“Trump’s Visit to Asia…..”

Trump’s Visit to Asia

Trump is on an eleven day trip in Asia where this week he visited Japan, South Korea and China.    On his first stop he warned the nations against challenging the US and said he will push for freedom in the region and for fair trade in his meetings with other leaders.  In Japan, Trump urged Prime Minister Shinzo Abe to purchase US military equipment to create jobs in America.  He further added that Japan had an unfair advantage on trade and he even called for a reduction in the trade gap between the two countries.   Currently the US trade deficit with Japan amounts to $69 billion which is the second largest and arises from American imports of cars and electronics.  On his stop to Japan no major deals or policies were announced. From his end Abe focused on praising Trump for his commitment to the defence alliance while deflecting questions on trade ties.  After Japan, Trump spent two days in South Korea focusing on a trade deal with the country that according to Trump hurts US workers.  Trump has called on North Korea to “come to the table” and forge a deal on its missile and nuclear programs.  After South Korea, Trump visited China.  It happened to be one year after the anniversary of the US election during which he campaigned strongly against the export practices in China.  On his visit to China, he is looking into winning concessions on trade and the country’s stance on North Korea.  Trump said that all responsible nations must join forces to deny Kim’s regime of any support, supply or acceptance.  Rallying the world to stand up to the threats of North Korea is the main goal of Trump’s visit to Asia.  On Wednesday Trump said that he’s ready to offer North Korea “a path to a much better future” if it puts an end to aggression, stops development of ballistic missiles and undergoes “complete, verifiable and total denuclearization”.  In a speech alongside President Xi Jinping, Donald Trump said that China had taken advantage of America with unfair trade practices.  On his part the Chinese leader reiterated his government’s commitment to opening up the economy.  The White House expects to announce $250 billion in business deals in China this week according to an administration official.  Many of the deals are expected to be in the form of nonbinding memorandum of understanding, rather than contracts.

US – Tax Bill

On Monday 6^th November the House tax writing committee started a debate on the GOP’s proposed overhaul.  It kicks off four days of lobbying and lawmakers are to revise a bill that represents the final hope for President Trump to seal a legislative achievement this year.  The focus is on the importance of reaching deals on provisions such as ending most of the individual deductions for state and local taxes.  Another plan is to reduce the cap on the mortgage-interest deduction to $500,000 and to create  tough rules for which partnerships, limited liability companies and other pass-through businesses would qualify for a major rate cut.

UK Government

The UK government is facing new turmoil in the midst of Brexit talks.  Prime Minister Theresa May ordered her international development secretary Priti Patel to abandon a visit to Africa and return home immediately. Patel, won a seat in Parliament in 2010 and became a junior Treasury minister four years later.  She joined the cabinet as development secretary when May succeeded David Cameron after the Brexit referendum.   Patel has admitted to holding a series of unauthorised meetings with Israel officials behind the prime minister’s back.  Patel resigned and is the second minister to depart May’s cabinet in a week after the Defence Secretary Michael Fallon resigned amid allegations over his past behaviour towards women.    It emerged that Patel had suggested giving British aid money to an Israeli army project and that she had held further unauthorised meetings.  An Israeli newspaper on Wednesday also reported that Patel travelled to the Golan Heights in a breach of normal diplomatic protocol.  Theresa May is struggling to keep her grip on the government as it has been rocked by multiple crises since she failed to retain her parliamentary majority in the June’s election.

Brexit Talks

Brexit Talks resumed in Brussels this week with no indication of a breakthrough after more than a year from the Brexit referendum and just 17 months before Brexit day.  The EU are waiting for the UK to make an offer on the divorce bill.   The European side reckons that the UK owes about EUR 60 billion.  The UK has so far agreed to pay a third of that and as May says the UK is going through the other demands “line by line”.  Brexit secretary David Davis hinted that the amount could go further although it is quite a sensitive issue in the UK with people expecting that the departure from the EU will bring financial dividends rather than bills.   Another issue which still has to be sorted is the rights of EU citizens in the UK and that of the British in Europe.    The EU is moving on the premise that first the divorce is settled and then the future will be discussed.  German government advisers on Wednesday are of the view of an extension saying that talks would likely drag on beyond the two years.  According to the Council of Economic Experts a one-time extension in EU membership should be granted.  This is unlikely to be welcomed by the UK.

