FILE PHOTO: The logo of Swiss bank UBS is seen in Zurich, Switzerland, Oct. 25, 2018. REUTERS/Arnd Wiegmann
June 17, 2019
BEIJING (Reuters) – China Railway Construction Corp (CRCC) has decided not to cooperate with UBS for a planned dollar-bond sale, a spokesman at the Chinese infrastructure giant told Reuters on Monday.
Earlier, Bloomberg reported that CRCC decided against hiring UBS as a joint global coordinator on the bond sale after remarks about pigs by an economist at the Swiss bank last week sparked a public outcry in China, citing people familiar with the matter.
(Reporting by Yawen Chen and Ryan Woo; Editing by Shri Navaratnam)
FILE PHOTO: The Alibaba group logo is seen at the high profile startups and high tech leaders gathering, Viva Tech, in Paris, France, May 16, 2019. REUTERS/Charles Platiau
June 17, 2019
BEIJING (Reuters) – China’s Alibaba Group Holding has proposed a one-to-eight stock split ahead of a listing in Hong Kong later this year that is expected to raise up to $20 billion.
The split, to be presented to shareholders for a vote at an annual general meeting in Hong Kong on July 15, will increase flexibility in the firm’s capital raising activities, including the issuance of new shares, the e-commerce giant said.
The firm’s board recommends shareholders to vote in favor of the proposal, it added in its statement dated Friday but published on the company’s website on Monday.
“The … subdivision will increase the number of shares available for issuance at a lower per share price,” it added.
Alibaba has filed confidentially for a Hong Kong listing, a person familiar with the matter told Reuters earlier this month.
Alibaba has also proposed to change the ratio of ordinary shares to American Depositary Shares (ADS) to eight ordinary shares representing one ADS to neutralize the impact of share split on its ADS listed in the U.S. market.
(Reporting by Beijing Monitoring Desk; Editing by Himani Sarkar)
FILE PHOTO: A man looks at an electronic board showing the Nikkei stock index outside a brokerage in Tokyo, Japan, January 7, 2019. REUTERS/Kim Kyung-Hoon
June 17, 2019
By Tomo Uetake
TOKYO (Reuters) – Asian shares wobbled near one-week lows on Monday as investors turned cautious ahead of a closely-watched Federal Reserve meeting, while political tensions in the Middle East and Hong Kong kept risk appetite in check.
European stock were expected to open higher, with futures for Britain’s FTSE climbing 0.4% and Germany’s DAX up about 0.2%.
MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed by early afternoon, after opening slightly weaker. Japan’s Nikkei average also closed flat.
Asian markets got a quick boost after Hong Kong’s Hang Seng Index jumped as much as 1.4%. At the weekend, the territory’s leader Carrie Lam climbed down on a bill that would have allowed extradition to China.
The Hang Seng fell for three sessions in a row through Friday, after the extradition bill triggered mass protests and some of the worst unrest seen in the territory since Britain handed it back to Chinese rule in 1997.
“Last week the issue looked as if it would become another thorny point between the United States and China. As the bill is now being postponed indefinitely, things will likely calm down, which is good for markets,” said Hiroyuki Ueno, senior strategist at Sumitomo Mitsui Trust Asset Management.
Mainland Chinese shares traded within a tight range, with benchmark Shanghai Composite up 0.2% and the blue-chip CSI 300 rising 0.1%.
U.S. Secretary of State Mike Pompeo told Fox News on Sunday that President Donald Trump would raise the issue of Hong Kong’s human rights with China’s President Xi Jinping at a potential meeting of the two leaders at the G20 summit in Japan later this month.
Wall Street stocks ended lower on Friday as investors turned cautious before this week’s Fed meeting, while a warning from Broadcom on slowing demand weighed on chipmakers and added to U.S.-China trade worries.[.N]
Investors were waiting for more clues from the Fed after policymakers raised expectations for a rate cut in recent weeks amid worries about mounting fallout from the U.S.-Sino trade war.
Strong U.S. retail sales data on Friday rolled back expectations of a Fed rate cut at this week’s meeting to 17.5%, from 31% shortly before the release of the data on Friday, according to CME Group’s FedWatch tool. But bets of an easing by the July meeting remain high at 84%.
“The week ahead is likely to provide some clarification for investors on three fronts that have been a source of uncertainty. The FOMC meeting, with updated forecasts, is center stage,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.
A private gauge on eurozone’s manufacturing sector as well as U.S.-China trade frictions will also be watched closely, Chandler said.
