Hong Kong (CNN)The Philippines government has filed a diplomatic protest with China over the presence of hundreds of Chinese vessels near a Philippines-administered island in the South China Sea.
Hong Kong (CNN)Taiwan has accused China of “reckless and provocative” action, after two Chinese air force jets crossed a maritime border separating the island from the mainland.
© Reuters. FILE PHOTO: A videographer films an electronic board showing the Japan’s Nikkei average and related indexes at the Tokyo Stock Exchange in Tokyo
By Shinichi Saoshiro
TOKYO (Reuters) – Asian stocks powered higher on Monday as positive Chinese factory gauges and signs of progress in Sino-U.S. trade talks boosted sentiment, although another defeat for British Prime Minister Theresa May’s Brexit deal added to sterling’s woes.
Spreadbetters expected European stocks to open higher, with Britain’s gaining 0.4 percent, Germany’s adding 0.8 percent and France’s rising 0.9 percent.
MSCI’s broadest index of Asia-Pacific shares outside Japan added 1 percent and the rallied 2.4 percent.
Australian stocks climbed 0.6 percent, South Korea’s gained 1.3 percent and Japan’s advanced 1.4 percent.
The markets took heart after China’s official purchasing managers’ index (PMI) released on Sunday showed factory activity unexpectedly grew for the first time in four months in March.
A private business survey, the Caixin/Markit PMI, released on Monday also showed the manufacturing sector in the world’s second biggest economy returning to growth.
If sustained, the improvement in business conditions could indicate that manufacturing is on a path to recovery, easing fears that China could slip into a sharper economic downturn.
“Our view is the impact of policy easing is gradually kicking in, pushing up sequential growth indicators such as PMI first,” wrote China economists at Bank of America Merrill Lynch (NYSE:).
“In particular, the larger-than-expected tax and fee cuts and improving financial conditions have likely helped boost business sentiment in the manufacturing space.”
Stocks in Asia also took their cues from Wall Street, with the posting its best quarterly gain in a decade on Friday amid trade optimism. ()
The United States and China said they made progress in trade talks that concluded on Friday in Beijing, with Washington saying the negotiations were “candid and constructive” as the world’s two largest economies try to resolve their drawn out trade war.
“The ongoing U.S.-China trade conflict has provided a steady stream of conflicting signals for the markets. But as a whole the negotiations appear to be headed towards a conclusion,” said Soichiro Monji, senior strategist at Sumitomo Mitsui DS Asset Management.
“Hopes that the United States and China would reach an agreement on trade as early as this month are enabling stocks to begin the quarter on a positive tone.”
In the currency market, the against a basket of six major currencies stood at 97.147 after going as high as 97.341 on Friday, its strongest since March 11.
The greenback had benefited from the flagging pound, which was on track to post its fourth day of losses in the wake of the ongoing Brexit saga.
Sterling took its latest knock after British lawmakers rejected Prime Minister May’s Brexit deal for a third time on Friday, sounding its probable death knell and leaving the country’s withdrawal from the European Union deeper in turmoil.
The pound crawled up 0.15 percent to $1.3055 having posted three sessions of losses.
The Australian dollar advanced 0.35 percent to $0.7122. The is sensitive to shifts in the economic outlook for China, the country’s main trading partner.
The euro rose 0.2 percent to $1.1239 while the dollar gained 0.2 percent to 111.035 yen.
Safe-haven government bonds retreated as risk aversion in the broader markets eased.
The benchmark edged up to a six-day high of 2.444 percent, pulling away from a 15-month low of 2.340 percent brushed on March 25.
The Treasury 10-year yield had sunk as the Federal Reserve halted its drive to hike rates and as risk aversion, driven by concerns about a global economic slowdown, gripped financial markets towards the end of March.
The slide had pushed the 10-year yield below the three-month rate for the first time since 2007 late last month.
This phenomenon – when the spread between short- and long- dated yields turns negative – is known as a curve inversion and has preceded every U.S. recession over the past 50 years.
The 3-month/10-year yield spread has since pulled back from negative territory and stood around 3 basis points.
prices added to Friday’s gains, with U.S. West Texas Intermediate (WTI) futures gaining 0.6 percent to $60.52 per barrel.
