Tag Archives: Global markets

Economic woes: Global Markets take big hit

Illustration-by-Maura-Losch-Axios-Global-Markets-plunge

Important Takeaways:

  • Fears of a U.S. recession tanked global markets Monday, with Japanese stocks suffering their biggest single-day rout since 1987’s Black Monday.
  • U.S. stock futures tumbled Monday, with NASDAQ’s futures falling as much as 4% pre-open.
  • In Japan, the Nikkei average shed a staggering 12.4% — the index’s worst showing in percentage terms since the October 1987 crash, Reuters reports.
  • The Nikkei’s 4,451-point loss was the biggest ever — eclipsing the 3,836 points it lost on Oct. 20, 1987, when the Black Monday crash hit Japan.
  • Between the lines: The recent batch of economic data indicates that the Federal Reserve waited too long to cut interest rates. Given the delays with which Fed policy affects the economy, the new numbers suggest the Fed should have started adjusting policy several months earlier.
  • What we’re watching: The big question now is whether this is the beginning of a global, risk-off movement that will spread deeper across markets.

Read the original article by clicking here.

Hong Kong records first virus death, Macau shuts casinos

By Farah Master and Ryan Woo

HONG KONG/BEIJING (Reuters) – Hong Kong reported its first coronavirus death on Tuesday, the second outside mainland China from a fast-spreading outbreak that has killed 427 people and threatened the global economy.

China’s markets steadied after losing $400 billion in stock values the previous day, and global markets also recovered from a sell-off last week. But bad news kept coming.

The Chinese-ruled gambling hub of Macau asked casino operators to close for two weeks to help curb the virus.

And in the latest major corporate hit, Hyundai Motor said it was to gradually suspend production at South Korean factories because of supply chain disruptions.

Hong Kong’s first fatality was a 39-year-old man with an underlying illness who had visited China’s Wuhan city, the epicentre of the outbreak, hospital staff said.

Chinese authorities, meanwhile, reported a record daily jump in deaths of 64 to 425. The only other death outside mainland China was a man who died in the Philippines last week after visiting Wuhan, the virtually quarantined city at the epicentre of the outbreak.

Total infections in mainland China rose to 20,438, and there have been nearly 200 cases elsewhere across 24 countries and China’s special administrative regions Hong Kong and Macau.

Thailand’s tally of infections jumped to 25, the highest outside China, while Singapore’s rose to 24, four of those from local contagion as opposed to visitors from China.

New cases were reported in the United States, including a patient in California infected via someone in the same household who had been infected in China.

The World Health Organization (WHO) has declared the flu-like virus a global emergency and experts say much is still unknown, including its mortality rate and transmission routes.

FOREIGN FEARS

Such uncertainties have spurred strong measures by some countries – offending Beijing’s communist government which has called for calm, fact-based responses instead of scaremongering.

The deluge of misinformation on social media – from a recommendation to eat more onions to a warning of spread via a video game – has led Asian governments to hit back with arrests, fines and fake news laws, alarming free speech advocates.

At least 16 people have been arrested over coronavirus posts on social media in Malaysia, India, Thailand, Indonesia and Hong Kong.

Australia sent hundreds of evacuees from Wuhan to an island in the Indian Ocean, while Japan ordered the quarantine of a cruise ship with more than 3,000 aboard after a Hong Kong man who sailed on it last month tested positive.

Thousands of medical workers in Hong Kong, which had seen months of anti-China political protests, held a second day of strikes to press for complete closure of borders with the mainland after three checkpoints were left open.

“We’re not threatening the government, we just want to prevent the outbreak,” said Cheng, 26, a nurse on strike.

The Asian financial centre has confirmed 17 cases of the virus and its public hospital network is struggling to cope with a deluge of patients and containment measures.

Hong Kong was badly hit by Severe Acute Respiratory Syndrome (SARS), another coronavirus that emerged from China in 2002 to kill almost 800 people worldwide and cost the global economy an estimated $33 billion.

WHO figures show SARS killed 299 people in Hong Kong then.

Chinese data suggest the new virus, while much more contagious, is significantly less lethal, although such numbers can evolve rapidly.

In Wuhan, authorities started converting a gymnasium, exhibition centre and cultural complex into makeshift hospitals with more than 3,400 beds for patients with mild infections, the official Changjiang Daily said.

U.S.-CHINA FRICTIONS

Raising the prospect of another major spat – just as trade frictions were easing – Beijing on Monday accused the United States of spreading panic after it announced plans to block nearly all recent foreign visitors to China.

A handful of other nations have done the same.