Financial markets were sideswiped by a sudden escalation in Sino-U.S. trade tensions in early May, with growing anxiety among investors that a protracted standoff could tip the global economy into recession.
Geopolitical tensions in the Middle East added another layer of uncertainty after the United States blamed Iran for attacks on two oil tankers in the Gulf of Oman last week.
Hopes that global central banks will keep the money spigots open have helped to temper some of the fears, and all eyes are on the Fed’s two-day meeting starting on Tuesday.
The Bank of Japan also meets this week and is widely expected to reinforce its commitment to retain a massive stimulus program for some time to come.
The retail sales report also sent short-dated U.S. Treasury yields higher, flattening the yield curve.[L2N23L10H]
Benchmark 10-year notes was last at 2.106%, while two-year bond yield edged up, shrinking the spread between two- and 10-year yields to 23.7 basis points compared to more than 30 earlier this month.
A Reuters poll showed a growing number of economists expect the Fed policymakers to cut interest rates this year, although the majority still see it holding steady.
In currency markets, the dollar index against a basket of six major currencies climbed to 97.583 on Friday, its highest level in almost two weeks, after the U.S. retail sales data eased fears that the world’s largest economy is slowing sharply.
The index last stood at 97.510, while the euro fetched $1.1216, near the lower end of its weekly trading range.
Oil prices rose on Monday after U.S. Secretary of State Pompeo said Washington will take all actions necessary to guarantee safe navigation in the Middle East, as tensions mounted following attacks on tankers last week.[O/R]
Brent futures added 0.4% to $62.27 a barrel, while U.S. West Texas Intermediate (WTI) crude futures gained 0.3% to $52.67.
Spot gold eased 0.2% to $1,338.17 an ounce after hitting a 14-month peak on Friday.
Bitcoin jumped overnight to $9,391.85, its highest level in 13 months. It was last quoted at $9,193.21.
(Additional reporting by Hideyuki Sano; Editing by Shri Navaratnam & Kim Coghill)
FILE PHOTO: A high-quality diamond is seen in a jewellery shop in Milan, October 18, 2016. REUTERS/Stefano Rellandini
June 17, 2019
By Emilio Parodi and Maria Pia Quaglia
MILAN (Reuters) – (Please note strong language in paragraph 38.)
A long-running criminal probe into diamond sales by Italian banks has uncovered what prosecutors say is further evidence of corruption by officials at UniCredit, Italy’s largest lender, and smaller rival Banco BPM.
The allegations, some previously unreported, are laid out in documents used by prosecutors when they sought a magistrate’s order seizing assets from the banks and two diamond brokers. Reuters viewed the documents, which also included excerpts of wire taps and witness statements.
The allegations relate to suspected crimes and do not necessarily mean that prosecutors will charge the companies and their employees when their investigation, which has been running since 2016, is concluded.
The number of bank officials under suspicion, and the allegations they may face if they are charged, however, are widening.
In a new development, officials from UniCredit and Banco BPM are also suspected of corruption because broker Intermarket Diamond Business (IDB) invested some of its profits from the diamond sales in the banks’ shares, according to evidence gathered by prosecutors.
In addition to UniCredit and Banco BPM, Intesa Sanpaolo and Banca Monte dei Paschi di Siene are also under investigation.
In February, magistrates guiding the probe ordered the seizure of more than 700 million euros in assets from the two brokers and five banks.
UniCredit said in a statement to Reuters it was cooperating closely with authorities and its policy was not to comment on an ongoing investigation. It would “continue to offer appropriate customer care services to its affected clients”.
Lawyers for Banco BPM, Banca Aletti, Intesa Sanpaolo and IDB did not respond to requests for comment. Monte dei Paschi’s lawyers declined to comment.
In a long-running scandal in a sector already tarnished by controversy, Italy’s biggest banks are suspected of colluding with diamond brokers to scam their own customers — allegedly selling them diamonds at vastly inflated prices while marketing them as sound financial investments.
All of the banks, along with a Banco BPM subsidiary, Banca Aletti, are suspected of fraud and money-laundering for using the proceeds to boost profits, according to allegations laid out in the documents used for the seizure order.
Prosecutors also allege that UniCredit and Banco BPM worked out a deal with IDB where, in return for the banks selling IDB’s diamonds, the broker would channel money into their stock, boosting their share capital at a time when it was under pressure from a rising tide of bad debts.
