Wednesday, April 12, 2017

Wednesday, April 12, Morning Global Market Roundup: Investors Swoop On Stocks As Geopolitical Strains Simmer

By Marc Jones 
April 12, 2017

A break in alarming political news lifted European stocks on Wednesday and cooled a safe-haven rally that saw the yen and gold at five-month highs and top-rated government bond yields at their lowest this year.

The mood remained skittish though, tarnishing an otherwise brightening outlook for global economic growth, and meant that what looked set to be oil's LCOc1 longest winning run since August went almost under the radar.

An early 0.5 percent rise for Europe's STOXX 600 share index put it on course for its best day of the month. The rise in oil underpinned energy stocks .SXEP while banks .SX7P and carmakers .SXAP also made ground.

"It is a modest rebound," said Rabobank strategist Philip Marey. "We have discounted much of the news like the conflict between the Americans and the Russian on Syria and Trump's tweets on North Korea, so maybe its time to move on."

E-mini futures for the S&P 500 ESc1 also turned firmer having spent the Asian session in the red. Japan's Nikkei .N225 had slid just over 1 percent as a rising yen weighed on exporters' shares.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS saw a late rally though Shanghai .SSEC closed down 0.4 percent as China reported a slight slowdown in producer price inflation.

In contrast, gold XAU= climbed as far as $1,280.30 at one stage, its highest since Nov. 10.

"A degree of uncertainty has found its way into previously seemingly bulletproof financial markets," wrote analysts at ANZ.

"There is clearly some nervousness out there, with tensions around North Korea ratcheting higher and adding to an already heightened geopolitical environment. Global cyclical assets have not yet responded, but that can't last."

Chinese President Xi Jinping on Wednesday stressed the need for a peaceful solution for the Korean peninsula on a call with U.S President Donald Trump.

North Korea has warned of a nuclear attack on the United States at any sign of aggression as a U.S. Navy strike group steamed toward the Korean peninsula - a force Trump described as an "armada". Japan's navy also plans joint drills with the U.S. force, sources told Reuters.

Trump said in a Tweet that North Korea was "looking for trouble" and the U.S. would "solve the problem" with or without China's help.

The bellicose language has dragged South Korean stocks and the won to four-week lows and caused jitters across Asia.

At the same time, U.S. Secretary of State Rex Tillerson was in Moscow to denounce Russian support for Syria's Bashar al-Assad, raising the stakes in the Middle East.

A joint news conference by Trump and NATO Secretary General Jens Stoltenberg was also likely to generate headlines.

Yen Fades

The yen, a favoured harbor in times of stress due to Japan's position as the world's largest creditor nation, also cooled in Europe after having surged over 1.2 percent against the dollar on Tuesday.

The dollar huddled at 109.72 yen JPY=, having been as low as 109.35 at one stage. Dealers warned there was little in the way of chart support until the 200-day moving average at 108.72.

The euro steadied too, having dropped to its lowest in five months at 115.91 yen EURJPY=R. It was looking to snap 11 straight sessions of losses, a record for the single currency. It was shade higher on the dollar at $1.0618 EUR=.

Political uncertainty in France added to the euro's woes as hard-left candidate Jean-Luc Melenchon surged in the polls ahead of the May presidential election.

All this unease boosted bonds with yields on 10-year Treasuries US10YT=RR boasting their lowest close of the year on Tuesday. Yields were last at 2.29 percent and testing a hugely important barrier on the charts.

European yields nudged only cautiously upwards despite the easier mood in other assets, as nearly 16 billion euros of upcoming debt sales weighing on risk-averse, holiday-thinned markets.

Wall Street's futures prices ticked higher as investors wagered on an upbeat earnings season, which kicks off this week with a handful of banks.

Analysts expect earnings for all S&P 500 companies to have risen 10 percent in the first quarter from a year ago, according to Thomson Reuters data.

Oil's winning streak got an added lift from reports Saudi Arabia was lobbying OPEC and other producers to extend a production cut beyond the first half of 2017.

Global benchmark Brent LCOc1 edged up 30 cents to $56.53 a barrel, while U.S. crude CLc1 added 25 cents to $53.66. If sustained, this would be the longest stretch of gains since August 2016.

Article Link To Reuters:

Wal-Mart Offers Discounts For Online Orders Picked Up In Store

By Nandita Bose 
April 12, 2017

Wal-Mart Stores Inc will offer 'pickup discounts' to U.S. shoppers on items they order online and pick up in-store, as it revamps its e-commerce offerings at a faster pace to close the gap with larger rival Inc.

