Aurelia Butler

Shares in some Chinese metals companies rallied for a second session as investors bet that higher prices for gallium and germanium, which Beijing’s export restrictions target, could boost revenues.Germanium is used in high-speed computer chips, plastics, and in military applications such as night-vision devices as well as satellite imagery sensors. Gallium is used in building radars and radio communication devices, satellites and LEDs.China’s abrupt announcement of controls from Aug. 1 on exports of some gallium and germanium products, also used in electric vehicles (EVs) and fibre optic cables, has sent companies scrambling to secure supplies and bumped up prices.On Wednesday, former Vice Commerce Minister Wei Jianguo told the China Daily newspaper that countries should brace for more should they continue to pressure China, describing the controls as a “well-thought-out heavy punch” and “just a start”.”If restrictions targeting China’s high-technology sector continue then countermeasures will escalate,” added Wei, vice commerce minister 2003-2008 and now vice chairman of China Center for International Economic Exchanges, a state-backed think tank.Announced on the eve of U.S. Independence Day and just before Yellen visits Beijing from Thursday, analysts said the controls were clearly timed to send a message to the Biden administration, which has been targeting China’s chip sector and pushing allies such as Japan and the Netherlands to follow suit. China’s move has also raised concerns that restrictions on rare earth exports could follow, with analysts pointing to a curb on shipments imposed 12 years ago in a dispute with Japan.China is the world’s biggest producer of rare earths, a group of metals used in EVs and military equipment.Analysts have described Monday’s move as China’s second – and bigger – countermeasure in the long-running U.S.-China tech fight, coming after it banned some key domestic industries from purchasing from U.S. memory chipmaker Micron (NASDAQ:MU) in May. The Global Times state media tabloid, in a separate editorial published late on Tuesday, said it was a “practical way” of telling the United States and its allies that their efforts to stop China procuring more advanced technology was a “miscalculation”.The Chinese commerce ministry did not respond to a request for further comment. Asked about the metals export curbs, Chinese foreign ministry spokesman Wang Wenbin said on Wednesday the government’s actions were reasonable and lawful. He told a regular press briefing that some European Union states also curb exports of some related goods. “Our action is not targeted at any specific country,” Wang said.WARNING SHOTSome larger chip manufacturers view China’s export controls on gallium as more of a warning shot about what economic pain the country could inflict. Others have warned in the past that if China really wanted to hit global automakers where it hurts it could, for example, control exports of graphite.China produces 61% of global natural graphite and 98% of the final processed material to make EV battery anodes, according to Benchmark Mineral Intelligence.A source at a major western chip maker, who spoke on condition of anonymity, said China’s gallium move seems more like a “message that they can hit back rather than intending a real punch”.Democratic Republic of Congo state miner Gecamines said its new plant opening in September could help fill the gap in germanium production. Washington is considering new restrictions on the shipment of high-tech microchips to China, following a series of curbs over the past few years. The United States and the Netherlands are also expected to further restrict sales of chipmaking equipment to China, part of efforts to prevent their technology from being used by the Chinese military.A day after China unveiled the curbs, President Xi Jinping called on nations to spurn decoupling and avoid severing supply chains in a virtual address to leaders attending the Shanghai Cooperation Organisation summit, state media reported.Shares in Chinese metals companies such as Yunnan Lincang Xinyuan Germanium Industry Co and Yunnan Chihong Zinc & Germanium Co surged for a second session on Wednesday, with local media reporting that a rise in germanium prices would boost revenue growth for the firms.Gallium at 99.99% purity in China was trading at 1,775 yuan ($245) a kg on Tuesday, unchanged from the day before, but up 6% week-on-week and 4% year-on-year, respectively, Shanghai Metal Exchange Market data on Refinitiv Eikon showed. It was, however, 46% lower from the same period a year earlier.China’s germanium ingot was priced at 9,150 yuan per kg on Tuesday, also flat on the day and on the week, Refinitiv data showed. It was down 4% month-on-month and up 4.6% year-on-year, respectively. ($1 = 7.2447 Chinese yuan) More

