EU leaders unite over Trump tariffs, foreign investments

EU leaders take part in a European Union summit in Brussels, Belgium June 28, 2018. Stephanie Lecocq/Pool via REUTERS

 

BRUSSELS (Reuters) – European Union leaders pledged on Friday to react firmly against protectionism and called for a new EU law to screen foreign investments, with Washington and Beijing clearly in mind.  The leaders, meeting in Brussels for a crucial summit focussed more on migration, said the U.S. import tariffs imposed on EU steel and aluminium could not be justified and supported the European Commission’s legal challenge and the duties set on U.S. products.

“The EU must respond to all actions of a clear protectionist nature,” the leaders said in written conclusions to their meeting.

The conclusions backed by the leaders said Europe would continue to negotiate ambitious free trade agreements with partners – after provisional deals struck in the past 12 months with Japan and Mexico. The bloc is still seeking a trade deal with the Mercosur group of Argentina, Brazil, Paraguay and Uruguay and will start talks in July with Australia and New Zealand. However, there were also lines showing the European Union wants to protect its own industries and retain technologies in the face of what it sees as unfair competition. The European Commission last year proposed that it should be allowed to scrutinize foreign investments amid rising concern about Chinese acquisitions on the continent. The European Parliament, which wants tougher screening, and the 28 member states, many of whom favour a lighter touch, have agreed common positions ahead of negotiations with each other expected to start next month and last at least until the end of 2018. The EU leaders called for a legislative proposal to be adopted as soon as possible. The European Union countries have also committed themselves to driving reform of the World Trade Organization to ensure trade is both free and fair.

GM warns U.S. import tariffs could lead to ‘smaller’ company, fewer jobs

(Reuters) – General Motors Co (GM.N) warned on Friday that expansive U.S. tariffs on imported vehicles being considered by the Trump administration could lead to a “a smaller GM” with fewer jobs while isolating U.S. businesses from the global market. The Trump administration in May launched an investigation into whether imported vehicles posed a national security threat, and U.S. President Donald Trump has repeatedly threatened to quickly impose a 20 percent import tariff on vehicles. The largest U.S. automaker said in comments filed with the U.S. Commerce Department that overly broad tariffs could “lead to a smaller GM, a reduced presence at home and abroad for this iconic American company, and risk less — not more — U.S. jobs.” GM, which makes some vehicles for the U.S. market in Mexico and Canada, said the tariffs could hike vehicle prices and reduce sales. Even if automakers opted not to pass on higher costs “this could still lead to less investment, fewer jobs, and lower wages for our employees. The carry-on effect of less investment and a smaller workforce could delay breakthrough technologies,” GM said. GM operates 47 U.S. manufacturing facilities and employs about 110,000 people in the United States. It buys tens of billions of dollars worth of parts from U.S. suppliers every year, and has invested over $22 billion in U.S. manufacturing operations since 2009.

“The overbroad and steep application of import tariffs on our trading partners risks isolating U.S. businesses like GM from the global market that helps to preserve and grow our strength here at home,” GM said.

Some aides have said that Trump is pursuing the national security probe to put pressure on Canada and Mexico to agree to concessions in talks to renegotiate the North American Free Trade Agreement. On Wednesday, two major auto trade groups warned that imposing up to 25 percent tariffs on imported vehicles would cost hundreds of thousands of auto jobs, dramatically hike prices on vehicles and threaten industry spending on self-driving cars.