Online orders picked up in store already qualify for no shipping charges since the retailer saves on shipping fees. The latest discounts come on top of that. For example, a Vizio 70-inch 4K Ultra HD television priced at $1,698 for store pick up will qualify for an additional discount of $50.

Marc Lore, head of Wal-Mart's e-commerce operations, told Reuters in an interview on Tuesday he expects the move to boost transactions online and improve customer traffic in stores.

"This is a very material change in the value proposition we are offering customers," he said.

Lore said Wal-Mart is able to offer these discounts as it is able to eliminate delivery costs by leveraging its fleet of more than 6,700 trucks to deliver products from warehouses to stores.

The decision to offer these discounts is the latest move by Lore to revamp an existing e-commerce offering from Wal-Mart. The change is expected to improve the retailer's competitive advantage by making its 4,700 U.S. stores more relevant to shoppers in a digital age, analysts said.

Lore has been at the forefront of bold moves Wal-Mart has undertaken to challenge Amazon since he took charge of the retailer's struggling online business in August, after Wal-Mart acquired, a company Lore founded, for over $3 billion.

Since then he has acquired three online retailers, shuffled Wal-Mart's e-commerce decks and made two-day shipping free on all online orders over $35, without any membership fees, to compete with Amazon's popular Prime shipping program.

These moves are in line with the broader push by Wal-Mart's Chief Executive Doug McMillon to give the retailer an even more dominant position in U.S. e-commerce.

Wal-Mart has been investing in e-commerce for the past 15 years, but it still lags far behind its Seattle-based rival.

Starting April 19, Wal-Mart will offer pickup discounts on 10,000 items and on more than 1 million products by June.

In a separate blog post, Mark Ibbotson, executive vice president of central operations, said Wal-Mart is expanding its same-day pick up service and is rolling out a pick-up tower - a giant vending machine that delivers packages ordered online when a customer enters a bar code - to more stores.

Article Link To Reuters:

Trump's Message To Bankers: Wall Street Reform Rules May Be Eliminated

By Jeff Mason and Sarah N. Lynch
April 12, 2017

President Donald Trump told a group of chief executives on Tuesday that his administration was revamping the Wall Street reform law known as Dodd-Frank and might eliminate the rules and replace them with "something else."

At the beginning of his administration, Trump ordered reviews of the major banking rules put in place after the 2008 financial crisis, and last week he said officials were planning a "major haircut" for them.

"For the bankers in the room, they'll be very happy because we're really doing a major streamlining and, perhaps, elimination, and replacing it with something else," Trump said on Tuesday.

"That will be the minimum. But we're doing a major elimination of the horrendous Dodd-Frank regulations, keeping some obviously, but getting rid of many," he said.

The White House is not unilaterally able to upend Dodd-Frank’s rules, almost all of which are implemented by independent regulatory agencies like the Securities and Exchange Commission and the Federal Reserve.

A sweeping change to the law would require congressional action, though in some cases regulators may also have wiggle room to make changes through a formal rule-making process.

In February, Trump issued an executive order requiring Treasury Secretary Steve Mnuchin to consult with U.S. regulators and submit a report outlining a proposal for possible regulatory and legislative changes that would help fuel economic growth and promote American business interests.

That report, due to be released in June, will likely serve as a blueprint for possible changes down the road.

Congressional action on a Wall Street bill is not expected in the near term, as Congress focuses primarily on healthcare and tax reform.

On Tuesday, House of Representatives Financial Services Committee Chairman Jeb Hensarling announced that he was planning to introduce a new draft by month's end of sweeping legislation known as the "Financial CHOICE Act" that would give Dodd-Frank a major overhaul.

The new draft of the bill would largely defang the Consumer Financial Protection Bureau's supervisory powers and make the director removable at will.

It would also revamp bank stress-testing rules and loosen securities regulations to help companies raise cash.

The bill is likely to face an uphill battle in the Senate, where Democrats are expected to be resistant and a 60-vote threshold is needed to pass legislation.

Participants in Tuesday's meeting included Rich Lesser, chief executive of Boston Consulting Group; Doug McMillon, chief executive of Wal-Mart Stores Inc (WMT.N); Indra Nooyi, chief executive of PepsiCo (PEP.N); Jim McNerney, former chief executive of Boeing Co (BA.N); Ginni Rometty, chief executive of IBM (IBM.N); and Jack Welch, former chairman of General Electric Co (GE.N).

The business leaders are part of Trump's "Strategy and Policy Forum" that last met with him in February.

Trump also reiterated his criticism of the North Atlantic Free Trade Agreement between the United States, Canada and Mexico.

