent over Brexit -- 62 percent of Scots voted to stay in the EU in 2016 -- will push her over the top in a rerun of a 2014 independence referendum the pro-UK side won 55-45.

She has tentatively scheduled a new poll for next year. The British government would have to give her the ultimate go-ahead for a vote.

Scottish nationalists "would probably see Brexit as their best opportunity to push for independence," said Open Europe think tank analyst David Shiels.

Springford called Johnson "a gift for Sturgeon".

"If (Johnson) manages to force through a no-deal Brexit, then the likelihood that Scotland leaves is much higher."

But resistance to independence is also strong.

Scotland's last drive was thwarted by concerns over a new currency and the loss of open access to the British market.

Brussels has also cautioned that there would be no clear path for Scotland to join the EU on its own.

'Fundamental questions'

Northern Ireland was torn apart for three decades by a civil conflict involving the British military and the Catholic and Protestant communities.

The 1998 Good Friday Agreement ending the bombings and street clashes hinged on an open Irish frontier and relaxed citizenship rules.

A no-deal Brexit could lead to border checks once again -- something that local residents on both sides and of all political affiliation are against.

Sinn Fein republican leader Mary Lou McDonald said after meeting Johnson that "Brexit has raised fundamental questions around the wisdom and the sustainability of the partition of our island".

Uncertainty over the day after Brexit creates what Shiels called "a moment of danger for the union of the United Kingdom".

"The danger of a no-deal is that people in Scotland and in Ireland jump to support independence -- or in the case of Northern Ireland unification -- and that weakens the union," The UK in a Changing Europe director Anand Menon agreed.

Yet analysts also caution against overstating the case for the island kingdom's break-up.

Pitfalls include potential resistance in Dublin to having to fill the North's annual budget gap of around £10 billion ($12 billion, 11 billion euros).

Shiels added that no-deal chaos would create "an issue of crisis management and there may not be an appetite in Scotland or anywhere else in the UK in those circumstances" for a split from London. - AFP

source https://www.thesundaily.my/business/disunited-kingdom-hard-brexit-threat-tests-historic-ties-YF1205980

Trump hits China with more tariffs, says Xi moving too slowly on trade

WASHINGTON: U.S. President Donald Trump vowed to impose a 10% tariff on $300 billion of Chinese imports from Sept. 1, sharply raising the stakes in a bruising trade war with China and jolting global financial markets.

The announcement on Thursday extends Trump's trade tariffs to nearly all China's imports into the United States and marks an abrupt end to a temporary truce in a trade row that has hurt world growth and disrupted global supply chains.

Trump also threatened to raise tariffs further if China's President Xi Jinping fails to move more quickly to strike a trade deal.

"I think President Xi ... wants to make a deal, but frankly, he's not going fast enough," Trump said.

Trump made the announcement in a series of Twitter posts after his top trade negotiators briefed him on a lack of progress in U.S.-China talks in Shanghai this week.

Trump later said if trade negotiations fail to progress he could raise tariffs further - even beyond the 25 percent levy he has already imposed on $250 billion of imports from China.

The news hit U.S. financial markets hard. On Friday, Asian stocks took a battering and the safe-haven yen jumped as investors rushed for cover.

Oil prices plummeted 7%, with Brent crude registering the biggest daily percentage drop since February 2016. The benchmark S&P 500, which had been in solidly positive territory on Thursday afternoon, closed down 0.9%. Benchmark U.S. Treasury yields also fell.

Retail associations predicted a spike in consumer prices. Target Corp tumbled 4.2%, Macy's Inc fell 6% and Nordstrom Inc was down 6.2%. Asked about the impact on financial markets, Trump told reporters: "I'm not concerned about that at all."

Moody's said the new tariffs would weigh on the global economy at a time when growth is already slowing in the United States, China and the euro zone.

The tariffs may also force the Federal Reserve to again cut interest rates to protect the U.S. economy from trade-policy risks, experts said.

Raising tariffs would lower the prospects of a deal rather than expedite it, China's Global Times newspaper said. Beijing would focus more on efforts to survive a prolonged trade war, Hu Xijin, editor-in-chief of the Communist Party-backed newspaper, said on Twitter.

"New tariffs will by no means bring closer a deal that the U.S. wants; it will only make it further away," Hu said.

CHINESE RETALIATION?

Possible retaliatory measures by China could include tariffs, a ban on the export of rare earths and penalties against U.S. companies in China.

So far, Beijing has refrained from slapping tariffs on U.S. crude oil and big aircraft, after cumulatively imposing additional retaliatory tariffs of up to 25% on about $110 billion of U.S. goods since the trade war broke out last year.

