South Korea November exports plunge as China-U.S. deal still in dark

By Choonsik Yoo and Joori Roh

SEOUL (Reuters) – South Korean exports in November fell for the 12th month in a row and far more than expected, denting hopes for the global manufacturing sector stabilizing as a much-awaited China-U.S. trade deal is still in darkness.

Exports declined 14.3% in November from a year earlier, trade ministry data showed on Sunday, far below a median 10.2% fall tipped in a Reuters poll and missing even the worst forecast in the survey of an 11.1% loss.

It was also the second-worst drop in overseas sales in nearly four years as global semiconductor prices failed to turn around while China, the country’s biggest export market, continued to cut down purchases from its smaller neighbor.

The surprisingly weak November data from a manufacturing powerhouse, which reports monthly trade data ahead of major exporting nations each month, underscores the global economy still far from a turning point.

“The optimism for the first-phase trade deal between the United States and China will take time before actually boosting exports, and today’s poor data means the turnaround in exports is taking longer than expected,” said Chun Kyu-yeon, economist at Hana Financial Investment.

Shipments to China fell 12.2% in November from a year earlier, while overseas sales of semiconductors, South Korea’s top export item, tumbled by 30.8% in value as prices plunged this year from a super-rally last year.

Imports fell 13.0% on-year in November, also missing an 11.9% contraction tipped in the survey. That brought the November trade balance to a $ 3.37 billion surplus, versus a $ 5.34 billion surplus a month earlier.

Sunday’s data left shipments for the first 11 months of this year 10.7% below a year earlier, putting the country on track for its worst annual exports performance since a 13.9% fall in 2009 during the height of a global financial crisis.

South Korea’s economy, the fourth-largest in Asia and heavily dependent on exports, has been hit especially hard by cooling global trade and a prolonged tariff war between China and the United States.

On Friday, the central bank trimmed its 2019 economic growth forecast for the fourth time this year to the lowest in a decade, and also lowered next year’s forecast.

The downgrades came even after the Bank of Korea cut rates twice this year, the most recent cut coming in October. Many analysts expect the central bank to ease policy further next year to support the stuttering economy.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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In swipe at Trump, China tells U.N. tariffs could plunge world into recession

© Reuters. Chinese Foreign Minister Wang Yi addresses the 74th session of the United Nations General Assembly at U.N. headquarters in New York © Reuters. Chinese Foreign Minister Wang Yi addresses the 74th session of the United Nations General Assembly at U.N. headquarters in New York

By David Lawder and David Brunnstrom

UNITED NATIONS (Reuters) – The Chinese government’s top diplomat said on Friday that tariffs and trade disputes could plunge the world into recession and Beijing was committed to resolving them in a “calm, rational and cooperative manner.”

In a blunt speech to the annual United Nations General Assembly, State Councilor and Foreign Minister Wang Yi said: “Erecting walls will not resolve global challenges, and blaming others for one’s own problems does not work. The lessons of the Great Depression should not be forgotten.”

Taking a clear swipe at U.S. President Donald Trump, who started a damaging trade war on China nearly 15 months ago, Wang added, without naming the U.S. leader:

“Tariffs and provocation of trade disputes, which upset global industrial and supply chains, serve to undermine the multilateral trade regime and global economic and trade order.

“They may even plunge the world into recession.”

In successive rounds of tit-for-tat tariffs, the United States and China have levied punitive duties on hundreds of billions of dollars of each other’s goods, roiling financial markets and threatening global growth.

A new round of high-level talks between the world’s two largest economies is expected in Washington in the first half of October.

Wang’s remarks, unusually pointed for a Chinese diplomat, coincided with word that the Trump administration is considering radical new financial pressure tactics on Beijing, including the possibility of delisting Chinese companies from U.S. stock exchanges.

Sources told Reuters on Friday that the move would be part of a broader effort to limit U.S. investments into Chinese companies, in part because of growing security concerns about their activities.

News of the potential restrictions on portfolio investments restrictions sent U.S. stocks and oil prices lower on Friday on fears that U.S.-China trade tensions would again escalate. An increase in U.S. tariffs to 30% from 25% on $ 250 billion in Chinese imports is scheduled for Oct. 15 if no progress is made before then.