Under Italian law it is deemed to be corruption when one party abuses its commercial position to induce the counterparty to provide it with favors — in this case, the alleged purchase of shares. The IDB officials involved are also under investigation.
According to a criminal lawyer when asked by Reuters, under Italian law, if the banks are charged and convicted, they could be fined millions of euros, risk forfeiting the total of 161 million euros seized from them in February and could even be temporarily suspended from operating by court order.
They could also be ordered to pay compensation to victims, with sums to be decided by a civil court.
More than 100,000 people are estimated to have bought diamonds at Italian banks over the last 20 years, judicial sources say.
A GUN TO THE HEAD
Banks have been selling diamonds on behalf of brokers in Italy since the 1980s but they ramped up the business after the global financial crisis, according to prosecutors, when a deep recession left them saddled with soured loans and looking for alternative revenue sources.
Banco BPM, Italy’s third-largest bank, was known as Banco Popolare in 2016 when it was looking to raise capital to fund its merger with Banca Popolare di Milano.
In a telephone conversation in early June 2016, a transcript of which was seen by Reuters, the former CEO of IDB complained that Banco Popolare was insisting he invest in the bank’s shares.
“Given we decided more or less voluntarily to subscribe in a very substantial way to Banco Popolare’s capital increase, they arrived with a 9-milimetre and they pointed it at my forehead and told me, ‘sign here’,” Claudio Giacobazzi said in a call to his financial adviser in 2016.
Giacobazzi died last year. IDB went bankrupt in January and is in liquidation.
IDB invested more than 7 million euros in shares and share options in UniCredit in 2012, and a total of more than 950,000 euros in Banco Popolare shares in 2014 and 2016, according to the February order authorizing the seizure of the banks’ assets. Reuters reviewed a copy of the order.
Banco BPM profited the most from diamond sales, netting around 85 million euros, including the Banca Aletti business, between 2012 and 2016 — more than all the income earned by the other three banks combined, according to the order. Banco BPM also charged the biggest commissions, up to 24.5%, they show.
Milan prosecutors believe the banks teamed up with brokers to sell the stones in blister packs to bank customers, often at more than double their market value, making tens of millions of euros each in commissions. Their partners IDB and another broker Diamond Private Investment (DPI), made hundreds of millions each.
A lawyer for DPI declined to comment on what he called an ongoing preliminary investigation.
Prosecutors believe staff from UniCredit, Banco BPM and Monte dei Paschi accepted gifts including hotel stays and antiquities from brokers as sales incentives.
Italian state television channel Rai3 first reported the alleged mis-selling in late 2016.
Currently, 68 banking and brokerage officials are under investigation, as well as the banks themselves, but more individuals are expected to be investigated before the probe concludes within a few months, two sources familiar with the matter said.
Prosecutors have received lawsuits from more than 450 alleged victims, one of the sources said.
Italy’s antitrust authority fined the banks and brokers a total of 15 million euros in 2017 for selling the stones at inflated prices.
Since then, the banks have begun to compensate customers. All except Banco BPM have offered to buy back diamonds at the purchase price. Banco BPM said last month it would compensate clients for their losses but leave them with the stones. In April, it said it had received 18,400 claims for compensation.
Investigators allege the banks and the diamond brokers made the diamonds look like a safe investment.
Customers who queried the price they were paying were referred to inflated diamond prices listed in Italy’s main financial daily, Il Sole 24 Ore. The listings, which were assumed by clients to be official market quotes, were in fact ads placed by the brokers, prosecutors say.
A spokeswoman for the newspaper declined to comment.
One Banca Aletti brochure distributed to its clients describes diamonds as a “good refuge” over the medium and long term, forecasting returns of 50-80 percent above inflation.
In one phone tap in May 2017, a planning and marketing executive for parent bank Banco BPM, Pietro Gaspardo, discusses the brochure with BPM director general Maurizio Faroni.
“The things written inside are amazing. Amazing! Amazing!” Gaspardo tells Faroni. “Expected returns … crazy stuff. There are things written there that are really madness.
“I’m not thinking of myself now but for the bank. That stuff there will screw us up the arse totally. To make an investment and not sell it as a jewel, with expected return — shit!”
Gaspardo’s lawyer, Maurizio Miculan, said his client’s comments show his innocence because he was clearly surprised at what he found in the brochure.
Faroni’s lawyer declined to comment.
When customers wanted to cash in the diamonds, they would resell the stones back via the banks to the brokers. The lenders made commissions of 12-24.5% on selling the diamonds and the brokers made commissions of 7-16% on buying them back, according to the judicial order that authorized the February asset seizures.
