African swine fever could drive up inflation in emerging markets as pork prices soar

African swine fever, which has already ravaged pig herds in China and pushed up food prices there, could also drive up inflation in the other emerging markets, according to research firm Capital Economics. “The most obvious channel through which this will impact (emerging markets) is via higher inflation,” James Swanston, assistant economist at Capital Economics, wrote in a note last week. That compares with less than 1% in most other emerging markets, and about 3.5% in China, Swanston wrote. Da


African swine fever, which has already ravaged pig herds in China and pushed up food prices there, could also drive up inflation in the other emerging markets, according to research firm Capital Economics. “The most obvious channel through which this will impact (emerging markets) is via higher inflation,” James Swanston, assistant economist at Capital Economics, wrote in a note last week. That compares with less than 1% in most other emerging markets, and about 3.5% in China, Swanston wrote. Da
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Company: cnbc, Activity: cnbc, Date: 2019-06-17  Authors: weizhen tan
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African swine fever could drive up inflation in emerging markets as pork prices soar

A hired hand feeds a sow which recently gave birth to a new litter at the Grand Canal Pig Farm in Jiaxing, in China’s Zhejiang province.

African swine fever, which has already ravaged pig herds in China and pushed up food prices there, could also drive up inflation in the other emerging markets, according to research firm Capital Economics.

Outbreaks of the disease have been detected not just in China, but also in parts of Southeast Asia, Japan, Australia, Poland and Russia.

The Chinese government said in April it had culled more than a million pigs in a bid to control the outbreak, but some experts — such as Rabobank and TS Lombard — estimated that the number of hog culled could be more than 100 million.

“The most obvious channel through which this will impact (emerging markets) is via higher inflation,” James Swanston, assistant economist at Capital Economics, wrote in a note last week.

“If the disease spreads and increases in severity, it would probably make a notable contribution to inflation in parts of Asia … and Eastern Europe,” he said.

He singled out Taiwan, Cambodia, Vietnam, Russia, Poland and Romania, saying that pork is a relatively large part of the consumer price index basket in those countries — at around 2%. That compares with less than 1% in most other emerging markets, and about 3.5% in China, Swanston wrote.

Data from China’s National Bureau of Statistics on Wednesday showed that food prices in the country spiked 7.7% in May compared to a year ago, as pork prices surged 18.2% also in the same period.

The rise in inflation in China “probably has further to run,” while consumer prices in the other emerging markets would also be pushed up — by around 0.3 percentage points — if pork inflation were to rise to 15%, according to Capital Economics.

Recent spikes in prices have caused pork inflation in emerging economies to rise by as high as 15%, Swanston wrote.


Company: cnbc, Activity: cnbc, Date: 2019-06-17  Authors: weizhen tan
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‘Sporadic’ attacks from Iran’s increased presence is a risk to oil, says US think tank

Oil prices rose as much as 4% on Thursday following attacks on two tanker ships off the coast of Iran, which the Trump administration has blamed on Tehran. It occurred near the Strait of Hormuz which is one of the world’s most vital sea lanes for oil shipments. It can conduct sporadic, low-level attacks that do not necessarily provoke a major U.S. or Arab reaction, but create sudden risk premiums in petroleum prices. The UAE and Saudi Arabia have sought to find alternatives to bypass the strait.


Oil prices rose as much as 4% on Thursday following attacks on two tanker ships off the coast of Iran, which the Trump administration has blamed on Tehran. It occurred near the Strait of Hormuz which is one of the world’s most vital sea lanes for oil shipments. It can conduct sporadic, low-level attacks that do not necessarily provoke a major U.S. or Arab reaction, but create sudden risk premiums in petroleum prices. The UAE and Saudi Arabia have sought to find alternatives to bypass the strait.
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Company: cnbc, Activity: cnbc, Date: 2019-06-14  Authors: weizhen tan
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'Sporadic' attacks from Iran's increased presence is a risk to oil, says US think tank

Fire and smoke billow from the Norwegian owned Front Altair tanker, which was said to have been attacked in the Gulf of Oman. ISNA | AFP | Getty Images

Analysts have played down fears of a huge spike in oil prices this year, citing the economic slowdown and trade war — but rising tensions in the Middle East could be a threat to the energy markets, according to a U.S.-based think tank. Oil prices rose as much as 4% on Thursday following attacks on two tanker ships off the coast of Iran, which the Trump administration has blamed on Tehran. The attacks in the Gulf of Oman, which involved Japanese and Norwegian vessels, renewed fears of conflict in the Middle East after a series of strikes on oil tankers last month. It occurred near the Strait of Hormuz which is one of the world’s most vital sea lanes for oil shipments. Such incidents “can lead to immediate price rises” in oil, said Anthony Cordesman of the Center for Strategic and International Studies in a note.