U.S. and Chinese rhetoric on trade this week had seesawed between harsher and more conciliatory, with Trump issuing a sharp rebuke of China’s trade practices and state-led development model in his speech before the General Assembly on Tuesday, adding that he would not accept a “bad deal.”

On the same day, Wang warned the United States not to interfere with China’s sovereignty. But on Thursday he said China was willing to consider increased purchases of farm products and predicted that talks would lead to a resolution if both sides took more steps to improve goodwill.

Trump said on Wednesday a trade deal with China could come sooner than people think, and praised the Chinese purchases.

NORTH KOREA

At the United Nations, Wang also took aim at Trump’s policy on North Korea, in which groundbreaking talks between Pyongyang and Washington have stalled, largely over the U.S. refusal to ease punishing sanctions.

Wang said it was necessary for the United Nations to consider invoking the rollback terms of North Korea-related sanctions resolutions “in the light of new developments” on the Korean Peninsula “to bolster the political settlement of the Peninsula issue.”

He said “the realistic and viable way forward” was to promote “parallel progress in denuclearization and the establishment of a peace mechanism” to gradually build trust “through phased and synchronized actions.”

Wang criticized the U.S. withdrawal this year from a treaty governing intermediate range nuclear missiles, and said China was against the deployment of such missiles in the Asia-Pacific region.

He said China would continue to take an active role in the international arms control process and added that it has initiated domestic legal procedures to join the Arms Trade Treaty.

Trump has said he intends to revoke the U.S. signature to the treaty, which regulates the $ 70 billion global cross-border trade in conventional arms and seeks to keep weapons out of the hands of human rights abusers.

So far, 104 countries have joined the pact, which the General Assembly approved in 2013.

Wang reiterated comments made earlier in the week, stressing China’s commitment to the principle of non-interference in the internal affairs of another country, an apparent reference to Beijing’s displeasure at criticism of its handling of protests in Hong Kong.

“On the international stage, we speak for justice and oppose hegemonism or bullying,” Wang said.

Shortly before Wang’s speech, China and Kiribati formally resumed diplomatic ties at a ceremony he presided over at the Chinese Permanent Mission to the United Nations in New York.

The move followed the Pacific island state’s decision to ditch relations with Taiwan, which the United States supports with arms supplies and which Beijing considers a renegade province.

“I do believe that there is much to learn and gain from the People’s Republic of China, and the re-establishment of our diplomatic relations is just the beginning,” Kiribati’s President Taneti Maamau said at the event.

The Solomon Islands and Kiribati are the latest countries to switch relations to China, leaving self-ruled Taiwan with formal ties to only 15 countries.

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Pound plunge prompts bargain hunters to look beyond Brexit fog

© Reuters.  Pound plunge prompts bargain hunters to look beyond Brexit fog © Reuters. Pound plunge prompts bargain hunters to look beyond Brexit fog

By Tommy Wilkes, Olga Cotaga and Josephine Mason

LONDON (Reuters) – For those with the stomach to digest more months of Brexit-induced political wrangling, sterling’s plunge to two-year lows is raising the question: is it time to dip back into hard-hit British markets for potential bargains?

The pound has shed more than 8% since May, a drop that accelerated since Prime Minister Boris Johnson declared that the UK would leave the European Union on Oct. 31, with or without a transitional trade agreement.

A no-deal exit could inflict huge damage on the UK economy.

Bank of England Governor Mark Carney repeated that warning this week, and the prospect has driven significant underperformance in UK equities and real estate, and saddled British UK companies looking to borrow overseas with a ‘Brexit premium’.

Investors are generally staying clear of big bets on a UK recovery, and few are brave enough to predict when the political turmoil might end. The rest of the year could easily bring snap national elections, another Brexit delay and more uncertainty.

After sterling’s latest lurch lower, however, some managers with long horizons are taking a second look and concluding that — at least on paper — some British assets look too cheap to ignore.

Also tempting is the prospect of a sterling rally if a no-deal Brexit is averted. Reuters polls show it could bounce to $ 1.36.

“We’re having those discussions internally, because domestic UK assets are starting to look quite cheap relative to elsewhere,” said Legal and General Investment Management’s head of economics Tim Drayson. 