Oil prices posted their biggest quarterly rise in a decade during January-March, as U.S. sanctions against Iran and Venezuela as well as OPEC-led supply cuts overshadowed concerns over a slowing global economy. [O/R]
STR – AFP – Getty Images
October 12, 2016: A a Chinese worker making soft toys at a factory in Lianyungang, Jiangsu province.
poll of economists.
A reading below 50 signals contraction, while a reading above that level indicates expansion.
New orders climbed to their highest level in four months, while the index for new export orders returned to expansionary territory, “showing that both domestic and external demand rebounded moderately,” wrote Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, a subsidiary of Caixin.
Markit and Caixin said in a joint press release that staffing levels at factories rose in March to mark their first expansion since October 2013. Some firms also hired additional workers to support greater production and new business developments, they added.
“Overall, with a more relaxed financing environment, government efforts to bail out the private sector and positive progress in Sino-U.S. trade talks, the situation across the manufacturing sector recovered in March,” said Zhong.
Results of the private survey came after data on Sunday showed the official Purchasing Managers’ Index rose to 50.5 in March from February’s three-year low of 49.2. It marked the first expansion in four months, according to data released by China’s National Bureau of Statistics.
The manufacturing numbers come amid ongoing tariff talks between the U.S. and China aimed at resolving their trade differences. High-level trade negotiations between the two economic powerhouses are set to resume in Washington this week following last week’s talks in Beijing.
The Caixin PMI is a private survey focused on smaller businesses and offers a first glimpse into the operating environment. It is closely watched as an alternative to the official PMI.
Despite the strength of China’s March manufacturing data, there are still reasons to be cautious about the country’s near-term outlook, said Julian Evans-Pritchard, senior China economist at Capital Economics.
The breakdown of both the official and private PMI indexes suggests a slight recovery in external demand, with most of the improvement coming from a pick-up in domestic demand, wrote Evans-Pritchard in a note on Monday.
“We suspect that this was driven by stronger fiscal support since local governments have stepped up bond issuance recently,” he added. “On that note, the official PMI for the construction sector rose last month, consistent with an acceleration in infrastructure spending.”
China’s growth could still weaken in the near-term as indicated by recent credit growth data and a sharp decline in land sales purchases, Evans-Pritchard said.
Results of the Caixin PMI survey for the services sector are due to be released on Wednesday.
— Reuters contributed to this report.
We’ve detected unusual activity from your computer network
To continue, please click the box below to let us know you’re not a robot.
Why did this happen?
For inquiries related to this message please contact our support team and provide the reference ID below.
Block reference ID:
BEIJING—China is offering foreign technology firms better access to the country’s fast-growing cloud-computing market, people briefed on the matter said, as Beijing fashions a compromise in a tech sector the U.S. wants opened as part of a trade deal.
Premier Li Keqiang disclosed the proposal to allow trial operations for foreign cloud-service providers at a Monday meeting with about three dozen corporate chieftains, including those from International Business Machines Corp., Pfizer Inc., Rio Tinto PLC, BMW AG and Daimler AG….
| March 28, 2019 01:22 PM
Rebuking Huawei’s claim that it is a harmless provider of consumer telecommunications services, British cybersecurity specialists on Thursday ruled that the firm’s inclusion in 5G network facilitation would be dangerous.
This supports active U.S. efforts to exclude Huawei from global 5G networks. China is aggressively resisting the U.S. on this, because Huawei is its primary intended proxy for cyberespionage in the 21st century.
But this report, under the auspices of Britain’s NSA equivalent, is especially important for two reasons. First, because it comes from the NSA’s top foreign partner and some of the world’s top cybersecurity experts. Second, because it represents forensic insight into how China would use Huawei to conduct espionage operations.
The report’s takeaway is clear: It offers only “limited assurance that all risks to UK national security from Huawei’s involvement in the UK’s critical networks can be sufficiently mitigated long-term.” This is thanks to “significant technical issues in Huawei’s engineering processes.” Specifically, Huawei has failed to embrace “universally applied… configuration item types (source code, build tools, build scripts etc). Without good configuration management, there can be no end-to-end integrity in the products as delivered by Huawei.”
