Category: Economy and Policy

* Trump says will meet Xi soon to seal a trade deal

* Markets await U.S. non-farm payrolls

* Spot gold up 1.1 pct so far this week (Updates prices)

By Sethuraman N R

Feb 1 (Reuters) – Gold fell on Friday as investors sought riskier assets amid optimism the United States and China may reach a trade deal, although a pause in U.S. interest rate hikes kept bullion on track for a second weekly increase.

Spot gold fell 0.3 percent to $1,317.59 per ounce at 0614 GMT. Prices rose to $1,326.30, their highest since April 26, on Thursday and are set to gain 1.1 percent for the week.

U.S. gold futures were down 0.2 percent at $1,317.80 per ounce.

U.S. President Donald Trump said on Thursday he will meet with Chinese President Xi Jinping soon to try to seal a comprehensive trade deal as the top U.S. negotiator reported “substantial progress” in two days of high-level talks.

“If there is real progress on the trade talks, that could hurt gold because that better outlook would mean the (U.S. Federal Reserve’s) accommodative stance will not come into play,” said Michael McCarthy, chief markets strategist at CMC Markets, referring to the U.S. central bank’s intention to halt raising interest rates.

Investors often sell gold to buy other asset classes when interest rates rise since bullion does not pay interest.

Global equity prices rose, cheering the hopes of a deal.

“There would be concerns with the gold bulls in that scenario, but markets generally have become a little weary about responding to announcements from the White House. Too many have proved to be contradicted in the near future,” McCarthy said.

Spot gold rose nearly 3 percent in January, mostly on hopes that the U.S. Federal Reserve would halt its multi-year rate hiking cycle.

The central bank said Wednesday it would hold interest rates steady and would be patient in lifting borrowing costs further this year as it pointed to rising uncertainty about the economic outlook.

Adding to global worries, factory activity in China, the world’s second-largest economy, shrank by the most in almost three years in January.

Also, investor caution appears to be mounting ahead of U.S. jobs data to be released later on Friday, with analysts unsure what impact the government shutdown might have had on employment.

Reflecting investor interest in gold, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, were at their highest since June on Tuesday.

“From a technical perspective, support for gold is now at $1,310 and more strongly at the $1,300 level,” said Ronan Manly, precious metals analyst with BullionStar, adding the metal was facing resistance at $$1,325 per ounce.

Palladium rose 0.2 percent to $1,345 per ounce, while platinum fell 0.6 percent to $815.

Silver fell 1 percent to $15.92 per ounce after rising to its highest since July 2018 at $16.19 in previous session. (Reporting by Nallur Sethuraman and Karthika Suresh Namboothiri in Bengaluru; editing by Christian Schmollinger and Richard Pullin)

BRUSSELS/PHILADELPHIA (Reuters) – This Bud’s for you.

At least, that is what Anheuser-Busch InBev hopes as it strives to reach more than 100 million U.S. TV viewers during Sunday’s Super Bowl, promoting vintage brands such as Budweiser and Bud Light.

The world’s largest brewer will not say how much it is spending for nearly six minutes of commercials, but industry sources estimate it is more than $50 million. That is up from the $42 million that Kantar Media said the brewer spent for four minutes of ad time last year.

It is only part of the company’s strategy to recapture market share from craft beers and Mexican imports.

Brendan Whitworth, the head of sales for U.S. arm Anheuser-Busch, told Reuters the company would retain its big, national campaigns but also push ahead with its new strategy of tailoring brand marketing to individual American cities.

“The things we’ve started to work on this year, we’re starting to see real results. We’re looking forward to scaling up those localized programs even more,” he said.

The Super Bowl’s huge and diverse audience has makers of cars, beer and other consumer goods scrambling to create eye-catching commercials that are sometimes more memorable than the game. Budweiser this year will bring back its iconic Clydesdale horses, while telling drinkers that the beer is produced with renewable energy from wind power. Bud Light has continued its mock medieval ad series.