“Everyone’s joking it’s a brave decision to do it… As is always the case, if the disconnect continues to widen, it will be worth the risk.”

A weaker pound makes it cheaper for overseas investors holding other currencies to buy British assets. It can also provide UK-based fund managers with an incentive to take profits on foreign holdings and repatriate the cash.

Cheap valuations aside, there is a belief in some quarters that the UK economy should be able to weather Brexit as long as a no deal is averted. Positives include low unemployment, resilient consumer spending and Johnson’s promise of more investment.

Some fund managers have already started buying.

Martin Todd at Hermes Investment Management said he had “marginally increased UK equity exposure thanks to better-looking valuations.

HOW CHEAP?

So how cheap is the pound really?

On JPMorgan’s Real Effective Exchange Rate Index, which measures currencies’ inflation-adjusted value against trading partners, the pound is cheaper than at any time since October 2016.

(GRAPHIC – Sterling’s real effective exchange rate: https://tmsnrt.rs/2ywEL0k)

Trading around $ 1.50 before the 2016 Brexit referendum, sterling has stumbled to sub-$ 1.21 . Parity with the dollar and the euro () could beckon under a no-deal scenario.

But UBS Wealth Management sees sterling as “increasingly oversold” against the dollar. The pound’s purchasing power parity (PPP) valuation is $ 1.57, it told clients – 30% above current levels.

That measure takes into account what money can buy in two different currencies, and many investors believe currencies gravitate towards it.

“We are not expecting a sharp convergence to PPP anytime soon, but this highlights the extent of sterling undervaluation and the scope of a recovery,” UBS Wealth said.

Of course, not everyone is piling back in. A currency trader at a major bank said clients were wary of buying sterling until it was firmly below $ 1.20.

The debate for many is whether sterling reverts to historical averages once the dust settles or if Brexit does permanent damage to its long-term fair value.

For fans of ‘mean reversion’, the pound is near the bottom of a 35-year trading range between $ 1.0 and $ 2.0. What’s more, it’s only spent 0.7% of the time since 1985 below $ 1.20.

Others think old charts might need to be ripped up.

“It is not unreasonable to conclude that a ‘no deal’ Brexit outcome would result in a structural revaluation of sterling,” said Roger Hallam, currency chief investment officer at JP Morgan Asset Management.

STOCKS AND PROPERTY

Also on the slide are UK equities and British commercial and residential real estate, long a magnet for overseas buyers.

JPMorgan’s index of British domestic-focused stocks , including supermarket J Sainsbury (L:) and insurer Admiral (L:), has fallen 12% since April.

Since the 2016 referendum, the domestically-focused FTSE 250 index () has fallen in euro terms by 2%, even though earnings growth has held up relatively well. The S&P 500 () has surged 112% in euro terms over the same period.

Price-to-earnings multiples for FTSE 250 stocks also stand below their euro zone and U.S equivalents.

(GRAPHIC – UK vs European and U.S. stocks’ PE: https://tmsnrt.rs/33gQmPw)

(GRAPHIC – London vs global stocks: https://tmsnrt.rs/2MvO8FN)

Since June 2016, UK property stocks are down 28% in U.S. dollar terms while global property shares have risen 15%.

London house prices fell at their fastest pace in almost 10 years in May, while investment in commercial property has fallen.

“We do see good relative value in UK real estate right now, despite elevated political risk,” said Simon Durkin, BlackRock’s head of European real assets research.

(GRAPHIC – UK real estate since Brexit vote: https://tmsnrt.rs/2MuIaFb)

Julian Sandbach, head of central London capital markets at Jones Lang LaSalle, said that in recent weeks long-term focused Asian investors had returned to the London office market, and the pound’s plunge was the catalyst.

“Whatever happens, the longer-term prospects are extremely good for the UK,” said a person familiar with sovereign wealth fund (SWF) investment in Britain – adding that most SWFs were likely to hold off until “a further sterling fall and clarity on the terms of the (EU) exit”.

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Pound Plunge May Test Johnson’s ‘Pain Threshold’: Commerzbank

(Bloomberg) — A deep and swift slump in the pound will prompt the U.K. government to rethink its approach to leaving the European Union without a divorce deal.