With the world’s second biggest economy facing increasing international isolation and disruption, some economists predict world output will shrink by 0.2 to 0.3 percentage points.

Many airlines have stopped flights to parts of China, with Japan’s biggest carrier, ANA Holdings <9202.T>, the latest to announce cuts, saying it would slash the number of flights to Beijing by two-thirds for at least seven weeks.

Hong Kong’s Cathay Pacific Airways Ltd <0293.HK> plans to cut 30% of global capacity over the short term, including 90% to mainland China.

Data from aviation statistics provider VariFlight showed 41 Chinese carriers cancelled nearly two-thirds of 16,623 planned flights for Tuesday as of 10:30 a.m. Beijing time (0230 GMT).

In addition, 10 regional airlines from Hong Kong and Taiwan had cancelled 162 flights, while 37 airlines from other countries cancelled 168 flights on the same day, it said.

each day since the start of February.

For a graphic comparing coronavirus outbreaks, see https://tmsnrt.rs/2GK6YVK.

(Reporting by Lusha Zhang and Ryan Woo in Beijing, Farah Master in Hong Kong, Cheng Leng and Winni Zhou in Shanghai, Roxanne Liu, Muyu Xu and Se Young Lee in Beijing, Brenda Goh and Zoey Zhang in Shanghai, Tom Westbrook in Singapore, Byron Kaye in Sydney, Matthew Tostevin in Bangkok, Linda Sieg, Sakura Murakami and Ami Miyazaki in Tokyo, John Geddie in Singapore, Kate Kelland in London, Stephanie Nebehay in Geneva, Ben Blanchard in Taipei; Writing by Robert Birsel and Andrew Cawthorne; Editing by Clarence; Fernandez and Alex Richardson)

Global protests gaining attention in financial markets

Global protests gaining attention in financial markets
By Marc Jones and Mike Dolan

LONDON (Reuters) – An alarming spread of street protests and civil unrest across the world in recent weeks looms large on the radar of financial markets, with investors wary the resulting pressures on stretched government finances will be one of many consequences.

Money managers and risk analysts seeking a common thread between often unconnected sources of popular anger – in Hong Kong, Beirut, Cairo, Santiago and beyond – reckon the unrest is particularly worrying following years of modest global economic growth and relatively low joblessness.

If, as many fear, the world is slipping back into its first recession in more than a decade, then the root causes of restive streets will only deepen and force embattled governments to loosen purse strings further to fund better employment, education, healthcare and other services to placate them.

Forced fiscal loosening in a world already swamped with debt and heading into another downturn may unnerve creditors and bond holders, especially those holding government debt as an insurance against recession and a haven from volatility.

“Protests per se are unpredictable for investors by definition and fit a pattern of rising political risks that have affected market perceptions in almost all geographies,” said Standard Chartered Bank strategist Philippe Dauba-Pantanacce.

“Investors will get more nervous when they see that a country’s IMF package or investment promises are conditioned on fiscal consolidation and that the first austerity measures are followed by massive protests.”

More broadly popular pushback against debt reduction and austerity raises serious questions about how still-mushrooming debt loads can be sustained, even after the massive central bank intervention to underwrite it in recent years.

Many also fear the feedback loop.

According to the International Monetary Fund this month, a global downturn half as severe as the one spurred by the last financial crisis in 2007-9 would result in $19 trillion of corporate debt being considered “at risk” – defined as debt from firms whose earnings would not cover the cost of their interest payments let alone pay off the original debt.

Rising bankruptcies at so-called “zombie” firms would, in turn, risk spurring rising job losses and yet more unrest.

Marc Ostwald, global strategist at ADM Investor Services, said he saw many of the protests as ‘straws that break the camel’s back’ – tipping points in a broad swathe of long-standing complaints about inequality, corruption and oppression, variations on the broader themes of populism and anti-globalization.

But Ostwald said there was a worry for financial markets who have surfed rising debt piles for years thanks to central bank money printing and bond buying.

“At some point the smothering impact of QE (quantitative easing) will run its course,” Ostwald said.

“And as many of the zombie companies then go to the wall, so governments will face rising unemployment and desperately need to borrow money to prop up their economies – particularly as social unrest rises, as we are witnessing.”

Of the dozens of protest movements that have emerged in recent years, here are some of the most prominent ones.

HONG KONG

Hong Kong has been battered by five months of often violent protests after the city state tried to bring in legislation that would have allowed extraditions to mainland China. The plan has been formally withdrawn but it is unlikely to end the unrest as it meets only one of five demands pro-democracy protesters have.