Iran also does not have to launch a major war. It can conduct sporadic, low-level attacks that do not necessarily provoke a major U.S. or Arab reaction, but create sudden risk premiums in petroleum prices. Anthony Cordesman Center for Strategic and International Studies

Iran’s growing presence

Tensions between the U.S. and Iran are already high after the Trump administration withdrew from an international nuclear pact with Tehran in May last year. The Islamic Republic has repeatedly threatened to block traffic in the Strait of Hormuz in retaliation for U.S. sanctions on Iran. Iran can use its naval, air or missile forces to attack ships anywhere in the Gulf, or use proxies to do so, said Cordesman. “Iran also does not have to launch a major war. It can conduct sporadic, low-level attacks that do not necessarily provoke a major U.S. or Arab reaction, but create sudden risk premiums in petroleum prices,” he wrote. Those attacks can be carried out by ships without Iranian flags, or operators not wearing Iranian uniforms, “that cannot be directly tied to actions by the Iranian government,” Cordesman said. Furthermore, he pointed to the growing Iranian naval presence in the Gulf of Oman and the Gulf of Aden near Yemen, ostensibly to prevent smuggling and deal with Somali pirates.

Limited route options

In addition, there are “limited options” to bypass the Strait of Hormuz, which is the world’s most important choke point for oil shipments, Cordesman wrote. The U.S. Energy Information Administration estimated a record 18.5 million barrels per day of sea-borne oil passed through the waterway in 2016, and it accounted for a third of such sea-borne traded oil and other liquids in 2015. Most of the crude exported from Saudi Arabia, Iran, the United Arab Emirates (UAE), Kuwait and Iraq passes through the strait, which lies between the Persian Gulf and the Gulf of Oman. The UAE and Saudi Arabia have sought to find alternatives to bypass the strait. But existing alternatives are limited, said Cordesman. “The only options to this traffic by sea are a limited pipeline through Iraq to a port in Turkey that offers little real-world surplus capacity,” he said. There is another bigger pipeline through Saudi Arabia to a port at Yanbu on the Red Sea, but “even in a best case, this amounts to less than 20% of the petroleum that now flows daily out of the Gulf,” he wrote. Furthermore, such alternatives are also subjected to risk, Cordesman pointed out, citing that Saudi Arabia shut down the Yanbu pipeline after an attack by armed drones in May this year. Only Saudi Arabia and the UAE have pipelines that can ship crude outside the Persian Gulf and still have additional pipeline capacity to circumvent the Strait of Hormuz, he indicated. Even so, the total capacity from both countries was only 6.6 million barrels per day at the end of 2016. — Reuters contributed to this report.

WATCH: Two tankers on fire after attack in Gulf of Oman


Company: cnbc, Activity: cnbc, Date: 2019-06-14  Authors: weizhen tan
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The price of apples is soaring in China, and Beijing is showing concern

The price of apples in China has surged nearly 30%, and consumers are cutting their purchases of the fruit, according to data from grocery delivery platform Dada-JD Daojia. Government figures released Wednesday showed China’s consumer price index rose in May to 2.7%, its highest in more than a year, boosted by an 18.2% climb in pork prices and a 26.7% increase in fruit prices. African swine fever has hit millions of pigs, while bad weather has hit the fruit crop. The cost of half a kilogram of a


The price of apples in China has surged nearly 30%, and consumers are cutting their purchases of the fruit, according to data from grocery delivery platform Dada-JD Daojia. Government figures released Wednesday showed China’s consumer price index rose in May to 2.7%, its highest in more than a year, boosted by an 18.2% climb in pork prices and a 26.7% increase in fruit prices. African swine fever has hit millions of pigs, while bad weather has hit the fruit crop. The cost of half a kilogram of a
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The price of apples is soaring in China, and Beijing is showing concern

The price of apples in China has surged nearly 30%, and consumers are cutting their purchases of the fruit, according to data from grocery delivery platform Dada-JD Daojia.

That’s just one example in several jumps in food prices in the country. The rapid increase is worth watching for any impact on consumer sentiment and spending, especially since Beijing is putting great emphasis on consumption as a way to keep the economy steadily growing.

Government figures released Wednesday showed China’s consumer price index rose in May to 2.7%, its highest in more than a year, boosted by an 18.2% climb in pork prices and a 26.7% increase in fruit prices.

African swine fever has hit millions of pigs, while bad weather has hit the fruit crop.

The cost of half a kilogram of apples jumped to 15.19 yuan at the beginning of June from 11.81 yuan at the end of April, Dada-JD Daojia said. That’s an increase from about $1.55 a pound to nearly $2 per pound.