The report adds that even where Huawei has been told specifically how to close down these backdoors, its product “continues to demonstrate a significant number of major defects. The NCSC therefore remains concerned that Huawei’s software engineering and cyber security competence and associated processes are failing to improve sufficiently.” With typical British understatement, the report notes that this is exacerbated because of “the currently unknown trajectory of Huawei’s [research and development] processes.”
Of course, Huawei’s failure to resolve identified issues is not coincidental. It reflects the Chinese government’s interest in creating backdoors in hidden cyber-telecommunications spaces that will allow Chinese intelligence collection in the future. The report hints as much by asserting that
The number and severity of vulnerabilities discovered, along with architectural and build issues, by the relatively small team… is a particular concern. If an attacker has knowledge of these vulnerabilities and sufficient access to exploit them, they may be able to affect the operation of the network, in some cases causing it to cease operating correctly. Other impacts could include being able to access user traffic or reconfiguration of the network elements.
No excrement, Sherlock.
Here, “access user traffic or reconfiguration of the network elements” should translate as “use 5G network access to turn the network or significant elements therein into one big Chinese signal intelligence targeting and collection program. But the report shows that China is trying to be crafty: fixing limited issues to gain a pretense of concern for western security, but simultaneously creating new backdoors.
Fortunately, this report shows the gambit is failing. Reports like this one will help the U.S. and U.K. educate their allies as to the risks of entertaining Huawei’s sour claim of mutual interest. Huawei is a Chinese intelligence cutout in foundation, intent, and action. It must be restricted as such.
In early 2018 — two months after Boeing (NYSE:BA) announced a deal to sell 300 jets to China — French President Emmanuel Macron announced that China was close to finalizing orders for 184 Airbus (NASDAQOTH:EADSY) A320-family planes. He also said that France was hoping to strike additional deals to sell A350 or A380 widebody jets to China.
However, 2018 came and went with no order. But on Monday, in conjunction with a state visit to France by China’s President Xi Jinping, China placed an even bigger order for Airbus jets than the one discussed last year.
More orders coming Airbus’ way
While there are numerous different state-owned and private airlines in China, the government has ultimate authority over aircraft orders. China periodically places large orders with Boeing and Airbus, and it tends to use these orders as a “carrot” in political and economic negotiations with those aircraft manufacturers’ home countries.
Under the deal announced this week, China plans to buy 300 Airbus aircraft — 290 A320-family planes and 10 A350s. Neither party specified which variants of these aircraft families will be acquired. In all likelihood, details like that are still being hammered out: The two sides have only reached a “general terms agreement” thus far, not a binding firm order.
Airbus and China have announced an order for 290 A320-family jets. Image source: Airbus.
The deal with China should help the European aerospace giant get its order backlog moving in the right direction again. In the first two months of 2019, Airbus’ backlog shrank, as it booked new orders for just four aircraft, offset by 103 cancellations.
That said, the 300 orders announced this week are not necessarily all new, as Flightglobal noted recently. Airbus has a substantial number of orders from undisclosed customers in its official backlog already, including nearly 600 A320-family orders and two dozen A350-family orders.
Bad news for the 737 MAX? Not necessarily…
China’s big Airbus deal comes in the shadow of the worldwide grounding of Boeing’s 737 MAX jets, following two fatal crashes in the span of five months. Aviation regulators in China have been among the most aggressive in addressing this safety crisis. China was the first country to ground the 737 MAX, and it has stopped taking applications for airworthiness certifications of new 737 MAX aircraft. Chinese regulators have also made it clear that they will independently evaluate any design changes proposed by Boeing, rather than just following the FAA’s lead.
The combination of the big Airbus order and China’s response to the Boeing 737 MAX crashes might make it seem like Boeing is in trouble in the fast-growing Chinese market. But here as elsewhere, any dip in orders for the Boeing 737 MAX is likely to be temporary.