MANCHESTER, England (Reuters) – Sick of customs delays and extra bureaucracy since Britain left the European Union, Farrat, a small manufacturer on the edge of Manchester, is ramping up investment to compensate – in Germany.The maker of anti-vibration parts for buildings and machinery is growing fast, almost doubling its headcount in the English city over the past five years, but it says Brexit is proving to be an obstacle.”We are now channelling a lot of investment in setting up production facilities in Germany to remove the trading friction,” said chief executive Oliver Farrell. “Brexit is materially restricting our growth now.”The company is far from alone, according to a dozen conversations Reuters has had with company bosses, business groups and politicians across England over the course of 2023.Economic data tell a similar story. German data show British firms opened 170 foreign direct investment projects in Europe’s biggest economy last year as companies sought a foothold in the bloc’s single market.That’s a far cry from the 50 enquiries from British firms – rather than projects committed – recorded by German Trade & Invest in 2015, the year before the Brexit referendum.Next door, the government in the Netherlands said over 300 “Brexit companies” – British firms it reckons are trying to sidestep trade friction – had moved operations there since 2016.Business investment within Britain in early 2023, meanwhile, stood about 1% above its level at the time of the June 2016 vote, a reading some economists put down to uncertainty over EU trade ties.Over the same period, business investment jumped 25% in France, 21% in the United States and rose 7% in Germany, according to data from the Organisation for Economic Co-operation and Development.Pro-Brexit economists say such data ignore the fact British corporate investment boomed in the years before mid-2016, and it was bound to slow. Business surveys, though, point to Brexit as a factor behind weak investment in recent years.LOST OPPORTUNITIESTales of lost opportunities due to Brexit are commonplace among business leaders in and around Manchester in England’s northwest, the city’s mayor Andy Burnham said.”Barely anyone has anything positive to say,” said Burnham, who is a member of the opposition Labour Party and wanted Britain to remain in the EU. “In most cases, it’s added a layer of complexity that they didn’t have before.”Burnham said, nevertheless, that the EU market remained massively important for Manchester, the third biggest city in Britain after London and Birmingham.About 61% of goods exports from Greater Manchester went to the EU in 2019, according to official estimates, compared with 42% of exports from London and the southeast of England.Burnham said Manchester had a successful track record in attracting international trade and investment but, like at Farrat, there was a feeling among local businesses that easier trade ties would have made that track record even better.While some firms in Manchester are investing in production facilities and offices in the EU to skirt trade disruption, others say they have no choice but to share new business with companies in a better position to work within the bloc. Creative Concern, an advertising and marketing agency, employs over 20 staff and for the last 20 years has built up a strong European business, capitalising on the status of English as a common language on the continentFounder and director Steve Connor said it was business-as-usual in the years immediately following the Brexit vote – until new trade terms with the EU came into force in January 2021.Now, Creative Concern finds it can no longer bid directly for projects involving the European Commission, even though some rivals from other non-EU countries can, and must share projects it used to bid for on its own with firms based in the EU.”Because our government, in its infinite wisdom have chosen to pursue a hard Brexit, we find ourselves more disadvantaged than other non-EU countries, which is rubbing salt in the wound,” Connor said.The British government says EU relations are progressing, pointing to a memorandum of understanding for financial services trade signed last month, described by finance minister Jeremy Hunt as a “turning point” in dialogue with the bloc. ‘PEOPLE ARE NERVOUS’Economists and business groups say the problem of trade friction with the EU has been compounded by a lack of long-term fiscal strategy in Britain, as repeated temporary tax breaks sit uneasily with the average seven-year investment cycle for manufacturers, according to trade body Make UK.British firms are also waiting to hear how – or even if – London intends to compete with the enormous green energy and tech subsidies pitched by the United States and EU.Britain’s government said it has an ambitious target to reach net zero emissions by 2050 and it believes free markets – rather than subsidies – are the best way to achieve that.At Farrat, the effects of Brexit are insidious, running beyond decisions over investments, said Farrell, describing a sense of unease felt towards British firms from potential foreign clients, worn down by years of political turmoil”People are nervous. We’re going to customers who are saying, ‘Great, this is good technical proposal – but hmmm, we’re going to have to get British guys on it’,” he said.This unease has already hurt 3P Innovation, another fast-growing manufacturer based 85 miles (137 km) south of Manchester in the midlands town of Warwick.It makes automation equipment used in the healthcare and food industries, machinery often paired with isolator units – housings for sterile production – built by specialist firms. Founder Dave Seaward said 3P missed out on an EU contract