Company: cnbc, Activity: cnbc, Date: 2019-06-13  Authors: evelyn cheng
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Dow futures rise as oil prices surge on tanker incident in the Gulf of Oman

U.S. stock index futures were slightly higher Thursday, after President Donald Trump declined to set a deadline on levying tariffs on another $325 billion of Chinese goods. Oil prices pared some of their recent losses on Thursday, following a sharp sell-off in the previous session. Crude futures tumbled as much as 4% on Wednesday, slipping to near five-month lows amid continued increases in U.S. crude stockpiles and concerns about lower demand growth. Oil prices rebounded more than 2% Thursday m


U.S. stock index futures were slightly higher Thursday, after President Donald Trump declined to set a deadline on levying tariffs on another $325 billion of Chinese goods. Oil prices pared some of their recent losses on Thursday, following a sharp sell-off in the previous session. Crude futures tumbled as much as 4% on Wednesday, slipping to near five-month lows amid continued increases in U.S. crude stockpiles and concerns about lower demand growth. Oil prices rebounded more than 2% Thursday m
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Dow futures rise as oil prices surge on tanker incident in the Gulf of Oman

U.S. stock index futures were slightly higher Thursday, after President Donald Trump declined to set a deadline on levying tariffs on another $325 billion of Chinese goods.

Around 6 a.m. ET, Dow futures indicated a positive open of more than 60 points. Futures on the S&P and Nasdaq were both seen slightly higher.

Oil prices pared some of their recent losses on Thursday, following a sharp sell-off in the previous session. Crude futures tumbled as much as 4% on Wednesday, slipping to near five-month lows amid continued increases in U.S. crude stockpiles and concerns about lower demand growth.

Oil prices rebounded more than 2% Thursday morning amid reports of a tanker incident in the Gulf of Oman.

International benchmark Brent crude traded at around $61.58 during early morning deals, up nearly 3%, while U.S. West Texas Intermediate (WTI) stood at $52.38, up more than 2%.

On the data front, import prices for May and the latest weekly jobless claims figures will both be released at around 8:30 a.m. ET.

Broadcom is expected to report its latest quarterly earnings results after market close.

Market focus is largely attuned to global trade developments, amid intensifying tensions between the world’s two largest economies.

Expectations that trade officials from the U.S. and China will clinch a deal on the side-lines of a G20 meeting in Osaka on June 28-29 have been fading in recent days.

Trump, who has said he still has plans to meet with Xi later this month, has repeatedly threatened to escalate an already months-long trade war by putting tariffs on almost all of the remaining Chinese imports that are not already impacted by U.S. charges.

Washington and Beijing have imposed tariffs on billions of dollars’ worth of one another’s goods since the start of 2018, battering financial markets and souring business and consumer sentiment.


Company: cnbc, Activity: cnbc, Date: 2019-06-13  Authors: sam meredith
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Explosions on two oil tankers near Iran send oil prices 2% higher

Oil prices jumped as much as 4% on Thursday following attacks on tanker ships off the coast of Iran, renewing fears of conflict in the Middle East following a series of strikes last month. The attacks occurred in the Gulf of Oman, near the Strait of Hormuz, the world’s busiest sea lane for oil shipments. Brent crude, the international benchmark for oil prices, was up $1.22, or 2%, at $61.19 per barrel around 12:30 p.m. Oil prices earlier fell toward five-month lows on Thursday, continuing a stee


Oil prices jumped as much as 4% on Thursday following attacks on tanker ships off the coast of Iran, renewing fears of conflict in the Middle East following a series of strikes last month. The attacks occurred in the Gulf of Oman, near the Strait of Hormuz, the world’s busiest sea lane for oil shipments. Brent crude, the international benchmark for oil prices, was up $1.22, or 2%, at $61.19 per barrel around 12:30 p.m. Oil prices earlier fell toward five-month lows on Thursday, continuing a stee
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Company: cnbc, Activity: cnbc, Date: 2019-06-13  Authors: natasha turak tom dichristopher, natasha turak, tom dichristopher
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Explosions on two oil tankers near Iran send oil prices 2% higher

Oil prices jumped as much as 4% on Thursday following attacks on tanker ships off the coast of Iran, renewing fears of conflict in the Middle East following a series of strikes last month.

The vessels sustained significant damage and their crews have been evacuated, according to shipping agents and chartering sources. The attacks occurred in the Gulf of Oman, near the Strait of Hormuz, the world’s busiest sea lane for oil shipments.

It was not immediately clear who was responsible for the attacks, but the incident occurred against the backdrop of heightened tension within the Middle East and between the U.S. and Iran. The Iranian leadership has repeatedly threatened to block traffic in the Strait of Hormuz in retaliation for U.S. sanctions on the Islamic Republic.

Brent crude, the international benchmark for oil prices, was up $1.22, or 2%, at $61.19 per barrel around 12:30 p.m. ET (1630 GMT). Brent earlier rose more than 4% to $62.64.

U.S. West Texas Intermediate crude rose $1.09, or 2.1%, to $52.23, after topping out at $53.45 earlier in the session.

