Central bank buying of gold reached its highest levels for almost half a century last year, as Russia, Turkey and Kazakhstan boosted purchases to shift their reserves away from the US dollar. Central banks bought a net $27bn worth of gold, driven by Russia, whose net purchases were the highest on record, according to the World Gold Council, an industry-backed body. Volumes came to 651.5 tonnes, an increase of 74 per cent on the previous year. The buying reflects continued efforts by emerging market central banks to diversify their large holdings of dollar reserves in the face of rising global trade tensions. The share of central bank currency reserves held in the dollar fell close to a five-year low in the third quarter of 2018, according to the International Monetary Fund. The purchases helped boost the price of gold in the second half of last year, following a 10 per cent fall in the first half of 2018. Gold prices hit their highest level in eight months on Tuesday at $1,314 a troy ounce. The US has accused China’s Huawei and its chief financial officer of stealing American technology and breaking US sanctions against Iran, in a criminal indictment that sharply escalates the two countries’ technological rivalry and will overshadow trade talks aimed at averting an all-out trade war between the world’s two largest economies. Matthew Whitaker, acting attorney-general, announced the action against the world’s biggest telecoms equipment maker on Monday as China’s trade negotiators, led by Vice-Premier Liu He, arrived in Washington for talks that are scheduled to open on Wednesday. Depending on the penalties sought by the justice department, the Trump administration’s salvo could disrupt the global operations of a Chinese corporate champion and land its chief financial officer, Meng Wanzhou, in prison. Donald Trump has signed into law a funding package temporarily reopening the federal government without securing money for his proposed border wall, in a defeat for the president following a 35-day stand-off. Mr Trump said on Friday that he had agreed to a measure to open the government for three weeks, while leaving the matter of border wall funding for upcoming discussions with lawmakers. As recently as Thursday, Mr Trump had insisted that some border wall money be committed upfront before the partial shutdown ended. The president’s climbdown reflected mounting anxiety within the GOP over the ripple effects of a record-breaking shutdown. On Friday, flights in the New York area were disrupted because of air traffic controller staffing shortages, underscoring the risks to the country’s transport network. Kevin Hassett, the chairman of the president’s Council of Economic Advisers, has acknowledged a continued shutdown for the whole quarter could drive economic growth to zero. The European Central Bank has left its interest rates and its monetary policy message unchanged, as president Mario Draghi prepares to tell the press just how bad officials think the damage to the region’s economy is. The bank’s 25-member governing council has kept its benchmark interest rate unchanged at zero. The deposit rate charged on a portion of bank’s deposits parked at the ECB stayed at minus 0.4 per cent. The bank’s message on its monetary policy intentions echoed its December statement, saying the council still “expects the key ECB interest rates to remain at their present levels at least through the summer of 2019”. The bank also repeated that it expects to keep reinvesting the bonds bought under its €2.6tn quantitative easing programme but which are now maturing “for an extended period of time past the date when it starts raising the key ECB interest rates”. The US Senate will vote on two proposals on Thursday to end the longest US government shutdown, but hopes for a long-term solution to the impasse remained dim, with both sides refusing to budge on their core demands. Mitch McConnell, the Republican Senate majority leader, reversed his previous position on Tuesday to allow the votes. He had said earlier that he would only let the chamber consider shutdown-related legislation that was backed by President Donald Trump and congressional Democrats. Mr McConnell called on senators to support a proposal put forward on Saturday by Mr Trump, which would allocate $5.7bn for border wall spending, and make a series of changes to the existing immigration system. However, Mr McConnell also agreed to allow a short-term spending bill, backed by Democrats, to go up for a vote. That legislation would reopen the government until February 8 — giving Congress and the White House a two-week breather to find a solution to the crisis. China’s economic growth dropped to its slowest annual rate since 1990 and was at its lowest level since the global financial crisis in the fourth quarter of last year, as the US trade war and policy decisions in Beijing hit consumer sentiment and capital expenditure. Growth for the full year