The United Kingdom and the United States entered in an agreement on Monday for a long-term pact to ensure that the $2 trillion a day transatlantic derivatives market remains uninterrupted by Brexit. The transactions in London and New York account for 80% of all global off-exchange trade contracts.

Derivatives are extensively utilized by companies to protect themselves against unexpected fluctuations in borrowing costs, currencies or raw material prices. However, at present, derivatives trading in the UK confirms no rules written by the European Union, which is set to exit on March 29. Bank of England Governor, Mark Carney told reporters on Monday that the derivative traders in the market can be confident that the trading between the UK and the US will not be affected even by a no-deal Brexit, and the high standards will continue to prevail.

Christopher Giancarlo, Chairman of the US Commodity Futures Trading Commission (CFTC), stated that the agreement highlights London’s status as a global financial center for a long time to come. Measures announced on Monday by the CFTC, the UK Financial Conduct Authority and the Bank of England were aimed at reassuring markets that derivatives will not be affected even if there is a “hard” Brexit. He also added that the London derivatives market could not be readily replicated anywhere else.

Giancarlo assured that these measures provide a “bridge over Brexit” through a sustainable regulatory framework which the booming transatlantic derivatives market may continue and endure. He said that the steps taken are to ensure continuity, and will be implemented regardless of the form of Brexit, and are taken from a long-term perspective. Time for Brexit is ticking away, with just a month to go, however, uncertainty over an exit with transition agreement continues to threaten with economic disruption.

The transatlantic deal makes room for both, trading and clearing of derivatives, by institutions like the London Stock Exchange’s LCH clearing arm, ICE and CME. Andrew Bailey, Chief Executive Officer of the UK’s Financial Conduct Authority, claimed that the agreement is an indication that they want economic cooperation to continue.

Head of the global derivatives industry body, ISDA, Scott O’Malia opined that the agreement between the US and the UK would ensure safe, efficient and uninterrupted functioning of the market.

The European Union, too, has taken steps to ensure cross-border derivatives clearing are not affected in a “no-deal Brexit” scenario, as London dominates clearing of euro-denominated interest rates swapping. However, it still needs to strike a long-term relationship. Police Chief of City of London financial district, Catherine McGuiness said it is extremely important that the EU regulators immediately address critical issues that might arise after a no-deal Brexit, like the continuity of derivative transactions.

Steps taken by the US are permanent covering derivative transactions, while those taken by the EU are temporary and cover only clearing. Meanwhile, EU regulators are framing stricter requirements for foreign clearing houses that want to cater EU customers by insisting it could tell them what to do in a crisis, a step which both UK and US are opposing. This is being considered as an attempt to coerce some derivative businesses to move in the EU.

As soon as US President Donald Trump announced that the trade talks were progressive and are ready to the extent the tariff hike on Chinese goods, the Indian shares reached another high level along with Asian stocks.

When the news arrived about the trade talks between Beijing and Washington has achieved substantial progress during the high-level trade talks between the delegates, the Asian share was up and crossed the 5-month peak level on Monday. Three years record high gain in Chinese shares was noticed after the tariff hike delay announcement, the market was flooded with funds over the positive trade talk news.

The Nifty noticed a rise of around 0.16 percent to 10,809.30 at 0626 GMT and the Sensex was up by 0.26 percent to 35,965.83.

There was also a rise in the financial stock of the country namely the ICICI Bank and HDFC Bank. The ICICI bank shares were up by 1.5 percent and HDFC Bank shares up by almost 1 percent.

IT stocks also noticed a gain in its shares. More than 2 percent each increased shares of Tata Consultancy Services and Infosys, the top IT companies of India.

Shares of other companies like Sobha Ltd, Godrej Properties Ltd, and Oberoi Really Ltd were up by nearly 3.5 percent to 4.4 percent during the trading hour.

Meanwhile, the shares of Adani Ports and Special Economic Zone Limited were trading low by almost 9.1 percent.

