Chinese Economy

Market Review 15-02

Market Review 15-02

Forex News

Yuan Falls on Weak CPI, PPI; U.S. Dollar Rises Despite Retail Sales Data

From: Investing.com

The yuan fell against the U.S. dollar on Friday in Asia after data showed China’s January Consumer Price Index and Producer Price Index both missed expectations.

The country’s CPI rose 1.7% in January from a year earlier, slower than the 1.9% increase in December and below market expectations for a 1.9% rise.

Meanwhile, the PPI rose 0.1% year-on-year in January, the weakest pace since September 2016 and slowing from the previous month’s 0.9% increase.

Generally speaking, a high reading is seen as positive for the yuan, while a low reading is seen as negative for the Chinese currency.

The USD/CNY pair last traded at 6.7753 at 12:23 AM ET (5:23 GMT), up 0.1%.

Meanwhile, the U.S. dollar index that tracks the greenback against a basket of other currencies was also up 0.1% at 96.893.

The rise in the dollar came even after the U.S. Commerce Department reported on Thursday that U.S. retail sales fell for the first time in ten months in December.

CIBC said one weak reading shouldn’t prove worrisome as a strong labour market will lend support to consumer spending in the coming months.

“Still, today’s data reinforces the Fed’s cautious stance for the time being and will weigh on the USD and see yields fall,” the bank added.

The market now awaits developments in trade talks between Washington and Beijing.

U.S. President Donald Trump’s upbeat assessment of the talks earlier in the week raised hopes that the two sides might still be able to reach a deal before the March 1 deadline, but headlines that came out today suggested an agreement might still be some way off.

Citing three unnamed U.S. and Chinese officials, Bloomberg reported that the two countries have made little progress so far during their discussions in Beijing this week. They have failed to narrow the gap on issues related to structural reforms to China’s economy, according to the report.

Elsewhere, the AUD/USD pair fell 0.2%. Reserve Bank of Australia Governor Christopher Kent said in a speech in Melbourne Friday that he thinks recent weakness in the Aussie dollar might be helpful to the economy.

“While the exchange rate is still within the relatively narrow range of the past few years, the recent depreciation is helpful at the margin given that there remains spare capacity in the economy and inflation remains below target,” he said.

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EUR/GBP: Downside capped as UK government losing motion, hard Brexit still on the cards

From: FXstreet.com

  • EUR/GBP tops out in an overbought territory to prior resistance area between 0.8813/20
  • EUR/GBP traders tune into the UK Brexit Parliamentary vote and a series of amendments tabled and voted upon

EUR/GBP was better bid after the pound dropped around 1.5c vs the buck yesterday, for no apparent reason as the dollar marched on within its uptrend, with the DXY reaching as a high as 97.29. The Brexit fatigue is weighing in investor sentiment and the business climate in the UK which is leaving the pound on thin ice as the clock ticks down towards the Brexit deadline, scheduled for March 29 exit date.

Prime Minister Theresa May begged MPs on Tuesday to ‘hold their nerve’ and give her more time to secure a Brexit deal. But the question is whether she will be able to maintain political support and win concessions from the EU? We’ll see at the next vote, scheduled for 27 February. In the meantime, UK Parliament is in session at the time of writing and a series of amendments tabled and voted upon.

One of the key amendments was Blackford amendment that seeks to extend Article 50 by three months. This was rejected by votes and came of no great surprise. Another key vote that went against the government has been won by UK lawmakers 303 to 258 which was a government motion to reaffirm support for PM May’s plan which was:

“That this house welcomes the prime minister’s statement of 12 February 2019; reiterates its support for the approach to leaving the EU expressed by this house on 29 January 2019 and notes that discussions between the UK and the EU on the Northern Ireland backstop are ongoing.”

No deal Brexit still on the cards

This was a motion that effectively asked for more time to renegotiate with the EU. However, the problem PM May now faces in losing this Commons majority means that EU leaders may feel even less inclined to offer her Brexit concessions than they already were. It has dented sterling, capping EUR/GBP’s downside.

EUR/GBP levels

Analysts at Commerzbank explained that EUR/GBP continues to consolidate around the 38.2% retracement at 0.8810:

“Currently the market remains in upside corrective mode and we are unable to rule out gains to 0.8840/90 where we look for signs of failure. We have minor support at 0.8723 and this guards the 0.8620/18 lows. Only failure at .8620/18 would suggest ongoing weakness to the base of the channel at 0.8545 and potentially the 200-week ma at 0.8357. The market stays directly offered below the 200-day ma at 0.8863, and only above here allows for a move to the 55-day ma at 0.8889 and this, together with the October 0.8941 high, are expected to contain the topside.”