Protestors March Across US Over Immigration Policy

Image: Protestors March Across US Over Immigration Policy
(Alex Edelman/AFP/Getty Images) Saturday, 30 June 2018 12:30 PM

Thousands of protesters across America, moved by accounts of children separated from their parents at the U.S.-Mexico border, marched Saturday — in major cities and tiny towns — to demand President Donald Trump’s administration reunite the divided families. More than 700 planned marches are expected to draw hundreds of thousands of people across the country, from immigrant-friendly cities like Los Angeles and New York to conservative Appalachia and Wyoming under the banner Families Belong Together. Thousands dressed in white and gathered early Saturday morning in sweltering 90-degree heat in Lafayette Park across from the White House in what was expected to be the largest of the day’s protests. “What’s next? Concentration Camps?” one marcher’s sign read. “I care, do you?” read another, referencing a jacket the first lady wore when visiting child migrants amid the global furor over the administration’s zero-tolerance policy that forced the separation of more than 2,000 children from their parents. Her jacket had “I really don’t care. Do you?” scrawled across the back, and that message has become a rallying cry for Saturday’s protesters. “We care!” marchers shouted outside city hall in Dallas. Organizer Michelle Wentz says opposition to the administration’s “barbaric and inhumane” policy has seemed to cross political party lines. Marchers carried signs that read “Compassion not cruelty” and “November is coming.” “Honestly, I am blown away. I have literally never seen Americans show up for immigrants like this,” said Jess Morales Rocketto, political director at the National Domestic Workers Alliance, which represents nannies, housekeepers and caregivers, many of whom are immigrants. “We just kept hearing over and over again, if it was my child, I would want someone to do something.” Tweeting from New Jersey, Trump said that Democrats “are making a strong push to abolish ICE, one of the smartest, toughest and most spirited law enforcement groups of men and women that I have ever seen.” He urged ICE agents to “not worry or lose your spirit.” Immigration attorney Linda Rivas said groups have met with U.S. authorities, congressional representatives and other leaders to discuss an escalating immigration crackdown that they say began decades ago. But the family separation policy has been a watershed for attracting a broader spectrum of demonstrators, she said. “To finally have people on board wanting to take action, marching, taking to the streets,” Rivas said. “It’s been motivating for us as advocates because we have to keep going.”

Top ICE Lawyer Sentenced to Four Years in Prison For Stealing Immigrants’ Identities

Raphael A. Sanchez used to have quite the cushy job. He was chief counsel for U.S. Immigration and Customs Enforcement in Seattle. Now, he’s been sentenced to four years in prison. In February of this year, Sanchez was charged with stealing the identities of seven immigrants. According to the indictment:

[Sanchez] did knowingly transfer, possess, and use, without lawful authority, a means of identification of another person, including the name, Social Security number, and birth date…during and in relation to a felony…wire fraud.

Specifically, Sanchez’s scheme involved opening credit cards and taking out loans using the personal information of undocumented immigrants who had been targeted by ICE and were undergoing immigration proceedings. This vulnerability–being run through the byzantine U.S. immigration system–made it difficult for the immigrants targeted to detect the theft. Sanchez’s use of stolen information was also charged as wire fraud over the various banks and other financial institutions who were taken advantage of during the scheme. After being caught, he resigned. Three days later, he took a plea deal admitting to all of the accusations against him. On Thursday, Sanchez’s plea deal was finally signed off on by a federal judge.While overseeing ICE’s legal office office in Seattle, Sanchez’s responsibilities bore directly on his criminal scheme. He was in charge of overseeing immigration removal cases in various states. Prosecutors said this made his targets “particularly vulnerable given their status as deported or otherwise excludable.” The scheme lasted from 2013 to 2017. During this time, Sanchez was already being paid $162,000 per year by the federal government. His net worth hovered around $700,000. Still, he found the time to open bank accounts, utility service accounts and email accounts using names, birthdates, Social Security numbers and more that he stole from ICE databases. Then he created fake drivers’ licenses.

A press release from the Department of Justice notes:

Once the accounts were approved and opened, Sanchez made charges or drew payments totaling more than $190,000 in the names of aliens to himself or entities that he controlled, often using PayPal and mobile point-of-sale devices from Amazon, Square, Venmo and Coin to process the fraudulent transactions. In a number of cases, Sanchez purchased goods online in the names of aliens and had them shipped to his residence. Sanchez also employed credit-monitoring services and corresponded with credit bureaus in the names of aliens to conceal his fraud scheme. Sanchez also claimed three aliens as relative dependents on his tax returns for 2014, 2015, and 2016.