One of those clients was Gabriele Moggi who spent around 33,000 euros — most of an early-retirement payoff from the Italian Air Force — on diamonds in 2016 on the advice of his bank, a unit of Banco Popolare. He had them independently valued six months later for around 8,000 euros.
Moggi told Reuters he eventually settled with the bank in January this year for compensation of 15,000 euros, leaving him with the stones and a net 10,000 euros loss.
“I was asking for 20,000,” said Moggi who was fed up and wanted out. “In the end I accepted 15,000 euros because there was no other way to get out of it.”
A spokeswoman for Banco BPM said the bank couldn’t comment on individual cases.
(Editing by Mark Bendeich and Carmel Crimmins)
FILE PHOTO: Demonstrators hold flag during anti government protests in Algiers, Algeria April 23, 2019. REUTERS/Ramzi Boudina
June 17, 2019
By Lamine Chikhi
HAIZER, Algeria (Reuters) – While tens of thousands of Algerians have been gathering for four months in the capital to demand sweeping political reforms, former fighters who led the last confrontation with the establishment have been warning people not to rock the boat.
In the 1990s, they drove an uprising against the military after it canceled a landmark multiparty election that Islamists were poised to win. This time they say protests could bring a repeat of the chaos and bloodshed their actions unleashed.
“I deeply regret what happened in the 1990s,” once such fighter, Sheikh Yahya, said at his home in Haizer, a village in the Kabyle mountains 120 km (75 miles) east of the capital Algiers where he now works as a butcher.
“This is why I will never participate in any action that might end up violent.”
Some 200,000 people died in Algeria’s decade-long civil war, leaving many Algerians fearful of radical change now that longtime President Abdelaziz Bouteflika has given into the pressure from the streets and stepped down.
Following Bouteflika’s departure in April, the protesters have been pressing for the exit of the entire elite in control since the North African country’s independence from France in 1962 – the same cause the jihadists took up arms for in 1991.
But Yahya and other former jihadists now support the army and other security forces, the strongest part of that elite. It also includes business tycoons and former independence fighters in Algeria’s ruling FLN party as well as labor unions in a state-dominated economy sustained by oil and gas production.
The ex-fighters are Salafists, a literalist Sunni school of Islam whose adherents range from the radical jihadists of Islamic State to an overwhelming majority which shies away from politics.
Salafi influence in Algeria is far wider than their numbers – an estimated one in 40 people – would suggest, analysts say. This makes their anti-protest messages a significant counterweight to calls for radical change.
“Algeria has around 18,000 mosques, most of them are under Salafi influence,” said political analyst Mohamed Mouloudi. One Salafi cleric has a website with a million followers.
By contrast leading Sufis, a more inclusive Sunni school that most Algerians belong to, have kept a low profile since the ouster of Bouteflika, their most high-profile member.
Salafists are social conservatives heavily influenced by Saudi Arabia’s Wahhabis. They reject both political Islamist groups like the Muslim Brotherhood, which led Egypt in a 2012-2013 interlude from military-backed rule, as well as Western influence – from clothing to political systems.
They were part of the reason the 2011 Arab Spring pro-democracy movement bypassed Algeria, after Sheikh Ali Ferkous, a Salafi icon, declared “unrest is forbidden in Islam”, and they continue to argue that stability is paramount.
MILITARY CHIEF, CONSERVATIVE LEADER
The Army chief, Lieutenant-General Ahmed Gaed Salah, played a key role in toppling Bouteflika by saying the president’s poor health made him unfit for office.
Upper House Chairman Abdelkader Bensalah became interim president but is now under pressure from demonstrators to quit, due to his links with Bouteflika and pledge on June 6 to stay in office until elections, which have been postponed indefinitely.
A group of protesters and some Salafi clerics have suggested Bensalah hands over to former conservative minister Ahmed Taleb Ibrahimi, son of well-known cleric Bachir Ibrahimi who played a role in the independence war against France from 1954 to 1962.
Ahmed Taleb Ibrahimi is a fierce opponent of Bouteflika, who did not allow him to set up a political party. Ibrahimi, 87, has promised to end of what he called “dirty money”, referring to corruption under Bouteflika, and introduce transparency.
“Ibrahimi is one of the rare clean politicians in Algeria who can reconcile the youth with politics. We believe he can play a very positive role,” said Seif Islam Benatia, a dentist prominent among protesters who encompass a wide array of views.