A plunge of about 10% in sterling in a short span of time may cause Prime Minister Boris Johnson’s cabinet to refrain from pursuing a no-deal exit, according to Commerzbank. A decline that takes the currency below $ 1.19 would leave markets in “uncharted waters”, says Manulife Asset Management that oversees almost $ 400 billion.

The pound, which has emerged as one of the loudest voices of opposition to the government’s handling of Brexit, has slumped more than 4% in July, set for the biggest monthly drop since October 2016, when the currency plunged in a one-minute flash crash. Prime Minister Boris Johnson, who took office earlier this month, hinted he may hold no negotiations with the European Union before the Brexit deadline on Oct. 31.

“We have seen from time to time that the market is able to put pressure on governments,” said Thu Lan Nguyen, a currency strategist at Commerbank AG. “Increasing market turmoil could put the government under pressure to refrain from a no-deal Brexit. As a pain threshold, I could imagine a depreciation just above 10% in a short time that takes the currency close to parity against euro.”

traded around $ 1.2150 on Tuesday, having touched $ 1.2119 earlier, its weakest since March 2017. The pound was at 91.61 pence per .

A messy departure from the EU has long been deemed the worst-case scenario by markets. Those fears crystallized after Johnson appointed Brexiteers to key government positions and demanded changes to the existing agreement with the EU, which Brussels has ruled out.

Still, some analysts say it’s a bit too early for the tremors in the pound to be upsetting the political calculations at 10 Downing Street.

“The government has a pain threshold, but we’re not there yet,” said Ned Rumpeltin, head of currency strategy at Toronto-Dominion Bank. “It’s too early into Johnson’s term for him to be seen as being brought to heel by the markets. It may not be a level, per se, but may be more a function of the speed with which the pound may collapse that attracts their attention.”

With lawmakers on recess until early September and the Bank of England silent before its policy decision on Thursday, investors say the currency is bound to fall further in the weeks to come.

“Ultimately it’s the pound that takes the Brexit strain,” said Grant Peterkin, a senior managing director at Manulife Asset Management which manages $ 386 billion in assets globally. “It’s the purest way to reflect the concerns financial markets have for the U.K. economy.”

Manulife Asset Management’s Absolute Return Rates Fund is betting on further declines in sterling. “Into the $ 1.19’s would be moving into relatively uncharted territory for cable,” Peterkin said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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More poor South Korean data – preliminary data for July show exports plunge

South Korean July 1-20 exports (data via the Customs agency, Reuters)  

  •  -13.6 % y/y

July 1-20 imports

  •  -10.3 % y/y

Semiconductor exports -30.2% y/y 

‘Canary in the coalmine’ is often how the performance of SK is viewed. If these are anything to go by its an ex-canary. There will be impact in these from Japan’s move on curbing exporting technology products to the country. 

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Dollar holds modest gains, Aussie finds footing after plunge

© Reuters. U.S. 100 dollar notes are seen at a bank in this picture illustration in Seoul © Reuters. U.S. 100 dollar notes are seen at a bank in this picture illustration in Seoul

By Shinichi Saoshiro

TOKYO (Reuters) – The dollar held gains against its peers early on Friday, bolstered by a rise in U.S. yields, while the clawed back some of its recent plunge on upbeat central bank comments and easing concerns about China’s ban on Australian coal imports.

The against a basket of six major currencies was little changed at 96.582 after edging up about 0.15 percent overnight when long-term Treasury yields surged to a one-week high amid on news of progress in U.S.-China trade talks. [US/]

The rise by the greenback, however, had been limited after Thursday’s soft U.S. economic data, including an unexpected fall in core capital goods orders and weak existing home sales, which affirmed expectations that the Federal Reserve will hold interest rates steady.

"The currency market is entering a phase when it is becoming a little numb to political developments such as U.S.-China trade talks and Brexit," said Takuya Kanda, general manager at Gaitame.Com Research.

"It’s back to fundamentals, particularly for the dollar, with each data release until next week’s non-farm payrolls report likely to slowly build directional cues."

The euro was 0.05 percent higher at $ 1.1340 and on track to gain 0.4 percent on the week.

The dollar was effectively flat at 110.66 yen following modest overnight losses. It was headed for a gain of roughly 0.2 percent this week.

