Wednesday, March 29, 2017

Wednesday, March 29, Morning Global Market Roundup: Asia Stocks Up With Dollar, Sterling Suffers On Brexit Day

By Wayne Cole 
Reuters
March 29, 2017

Asian shares inched ahead on Wednesday while the dollar and commodities held gains as investors shook off disappointment about U.S. President Donald Trump's failed healthcare bill and focused on an improving outlook for global growth.

The good cheer did not extend to the pound which was on the skids as the British government sent a letter to Brussels formally starting the country's exit from the European Union.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS edged up 0.2 percent and back toward recent 21-month peaks. Australia's main index climbed 0.8 percent to its highest since mid-2015.

Japan's Nikkei .N225 added 0.1 percent, having climbed over 1 percent the previous day.

The Dow snapped an eight-day losing streak, its longest run of losses since 2011, in part as a survey showed consumer confidence surged to a more than 16-year high.

"Economic fundamentals still remain exceedingly sound here in 2017 and you do not need Trump’s pro-growth fiscal agenda for this to be one of the best years for growth since the recovery started," argued Tom Porcelli, chief U.S. economist at RBC Capital Markets.

"We still think tax reform happens, but you are better off thinking about the timing as an end of year event at best."

The Dow .DJI ended Tuesday up 0.73 percent, while the S&P 500 .SPX gained 0.73 percent and the Nasdaq .IXIC 0.6 percent.

The dollar bounced from 4-month lows as a top Federal Reserve official talked of more rate hikes to come while political uncertainties surrounding Britain's exit from the EU pressured European currencies.

Fed Vice Chairman Stanley Fischer, one of the more influential policymakers with markets, said two more rate increases this year seemed "about right".

B-Day


The pound shed a further 0.3 percent to $1.2414 GBP= after British Prime Minister Theresa May signed a letter notifying the EU of Britain's intention to leave the bloc.

The Brexit letter is due to be delivered to Brussels later on Wednesday, triggering years of uncertain negotiations that will test the endurance of the European Union.

That came a day after the Scottish Parliament voted in favor of a second independence referendum that would break up the UK.

The euro pulled back to $1.0820 EUR=, while the dollar bounced to 111.24 yen JPY=. Against a basket of currencies, the dollar was steady around 99.685 .DXY.

The biggest loser overnight was the South African rand which has lost almost five percent in two sessions on speculation well-respected Finance Minister Pravin Gordhan might lose his job.

In commodity markets, base metal prices bounced on more upbeat economic news from China with copper CMCU3 gaining 2 percent overnight.

Oil prices gained after a severe disruption to Libyan oil supplies and as officials suggested the Organization of the Petroleum Exporting Countries and other producers could extend output cuts to the end of the year. [O/R]

U.S. crude CLc1 added 17 cents to $48.54 a barrel, while Brent LCOc1 rose 12 cents to $51.45.

Spot gold XAU= was 0.3 percent softer at $1,247.90 an ounce.


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Oil Rises On Libyan Supply Disruptions, Likely OPEC Output Cut Extension

By Henning Gloystein 
Reuters
March 29, 2017

Oil prices on Wednesday extended gains from the previous session, lifted by supply disruptions in Libya and expectations that an OPEC-led output reduction will be extended into the second half of the year.

Prices for front-month Brent crude futures, the international benchmark for oil, had risen 14 cents from their last close to $51.47 per barrel.

In the United States, West Texas Intermediate (WTI) crude futures were up 20 cents at $48.57 a barrel.

Both crude benchmarks rose by more than 1 percent the previous day.

Oil production from the western Libyan fields of Sharara and Wafa has been blocked by armed protesters, reducing output by 252,000 barrels per day (bpd), a source at the National Oil Corporation (NOC) told Reuters late on Tuesday.

"That (Libya), along with the Iranian oil minister saying there is likely to be an extension to the production cut deal helped crude oil rally overnight," said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

The Organization of the Petroleum Exporting Countries (OPEC), along with some other producers including Russia, have agreed to cut production by almost 1.8 million bpd during the first half of the year in order to rein in a global fuel supply overhang and prop up prices.

But as markets remain bloated halfway into the cuts, there is a broad expectation that the supply cuts will be extended into the second half of the year.

Despite the rising consensus of extended cuts, the OPEC-led strategy to re-balance oil markets is not without controversy.

As OPEC and especially Saudi Arabia cut their production, other producers not participating in the cuts have been quick to fill the supply gap and gain market share.

In the United States in particular, shale oil drillers have seized the opportunity to ramp up output and exports.