was 6.6 per cent, down from 6.8 per cent in 2017, the lowest level since the country faced international sanctions after the Tiananmen Square massacre. Gross domestic product growth has slowed for three consecutive quarters, prompting concern among investors that the country could drag down the global economy. China has adopted a series of fiscal and monetary stimulus measures since July that have failed to reverse the deceleration. Last week, the finance ministry outlined plans for additional tax cuts. When Theresa May announced her new Brexit strategy on Monday, there was a sense of déjà vu in the House of Commons. Labour leader Jeremy Corbyn called it “groundhog day”, while Tory MP Sarah Wollaston declared: “Plan B is Plan A.” But while the prime minister’s attempt to broker a deal between Brussels and her Eurosceptic critics over the Irish backstop was wearyingly familiar, there was a sense that the Westminster logjam on Brexit may finally be starting to shift. The difference is that Tory Brexiters and Mrs May’s notional allies in Northern Ireland’s Democratic Unionist party, both of whom helped inflict last week’s 230 vote defeat on her Brexit plan, are now starting to feel the heat. While global growth in 2018 remained close to postcrisis highs, the global expansion is weakening and at a rate that is somewhat faster than expected. This update of the World Economic Outlook (WEO) projects global growth at 3.5 percent in 2019 and 3.6 percent in 2020, 0.2 and 0.1 percentage point below last October’s projections. Jack Bogle, founder of Vanguard and creator of the world’s first index mutual fund, has died at the age of 89. He leaves an unassailable legacy as the pioneer and leading advocate of the $10tn index investment universe. Born in New Jersey to a family stricken by the Great Depression, he became one of the greatest men in the history of investing by ripping asunder the “great man” image of supreme, cerebral stockpickers who could beat the market. His insight: on average, stockpickers make average returns. He launched the first-ever index fund for ordinary investors and vociferously championed the merits of cheap, passive investing for decades. It was an astonishing success. Today, Vanguard is a $5tn investment behemoth, and one of the leading players in the global index investing industry that he helped birth. Elon Musk has warned that Tesla faced a struggle to make a profit this quarter as he cut more than 3,000 jobs from the electric carmaker. More than 10 per cent was wiped from Tesla’s share price in afternoon trading in New York — setting the stage for another volatile year for the carmaker — after Mr Musk published a blog post warning of “an extremely difficult challenge” in making its products cost-competitive. Mr Musk last year defied short-sellers on Wall Street as Tesla finally managed to reach the early production targets he had set for the Model 3, its first attempt at building a mass-market vehicle. This year, with tax incentives for US customers waning and pressure to bring down prices to reach a bigger market with the Model 3, Tesla faces a new set of challenges. Mr Musk said the company had “no choice” but to cut staff numbers, adding that Tesla needed to lower the price of the Model 3 “as we need to reach more customers who can afford our vehicles”. Donald Trump has cancelled his delegation’s trip to Davos due to the government shutdown, shortly after he informed House Speaker Nancy Pelosi her own overseas travel needed to be postponed because of the dispute. The president, who had already scrapped his own plans to go to the Swiss resort, decided the other members of the administration should stay home as well, including Treasury secretary Steven Mnuchin and secretary of state Mike Pompeo. Sarah Sanders, the White House spokeswoman, said Mr Trump was taking the decision “Out of consideration for the 800,000 great American workers not receiving pay and to ensure his team can assist as needed”. Earlier in the day, Mr Trump told Ms Pelosi that an upcoming trip she had been planning would be delayed because of the US government shutdown, as their feud over border wall funding escalated. The White House released a letter from the president to Ms Pelosi on Thursday saying that her trip to Brussels and Afghanistan was postponed. Mexico successfully raised $2bn from the global debt market on Wednesday, as investors overlooked some of the initial policy mis-steps by the new leftist government of Andrés Manuel López Obrador to snap up the offering. The 10-year dollar denominated bond — which has a 4.577 per cent yield and a 4.5 per cent coupon — was four times oversubscribed, with 320 institutional investors taking part in the deal, the finance ministry said in a statement. While Mexico is paying more compared to its last 10-year dollar debt sale last January, when it raised $2bn at an effective yield of 3.8381 per cent, the higher borrowing costs reflect in part the