Scrapping India’s trade privileges could hit U.S. consumers, senators say

Scrapping India's trade privileges could hit U.S. consumers, senators say

NEW DELHI (Reuters) – A U.S. plan to end preferential duty-free imports of up to $5.6 billion from India could raise costs for American consumers, two U.S. senators have told their country’s trade office, urging a delay in adopting the plan, and seeking more negotiations.

FILE PHOTO: A man holds the flags of India and the U.S. while people take part in the 35th India Day Parade in New York August 16, 2015. REUTERS/Eduardo Munoz/File Photo

If President Donald Trump presses ahead with his plan to end the Generalized System of Preferences (GSP) for India, it could lose the status in early May, Indian officials have said, raising the prospect of retaliatory tariffs.

India is the world’s largest beneficiary of the GSP, dating from the 1970s, but trade ties with the U.S. have widened over what Trump calls its high tariffs and concerns over New Delhi’s e-commerce policies.

“While we agree that there are a number of market access issues that can and should be addressed, we do remain concerned that the withdrawal of duty concessions will make Indian exports of eligible products to the United States costlier,” the senators, John Cornyn and Mark Warner, wrote.

“Some of these costs will likely be passed on to American consumers”.

In their Friday letter, the co-chairs of the Senate’s India caucus of more than 30 senators called for withdrawal to be delayed until the end of India’s 39-day general elections, which began on Thursday, with results expected on May 23.

Allowing for talks to continue beyond the elections would underscore the importance of the trade ties, presenting an opportunity to resolve market access issues and improve the overall U.S.-India relationship for years to come, they added.

If the United States scraps duty-free access for about 2,000 product lines, it will mostly hurt small and medium businesses in India, such as makers of engineering goods.

Despite close political ties, trade between India and the United States, which stood at $126 billion in 2017, is widely seen to be performing at nearly a quarter of its potential.

Trade relations suffered in the past few months after India adopted new rules on e-commerce reining in how companies such as Amazon.com Inc and Walmart Inc-backed Flipkart do business.

Last June, India said it would step up import duties varying from 20 percent to 120 percent on a slew of U.S. farm, steel and iron products, angered by Washington’s refusal to exempt it from new steel and aluminum tariffs.

But it has since repeatedly delayed adopting the higher duties.

Reporting by Aditya Kalra; Writing by Sankalp Phartiyal; Editing by Krishna N. Das and Clarence Fernandez

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Share rally cools as Trump turns trade heat on Europe

Share rally cools as Trump turns trade heat on Europe

NEW YORK (Reuters) – The dollar fell and the rally in global equities lost steam on Tuesday as a U.S. threat to slap tariffs on hundreds of European goods and a downgrade by the International Monetary Fund in its global economic growth forecasts dimmed the appetite for risk.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., April 9, 2019. REUTERS/Brendan McDermid

The IMF warned that growth could slow further due to trade tensions and a potentially disorderly British exit from the European Union. China, Germany and other major economies might need to take short-term actions to prop up growth, the IMF said.

U.S. Treasury Secretary Steven Mnuchin told lawmakers the Trump administration is preparing for the possibility of a “hard Brexit.”

Asian shares rose to an eight-month high overnight but U.S. and European markets fell after President Donald Trump welcomed the World Trade Organization’s finding that Europe’s subsidies to planemaker Airbus had hurt the United States.

The U.S. Trade Representative on Monday proposed a range of EU products, from large commercial aircraft and parts to dairy products and wine, to target as retaliation for subsidies given to Airbus.

Equities fell in Europe and on Wall Street, poised to snap an eight-day rally for the S&P 500, after an EU official said the European trade bloc was beginning preparations to retaliate over Boeing subsidies.

Uncertainty over tariffs and trade between the United States and China have dented business confidence and led corporate investment to dry up, said Hank Smith, co-chief investment officer at The Haverford Trust Co in Radnor, Pennsylvania.

“Business investment is now being put on hold because of the uncertainty around tariffs,” he said.

A weak U.S.-China trade deal probably is priced into the market, but a very good trade deal is not, Smith said.

“Even if it’s not so good, it is going to have a positive effect on the economy because it is going to remove an uncertainty,” he said.

MSCI’s all-country world index, a gauge of stock performance in 47 countries, fell 0.37%. The pan-European STOXX 600 index closed down 0.47% and the FTSEurofirst 300 index of leading regional shares fell 0.41%.

Airbus said it saw no legal basis for the U.S. move toward imposing tariffs on its aircraft and warned of deepening trade tensions.