On Tuesday, authorities announced HK$2 billion ($255 million) relief measures for the city’s economy, particularly in its transport, tourism and retail industries. It followed a more sizeable HK$19.1 billion ($2.4 billion) package in August to support the underprivileged and businesses. Hong Kong’s Financial Secretary has also said more assistance will be given if needed.

The Hang Seng, one of Asia’s most prominent share markets, is down 12% since the protests started and although it has been recovered some ground over the last two months, it has continued to lag other major markets.

LEBANON

Hundreds of thousands of people have been flooding the streets for nearly two weeks, furious at a political class they accuse of pushing the economy to the point of collapse.

Prime Minister Saad al-Hariri announced on Monday a symbolic halving of the salaries of ministers and lawmakers, as well as steps toward implementing long-delayed measures vital to fixing the finances of the heavily indebted state.

Markets are increasingly worried it will all end in default. The government’s bonds are now selling at a 40% discount and Credit Default Swaps, which investor use as insurance against those risks, have soared.

IRAQ

Similar factors were behind deadly civil unrest in Iraq which flared in early October. More than 100 people died in violent protests across a country where many Iraqis, especially young people, felt they had seen few economic benefits since Islamic State militants were defeated in 2017.

The government responded with a 17-point plan to increase subsidized housing for the poor, stipends for the unemployed and training programs and small loans initiatives for unemployed youth.

 

EXTINCTION REBELLION

This London-bred movement is pushing for political, economic and social changes to avert the worst devastation of climate change. XR protesters began blockading streets and occupying prominent public spaces late last year, and following 11 days of back-to-back protests in April the UK government symbolically declared a climate “emergency”.

The movement is developing alongside the growing FridaysForFuture led by Swedish teenager Greta Thunberg which sees school children boycott lessons on Fridays.

It has been particularly strong in Germany and the government there recently launched the ‘Gruene Null’ or ‘Green Zero’ policy which specifies that any spending that pushes the government’s budget into deficit must be on climate-focused investments.

Incoming European Commission chief, Ursula von der Leyen, has also introduced an ambitious “European Green Deal” which would include the support of 1 trillion euros ($1.11 trillion) in sustainable investments across the bloc.

Amazon <AMZN.O> Chief Executive Officer Jeff Bezos last month pledged to make the largest U.S. e-commerce company net carbon neutral by 2040.

CHILE

At least 15 people have died in Chile’s protests which started over a hike in public transport costs but have grown to reflect simmering anger over intense economic inequality as well as costly health, education and pension systems seen by many as inadequate.

Chile’s President Sebastian Pinera announced an ambitious raft of measures on Tuesday aimed at quelling the unrest, including with a guaranteed minimum wage, a hike in the state pension offering and the stabilization of electricity costs.

ECUADOR

Violent protests at the start of October forced Ecuadorean President Lenin Moreno to scrap his own law to cut expensive fuel subsidies that have been in place for four decades.

The government had estimated the cuts would have freed up nearly $1.5 billion per year in the government budget, helping to shrink the fiscal deficit as part of a $4.2 billion IMF loan deal Moreno had signed.

BOLIVIA

Mass protests and marches broke out in Bolivia this week after the opposition said counting in the country’s presidential election at the weekend was rigged in favor of current leader Evo Morales.

The unrest – already the severest test of Morales’ rule since he came to power in 2006 – could spread if his declaration of outright victory is confirmed, after monitors, foreign governments and the opposition called for a second-round vote.

EGYPT

Protests against President Abdel Fattah al-Sisi broke out in Cairo and other cities in September following online calls for demonstrations against alleged government corruption, as well as recent austerity-focused measures.

Protests are rare under the former army chief and about 3,400 people have been arrested since the protests began, including about 300 who have since been released, according to the Egyptian Commission for Rights and Freedoms, an independent body.

The country’s main stock market <.EGX30> dropped 10% over three days as the protests kicked off although it has since recovered over half of that ground.

FRANCE

The Gilets Jaunes movement named after the fluorescent yellow safety vests that all French motorists must carry began a year ago to oppose fuel tax increases, but quickly morphed into a broader backlash against President Emmanuel Macron’s government, rising economic inequality and climate change.

Macron swiftly reversed the tax hikes and announced a swathe of other measures worth more than 10 billion euros ($11.3 billion) to boost the purchasing power of lower-income voters. That was followed up with another 5 billion euro package of tax cuts in April.