As a result, China became the third biggest overseas destination for U.S. crude oil in 2016, according to data from the Energy Information Administration (EIA), up from ninth position the previous year.

"In 2016, U.S. crude oil exports averaged 520,000 bpd, 12 percent above the 2015 level, despite a year-over-year decline in domestic crude oil production," the EIA said.

With U.S. oil production rising sharply again this year, traders expect American exports to surge further in 2017.


Article Link To Reuters:

Newest Texas Refineries Plan To Turn Shale Into Fuel For Mexico

Goal is to send gasoline, diesel by rail across border; Eagle Ford shale crude to be used as feedstock for Raven plant.


By Sheela Tobben
Bloomberg
March 29, 2017

The newest oil refineries in Texas are looking to join the hottest two plays in the North American oil industry.

Raven Petroleum LLC and MMEX Resources Inc. are building refineries in the Eagle Ford and Permian Basin that will process ample local supplies of light crude into gasoline and diesel. The fuel will be shipped on existing rail lines across the border to Mexico, where the government has opened the market to foreign competition, attracting companies including BP Plc and Glencore Plc.

U.S. shale drillers have doubled the number of rigs seeking oil since May, with most of the gains seen in Texas. Production nationwide is expected to approach the all-time high from 1970. At the same time, Mexico’s gasoline demand is outpacing local supply, forcing the nation to increase imports, which government data show grew 3 percent year-on-year in 2016.

"It looks like they are a set of entrepreneurs that see opportunities in the refined fuels markets in Mexico as it’s getting deregulated and denationalized," Neil Earnest, president of industry consultants Muse Stancil, said by phone from Dallas. "If you are sitting in Texas, you are sitting on low cost crude oil."

South Texas


The Woodlands, Texas-based Raven’s proposed 50,000-barrel-a-day refinery, about 70 miles from the border in Duval County, will produce gasoline and low-sulfur diesel starting by early 2019, Christopher Moore, the company’s managing director, said in a phone interview this week. MMEX Resources plans to build a similar-sized refinery in West Texas.

The refinery’s location about 50 miles east of Laredo is close to its feedstock supply from the Eagle Ford shale, as well as to the market for its products in Mexico, he said.

The Mexican government has been taking steps to deregulate its fuels market, with the latest measure being phasing out government-set pump prices. Mexico’s fuel prices rose by about 20 percent on average in January as the government raised the maximum pump price. The prices increases were part of reforms to open state-owned Petroleos Mexicanos’s monopoly to foreign competition and lure in private investment.

"Demand for fuels in Mexico is growing at over 3 percent per year," Moore said. "A constrained market won’t be resolved internally, so it will have to import as they are doing now."


Article Link To Bloomberg:

Vote To Repeal U.S. Broadband Privacy Rules Sparks Interest In VPNs

By Stephen Nellis and David Ingram
Reuters
March 29, 2017

The vote by the U.S. Congress to repeal rules that limit how internet service providers can use customer data has generated renewed interest in an old internet technology: virtual private networks, or VPNs.

VPNs cloak a customer's web-surfing history by making an encrypted connection to a private server, which then searches the Web on the customer's behalf without revealing the destination addresses. VPNs are often used to connect to a secure business network, or in countries such as China and Turkey to bypass government restrictions on Web surfing.

Privacy-conscious techies are now talking of using VPNs as a matter of course to guard against broadband providers collecting data about which internet sites and services they are using.

"Time to start using a VPN at home," Vijaya Gadde‏, general counsel of Twitter Inc, said in a tweet on Tuesday that was retweeted by Twitter Chief Executive Jack Dorsey.

Gadde was not immediately available for comment. Twitter said she was commenting in her personal capacity and not on behalf of the company.

The Republican-led U.S. House of Representatives voted 215-205 on Tuesday to repeal rules adopted last year by the Federal Communications Commission under then-President Barack Obama to require broadband providers to obtain consumer consent before using their data for advertising or marketing.

The U.S. Senate, also controlled by Republicans, voted 50-48 last week to reverse the rules. The White House said President Donald Trump supported the repeal measure.

Supporters of the repeal said the FCC unfairly required internet service providers like AT&T Inc, Comcast Corp and Verizon Communications Inc to do more to protect customers' privacy than websites like Alphabet Inc's Google or Facebook Inc.

Critics said the repeal would weaken consumers' privacy protections.

VPN Advantages, Drawbacks

Protected data includes a customer's web-browsing history, which in turn can be used to discover other types of information, including health and financial data.

