Overseas Headlines: August 5, 2019

Date: August 5, 2019

United States:

Trump Links Gun-Sale Background Checks and Immigration Overhaul

 President Donald Trump proposed combining stricter background checks for gun purchases with “desperately needed immigration reform” after the weekend deaths of 29 Americans in mass shootings in Ohio and El Paso, Texas. Trump, who faces charges that his anti-immigrant rhetoric helped incite the El Paso shooting, called for “marrying” a bipartisan effort to strengthen background checks with unspecified changes to immigration law. “We must have something good, if not GREAT, come out of these two tragic events!’ Trump said Monday on Twitter. The comments are a sign that the president could seek to deflect criticism that he and fellow Republicans have opposed stricter gun laws — despite a spike in mass shootings — by conditioning Democrats’ demands for action on background check legislation on immigration measures they oppose, such as funding for a U.S.-Mexico border wall. “Perhaps more has to be done,” Trump told reporters Sunday, adding that he’d say more about the attacks on Monday. He’s scheduled to deliver remarks at 10 a.m. in Washington. Democrats are demanding the Republican-controlled Senate interrupt its August recess to pass background check legislation similar to a measure defeated in 2013 after a shooter killed 20 first graders and six staff members at an elementary school in Sandy Hook, Connecticut. Authorities are investigating a possible link between the suspected El Paso gunman who opened fire at a Walmart store a few miles from the Mexican border, killing 20 people, and an online manifesto that complained of a “Hispanic invasion” of Texas. Seven Mexican citizens were among the victims of the attack, which is being investigated as domestic terrorism. Mexico’s Foreign Minister Marcelo Ebrard called the shooting an act of terrorism and said he would travel to El Paso on Monday. Only four days before the shooting, the National Cathedral in Washington rebuked the president for verbal attacks on minority lawmakers and the cities they represent that have been called racist. “Violent words lead to violent actions,” the cathedral’s religious leaders said in their unusual statement.”




U.K. Yields Hit Record Low on Election Risk, Global Trade Woes

“U.K. government bonds rallied, driving benchmark yields to a record low, as global risk sentiment worsened and speculation swirled that the nation’s new Prime Minister is preparing for a general election. Ten-year gilt yields slipped below 0.5% for the first time on a potential increase in U.K. political uncertainty, with Premier Boris Johnson’s spending plans fueling speculation about a snap vote even as he denied it. The pound erased early declines that were fueled by a broader risk-off move across markets after the latest escalation in U.S.-China trade tensions. “We can see a clear demand for global fixed income so global and idiosyncratic factors add appeal to the gilt market,” said Theo Chapsalis, head of U.K. rates strategy at NatWest Markets. “August has historically been a strong month for duration so there are tactically still good reasons to like fixed income and in particular gilts.” The yield on 10-year gilts fell as much as six basis points to 0.49%, an all-time low. The pound was little changed at $1.2164, after falling as much as 0.5% earlier to $1.2102. Sterling weakened 0.5% to 91.81 pence per euro, after earlier touching the weakest since September 2017. After steepening last week, the U.K. yield curve pared the move despite Johnson’s additional spending commitments. For now, investors are focusing more on the political uncertainty given the possibility of an early election rather than the implications of extra government spending, according to Aberdeen Standard Investments. “Gilts obviously have had a bit of a kicker as the market is quite aggressively coming to terms with Boris’s stance and the rhetoric emanating from the camp,” said James Athey, a fund manager at Aberdeen. “The long end has been steepening but i think the market struggles to see that far into the future.” U.K. government bonds also remain attractive to investors given the Bank of England has more room to ease policy than some other central banks, with its benchmark rate still in positive territory. The central bank has said it could hike or cut borrowing costs in the event of a no-deal Brexit. For the pound, the outlook remains gloomy. A pickup in services sector activity led the currency to pare earlier losses Monday but the broader global risk-off move and the domestic political turmoil are likely to keep sterling on the back foot, according to Nomura International Plc. “Given the turn of risk sentiment, Brexit and geopolitics, it is surprising that we are not already witnessing the pound making new lows,” said Jordan Rochester, an analyst at Nomura. “It seems only a matter of time, with the U.K. on a near snap election footing and the U.S.-China talks finding little way of de-escalating anytime soon.” ”




China Takes on Trump by Weakening Yuan, Halting Crop Imports

“China responded to Donald Trump’s tariff threat with another escalation of the trade war on Monday, letting the yuantumble to the weakest level in more than a decade and asking state-owned companies tosuspend imports of U.S. agricultural products. The moves are likely to further antagonize Trump, who has criticized Beijing for managing its currency unfairly andfailing to keep promises to buy more U.S. crops. Stocks and emerging-market currencies sank on concern a prolonged conflict between the superpowers will weigh on global economic growth, while haven assets including the Japanese yen, U.S. Treasuries and gold climbed. Investors increasedbets on Federal Reserve interest-rate cuts. “It’s among the worst-case scenarios,” said Michael Every, head of Asia financial markets research at Rabobank in Hong Kong. “First markets sell off, then Trump wakes up and this all gets far, far worse.” The White House didn’t immediately respond to a request for comment. In a statement published Monday evening in Beijing, People’s Bank of China Governor Yi Gang said China won’t use the yuan as a tool to deal with trade disputes. “I am fully confident that the yuan will remain a strong currency in spite of recent fluctuations amid external uncertainties,” Yi said, adding that the bank will work to ensure “reasonable and legal demand” by companies and the public for foreign exchange. Trump last week proposed adding 10% tariffs on another $300 billion in Chinese imports from Sept. 1, abruptly ramping up the trade war between the world’s largest economies shortly after the two sides had restarted talks. Chinese bureaucrats were stunned by Trump’s announcement, according to officials who’ve been involved in the negotiations. The threat of more tariffs came just as Chinese President Xi Jinping and other senior members of the Communist Party gathered for a secretive summer getaway in Beidaihe, a seaside town about a three-hour drive from Beijing. Xi had already faced pressure for weeks to take a harder stance on trade — particularly after the U.S. blacklisted telecom equipment giant Huawei Technologies Co.”


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