BERLIN (Reuters) – The European Union has suggested that it and the United States suspend tariffs imposed on billions of dollars of imports for six months, EU trade chief Valdis Dombrovskis was quoted as telling Germany’s Der Spiegel on Saturday.
That would go beyond a four-month suspension agreed last month, and send a signal that Brussels is seeking compromise in a 16-year-old dispute over aircraft subsidies.
“We have proposed suspending all mutual tariffs for six months in order to reach a negotiated solution,” Dombrovskis told the news magazine.
“This would create a necessary breathing space for industries and workers on both sides of the Atlantic,” he added.
In March, the two sides agreed on a four-month suspension covering all U.S. tariffs on $7.5 billion of EU imports and all EU duties on $4 billion of U.S. products, which resulted from long-running World Trade Organization cases over subsidies for planemakers Airbus and Boeing.
Dombrovskis also said the EU would closely monitor U.S. President Joe Biden’s “Buy American” laws which provide for U.S. public contracts to be awarded exclusively to American firms.
“Our goal is to push for procurement markets that are as open as possible all over the world,” he told Der Spiegel.
Reporting by Madeline Chambers; Editing by William Maclean and Helen Popper
(Reuters) – While the pace of the global equity rally has waned in recent weeks, world shares have a better chance of climbing again if history repeats itself.
MSCI’s gauge of stocks across the globe has delivered an average gain of 2.6% in the month of April in the last 19 years, the highest compared with other months of the year.
It was followed by November’s 1.7% gain and July’s 1.1%, according to the data.
Graphic: MSCI World index’s April gains
“April tends to be a strong month for risk assets, with monthly returns statistically significant across major markets, said Andrew Sheets, a strategist at Morgan Stanley, adding that higher dividend payments could be a reason behind this rise in shares in the month.
“The April month could be an important tactical window for investors to take on beta, before heading into a possibly quieter summer period,” he said.
The MSCI World index rose just 4.1% in the Jan-Mar quarter, the lowest in a year, as global shares were pressured by growing concerns about hiccups in vaccine rollouts and a fresh wave of coronavirus infections, particularly in Europe.
Some analysts said higher corporate profits could boost stock prices this month, with factories across Europe and Asia ramping up production in March.
Paul Sandhu, head of multi-asset quant solutions at BNP Paribas Asset Management, said investors should take this pause in the rally as an opportunity to rebalance their portfolios and buy on dips this month.
Refinitiv data showed global companies’ profits in the March quarter are expected to rise 70%, compared with a year ago, led by a recovery in energy, consumer and mining firms.
Graphic: Expected March quarter profit growth
“April should see good data, strong 1Q earnings, still-modest realised inflation and a pause in the yield move,” said Morgan Stanley’s Sheets.
The MSCI World index was up 0.24% on Thursday, which was the first trading day of the month.
LONDON (Reuters) – A rotation by sovereign wealth funds and other institutional investors to add risk since the COVID-19 pandemic, moving from cash and bonds to stocks, may have further to run as many still have large cash positions, according to research published Thursday.
Investors had a more positive outlook for 2021, having reached a risk-neutral level across asset classes after starting last year with the highest cash levels since the 2009 financial crisis, the research from State Street Corporation and the International Forum of Sovereign Wealth Funds (IFSWF) found.
Many are also adding to their exposure within private markets, with a particular focus on infrastructure and real estate, hastened by low real returns in public markets, according to the findings, based on State Street data and an IFSWF survey of seven of its largest sovereign fund members.
For example, sovereign fund investments in private markets more than doubled during 2020 to $50.3 billion, IFSWF data showed, in part due to funds helping out their portfolio companies hit by the pandemic.
“The current macroeconomic environment, anticipated fiscal stimulus and portfolio positioning of institutional investors and sovereign wealth funds present reasons to be optimistic as we move further into 2021,” said Neill Clark, head of State Street Associates, Europe, Middle East and Africa at State Street.
There was a marked uptick in interest in U.S. equities in 2020, with IFSWF data showing over $16 billion invested across 46 deals in 2020, up from $2 billion across 28 deals in 2019.
The rise was largely due to Saudi Arabia’s Public Investment Fund’s countercyclical investments in energy, consumer and financial sectors at the peak of the crisis in the second quarter.
Institutional investors also scaled back investments in emerging markets and withdrew from investments in Britain during 2020, according to the research.