China is also drafting a list of "unreliable entities" - foreign firms that have harmed Chinese interests. U.S. delivery giant FedEx is under investigation by China.

"China will deliver each retaliation methodically, and deliberately, one by one," ING economist Iris Pang wrote in a note.

"We believe China's strategy in this trade war escalation will be to slow down the pace of negotiation and tit-for-tat retaliation. This could lengthen the process of retaliation until the upcoming U.S. presidential election," Pang said.

FRUSTRATED

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin briefed Trump on their first face-to-face meeting with Chinese officials since Trump met Xi at the G20 summit at the end of June and agreed to a ceasefire in the trade war.

"When my people came home, they said, 'We're talking. We have another meeting in early September.' I said, 'That's fine, but until such time as there's a deal, we'll be taxing them," Trump told reporters.

A source familiar with the matter said Trump grew frustrated and composed the tweets shortly after Lighthizer and Mnuchin told him China made no significant movement on its position.

Previous negotiations collapsed in May, when U.S. officials accused China of backing away from earlier commitments.

American business groups in China expressed disquiet over the latest round of U.S. tariffs. The U.S.-China Business Council said on Friday it was concerned the action "will drive the Chinese from the negotiating table, reducing hope raised by a second round of talks that ended this week in Shanghai."

"We are particularly concerned about increased regulatory scrutiny, delays in licenses and approvals, and discrimination against U.S. companies in government procurement tenders," said the U.S.-China Business Council's President Craig Allen in an e-mail.

Ker Gibbs, the president of the American Chamber of Commerce in Shanghai, urged both sides to keep talking.

Gibbs said that as market access in China "remains unnecessarily restricted," the United States should continue its dialogue with Beijing, and "also work with like-minded countries to persuade China that fair and reciprocal trade and investment benefits all."

CROPS AND DRUGS

Trump said Beijing had failed to stop sales of the synthetic opioid fentanyl to the United States, as it had promised to do. He also said Beijing had not fulfilled a goodwill pledge to buy more U.S. agricultural products.

Trump has failed to make good on a goodwill gesture he said he would make after the G20 meeting to relax restrictions on sales to Chinese telecommunications giant Huawei.

Trump had been pressing Xi to crack down on a flood of fentanyl and fentanyl-related substances from China, which U.S. officials say is the main source of a drug blamed for most of more than 28,000 synthetic opioid-related overdose deaths in the United States in 2017.

China had pledged that from May 1 it would expand the list of narcotics subject to state control to include the more than 1,400 known fentanyl analogues, which have a slightly different chemical makeup but are addictive and potentially deadly, as well as any new ones developed in the future.

The U.S. Department of Agriculture on Thursday confirmed a small private sale to China of 68,000 tonnes of soybeans in the week ended July 25.

It was the first sale to a private buyer since Beijing offered to exempt five crushers from the 25% import tariffs imposed more than a year ago. Soybean futures opened lower on Thursday as traders shrugged off the purchase because of the small volume involved, and losses accelerated after Trump's tweets.

RETAIL IMPACT

The new tariffs will jack up prices for consumers at the start of the back-to-school buying season, four large retail trade associations said on Thursday.

"President Trump is, in effect, using American families as a hostage in his trade war negotiations," said Matt Priest, president of the Footwear Distributors and Retailers of America.

Stephen Lamar, executive vice president of the American Apparel & Footwear Association, said his group's members were shocked that Trump had not allowed the resumed U.S.-China trade talks to proceed further before acting.

The measure will hit U.S. consumers far harder than Chinese manufacturers, who produce 42% of apparel and 69% of footwear purchased in the United States, Lamar said. - Reuters

source https://www.thesundaily.my/business/trump-hits-china-with-more-tariffs-says-xi-moving-too-slowly-on-trade-DF1205948

Ringgit opens lower against US dollar

KUALA LUMPUR: The ringgit opened lower against the US dollar in early session today as the greenback stayed firm on dovish Federal Reserve’s statement and the heightening concerns on protracted US-Sino trade disputes.

At 9am, the ringgit stood at 4.1500/1530 from Thursday’s 4.1440/1470.

Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said concerns about a new round of US-China trade war followed recent tweet from US President Donald Trump that he would levy an additional 10 per cent tariff on US$300 billion (RM1.2 trillion) worth of Chinese imports on Sept 1.

“This suggests that the ringgit would stay weak against the greenback. Risk-off mode should be prevalent as the imposition of the additional tariff rates on China would raise the business cost and potentially affect the global growth momentum,“ he told Bernama.

Overall, the ringgit was also traded lower against a basket of major currencies.