Driven by the need to pay off some $100 billion from its 2016 purchase of rival SABMiller, the company, which is known for acquisitions and cost savings, has made top-line growth its priority. U.S. management, overhauled in late 2017, believes it is on course to rebound in the company’s biggest market. Part of that is the local-ad focus and fresh versions of 143-year-old staple Budweiser, as well as Bud Light – available now in an orange flavor.

The two main brands make up 56 percent of its U.S. beer sales, according to market research company Euromonitor International. That is down from more than 60 percent in 2013. Whitworth, a former Marine, CIA officer and PepsiCo Inc director, said the goal is to boost the brand’s shares and eventually halt their sales decline.

AB InBev has a 36.4 percent share of the U.S. beer market, according to Euromonitor, followed by Molson Coors and Constellation Brands.

In general, mainstream lagers including Bud and Bud Light have fallen, while the shares of craft and imports have risen, according to market research group Nielsen. Drinkers have also shifted to wine and spirits.

Executives at Heineken, the world’s second largest beer maker, have said brewers need to work together to win back drinkers. Industry leaders say there still is a space for mainstream beer, which is cheaper and less caloric than many crafts.

“When (fans)are watching an NFL game, that’s a four to five hour experience… I’m not sure it’s a craft moment,” said Jonnie Cahill, Heineken USA’s chief marketing officer.

Given recent trends, Anheuser-Busch needs the equivalent of a ‘Hail Mary’ pass. Its share of beer sales in the United States, its biggest market, is set to have declined 0.50 percentage points in 2018 after a 0.75 drop in 2017. That may seem slight, but the trend is in the wrong direction.

A return to growth is not imminent.

“It’s a supertanker and it’s not going to turn on a six-pence. I think it’s going to be a slow journey,” said Trevor Stirling, a London-based beverage analyst at Bernstein Research.

AB InBev’s share of the U.S. beer market has declined every year but one since its formation in 2008, when Belgium-based InBev bought America’s Anheuser-Busch. Budweiser has steadily fallen. Bud Light’s share last rose in 2012, when it rolled out an offshoot: Bud Light Lime-A-Rita, a margarita-flavored brew with double the alcohol and calories of Bud Light.

Despite the revival, Anheuser-Busch said it has learned that the company should not stray too far from a brand’s roots.

“Those extensions, they didn’t necessarily reinforce the mother brand’s position,” Whitworth said.

The brewer removed “Bud Light” from Lime-a-Rita cans this year.

Last summer, it launched Bud Light Orange, brewed with orange peels. The product, with slightly more calories, is sweet and fruity, akin to an orange soda with alcohol, some drinkers say.

Whitworth said it was one of the industry’s most successful new products of 2018, boosting sales and margins and bringing in more female drinkers. The company hopes some Bud Light Orange drinkers will become regular Bud Light fans.

Bud Light has partnerships with 28 of the 32 NFL teams, including this season’s finalists, the Los Angeles Rams and the Boston-based New England Patriots. But its marketing efforts with them have been modest to date, including special cans showing each team’s logo.

Earlier this season, Bud Light focused on Cleveland, whose team, the Browns, was experiencing one of the longest losing streaks in the sport. When the Browns finally won, the brewer set up “victory fridges” in bars across the city. Bud Light’s share of core beer sales there grew as a result, Whitworth said.

Citing another localized effort, Whitworth pointed to Philadelphia, the nation’s sixth largest city. Bud Light offered free beer to fans of the Eagles when they won their first Super Bowl in 2018. This season the company unveiled a statue to commemorate the “Philly Special,” a trick play in which the quarterback turned receiver for a touchdown in the championship game.

Whitworth said the approach led to Bud Light sales growth of 9 percent in Philadelphia in the first half of 2018.

“They had an army of people handing out beer at the parade,” said Pete Ciarrocchi, chief of Chickie and Pete’s, a popular chain of sports bars in the Philadelphia area.

The brewer’s U.S. arm is hoping the sales boost will help build long-term loyalty.

In one potentially positive sign, Philadelphian Peter Rosa, who normally chooses regional craft brands such as Dogfish Head and Troeg, said he turned to Bud Light this season when watching his beloved Eagles.

“I have become superstitious and will only drink Bud Light during Eagles games,” he said.