The Indian Market is looking out for cues from the global market especially on the news like parliamentary elections and government policies which are still far to take place, vice president of Kotak Securities, Sumit Pokarana informed.

Pokharana also said that there are geopolitics tensions in India especially after the suicide attack that almost killed 40 Indian troops in India planned by Pakistan. Also, there are risks related to it, and market participants want some actions to be implemented by the government before the general elections.

China’s Shanghai Composite Index significantly reached another level and was up by 5.6 percent to 2,915.28. The gain was the highest recorded one after November 2015.

The world’s biggest manufacturer of computers, Lenovo Group, shrugged off the United China-China trade tensions to post a handsome profit in its quarterly results. The Chinese companies results beat the estimates of analysts, and this is an important development since many would have expected the computer maker’s results to be disappointing due to the trade war. Following the results, the Lenovo stock rose sharply and at one point rose by more than 11%.

The average of the estimates by 10 analysts pegged the company’s net profit at $207 million for the quarter, but Lenovo beat these numbers comfortably with a net profit of $233 million. The quarterly results show the sort of turnaround that Lenovo has enjoyed. In the same quarter last year, they had posted a $289 million loss. The company’s revenues stood at $14.04 billion, which reflects a handsome rise of 8.5%.

Lenovo announced that its foothold of the global computer market now stood at 24.6% and in addition to that, the companies smaller smartphone business also recorded a profit. The mobile phone unit recorded a profit of $3 million, before taxes. On the other hand, the company’s loss-making data center unit reduced its losses by a big margin in the latest quarter. It recorded a loss of $55 million, which is a healthy 31% drop from a disappointing $86 million loss in the same quarter last year.

All this is particularly heartening for a Chinese company, which delivered this strong result at a time when many other companies have gone into a bit of a meltdown. According to Gartner, which tracks the personal computer industry, shipments fell in 1.3 percent during the course of 2018, and despite that, Lenovo managed to grow its market share to 24.6%.

However, the Chief Executive Officer of Lenovo, Yang Yuanqing pointed out that there is still scope for massive growth for the company in China. He stated that despite being the world’s biggest market for smartphones, China has not yet toppled the United States when it comes to personal computers and that is not ‘not consistent’ with the population of the country. He went on to state that the company would look for more consolidation and have a bigger focus on the premium personal computer business. That being said, the shadow of the US-China trade talks looms large over most companies, and Yang stated that it is something that hurts all companies. He said, “Definitely we don’t want to see more trade war, political tension. If that continues, that will affect everyone, not just us, all multinationals.”

Declaring the annual financial report card for 2018, HSBC on Tuesday admitted falling short of expectations on several fronts, following a challenging fourth quarter. Markets across the globe experienced sharp falls in business activity during the last quarter.

Europe’s largest bank’s reported pre-tax profits for 2018 stood at $19.89 billion, a 15.9% jump from the previous year. Total revenue reported for the last year was $53.78 billion, 4.5% higher than in 2017. However, the London based bank’s pre-tax profit for the year gone by was expected to be at $21.26 billion, a 23.8% hike from 2017. Revenue projections were at $54.674 billion, 6.28% higher than the previous year.

The lender bank warned that it might have to scale down investment plans to avoid missing a key target known as ‘positive jaws,’ tracks whether banks are growing revenues faster than costs, for a second straight year. The share prices of HSBC fell by 3%. The bank has attributed the shortfall of expectations to the slowing trade in China and the UK.

HSBC CEO John Flint said on Tuesday that the bank would be proactive in managing costs and investments to meet risk to growth ratios where necessary. However, he assured that they wouldn’t take short term decisions that would hurt business interests in the longer run. He stated that the key focus would be to moderate investments and not to cancel or change the shape of investments.

The Chinese economy has slowed down to a 28-year low at 6.6%. This has challenged HSBC’s plans to increase investments in Asia, from where the banking giant accumulates 90% of its total profits. One of the major reasons for the slowdown of China is its elongated trade tussle with the United States. And if Beijing and Washington don’t reach the point of mutual consent, businesses will continue to suffer in both countries.