Still, IFSWF data indicated an uptick in sovereign fund investments in the country to $4.4 billion in 2020 compared with $1 billion in 2019, almost two-thirds in private markets, as funds eyed deals in the battered economy.
With assets such as global stocks and bitcoin near record highs, talk of bubbles in certain sectors has increased this year.
Yet State Street said it did not see evidence of bubble behaviour and sovereign funds surveyed in the report were generally not worried either.
One IFSWF member surveyed did express concern about the number of special purpose acquisition company (SPAC) initial public offerings, the number of tech firms trading at more than 20 times revenues and multiples that private equity firms are paying for deals.
STOCKHOLM (Reuters) – H&M said on Wednesday its commitment to China remained strong and it was dedicated to regaining shoppers’ and partners’ trust following a recent backlash in the country against comments it made in 2020 on China’s Xinjiang region.
“We are dedicated to regaining the trust and confidence of our customers, colleagues, and business partners in China,” the Swedish fashion retailer said in a statement on its website.
“By working together with stakeholders and partners, we believe we can take steps in our joint efforts to develop the fashion industry, as well as serve our customers and act in a respectful way,” it said.
H&M swings to loss in first quarter
H&M reported a quarterly loss on Wednesday and said that it was dedicated to regaining shoppers’ and partners’ trust in China following the recent backlash in the country after comments it made last year on the Xinjiang region.
The world’s second-biggest fashion retailer is under fire from consumers and officials in China after an H&M statement from 2020 began circulating in social media expressing concern over reports of forced labour in Xinjiang, saying it would no longer source cotton from the region.
It said on its website that its commitment to China remained strong and it was dedicated to regaining the trust and confidence of customers, colleagues, and business partners in China.
H&M reported a pretax loss for the December-February period, its fiscal first quarter, of 1.39 billion crowns ($159 million) against a year-earlier profit of 2.50 billion. Analysts polled by Refinitiv had on average forecast a 1.41 billion crown loss.
Sales in March 1-28 were up 55% measured in local currencies.
H&M said it would not propose a dividend at its annual general meeting but saw good prospects of one in the second half of the year.
The UK’s new trading relationship with the European Union (EU) might only be a few months old.
But some businesses are struggling to adjust to the new trading landscape outside of the customs union and single market.
Firms across four different sectors share their stories of rising costs, extra paperwork and packages that never arrive.
The fashion firm
Ben Taylor and Alice Liptrot have come a long way since they founded their knitwear brand Country of Origin straight out of university.
The couple now employ four other people and sell clothes wholesale to independent shops and to customers online.
About a third of sales, Ben says, came from customers in the EU.
“But since the end of January, it’s tailed off completely.”
Ben says the firm has been caught up in an “onslaught of admin” and about 80% of orders to the EU after Brexit have seen customers having to pay extra charges.
What are the new rules?
New rules have come into force for those in the UK either importing from, or exporting to, Europe.
Exactly what licenses are needed or what duties must be paid depends on what is being exported, its value, where the product originates from and to which country it is being sent, according to government guidance.
From 1 January, the UK government introduced a rule that VAT must be collected at the point of sale rather than the point of import.
This essentially means that overseas retailers sending goods to the UK are expected to register for UK VAT and account for it to HMRC if the sale value is less than €150 (£135).
One customer in the Netherlands was asked to pay an additional €100 (£88) on their order, Ben says, for “government fees”, with no further explanation from customs agents.
Ben adds that the firm is not an “inexperienced” exporter, having shipped goods to Japan and the US. He says the lack of clarity on why certain charges are being raised is “frustrating”.
The next step? “To get some kind of operation going in Europe – moving stock to dispatch from there because this just isn’t sustainable,” he says.
“I just hope this doesn’t put off any other young person who wants to start a small business today.”
The flower grower
Diane Collison has been responsible for helping her firm, Collison Cut Flowers, adapt to post-Brexit changes.
The Norfolk cut flower producer imports 35 million bulbs a year – mostly tulips from Holland, scented stock and lilies.
The government recently pushed backintroducing new checks on most imported plants until 2022. But some of the bulbs imported by Collison’s Cut Flowers count as “high-risk”, so they have already had to make some changes.
Diane has registered the business as a “place of destination”, where plants could be checked by local health teams, and for an EORI number so the firm can bring EU goods into the UK.
