Trump, German Court Cast a Long Shadow Over Stretched Markets By Investing.com


© Reuters.

By Geoffrey Smith 

Investing.com — What could be worse for the stock market’s spirits than the resumption of a trade war and the crippling of Europe’s crisis response? While neither is real yet, the coming week will show how present the risk is.

On Sunday, President Donald Trump and Secretary of State Mike Pompeo both launched attacks against China for its perceived role in unleashing the pandemic, Trump in particular highlighting the possibility and desirability of punishing it, not least through the imposition of new tariffs.

By 5:30 AM ET (0930 GMT), the benchmark was down 3.6% at 327.86, its lowest in over a week, making April’s rebound look more than ever like a bear-market rally. The German , Europe’s best performer in April, was down 3.7%, while the was the outperformer, falling only 0.5% thanks to some strong performances by virus-beating stocks such as Rentokil (LON:) (office cleaning) and Reckitt Benckiser (LON:) (disinfectants) and to the stabilization of index heavyweights Royal Dutch Shell (LON:) and BP (NYSE:) after last week’s bloodbath.

There is evidence to suggest that the coordinated media blitz is an exercise in diverting attention rather than an earnest threat: the Trump administration has temporarily waived tariffs on a large range of Chinese imports since the crisis began, afraid of burdening U.S. consumers with higher prices as tens of millions lose their jobs or suffer cuts to their income.

“If President Trump’s attempts to get re-elected continue to rely on attacking China, investors will worry about whether this will bring additional costs to specific U.S. firms,” UBS Wealth Management chief economist Paul Donovan said in a morning note.

Pompeo, meanwhile, told ABC at the weekend that there was “significant evidence” that the Covid-19 virus originated in a laboratory in Wuhan, without actually presenting any of that evidence – an approach that worked for his predecessor Colin Powell in rallying public opinion before the invasion of Iraq 17 years ago, but which may be difficult to repeat, given how that turned out.

While U.S.-China tensions have kept their ability to terrorize global markets, the more immediate threat to European markets is a more local one. On Tuesday, Germany’s Constitutional Court is set to give its final ruling on the legality of the European Central Bank’s asset purchase programs.

A couple of months ago, this looked likely to be waved through with little more than the usual grumbling from a court which has already backed away twice from challenging the ECB head-on.

However, the ECB last month cast aside all the restraints on its bond-buying that it had previously adopted to placate its German critics. That raises the risk of the judges handing down a ruling that could stop the German central bank from participating in QE, damaging the credibility of a policy that is the centerpiece of the euro zone’s crisis response.

This being the euro zone, the likeliest outcome is still a fudge that puts off answering the hard question – how willing are Germany and the rest of northern Europe to accept liability for their brethren in the weaker periphery of the euro zone.

Even so, it’s more than enough to keep markets on the defensive after a month-long rally that has found little justification so far in companies’ quarterly reports: data from Refinitive suggest that first-quarter earnings will be down 25% on the year for Stoxx 600 companies. The second quarter, of course, is likely to be much worse.

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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German government divided over form of Lufthansa rescue deal By Reuters


© Reuters. FILE PHOTO: Planes of German carrier Lufthansa parked on a closed runway at Frankfurt airport

BERLIN (Reuters) – Germany’s ruling coalition is divided over whether the state should have a role in running airline Lufthansa (DE:) in return for a rescue package the company aims to finalise next week, politicians said on Sunday.

Rolf Muetzenich, parliamentary party leader of junior coalition partners the Social Democrats, demanded a say in the running of the company in return for financial aid.

“If companies such as Lufthansa receive billions of euros in state aid from taxpayers’ money, the federal government must also be guaranteed a say in the matter,” he told the Bild newspaper.

Joachim Pfeiffer, from Chancellor Angela Merkel’s Christian Democrats (CDU), said the company must retain the freedom to make “structural adjustments” to remain competitive worldwide.

And Hans Michelbach, from the CDU’s Bavarian sister party the Christian Social Union (CSU), said the government should not intervene in the firm’s management, but be a silent partner.

“The necessary later exit from the state holding will be made even more difficult if the state is involved in the management of the company,” he said.

Reuters reported last week that Lufthansa aims to finalise a state aid rescue package worth up to 10 billion euros ($10.82 billion) this week, people close to the matter said.

The package will consist of equity from Germany’s new economic stabilisation fund (ESF), state-guaranteed loans from Germany and debt supplied by Austria, Switzerland and Belgium, where Lufthansa subsidiaries are based, they added.

Chief Executive Carsten Spohr this month said that Lufthansa would seek state aid in Germany, Austria, Switzerland and Belgium, citing cash burn at a rate of 1 million euros per hour, meaning its 4 billion euro cash reserves will be inadequate.

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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U.S., Europe could team up on 5G, but not if trade war under way: German lawmaker By Reuters



By Andrea Shalal

WASHINGTON (Reuters) – The United States and the European Union could team up to counter the dominance of China’s Huawei Technologies in next-generation 5G telecoms technology, but not if Washington continues to threaten tariffs against Brussels, a senior German conservative lawmaker said late on Friday.

Norbert Roettgen, a member of German Chancellor Angela Merkel’s Christian Democrats, said he told U.S. officials during a visit to Washington that he saw opportunities for greater transatlantic cooperation on 5G that would benefit both sides.

“But … it must be clear that cannot happen if there is simultaneously the threat of trade war on the table,” said Roettgen, who heads the foreign affairs committee of Germany’s lower house of parliament, speaking after meetings with State Department and White House officials.

After reaching a Phase 1 trade deal with China, and securing the passage of a new North American trade pact in Congress, U.S. President Donald Trump has set his sights on Europe and what he views as its unfair barriers for U.S. companies.

Trump has threatened to slap 25% tariffs on European car imports, a move Brussels says it would counter with tariffs of its own. The two blocs are also at odds over digital services taxes, aircraft subsidies, and Huawei .

The United States says gear provided by Huawei, the leading telecoms equipment vendor with a global market share of 28%, contains “back doors” that would enable China to spy on other countries, a claim Huawei vigorously denies.

Roettgen told reporters he did not expect Trump to follow through on the car tariff threat until after the November presidential election, but said the situation was unpredictable.

He said Trump’s rhetoric had become increasingly polarizing, but the historic allies shared security concerns about China and could work together to expand Europe’s alternatives to Huawei’s dominance of the 5G market.

U.S. Attorney General William Barr on Thursday suggested the United States consider taking a “controlling stake” in two major foreign rivals of Huawei, Finland’s Nokia (HE:) and Sweden’s Ericsson (ST:), but the White House dismissed that proposal on Friday.

The EU last week said members should decide for themselves what part Huawei can play in their 5G networks, resisting pressure from Washington for an outright ban.

Merkel favors strict security requirements for Germany’s 5G network, but opposes excluding individual companies.

Roettgen sees growing support for taking a tougher line by requiring firms that roll out a 5G network to be free of political influence in their home country, a move clearly aimed at Huawei.

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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