Asian markets contributed $17.8 billion to the bank’s profits, 16% more than what they did in 2017. Flint said that though the profits from Asia would continue to grow, the growth rate will dip a little due to the Sino-US trade war.

On the other hand, business back home continues to suffer. The sword of a no-deal Brexit is hanging on the UK as the deadline for Britain’s exit from the European Union is approaching. HSBC recently set aside $165 million against possible future bad loans in Britain, which reflected potential economic suffering due to a no-deal Brexit. Commenting of UK figures, Flint said that the longer uncertainty hovers around, the worse situations will continue to be for their customers. Due to uncertainty, the majority of the bank’s customers are postponing investments, which has resulted in the slowdown of the UK economy.

The core capital ratio of HSBC dropped to 14% for December 2018, a 0.5% drop from the previous year’s corresponding period, mainly due to adverse foreign exchange movements. Nonetheless, the bank has announced that it will be paying the yearly dividend at $0.51 per share, which is more or less in line with what markets analysts had predicted.

There is great optimism that the US and China will be able to come to a deal and resolve the seven-month trade war between both countries. Due to that sentiment, the stocks in the Asian markets which were fluctuating mostly in the negative side rose to a 4-month high on Wednesday.

At the market:

The Beijing and Washington officials are hopeful that the talks which will begin next week will bring them closer to deal over the trade war and that cheered the markets.

The Shanghai Composite which is China’s benchmark and CSI 300 which is a blue-chip rose to 0.4% and the Hang Seng of the Hong Kong market increased by 0.6%. Asian markets rose on indications from the Wall Stress where Nasdaq and Dow rose by 1.5% over the positive outcome of trade talks between China-US. Wall Street was also optimistic as the possibility of another government shutdown became less due to a tentative deal with the US Congress.

Asia-Pacific broadest index MSCI increased by 0.5% and reached its highest since October 2018. South Korea’s KOSPI rose by 0.5%. Meanwhile, Nikkei climbed by 1.3% to reach a two month high.

In the currency market, the dollar was shedding as investors in the hope of a deal between China and the US moved their money to assets that are riskier. The dollar after reaching a two week high stood at 96.69.

The Euro ended a little higher by gaining 0.5% from yesterday and ended at $1.133 surpassing the 3-month low of $1.1258.

The Reserve Bank of New Zealand confined the cash rate at 1.75% which is a record low and highlighted its neutral stance. The Kiwi dollar increased by 1.4% and reached a one week high of $0.6829.

The dollar was steady at 110.57 yen.

Another major development that happened overnight in Wall Street is that the Cboe Volatility Index dropped to its lowest in more than four months and was at 14.95. The yields of the government bonds rose due to the risks being averted for the time being. The 10-year bonds of the US Treasury increased to a high of 2.694%.  The US crude oil futures also increased by 0.1% and was at $53.64 per barrel after it rallied at 1.3% on Tuesday.

There was an increase in oil prices as the data published by OPEC showed that there was a reduction in oil production in January. Moreover, Saudi Arabia which is a leading member in OPEC said that it would cut its output in March additionally by 500,000 barrels.

Eveready, one of the biggest manufacturers of flashlights and dry cell batteries, has been put on the market by India’s Williamson Magor Group due to a pile of debt that has crippled the holding company of the group. According to a report in India’s Economic Times, the fight for the controlling stake in Eveready is going to see be an intense one, and it is interesting to note that two American heavyweights, Duracell and Energizer, are both vying for it. However, what places Energizer in a far better bargaining position is the fact that the company already owns the Eveready brand in key markets like the United States and China. They are, without a doubt, in pole position.

That being said, Duracell is going to mount a serious challenge to their bid, according to sources that are familiar with the matter. The fact that Warren Buffett’s Berkshire Hathaway is the owner of Duracell also makes it a very interesting duel. Other than the two American companies, major private equity companies are also in the running for the controlling stake. Among them are India private equity outfit Kedaara and global giants like KKR and Blackstone. Eveready is an incredibly attractive asset, and the interest among investors is palpable.