Some smaller broadband providers are now seizing on privacy as a competitive advantage. Sonic, a California-based broadband provider, offers a free VPN service to its customers so they can connect to its network when they are not home. That ensures that when Sonic users log on to wi-fi at a coffee shop or hotel, for example, their data is not collected by that establishment's broadband provider.

"We see VPN as being important for our customers when they're not on our network. They can take it with them on the road," CEO Dane Jasper said.

In many areas of the country, there is no option to choose an independent broadband provider and consumers will have to pay for a VPN service to shield their browsing habits.

Private Internet Access, a VPN provider, took a visible stand against the repeal measure when it bought a full-page ad in the New York Times on Sunday. But the company, which boasts about a million subscribers, potentially stands to benefit from the legislation, acknowledged marketing director Caleb Chen.

VPNs have drawbacks. They funnel all user traffic through one point, so they are an attractive target for hackers and spies. The biggest obstacle to their routine use as a privacy safeguard is that they can be too much of a hassle to set up for many customers. They also cost money.

"The further along toward being a computer scientist you have to be to use a VPN, the smaller a portion of the population we're talking about that can use it," said Ernesto Falcon, a legislative counsel for the Electronic Frontier Foundation, which opposed the bill.


Article Link To Reuters:

With New Phone Due, Samsung Dials Down On Safety Message

By Se Young Lee 
Reuters
March 29, 2017

After the damaging recall of its fire-prone Note 7 smartphone, you could be forgiven for thinking Samsung Electronics Co Ltd (005930.KS) would make a song and dance about battery safety in its new flagship phones, due to be launched in the United States on Wednesday.

But in the run-up to the launch, crucial to the South Korean technology giant winning back consumer confidence, its marketing effort so far makes little mention of safety.

"If you talk about safety, it presupposes a rationale for why, unconsciously, and they know this; and they also know the media will pick up that narrative," said Los Angeles-based Eric Schiffer, a brand strategy expert and chairman of Reputation Management Consultants.

"Highlighting the safety issue at this point will cause the other narrative to be recycled, so they have elected to suppress and hope."

Samsung declined to comment ahead of the launch.

To be sure, Samsung announced a comprehensive safety plan after concluding in January that faulty batteries from two suppliers caused some Note 7s to catch fire.

It now has an eight-point safety check protocol that includes x-raying the batteries. And, at the design level, phones have more room to properly house the battery. Such steps have been reflected in the S8's development, the company says.

Executives have said there will be no repeat of the Note 7 debacle, and one person familiar with the matter told Reuters the S8 launch was pushed back to ensure it is safe to use.

"The additional measures Samsung has taken should certainly improve battery safety and durability," said Lewis Larsen, president of Chicago-based battery technology consultancy Lattice Energy LLC. "These are most definitely not just cosmetic steps 'for show.'"

The company has also this month put a long-time mobile executive in charge of a new product quality improvement office, and affiliate Samsung SDI Co Ltd (006400.KS) has invested 150 billion won ($135 million) on improving battery safety.

"Needle In A Haystack"


Samsung recalled the Note 7 last September to replace faulty Samsung SDI batteries, but replacement batteries from Amperex Technology Ltd also proved faulty due to different problems - an embarrassment for a company that prides itself on product quality, analysts say. The Note 7 was eventually pulled from the market in October.

The company said earlier this week it plans to sell refurbished versions of the Note 7 smartphones, equipped with new batteries that have gone through new safety measures.

Downplaying the battery safety issue may also be a sensible marketing option as the new quality measures can't guarantee there will be no future problems. Any failure rate would likely be very low at first.

Samsung said last year it confirmed just 140 faulty batteries in more than 3 million Note 7s it sold - fewer than five in every 100,000.

"How confident are they that they can actually find a faulty cell with these additional checks," said Venkat Viswanathan, assistant professor at Carnegie Mellon and a battery technology expert. "It's sort of finding a needle in a haystack."

And safety is still on the minds of potential buyers of the new phone.

In one poll asking people what features they were looking forward to most in the S8, one Twitter user quipped: "A non exploding phone."

And at last week's annual shareholder meeting, one young boy stood up and asked Samsung to double down on safety. "In future, even if it takes time, I hope there will be no incidents like the Galaxy Note 7 explosions," he said.

Some analysts expect the S8, expected to go on sale next month, to outsell the Galaxy S7, which was Samsung's best seller in its first year from launch.

Others, though, say consumers may prefer to wait a few months before buying, just to be sure the new phones are safe.


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