Oil prices earlier fell toward five-month lows on Thursday, continuing a steep slide fueled by concerns that the U.S.-China trade war will slow global growth and dent fuel demand. On Wednesday, crude futures fell 4% on the ongoing demand fears and another big jump in U.S. crude stockpiles.

OPEC on Thursday cut its forecast for oil demand growth in 2019 as the 14-nation producer group pumped at its lowest level in five years.

But the attacks in the Gulf of Oman renewed geopolitical concerns that have largely abated in recent weeks.

“This is the kind of nightmare headline that you don’t necessarily want to wake up to,” John Kilduff, founding partner at energy hedge fund Again Capital, told CNBC’s “Squawk Box.”

The Trump administration believes it knows who is responsible for the incident and will make its conclusions public on Thursday, according to Bloomberg News. Separately, a spokesperson for the Saudi-led military coalition waging war in Yemen said he can connect Thursday’s attack to a previous tanker strike by Yemen’s Iran-backed Houthi rebels, Reuters reported.

Iran has been hosting Japanese Prime Minister Shinzo Abe for a two-day visit aimed at easing tensions between Tehran and Washington. Iranian Foreign Minister Javad Zarif addressed Thursday’s incident on Twitter, writing, “Suspicious doesn’t begin to describe what likely transpired this morning.”

The Iranian navy is investigating the incidents, according to state-owned news agency IRNA. The crew aboard the ships were initially picked up by nearby ships, but have been transferred to Iranian rescue vessels and brought to a port in southern Iran, according to IRNA.

A spokesman for the U.S. Navy’s Fifth Fleet in Bahrain told The Associated Press that his command was “aware” of the incident and was seeking further details. U.S. naval ships are in the area and are “rendering assistance” after forces in the region received two separate distress calls, the Fifth Fleet said.


Company: cnbc, Activity: cnbc, Date: 2019-06-13  Authors: natasha turak tom dichristopher, natasha turak, tom dichristopher
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Oil prices fall more than 2% after another big jump in US crude stockpiles

Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain. Oil prices sank on Wednesday after government data showed a large increase in U.S. crude stockpiles for the second week in a row and as the market continues to grapple with concerns about weakening fuel demand. Brent crude, the international benchmark for oil prices, was down $1.22, or 2%, at $61.07 around 12:10 p.m. Crude futures fell to a nearly five-month low last week after EIA figures showed crude sto


Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain. Oil prices sank on Wednesday after government data showed a large increase in U.S. crude stockpiles for the second week in a row and as the market continues to grapple with concerns about weakening fuel demand. Brent crude, the international benchmark for oil prices, was down $1.22, or 2%, at $61.07 around 12:10 p.m. Crude futures fell to a nearly five-month low last week after EIA figures showed crude sto
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Company: cnbc, Activity: cnbc, Date: 2019-06-12  Authors: tom dichristopher
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Oil prices fall more than 2% after another big jump in US crude stockpiles

Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Oil prices sank on Wednesday after government data showed a large increase in U.S. crude stockpiles for the second week in a row and as the market continues to grapple with concerns about weakening fuel demand.

U.S. commercial crude inventories rose by 2.2 million barrels in the week through June 7, according to the U.S. Energy Information Administration. Analysts in a Reuters poll had expected stockpiles to fall by 481,000 barrels.

Brent crude, the international benchmark for oil prices, was down $1.22, or 2%, at $61.07 around 12:10 p.m. ET (1610 GMT). Brent hit a session low at $60.30 in early morning trading.

U.S. West Texas Intermediate crude futures fell $1.35, or 2.5%, to $51.92 per barrel. WTI fell as low as $51.46 earlier in the session.

Crude futures fell to a nearly five-month low last week after EIA figures showed crude stocks surged to the highest level since July 2017. Brent is now down 19% from its 2019 high in April, while WTI is trading 22% lower over the same period.

“At a minimum, these results are going to keep traders on the sidelines, or more likely, pressing crude until it stops going down,” Michael Bradley, equity strategist at energy investment bank Tudor, Pickering, Holt & Company, said in a research note.

Oil prices have been supported by expectations that OPEC and its allies will continue to prop up prices by limiting production, but buffeted by concerns that the U.S.-China trade war will weigh on global economic growth and fuel demand.

President Donald Trump on Tuesday said he is holding up negotiations until Beijing agrees to return to the terms of negotiations laid out earlier in trade talks.

“It is constant concern about the demand outlook because of what’s happening with the situation with China,” said John Kilduff, founding partner at energy hedge fund Again Capital.

Stocks and other assets have been bolstered by hopes that the U.S. Federal Reserve will cut interest rates and stimulate growth, but energy commodities need more evidence that economic activity will rebound, Kilduff added.

“Oil is reacting to the disease, while other assets are reacting to the cure more,” he said.

