Month: April 2019

The U.S. Trade Representative said on Thursday it has added Pinduoduo.com, China’s third-largest e-commerce platform, to its “notorious markets” list for a proliferation of counterfeit products, as the agency also called out China as a priority to watch for intellectual property rights concerns.

In its annual review of trading partners’ protection of intellectual properties rights and so-called “notorious markets,” the U.S. Trade Representative said 36 countries warranted additional bilateral engagement over these issues. The agency kept China on the list and lifted Saudi Arabia up as a priority.

The release of the report comes as the United States and China are embroiled in negotiations to end a tit-for-tat tariff battle that has roiled supply chains and cost both countries billions. The two countries are due to resume talks in Beijing next week.

USTR also kept Alibaba Group’s taobao.com on the “notorious” list, even though the parent company has “taken some steps” to curb the offer and sale of copyright infringing products, according to the report.

The agency bumped Saudi Arabia up to priority in part due to an illicit service for pirated content called BeoutQ, the report said.

Despite “extensive engagement” in Saudi Arabia by both U.S. government and private stakeholders, treatment of intellectual property rights “continued to deteriorate,” USTR said.

 
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Brent oil rose above $75 per barrel on Thursday for the first time this year as quality concerns forced the suspension of some Russian crude exports to Europe while the United States prepared to tighten sanctions on Iran.

Brent crude futures were at $75.24 by 1156 GMT, up 67 cents. They earlier hit a session high of $75.60, their strongest since Oct. 31.

U.S. West Texas Intermediate crude was at $66.14 per barrel, up 25 cents.

Poland and Germany have suspended imports of Russian crude via the Druzhba pipeline, citing poor quality. Trading sources said the Czech Republic had also halted purchases.

The pipeline can ship up to 1 million barrels per day, or 1 percent of global crude demand, with around 700,000 bpd of flows suspended, according to trading sources and Reuters calculations.

U.S. attempts to drive Iranian oil exports down to zero also boosted prices.

The United States this week said it would end all exemptions for sanctions against Iran, OPEC’s third-largest producer, demanding countries halt oil imports from Tehran from May or face punitive action from Washington.

The U.S. decision comes amid supply cuts led by the Organization of the Petroleum Exporting Countries since the start of the year aimed at propping up prices.

Still, Brian Hook, U.S. special representative for Iran and senior policy adviser to the secretary of state, said on Thursday “there is plenty of supply in the market to ease that transition and maintain stable prices.”

Consultancy Rystad Energy said Saudi Arabia and its main allies could replace lost Iranian oil.

“Saudi Arabia and several of its allies have more replacement barrels than what would be lost from Iranian exports,” said Rystad’s head of oil research, Bjoernar Tonhaugen.

“Since October 2018, Saudi Arabia, Russia, the UAE, and Iraq have cut 1.3 million bpd, which is more than enough to compensate for the additional loss,” he added.

On the supply side, U.S. crude production has risen by more than 2 million bpd since early 2018 to a record of 12.2 million bpd currently, making the United States the world’s biggest oil producer ahead of Russia and Saudi Arabia.

In part because of soaring domestic production, U.S. commercial crude inventories last week soared to 460.63 million barrels, their highest since October 2017, the Energy Information Administration said on Wednesday.

 

 

 

 
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South Korea’s economy unexpectedly shrank in the first quarter, marking its worst performance since the global financial crisis, as government spending failed to keep up the previous quarter’s strong pace and as companies slashed investment. 

The shock contraction reinforced financial market views that the central bank is likely to make a U-turn on policy, shifting to an easing stance and possibly cutting interest rates to counter declining business confidence and growing external risks.

A worse-than-expected downturn in the memory chips sector hit first quarter capital investment, while slumping exports amid the Sino-U.S. trade dispute erased gains from private consumption, the Bank of Korea said Thursday.

Gross domestic product (GDP) in the first quarter declined a seasonally adjusted 0.3 percent from the previous quarter, the worst contraction since a 3.3 percent drop in late 2008 and sliding from 1 percent growth in October-December, the Bank of Korea said Thursday.

None of the economists surveyed in a Reuters poll had expected growth to contract. The median forecast was for a rise of 0.3 percent.

Government spending

“Government spending failed to keep up the bumper boost of the fourth quarter, especially for construction investment, while a drop in business investment was worse than expected due to a downturn in the chips sector,” a BOK official said, adding there was also a strong base effect after solid fourth-quarter growth.

The grim data came a day after the Moon Jae-in government unveiled a 6.7 trillion won ($5.9 billion) supplementary budget to tackle unprecedented air pollution levels and boost weak exports.

Capital investment tumbled 10.8 percent, the worst reading since 1998, while construction investment inched down 0.1 percent, the BOK said.