A court filing from June 12 details additional shocking behavior in furtherance of the scheme. According to prosecutors, “Sanchez affixed his own photograph onto the forged identification documents using the information of male Victim Aliens. To forge female Victim Aliens’ identifications, Sanchez was even more brazen: he used the photograph of a murdered woman published in press accounts and the names of female Victim Aliens.” As part of his sentencing, Sanchez will be forced to pay $190,000 in restitution to the various aggrieved parties.

Comcast Blames Widespread Service Outage on Cut Fiber Lines

The company, which has more than 29 million business and residential customers, says it restored services

An employee demonstrates the Xfinity app at Comcast Corp. headquarters in Philadelphia in October 2016.
An employee demonstrates the Xfinity app at Comcast Corp. headquarters in Philadelphia in October 2016. Photo: Charles Mostoller/Bloomberg News

Cuts to two fiber lines caused a widespread system failure at cable giant Comcast Corp. CMCSA 0.55% on Friday that knocked out cable, internet and phone services around the country. It was unclear how many customers were affected as the system failure, which appeared contained to Comcast’s network, also disrupted connectivity services such as Netflix Inc. and Okta Inc. as other internet service providers routed internet traffic through Comcast’s network, according to network-monitoring firm ThousandEyes. Philadelphia-based Comcast, one of the dominant telecom companies in the U.S. with more than 29 million business and residential customers, said the lines damaged are owned by CenturyLink Inc. and Zayo Group Holdings Inc. A spokeswoman for CenturyLink issued a statement saying CenturyLink’s network was working normally, though the company had “experienced two isolated fiber cuts in North Carolina affecting some customers that in and of itself did not cause the issues experienced by other providers.” The spokeswoman didn’t comment further. A spokesman for Zayo said the company experienced a fiber cut in the New York area but all services had been since restored. Fiber networks, which make up the backbone of the internet, transmit vast amounts of internet traffic, processing everything from online purchases to 911 calls. Down Detector and Outage.Report, two websites that monitor the running of consumer-technology services, ranked the system failure as extreme and posted maps indicating large numbers of customers affected in the New York, Philadelphia and Washington, D.C., metro areas as well as San Francisco, Chicago and Denver. Reports of outages, according to the websites, spiked early Friday afternoon.

It’s been decades since the White House has warned the Fed the way Kudlow just did

Senior Bush blamed Fed for his 1992 defeat
Getty Images National Economic Council Director Larry Kudlow speaks during an interview in front of the White Hous

It has been a long time —the early 1990s in fact— since a White House tried to influence Federal Reserve policy the way Trump economic advisor Larry Kudlow did on Friday. In an interview with Fox Business Network, Kudlow jawboned the Fed, saying: “My hope is that the Fed, under its new management, understands that more people working and faster economic growth do not cause inflation.” “My hope is that they understand that and that they will move very slowly,” he added. It was the senior advisers to President George Bush, particularly Treasury Secretary Nicholas Brady, who pushed the Fed to cut rates at a faster pace in the run-up to the recession that lasted from July 1990 until March 1991. In fact, Bush blamed former Fed Chairman Alan Greenspan for his defeat to Bill Clinton in 1992. Financial markets were roiled by Brady’s warnings, said Lewis Alexander, chief economist at Nomura.  “The sense that the Fed was being criticized by the administration undermined the market’s confidence in the Fed’s ability to anchor inflation expectations,” Alexander said. This was reflected in higher interest rates. In light of this experience, Robert Rubin, Clinton’s Treasury secretary, instituted the practice that administration officials should not comment of Fed policy. This gentlemen’s agreement lasted, on the whole, through the George W. Bush and Obama administrations. To be fair, most of this period Fed interest-rate policy during this period was trying to support economic growth, not take away the punch bowl. The Fed is now attempting to slow the economy down with steady rate hikes but has said it will move at a gradual pace. Robert Brusca, chief economist at FAO Economics, said Kudlow has probably notices that Fed Chairman Jerome Powell “has moved a little bit more to the side of the hawks than Yellen.” Powell has signaled the Fed will continue to hike rates at a once-per-quarter pace, despite warnings from doves at the central bank that the market is signalling caution.