ARAB SPRING

Beginning in late 2010, anti-government protests roiled Tunisia. By early 2011 they had spread into what became known as the Arab Spring wave of protests and uprisings which ended up toppling not only Tunisia’s leader but Egypt, Libya, and Yemen’s too. The Arab Spring uprisings in Syria developed into a civil war that continues to be waged today.

ETHIOPIA

A total of 16 people have been killed in at least four cities since fierce clashes broke out on Wednesday against the reformist policies of Nobel Prize-winning Prime Minister Abiy Ahmed.

The greater freedoms that those policies bring have unleashed long-repressed tensions between Ethiopia’s many ethnic groups as local politicians claim more resources, power and land for their own regions. Ethiopia is due to hold elections next year.

(Reporting by Marc Jones and Mike Dolan, additional reporting by Karin Strohecker in London and Mitra Taj in La Paz; Editing by Sonya Hepinstall)

Trump says U.S.-China trade deal may be reached in four weeks

U.S. President Donald Trump talks with with China's Vice Premier Liu He in the Oval Office of the White House in Washington, U.S., April 4, 2019. REUTERS/Jonathan Ernst

By Jeff Mason and David Lawder

WASHINGTON (Reuters) – U.S. President Donald Trump said on Thursday the United States and China were close to a trade deal that could be announced within four weeks, while warning Beijing that it would be difficult to allow trade to continue without a pact.

The two countries are engaged in intense negotiations to end a months-long trade war that has rattled global markets, but hopes of a resolution soared after both sides expressed optimism following talks in Beijing last week.

Speaking to reporters at the White House at the start of a meeting with Chinese Vice Premier Liu He, Trump said some of the tougher points of a deal had been agreed but there were still differences to be bridged.

“We’re getting very close to making a deal. That doesn’t mean a deal is made, because it’s not, but we’re certainly getting a lot closer,” Trump said in the Oval Office.

“And I would think with, oh, within the next four weeks or maybe less, maybe more, whatever it takes, something very monumental could be announced.”

Trump said he would hold a summit with Chinese President Xi Jinping if there were a deal.

Xi assured Trump that text of the China-U.S. trade could be finalized soon, in a message conveyed by Liu He.

According to state-run news agency Xinhua, Liu He told Trump that Xi believed under his and Trump&rsquo;s leadership, China-U.S. relations will make new and greater progress.

Xi said that in the past month or more, the two sides’ trade teams had maintained close contact and “achieved new and substantive progress on issues in the text of two countries’ trade agreement”.

“I hope the two sides’ trade teams can continue working in the spirit of mutual respect, equality, and mutual benefit to resolve each other’s concerns, and finish negotiations on the text of the China-U.S. trade agreement soon,” Xi said to Trump through Liu.

KEEPING LEVERAGE

Trump declined to say what would happen to U.S. tariffs on $250 billion worth of goods as part of a deal. China wants the tariffs lifted, while U.S. officials are wary of giving up that leverage, at least for now.

Asked about the benefits of an agreement for China, Trump said: “It&rsquo;s going to be great for China, in that China will continue to trade with the United States.&nbsp;I mean, otherwise, it would be very tough for us to allow that to happen.”

Goods trade between the United States and China, the world’s two largest economies, totaled $660 billion last year, according to U.S. Census Bureau data, consisting of imports of $540 billion from China and $120 billion in exports to China.

On China’s behalf, Liu cited “great progress” in the talks because of Trump’s direct involvement and expressed hope that the talks would lead to “a good result.”

U.S. SEEKS SWEEPING CHANGES

Trump has previously threatened to impose punitive tariffs on all imports from China, more than a half-trillion dollars worth of products.

U.S. Trade Representative Robert Lighthizer, who is leading the talks for the Trump administration, said there were still some “major, major issues” to resolve and praised Liu’s commitment to reform in China.

Asked about the remaining sticking points, Trump mentioned tariffs and intellectual property theft. He said he would discuss tariffs with Liu in their meeting.

“Some of the toughest things have been agreed to,” Trump said. He later said that an enforcement plan for a deal remained a sticking point as well.

“We have to make sure there’s enforcement. I think we’ll get that done. We’ve discussed it at length,” he said.

Lighthizer and Treasury Secretary Steven Mnuchin are holding talks in Washington with a Chinese delegation this week after meeting together in Beijing last week. The current round of talks is scheduled to go through Friday and possibly longer.

Hopes that the talks were moving in a positive direction have cheered financial markets in recent weeks. But U.S. stocks were mixed on Thursday as investors waited for more developments in the trade negotiations, with the Dow Jones industrial Average slightly higher, and the S&amp;P 500 and Nasdaq Composite slightly lower. [.N]

The United States is seeking reforms to Chinese practices that it says result in the theft of U.S. intellectual property and the forced transfer of technology from U.S. companies to Chinese firms.