Yahya, who spoke to Reuters with two of his fellow former fighters Akli and Mohamed sitting alongside, also supports Ibrahimi, as well as army chief Salah. “We want stability to remain,” he said.
Their village lies in what was known in the 90s as the “triangle of death” — the flashpoint of the civil war, which the army said it was fighting to prevent Taliban-style rule. The mountains with its caves and valleys were ideal hiding ground for fighters to store arms and prepare ambushes on the army.
Yahya gave up the fight in 2006 after accepting amnesty from Bouteflika and persuaded others to make peace with the state.
Algeria’s welfare state rewarded him with $6,000 in aid to build a modest house where the ground floor serves as his poultry butchery. Two sons got jobs at state firms — a livelihood they fear losing if chaos erupts.
“GIFT FROM GOD”
Salafists have been quietly working to influence society, identifiable here, as elsewhere, by their long beards, white robes and short trousers emulating the Prophet Mohammad.
Their clout can be seen in Haizer, where Yahya’s house is a gathering point for youth, neighbors and other ex-fighters he persuaded to lay down arms.
“Marches, protests, unrest and all the tools used in democracies to topple leaders are illicit in Islam,” Yahya said.
Such messages resonate in Algeria, analysts say, because many people fear protracted unrest would undermine a state that provides jobs, health insurance and housing.
They also undermine Islamist political parties, which have struggled since the Islamic Salvation Front (FIS), which almost took power in 1991, was banned the following year.
“Salafi are influential because they focus on the youth, and society,” Mouloudi told Reuters. “Political Islam’s leaders are divided, fragmented and hold little influence politically.”
In Algiers, some of the young protesters, who include many women and some children, oppose any kind of Islamist takeover.
“We want radical change, but I don’t want to end up with Islamists ruling the country,” said Nadia Beigacem, 21, who studies English at Algiers University and does not wear a veil. “Western democracy is my model, not the Saudi Arabian model.”
Rather than Ibrahimi, she wanted a young Algerian as leader, like former U.S. President Barack Obama or French President Emmanuel Macron. “We are a young nation,” she said.
Salafist leader Ferkous has not commented on recent protests but other followers have rejected them. “What is forbidden remains forbidden, even if everyone does it,” said Mohamed Al-Habib, a prominent Salafist in a video message.
The weekly Friday protests have been continuing, but numbers have declined in recent weeks, indicating the resignation of Bouteflika and prosecution of his younger brother and closest former advisor Said and others have slowed their momentum.
“After chaos and 200,000 people killed, we now have peace and stability, this is a gift from God,” Yahya said.
“Let’s preserve it.”
(Editing by Ulf Laessing and Philippa Fletcher)
FILE PHOTO: The Federal Reserve building is pictured in Washington, DC, U.S., August 22, 2018. REUTERS/Chris Wattie/File Photo
June 17, 2019
By Ann Saphir and Howard Schneider
SAN FRANCISCO/WASHINGTON (Reuters) – The U.S. Federal Reserve, facing fresh demands by President Donald Trump to cut interest rates, is expected to leave borrowing costs unchanged at a policy meeting this week but possibly lay the groundwork for a rate cut later this year.
New economic projections that will accompany the U.S. central bank’s policy statement on Wednesday will provide the most direct insight yet into how deeply policymakers have been influenced by the U.S.-China trade war, Trump’s insistence on lower interest rates, and recent weaker economic data.
Analysts expect the “dot plot” of year-end forecasts for the Fed’s benchmark overnight lending rate – the federal funds rate – will show a growing number of policymakers are open to cutting rates in the coming months, though nowhere near as aggressively as investors expect or Trump wants.
The Fed is also widely, though not universally, expected to remove a pledge to be “patient” in taking future action on rates, opening the door to a possible cut at its coming policy meetings.
Risks may be rising, but “I don’t think they want to box themselves into a corner,” said Carl Tannenbaum, chief economist at Northern Trust. “The markets are set up for a cut in July, and if they don’t get it, financial conditions will tighten.”
The federal funds rate is currently set in a range of 2.25% to 2.50%.
The Fed’s policy-setting committee is due to release its latest statement and economic projections at 2 p.m. EDT (1800 GMT) on Wednesday after the end of a two-day meeting. Fed Chairman Jerome Powell will hold a press conference shortly after.