(Reuters) – British currency exchange startup WorldFirst is shutting its U.S. operations to ward off a potential regulatory hurdle for its planned takeover by China’s Ant Financial Services Group, the Financial Times reported on Friday.

WorldFirst told its customers this week that the company will stop offering all services in the United States after Feb. 20, according to the FT.

Its U.S. operations will be rebranded as Omega and it will operate independently of World First Group, the newspaper said.

The United States in recent years has blocked many proposed Chinese investments in American companies in an effort to stop China from acquiring important technologies, making this approval a rare win.

It could have become Ant Financial’s second deal to face U.S. regulators’ opposition citing security concerns, the newspaper reported, citing two people briefed on its decision.

Last year, Ant Financial’s plan to acquire U.S. money transfer company MoneyGram International Inc was rejected because the companies could not mitigate concerns over the safety of data that can be used to identify U.S. citizens, sources had told Reuters.

Ant Financial, the fintech affiliate of Chinese e-commerce giant Alibaba Group Holding Ltd, held discussions to buy WorldFirst was earlier reported by British media in December. The FT said the potential deal would be valued at 700 million pounds ($916.5 million).

WorldFirst and Ant Financial were not immediately available for a comment.

($1 = 0.7638 pounds)

* Australia’s Jan exports dip 6.5 percent from Dec – Eikon

* Qatar exports rise back to overtake Australia

* Chevron’s Gorgon train 3 remains shut – sources

* Asian demand tepid due to mild winter – sources

By Jessica Jaganathan

SINGAPORE, Feb 1 (Reuters) – Australia’s liquefied natural gas (LNG) exports fell in January due to lower production from an LNG plant and a bout of hot weather, pushing exports below rival Qatar, according to export data in Refinitiv Eikon.

Monthly exports from Australia, which overtook Qatar as the world’s top LNG exporter last November, dipped 6.5 percent from December to about 6.26 million tonnes of the super chilled fuel.

Qatar, meanwhile, ramped up exports in January by about 4.3 percent from the previous month to about 6.8 million tonnes, the data showed.

Australia’s exports have grown rapidly following the start-up of new projects.

However, one of three production trains at Chevron Corp’s Gorgon LNG project in Western Australia remains shut after it was halted in mid-January to address a mechanical issue, industry sources said on Friday.

A Chevron spokesman declined to comment.

The Gorgon train shutdown was the main reason for the drop in Australian LNG exports, with east coast LNG plants around Gladstone performing well, said Wood Mackenzie analyst Nicholas Browne.

“Under extremely hot temperatures the efficiency of liquefaction plants will be impacted somewhat,” he added.

Australia endured its hottest month on record in January, with the west coast facing hot, dry weather over the next three months.

Asian spot LNG prices LNG-AS have also fallen to a nine-month low on subdued demand in North Asia due to a warmer than winter season.

“With (Asian spot prices) in the $7s, there is less incentive to push the trains,” an Australia-based industry source said, declining to be named as he was not authorised to speak with media.

Further out, Australia is expected to regain its position as world’s largest LNG supplier by capacity as output is ramped up from new projects such as Ichthys, run by Japan’s Inpex Corp , and Royal Dutch Shell’s Prelude, said James Taverner of energy consultancy IHS Markit.

However, export growth will depend on the availability of feedstock from east coast coal seam gas wells, he added. (Reporting by Jessica Jaganathan; editing by Richard Pullin)

SYDNEY (Reuters) – Asian shares crept back from four-month highs on Friday as a dismal survey on Chinese factory activity dulled optimism about the prospects for a Sino-U.S. deal on tariffs.

The Australian dollar, a liquid barometer of investor sentiment toward China, skidded 0.5 percent after the Caixin/Markit index of manufacturing fell to its lowest since February 2016. That was more downbeat than the official version of the index and inflamed fears for the economy.

Investor caution is also mounting ahead of U.S. jobs data later in the session with analysts unsure what impact the government shutdown might have had employment.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.2 percent, though that followed a stellar 7.2 percent gain in January.