Day-to-day, she must email a freight forwarding business details of expected deliveries before they hit UK ports. That’s on top of registering invoices and plant health certificates with UK authorities.
“Each load is probably costing us about £200 extra now – and at about 150 per year that’s not an insignificant amount of money,” Diane says.
The firm may soon need to increase costs for customers.
“But I’m just pleased we’ve managed to get our imports in and what we’ve done is working,” Diane says, adding the firm has only seen deliveries delayed by a few hours so far.
The sausage exporter
Steve Howell’s Foodlynx sells British sausages, bacon and bread to hotels and restaurants across the EU.
Typically it sends one or two trucks out a week and up to six in the peak summer season. But the Dorset-based firm suffered a three-day delay to the one shipment it has made since Brexit.
Its truck was held up at the port of Le Havre in France as customs officials questioned whether certificates for some animal products had been filled in correctly.
It was moved to another cold storage unit nearby while the issue was sorted out. Steve was charged €3,914 for storage and admin costs.
“Demand dropped off due to Covid last year anyway, plus we, like many others advised our customers to stock up before Christmas to avoid these types of delays.
“Now, the customers are running low on stock and we’re still trying to battle through paperwork, new labelling regulations and compliance.”
“The whole point [of Brexit] was to take back control of our country,” Steve says.
“We have succeeded in doing exactly the opposite because British exporters are completely and utterly blown out the water.”
The car parts dealer
Martyn Wilson set up his classic car parts firm 12 years ago and about 60% of orders are shipped to the EU.
VAT is now applied at the point of sale for parts under £135 – on top of duty charged on car parts at 24%.
Citroen Classic Car Parts typically sends out 130 items per month – but difficulties arose quickly.
“For couriers, I have to supply customers’ contact details – and often have to write to them in French and German to get those, which is a bit of a drama we never had to deal with before.”
Deliveries into Italy, for example, have never arrived and others have been returned due to customers not paying the new charges.
“It has impacted us certainly from the mental point of view. It’s a lot of additional stress and you’re continually on deadlines, trying to get good reviews from customers and make sure things get delivered.”
Martyn points out that he is able to deliver car parts to the US in less than 24 hours – and no tariffs are applicable on those under $700.
“I will muddle on through in the best possible way I can and maybe it’ll push me to think outside the box a bit.
“Perhaps in the long-run it might be good for us, but we’re going through the pain barrier.”
BEIJING (Reuters) – More foreign retail brands came under criticism from social media in China on Thursday, in the wake of Beijing’s propaganda offensive against H&M over the Swedish company’s previously aired concerns on Xinjiang.
Earlier this week, China denied allegations of human rights abuses by its officials in the western region of Xinjiang after the European Union, United States, Britain and Canada imposed sanctions on the officials on Monday. Beijing hit back with retaliatory sanctions on European lawmakers, academics and institutions.
Chinese state media singled out H&M on Wednesday for a statement that was reported by media last year in which the Swedish retailer said it was deeply concerned by reports of accusations of forced labour in Xinjiang, and that it did not source products from the Chinese region. It was not clear why the H&M statement was back in the public eye.
A social media frenzy ignited by a government call to stop foreign brands from tainting China’s name sent internet users looking for other previously issued statements by foreign retailers on Xinjiang.
Nike Inc, which said earlier in an undated statement it was “concerned” about reports of forced labour, came under fire. And so did German sportswear firm Adidas.
Many internet users said they will stop buying Nike and will support local brands such as Li Ning and Anta, while others bluntly told Adidas to leave China.
Shares of Anta Sports Products Ltd jumped over 6% in Hong Kong on Thursday after issuing a statement saying it will continue to use cotton from Xinjiang. Li Ning Co’s shares surged over 7%.
Internet users also targeted the Better Cotton Initiative (BCI), a global group that promotes sustainable cotton production which had said in October it was suspending its approval of cotton sourced from Xinjiang for the 2020-2021 season, citing concerns over human rights.
“If you boycott Xinjiang cotton, we’ll boycott you. Either Adidas quits BCI, or get out of China,” one internet user wrote.
The BCI’s members include Nike, Adidas and Japan’s Fast Retailing.
Nike, Adidas and the BCI did not immediately respond to requests for comment.
In response to the furore, H&M said on Wednesday it respected Chinese consumers and that it was committed to long-term investment and development in China.
