“May Targets Putin …..”

May Targets Putin

Prime Minister Theresa May gave 23 officials operating out of the Russian embassy one week’s notice to leave the UK, saying these individuals were effectively spies.  She braced the country for further attacks.  Her retaliation came after the first use of a nerve agent on European soil since World War II as a former spy and his daughter were poisoned.   The nerve agent used in the attack called Novichok was developed by the Soviet Union in the 70s and 80s.     Theresa May said the UK will move to freeze Russian state assets where it is necessary in response to what she called an “unlawful use of force” involving a weapons-grade nerve agent against the UK.  The Russian Embassy in London denounced the expulsions as totally unacceptable, unjustified and short sighted.  May has further warned the UK to expect further provocations from Putin.    May’s retaliation come after Russia refused to recognise a deadline on Tuesday to give an explanation for the nerve agent attack on Sergei Skripal and his daughter Yulia in southwest England.  The two remain in critical condition.  Putin’s officials rejected May’s ultimatum to account for the attack and warned her there will be repercussions if she acts against Russian media or diplomats based in London. Amongst the actions May will take against Putin’s administration is the removal of “undeclared intelligence officers” based in London to “dismantle the Russian espionage network in the UK”.  Theresa May said she is seeking support from international allies and has already spoken to US President Donald Trump, German Chancellor Angela Merkel and Emmanuel Macron.

UK – New Tax For Online Sales Under Consideration

During his spring statement to Parliament, Chancellor of the Exchequer Philip Hammond said that the British government will consult on a new mechanism for the collection of value-added-tax (VAT) for online sales to ensure that the tax paid by consumers reaches the treasury.  He further added that the government would launch a ‘call for evidence’ on how online platforms can assist users to pay “the right amount of tax”.  He said that he is still looking at the level of tax paid by the major internet companies.  Major digital companies such as Facebook and Google have previously paid little tax in Europe, by channelling sales via countries like Ireland and Luxembourg.

Other Issues With Brexit

After Theresa May has won approval from the Cabinet for an ambitious set of negotiating goals, another problem has come up involving devolved governments in Scotland and Wales who are seeking guarantees that when the UK leaves the UK in one year’s time, powers that return to London are automatically passed on to them.  May’s UK wide government says it might not be possible to deal with all legal complexities that the devolution will require in the short time left before Brexit.  She is proposing a temporary plan to keep control of some laws until they can be dealt with and handed to the governments in Wales and Scotland.  Meanwhile, the Scottish and Welsh authorities, which are not controlled by May’s Conservative Party are putting forward their own rival laws that threaten to cause legislative chaos which could end up in the Supreme Court.  This is a sensitive matter as May does not once again to raise the debate over whether Scotland should separate from the rest of the UK as she’s trying to negotiate Brexit.  In view that many EU regulations currently apply in the UK but will have no legal force once the UK is out of the bloc, May is rushing to pass her EU Withdrawal Bill, which aims to replicate these regulations so there is no legal black hole in the domestic British statute book after Brexit.

China’s Economy

Factory output climbed 7.2 percent while investment in fixed assets climbed 7.9 percent from a year earlier exceeding economist’s expectations in the first two months of this year.  Chinese exports surged as well while retail sales also remained robust according to statistics bureau data.  Although the figures show an economy that is reaping the benefits from a rise in global demand, Chinese policy makers have intensified their plans to reduce debt risk and tighten the fiscal budget.  Despite the stronger than expected data, economists see Chinese growth moderating this year after having accelerated in 2017.  Data released on Wednesday showed home sales growth has slowed amid an almost two-year campaign to cool the market.  Property development investment increased 9.9 percent on the year.

China – More Power To President Xi Jinping

As part of a sweeping overhaul aimed at closing regulatory loopholes and reducing risk in the $43 trillion banking and insurance industries, power is being given to the central bank to write the rules for the financial sector.   According to a proposal, the China Banking Regulatory Commission and the China Insurance Regulatory Commission will be merged in the biggest industry overhaul since 2003 as some of the drafting of key regulations and prudential oversight will move to the People’s Bank of China.  Back in July, China announced the creation of a Financial Stability and Development Committee and since then there has been intensified efforts to clamp down on shadow financing and other perceived risks.

Trump’s Executive Order

President Donald Trump issued an executive order Monday blocking Broadcom Ltd, from pursuing its hostile takeover of Qualcomm Inc. which would have been the biggest technology deal in history.   Trump acted on recommendation by the Committee on Foreign Investment in the US (CFIUS) which reviews acquisitions of American firms by foreign investors.  In the order released Monday evening, Trump said, “There is credible evidence that leads me to believe that Broadcom Ltd., by acquiring Qualcomm, might take actions that threatens to impair the national security of the United States”.  The fear was that China would gain an edge in critical technology by encouraging Qualcomm.  That would have put Huawei Technologies Co in the lead in developing next-generation wireless solutions.  The order highlights the tough position taken by the Trump administration on foreign takeovers of US technology firms.  At least half a dozen technology deals have collapsed during the Trump administration in the face of concerns raised by the CFIUS.