Administration officials initially envisioned a summit between Trump and Xi potentially taking place in March, but some U.S. lawmakers and lobbying groups have said recently they were told that the administration was now aiming for a deal in late April.

OUTSTANDING ISSUES

White House economic adviser Larry Kudlow said last week that the talks were “not time-dependent” and could be extended for weeks or even months longer.

While some reform pledges by Beijing are largely set, including an agreement to avoid currency manipulation, an enforcement mechanism to ensure that China keeps its pledges and the status of U.S. tariffs on $250 billion worth of Chinese goods must be resolved.

“China has been very clear, publicly and privately, that they would like to see all the tariffs removed,” U.S. Chamber of Commerce international affairs chief Myron Brilliant told reporters on Tuesday.

“The (Trump) administration has been equally clear that they want to keep some of the tariffs in place as a way to have leverage over China fulfilling its obligations under whatever final package is reached.”

(Reporting by Jeff Mason and David Lawder; Additional reporting by Chris Prentice and Michael Martina in BEIJING; Editing by Peter Cooney, Simon Cameron-Moore and Michael Perry)

U.S.-China trade talks continue, Trump not expected to announce summit: official

FILE PHOTO: U.S. President Donald Trump and China's President Xi Jinping arrive for a state dinner at the Great Hall of the People in Beijing, China, November 9, 2017. REUTERS/Jonathan Ernst/File Photo

WASHINGTON (Reuters) – The White House is not expected to announce a date on Thursday for a trade summit between U.S. President Donald Trump and Chinese President Xi Jinping, a senior administration official said, as negotiators for the two sides launch another day of talks.

China and the United States are in the middle of intense negotiations to end a months-long trade war that has rattled global markets.

After meetings in Beijing last week, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are holding talks with a Chinese delegation in Washington this week.

Trump is slated to meet with China’s top trade negotiator, Liu He, at 4:30 p.m. (2030 GMT) at the White House. The Wall Street Journal and the New York Times reported that he was expected to announce a date for a summit at that time, but a senior administration official told Reuters that was incorrect.

“The White House is not expected to announce a date for a meeting,” the official said.

Trump administration officials have cited progress in the talks on tricky aspects, including reforming practices that Washington objects to by Beijing such as the intellectual property theft and forced transfer of technology from U.S. companies doing business in China.

Hopes that the talks were moving in a positive direction have cheered investors.

Administration officials initially envisioned a summit between Trump and Xi potentially taking place in March, but that period passed while talks continued.

How to enforce a deal as well as when and whether to lift tariffs on billions of dollars of goods have been sticking points in what appear to be the final stages of the talks.

(Reporting by Jeff Mason; Editing by Susan Thomas)

U.S.-China dispute casts shadow as world leaders gather in Argentina

U.S. President Donald Trump and Argentina's President Mauricio Macri meet before the G20 leaders summit in Buenos Aires, Argentina November 30, 2018. REUTERS/Kevin Lamarque

By Scott Squires and Daniel Flynn

BUENOS AIRES (Reuters) – The leaders of the world’s top economies gathered in Argentina on Friday for talks overshadowed by a U.S.-China trade war that has roiled global markets, bracing for the kind of geopolitical drama U.S. President Donald Trump often brings to the international stage.

The two-day annual gathering will be a major test for the Group of 20 industrialized nations, whose leaders first met in 2008 to help rescue the global economy from the worst financial crisis in seven decades. With a rise in nationalist sentiment in many countries, the group faces questions over its ability to deal with the latest round of crises.

Overhanging the summit in Buenos Aires, the Argentine capital, is a trade dispute between the United States and China, the world’s two largest economies, which have imposed tariffs on hundreds of billions of dollars of each other’s imports.

All eyes will be on a planned dinner between Trump and Chinese President Xi Jinping on Saturday to see whether they can make progress toward resolving differences threatening the global economy.

Beijing hopes to persuade Trump to abandon plans to hike tariffs on $200 billion of Chinese goods to 25 percent in January, from 10 percent at present.

“We hope the U.S. can show sincerity and meet China halfway, to promote a proposal that both countries can accept,” Foreign Ministry spokesman Geng Shuang told a briefing in Beijing.

Speaking in Buenos Aires, U.S. Trade Representative Robert Lighthizer said he would be surprised if the dinner was not a success, but it would depend entirely on the two presidents.