It was weaker against the Singapore dollar at 3.0184/0210 from 3.0134/0167 on Thursday and depreciated vis-a-vis the euro at 4.6015/6065 from 4.5741/5779.

The local currency fell against the yen 3.8734/8773 from 3.7984/8021 and slipped versus the British pound to 5.0327/0380 from 5.0126/0179 previously. — Bernama

source https://www.thesundaily.my/business/ringgit-opens-lower-against-us-dollar-DF1205731

Bursa Malaysia opens lower

KUALA LUMPUR: Share prices on Bursa Malaysia extended its downtrend to open lower this morning on weak global market sentiment and the dismal overnight performance of Wall Street.

At 9.11am, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) was down 12.50 points to 1,626.57 from Thursday’s close of 1,639.07.

The FBM KLCI opened 7.68 points weaker at 1,631.39.

There were 325 losers and 46 gainers, while 180 counters were unchanged, 1,346 untraded and 28 others suspended.

Turnover stood at 193.24 million units worth RM85.01 million.

A tweet by US President Donald Trump that he would impose an additional 10 per cent tariff on US$300 billion (RM1.2 trillion) in Chinese imports abruptly reversed early gains made by Wall Street and putting back concerns about a full-blown US-Sino trade war.

Malacca Securities Sdn Bhd said although there were prospects for recovery from oversold, the continuing weakness on Wall Street may keep the recovery in check over the near term.

“As it is, global markets are rocked again by the US’ move to impose new tariffs on China goods, that is unlikely to leave the local market unscathed.

“This is set to dampen sentiments again at the end of the week, albeit we think that the downside bias could be limited as the FBM KLCI is already oversold and may provide some cushion to the potential downside,” it said in a note today.

Back home, the stockbroking firm said there remain few noteworthy leads for market players to follow which could keep market players on the sideline.

“On the downside, supports are at the 1,635 and 1,626 levels. The resistances, meanwhile, are at 1,650 and 1,660 respectively.

“We also think that the rebound in the lower liners and broader market shares could stall as market sentiments turn warier with the fresh tariff threats. Therefore, we see the FBM Small Cap index returning to the dour side to end the week,” it added.

Among top losers, Nestle fell 80 sen to RM147.90, HLFG eased 32 sen to RM17.62, PPB dropped 30 sen to RM18.42 and Tenaga shed 28 sen to RM13.76.

Heavyweights counter Maybank was flat at RM8.69, PBBank declined 10 sen to RM21.72 and PChem was one sen lower to RM7.46.

Most active stocks, Bumi Armada and Sapura Energy each lost half-a-sen to 22.5 sen and 29 sen, while VSolar slipped one sen to 17 sen.

On the scoreboard, the FBM Emas Index fell 86.66 points to 11,528.41, the FBM Ace shed 30.03 points to 4,743.38, the FBM 70 edged down 104.47 points to 14,389.91, the FBMT 100 Index contracted 86.07 points to 11,350.21, and the FBM Emas Shariah Index shed 110.83 points to 11,937.83.

Sector-wise, the Plantation Index decreased 53.82 points to 6,669.12, the Financial Services Index gave up 64.98 points for 15,982.39 and the Industrial Products & Services Index declined 0.60 of-a-point to 154.65.

The physical price of gold as at 9.30am stood at RM186.19 per gramme, up RM5.12 from RM181.07 at 5pm yesterday. — Bernama

source https://www.thesundaily.my/business/bursa-malaysia-opens-lower-DF1205713

Ringgit closes lower on Fed rate cut

KUALA LUMPUR: The ringgit, unsurprisingly, closed lower against the US dollar today after the US Federal Reserve (Fed) eased its interest rate by 25 basis-point early Thursday, coupled with the US-China trade talks that ended without any definitive deal.

At 6pm, the ringgit lost 190 basis points to close at 4.1440/1470 from Wednesday’s close of 4.1250/1280.

Vanguard Markets Pte Ltd managing partner Stephen Innes said the fall in the local note was in line with other Asian currencies, as there had been an exit of carry trades due to the Fed’s hawkish rate cut.

“If we frame this with a less-than-convincing outcome from this week’s trade negotiations in Shanghai, it’s a double negative for the ringgit,“ he told Bernama.

It was reported that both US and Chinese trade negotiators planned to continue another round of trade negotiations in Washington in early September as the two-day meeting in Shanghai today ended without any significant breakthrough.

Other than that, Innes said, “With crude oil markets trending lower, it hasn’t been a great day for Asian currencies, the ringgit in particular.”

Benchmark Brent crude oil slid to US$64.40 (RM 266.78) per barrel as at 6.19pm today.

At the closing bell, the ringgit traded mostly higher against a basket of major currencies except for the Singapore dollar.