The Willamson Magor Group, which has interests in a range of business, is led by the Khaitans, an Indian business family and as of now, they own 45% of the shares in the company. Having been saddled with debts to the tune of around $140 million in the group, the Khaitans now want to sell off their stake in Eveready, and they have contacted Indian bank Kotak Mahindra to look for buyers. Any bidder who manages to get his hands on 45% of the shares owned by the group will also have the option to enforce a clause by way of which they can acquire a further 26% stake in the company.

All bids are going to be sent in this week and out of those a set of entities will be selected. Once that is done, a concrete offer can be made. Everyone who is close to the developments refused to comment on the issue. Spokespersons for Eveready refused to comment, while it was the same with Duracell, Energizer and private equity players KKR and Blackstone. A source, however, pointed out that the Khaitan family might retain a stake of around 10% to 15% following the sale. He said, “They are flexible and are looking at all options and will take a final call based on the final offers on the table. There is significant traction for the asset for its scale and brand equity. Expect a 30-40% control premium to the current market price.” 

Significant progress has been made during the latest round of China-United States trade talks. Business leaders, analysts, and officials said that it could pave the way for a complete solution during the next-step of negotiations. They also conveyed that China has been opening up its economy to the rest of the world and is offering ample opportunities for various global investors.

The comment was made after the wrap-up of the latest round of talks between the United States and China in Washington on Thursday. According to the Chinese delegation, it is reported that both the sides had specific and constructive discussions covering topics such as technology transfers, protection of intellectual property rights, trade balance, and non-tariff barriers. The Chinese delegation said, “Important progress has been achieved in the current stage, and the two sides had candid, specific and constructive discussions.”

According to a Xinhua News Agency report, Vice-Premier Liu He met with United States President Donald Trump, who assured that a United States trade delegation would visit China in the middle of February for further negotiations. It added that the United States delegation is to be led by Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer.

Liu and Lighthizer were the ones who lead the two-day talks that happened in Washington on Wednesday morning. They were accompanied by dozens of other senior officials from both governments.

During the talks both the sides also determined the road map and timetable for next-step consultations. Both the United States and the Chinese delegation attached massive importance to the issue of technology transfers and IPR protection and accepted to improve the cooperation in this regard further.

The president of the US-China Business Council, Craig Allen said, “We understand that this week’s discussions covered familiar ground on structural issues and looked forward to hearing details about any progress that was made.” Craig Allen led council, in a statement has advised both the governments to use this month to address their unsettled issues.

The Chinese delegation said that creating a market environment of fair competition aligns with the direction of China’s opening-up and reform and therefore, China will look forward to addressing relevant US concerns.

Chinese delegation went on to add that both the countries have concurred to take adequate steps to engage in the more balanced development of bilateral trade. China will be making active efforts to expand imports from the United States in manufacturing, energy, agriculture, and services. This in return will help the country’s goal of high-quality economic development and also meet the people’s demand for a better life.

Craig Allen said it’s evident that changes to the bilateral commercial relationship are going to happen. But due to the complexity of the issue, it might take considerable time and hard work to resolve them.

The president for Asia-Pacific of the United States agricultural conglomerate Cargill Inc, Robert Aspell said that the best way to resolve trade issues is communicating with each other and finding a solution. “A large number of global companies have invested in China; it is a clear signal that China is going to open its markets further, and many opportunities can be found in different sectors across the country,” he commented.

Experts say that with collaborative efforts, both the United States and the Chinese economies can improve and could also increase the supply chain and global economy in 2019. The economies of both United States and China are strongly interconnected and that a blow to anyone would most likely make an impact in the other said Bai Ming who is the present deputy director at the International Market Institute of the Beijing-based Chinese Academy of International Trade and Economic Cooperation. Chen Wenling, the chief economist at the China Center for Economic Exchanges, said, “The United States needs Chinese goods as much as China needs equipment and agricultural products from the United States.”