MIND THE DOTS
The Fed’s last set of economic and policy projections, released in March, showed most policymakers foresaw no need to change rates this year and only very gradual rate hikes thereafter. (For a graphic of the gap between market and Fed expectations, please see https://tmsnrt.rs/2WzJ6tu.)
But since that meeting the economic outlook has become cloudier.
Recent U.S. retail sales numbers were strong. But while unemployment has held near a 50-year low of 3.6%, U.S. employers created a paltry 75,000 jobs in May. Inflation, which Powell says is low in part because of temporary factors, continues to undershoot the Fed’s 2% target.
The Atlanta Fed forecast on Friday that gross domestic product will increase at a 2.1 percent annualized rate in the April-June quarter, a drop from the 3.1 percent pace of the first three months of the year.
Trade uncertainty has increased as well, with Trump using the threat of tariffs on goods from Mexico to force the country to curb the number of mostly Central American immigrants crossing the U.S.-Mexico border.
He has also vowed to slap more tariffs on Chinese imports if no trade deal is reached when he meets Chinese President Xi Jinping at a Group of 20 summit at the end of this month in Japan.
Concern that mounting tariffs could further slow U.S. and global economic growth is one of the chief reasons traders in interest rate futures loaded up on contracts anticipating three U.S. rate cuts by the end of the year.
Fed officials may have reason to trim their rate outlook a bit, but meeting market expectations would involve a dramatic shift. Nine of the Fed’s current 17 policymakers would have to move their rate projections downward for the median to reflect a single cut, let alone three.
“Powell will do what he can to try to downplay the dots especially if they don’t show what the markets want them to show,” said Roberto Perli, economist at Cornerstone Macro. “He will have a tough time.”
Adding to the pressure for a rate cut is a yield curve inversion in parts of the market for U.S. government debt, historically a precursor of recessions. The three-month Treasury bill, for instance, has paid out a higher rate than a 5-year Treasury note for the last several months running.
And Trump, who has said that rates should be lowered by perhaps a full percentage point or more, continues to publicly berate the Fed and Powell, his handpicked chairman, for refusing to act.
“I’ve waited long enough,” Trump said in an interview with ABC News last week, talking favorably of the “old days” when Presidents Lyndon Johnson and Richard Nixon intervened forcefully in Fed policy – and set the stage, many economists argue, for the high inflation, economic volatility and recessions that followed in the 1970s.
Most of the more than 100 economists polled June 7-12 by Reuters say they are not penciling in a rate cut until the third quarter of next year. But views are shifting rapidly. Forty respondents expected at least one rate cut sometime in 2019, up from just eight who did in the previous poll.
Within the U.S. central bank, St. Louis Fed President James Bullard is the only policymaker who has said a rate cut may be needed “soon.”
Several others have signaled a readiness to move off their wait-and-see stance, with Powell saying earlier this month in a speech in Chicago that the Fed will act “as appropriate” in the face of risks posed by the global trade war and other developments.
The word “patient,” which had been repeatedly used by the Fed since early this year to signal its willingness to hold off further rate hikes, was notably absent from Powell’s remarks, though the Fed chief stopped well short of suggesting a rate cut was coming soon.
The Fed raised rates four times in 2018 but has since abandoned plans to continue lifting borrowing costs this year.
It is likely to avoid signaling any move to cut rates until it is ready to deliver, predicted Bruce Monrad, a high-yield bond portfolio manager at Boston-based Northeast Investors Trust.
Nevertheless, Monrad added, Fed policymakers may have tied their own hands by letting bets in financial markets stray so far. “They have had six months to control the rhetoric. They really haven’t walked back the market.”
(Reporting by Ann Saphir and Howard Schneider; Editing by Paul Simao)
FILE PHOTO: A security guard walks past in front of the Bank of Japan headquarters in Tokyo, Japan January 23, 2019. REUTERS/Issei Kato/File Photo
June 17, 2019
By Leika Kihara
TOKYO (Reuters) – The Bank of Japan is expected to maintain its massive stimulus program on Thursday and signal its readiness to ramp up monetary support if growing risks such as the escalating U.S.-China trade war threaten the economy’s modest expansion.
Many BOJ policymakers are wary of using their dwindling policy ammunition any time soon as years of ultra-low interest rates strain financial institutions’ profits, say sources with knowledge of the central bank’s thinking.
But the darkening outlook is also forcing them to brace for the likelihood of another economic downturn and brainstorm ideas on how to respond, they say.
Adding to the uncertainty are heightening market expectations the U.S. Federal Reserve will start to cut interest rates to fend off the damage from the trade war with China.