EIA on Tuesday cut its forecast for global oil demand growth to roughly 1.2 million barrels per day in 2019, down from last month’s projection of about 1.4 million bpd. OPEC and the International Energy Agency are scheduled to update their demand outlook on Thursday and Friday, respectively.

OPEC and other major producers are set to meet in the coming weeks to discuss their policy of withholding 1.2 million bpd from the market.


Company: cnbc, Activity: cnbc, Date: 2019-06-12  Authors: tom dichristopher
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Gold dips slightly on profit booking, US-China trade optimism

Gold prices dipped slightly on Tuesday as investors booked profits following robust gains over the past weeks, while rising hopes of a trade deal between China and the United States lifted equities. Spot gold dipped slightly to $1,327.41 per ounce. Global Investors, adding that strong gains last week prompted some profit booking. Lower interest rates reduce the opportunity cost of holding nonyielding bullion and weigh on the dollar. “I dont think it (gold prices) has the fundamentals to move muc


Gold prices dipped slightly on Tuesday as investors booked profits following robust gains over the past weeks, while rising hopes of a trade deal between China and the United States lifted equities. Spot gold dipped slightly to $1,327.41 per ounce. Global Investors, adding that strong gains last week prompted some profit booking. Lower interest rates reduce the opportunity cost of holding nonyielding bullion and weigh on the dollar. “I dont think it (gold prices) has the fundamentals to move muc
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Gold dips slightly on profit booking, US-China trade optimism

Gold prices dipped slightly on Tuesday as investors booked profits following robust gains over the past weeks, while rising hopes of a trade deal between China and the United States lifted equities.

However, increasing expectations the U.S. Federal Reserve would proceed with an interest rate cut this year pressured the dollar, supporting bullion rates.

Spot gold dipped slightly to $1,327.41 per ounce. Prices had hit a 14-month high of $1,348.08 on June 7.

U.S. gold futures settled 0.1% higher at $1,328.50 per ounce.

With fears easing that the United States would impose trade tariffs with Mexico, investors are now optimistic that U.S. President Donald Trump could shelve threats to impose more tariffs on China as well. He is expected to meet with President Xi Jingping at a Group of 20 summit on June 28-29.

“People think there is going to be a sort-of resolution at the end of this month with tariffs when President Trump meets with Xi,” said Michael Matousek, head trader at U.S. Global Investors, adding that strong gains last week prompted some profit booking.

The trade dispute between Beijing and Washington has toppled markets since its inception more than a year ago and raised concerns of a global economic slowdown, prompting central banks around the world to keep a hold on interest rates.

“The rhetoric around Fed rates cut is weakening the dollar, which will help drive gold,” Matousek said. Lower interest rates reduce the opportunity cost of holding nonyielding bullion and weigh on the dollar.

Investors now see the U.S. Federal Reserve cutting rates as well, with Fed fund futures now pricing in more than two 25-basis point rate cuts by year-end.

Markets await consumer price index data on Wednesday, closely watched by the Fed as an inflation indicator, and Retail sales on Friday for indication on whether tariffs are slowing the economy.

“Stronger equity markets has drawn money away from gold,” said Rob Lutts, chief investment officer at Cabot Wealth Management. “I dont think it (gold prices) has the fundamentals to move much higher. It has exhausted its run right here.”

Other precious metals did not resonate with bullion’s move, with silver up 0.6% at $14.75 per ounce and platinum gaining nearly 1% to $809.50 per ounce.

Among other precious metals, palladium extended gains for a fourth straight session, climbing 0.9% to a six-week high at $1,395.01 per ounce.


Company: cnbc, Activity: cnbc, Date: 2019-06-11
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US crude falls 1.4% in delayed settle amid uncertainty on supply cuts, US-China tariffs

Front-month Brent crude futures, the international benchmark for oil prices, fell $1 per barrel, or 1.6%, to $62.29. Moscow is considering whether further cuts could allow the United States to take Russian market share and has yet to signal whether it will continue to curb its supply. Novak said he could not rule out a drop in oil prices to $30 per barrel if the global deal was not extended. But analysts said there were still concerns about the health of the global economy with no signs of an en


Front-month Brent crude futures, the international benchmark for oil prices, fell $1 per barrel, or 1.6%, to $62.29. Moscow is considering whether further cuts could allow the United States to take Russian market share and has yet to signal whether it will continue to curb its supply. Novak said he could not rule out a drop in oil prices to $30 per barrel if the global deal was not extended. But analysts said there were still concerns about the health of the global economy with no signs of an en
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US crude falls 1.4% in delayed settle amid uncertainty on supply cuts, US-China tariffs

Oil prices settled lower after a choppy trading session on Monday, as major producers Saudi Arabia and Russia had yet to agree on extending an output-cutting deal and U.S.-China trade tensions continued to threaten demand for crude.

U.S. West Texas Intermediate crude futures settled 73 cents lower at at $53.26 per barrel, falling 1.4% on the day and settling later than usual on Monday.