Japan’s Nikkei went flat, while Shanghai blue chips held onto a 0.7 percent gain. E-Mini futures for the S&P 500 eased 0.1 percent and spread betters pointed to a marginally mixed start for European bourses.

Stocks had taken heart after U.S. President Donald Trump said he would meet with Chinese President Xi Jinping soon to try to seal a comprehensive trade deal as the top U.S. negotiator reported “substantial progress” in the talks.

Beijing’s trade delegation said the talks made “important progress” for the current stage, China’s official Xinhua news agency reported on Friday.

The previously upbeat mood was also chilled somewhat by White House insistence that March 1 was a hard deadline for a deal, a failure of which would lead to an increase in U.S. tariffs on Chinese goods.

“Analysts mostly remain deeply skeptical that a genuine trade deal can be done on this time frame,” economists from Commonwealth Bank of Australia said in a note.

“We are less pessimistic since these negotiations are being conducted by senior politicians, not by trade bureaucrats,” they added. “Both sides also have an incentive, and arguably a growing incentive, to get a meaningful deal done.”

The optimism supported Wall Street with the S&P 500 ending Thursday with a gain of 0.86 percent. The Nasdaq jumped 1.37 percent on the back of a near 11 percent rise in Facebook Inc. The Dow slipped 0.06 percent.

Over January, the S&P 500 rose 7.9 percent, its best monthly performance since late 2015 and its strongest start to a year since 1987. The Nasdaq gained 9.7 percent in the month and the Dow rose 7.2 percent.

FED’S ABOUT-FACE

Equity markets have also been relieved by a change of heart at the U.S. Federal Reserve, which this week surprised many by all but abandoning plans for further rate hikes.

Investors responded by pricing in a one-in-three chance that interest rates could actually be cut this year.

Yields on two-year Treasuries were down almost 15 basis points on the week so far, which if sustained would be the largest weekly decline since mid-2010.

That in turn has been a drag on the U.S. dollar, though it was off its lows on Friday. It was down 0.6 percent so far this week against the yen at 108.85, but found some support around 108.50.

Against a basket of currencies, the dollar was a fraction firmer at 95.622 thanks in part to a pullback in the euro to $1.1439.

The single currency had taken a knock when Bundesbank president Jens Weidmann painted an unusually bleak picture of the German economy, saying the country’s slump will last longer than initially thought.

Gold prices hovered just short of nine-month highs supported by the fall in bond yields and expectations for a softer dollar. Spot gold stood at $1,318.44 per ounce, having touched a top of $1,326.30.

Oil prices were subdued as the poor China data offset signs major exporters were quickly reducing output in line with a pact to cut supply.

U.S. crude futures edged up 5 cents to $53.87 per barrel, while Brent rose 13 cents to $60.97. [O/R]

SINGAPORE (Reuters) – Asian spot prices for liquefied natural gas (LNG) fell to a nine-month low this week as the region remains oversupplied amid a warmer-than-usual winter. Spot prices for March delivery to Asia this week fell to $7.00 per million British thermal units (mmBtu), down $1 from the previous week, lowest since April 6, trade sources said.

They are also seasonally at the lowest for this time of the year since 2016, Reuters data showed.

Oil major BP offered a cargo for March 26 to 28 for delivery into Japan, South Korea, Taiwan or China at $7.10 per mmBtu during the Platts pricing process on Thursday, industry sources said.

Asian prices for March cargoes have fallen below the UK front-month gas price, reversing a multi-year trend in which Asian prices had a premium over Europe and prompting some traders to redirect cargoes to Europe from Asia.

Vitol on Wednesday changed the destination of two LNG cargoes sourced in the United States to northwest Europe from Asia due to the discount on Asian prices compared to those in Britain, an industry source familiar with the matter said.

“The market’s getting kind of crazy,” a Singapore-based industry source said, adding that derivatives volumes in Asia have dropped recently.

Trade was also quiet ahead of week-long Chinese New Year holidays, when most dealers from the world’s second largest LNG importer will be away, amid a production shut down at factories.

