Trade war rumbles hit emerging stocks sending Indian rupee to record low

An Indian cycle rickshaw driver waits for customers next to a busy road in New Delhi. Facing a widening emerging market selloff, India’s rupee plumbed a fresh record low, with nationwide protests adding to the pressure. (AFP)
Updated 10 September 2018
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Trade war rumbles hit emerging stocks sending Indian rupee to record low

  • MSCI’s emerging market equity index slipped as much as 1 percent to hit its weakest level since July 2017
  • Markets in Asia chalked up hefty losses after US President Donald Trump warned on Friday he was ready to slap tariffs on virtually all Chinese imports to the US

LONDON: Fears over a rapid escalation of trade wars hit emerging markets on Monday, sending stocks to a fresh 2018 low and hurting major currencies with India’s rupee tumbling to record lows and Russia’s rouble at its weakest in two years.
MSCI’s emerging market equity index slipped as much as 1 percent to hit its weakest level since July 2017 with markets in Asia chalking up hefty losses after US President Donald Trump warned on Friday he was ready to slap tariffs on virtually all Chinese imports to the US.
Beijing warned it would retaliate.
Chinese mainland stocks ended as much as 1.5 percent lower with shares in suppliers to Apple dropping after Trump tweeted on Saturday that Apple should make products in the US if it wanted to avoid tariffs on Chinese imports.
Bourses in export heavyweights such as Hong Kong and Taiwan as well as India’s BSE index nearly matched those declines.
Emerging currencies painted a similar downbeat picture, with the EM currency index falling around 0.5 percent and edging back toward a 17 month low hit last week.
“Emerging economies have borne the brunt of the market stress since the start of the year,” Didier Saint-Georges, managing director at French asset manager Carmignac wrote in a note to clients.
“In drying up the global flow of dollars, the Fed has weakened the entire EM asset class and literally wrecked those countries most reliant on dollar financing. The trade standoff initiated by the Trump administration thus amounts to a double whammy, with contagion doing the rest of the damage.”
Facing a widening emerging market selloff, India’s rupee plumbed a fresh record low, with nationwide protests adding to the pressure while an official at the country’s finance ministry pledged the government would take measure to stem the slide in the currency.
With a general election less than nine months away, demonstrations against record high petrol and diesel prices shut down businesses, government offices and schools in many parts of India while in some places protesters blocked trains and roads and vandalized vehicles.
Russia’s rouble weakened beyond 70 versus the dollar for the first time since March 2016 before recovering its losses, buckling under pressure from uncertainty about US sanctions and concern ahead of a central bank meeting on Friday.
Governor Elvira Nabiullina said rates could stay on hold or go higher. But Kremlin economic aide Andrei Belousov said a rate increase would be “highly undesirable,” echoing comments by Prime Minister Dmitry Medvedev who stated late last week that lending rates should be lower.


‘Get prices down’ Trump tells OPEC

Updated 20 September 2018
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‘Get prices down’ Trump tells OPEC

  • Trump highlights US security role in region
  • Comments come ahead of oil producers meeting in Algeria

LONDON: US president Donald Trump urged OPEC to lower crude prices on Thursday while reminding Mideast oil exporters of US security support.
He made his remarks on Twitter ahead of a keenly awaited meeting of OPEC countries and its allies in Algiers this weekend as pressure mounts on them to prevent a spike in prices caused by the reimposition of oil sanctions on Iran.
“We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices!” he tweeted.
“We will remember. The OPEC monopoly must get prices down now!”
Despite the threat, the group and its allies are unlikely to agree to an official increase in output, Reuters reported on Thursday, citing OPEC sources.
In June they agreed to increase production by about one million barrels per day (bpd). That decision was was spurred by a recovery in oil prices, in part caused by OPEC and its partners agreeing to lower production since 2017.
Known as OPEC+, the group of oil producers which includes Russia are due to meet on Sunday in Algiers to look at how to allocate the additional one million bpd within its quote a framework.
OPEC sources told Reuters that there was no immediate plan for any official action as such a move would require OPEC to hold what it calls an extraordinary meeting, which is not on the table.
Oil prices slipped after Trumps remarks, with Brent crude shedding 40 cents to $79 a barrel in early afternoon trade in London while US light crude was unchanged at about $71.12.
Brent had been trading at around $80 on expectations that global supplies would come under pressure from the introduction of US sanctions on Iranian crude exports on Nov. 4.
Some countries has already started to halt imports from Tehran ahead of that deadline, leading analysts to speculate about how much spare capacity there is in the Middle East to compensate for the loss of Iranian exports as well as how much of that spare capacity can be easily brought online after years of under-investment in the industry.
Analysts expect oil to trend higher and through the $80 barrier as the deadline for US sanctions approaches.
“Brent is definitely fighting the $80 line, wanting to break above,” said SEB Markets chief commodities analyst Bjarne Schieldrop, Reuters reported. “But this is likely going to break very soon.”