Front-month Brent crude futures, the international benchmark for oil prices, fell $1 per barrel, or 1.6%, to $62.29.

Saudi Energy Minister Khalid al-Falih said on Monday that Russia was the only oil exporter still undecided on the need to extend the output deal agreed by top producers.

OPEC and some non-members, including Russia, have withheld supplies since the start of the year to prop up prices.

Moscow is considering whether further cuts could allow the United States to take Russian market share and has yet to signal whether it will continue to curb its supply.

Yet Russian energy minister Alexander Novak said there is a still a risk that oil producers pump out too much crude and prices fall sharply. Novak said he could not rule out a drop in oil prices to $30 per barrel if the global deal was not extended.

“Indeed, there are big risks of over-production. But on the whole … we need to analyze deeper and look at how the events will develop in June in order to take a balanced decision at the joint OPEC+ meeting in July.”

Many oil exporting countries have confirmed they are prepared to hold a policy meeting with OPEC in Vienna over July 2-4, instead of the scheduled date later this month, Novak said.

A deal between the United States and Mexico to combat illegal migration from Central America late last week removed the threat of U.S. tariffs on goods imported from Mexico, buoying markets on Monday.

But analysts said there were still concerns about the health of the global economy with no signs of an end in sight to the United States’ trade war with China.

U.S. President Donald Trump said additional tariffs on Chinese goods were ready to kick in after the G20 summit this month if no trade deal is reached with China.


Company: cnbc, Activity: cnbc, Date: 2019-06-10
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Italy and the twin problem of feuding politicians and frequently plunging bond prices

During the recent European parliamentary elections, Italy saw a significant reframing of its government’s political dynamics. Italian political stability has long been an oxymoronic punchline, with the current government under Giuseppe Conte the 66th to form since World War II. In an interview last week, the governor of the Banca d’Italia, Ignazio Visco, told me the yield on Italian government debt was “too high.” One solution to reignite Italy’s sluggish growth, Visco argues, is to “harmonize a


During the recent European parliamentary elections, Italy saw a significant reframing of its government’s political dynamics. Italian political stability has long been an oxymoronic punchline, with the current government under Giuseppe Conte the 66th to form since World War II. In an interview last week, the governor of the Banca d’Italia, Ignazio Visco, told me the yield on Italian government debt was “too high.” One solution to reignite Italy’s sluggish growth, Visco argues, is to “harmonize a
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Company: cnbc, Activity: cnbc, Date: 2019-06-04  Authors: willem marx
Keywords: news, cnbc, companies, twin, italys, debt, plunging, politicians, m5s, italian, political, visco, problem, feuding, bond, elections, told, frequently, prices, european, italy


Italy and the twin problem of feuding politicians and frequently plunging bond prices

During the recent European parliamentary elections, Italy saw a significant reframing of its government’s political dynamics.

Even if you discount for the fact that EU elections typically attract a significantly lower turnout than national polls, it was still striking that the government’s junior coalition partner, the anti-immigration and euroskeptic Lega party, saw its popular support double from the 17% of voters it attracted in last year’s general election. The anti-establishment, anti-austerity Five Star Movement (M5S), which had won roughly a third of all votes in those elections last March, meanwhile watched its support crumble by half.

Italian political stability has long been an oxymoronic punchline, with the current government under Giuseppe Conte the 66th to form since World War II. But after a year of often fractious partnership the two deputy prime ministers, Lega chief Matteo Salvini and Luigi di Maio of M5S, appear to be even less simpatico than was the case when they announced their surprising tie-up last May after months of post-electoral wrangling.

The past twelve months have provided no end of drama, gossip and intrigue for political observers in Rome, with cabinet ministers fired amid corruption allegations and insults hurled publicly at senior European Commission officials during disputes over Italy’s finances. But for investors — and particularly the owners of Italian government debt, among them most Italian banks — this continued instability, and now the latest round of political uncertainty engendered by the EU election results, has become less of a genteel spectator sport and more of a gut-wrenching roller-coaster ride.

In an interview last week, the governor of the Banca d’Italia, Ignazio Visco, told me the yield on Italian government debt was “too high.” But he was at pains to point out in the central bank’s annual report on Italy’s economy that the country’s household and corporate debt levels are lower than the European average. He told me Italy has to be “credible in the ability to reduce the burden of debt,” and that investors must perceive that credibility “starting now” to avoid the possibility that businesses and consumers start really feeling the impact of the state’s high borrowing costs. The prospect that this would happen soon, Visco concluded, was now “close to a razor edge.”

One solution to reignite Italy’s sluggish growth, Visco argues, is to “harmonize and recompose” the country’s antiquated and disjointed tax code. This suggestion was seized on last week by Salvini, who has tried but so far failed to prioritize lower taxes, and in particular proposals for a flat tax rate. But with any attempt to reduce taxes, writes Lorenzo Codogno, former chief economist at the Italian treasury department, “the Lega may soon enter a collision course with its ally,” warning that the market had proved “ultra sensitive” to political or fiscal announcements or changes.

