Financial Times


Thursday, May 24, 2018

Asia share markets hit by U.S. auto tariff threat, dollar pulls back

© Reuters. An investor sits in front of an electronic board showing stock information at a brokerage house in Nanjing
By Andrew Galbraith
SHANGHAI (Reuters) - Asian shares fell on Thursday after the U.S. government launched a national security probe into auto imports that could lead to new tariffs, and President Donald Trump's comments indicated fresh setbacks in U.S.-China trade talks.
MSCI's broadest index of Asia-Pacific shares outside Japan was 0.1 percent higher, but Japan's Nikkei stock index fell 1.2 percent as auto shares slumped. South Korea's KOSPI lost 0.3 percent.
A broad MSCI index of automobile and auto components firms was down 0.9 percent. Tokyo's SE TOPIX transportation equipment index was 2.6 percent lower.
The U.S. Commerce Department said on Wednesday that it would launch a national security investigation into car and truck imports under Section 232 of the Trade Expansion Act of 1962, a move that could lead to tariffs like those imposed on steel and aluminum in March.
Adding to market jitters, Trump on Wednesday called for "a different structure" in any trade deal with China, fuelling uncertainty over the negotiations.
On Thursday, China's Commerce Ministry said it had not pledged to cut China's trade surplus with the U.S. by a certain figure, and that it hopes the U.S. implements measures promised during trade negotiations as soon as possible.
China's blue chip CSI 300 index was 0.1 percent lower.
Prompting further uncertainty, Trump on Wednesday cast doubt on plans for an unprecedented summit with North Korean leader Kim Jong Un, saying he would know next week whether the meeting would take place.
"There's a lot of noise around Donald Trump, China-U.S. trade, the auto imports now, and then the Korean summit, and all these things are just weighing on investors at the moment," said Shane Oliver, chief economist & head of investment strategy, AMP Capital, Sydney.
"I think we probably would have seen a decent day in Asian markets were it not for these ongoing geopolitical worries because the minutes from the Fed's last meeting were relatively benign."
While the minutes from the Federal Reserve's May 1-2 meeting indicated that policymakers expect another interest rate increase would be warranted "soon" if the U.S. economic outlook remains intact, they helped to ease market concerns that the Fed would accelerate the pace of interest rate increases.
The two-year Treasury note yield, which rises with traders' expectations of higher Fed fund rates, was at 2.5121 percent after touching 2.5970 on Wednesday.
The yield on benchmark 10-year Treasury notes fell back below the 3-percent threshold to 2.9825 percent, compared with its U.S. close of 3.003 percent on Wednesday.
Analysts said that market uncertainty was prompting a clear flight to safety across financial markets.
The dollar was down 0.6 percent against the yen to 109.44.
"With Trump's unpredictable behavior leaving investors on edge, the Japanese yen has scope to appreciate further in the short term," said Lukman Otunuga, an analyst at FXTM. "However, a strengthening dollar on the back of heightened U.S. rate hike expectations could limit the yen's upside gains."
The euro was up 0.1 percent on the day at $1.1709. The dollar index, which tracks the greenback against a basket of six major rivals, was 0.2 percent lower at 93.839.
Concerns over trade, talks and tariffs overpowered indications of strong economic performance in two of the region's major economies.
Confidence among Japanese manufacturers saw its first rise in fourth months, and service-sector sentiment rose to a record high in the latest Reuters Tankan poll, underscoring expectations that the Japanese economy will return to growth in the second quarter.
In South Korea, Finance Minister Kim Dong-yeon said the economy is on track for annual growth of 3 percent despite concerning indicators such as high youth unemployment.
The Bank of Korea held interest rates steady for a sixth straight month on Thursday, with inflation seen remaining below target and amid concerns a U.S.-China trade war would hurt regional economies.
In commodities markets, U.S. crude was down 0.2 percent at $71.68 a barrel. Oil prices fell on Wednesday after an unexpected rise in U.S. crude and gasoline inventories.
Brent futures were 0.3 percent lower at $79.53 a barrel, continuing to move lower after rising above $80 for the first time since November 2014 last week.
The most-traded iron ore futures on the Dalian Commodity Exchange rose for the first time in six sessions on Thursday, gaining 0.3 percent.
Weak commodity prices continued to put pressure on Australian shares, which were 0.2 percent lower, extending losses into a sixth consecutive session. New Zealand's benchmark S&P/NZX 50 index was 0.7 percent higher.
Gold was slightly higher. Spot gold was traded at $1,294.11 per ounce. [GOL/]