Latest forecasts by the European Commission

On a different note the European Commission published the latest forecasts on Thursday which show that the British economy will post the slowest growth in 2019 since the height of the financial crisis a decade earlier. The European Commission has raised its 2017 forecast for the 19 country bloc to 2.2 percent from 1.7 percent in May.  The EU executive arm cited “resilient private consumption” and predicted a 2.1 percent expansion in 2018.  The prediction for the UK has been cut and sees growth cooling to just 1.1 percent in 2019 which would be the worst performance since the recession of 2009.    Although the inflation is projected to remain below the European Central Bank’s goal in the future, the UK will likely exceed the target of the Bank of England through 2019.  This is attributed to a weaker sterling although the Bank of England has raised the interest rates this month for the first time in a decade.  With regards to the EU after many years of tackling the financial crisis the economy of the EU has seen positive economic momentum.

MIFID II

MIFID II is the Markets in Financial Instruments Directive which is the EU legislation that regulates firms who provide services to clients linked to financial instruments such as bonds, shares, units in collective investment schemes and the venues where these instruments are traded.  It will come into force in January 2018 and European regulators are rewriting their financial rule book.   Among the changes, the new rules state that the services attached to trading now must be bought and sold as individual pieces. The new regulations will affect everything from investment research to the booking of transactions.  Under new regulations gone will be the days when market analysis will be provided for free and as part of a bundle of services offered to clients.  Brokers will soon have to decide how much to charge for research and for the access to top executives that come with it.  Some research packages are being modelled.  Under the old system, there was a concern that money managers could route their transactions to the firms that offered the best tips and access, rather than the best prices to execute the client’s trades.     In view that MIFID II may be felt around the world, US and European Authorities are trying to reconcile regulations in the two jurisdictions.

Oil

Oil has advanced for four straight weeks in New York on the premise that the global gut is falling as a result of the cap measures taken by the Organisation for Petroleum Exporting Countries and allied producers including Russia.   It reached levels not seen in more than two years ago as Saudi Arabian King Salman’s anti-corruption drive shook the world’s biggest crude exporter.  A platform in the Gulf of Mexico led futures to spike when operations were suspended after Royal Dutch Shell plc shut its Enchilada-Salsa platform due to a fire.  Although the shutdowns caused shortages, a government report showed crude stockpiles unexpectedly rose last week, overseas demand shrank and the US output hit a record-high.   On 30 November OPEC members will meet with Saudi Arabia and Iraq and major suppliers to discuss the possibility of extending the limits beyond March.

The Anti-corruption Drive in Saudi

Security forces arrested princes, billionaires, ministers and former top officials as soon as 32 year  old Prince Mohammed bin Salman announced a sweeping anti-corruption drive.  Saudi media has put the total of those who are in custody at more than three dozen, including 11 princes, four ministers and former officials.  Since 2015, the prince has embarked on shaking up to prepare the economy for the post-oil era, plunging the kingdom into war in Yemen and severed diplomatic and transport links with neighbouring Qatar.  He has further taken control from defence to oil policies.    His move on corruption in Saudi Arabia has put $33 billion of personal wealth at risk with Prince Alwaleed bin Talal losing more than $1 billion after shares in his Kingdom Holding Co. plunged after his arrest.  Investors in the region are getting nervous with Gulf stocks losing $6.8 billion since the weekend.  To ease the worries, Saudi authorities are saying that they are only freezing the personal bank accounts of individuals and not of the companies they manage.  Saudi billionaires and millionaires are seeking to move assets from the kingdom and the wider Gulf Cooperation Council region.

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