The Australian dollar was up 0.3 percent at $ 0.7109 after sliding more than 1 percent to a 10-day low the previous day on fears a ban on the country’s coal by a Chinese port would hurt Australia’s already slowing economy.

The Aussie’s bounce came after the government downplayed the ban on the country’s coal by a Chinese port, Rodrigo Catril, currency strategist at National Australia Bank said. In addition, upbeat remarks from the country’s central bank chief earlier in the day also boosted the currency.

The pound was steady at $ 1.3042 after inching lower overnight.

Sterling has swung wildly between a low of $ 1.2895 and a high of $ 1.3109 this week as British Prime Minister Theresa May tries to persuade European Commission chief Jean-Claude Juncker to modify her withdrawal deal and then get the tweaked agreement through the British parliament. [GBP/]

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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It's officially a bear market: S&P 500 decline hits 20% on late plunge

Market closes down exactly 20% from the highs

US stock markets crumbled into the close and the S&P 500 finished down 65 points, or 2.7%, to 2351. That’s almost exactly 20% lower from the all-time high, which was set September 24.

The index is also at the lowest since April 2017 as sentiment crumbles on the combination of a tariff war and rate hikes.

I’m going to throw something else out here as well: The market may increasingly believe that Trump is going down. I’m not sure anyone has an idea of how he’s going down but all the resignations in his White House are bad news. Mueller is looming as well.

With this drop, money is going to abandon Trump and that was one of the final things holding together his loose alliance with mainstream Republicans..

If you assume that Trump is done, it doesn’t take too much imagination to imagine an ugly downfall.

As for the decline, markets are mercifully closed on Christmas and that leaves little time left for a recovery before the end of the month/year. If the Dow closes at these levels, it will be the worst month for US stocks since October 2008 and the 16th worst month ever.

Here’s the damage today:

  • S&P 500 -65 points to 2351
  • Nasdaq -2.2% to 6192
  • DJIA -653 points, or 2.9%, to 21792

This tweet came on August 30, the exact day the Nasdaq peaked.

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Pound Plunge Was Mere Prelude to What May Happen With No Deal

© Bloomberg. A collection of British five pound banknotes sit in this arranged photograph in London, U.K., on Thursday, Oct. 13, 2016. The U.K. currency is getting harder to trade, and to predict, because the nation’s exit from the European Union has changed the rules of engagement. © Bloomberg. A collection of British five pound banknotes sit in this arranged photograph in London, U.K., on Thursday, Oct. 13, 2016. The U.K. currency is getting harder to trade, and to predict, because the nation’s exit from the European Union has changed the rules of engagement.

(Bloomberg) — U.K. politicians got a first view Thursday of the financial market turmoil that may be triggered if they fail to approve the Brexit deal struck with the European Union.

It didn’t look pretty. A drop of almost 2 percent in ; banks, builders and utilities tumbling 5 percent or more; rising credit risks and a debt sale that was pulled — these are the sort of moves that draw comparisons with emerging-market economies. And volatility markets point to the possibility of things getting much worse before they get better.

That rebuke may chasten lawmakers and ultimately force them into action, analysts say.

“The assumption that a Brexit deal will be reached and ratified by all sides has now been called into question,” writes Lena Komileva, an economist in London at G Plus Economics. “For a deal to happen, the threat of a no deal has to become realistic, causing serious financial disruption, and a possible business and consumer confidence shock.”

True, markets may take temporary solace in the leadership of Theresa May: sterling steadied during her defiant press conference on Thursday. If she can hold onto the leadership of the Conservative Party, that may lift its fortunes, at least for a while.

But if lawmakers reject the deal, the currency vigilantes may re-emerge en masse over the low-liquidity Christmas period, ratcheting up pressure on a divided Parliament. Remember the 6 percent flash crash in October 2016 when the pound was pummeled in just one minute in thin Asian trading?

“It will take a brave Parliament to reject the economic security of an unpopular compromise arrangement for the uncertain alternatives that risk a damaging no-deal Brexit,” David Page, a senior economist at Axa Investment Managers, wrote in a note. “Even now speculation mounts that if Parliament rejects a deal in December, a second vote could follow in February once alternative options have been explored and exhausted over the intervening months, that might yet accept such a deal.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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