It rose against the yen to 3.7984/8021 from 3.7997/8029 on Wednesday, advanced against the euro to 4.5741/5779 from 4.5969/6019 and improved versus the pound to 5.0126/0179 from 5.0189/0242.

Vis-a-vis the Singapore dollar, the local unit was flat at 3.0134/0167 from 3.0134/0162 previously. — Bernama

source https://www.thesundaily.my/business/ringgit-closes-lower-on-fed-rate-cut-MX1202196

Bursa Malaysia bucks regional trend to end higher

KUALA LUMPUR: Bursa Malaysia bucked the regional trend to end higher today, thanks to buying support in the selected heavyweights, led by Tenaga and Press Metal despite weak global market sentiment.

The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) rose 4.2 points to finish at 1,639.07 from Wednesday’s close of 1,634.87, thus snapping its three-session losing streak.

Tenaga, which is enroute for internal restructuring, soared 22 sen to RM14.04 with 18.47 million shares changing hands, while Press Metal, which recently secured a long-term electricity supply contract from Sarawak Energy Bhd, chalked up 31 sen to RM4.86 with 16.58 million shares transacted.

Both stocks contributed a combine of 4.381 points to the rise in composite index.

On the broader market, there were 482 losers, 348 gainers, while 420 counters remained unchanged, 639 untraded and 28 others suspended.

Turnover rose to 2.45 billion units worth RM2.02 billion from Wednesday’s close of 2.75 billion units valued at RM2.75 billion.

Rakuten Trade Sdn Bhd vice-president of research Vincent Lau said Bursa Malaysia was weaker in the early trade, but managed to reverse the trend after bargain-hunting emerged during midday as investors accumulated low value stocks following the recent sell-off.

“Sentiment in the local market was still weak, reflecting to the higher losers than gainers. Some bargain-hunting in selected blue-chips did help the market bucked regional trend,” he told Bernama.

Resistance level is now located at 1,660, while support level stands at 1,630, he projected.

Another dealer said most Asian stocks were dragged further into the red following the slip in US stocks, as investors were disappointed that the US Federal Reserve cut interest rates to cushion the American economy from the effects of the trade war with China, but refrained from suggesting further rate cuts were on the way.

Meanwhile, the US and China wrapped up their trade talks in Shanghai without any deal despite negotiators from both economic powerhouses indicated the talks as “constructive”.

Among heavyweights, Maybank rose four sen to RM8.69, IHH Healthcare gained two sen to RM5.76, while CIMB was flat at RM5.08.

Public Bank lost eight sen to RM21.82 and Petronas Chemicals shed two sen to RM7.47.

As for the actives, Netx and KNM were flat at 1.5 sen and 40.5 sen, respectively, Priceworth inched up half-a-sen to seven sen, ARB added three sen to 47 sen, while Sapura Energy slipped half-a-sen to 29.5 sen.

Newly-listed in the ACE Market, Tashin slid 9.5 sen to 48.5 sen against its initial public offering price of 58 sen with 53.15 million shares changing hands.

The FBM Emas Index improved 22.4 points to 11,612.07, the FBMT 100 Index advanced 22.43 points to 11,436.28, the FBM Emas Shariah Index increased 45.72 points to 12,048.66, the FBM 70 added 0.03 point to 14,494.38, and the FBM Ace gained 5.65 points at 4,773.44.

Sector-wise, the Financial Services Index gave up 11.63 points to 16,047.37, the Plantation Index trimmed 10.34 points to 6,722.94, but the Industrial Products and Services Index edged up 0.93 point to 155.25.

Main Market volume reduced slightly to 1.52 billion shares worth RM1.83 billion versus 1.76 billion shares valued at RM2.60 billion on Wednesday.

Warrants turnover increased to 462.54 million units worth RM104.86 million from 413.01 million units valued at RM73.83 million.

Volume on the ACE Market decreased to 471.70 million shares worth RM84.90 million compared with 570.24 million shares valued at RM71.04 million previously.

Consumer products and services accounted for 222.42 million shares traded on the Main Market, industrial products and services (286.51 million), construction (130.81 million), technology (106.67 million), SPAC (nil), financial services (41.94 million), property (68.40 million), plantations (9.88 million), Reits (21.21 million), closed/fund (81,500), energy (252.85 million), healthcare (26.28 million), telecommunications and media (269.25 million), transportation and logistics (43.67 million), and utilities (37.48 million).

The physical price of gold as at 5.00pm stood at rm181.07 per gramme, down RM2.64 from RM183.71 at 5.00pm yesterday. — Bernama

source https://www.thesundaily.my/business/bursa-malaysia-bucks-regional-trend-to-end-higher-MX1202178