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Stock Market News

U.S. negotiating multibillion-dollar fine with Facebook: report

From: Reuters.com

The U.S. government and Facebook Inc are negotiating a settlement over the company’s privacy lapses that could require the online social network to pay a multibillion-dollar fine, the Washington Post reported on Thursday.

The newspaper said that the U.S. Federal Trade Commission and Facebook had not agreed on an amount, citing two people it said were familiar with the matter. Facebook reported fourth-quarter revenue of $16.9 billion and profit of $6.9 billion.

The FTC has been investigating revelations that Facebook inappropriately shared information belonging to 87 million of its users with the now-defunct British political consulting firm Cambridge Analytica.

The probe has focused on whether the sharing of data with Cambridge Analytica and other privacy disputes violated a 2011 agreement with the FTC to safeguard users’ privacy.

An eventual settlement may also mandate changes in how Facebook does business.

Facebook declined to comment directly on the Washington Post report. “We have been working with the FTC and will continue to work with the FTC,” a spokeswoman said.

The FTC declined comment.

The biggest FTC fine for a privacy lapse was $22.5 million levied on Alphabet Inc’s Google in 2012. The agency has had bigger settlements on other issues.

The FTC settled with pharmaceutical company Teva Pharmaceutical Industries in 2015 for $1.2 billion to resolve antitrust violations committed by Cephalon, which it had acquired.

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Amazon To Pay $0 In Federal Taxes In 2019: Report

From: Huffpost.com

Amazon almost doubled its profits from $5.6 billion in 2017 to $11.2 billion in 2018, but the company isn’t expected to pay a cent in federal taxes this year, according to a new report.

The Institute on Taxation and Economic policy released its findings Wednesday after examining the company’s corporate filings. Amazon reported a $129 million federal income tax rebate for 2018, equaling a tax rate of negative 1 percent. (The federal corporate income tax rate is 21 percent.)

“The fine print of Amazon’s income tax disclosure shows that this achievement is partly due to various unspecified ‘tax credits’ as well as a tax break for executive stock options,” the report stated.

This would be the second year in a row that the company has avoided paying federal taxes, despite being valued at a whopping $1 trillion.

“When Congress in 2017 enacted the Tax Cuts and Jobs Act and substantially cut the statutory corporate tax rate from 35 percent to 21 percent, proponents claimed the rate cut would incentivize better corporate citizenship,” the report continued. “However, the tax law failed to broaden the tax base or close a slew of tax loopholes that allow profitable companies to routinely avoid paying federal and state income taxes on almost half of their profits.”

Amazon did not immediately respond to a request for comment.

Contrary to claims by President Donald Trump that Amazon is a “no-tax” company, it actually does pay some taxes. In 2017, the company paid a combined total of $412 million in federal, state, local and foreign taxes. In 2015, it paid $273 million. Amazon charges consumers sales taxes in all 45 states where such taxes exist, plus Washington, D.C.

But Amazon did appear to be on the hunt for tax breaks in 2017 and 2018 when it was shopping for a new location to house its second headquarters. City officials eager for Amazon’s attention offered up a slew of tax breaks and credits to lure the company.

When it announced last year it would split the new headquarters between New York City and Arlington, Virginia, with an additional operations center in Nashville, Tennessee, Amazon was poised to collect billions in performance-based incentives between the three cities.

Amazon on Thursday announced it was canceling plans for a New York City-based headquarters.

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Cryptocurrency News

Luxembourg Passes Blockchain Framework Bill Into Law

From: Cointelegraph.com

Luxembourg lawmakers have passed bill 7363 into law, facilitating the use of blockchain technology in financial services, according to an official announcement published by the country’s parliament, the Chamber of Deputies, on Feb. 14.

The new law aims provide financial market participants with more transparency and legal certainty in regard to the circulation of securities with blockchain technology. The bill is also geared to make the transfer of securities more efficient by reducing the number of intermediaries.

According to local news outlet Luxembourg Time, the bill grants transactions done with blockchain technology the same legal status and protection as those done through traditional means. Out of 60 parliamentarians, only two members of the left-wing party déi Lénk reportedly voted against the bill.

Luxembourg is known for its proactive approach to blockchain technology. In November 2018, the University of Luxembourg partnered with Luxembourg-based trading platform VNX Exchange in a bid to improve the security of digital assets. Within the collaboration, the University of Luxembourg purportedly helps VNX develop higher levels of network security for digital assets.

In March, the Luxembourg Financial Regulator CSSF issued a warning against investments in cryptocurrencies and initial coin offerings (ICOs). The regulator noted in the warning that cryptocurrencies are not backed by any central bank, and warned against the volatility of virtual currencies, stressing that deals are often not entirely transparent and business models are incomprehensible.

Meanwhile, a study conducted by research company Ipsos on behalf of Dutch ING Bank B.V. in June revealed that the lowest rate of people owning cryptocurrency — 4 percent — rate is in Luxembourg.

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