First, China’s aviation market is massive and growing rapidly. Airbus expects China to need an additional 7,400 aircraft over the next 20 years, including more than 6,000 single-aisle planes (like the A320neo and 737 MAX families). Boeing’s estimates are even more bullish. Airbus alone cannot meet all of that demand. While a homegrown Chinese jet will soon be available as a third option, it will take a while for production to ramp up — and in any case, it’s not as technologically advanced as the 737 MAX and A320neo families.
Second, Boeing opened a 737 MAX completion center in China just a few months ago. This new facility currently installs interiors for the numerous 737s destined for Chinese airlines. In the future, the jets will also be painted there. If China stops ordering 737 MAX aircraft, this work will go away.
Third, as noted above, aircraft orders are often used by China as a bargaining chip. With China eager to roll back U.S. tariffs on various Chinese imports, a long-term move away from Boeing jets — and the 737 MAX in particular — would be hard to pull off. Thus, once Boeing demonstrates that it has addressed any safety vulnerabilities for the 737 MAX, it could be in line for another big order from China.
Airbus should be pleased about landing a big order from China. But the deal announced this week doesn’t reflect a change in the balance of power in the aircraft manufacturing industry.
Adam Levine-Weinberg has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Science 22 Mar 2019:
Vol. 363, Issue 6433, pp. 1338-1342
U.S. stock futures fell on Friday, pointing to a fifth straight session of losses for Wall Street, after a slump in Chinese exports piled onto concerns about slowing global growth.
Investors are also braced for U.S. jobs data due later.
How did major indexes fare?
Dow Jones Industrial Average futures
fell 98 points, or 0.4%, to 25,405, while S&P 500 futures
were down 10.6 points, or 0.4%, to 2,744.50. Nasdaq-100
futures dropped 37 points, or 0.5%, to 7,019.
On Thursday, the Dow Jones Industrial Average
fell 200.23 points, or 0.8%, to 25,473.23. The S&P 500 index
dropped 0.8% to 2,748.93 and the Nasdaq Composite Index
shed 1.1%, to 7,421.46.
With one session left, the Nasdaq is facing a 2.2% drop for the week, while the Dow industrials and S&P 500 are off around 2% each.
What’s driving the market?
Tumbling 4.4%, Chinese stocks logged their worst one-day percentage drop since October on Friday, after the nation reported a 20% drop in February exports on the heels of a 9.1% gain in January. Officials attributed the plunge to sagging demand and some distortions from the Lunar New Year holiday. But economists said that even adding those two months together, the data looked weak.
And China’s biggest brokerage, Citic Securities, hit People’s Insurance Group of China
with a rare sell rating, citing concerns over valuations, according to Reuters. Those shares slid 4% in Hong Kong, after falling as much as 10% at one point.
China’s news adds to global growth concerns, with investors still reeling from a more dovish-than-expected European Central Bank, which announced new measures to support a slowing economy on Thursday. That included fresh long-term loans to European financial institutions and a surprise pledge to hold off on any interest-rate increases until at least the end of the year.
Other data on Friday showed German manufacturing orders fell sharply in January, though December data was revised upward.
Investors are also bracing for U.S. jobs data Friday, with February nonfarm payrolls due at 8:30 a.m. Eastern Time, alongside the unemployment rate and average hourly earnings. Economists polled by MarketWatch are forecasting the creation of 178,000 new jobs, and a downward revision for January’s 304,000 spike.
And uncertainty was lingering over a U.S.-China trade deal. Washington and Beijing have yet to set a date for a summit to resolve their trade dispute, the U.S. ambassador to China, Terry Branstad, said in an interview with The Wall Street Journal. Branstad said negotiators need to further narrow the gap in their positions, including over enforcement of a potential deal, before any summit arrangements are made.
How did other markets trade?
Asian stocks closed lower across the board, led by that big loss for the Shanghai Composite
and a 2% drop for the Nikkei 225
Investors sought shelter in perceived safe haven assets such as the Japanese yen
which weighed on the U.S. dollar
prices fell along with equities.
European stocks tracked global equities lower, with the Stoxx Europe 600 index
Providing critical information for the U.S. trading day. Subscribe to MarketWatch’s free Need to Know newsletter. Sign up here.