Gail (India) sold six LNG cargoes from Cove Point and Sabine Pass terminals in the United States for loading in 2020, industry sources said. Price details could not immediately be confirmed but there were several buyers including Glencore, the sources added.

It has also offered two more tenders offering more cargoes for next year.

The Indian importer has 20-year deals to buy 5.8 million tonnes a year of U.S. LNG, split between Dominion Energy’s Cove Point plant and Cheniere Energy’s Sabine Pass site but is likely selling the cargoes as part of optimization, one of the sources said.

Papua New Guinea LNG plant may have sold its cargo for March delivery at about $6.50 per mmBtu on a free-on-board basis while Sakhalin LNG may have sold its March loading cargoes at below $7 per mmBtu, a second source said. The deals could not immediately be confirmed.

Offering some support for prices, Chevron Corp’s Gorgon LNG project’s train 3 remains shut after production was halted at the train in mid-January due to a mechanical issue, industry sources said.

Feb 1 (Reuters) – Gambling revenue in the Chinese territory of Macau fell 5 percent in January, the first drop in more than two years, as appetite for gambling waned amid slowing economic growth and increased headwinds from the Sino-U.S. trade war.

The special administrative region reported 24.9 billion patacas ($3 billion) revenue, versus 26.3 billion patacas a year ago, Macau’s Gaming Inspection and Coordination said on Friday.

The drop was likely due to a smoking ban that came into effect on Jan. 1 as well as muted sentiment among VIP players ahead of Chinese New Year holidays in February, analysts said.

The figure was in line with analyst expectations of flat to a 12 percent drop in growth.

Macau, located on China’s southern coast and the country’s only legal casino hub, is highly reliant on gambling revenues for its finances, with taxes from the casinos accounting over 80 percent of the government’s revenue. ($1 = 8.0490 patacas) (Reporting by Farah Master; Editing by Himani Sarkar)

SINGAPORE, Feb 1 (Reuters) –

* A north China natural gas field, invested by French oil firm Total, pumped a record 2.24 billion cubic metres (bcm) of gas in 2018, 11 percent more than a year earlier, according to China’s state energy group CNPC that operates the field

* Total and CNPC signed a deal to jointly develop the Sulige South field in north China’s Ordos basin in 2011 and production had started in 2012. This is one of the handful foreign-invested gas projects in onshore China

* The joint venture currently operates 594 gas wells with a daily output of 6.5 million cubic metres, CNPC said on Friday

* China’s national oil companies are stepping up domestic drilling for oil and gas in a response to a government call to boost national energy security. China’s gas output rose 7.5 percent last year to record 161 bcm.

* Apart from Total, Shell and Chevron are also producing gas in China in joint operations with CNPC. (Reporting by Chen Aizhu, Editing by Sherry Jacob-Phillips)

Jan 31 (Reuters) – Diversified miner Teck Resources Ltd said on Thursday it expects fourth-quarter profit to be significantly below market estimates, hurt mainly by “disappointing” business at its energy and Trail operation units.

Teck said results of its energy business and Trail operations, as well as inventory valuations, would reduce quarterly earnings by C$0.30 per share and earnings before interest, tax, depreciation and amortization (EBITDA) by C$195 million. (Reporting by Ismail Shakil in Bengaluru; Editing by Gopakumar Warrier)

HONG KONG (Reuters) – Factory activity shrank across much of Asia in January, falling to the weakest in years in several countries and adding to worries that trade tariffs and cooling demand in China pose an increasing threat to global growth.

The weak Purchasing Managers Index (PMI) readings reinforce expectations that central banks in Asia will put any further interest rate hikes on hold this year.

In some countries, such as China, Australia and India, there is even chatter about potential rate cuts.

Trade-focused Asia appears to be suffering the most visible loss of momentum so far, but the euro zone economy is stuck in low gear and many emerging markets are sputtering.

The U.S. economy, while a bit wobbly of late, still looks set to post solid growth, though softer than last year’s pace.

That puts pressure on Beijing to come up with more stimulus measures at its upcoming parliamentary meeting in March and find common ground with the United States to prevent their trade war from escalating, with a truce expiring next month.

