“The Aim Of The Two Korean Leaders To End War …..”

4th may 2018 for website

The Aim Of The Two Korean Leaders To End War

The leaders of the North and South Korea embraced after pledging to work for the denuclearisation of the Korean peninsula  in the first inter-Korean summit in more than a decade.  The two leaders announced they would work together with the United States and China this year, to declare an official end to the 1950s Korean War and seek an agreement on “permanent” and “solid” peace.  The declaration included promises to pursue phased arms reduction, cease hostile acts, transform their fortified border into a peace zone and seek multilateral talks with other countries and the US. Kim Jong Un the North Korean leader became the first North Korean leader since the 1950 -53 Korean War to set foot in South Korea after shaking hands with his counterpart over a concrete curb marking the border in the heavily fortified demilitarised zone.  This is a contrast over last year’s North Korean’s missile tests and its largest ever nuclear test that lead to international sanctions and fears of war.  The meeting comes weeks before Mr Kim is due to meet US President Trump in what would be the first ever meeting.

News From The European Commission

On Tuesday the European Commission said that  President Trump’s decision not to impose steel and aluminium tariffs on the EU for now prolonged business uncertainty and the EU should get a permanent exemption.  The White House on Monday announced that Trump had extended a temporary reprieve from the tariffs for the EU, Canada and Mexico until 1 June, just hours before they were due to come into force.  Trump also reached agreements for permanent exemptions for Argentina, Australia and Brazil.  The Commission that coordinates the trade policy of the 28 EU nations  although acknowledged Trump’s decision, said that the EU should be permanently exempted from the tariffs, since it was not the cause of overcapacity in steel and aluminium.

News From The ECB and The EU Commission

Consumer price growth unexpectedly weakened to 1.2 percent last month and the core rate excluding volatile items such as food was the lowest in more than a year at just 0.7 percent.  Both the ECB and the European Commission predict an upturn later this year.  There is however concern that the feeble data and the damage caused by the protectionism could have an impact on the spending of households and companies.  ECB chief economist Peter Praet said in his Paris speech, after the inflation report, that the intention is for the central bank to wait while it judges whether the slowdown is a short term or not.  He also noted that the euro-area economy has been expanding for five years, and that any slowdown needs to be judged against the exceptionally strong performance in 2017 when growth was the highest in a decade.  The European Commission has stuck to its optimistic outlook in its economic forecasts published on Thursday, when it kept its inflation predictions unchanged.  The Commission predicts the price growth averaging 1.5 percent this year and 1.6 percent in 2019.  After the report the euro dipped to $1.1965.  The single currency was already near a four-month low.

Euro-Area Growth

Euro-area economic growth slowed in the first quarter.  The 0.4 percent expansion was the weakest in six quarters and followed a reading of 0.7 percent at the end of 2017.  Although temporary factors such as bad weather played their role, another report showed manufacturing continued to cool this quarter.  There is also concern by some firms about the stronger euro.  The weakness could pose a challenge for the European Central Bank as it contemplates withdrawing from the stimulus measures.  A major concern is also the risk of a major trade war with the International Monetary Fund warning it could undermine global growth.  The factory report from IHS Markit showed that export growth softened in April.  Some are blaming the Euro’s increase of 10% against the dollar in the past year.

Politics in Italy

Politics in Italy have been at a deadlock since an inconclusive vote on 4 March.  This week the leader of Italy’s anti-establishment 5 star Movement called for an early election in June as the efforts to form a coalition government have failed.  However, the Italian President Sergio Mattarella, has ruled out the possibility of early elections in June preferring instead to have a new government in place to pass the 2019 Budget, according to a presidential palace source.  So far, four rounds of consultation, two by the President and two by parliamentary leaders have failed to gather any consensus for a new government.  The Budget has to go to Parliament in October and passed by the end of this year.

Brexit

Theresa May is facing a crisis after pro-Brexit ministers rejected her plea for a compromise solution, demanding a clean break from the European Union’s custom system.  She was outnumbered at a meeting of her inner Cabinet on Wednesday where ministers were unable to agree on either of the middle-of-the road customs options that May had proposed.  A senior official said that now she has a little as a week to get a compromise or face the choice between staying in Europe’s custom union or leave without a deal.  Either prospect could risk collapse of her government.

UK Services

The UK services sector which dominates the economy, grew at a slower-than-expected pace in April.  IHS Markit said that the Purchasing Manager’s Index for the industry saw only a modest rebound from the 20-month low posted in March, with the reading of 52.8, the second weakest since September 2016.  On Thursday, in a separate report, the European Commission forecasts that the UK will continue to lag growth in the euro area and the US for the next two years.