While such rate cut expectations have kept a floor on stock prices so far, an actual cut by the Fed could push down the dollar and trigger an unwelcome yen spike that hurts Japan’s export-reliant economy, some analysts say.
“There may be no immediate need for action,” one of the sources said. “But with uncertainty over the outlook so high, the BOJ would need to think about how to respond if a shock hits the economy.”
At the two-day rate review ending on Thursday, the BOJ is widely expected to keep its short-term rate target at -0.1% and a pledge to guide the 10-year government bond yield around zero percent. The Fed meets this Tuesday and Wednesday.
The BOJ board is likely to maintain its view Japan’s economy continues to expand moderately as a trend, but debate whether its projection of a rebound in overseas growth later this year remains valid, the sources say.
At a post-meeting news conference, BOJ Governor Haruhiko Kuroda is likely reinforce his view the central bank is ready to deploy additional stimulus if the economy loses momentum to hit its 2% inflation target.
Japan’s economy expanded an annualized 2.1% in January-March but many analysts predict growth to slow in coming quarters as the U.S.-China trade row hurts global trade. A scheduled domestic sales tax hike in October may also cool consumption, they warn.
Many in the BOJ prefer to wait for more data, such as the central bank’s “tankan” quarterly business sentiment survey due July 1, to see how deeply the trade tensions could hurt domestic demand, the sources say.
“Domestic demand, including capital expenditure, is still firm. The key is to see whether this will remain the case,” a second source said.
Japan’s annual core consumer inflation hit 0.9% in April, remaining distant from the BOJ’s target, despite years of heavy money printing by the central bank.
Many analysts say the BOJ has very little tools left to fight the next recession, with its negative rate policy hurting financial institutions’ margins and long-term yields already hovering below zero.
(Reporting by Leika Kihara; Editing by Kim Coghill)
President Donald Trump is sitting on a war chest topping $40 million, has boots on the ground spread across nine regions crucial to his 2020 map and owns a sprawling network of volunteers who’ve been rigorously trained for the months ahead.
When he takes the stage Tuesday in Orlando, Fla., to announce his bid for reelection, Trump will be joined by 20,000 guests whose personal information — names, zip codes, phone numbers — was meticulously recorded when they requested tickets to the rally. First-time attendees will receive relentless emails and texts in the coming weeks, reminding them they can help “Keep America Great” by contributing $5, $10 or $15. Some maxed-out donors who gave generously to his 2016 campaign will trek to Florida to witness what they delivered — and decide whether to give big again.
Story Continued Below
It’s a straightforward strategy to get the president four more years in the White House: be the political juggernaut Trump lacked in 2016.
While 23 Democratic presidential candidates scramble for attention, Trump’s 2020 campaign is quietly flipping the script from its ham-fisted approach the first time he sought elected office. His team has spent 2½ building a robust, modern and professional operation to optimize as many variables as possible and amassing an unprecedented pile of cash to keep it all afloat.
It’s worked so far. The Trump campaign and Republican National Committee had a combined $82 million in the bank as of April — the result of a joint fundraising operation — and staffers have yet to devolve into the bitter infighting that strained the president’s first campaign and stained his earliest days in the White House.
“In 2016, the people on the campaign like to say that they were building the airplane while it was in flight. This time, he will have a campaign that is befitting of an incumbent president of the United States,” said Tim Murtaugh, communications director for the new-and-improved Trump campaign.
Indeed, one official involved in Trump’s first presidential campaign likened the experience to a slow-motion plane crash: “We were strapped in on a sloppily assembled machine that was gradually spiraling out of control.”
Even with a better-financed and well-ordered campaign, Trump has found the developing 2020 landscape to be tough. State investigators are still probing his past business ventures and financial history. Court rulings have delivered devastating setbacks for his agenda. And House Speaker Nancy Pelosi has encouraged congressional Democrats to do everything short of impeachment to hold his administration accountable.
On top of all that, the outburst-prone president has struggled to boost his approval rating above 42 percent — where it hovers — and could encounter difficulty billing himself as an outsider while occupying the center of the swamp.
“He’s an incumbent. It’s hard to run the same way in 2020 as he did in 2016,” a person close to the Trump campaign said.
The challenges are not lost on the president’s campaign staff. This time, Trump will launch his 2020 campaign with organizational and financial advantages his previous crew could have only dreamed of — soothing allies who worry the current political environment is less conducive to victory.