Earnings of China’s industrial firms have gone down further in December. This has placed a lot of pressure on policymakers to support the industries hurt by weak factory activity and slowing prices as a result of the U.S.- Sino trade war.

The dipping earnings point to troubled times ahead for China’s huge manufacturing sector which is already struggling with job layoffs, declining jobs, factory closures and so on. In fact, the Chinese economic growth is at its weakest in the past three decades.

The Chinese economy grew only 6.6 percent in 2018, and the growth is forecast to be even slower this year as a result of Beijing’s endeavors in reducing debt risks.  It has depressed the property market and as a result, slowed down the credit flow to the private sector.

Industrial profits saw a decline of 1.9 percent in December compared to the profit a year back. This decline was reported after a 1.8 percent decline in November, making the downward dip continue two months in a row. This is the first dip in profits in the last three years.

According to Tang Jianwei, at Bank of Communications in Shanghai, the declining trend will continue as the producer price index has also turned negative the previous month. When the PP becomes negative, it causes the industrial enterprises’ profits to go down as well. He also stated that the structure of corporate profitability would soon change.

Date released has shown that profits in coal mining, chemical as well non-ferrous metal sectors have all slowed down significantly. The profits of the entire year rose to only 10.3 percent or 6.64 trillion yuan in 2018 compared to the 21 percent rise in 2017.

Even upstream sectors like coal and metal mining, oil extraction. which command a larger share of the profits slowed down considerably in 2018.

According to Tang, rolling out the large-scale cuts promised by the Chinese government would help stall the declining industrial profits.

A recent survey showed that the activity of around 2500 small and mid-sized Chinese firms continued to contract in their fourth quarter in 2018, despite the many supportive government policies.

The Small and Medium Enterprises Development Index went down to 93, well below the 100-mark that marks the difference between growth and contraction.

A recent report stated that the latest measures by the Chinese government would provide support funding to private firms but will be limited, and the credit will be diverted to stronger private enterprises.

American trade peacemakers were informed by two US business groups that the Hi-tech initiative of Beijing is moving ahead as illustrated in the Made in China 2015 plan. Made in China is a policy whose objective is to concentrate on the tasks that are assumed to be resumed by next week in an attempt to end the trade war.

American Chamber of Commerce that was held in China along with a joint report said that the US Chamber of Commerce had recognized more than 100 policies within 24 provinces and cities such that they create rules, either set goals or furnish the initial guidance that will instantly initiate or are directly associated to MIC 2025. MIC 2025 is an essential initiative which is backed by Xi Jinping the Chinese President focused mainly on developing technology sectors which compromise semiconductors, aviation, robotics, and AI.

The group’s results were later rendered to the US Trade Representative Office a few days back The Wall Street Journal first mentioned about it in its report.

Is it made in China 2025 Plan How is Beijing going to direct the world?

According to the data that was published by South China Morning Post says that positive Chinese approach seems to be occurring at a regional level.

Outstanding individual innovations, developing and intellectual property is the main goal while the local government is vigorously trying to promote and develop their specific plans along with the MIC 2025 plan with the help of the state government, declaration according to the US Chamber of Commerce.

Is this the turning phase for the US-China relations and trade war?

It is recommended for in-depth, constant and combined effort within the sub-central authorities to execute and also accept profit about the incentives ties of Made in China 2025 plan stated in a report.

Systematic challenges must be addressed by the Chinese government at all levels whatever the solution could be.

Apart from lowering the trade deficit of US with China as per the reports titled on Washington to priorities outcomes to address the fundamental challenges related to China’s economic policies and habits while the groups claim are unjust and limiting for the US companies.

With the help of Made in China in 2025, China intends to govern the Hi-tech sector hit a stumbling block

Little progress was made at the time of negotiations which has led for high concerns. In Beijing during the recent time, Beijing has approached the issue related to the deep-rooted conflicts about China’s state-approved industry policies and the Hi-tech development program.