But by Thursday morning, H&M did not exist on some Chinese store locator maps. Searches for H&M stores on Baidu Maps yielded no results. The Swedish clothing retailer’s official store on Alibaba’s Tmall, an e-commerce platform, was inaccessible.
A department store in Urumqi, capital of Xinjiang, said on its website it had shut an H&M section and demanded an apology from the company for “spreading rumours” and harming the interests of the region and China. (mp.weixin.qq.com)
Overnight, People’s Daily, the main newspaper of the Communist Party, rolled out a social media campaign in support of cotton sourced from Xinjiang. The graphic “I support Xinjiang cotton” posted by the newspaper on the Twitter-like microblog Weibo has since attracted about 2.2 million likes.
BEIJING (Reuters) – China on Thursday urged the United States to stop “discriminatory” action against Chinese companies after the U.S. adopted measures that would kick foreign companies off stock exchanges if they do not comply with U.S. auditing standards.
Chinese Foreign Ministry spokeswoman Hua Chunying said the U.S. measures distort market principles.
US and Chinese officials have exchanged sharp rebukes in the first high-level talks between the Biden administration and China, taking place in Alaska.
Chinese officials accused the US of inciting countries “to attack China”, while the US said China had “arrived intent on grandstanding”.
Relations between the two superpowers are at their most strained for years.
The US has pledged to raise contentious issues such as Beijing’s treatment of Uighur Muslims in Xinjiang.
The ill-tempered talks in Anchorage involved Secretary of State Antony Blinken and National Security Adviser Jake Sullivan on the US side, facing off with China’s most senior foreign policy official, Yang Jiechi, and foreign minister Wang Yi.
In a blunt opening statement, Mr Blinken said the US would “discuss our deep concerns with actions by China, including in Xinjiang, Hong Kong, Taiwan, cyber attacks on the United States, economic coercion of our allies”.
“Each of these actions threaten the rules-based order that maintains global stability,” he said.
In response, Mr Yang accused Washington of using its military might and financial supremacy to suppress other countries.
“It abuses so-called notions of national security to obstruct normal trade exchanges, and incite some countries to attack China,” he added.
Mr Yang said human rights in the US were at a low point, with black Americans being “slaughtered”.
Mr Sullivan hit back, saying Washington did not seek a conflict with China, but added: “We will always stand up for our principles for our people, and for our friends.”
The exchange, which took place in front of the world’s media, went on for more than an hour. It came at the start of three sessions, which are due to end on Friday morning.
It was an unusually undiplomatic sparring match, especially for a meeting called to take stock of the US-China relationship under a new American administration.
Beforehand the Biden team had been blunt in public criticism of Beijing. So the Chinese knew what to expect and seemed to have come prepared to hit back.
They were particularly angry that Washington had imposed sanctions on them the day before the talks, over a crackdown on pro-democracy advocates in Hong Kong.
There may have been a certain amount of posturing involved, as a US official said the private conversation that followed was substantive and serious.
The Biden administration has said it will be tough on issues of concern, but willing to work with Beijing on matters of interest. However, it has described the relationship as a geopolitical competition between democracy and autocracy.
And the Chinese have refused to compromise on what they say are matters of national sovereignty and security. Whether or not they can find pragmatic points of co-operation will be the measure of how the relationship moves forward.
Afterwards, the US delegation accused China of violating the agreed protocol of two minutes of opening remarks by each side.
“The Chinese delegation… seems to have arrived intent on grandstanding, focused on public theatrics and dramatics over substance,” a senior administration official said.
The official said the US would continue with the talks as planned, adding that “exaggerated diplomatic presentations often are aimed at a domestic audience”.
In later remarks via state media, Chinese officials said it had been the US, not China, that had violated protocol by exceeding the agreed time in opening remarks. They accused the US of making a “groundless attack on China’s domestic and foreign policies”.
On a more positive note, it quoted Mr Yang as saying that “serious difficulties in China-US relations in the past should not continue”.
The BBC’s Barbara Plett Usher says the talks are the first chance for the Biden administration to show how it intends to deal with what Mr Blinken has called “the biggest geopolitical test of the 21st Century”.
China is looking for a reset after relations hit rock bottom under the Trump administration, our correspondent adds. Mr Wang has said that Beijing is ready to reopen “constructive dialogue.”
What do China and the US disagree about?
Quite a lot.