because the client deemed it too risky to send the isolator unit to Britain to pair with 3P’s machinery before coming back to the EU – because of the potential for customs checks and delays.”So that was a contract that we know we lost just because we’re no longer in the EU,” said Seaward, declining to identify the client in question.’LESS HASSLE’Seaward said easy access to the EU’s CE certification programme is key to 3P Innovations’s survival, as the safety, health and environmental requirements are demanded by EU clients, as well as U.S. and Japanese customers who want CE-certified equipment. He said there were fraught months while the company worked out how to access the CE programme outside the EU. In the end, it opened an office in the Netherlands.So far, there has also been little sign firms are bringing production back to Britain in the wake of Brexit, though some are considering it, according to research by UK in a Changing Europe, a think-tank, which looked at smaller manufacturers in the West Midlands.But, like with Farrat and 3P Innovation, it also found some companies had opened or expanded their operations in the EU.”EU customers … want less hassle. They don’t see the UK as a reliable supplier,” said Subrah Krishnan Harihara, head of research at the Greater Manchester Chambers of Commerce (GMCC).”The long-term impact of this is probably going to be that fewer businesses are keen on taking up the opportunities for international trade,” he said. More

(Reuters) – Federal Reserve meeting minutes from the June policy gathering to be released on Wednesday are likely to show an active debate among policymakers who still on balance appear inclined to support more action to tame inflation.The meeting minutes, due at 2 p.m. EDT (1800 GMT), will arrive after U.S. central bank officials have spent the last three weeks following the June Federal Open Market Committee meeting sketching out their policy outlooks. Key officials like Fed Chair Jerome Powell have pointed to forecasts released at that gathering indicating that a half percentage point’s more tightening this year was very much still in play. “The committee clearly believes that there’s more work to do, that there are more rate hikes that are likely to be appropriate” at some point over the course of the year, Powell said last Wednesday in an appearance with other central bank chiefs in Portugal. “Although policy is restrictive, it’s not, it may not be restrictive enough and it has not been restrictive for long enough,” which keeps alive prospects for more increases, Powell said.But some feel enough has been done. Atlanta Fed President Raphael Bostic said last Thursday that he believes no more rate increases are needed, noting “the data, survey results, and on-the-ground intelligence constitute a reasonable case that gradual disinflation will continue.” He added, “that will happen even if the Committee does not increase the federal funds rate.”The minutes will describe the deliberations that allowed the Fed, after just over a year of very aggressive rate rises, to maintain its overnight target rate at between 5% and 5.25%. It stood at near zero levels in March 2022 and has risen swiftly as Fed officials have sought to tame the worst levels of inflation in decades. The Fed held steady on June 14 in large part to take stock of the impact of the increases it has already implemented. Over recent days, some central bankers have noted that the effects of past tightening are still flowing into the economy. The meeting minutes will also add details about what officials and their staff expect for the economy, and some are watching the central bank staff’s view with particular interest. Fed economists have been warning of recession prospects for some time and have authored a series of recent papers that have sounded cautionary notes about parts of the economy and financial system. “The Fed staff look to be priming the Board to expect soft data,” said Tim Duy, chief U.S. economist at SGH Macro Advisors, which could tilt against the need for rate rises, if realized. More

ISLAMABAD (Reuters) – Prime Minister Shehbaz Sharif said on Wednesday that he hoped the $3 billion short-term bailout for Pakistan would be given final approval by the International Monetary Fund board when it meets on July 12.After eight months of negotiations, both sides signed a staff-level agreement on Friday, to avert a imminent default on sovereign debt. Finance Minister Ishaq Dar has said Pakistan will receive a first installment of $1.1 billion, but the IMF board’s approval is needed before funds can be disbursed.”The agreement will go through, God willing,” Sharif said during a ceremony in Islamabad.Sharif also thanked longtime allies China, Saudi Arabia and United Arab Emirates for their support while his government was in negotiations with the IMF. The allies had pledged bilateral financing or rolled over debts to help slow the drain on Pakistan’s foreign currency reserves, which by the end of last month were down to just a little below $4 billion, barely enough to pay for a month of controlled imports.Dar said on Friday that the IMF deal would unlock bilateral lending from friendly governments and other multilateral lenders, and Pakistan’s reserves could rise up to $15 billion by the