From a 14th-floor suite originally designed to house the offices of a capital markets firm, Trump’s modest campaign team of about 50 employees has spent the past several months laying the groundwork for a 2020 race that diverges from 2016 without sacrificing his insurgent populist message. Extensive assistance from the Republican National Committee — driven by a massive staff, existing presence in all 50 states and a staunch Trump ally at its helm — has helped, bringing institutional knowledge and resources that were notably absent in 2016.
Officials at the RNC’s Capitol Hill headquarters are in constant contact with counterparts who work out of the Trump campaign’s Arlington, Va., office, and staffers from each side often travel to the same events to show simultaneous support for the party and for Trump. For example, Trump campaign manager Brad Parscale and RNC Chairwoman Ronna McDaniel both attended a dinner this week hosted by the local Republican Party in Macomb County, Mich., often called the “home of the Reagan Democrats” and a must-win for Trump in 2020.
“If you look at where the campaign was in 2016 and where it is today, it’s a completely different organization. It has a united Republican Party behind it that also has one of the best fundraising operations we’ve ever seen,” a Michigan Republican Party official said, adding the Trump campaign plans to deploy significant staff to Michigan beginning in early July.
A campaign official said Parscale plans to have “a fully functioning ground game by the end of summer,” as well as several coalition groups that will specifically target female, Latino and African American voters.
Many of those campaign staffers, along with members of the GOP’s state party affiliates, have gone through a program known as GROW, or Growing Republican Organizations to Win. The custom workshop-type classes were created by the Trump campaign and the RNC to train field staff in fundraising, communications, data and digital efforts that will be unique to their states in 2020. One state party official who recently completed the training said they were asked to draft mock news releases and budgets as part of the programming.
Campaign officials readily admit that Trump determines the message on any given day, making it difficult to create a fixed communications strategy that volunteers and staff can follow. Earlier this year, for instance, Trump son-in-law and White House adviser Jared Kushner instructed campaign staff to avoid targeting specific 2020 Democratic candidates only to watch the president lob repeated insults at former Vice President Joe Biden weeks later. Trump has also insulted Sens. Elizabeth Warren and Bernie Sanders, former Rep. Beto O’Rourke, New York Mayor Bill de Blasio and Pete Buttigieg, the mayor of South Bend, Ind.
“The key for the Trump campaign is to successfully build its operation around the most unconventional candidate in history,” said Jason Miller, a former campaign adviser who remains close to the president. “Parscale has a good enough relationship with Trump to know that you always follow his lead and your job as the campaign is to build upon and amplify his message, not force feed him some message that you cooked up.”
Parscale has declined to foist soundbites on Trump, opting instead to let the president weaponize Twitter at his own discretion. But the campaign has begun crafting candidate-specific messages that it hopes Trump will test out and eventually deploy regularly, depending on who becomes the Democratic nominee. Officials have largely focused on Biden, Sanders and Warren, believing Trump’s opponent be one of those three.
“If it’s Sanders or Warren, they immediately become advocates for radical change that’s a step too far for most voters, and Trump becomes the centrist. But against Joe Biden, the race is much more of a change vs. status quo dynamic,” Miller said.
Campaign allies who are aware of internal polling said they also want Trump to tout his accomplishments constantly. He will only outperform his Democratic opponent if he’s “getting the right amount of credit for the progress he’s making on immigration, the economy and national security,” one outside adviser said. Several 2020 Democrats have argued that the economy is booming because of policies put in place by former President Barack Obama, although Trump’s economic approval rating reached a new high in a CNN poll last month.
Trump’s campaign has been briefing him almost weekly on polling, according to two aides familiar with the conversations, one of whom said the president is more obsessed with polls than anything else, despite repeatedly questioning their reliability after 2016.
The campaign’s first internal reelection poll found Biden trouncing Trump by 7 percentage points in Florida when it surveyed Sunshine State voters in March, ABC reported Friday. The state is key to Trump’s campaign strategy: Without it, a single loss in the Rust Belt could trigger the end of his presidency.
Campaign officials said that isn’t going to happen. They said fundraising has been too successful and that their massive data-gathering operation is unmatched by any Democratic presidential hopeful.
But as Trump prepares to launch his reelection bid 17 months before voters hit the polls in November 2020, perhaps his most distinct advantage is time.
“It’s important to remember that we are not on the same timetable as the Democrats,” Murtaugh said. “We are already in the general election.”
Alex Isenstadt contributed to this story.