On the eve of the summit, G20 member nations were still trying to reach agreement on major issues including trade, migration and climate change that in past years have been worked out well in advance.

Trump’s skepticism that global warming is caused by human activity has raised questions about whether the countries will be able to reach enough consensus on climate change to include it in the summit’s final communique.

Earlier this month, officials from countries attending a major Asia-Pacific summit failed to issue a joint statement for the first time after the U.S. delegation clashed with China over trade and security.

However, delegates to the talks in Buenos Aires said good progress had been made on economic sections of the statement overnight. Argentina’s presidency voiced optimism consensus would be reached on a draft.

“As this is a difficult moment for international cooperation, I would like to appeal to the leaders to use this summit … to seriously discuss real issues such as trade wars, the tragic situation in Syria and Yemen and the Russian aggression in Ukraine,” European Council President Donald Tusk told a news conference in Buenos Aires.

Highlighting the deep rifts within the G20, Tusk said the European Union would extend its economic sanctions on Moscow next month, after Russian ships fired on Ukrainian ones in the Sea of Azov last week, seizing the boats and sailors.

Trump cited Russia’s seizure of the ships as the reason he canceled a planned bilateral meeting with Russian President Vladimir Putin, where they had been expected to discuss the U.S. leader’s threat to withdraw from the Cold War-era Intermediate-Range Nuclear Forces treaty.

However, Moscow said U.S. domestic politics may have been the real reason behind the cancellation after Michael Cohen, Trump’s former longtime personal lawyer, pleaded guilty on Thursday to lying to Congress about a proposed Trump Organization skyscraper in Moscow.

The presence of Crown Prince Mohammed bin Salman at the summit also raised an awkward dilemma for leaders. Saudi Arabia’s de facto ruler arrived under swirling controversy over the murder of Saudi journalist Jamal Khashoggi in the Saudi consulate in Istanbul in October.

British Prime Minister Theresa May said she would be robust when she talks to Prince Mohammed, urging him to hold a full and credible investigation into Khashoggi’s killing and hold those responsible to account.

TRUMP AND TRADE

Uncertainty prevailed about how Trump, known for his unpredictability, would behave at what was shaping up as one of the group’s most consequential summits.

Trump rejected a statement by fellow leaders of the G7 industrialized economies at a summit in May after a tense gathering ended in acrimony, again over tariffs and trade.

Before heading for Buenos Aires on Thursday, Trump said he was open to a trade deal with China, but added, “I don’t know that I want to do it.”

Global financial markets will take their lead on Monday from the outcome of the Xi-Trump meeting, having seesawed in recent days on concerns trade tensions could escalate.

Oil markets will also be closely watching a bilateral meeting between Putin and Crown Prince Mohammed on Saturday afternoon for any sign of a breakthrough in a deal for Russia to participate in a production cut by the OPEC oil cartel next month.

In another bilateral meeting on Friday, French President Emmanuel Macron will discuss the Renault-Nissan alliance’s future with Japanese Prime minister Shinzo Abe, seeking to defuse a brewing diplomatic row over the balance of power inside the partnership.

NEW-LOOK NAFTA

One bright spot in Buenos Aires on Friday before the summit opened was the signing of a revised U.S.-Mexico-Canada trade pact to replace the North American Free Trade Agreement.

Signing the agreement alongside Canadian Prime Minister Justin Trudeau and Mexican President Enrique Pena Nieto, Trump said he looked forward to working with the U.S. Congress to complete the terms of the deal and did not anticipate problems in passing it.

The three countries agreed a deal in principle to govern their trillion dollars of mutual trade after a year and a half of contentious talks concluded with a late-night bargain just an hour before a deadline on Sept. 30.

However, Trudeau took advantage of the signing ceremony to say the partners needed to keep working to lift tariffs on steel and aluminum.

(Reporting by Andreas Rinke in Berlin, Jeff Mason, Roberta Rampton and Makini Brice in Washington; Yawen Chen and Ryan Woo in Beijing and Cassandra Garrison, Daniel Flynn and Pablo Garibian in Buenos Aires; Writing by Matt Spetalnick and Daniel Flynn; Editing by Ross Colvin and Frances Kerry)

Erdogan says Turkey will boycott U.S. electronics, lira steadies

Businessmen holding U.S. dollars stand in front of a currency exchange office in response to the call of Turkish President Tayyip Erdogan on Turks to sell their dollar and euro savings to support the lira, in Ankara, Turkey August 14, 2018. REUTERS/Umit Bektas

By Daren Butler and Behiye Selin Taner

ISTANBUL (Reuters) – President Tayyip Erdogan said on Tuesday that Turkey would boycott electronic products from the United States, retaliating in a row with Washington that helped drive the lira to record lows.