“The slowing down of the manufacturing sector in Asia continues,” said Irene Cheung, Asia strategist at ANZ.

“A lot depends on whether the U.S. and China come to a reasonable deal. Then we can actually avert this potential trade recession, but at the moment it’s all tentative.”

U.S. President Donald Trump said on Thursday he will meet with Chinese President Xi Jinping soon to try to seal a comprehensive trade deal as Trump and his top trade negotiator both cited substantial progress in two days of high-level talks.

Trump, speaking at the White House during a meeting with Chinese Vice Premier Liu He, said he was optimistic that the world’s two largest economies could reach “the biggest deal ever made.”

Meanwhile, bleak factory gauges suggests that the global economy will get worse before it gets better.

China’s factory activity shrank by the most in almost three years in January as new orders slumped further and output fell, the private Caixin/Markit PMI survey showed. The numbers were weaker than Thursday’s official PMI survey.

Taiwan posted its weakest readings since September 2015, South Korea the joint-lowest since November 2016 and Indonesia the first contraction in a year.

Japan’s factory activity was the slowest in 29 months, with weakening exports and output suggesting it could soon fall into contraction. Manufacturers in the world’s No.3 economy are facing both falling exports and a likely slump in domestic demand when the country’s sales tax is hiked in October.

Freight rates for dry-bulk and container ships, carriers of most of the world’s raw materials and finished goods, have plunged over the last six months.

The Baltic Dry Index, a measure of ship transport costs for materials like iron ore and coal, has fallen by 47 percent since mid-2018, when the main tariffs were imposed.

A Reuters poll of hundreds of economists from around the world showed a synchronized global economic slowdown was under way, with growth forecasts cut for 33 of 46 economies.

The International Monetary Fund last week cut its world growth forecasts for this year and next and said failure to resolve protectionism could further destabilize the slowing global economy.

Those concerns were reinforced on Monday by sales warnings from Caterpillar and Nvidia Corp, coming on the heels of similar alarms raised by Apple Inc, FedEx Corp and a host of chipmakers.

STIMULUS

Veteran China watchers typically advise taking its data early in the year with a pinch of salt, suspecting the trends may be distorted by the timing of the Lunar New Year holidays.

Many firms scale back operations or close for long periods around the holidays, which begin on Feb. 4 this year.

However, workers, business owners and labor activists have told Reuters that companies are shutting earlier than usual as the trade war bites, with some likely to close for good.

So far, China has fast-tracked infrastructure projects, cut taxes and pumped liquidity into the financial system to help keep cash-starved firms afloat. It has also been guiding down borrowing costs.

Investors are closely watching to see if Beijing unveils more fiscal stimulus during the upcoming parliamentary meeting in March, including bigger tax cuts, though the effects of policy easing are not expected to steady the economy until the second half of the year.

Chinese leaders, with an eye on a mountain of debt, have vowed they will not resort to massive stimulus like that deployed in past downturns. But some analysts believe more aggressive measures such as rate cuts are possible if conditions sharply deteriorate.

“Although we believe (China’s) GDP growth will eventually bottom out, markets do not appear to have factored in such a sharp slowdown and may still be putting, in our opinion, too much faith in the efficacy of government support,” economists at Nomura said in a recent note.

Even then, some economists say support measures may only steady activity in China and not produce a strong rebound in its demand like that which helped pull the global economy out of recession after the financial crisis.

“The global outlook is a bit more at risk from China today than it was, say, two or three years ago,” said Sonal Desai, chief investment officer at Franklin Templeton Fixed Income.

GRAPHIC – Asia policy rates: tmsnrt.rs/1U5hc2W

GRAPHIC – China’s economic trends: tmsnrt.rs/2iO9Q6a

GRAPHIC – Major items among $200 bln of Chinese goods hit by U.S. tariffs (announced Sept): tmsnrt.rs/2HGBgfj

GRAPHIC – Major items among $16 bln of Chinese goods hit by U.S. tariffs (Aug): tmsnrt.rs/2HFiipx

GRAPHIC – Major items among $34 bln of Chinese goods hit by U.S. tariffs (July): tmsnrt.rs/2HG2Rxj