Date : August 7, 2018
United States:
U.S. Trade Deficit Widened in June for First Time in Four Months
The U.S. trade deficit grew in June for the first time in four months as imports increased and the value of shipments overseas declined against a backdrop of escalating tensions with America’s trading partners. The gap widened 7.3 percent to $46.3 billion from a revised $43.2 billion in the prior month, Commerce Department data showed Friday. The June figures capped an otherwise positive quarter for U.S. trade, as a narrowing of the deficit contributed the most to economic growth since 2013. While tariffs and the threat of retaliatory levies prompted a pickup in shipments of soybeans and some other materials, American exports of capital goods, vehicles and consumer goods declined in June, indicating trade may be of less help to the economy going forward. Overall exports dropped 0.7 percent to $213.8 billion, despite record overseas shipments of petroleum and all industrial supplies and materials. Imports climbed 0.6 percent to $260.2 billion, boosted by pharmaceuticals, crude oil, chemicals and other industrial supplies. The median estimate of economists surveyed by Bloomberg called for a June trade deficit of $46.5 billion. The trade gap data for July will be more closely watched for signs that developments related to President Donald Trump’s trade policies are taking a toll on the economy. Rising demand by U.S. households and businesses is expected to keep supporting purchases of foreign-made goods in coming months. At the same time, it is hard to predict how exports may perform, given that the headwinds from trade also are a risk to the outlook for the global economy. In addition, the dollar continues to strengthen. The U.S. economy accelerated to a 4.1 percent pace of growth in the second quarter, the fastest since 2014. A big boost came from net exports, which contributed 1.06 percentage points to growth, the most since 2013. That reflected a jump in shipments abroad of soybeans, up 40 percent in the first half of the year compared with 2017, and petroleum and related products. The report also showed the merchandise trade gap with China, the world’s second-biggest economy, was little changed in June at $32.5 billion after May’s $32 billion. The trade deficit with Mexico widened to $6.7 billion and the gap with European Union countries grew to $12.8 billion.
Europe:
Trump Tariff Threats Have Done Little to Shrink German Surplus
Germany’s trade surplus with the U.S. is showing little sign of buckling under President Donald Trump’s accusations of unfair practices. The nation’s exports to the U.S. exceeded imports by 24.4 billion euros ($28.3 billion) in the first half of the year, German data showed on Tuesday. That’s barely changed from the 24.5 billion euros in the same period of 2017. The booming U.S. economy is continuing to suck in German goods from cars to chemicals, even amid repeated criticism from the Trump administration and threats of tariffs on Europe. Still, the latest figures show how tensions could flare up again, despite Trump’s agreement with European Commission President Jean-Claude Juncker to refrain from any action while the two sides negotiate. “At the moment, we don’t see much of a decline in the trading relationship with the U.S.,” said Jan-Philipp Schulz, treasury manager at Sparkasse Suedholstein. While some confidence indicators have weakened amid a worsening of ties, “this overflow into the real economy hasn’t happened.” Trump, who has German ancestry, has lambasted the country for its underspending on defense, links to Russia and exports. He has complained on Twitter about the “MASSIVE trade deficit” with Germany and at a meeting with European Union leaders called the country “very bad” for selling “millions of cars” in America. His top trade adviser, Peter Navarro, has accused it of benefiting from a “grossly undervalued” euro. Yet while German exporters do benefit from a weaker currency, and the euro has softened against the dollar recent years, the country doesn’t set the exchange rate. That’s largely a consequence of the European Central Bank, which is running looser monetary policy than the Federal Reserve because the bloc’s recovery from global financial crisis has been slower. There’s little sign that dynamic will change any time soon, with the Fed pledging to keep raising rates at a gradual pace and the ECB saying it expects to keep borrowing costs at current record lows at least through the summer of 2019.
Asia:
China Shares Post Biggest Gain in Two Years on Investment Hopes
Chinese equities powered higher Tuesday afternoon as the Shanghai Composite Index posted its biggest gain in more than two years. Infrastructure and property companies were some of the best performers after a report in state media raised hopes for further policy support. The Shanghai benchmark climbed 2.7 percent, its first advance in a week, to close at 2,779 points. The enthusiasm spread to small caps too, as the ChiNext gauge added 2.7 percent, its best day since July 12. Developer China Evergrande Group Co. soared as much as 27 percent in Hong Kong, leading gains on the Hang Seng Composite Index, after issuing a positive profit alert that helped boost the whole property sector. The China Daily, citing an unidentified official at the National Development and Reform Commission, said Tuesday the government would roll out more policies to improve investment appetite, without elaborating. The China Business Journal also reported that rail investment this year may be higher than originally planned. China Railway Construction Corp. was the best performer on the large-cap CSI 300 Index, rising by the 10 percent daily limit. The China Daily report was the main reason for the rally in stocks, according to Central China Securities strategist Zhang Gang. Sentiment was also helped by news that 14 companies have been approved to introduce new retirement products, as well as a stabilizing yuan and positive profit alerts from Evergrande and Country Garden Holdings Co., Zhang said. The yuan rose 0.23 percent to 6.8360 per dollar as of 4:15 p.m., erasing an earlier loss of 0.29 percent as the greenback weakened. The Bloomberg Spot Dollar Index fell 0.2 percent. Country Garden, one of the worst-performing high profile stocks in Hong Kong this year, led gains on the city’s benchmark Hang Seng Index, rising 6.8 percent. The company said Monday evening that its net income for the six months through June likely rose at least 50 percent. Evergrande, meanwhile, said first-half net profit from its core business would more than double. Van Liu, an analyst at Guotai Junan Securities Co., said the positive profit alerts buoyed earnings optimism for the entire sector. The Shanghai Stock Exchange Property Index jumped 4.4 percent, its biggest increase since August 2016, while a gauge of developers listed in Hong Kong rose the most in more than three months.