The lira has lost more than 40 percent this year and crashed to an all-time low of 7.24 to the dollar on Monday, hit by worries over Erdogan’s calls for lower borrowing costs and worsening ties with the United States.

The lira’s weakness has rippled through global markets. Its drop of as much as 18 percent on Friday hit European and U.S. stocks as investors fretted about banks’ exposure to Turkey.

On Tuesday the lira recovered some ground, trading at 6.4000 to the dollar at 1751 GMT, up almost eight percent from the previous day’s close and having earlier touched 6.2995.

It was supported by news of a planned conference call in which the finance minister will seek to reassure investors concerned by Erdogan’s influence over the economy and his resistance to interest rate hikes to tackle double-digit inflation.

Erdogan says Turkey is the target of an economic war and has made repeated calls for Turks to sell their dollars and euros to shore up the national currency.

“Together with our people, we will stand decisively against the dollar, forex prices, inflation and interest rates. We will protect our economic independence by being tight-knit together,” he told members of his AK Party in a speech.

The United States has imposed sanctions on two Turkish ministers over the trial on terrorism charges of a U.S. evangelical pastor in Turkey, and last week Washington raised tariffs on Turkish metal exports.

It was unclear whether Erdogan’s call was widely heeded, but a Turkish news agency said traders in Istanbul’s historic Eminonu district converted $100,000 into lira on Tuesday.

Chanting “Damn America”, they unfurled a banner saying “we will win the economic war”, the Demiroren agency said. Amid calls to “burn” the dollars, the group headed to a bank branch where they converted the money, it said.

Erdogan also said Turkey was boycotting U.S. electronic products. “If they have iPhones, there is Samsung on the other side, and we have our own Vestel here,” he said, referring to the Turkish electronics company, whose shares rose 5 percent.

His call met a mixed response on Istanbul streets.

“We supported him with our lives on July 15,” shopkeeper Arif Simsek said, referring to a failed 2016 military coup. “And now we will support him with our goods. We will support him until the end.”

But shopkeeper Umit Yilmaz scoffed. “I have a 16-year-old daughter. See if you can take her iPhone away … All these people are supposed to not buy iPhones now? This can’t be.”

INVESTMENT INCENTIVES

Erdogan said his government would offer further incentives to companies planning to invest in Turkey and said firms should not be put off by economic uncertainty.

“If we postpone our investments, if we convert our currency to foreign exchange because there’s danger, then we will have given into the enemy,” he said.

Although the lira gained some respite on Tuesday, investors say measures taken by the Central Bank on Monday to ensure liquidity failed to address the root cause of lira weakness.

“What you want to see is tight monetary policy, a tight fiscal policy and a recognition that there might be some short-term economic pain — but without it there’s just no credibility of promises to restabilize things,” said Craig Botham, Emerging Markets Economist at Schroders.

Dollar-denominated bonds issued by selected Turkish banks continued to fall on Tuesday, although sovereign bonds steadied.

Relations between NATO allies Turkey and the United States are at a low point, hurt by a series of issues from diverging interests in Syria, Ankara’s plan to buy Russian defense systems and the detention of pastor Andrew Brunson.

U.S. national security adviser John Bolton on Monday met Turkey’s ambassador to the United States to discuss Brunson’s detention. Following the meeting, U.S. officials have given no indication that the United States has been prepared to give ground in the standoff between the two countries’ leaders.

Ankara has repeatedly said the case was up to the courts and a Turkish judge moved Brunson from jail to house arrest in July. Infuriated by the move, Trump placed sanctions on two Turkish ministers and doubled tariffs on metal imports, adding to the lira’s slide.

Brunson’s lawyer said on Tuesday he had launched a fresh appeal to a Turkish court for the pastor’s release.

(Additional reporting by Ece Toksabay and Ezgi Erkoyun, Writing by Humeyra Pamuk and Dominic Evans, Editing by William Maclean and Jon Boyle)

Korean leaders aim for end of war, ‘complete denuclearization’ after historic summit

By Christine Kim and Josh Smith

SEOUL (Reuters) – The leaders of North and South Korea embraced on Friday after pledging to work for the “complete denuclearization of the Korean peninsula”, on a day of smiles and handshakes at the first inter-Korean summit in more than a decade.

The two Koreas announced they would work 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 including the United States.

“The two leaders declare before our people of 80 million and the entire world there will be no more war on the Korean peninsula and a new age of peace has begun,” the two sides.