end of this month.Pakistan is due to hold a general election by early October, though Sharif’s coalition government only came to power in April last year, after former prime minister Imran Khan lost a confidence vote in parliament.The government desperately needed the IMF bailout to avoid the deepening balance of payments crisis, while dealing with an economy suffering record high inflation, running at 38% annually in May.Sharif has had to take unpopular policy decisions demanded by the IMF since February. It has already announced an increase in the petroleum levy, and it will be raising electricity prices too. The government has also committed to raise more than 385 billion rupee ($1.34 billion) in new taxation, and in recent days the central bank raised the policy interest rate 22%. More

1. U.S. stock futures point lower after Independence Day holidayU.S. stock futures inched down on Wednesday as Wall Street prepared to reopen after the Fourth of July holiday and investors awaited the release of the minutes from the Federal Reserve’s June meeting (see below).At 05:20 ET (09:20 GMT), the Dow futures contract dropped by 99 points or 0.29%, S&P 500 futures shed 13 points or 0.31%, and Nasdaq 100 futures lost 70 points or 0.46%.Markets in the U.S. were shuttered on Tuesday and closed early on the prior day.In shortened trading on Monday, the main indices posted muted gains to kick off the second half of 2023, with the benchmark S&P 500 increasing by 0.12% and the broad-based Dow Jones Industrial Average rising by 0.03%. The tech-heavy Nasdaq Composite, which has performed strongly throughout the year thanks in part to a surge in interest in artificial intelligence, ticked higher by 0.21%.2. Fed minutes on the horizonThe Federal Reserve is set to publish the minutes from its June policy meeting Wednesday, with observers keen to learn more about why officials at the U.S. central bank decided to keep interest rates on hold last month.At their last gathering, the Federal Open Market Committee voted to keep borrowing costs steady at the existing target range of 5% to 5.25%. But policymakers signaled the possibility of two further rate hikes in 2023, including one at the Fed’s next meeting later this month.According to Investing.com’s Fed Rate Monitor Tool, the Fed is widely tipped to implement a quarter-point increase in July, which would bring the benchmark federal funds rate up to 5.25% to 5.5%.The minutes from last month’s meeting, as well as the upcoming release of the June jobs report on Friday, could factor into these expectations.Elsewhere, John Williams, president of the Federal Reserve Bank of New York, is scheduled to deliver remarks on Wednesday.3. Brent slips as broader economic concerns weighOil benchmark Brent retreated on Wednesday as renewed worries over a global economic slowdown dented market sentiment and overshadowed the news earlier this week of further supply cuts from two major exporters.By 05:20 ET, the Brent contract dipped by 0.54% to $75.84 a barrel, while U.S. crude futures traded 1.69% higher at $70.97 per barrel, having traded through the Fourth of July holiday without a settlement.Brent had climbed on Tuesday, lifted by announcements from Saudi Arabia and Russia that they planned to roll out more output reductions.However, concerns remain over how a renewal of Fed policy tightening could impact overall economic activity and, by extension, fuel demand.Much of the focus will subsequently center on the release of the Fed minutes later today, although traders will also be keeping an eye on U.S. crude and product inventory data from the American Petroleum Institute.4. China services activity slowsChina’s services sector expanded at a slower-than-expected pace in June, according to a private survey on Wednesday, raising more alarm bells over the post-pandemic recovery of the world’s second-biggest economy.The Caixin services purchasing managers’ index came in at 53.9 during the month, weaker than expectations of 56.2 and below May’s level of 57.1. It was the index’s second-worst reading this year.Despite the Dragon Boat festival holiday earlier in June, a revival in tourism has appeared to only give a limited boost to services demand. Government liquidity injections and interest rate cuts by the People’s Bank of China have also provided only subdued support to local business activity.When coupled with a recent series of weak economic data, the Caixin print adds to concerns over whether China will rebound from the COVID-19 era as strongly as markets are expecting.5. U.S. factory orders dueThe May reading for new orders for U.S.-made goods will also be released later on Wednesday, with recent data showing that the country’s manufacturing sector is being dragged down by a recent string of aggressive Fed interest rate hikes.U.S. factory orders are expected to increase by 0.8% during the month, up from the April mark of 0.4%.The manufacturing industry, which accounts for more than 11% of the economy, was boosted largely by defense spending in April.However, the Fed policy tightening, along with stricter lending conditions following the collapse of three U.S. banks earlier this year, have hit these businesses. Spending is also showing signs that it is shifting away from goods and into services. More