David Fuller and Eoin Treacy's Comment of the Day
Category - General

    China Is Said to Offer Path to Eliminate U.S. Trade Imbalance

    This article from Bloomberg News may be of interest to subscribers. Here is a section:

    China has offered to go on a six-year buying spree to ramp up imports from the U.S., in a move that would reconfigure the relationship between the world’s two largest economies, according to officials familiar with the negotiations.

    By increasing annual goods imports from the U.S. by a combined value of more than $1 trillion, China would seek to reduce its trade surplus -- which last year stood at $323 billion -- to zero by 2024, one of the people said. The officials asked not to be named as the discussions aren’t public.

    The offer, made during talks in Beijing earlier this month, was met with skepticism by U.S. negotiators who nonetheless asked the Chinese to do even better, demanding that the imbalance be cleared in the next two years, the people said.

    Economists who’ve studied the trade relationship argue it would be hard to eliminate the gap, which they say is sustained in large part by U.S. demand for Chinese products.

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    Email of the day on reading the Brexit tealeaves

    Palladium Reaches Another Record as JPMorgan Sees More Upside

    This article by Rupert Rowling and Marvin G. Perez for Bloomberg may be of interest to subscribers. Here is a section:

     

    Palladium rose as much as 5.4 percent to $1,439.29 an ounce. It traded at $1,394.97 by 1:39 p.m. in New York. At the Comex exchange, palladium for March delivery climbed 2.3 percent.

    Investors are shrugging off signs of automotive weakness in key markets, with annual car sales in Europe falling for the first time since 2013. China also declined last year and sales in the U.S. barely rose.

    The metal will remain in a supply deficit for an eighth straight year, according to Metals Focus Ltd. Palladium’s status as a byproduct of mines in South Africa and Russia means output levels aren’t adjustable to meet short-term demand, despite the surging price.

    “Investors appear to be ignoring the fact that weak sales figures have been reported for all major auto markets in recent days,” Commerzbank analysts including Daniel Briesemann said in a note. “Instead, they are seeing news such as the planned widening of a strike to include the platinum mines of a major South African gold and platinum producer as being a good reason to buy.”

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    Defense Intelligence Agency Chinese Military Power Report

    This report on China’s military readiness may be of interest to subscribers. Here is a section:

    China’s double-digit economic growth has slowed recently, but it served to fund several successive defense modernization Five-Year Plans. As international concern over Beijing’s human rights policies stymied the PLA’s search for ever more sophisticated technologies, China shifted funds and efforts to acquiring technology by any means available. Domestic laws forced foreign partners of Chinese-based joint ventures to release their technology in exchange for entry into China’s lucrative market, and China has used other means to secure needed technology and expertise. The result of this multifaceted approach to technology acquisition is a PLA on the verge of fielding some of the most modern weapon systems in the world. In some areas, it already leads the world.

    Chinese leaders characterize China’s long-term military modernization program as essential to achieving great power status. Indeed, China is building a robust, lethal force with capabilities spanning the air, maritime, space and information domains which will enable China to impose its will in the region. As it continues to grow in strength and confidence, our nation’s leaders will face a China insistent on having a greater voice in global interactions, which at times may be antithetical to U.S. interests. With a deeper understanding of the military might behind Chinese economic and diplomatic efforts, we can provide our own national political, economic, and military leaders the widest range of options for choosing when to counter, when to encourage, and when to join with China in actions around the world.

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    Pound Holds Steady as U.K. Government Wins No-Confidence

    This article by Charlotte Ryan for Bloomberg may be of interest to subscribers. Here it is in full:

    With May successfully seeing off the immediate threat to her government, she now has to turn her attention to plan B, which could involve bringing the divorce deal back to another vote. She invited rival parties to start talks following the Wednesday vote.

    “The pound fallout should be contained as the prime minister is safe from a leadership contest,” Kamal Sharma, head of Group-of-10 currency strategy at Bank of America, wrote in a note before the confidence vote. “There is scope for sizable pound appreciation once the political risk premium is priced out.”

    The U.K. currency has weakened about 14 percent since the result of the June 2016 Brexit referendum, and analysts in a Bloomberg survey see scope for a rally to $1.34 if a divorce deal is finally agreed on.

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    BofA and Goldman Crush Earnings, Lifting Bank Sector Stocks

    This article by Felice Maranz for Bloomberg may be of interest to subscribers. Here is a section:

    Earnings per share beat on higher fees and lower taxes, Morgan Stanley analyst Betsy Graseck wrote in a note, with the bank’s net interest margin beat showcasing that BofA’s “asset sensitivity is coming through.” Trading fees and investment banking topped her estimates as well, and she sees BofA generating “strong positive operating leverage, even in a weak revenue environment” -- which isn’t priced into its stock.

    Goldman’s fourth-quarter net revenue, investment banking revenue and equities sales and trading revenue all topped estimates. The bank’s release highlighted the highest net revenues in financial advisory since 2007.

    Goldman’s results weren’t all positive, though, as FICC and equities sales and trading revenue missed, its investment banking transaction backlog dropped from the end of the third quarter while questions about 1MDB will likely hang over the bank.

    JMP’s Devin Ryan said in a note that “relief” for Goldman’s shares is “warranted following disproportionate pressure over the past year.” He also sees Goldman’s slide deck presentation with more detail around the quarter as likely to be “much appreciated by investors and viewed as a sign that the firm is moving toward a greater level of transparency.” He’s listening for color on 1MDB on the call, which started at 9:30am, though he’s “not expecting much.” CEO David Solomon has so far said, “We apologize to the Malaysian people.”

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