South Korean President Moon Jae-in agreed to visit the North Korean capital of Pyongyang this year, they said.

Earlier, North Korea’s Kim Jong Un 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 demilitarized zone.

Scenes of Moon and Kim joking and walking together marked a striking contrast to last year’s barrage of North Korean missile tests and its largest ever nuclear test that led to sweeping international sanctions and fears of war.

Their meeting comes weeks before Kim is due to meet U.S. President Donald Trump in what would be the first ever meeting between sitting leaders of the two countries.

Trump welcomed the Korean talks.

“After a furious year of missile launches and Nuclear testing, a historic meeting between North and South Korea is now taking place. Good things are happening, but only time will tell!” he said on Twitter.

He later added: “KOREAN WAR TO END! The United States, and all of its GREAT people, should be very proud of what is now taking place in Korea!”

China, North Korea’s main ally, welcomed the leaders’ statement and said it was willing to keep playing a proactive role in promoting political solutions. China is wary of being sidelined by a thaw between the two Koreas and by the upcoming summit between Trump and Kim.

Russia said it was ready to facilitate cooperation between North and South Korea, including in the fields of railway transport and energy.

Japanese Prime Minister Shinzo Abe also welcomed the summit and said he expected North Korea to take concrete steps to carry out its promises.

Global markets were lifted by hopes the summit would pave the way for the end of conflict on the Korean peninsula. Shares in Seoul briefly rose more than 1 percent to a one-month high and Japan’s Nikkei share average also gained.

‘BALL IN U.S. COURT’

As part of efforts to reduce tension, the two sides agreed to open a liaison office, stop propaganda broadcasts and leaflet drops along the border and allow Korean families divided by the border to meet.

Days before the summit, Kim said North Korea would suspend nuclear and long-range missile tests and dismantle its only known nuclear test site.

But there has been widespread scepticism about whether Kim is ready to abandon the nuclear arsenal his country has developed for decades, justifying it as a necessary deterrent against U.S. invasion.

“Everything will not be resolved in the blink of an eye,” said Kim Young-hee, a North Korean defector-turned-economist at the Korea Development Bank.

“Kim Jong Un has put the ball in the U.S. court. He declared denuclearization, and promised to halt nuclear tests,” she said. “That tells us he wants the United States to guarantee the safety of his regime … in return for denuclearization.”

It is not the first time leaders of North and South Korea have declared hopes for peace. Two earlier summits, in Pyongyang in 2000 and 2007, failed to halt the North’s weapons program or improve relations in a lasting way.

“We will make efforts to create good results by communicating closely, in order to make sure our agreement signed today before the entire world, will not end as just a beginning like previous agreements before today,” Kim said after the agreement was signed.

FIRST ACROSS THE LINE

Earlier, Moon greeted Kim at the military demarcation line where the men smiled and shook hands.

In an unplanned move, Kim invited Moon to step briefly across into North Korea, before the two leaders crossed back into South Korea holding hands.

“I was excited to meet at this historic place and it is really moving that you came all the way to the demarcation line to greet me in person,” Kim said, wearing his customary black Mao suit.

“A new history starts now. An age of peace, from the starting point of history,” Kim wrote in Korean in a guest book in the South’s Peace House before talks began.

During a private meeting in the morning, Kim told Moon he came to the summit to end the history of conflict and joked he was sorry for waking Moon up with his early morning missile tests, a senior presidential official said.

Moon and Kim released their joint declaration before a dinner banquet.

Later, with their wives, they watched a music performance and held hands as they watched a montage of photos from their summit set to a K-pop song that included the words “be a family again”.

After warm farewells, Kim was driven back to North Korea.

The United States said earlier it was hopeful talks on peace and prosperity would make progress and it looked forward to discussions with South Korea in preparation for the planned meeting of Trump and Kim in coming weeks.

Just months ago, Trump and Kim were trading threats and insults as the North made rapid advances in pursuit of nuclear-armed missiles capable of hitting the United States.

The United States stations 28,500 troops in South Korea as a legacy of the Korean War, which ended in a truce, not a peace treaty. The war pitted the South, U.N. and U.S. forces against the communist North, backed by China and Russia.

Kim and Trump are expected to meet in late May or June. Trump said on Thursday he was considering several dates and venues.

(Reporting by the Inter-Korean Summit Press Corps, Christine Kim and Josh Smith; Additional reporting by Hyonhee Shin in SEOUL and David Brunnstrom and Susan Heavey and Eric Beech in WASHINGTON; Editing by Lincoln Feast, Robert Birsel)