The countdown for Trade War Agreement

During talks, sources informed the Post that the plans related to scaling up of buying the American goods were discussed by the Chinese negotiators, which would intent to help the trade imbalance by lowering it and further preventing the issues related to structural challenges of the Chinese economy.

Financial Times stated in its report that Chinese proposal of sending vice minister-level officials to Washington to make the we have rejected arrangement for the visit of Chinese Vice-Premier Liu He’s which is scheduled next week this has further led for doubts and confusion as to whether or not the countries intend to meet the March 1 deadline which is fixed by the US President Donald Trump and by Chinese President Xi Jinping ahead of the traffic increases resumes.

China’s Economy Slows Downs Further, Lowest ever compared with Quarterly Growth

The President of the US-China Business Council Craig Allen moved away from such issues quoting it as a simple logistics that keeps on changing over the time.

While planning its quite not essential to have a face to face consultation Craig stated.

Craig further believed that there is no need to worry about such developments at all and we should concentrate on the bigger picture.

The White House Chief Economic Adviser Larry Kudlow on Tuesday spoke to CNBC stating that no meeting has been lined-up during this week although both the countries are constantly in touch with each other before the talks that are scheduled in next week.

Chinese foreign ministry spokeswoman Hua Chunying In Beijing replied to Kudlow’s statement saying that she has observed the statement given by an American official and he has clarified the issue. Both the countries are in touch with each other related to trade talks. There are no changes that I have noticed or heard. Hua said it in a press conference that was held on Wednesday.

The joint report suggests that China should make changes in policy guidance and regulations to remove technology transfer, further coping with the market barriers and unfairness related to hi-tech development plans that are incorporated by MIC2025.

We request the US government authorities to make a comprehensive approach that will accomplish concurrent and distinct changes governing to regulations, laws, standards, and performance after that within China’s policy landscape it was mentioned.

Further, it also mentioned that China’s assurance to reform should be linked to free guidelines, timelines, and intense monitoring.

The report also suggests for the removal of obstacles related to cross border data flowed and approached the US negotiators to claim that the US digital service providers have objected about the China address security requirements, which are biased and harms the competition in the Chinese market.

The prices of oil hit its highest in 2019 as refinery processing data in China rose to a high in 2018. It brings a huge cheer to the industry as China which is the second largest economy in the world had a slowdown in 2018. The price rise is also partly because of the OPEC supply cuts. The National Bureau of statistics which released the data on Monday also reported that the output of the crude oil refinery jumped to 603.57 million tonnes in 2018 which is 12.12 million barrels a day and is up by 6.8% from last year. These figures are despite the slow economic growth witnessed by China after it posted its lowest growth in 28 years at 6.6%.

After the release of this data, the WTI or the West Texas Intermediate saw its price rise to $54 for a barrel for the first time in 2019. Brent also saw its cost rise to $63 for the first time this year. International Brent Crude oil was at $62.94 up by 0.4%.

Analysts had earlier predicted a much worse situation, and although the slowdown was as expected, it was not as worse as they had predicted. Despite the rise in oil prices the situation in the Chinese economy and the global economy is still gloomy, though a possible US-China truce and Beijing easing the credit crunch is a positive sign.

The Crude prices are likely to rise further as analysts believe that the supply cuts by OPEC will further strengthen it. A statement by JP Morgan said that Brent could remain above $60 per barrel on OPEC compliance, slower U.S growth, and the expiration of Iran waivers’. It also suggested that investors should consider staying for long as they expect the price to rise.

The reason behind the price rise:

Analysts believe that by the end of this year, the price of crude oil can rise to $70 as the OPEC cuts its supply which leads to a supply deficit in the market. Energy firms cut the rigs to drill for oil and reached its lowest of 852 in May 2018. That was mainly because of the slump in crude prices in the US by up to 40% last year. Though the number of rigs reduced, the oil production in the US still was up by 2 million barrels per day to a high of 11 million barrels per day. Though the growth which was seen by last year is not likely to happen this in 2019, analysts still expect that the US will remain the biggest producer of oil.