Shareholders are betting on the comeback of Destination Maternity

Shareholders at Gullane Capital Partners are betting on a comeback for maternity apparel retailer Destination Maternity.
While it hasn't been exactly rosy for the company — with sales weighed down by challenges so far, and a slow entry into e-commerce, Trip Miller, managing partner of Gullane Capital Partners, believes that things are looking up.
"There's just a myriad of opportunities here to generate value," Trip Miller, managing partner of Gullane Capital Partners told CNBC. His firm owns 3.4 percent of the company's outstanding shares.
"More importantly, we see a business, over the next year or two, that could rapidly turn around produce profits of a dollar or maybe even $2 per share, again roughly on just under $3 per share base here," Miller said on "Closing Bell" Wednesday.
Destination Maternity has a market cap of just $43 million, while stock prices have declined 75 percent over three years, or 90 percent since 2011.
"I think that points to the value destruction that's gone on by the past management and the past board of this company," Miller said. 
Management changes, reduced mall traffic and changes in the retail industry have all contributed to the company's diminished sales. The maternity apparel company has also been slow to enter the e-commerce market, manage its inventory and sales, general and administrative expenses have been "exceptionally high," Miller said.
"The biggest thing that went awry was just their strategy on cost-control," Miller said.
Destination Maternity would not respond to a request for comment.
But Miller said the company's "online piece is growing very rapidly right now. We see opportunity for them to consolidate three brands."
The company, which is parent to A Pea in the Pod and Motherhood Maternity, made headlines Wednesday over a proxy battle to determine whether prior board experience should preclude women from obtaining future board seats. In the company's 25-year history there have been only three female directors.
Shareholders, including Gullane Capital Partners, voted in favor of the female-dominated board. Shares fell 2.5 percent after Wednesday's vote. But Miller is optimistic.
"This is a company run for women and it needs to be run by women," he said. "So we're very excited to see three new female board members."
"Change was inevitable here, we believe," Miller said.