Exports fall

Exports fell 2.6 percent quarter-on-quarter, a sharper drop than the 1.5 percent decline in the previous three months.

Private consumption gained by 0.1 percent because of a rise in demands for durable goods.

From a year earlier, Asia’s fourth-largest economy grew 1.8 percent in the January-March quarter, compared with 2.5 percent growth in the poll and 3.1 percent in the final quarter of 2018.
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Facebook on Wednesday blew away Wall Street profit estimates in the first quarter as it kept a lid on the costs of making its social networks safer, and set aside $3 billion to cover a settlement with U.S. regulators, calming investors who had worried about the outcome of a months-long federal probe.

Shares of the world’s biggest online social network jumped more than 10% after hours.

The U.S. Federal Trade Commission has been investigating revelations that Facebook inappropriately shared information belonging to 87 million of its users with the now-defunct British political consulting firm Cambridge Analytica.

The probe has focused on whether the sharing of data and other disputes violated a 2011 agreement with the FTC to safeguard user privacy. Facebook set aside $3 billion to cover anticipated costs associated with the settlement, but said the charges could reach as high as $5 billion.

Civil penalty

If the settlement is in that range, it would be the largest civil penalty paid to the agency, said David Vladeck, a former FTC official now at Georgetown Law School.

“Everyone expected there would be a substantial civil penalty in this case,” said Vladeck. “There’s no question that Facebook is going to have to settle this matter. Investors want this behind them.”

The accrual cut the company’s net income in the first quarter to $2.43 billion, or $0.85 per share.

Excluding the $3 billion it set aside, Facebook would have earned $1.89 a share, up from $1.69 the year prior and easily beating analysts’ average estimate of $1.63 per share, according to IBES data from Refinitiv.

Total first-quarter revenue rose 26% to $14.9 billion from $12.0 billion last year, compared to analysts’ average estimate of $15.0 billion.

Shares rise 

Shares of Facebook rose 10% to $200.50 in after-hours trade, demonstrating the company’s resilience despite a series of scandals over improperly shared user data and propaganda that made it the target of political scrutiny across the globe.

The company’s shares lost a third of their value last year, after executives first warned about costs associated with its drive to improve safety and slowing growth in revenue and operating margin.

Total expenses in the first quarter were $11.8 billion, up 80% compared with a year ago. The operating margin fell to 22% from 46% a year ago, but would have been 42%  without the one-time expense.

“This is a strong report suggesting that advertisers still see value in Facebook’s platform, as they did before the controversies and scandals erupted,” said Haris Anwar, senior analyst at financial markets platform Investing.com.

Expenses will grow

Executives have forecast that expenses will grow 40% to 50%  in 2019, but say they expect the downward trend to taper off after this year as revenue from new ways of pushing ads and facilitating transactions offset the security spending.

Monthly and daily users of the main Facebook app compared to last quarter were both up 8% to 2.38 billion and 1.56 billion, respectively.

Estimates were for 2.4 billion monthly users and 1.6 billion daily users, according to Refinitiv averages.

 

 
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Stephen Moore, the economic commentator that U.S. President Donald Trump has said he will nominate to the Federal Reserve Board, is drawing new fire from top Democrats for his comments denigrating, among other targets, women and the Midwest.

But Republicans, whose 53 to 47 majority in the U.S. Senate gives them the final say on whether Moore’s pending nomination is confirmed, have not weighed in since news surfaced this week documenting Moore’s long history of sexist remarks, some of which he says were made jokingly.

As a Fed governor, Moore would have a say on setting interest rates for the world’s biggest economy. Some economists and Democratic lawmakers have questioned his competence, citing his support for tying policy decisions to commodity prices and his fluctuating views on rates. This week though, it is his comments about gender and geography that are drawing criticism.

“What are the implications of a society in which women earn more than men? We don’t really know, but it could be disruptive to family stability,” Moore wrote in one column in 2014.

In 2000, he opined that “women tennis pros don’t really want equal pay for equal work. They want equal pay for inferior work.” The New York Times among others has documented many other instances where he expressed similar viewpoints.

It’s just added evidence that Moore is unfit for the Fed job, vice chair of the joint economic committee Carolyn Maloney told Reuters.

“Those include his reckless tendency to politicize the Fed as well as his bizarre and sexist comments about women in sports that came to light this week,” she said.

Republicans, she said, “should also take note that Moore has said capitalism is more important than democracy. That’s a dangerous comment that further confirms my belief that Moore shouldn’t be allowed on the Fed Board.”

Maloney earlier this month sent a letter urging Republican Senator Mike Crapo and Democratic Senator Sherrod Brown to oppose Moore’s nomination. Crapo and Brown are the chair and vice chair, respectively, of the Senate banking committee, which would be Moore’s first stop in any confirmation hearings.