In particular, the yield curve has been flattening, with the spread between 2-year notes TMUBMUSD02Y, +0.81%  and 10-year notes TMUBMUSD10Y, +0.61% at the lowest level since 2007.

The curve is a line that plots yields across all debt maturities. It typically slopes upward. A flatter curve can signal concern about the outlook. An inverted curve is an accurate predictor of recessions. Powell and other Fed officials have said that times are different and the yield curve may not be the signal it once was. But St. Louis Fed President James Bullard on Thursday said he didn’t know why the Fed wanted to “test this theory” by continuing to push short-term rates higher. Brusca said Kudlow was trying to “guide the Fed’s eyes” to the yield curve signal. “I’m sure Larry was trying to send smoke signals. He’s trying to explain it to them,” Brusca said.

Dollar lower on euro strength

 
Getty Images

The euro climbed against major rivals on Friday, after the European Union reached a deal over the divisive issue of refugees, removing some political risk that is been hanging over the shared currency. German Chancellor Angela Merkel had been calling for an EU-wide deal on migration at the summit in Brussels. After nine hours of talks, a deal was reached early Friday to aid coastline countries such as Italy, by redistributing some of the migrants rescued in the Mediterranean. “The agreement takes a lot of the pressure off not just the EU as a whole but specifically off German Chancellor Merkel, who was under intense pressure from her interior minister to do something to stem migration. The agreement probably means no further worries about her coalition falling apart. It is therefore positive for the euro,” said Marshall Gittler, chief strategist at ACLS Global. Italy had been vowing to veto a joint statement over the summit unless EU members find a new way to deal with migration, and that situation had been weighing on the euro. As well, Merkel had been under pressure at home from the more conservative Bavarian sister party of her Christian Democrats—the Christian Social Union—over this issue. Brexit will also be on the agenda at the Brussels summit, but with the U.K. still unclear about its desired post-divorce relations with the continent, the meeting is expected to yield little progress. The British pound  dropped to its lowest level since early November 2017, buying $1.3110, compared with $1.3078 on Thursday.

Can Trump Counter Soaring Gasoline Prices?

Ethanol plant

Oil prices surged to their highest level in more than three years on Thursday, as the number and volume of supply outages continues to rise. The odds of a significant shortfall in supply are also growing by the day. With U.S. midterm elections nearing, the more oil prices continue to rise, the more likely it is that President Trump decides to tap the strategic petroleum reserve (SPR) to tamp down oil prices just ahead of the November vote. The 180-degree turnaround in the oil market from May is pretty staggering, even for an oil market steeped in volatility and uncertainty. In late May, rumors of higher output from Saudi Arabia and Russia led to a crash in prices, and led to speculation of another lengthy downturn. By late June, however, it isn’t clear that even a massive 1-million-barrel-per-day increase from OPEC+ will be enough to fill the worsening supply gap. That means higher oil prices are likely. WTI has spiked by about $8 per barrel since last week, and continues to climb higher. “We are in a very attractive oil price environment and our house view is that oil will hit $90 by the end of the second quarter of next year,” Hootan Yazhari, head of frontier markets equity research at Bank of America Merrill Lynch, said. “We are moving into an environment where supply disruptions are visible all over the world… and of course President Trump has been pretty active in trying to isolate Iran and getting U.S. allies not to purchase oil from Iran,” he added. As has been widely reported, the Trump administration has aggressively pressed Saudi Arabia to boost output to offset declines from Iran. Saudi Arabia has complied, promising to ramp up output to about 11 mb/d in July, up from less than 10 mb/d in May. It’s an astounding increase, both in terms of volume and the speed of the increase. But it still might not be enough. Outages in Libya, Venezuela, Iran, Canada, Angola and Kazakhstan will probably more than overwhelm the increase in supply from Saudi Arabia. That raises the odds that Trump turns to the SPR to head off higher oil prices. “We think that WTI would not have to advance much further before the U.S. Strategic Petroleum Reserve (SPR) is brought into play,” Standard Chartered wrote in a note. “Higher gasoline prices, particularly in the Midwest, are likely to provoke a SPR release in the run-up to November’s mid-term elections.”