Salvini told me ahead of the European elections that he had no plans to call it a day with his M5S coalition partners. But after a strongly worded public statement on Monday evening, it is clear that the coalition’s consensus choice for prime minister, professor turned political peacemaker Conte, is no longer prepared to wait any longer for these two parties to end their public feuding and address Italy’s long list of challenges.

However, for investors concerned about a fresh set of national elections or another battle royale with Brussels, there are those who continue to counsel calm. Wolfango Piccoli, the co-president of political intelligence consultancy Teneo Intelligence, wrote in a recent research note to clients that the “base case remains that Italy will not return to the polls.” He also insists that it is “somewhat doubtful” that a newly-installed European Commission will take a hard line on Italy and try to initiate an excessive deficit procedure that would further damage confidence.

Last year. Banca d’Italia’s Visco published a book about Italy’s challenges as it emerged from the 2008 financial crash and the European sovereign debt crisis. He titled it “Difficult Years.” I asked him on Friday how his country’s current set of circumstances stacked up in the context of that era. He responded with a smile and the laconic understatement you often expect from a central banker. “This year is difficult.”


Company: cnbc, Activity: cnbc, Date: 2019-06-04  Authors: willem marx
Keywords: news, cnbc, companies, twin, italys, debt, plunging, politicians, m5s, italian, political, visco, problem, feuding, bond, elections, told, frequently, prices, european, italy


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Is China really paying for Trump’s tariffs? It isn’t so straightforward

Trump has on many occasions said the U.S. is collecting billions of dollars in tariffs from China. But Trump could be right in that, eventually, it may be the Chinese that pay for the consequences of those tariffs, economists said. That would happen if exporters in China slash the prices they charge their American customers — and therefore earn lower profits — to remain competitive. Despite some studies pointing to American consumers eventually paying the cost of tariffs, the U.S. inflation rate


Trump has on many occasions said the U.S. is collecting billions of dollars in tariffs from China. But Trump could be right in that, eventually, it may be the Chinese that pay for the consequences of those tariffs, economists said. That would happen if exporters in China slash the prices they charge their American customers — and therefore earn lower profits — to remain competitive. Despite some studies pointing to American consumers eventually paying the cost of tariffs, the U.S. inflation rate
Is China really paying for Trump’s tariffs? It isn’t so straightforward Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-06-03  Authors: yen nee lee
Keywords: news, cnbc, companies, chinese, american, china, levies, economists, straightforward, consumers, tariffs, trump, paying, price, isnt, trumps, prices, really


Is China really paying for Trump's tariffs? It isn't so straightforward

U.S. President Donald Trump talks to reporters with Treasury Secretary Steven Mnuchin (L) and U.S. Trade Representative Robert Lighthizer (R) in the White House on March 8, 2018. Chip Somodevilla | Getty Images

More than a year after U.S. President Donald Trump fired the first tariff salvo that eventually led to a trade war with China, the debate about who actually bears the burden of those elevated levies has not found a definite conclusion. Trump has on many occasions said the U.S. is collecting billions of dollars in tariffs from China. In fact, the president reiterated that view over the weekend in a Twitter post, saying that “China is paying a heavy cost in that they will subsidize goods to keep them coming, devalue their currency.” But Trump’s claim has been disputed by many American businesses that import Chinese goods, which argue that they’re the ones bearing the brunt of those duties. According to economists, both sides could be right.

Footing the bill

When Chinese goods arrive in America, importers — which are generally American but can also be U.S.-registered entities of foreign firms — pay tariffs to customs in order to receive their products. In that sense, American businesses are right that they’re the ones footing the bill. But Trump could be right in that, eventually, it may be the Chinese that pay for the consequences of those tariffs, economists said. That would happen if exporters in China slash the prices they charge their American customers — and therefore earn lower profits — to remain competitive. Effectively, that situation would mean the Chinese companies are paying for the levies going into U.S. government coffers.

More often than not, the “real pain” of tariffs is split between the country that impose those levies and the nation targeted, according to Simon Baptist, global chief economist and managing director in Asia at consultancy The Economist Intelligence Unit. That means that everyone along the supply chain of a product targeted by Trump’s tariffs — from the manufacturer and exporter in China, to importer and consumer in the U.S. — will bear some burden. And economists are increasingly focusing their research on how that burden is shared among those involved in moving goods from China to the U.S. “How the real pain — along with the smaller amount of gain — is spread around depends on how prices and quantities in the market adjust in response,” Baptist wrote in a May note. He explained that, generally, if China is the only supplier for a product, “more (or all) of the tariff is passed on to US consumers, and the pain is felt by the latter.” But in the event that China is merely one of the many countries that sell a product, “prices do not change much and Chinese suppliers lose market share. Then the pain is felt mostly by Chinese producers.” “So, the answer very much varies by product, which is why both sides have been selecting the targets so carefully,” Baptist wrote.

