Published: Sun, July 01, 2018
Business | By Eloise Houston

China and European Union unite on trade and investment stance

China and European Union unite on trade and investment stance

The market recovered when Peter Navarro, one of President Donald Trump's top trade advisers, told CNBC that there was no plan for investment restrictions and that the administration's probe into alleged technology theft is limited to China.

Asian markets were mixed on Thursday, as White House statements on trade left investors divided on whether the administration was interested in soothing tensions with China. Hong Kong's Hang Seng rose 0.4 percent to 28,469.94 and the Shanghai Composite in mainland China gained 0.3 percent to 2,821.15. Taiwan's benchmark fell but Southeast Asian indexes were mostly higher. Wall Street was poised for a subdued open. The tariff on soybeans will be cut by half to 1.5 percent effective July 1 and those on some other crops such as rapeseed will fall from as much as 9 percent to as low as zero.

ASIA'S DAY: Japan's benchmark Nikkei 225 index remained nearly flat at 22,270.39 and South Korea's Kospi lost 1.2 percent to 2,314.24.

Japan's Nikkei index was moving down 0.3 percent despite automakers rebounding from recent heavy losses on tariff concerns.

Spot gold XAU= dropped 0.4 percent to $1,253.70 an ounce.

E Yongjian, an analyst with Bank of Communications, attributed the weakening of the yuan mainly to a stronger U.S. dollar backed by U.S. economic recovery, the U.S. Federal Reserve's interest rates hike earlier this month, easing policies of European and Japanese central banks and risk aversion sparked by concerns over a worsening trade friction.

China's government defended its trade record as a benefit to the world in a new effort Thursday, June 28, 2018 to defuse US and European pressure over market access and technology policy. But it didn't address complaints that Beijing is hampering access to promising industries and that plans for the state-led development of electric cars and other products violates China's free trade commitments.

While the prospect of trade protectionism and tit-for-tat tariffs are raising serious fears for the world economy, the growth and inflation outlook is being further complicated by oil prices rising back above $75 per barrel, due to Washington pressuring its allies to halt Iranian imports.

Separately, top USA economic advisor Larry Kudlow said the Trump administration has no intention of backing down from the current China situation.

Expectations that US interest rates will rise just as the European Central Bank is pushing back its planned rate increases have been a key driver for a two-month rally in the dollar. Beijing responded to Washington's first round of hikes on USD34 billion of imports by raising duties on United States soybeans, whiskey and other products. President Trump who withdrew the USA from the Iran nuclear deal in May, is pushing foreign nations to cut their oil imports from Iran to zero by November when sanctions on Iran's energy sector will kick in again.

In oil markets, prices rose on supply disruption in Canada, falling USA crude stocks, uncertainty over Libyan exports and US demands that importers stop buying Iranian crude from November. The euro weakened to $1.1623 from $1.1646.

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