rise in global interest rates over the past 12 months. Theresa May on Wednesday night narrowly saw off a vote of no confidence but immediately faced a new confrontation with Labour leader Jeremy Corbyn as she tried to save her Brexit deal. The prime minister was able to survive the attempt by Mr Corbyn to force a general election only by relying on Northern Ireland’s Democratic Unionists, whose 10 MPs prop up her minority government. They joined all Conservatives to reject the no-confidence motion 325 to 306. The new leader of Germany’s Christian Democrats has called for tax cuts to head off an economic slowdown, in a move that could trigger renewed tensions in the country’s governing grand coalition. The call from Annegret Kramp-Karrenbauer comes at a time of growing concern about the state of the German economy, with signs of a downturn emerging after nine straight years of growth. Germany’s gross domestic product fell in the third quarter and a further fall in the last three months of 2018 would place the country in a technical recession, defined as two consecutive quarters of negative growth. Germany’s export-orientated economy is seen as particularly exposed to trade frictions between China and the US, the possible negative consequences of Brexit and the cooling of the Chinese economy. Forecasts for German economic growth in 2019 have been scaled back in recent weeks from 2 per cent to around 1.5 per cent. Theresa May’s Brexit deal, the product of two years of tortuous negotiations in Brussels, was on Tuesday night overwhelmingly rejected by the House of Commons by 432 votes to 202. Mrs May’s crushing loss by 230 votes, the biggest defeat inflicted on any government, sees the prime minister in a race against time to revamp and resuscitate her deal before Britain’s scheduled departure from the EU on March 29. Some 118 out of 317 Conservative MPs voted against the deal and Jeremy Corbyn, Labour leader, immediately tabled a vote of no confidence in the government. He said the defeat of the deal had been “absolutely decisive”. Mrs May is expected to win the confidence vote, to be held on Wednesday evening, because neither the Conservatives nor the Democratic Unionists, the Northern Irish party that supports the prime minister in big votes, wants a general election. Despite U.S. President Donald Trump launching a high-stakes trade war against Beijing last year, China on Monday announced that its 2018 trade surplus with Washington was its largest in more than a decade. China's surplus with the U.S. grew 17 percent from a year ago to hit $323.32 billion in 2018, according to government data. It was the highest on record dating back to 2006, according to Reuters. Exports to the U.S. rose 11.3 percent on-year in 2018, while imports from the U.S. to China rose a meager 0.7 percent over the same period. China's overall trade surplus for 2018 was $351.76 billion, the government said. Exports in the whole of 2018 rose 9.9 percent from 2017 while imports grew 15.8 percent over the same period, official dollar-denominated data showed. While the surplus with the U.S. may have risen, last year's overall Chinese trade surplus was the lowest since 2013, even though export growth was the highest since 2011, according to Reuters' records. The weeks-long freeze in US junk bond issuance is beginning to thaw, with gas pipeline company Targa Resources set to sell $1.5bn of debt on Thursday in the first high-yield bond deal since November last year. Targa, which carries ratings at the upper end of high-yield issuers, initially came to market with a $750m bond with an 8½-year maturity, but strong investor demand saw the company double the size of the transaction, adding a $750m 10-year tranche, according to people familiar with the deal. There had been no new sales of high-yield bonds for 41 days, marking the longest drought on record, according to data company Dealogic, which has records back to 1995. Issuance froze amid fears over slowing global growth and further tightening by the Federal Reserve. Saudi Arabia drew a strong response on Wednesday in its first test of international bond market sentiment since coming under intense scrutiny in October from foreign governments and investors over the murder of journalist Jamal Khashoggi. Seeking to raise $7.5 billion, Riyadh attracted demand that topped $27 billion for the dual-tranche paper maturing in 2029 and 2050, according to a document issued by one of the banks leading the deal and seen by Reuters. The sale coincides with improved conditions across emerging markets, with yields compressing over the past few weeks, and Timothy Ash, senior emerging markets strategist at Bluebay Asset Management, called it "opportunistic." Volatile financial markets and muted US inflation are bolstering arguments within the Federal Reserve to take more time before increasing interest rates further, according to minutes from last month’s policy meeting. The US central