Trade for instance. The US accuses China of unfair practices, such as subsidising industries, stealing intellectual property, keeping its currency low and putting up barriers to trade.
For its part, China wants the big trade tariffs introduced by the Trump administration on Chinese goods eliminated. It also accuses the US of “suppressing” successful Chinese tech companies, such as Huawei.
Human rights and democracy. The US accuses China of genocide against the Uighur population in the province of Xinjiang, and trampling on democratic rights in Hong Kong with a recently introduced security law.
But China calls on the US to stop interfering in what Beijing considers its internal affairs and accuses the US of “smearing” the ruling Communist Party.
China is also pushing back against what it sees as US naval encroachment in the South China Sea, which Beijing considers Chinese territory.
LONDON (Reuters) – Close scrutiny of UK financial firms’ European Union outposts will continue indefinitely, the bloc’s securities watchdog said, as regulators begin a round of new checks on how they are operating.
Hundreds of trading and investment firms from the City of London have set up shop in the EU to avoid disrupting business with the bloc by relocating staff and assets.
The costly investment was vindicated by an UK-EU trade deal that left UK financial services largely cut off from the continent after Britain left the EU’s orbit on Dec. 31.
The European Securities and Markets Authority (ESMA) had checked the licence applications from new hubs in case national regulators were offering sweeteners.
ESMA Chair Steven Maijoor said the watchdog has now begun reviewing how the licences are working on the ground in a process that will continue indefinitely to ensure sufficient activity and senior staff.
“How you structure your business between the UK and the EU, that will be an ongoing issue. There will be new business models, there will be new questions around how can you organise that,” Maijoor told Reuters.
“Although it will not be done in the context of Brexit, the UK and EU will continue to be very interconnected markets and so there will be on a continuous basis questions around how do you ensure proper supervisable entities in the EU.”
The close scrutiny will test post-Brexit relations between Britain and the bloc, already strained by clashes over Northern Ireland and COVID-19 vaccines.
Both sides aim to agree a cooperation pact in financial regulation by the end of March, a first step in restoring trust and potential UK market access further down the road.
A former regulator in the Netherlands, Maijoor is due to step down from ESMA after 10 years at the helm, having overseen a watchdog that has steadily increased its powers and reach.
There is no need for a U.S.-style super-regulator but it would be “very logical” for ESMA to build on the Brexit checks to become the EU regulatory gateway for market participants from any part of the world that want to operate in the bloc.
“If market participants can choose 27 member states to locate themselves then there is obviously a high risk of regulatory competition,” Maijoor said.
EU policymakers breathed a sigh of relief when there was no market disorder in January due to severing most of the City’s access to the bloc.
Maijoor said assessments by UK and EU regulators of risks to market stability ahead of Brexit had proved to be on the mark. EU curbs on City access led to swathes of euro stock and swaps trading leaving London for the bloc and New York without a hiccup.
Regulators focused on stability, not on avoiding splits in markets, he said.
“With Brexit comes fragmentation, that is what Brexit is about, it’s a decision by the UK to leave the EU.”
China’s smartphone shipments increased more than threefold in February 2021 from a year ago, government data published on Thursday showed, signaling an encouraging rebound from last year’s nadir as the pandemic peaked in China.
Shipments of smartphones within China jumped 236.6% annually to 21.3 million handsets in January, according to the China Academy of Information and Communications (CAICT), a state-backed think tank.
That was up from 6.3 million in February 2020 and higher than the 14.9 million in February 2019, suggesting China’s smartphone sector has returned to its pre-pandemic levels.
Manufacturing glitches and a lagging consumer economy marred China’s smartphone sector as COVID-19 spread in early 2020, but the industry has largely recovered along with the broader economy.
Despite the pandemic’s retreat in China, handset brands now face production issues due to a global computer chip shortage.
A confluence of factors including demand miscalculation, unexpected factory shutdowns, and U.S.-China tensions caused a number of automobile companies to report chip sourcing issues in late December.
That shortage has since spread to many types of chips and all types of hardware, including smartphones.
In late February, Xiaomi Corp VP Lu Weibing posted a brief message on Chinese social media calling the chip crunch “an extreme shortage.”
Xiaomi was one of several Chinese handset makers that ramped up production late last year in anticipation of strong sales as U.S sanctions kneecapped the ability of Huawei Technologies Co Ltd to make handsets.
Analysts consider that ramp up as one of several key factors that contributed to the shortage.