Chancellor Angela Merkel Re-election

Lawmakers voted by 364 to 315 with nine abstentions, in favour of re-electing Angela Merkel, 63, as a chancellor for a fourth and likely final term.  “I accept the vote” she said as she told lawmakers before being sworn in by Bundestag President Wolfgang Schaeuble.  Merkel has been in office since 2005 and has dominated politics in Germany and steered the European Union during the financial crises.  However, her authority was impacted when in 2015 she decided to commit Germany to an open-door policy on refugees.

Slovakia

Robert Fico the Slovakian Prime Minister offered to resign yesterday evening on the condition that his party will be allowed to choose his successor.  Fico had been trying to keep his three-party government intact after coming under pressure to call a snap election after large protests in the central European nation.  Public anger has been fuelled by the murder of 27 year old investigative reporter Jan Kuciak, who had written about fraud cases involving businessmen with political anger regarding corruption in Slovakia.

Stephen Hawking’s Death

Stephen Hawking died at the age of 76.  His family said, “He was a great scientist and an extraordinary man whose work and legacy will live on for many years”.  The power of his intellect was a contrast to his body which was affected by the motor neurone disease he developed at the age of 21.  His work ranged from the origins of the universe, through the tantalising prospect of time travel and blackholes, the regions of space –time where gravity is so strong that nothing can escape not even light.

OECD

The OECD said on Tuesday that the global economy will see its strongest growth in seven years in 2018 thanks to a rebound in trade and investment.  It also warned that a trade war could threaten the improved outlook.  The OECD has raised its global growth forecast for both 2018 and 2019 to 3.9 percent which is the highest since 2011 from a previous estimate of 3.6 per cent for both years.  The forecast was raised due to expectations that US tax cuts would have boosted the world’s biggest economy.  The OECD further said that the global economy was vulnerable to an eruption of trade tensions after the Trump administration slapped import tariffs on steel and aluminium.  The OECD forecasts that the US economy would grow 2.9 percent this year and 2.8 percent in 2019 with tax cuts adding 0.5-0.75 percentage points to the outlook in both years.  The Federal Reserve will probably have to raise interest rates four times this year as inflation picked up, according to the OECD chief economist Alvaro Pereira.  The Eurozone’s outlook is 2.3 percent this year while 21 percent in 2019.  In Germany fiscal easing in Germany’s coalition agreement was seen lifting growth to 2.4 percent this year.  Furthermore, in France, Emanuel Macron’s social welfare, tax and labour market reforms, would help France narrow the gap with Germany with a growth forecast of an 11 year high of 2.2 percent.  Meanwhile Britain, is seen as missing out on the global upturn, lagging all other G20 countries with growth of only 1.3 percent this year.

Oil

US production is taking a large chunk of the Asian oil market which seems to diminish the efforts undertaken by the OPEC countries and other nations, to reduce the global glut in oil supply and stop the decline in prices.  On Thursday oil prices edged higher, supported by a pickup in equity markets but pressured by expectations that crude supply will exceed demand later this year.  Rising global oil demand and supply constraints from OPEC has helped to keep oil above $60 a barrel.  On Wednesday OPEC raised its forecast for non-member oil supply this year to almost double the growth predicted four months ago.  Meanwhile, the International Energy Agency said on Thursday that Global oil demand is expected to pick up this year but supply is growing at a faster pace, leading to a rise in inventories in the first quarter of 2018.  The IEA raised its forecast for oil demand this year to 99.3 million barrels per day from 97.8 million bpd in 2017.  Furthermore the Paris based IEA said that commercial oil inventories in industrialised OECD nations rose in January for the first time in seven months to 2.871 billion barrels, which is 53 million barrels above their five-year average.

Market Overview

Monday, the MSCI Asia Pacific Index rose 1.7 percent, its biggest one day move in more than a year while Japan’s Topix index closed 1.5 percent higher as the region was lifted by Friday’s US payrolls number.  On Tuesday the dollar fell and share markets flinched on news that Donald Trump has ousted Secretary of State Rex Tillerson.  Trump said that he was replacing the former oil executive Mr Tillerson with Mike Pompeo the director of the Central Intelligence Agency, and that Gina Haspel would take over from Mr Pompeo.  On news about Tillerson, the US 10 year Treasury yield fell as much as three basis points. World stocks became wavered as turmoil in the US administration kept markets watchful over concerns that the US tariffs could provoke a trade war.

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