What do we know so far?

An expanding body of research has found that the burden of tariffs has mostly fallen on the U.S. One of the latest papers published on the topic is by economics researchers from the International Monetary Fund, Harvard University, University of Chicago and the Federal Reserve Bank of Boston. Using price data collected at the U.S. borders and at retailers, the researchers found “nearly complete pass through of tariffs” to America. In other words, little cost is falling on the Chinese manufacturers. The investigation remains in progress into how much, if at all, retail prices are rising, although some preliminary findings suggest that retailers have absorbed “much of the price impact” and earn lower profit margins from products impacted by Trump’s tariffs.

How the real pain — along with the smaller amount of gain — is spread around depends on how prices and quantities in the market adjust in response. Simon Baptist economist, The Economist Intelligence Unit

Other studies, though, suggest that consumer prices have gone up in the U.S. as a result of higher levies. One such paper, focusing on washing machines, was published in April by researchers from the Federal Reserve and the University of Chicago. Washers were among the earliest products targeted by the Trump administration, with tariffs from 20% to 50% imposed on nearly all imported large residential washing machines, regardless of their countries of origin. The impact, according to the study, was a nearly 12% jump in the price of washers — both imported and domestically produced — in the immediate four to eight months after the implementation of the new levies. In addition, the study found that the price of dryers increased by the same magnitude, although they were not subject to elevated tariffs. William Reinsch, senior advisor and Scholl Chair in international business at think tank Center for Strategic and International Studies, cited that particular study in an April commentary on the impact of tariffs. He explained that prices of both items went up “because most consumers buy washers and dryers together, and manufacturers realized they could get away with increasing the price of both and simply pocket the extra money.” On why the price of washers made in the U.S. also went up even though they’re not subject to tariffs, Reinsch said that phenomenon “illustrates the central point of protection — to allow domestic producers to raise prices and make more money so they can recover from the damage done to them by the imports.”

Not all products will react to tariff the same way as washing machines due to different demand and supply dynamics at play. But another study published in March looking at the collective impact of all tariffs imposed by the Trump administration in 2018 found that consumers are bearing the full cost. “We find that the U.S. tariffs were almost completely passed through into U.S. domestic prices, so that the entire incidence of the tariffs fell on domestic consumers and importers up to now, with no impact so far on the prices received by foreign exporters. We also find that U.S. producers responded to reduced import competition by raising their prices,” wrote researchers from the Federal Reserve Bank of New York, Columbia University and Princeton University That change in prices has led to an estimated reduction in U.S. real income of $1.4 billion per month by the end of last year, the researchers said. Despite some studies pointing to American consumers eventually paying the cost of tariffs, the U.S. inflation rate has been relatively stable, according to the Bureau of Labor Statistics’ Consumer Price Index. Mary Daly, president and chief executive of the Federal Reserve Bank of San Francisco, said part of the reason inflation has not ticked up is “firms are still not passing along” the increase in costs to consumers. Instead, they appear to mostly be bearing the brunt of the levies themselves. Still, that analysis has not been universally confirmed. In fact, some research indicates that Chinese exporters may be the ones paying the toll. European economists Benedikt Zoller-Rydzek and Gabriel Felbermayr argued in a November 2018 paper that “Chinese firms pay approximately 75% of the tariff burden.” In particularly, their analysis found that a 25 percentage point increase in tariffs results in an average 4.5% rise in the price that U.S. consumers pay for Chinese products, but it slashes the price that producers in China charge by 20.5%.

Who really loses — the US or China?

How all parties along the supply chain are affected forms just one part of the overall economic cost of tariffs. Economists also take into account how the changes in prices and sales volume affect the behavior of consumers and companies in the long run. That’s ultimately more important for economic growth. Generally, economists predicted that the Chinese economy — instead of the U.S. — will experience a larger hit from Trump’s tariffs. That’s partly because the American economy is on better footing, and over the longer term, China may have more to lose because of its larger reliance on exports. Research firm Oxford Economics said in a May report that, if the U.S. and China impose elevated tariffs on all goods they trade, the American economy in 2020 is estimated to grow by 0.5 percentage points less than a no-tariff scenario. Meanwhile, China’s economic setback is expected to be 1.3 percentage points, the report said.

Yangshan Deepwater Container Port in Shanghai, China. Qilai Shen | Corbis Historical | Getty Images


Company: cnbc, Activity: cnbc, Date: 2019-06-03  Authors: yen nee lee
Keywords: news, cnbc, companies, chinese, american, china, levies, economists, straightforward, consumers, tariffs, trump, paying, price, isnt, trumps, prices, really


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