Senators Elizabeth Warren and Charles Schumer, both Democrats, have also publicly criticized Moore as well as businessman Herman Cain, who withdrew his name from consideration for the Fed this week amid mounting objections.

Cain said he stopped the process because he realized the job would mean a pay cut and would prevent him from pursuing his current business and speaking gigs.

The Senate banking panel’s 13 Republican members, contacted by Reuters about their views on Moore’s suitability for the Fed role after his derisive commentary about women came to light, all either did not respond or declined to comment.

But Brown on Wednesday blasted Moore for comments he made in 2014 calling cities in the Midwest, including Cincinnati, the “armpits of America.” Brown demanded an apology.

“It would be your job to carefully consider monetary and regulatory policies that support communities throughout the country” even those you apparently consider beneath you,” Brown wrote in a letter to Moore. “Based on your bias against communities across the heartland of our country, it’s clear that you lack the judgment to make important decisions in their best interest.”

 
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Boeing reported lower first-quarter profits Wednesday as the global grounding of its 737 MAX plane following two crashes hit results.

The US aerospace giant reported $2.1 billion in profits, down 13.2 percent from same period a year ago.

Revenues dipped 2.0 percent to $22.9 billion, due to a tumble in commercial plane revenues following the suspension of 737 MAX deliveries.

Boeing also withdrew its full-year profit forecast, citing uncertainty surrounding the 737 MAX.

The aerospace giant has been under scrutiny since the March 10 crash of an Ethiopian Airlines jet, which came on the heels of an October Lion Air crash. Together the crashes claimed 346 lives.

Boeing said it is “making steady progress” on a fix to the jet’s anti-stall system that is thought to be a factor in both accidents.

The company has conducted more than 135 test flights of the fix and is working with global regulators and airlines, it said in a news release.

“Across the company, we are focused on safety, returning the 737 MAX to service, and earning and re-earning the trust and confidence of customers, regulators and the flying public,” said Chief Executive Dennis Muilenburg in a press release.

The company announced earlier this month it was cutting monthly production of the 737 by about 20 percent.

Boeing shares were up 1.3 percent at $379.07 in pre-market trading.
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Vietnam this week just celebrated the fact it has survived nearly a millennium of independence from China, which previously ruled the smaller neighbor for nearly as long. Much is made of the ancient rivalry between the two sides — but there is far less attention, especially on the international stage, on areas where they both get along fairly well.

The textile and garment sector is as good an example as any of this amicable cooperation, given that China is the world’s biggest exporter in the industry, and Vietnam is the second biggest. Analysts often describe Hanoi as taking a path similar to Beijing’s, both having communist leaders who turned toward export-led market capitalism in recent decades, and in terms of selling ever more footwear, clothes and bags to the world, Vietnam is indeed following China’s actions.

“China and Vietnam hold a pivotal position in the global textile market,” Chen Dapeng, president of the China National Garment Association, said at a trade conference in Ho Chi Minh City this month. “The industries of the two countries are highly complementary.”

The industries compete for customers, but they are also complementary in that Chinese factories supply much of the fabric and other inputs needed in the business, while Vietnamese factory hands are increasingly supplying the labor as costs rise in China.

“We believe many in Asia can cooperate,” said Le Tien Truong, CEO of the Vietnam National Textile and Garment Group. “We are not just taking Chinese investment, but also reforming Vietnamese suppliers.”

He and others in Vietnam speak of domestic reform because the country does not have as large and complex a network of textile suppliers and processors as in China. That is one reason the smaller country relies on the larger one as its biggest source of imported goods overall. No matter the geopolitical problems at the top, the reality is that textile firms on both sides of the border work together to turn a profit. 

On one hand, amid the trade war between the United States and China, the latter competitor has lost some of its business to Vietnam. On the other hand, it is not just foreign third parties moving factories from China to Vietnam, but also Chinese investors themselves, who deem it beneficial to relocate some of their supply chain to the south.

This month a large contingent of Chinese textile companies went scouting for Vietnamese partners in the industrial parks just outside Ho Chi Minh City.

This global shift in interest toward Vietnam has helped it to catch up to China, which is still the export leader in shoes and garments.

“We congratulate Vietnam for that big effort,” said Sun Rui Zhe, president of the China National Textile and Apparel Council.

He noted his country looks to support that effort as part of its Belt and Road Initiative, which gives loans and grants to dozens of countries, mostly for infrastructure, but also private industry, including textiles. Beijing has already financed dozens of projects in Vietnam, from coal power to ship yards to fertilizer plants.

“China has done our best to improve our relations all over the world,” Sun said.
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