Tuesday, May 22, 2018

Top 5 Things To Know In The Market On Tuesday

© Reuters.  Top 5 things to know today in financial markets - Here are the top five things you need to know in financial markets on Tuesday, May 22:
1. China To Cut Tariffs On Cars, Auto Parts
In another promising sign of warming trade relations between the world's two largest economies, China said it will cut import tariffs for automobiles and some car parts, effective July 1.
Tariffs for qualifying vehicles would be lowered to 15% from either 20% or 25% currently, the finance ministry said Tuesday, while import tariffs for auto parts would be cut to 6%.
Meanwhile, the U.S. and China have agreed on the broad outline of a deal to settle the controversy over Chinese telecom giant ZTE (HK:0763), according to people with knowledge of the matter in both countries, as the two sides work toward an agreement to ease trade tensions.
The news comes after Washington and Beijing stepped back from the brink of a global trade war and agreed to hold further negotiations to boost U.S. exports to China.
2. Dow Futures Point To More Gains After Monday's Rally
U.S. stock futures pointed higher, indicating the Dow could build on the previous session's strong gains, as trade tensions between the U.S. and China dissipated for the moment.
At 5:50AM ET, the blue-chip Dow futures rose around 50 points, or about 0.2%, the S&P 500 futures tacked on 5 points, or nearly 0.2%, while the tech-heavy Nasdaq 100 futures indicated a gain of 24 points, or roughly 0.3%.
U.S. stocks rose sharply on Monday, as gains in industrials helped propel the Dow above the 25,000 threshold Monday for the first time since March.
Elsewhere, in Europe, the continent's major bourses moved cautiously higher in mid-morning trade, with Italy leading the advancers as political tension there eased for now.
Earlier, in Asia, markets in the region stumbled as a strong dollar appeared to sap demand from emerging market assets.
3. More Retailers Set To Report Earnings
Reports from Kohl’s (NYSE:KSS) and TJ Maxx parent company TJX (NYSE:TJX) due ahead of Tuesday's opening bell will be closely tracked by investors as the earnings season continues to wind down.
Besides the two retailers, investors will have a fairly busy earnings schedule with AutoZone (NYSE:AZO), Toll Brothers (NYSE:TOL), Intuit (NASDAQ:INTU), and Hewlett Packard Enterprise (NYSE:HPE) all set to report results.
4. Dollar Slips From 5-Month Highs
The dollar traded below a five-month high against a basket of currencies, catching its breath after a broad rally inspired by rising U.S. bond yields.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was down 0.2% at 93.28, down from a five-month high of 93.97 set on Monday.
Meanwhile, the U.S. 10-year Treasury yield stood at around 3.07% in early action, after scaling a seven-year peak of 3.128% last week.
The economic calendar will be nearly empty Tuesday, with only the Richmond Fed’s regional manufacturing survey set for release.
5. Oil Rises Back Towards $80
Oil prices rose back towards $80 a barrel, supported by concern that falling Venezuelan crude output and a potential drop in Iranian exports could further tighten global supply.
Brent crude, the global benchmark, rose 30 cents to $79.52 a barrel. Last week, it topped $80 for the first time since November 2014.
U.S. crude was up 21 cents at $72.56, having earlier traded at $72.72, its highest since November 2014.
The American Petroleum Institute is due to release its weekly inventory report at 4:30PM ET and it is expected to show an oil-stock decline of 2.8 million barrels, which would be a third straight weekly fall.

Stock futures rise as U.S.-China trade talks advance

 © Reuters. FILE PHOTO: Traders work on the floor of the NYSE in New York
By Medha Singh
(Reuters) - U.S. stock index futures rose on Tuesday on signs of further progress in trade talks between the United States and China as the world's two largest economies pull back from the brink of a full-blown trade war.
Washington neared a deal to lift its ban on U.S. firms supplying Chinese telecoms gear maker ZTE (HK:0763) Corp (SZ:000063), sources said on Tuesday, and Beijing said it will steeply cut import tariffs for automobiles and car parts.
Shares of Ford (N:F), General Motors (N:GM), Tesla (O:TSLA), as well as the U.S.-listed shares of Ferrari (N:RACE) and Fiat (N:FCAU), were up between 0.8 percent and 2.4 percent in premarket trading.
The stock market has generally been volatile this year on a combination of factors including the fear of higher inflation spurring faster U.S. interest rate hikes and worries over a global trade war.
While investors may be relieved over the easing trade tensions, many U.S. government and industry officials view President Donald Trump is backing off from his tough stance against what they see as China's unfair trade and market access practices.
At 7:26 a.m. ET, Dow e-minis (1YMc1) were up 55 points, or 0.22 percent. S&P 500 e-minis (ESc1) were up 5 points, or 0.18 percent and Nasdaq 100 e-minis (NQc1) were up 26.5 points, or 0.38 percent.
Micron (O:MU), which raised its quarterly forecast and led the chipmakers higher on Monday, jumped 5.3 percent after announcing a $10 billion share buyback.
Facebook (O:FB) edged up 0.3 percent ahead of Chief Executive Mark Zuckerberg's defense of the company's data practices to European lawmakers in Brussels. The testimony starts at 12:15 p.m. ET and comes three days before tough new European Union rules on data protection take effect.
The possibility of a ZTE reprieve boosted shares of optical component makers. Acacia Communications (O:ACIA), which got 30 percent of its 2017 revenue from ZTE, rose 4.6 percent, while Oclaro (O:OCLR) gained 1.4 percent.


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