News From The Fed

Monday’s release of the central bank’s preferred gauge of inflation had hit its 2 percent target after a long period below that goal in almost every month since 2012.  It also said that the risks to the economic outlook appeared “roughly balanced” and said it expected inflation to run “near” its goal over the medium term. The Statement by the Fed included the two mentions of the “symmetric” nature of their inflation target, meaning that the bank is not going to panic about reaching its 2 percent target.   The Fed increased the benchmark rate three times last year and began to slowly reducing its balance sheet.  This time round interest rates were left unchanged as was expected in a two day meeting in Washington.

Currencies

The Dollar held near a four-month high against a basket of major currencies on Wednesday buoyed by the outlook for a strong US economy and rising yields amid signs of a slowdown elsewhere particularly in Europe.  The institute for Supply Management survey published on Tuesday showed US factory activity slowed in April, but it highlighted shortages of skilled workers and rising costs, suggesting inflationary pressure is building.  The British pound traded at $1.3612 afte having fallen to a four-month low of $1.3588 on Tuesday on soft UK manufacturing data.  It was the latest economic data that further reduced the chances of a rate increase from the Bank of England when it meets next week.  The euro hovered around the $1.2005 which was its lowest since mid-January.

Sainsbury confirms plans to merge with Asda

Sainsbury has agreed to buy Walmart’s Asda for about £7.3 billion to create the biggest supermarket in Britain by market share, overtaking Tesco the long-standing leader.  The deal consists of cash and shares and provides a potential exit route for Walmart as Asda, which it bought in 1999 for £ 6.7 billion has been struggling to grow as Aldi and Lidl attract price conscious consumers.   According to Sainsbury’s the combination would generate at least £500 million and will enable prices to be lowered by about 10 percent on many products.  The deal faces significant regulatory hurdles and the British Competition and Markets Authority said it will likely review it.  Walmart will receive £3 billion in cash and a 42 per cent stake in the combined business equity.  Asda was valued at about £7.3 billion on a debt free basis.  Sainsbury shares jumped as much as 21 per cent to 327.1 pence, which is their highest since July 2014 while shares in rivals Tesco and Morrisons fell.

Apple Inc.

The company reported resilient iphone sales in the face of declining global demand and promised $100 billion in additional stock buybacks.  Apple planned to increase its dividend by 16 percent compared to a 10.5 percent increase last year.   Apple posted $61.1 billion in revenue for the March quarter up from $52.9 billion last year.  Traditionally apple updates its share buyback and dividend program each spring and the $ 100 billion it added this year compares with an increase of $ 50 billion last year.  In February, Apple said it planned to draw down its excess cash, although Cook had downplayed the possibility of a special dividend.  Investors, however have certain concerns around Apple because of any trade tensions with China.  Sales in Greater China rose 21 percent from a year earlier.  So far there has been no tariff on devices such as Apple Iphone, however Tim Cook has travelled to Washington to discuss trade matters with President Donald Trump.  Apple in recent months has been emphasizing its contributions to the US Economy outlining a $30 billion US spending plan and highlighting the tens of billions of dollars its spends each year with US-based suppliers.  Furthermore the company has been emphasising the size of its overall user base.

Oil

Oil is heading to its second monthly gain this year as concerns over the disruption of Iranian supplies and the success of OPEC in clearing a global crude surplus is bolstering prices.    Iran a member of OPEC has re-emerged in January 2016 as a major oil exporter when international sanctions against Tehran were lifted in return for curbs on Iran’s nuclear programme.   Iran’s oil exports hit 2.6 million barrels per day in April, according to oil Ministry news agency SHANA which is a record since the lifting of the sanctions.  The US, has however expressed doubts over Iran’s sincerity in implementing these curbs and President Donald Trump has threatened to re-impose sanctions.  May 12 is the deadline for President Donald Trump to decide on whether to extend support for the Iran nuclear deal.  Over the weekend French President Emmanuel Macron and Iranian President Rouhani agreed over a phone call during the weekend, to work and protect the content of the current deal.  Meanwhile, Israeli Prime Minister Benjamin Netanyahu said Iran had a secret plan to build nuclear weapons.  The announcement comes less than weeks before US President Donald Trump is about to take the decision about the deal and reimpose santions against OPEC’s third biggest oil producer.  Brent crude, the international benchmark traded in London at a level not seen since late 2014.

 

Antonella Mercieca

Client Relationship Manager

Source:

Reuters, Bloomberg

Date:

May 4th, 2018


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