bank lifted rates by another quarter-point during the meeting, and participants generally agreed that “some” further rises would be merited in future. But given violent moves in stock and bond markets and rising worries about global growth, policymakers judged that the extent and timing of future moves had become less clear. “Against this backdrop, many participants expressed the view that, especially in an environment of muted inflation pressures, the Committee could afford to be patient about further policy firming,” the minutes of the meeting held on December 18-19 said. Samsung Electronics said on Tuesday that its fourth-quarter earnings likely decreased sharply due to lackluster demand in its memory chip business as well growing competition in the smartphone segment. The South Korean tech giant predicted operating profit for the three months ended December was approximately 10.8 trillion Korean won ($9.67 billion) — or 28.71 percent down from a year ago. The figure missed market expectations, coming in 18.18 percent less than the 13.2 trillion won that analysts had predicted after factoring in the weakness in the semiconductor market. The expected average was already significantly lower than Samsung's third-quarter operating profit of 17.57 trillion won and below the 14.87 trillion netted in the June quarter. Consolidated sales for the fourth-quarter is predicted to be around 59 trillion won, lower than the 62.8 trillion won analysts predicted in a Reuters poll, and 10.57 percent down from a year ago. Donald Trump said a steel barrier would satisfy his demand for a wall along the US-Mexico border on Sunday, as the partial shutdown of the government look set to continue into its third week. The US president, and his acting chief of staff, reiterated comments that a concrete wall was not strictly necessary as they attempted to reframe Mr Trump’s demands as a call for the sort of border fencing constructed under previous US presidents. “We have to build the wall or we have to build a barrier,” said Mr Trump to reporters before he left the White House for Camp David. “The barrier or the wall can be of steel instead of concrete if that works better,” he added. Mick Mulvaney, the White House acting chief of staff, said on NBC’s Meet the Press that Mr Trump was willing to “take a concrete wall off the table”. Federal Reserve chair Jay Powell offered an upbeat assessment of US economic prospects following a strong jobs report on Friday, easing fears of a 2019 downturn that had spooked investors in recent weeks. Mr Powell said markets had moved “well ahead of the data” in pricing in risks to the US economy, following a sharp sell-off on Thursday and deep losses for equity investors during December. “US data seem to be on track to sustain good momentum into the new year,” the Fed chairman told a conference in Atlanta. Along with his comforting words about the health of the world’s largest economy, Mr Powell said the Fed would take a “patient” approach to monetary policy tightening, contributing to a rally which sent the S&P 500 up by 3.4 per cent in New York. Nancy Pelosi reclaimed her role as speaker of the US House of Representatives on Thursday, as the new Democratic majority passed funding bills aimed at ending the partial shutdown of the government, but without money for a wall that Donald Trump has insisted is needed to end the impasse. Apple shocked Wall Street with an extremely rare revenue warning late on Wednesday, blaming economic weakness in China and disappointing iPhone upgrades in the developed world for a shortfall of as much as 10 per cent from its previous expectations. The news wiped more than 7 per cent from the company’s shares in after-market trading and stoked investor concerns over the outlook for the global economy. The warning sparked share price falls among Apple suppliers in Asia and saw the Japanese yen, seen as a safe haven currency in times of uncertainty, rise as much as 3 per cent against the dollar. The scale of the disappointment was striking after Apple had appeared to rebut some recent suggestions of weakening demand for the iPhone. The company has been dogged in recent weeks by reports of falling orders among its suppliers and questions about the strength of demand for the new, lower-priced iPhone XR. Results of a private survey on China's manufacturing for the month of December showed factory activity contracted for the first time in 19 months amid a trade dispute with the U.S. The Caixin/Markit Manufacturing Purchasing Managers' index (PMI), a private survey, fell to 49.7 in December from 50.2 in November. Analysts' in a Reuters poll predicted the PMI to come in at 50.1 in December. A reading above 50 indicates expansion, while a reading below that level signals contraction. In December, two separate measures for new orders and new export orders showed contraction, the Caixin survey showed. |
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