Deutsche Bank investors should be shaken by U.S. stress test failure

People are silhouetted next to the Deutsche Bank’s logo prior to the bank’s annual meeting in Frankfurt, Germany, May 24, 2018. REUTERS/Kai Pfaffenbach

FRANKFURT (Reuters) – Deutsche Bank (investors took a largely long view on its failure in this year’s U.S. stress tests, with its shares recovering on Friday from a record low hit earlier this week. Goldman Sachs analysts said the U.S. Federal Reserve’s issues with Deutsche Bank were “long standing” and “not new”, while UBS said the failure was “not a total surprise.” The Fed last year classified Deutsche Bank’s U.S. unit as troubled and Deutsche Bank’s shares had been falling in anticipation of the stress test verdict on Thursday. Shares in the German bank, which are down 43 percent this year, were up just over 1 percent at 9.157 euros at 1023 GMT, above Wednesday’s record low of 8.76 euros. The test was the second stage in the Fed’s annual health check of banks. Deutsche Bank passed the first phase last week, but was the only lender to fail the second, in another blow to its fragile reputation as it struggles to revive profitability. “It does seems like Deutsche Bank at the moment is the worst student in the class that can’t get anything right,” said Octavio Marenzi, CEO of consultancy Opimas. Deutsche Bank said in a statement on Thursday it had made significant investments to improve its capital planning capabilities as well as controls and infrastructure at its U.S. subsidiary and would work with regulators to build on these. The European Central Bank, which oversees Deutsche Bank, and German financial market watchdog BaFin both declined to comment. Deutsche Bank will now need to obtain the Fed’s permission before making capital payouts to its German parent. But the overall impact will be limited, Marenzi said. The bank may need to invest just about $10 million in additional stress testing technology and external consultants.

John Kelly said to be on his way out, Trump is considering who will be next White House chief of staff

Discussing the possibility of John Kelly's White House exit
Discussing the possibility of John Kelly’s White House exit
 

With John Kelly’s tenure as White House chief of staff possibly winding down, President Donald Trump has been consulting with some of his advisers on who should succeed Kelly in that post, a source familiar with the situation said on Thursday. Kelly, a retired general, is nearing a year in the job and could be leaving soon, the source said. White House spokeswoman Lindsay Walters told reporters aboard Air Force One on the president’s flight to Washington from Milwaukee that both Trump and Kelly had denied that Kelly was on his way out. Trump called the report “fake news” and Kelly said that “this was news to him,” she said. Trump has occasionally chafed at the restrictions Kelly has placed on who gets access to see him and has wondered aloud whether he needs someone with more political experience for the job as congressional elections approach, two sources said. But he frequently praises Kelly publicly and has expressed admiration of him. The Trump White House has generated major turnover since he took office in January 2017. Figures compiled by Martha Joynt Kumar, a Towson University scholar who researches White House transitions and staffing, said Trump had the highest turnover of top-tier staff of any recent president at the 17-month mark. The figures for losses among designated high-level staff were 61 percent for Trump, compared with 14 percent for President Barack Obama and 5 percent for George W. Bush, her studies found.