Shares in Airbus fell 1.86% and many of its key suppliers lost between 0.7% and 1.2%. Boeing shares fell 1.5% ahead of its aircraft delivery and order numbers for March.

On Wall Street, the Dow Jones Industrial Average fell 207.09 points, or 0.79%, to 26,133.93. The S&P 500 lost 18.79 points, or 0.65%, to 2,876.98 and the Nasdaq Composite dropped 38.62 points, or 0.49%, to 7,915.26.

The yen rose as traders favored the safe-haven currency in the wake of the U.S. proposal for tariffs on European goods.

The dollar index fell 0.04%, with the euro up 0.05% to $1.1265. The Japanese yen strengthened 0.35% versus the greenback at 111.11 per dollar.

U.S. Treasury yields slid, pressured by concerns about the IMF’s global economic outlook for 2019 as well as a round of headlines on Britain’s messy departure from the EU.

In Europe, government borrowing costs in southern countries hit fresh lows, pushed down by hopes that this week’s European Central Bank meeting will reinforce expectations for supportive policy measures in the months ahead.

Benchmark U.S. 10-year Treasury notes rose 6/32 in price to push yields down to 2.4953%.

Oil fell from a five-month high above $71 a barrel after Russia signaled a possible easing of a supply-cutting deal with the Organization of the Petroleum Exporting Countries.

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Brent, the global benchmark, rose to $71.34 a barrel, the highest since November, but later settled down 49 cents at $70.61 per barrel. U.S. crude also hit a November high of $64.79, but settled down 42 cents at $63.98.

Gold rose to its highest in more than a week as the dollar and equities weakened.

U.S. gold futures settled 0.5% higher at $1,308.3 an ounce.

Reporting by Herbert Lash; Editing by Dan Grebler and Phil Berlowitz

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Overdone? Short EU equities ‘most crowded’ trade for first time

Overdone? Short EU equities 'most crowded' trade for first time

LONDON (Reuters) – Fund managers have named bearish bets in European equities as the “most crowded” trade in Bank of America Merrill Lynch’s survey for the first time in its history, suggesting sentiment for one of the world’s most shunned markets may rise from here.

FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, March 12, 2019. REUTERS/Staff

Investors have pulled cash from European stocks over the past year, betting the market would be weaker compared with the United States and other regions as euro zone economic growth slows and Britain’s chaotic exit from the European Union raises concerns about disruption to its economy.

Short European equities replaced long emerging markets, which held the title for just one month.

The shift in investor views reflects broader uncertainty about the direction of financial markets as the Federal Reserve and ECB keep interest rates on hold amid signs that growth is slowing.

The results also suggest that fund managers believe the gloom that has seen $30 billion leave European equities this year may have been overdone.

In a note on Sunday, Morgan Stanley chief European equity strategist Graham Secker said he believes Europe is set to surprise on the upside as issues that weighed on growth in the second half of last year start to fade.

The pan-European STOXX 600 rose 0.7 percent on Tuesday to its highest since Oct. 3 and was on track for its longest winning streak in six months.

Auto stocks led the gains after the bank’s auto analysts recommended contrarian investors buy select carmakers after the survey showed investors grew more bearish on the sector.

Tentative improvements in consumer and wage data – and the improving German car sector – are a good omen, Secker said, noting that China, whose slowdown has been behind much of Europe’s malaise, is finally showing a turnaround in new export orders PMIs.

(GRAPHIC: Evolution of FMS “most crowded trade” – tmsnrt.rs/2UDJerA)

CHINA SLOWDOWN

Still, BAML’s March survey – conducted between March 8 and 14, among 239 panelists managing $664 billion in total – also indicated that investor risk appetite had continued to fall, with global equity allocations remaining at September, 2016 lows.

“The pain trade for stocks is still up,” said Michael Hartnett, BAML’s chief investment strategist.

“Despite rising profit expectations, lower rate expectations and falling cash levels, stock allocations continue to drop. There is simply no greed to sell in equities.”

A slowdown in China, the world’s No. 2 economy, topped the list of biggest tail risks, ousting the trade war, which had been investors’ main concern for the previous nine months, according to the survey.

Third on this month’s list was a corporate credit crunch.

The slight improvement in investor outlook toward the protracted trade war which has rattled markets for the past year comes as Washington and Beijing make progress in talks to agree a truce.

But reflecting the broad spectrum of views on interest rate policy, about 55 percent of those surveyed say they think the Fed will continue to hike, while 38 percent believe the hiking cycle is done.

Reporting by Josephine Mason and Helen Reid, Editing by Ed Osmond

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