"NAFTA is a disaster. It's been a disaster from the day it was devised. And we're going to have some very pleasant surprises for you on NAFTA, that I can tell you," he said.

Article Link To Reuters:

Israeli Cabinet Minister Welcomes Spicer's Apology Over Hitler Remarks

By Jeffrey Heller 
April 12, 2017

A senior member of Israel's government welcomed on Wednesday White House spokesman Sean Spicer's apology for saying Adolf Hitler did not use chemical weapons, comments that overlooked the killing of millions of Jews in Nazi gas chambers.

"Since he apologized and retracted his remarks, as far as (I) am concerned, the matter is over," Intelligence and Transport Minister Israel Katz said in a statement, citing the "tremendous importance of historical truth and remembrance" of the victims of the Holocaust.

Spicer made the assertion at a daily news briefing, during a discussion about the April 4 chemical weapons attack in Syria that killed 87 people. Washington has blamed the attack on the government of Syrian President Bashar al-Assad.

"You had someone as despicable as Hitler who didn't even sink to using chemical weapons," Spicer said when asked about Russia's alliance with the Syrian government.

The Nazis murdered six million Jews during World War Two. Many Jews as well as others were killed in gas chambers in European concentration camps.

When a reporter asked Spicer if he wanted to clarify his comments, he said: "I think when you come to sarin gas, there was no, he was not using the gas on his own people the same way that Assad is doing."

Later on Tuesday, Spicer apologized and said he should not have made that comparison.

"It was a mistake. I shouldn't have done it and I won't do it again," Spicer told CNN in an interview. "It was inappropriate and insensitive."

Spicer's assertion, made during the Jewish holiday of Passover, sparked instant outrage on social media and from some Holocaust memorial groups who accused him of minimizing Hitler's crimes.

Katz, a member of Prime Minister Benjamin Netanyahu's party, had tweeted late on Tuesday that Spicer's comments at the news briefing were "grave and outrageous", and he said the White House spokesman should apologize or resign.

There was no immediate comment from other Israeli leaders, during a Passover holiday period when government business is largely at a standstill and many in the country are on vacation.

It was not the first time the White House has had to answer questions about the Holocaust. Critics in January noted the administration's statement marking International Holocaust Remembrance Day, which omitted any mention of Jewish victims.

At the time, Spicer defended that statement by saying it had been written in part by a Jewish staff member whose family members had survived the Holocaust.

Despite these difficulties, relations between Trump administration and the Israeli government have been more cordial than under the Obama presidency, although differences remain over the scope of Israeli settlement-building.

Article Link To Reuters:

Facebook Has Reached Its Microsoft Bing Moment, And History Shows The Results Won't Be Pretty

By Matt Rosoff
April 12, 2017

Facebook is responding to the challenge from Snap in the classic way that tech companies try to face new competitors — by duplicating every core feature that made Snap popular, and then trying to crush it with distribution and marketing.

According to a story published Tuesday in The Information (subscription required), Facebook created a "Teens Team" to figure out how to grab teenagers back from Snapchat, and has been up front about its tactics within the company: The internal mantra among some groups is "don't be too proud to copy."

Unfortunately for Facebook, the track record for this strategy is poor.

Flash back to the early 2000s, when Microsoft was the undisputed king of the tech industry, with two unassailable monopolies — operating systems and productivity apps for personal computers.

It faced a lot of competitors, but the one that scared it the most was Google, which was in a completely different business.

Google didn't start by creating alternatives to Windows and Office, although it did so later. Instead, it created a suite of online services — first search, followed by email and maps — that threatened the entire purpose of a personal computer. Why rely on Microsoft software running locally when you could get so much done with web apps?

Microsoft's response? Trying to build the exact same service that made Google famous — a search engine, first known as MSN Search, later rebranded to Bing.

Eleven years later, Bing is a small minority player in search, with less than 10 percent market share on the desktop and less than 1 percent in mobile, according to NetMarketShare. Google dominates with almost 80 percent share on the desktop and well over 90 percent in mobile. "Google" has become a verb. Nobody "Bings" anything.

Bolstered by the massive margins in search advertising, Google has moved farther and farther into Microsoft's core territory, adding a massively successful mobile operating system (Android), web browser (Chrome), online productivity apps (Google for Work) and an increasingly robust cloud computing business. It also surpassed Microsoft in market cap for the first time in 2012, and remains ahead today.

Google faced its own Bing moment in 2011, when it faced a challenge from then-upstart Facebook. The social network didn't threaten Google by building a better search engine. It did so by creating an entirely different online service, based around social networking and real identities, that drew people's attention away from search and other Google properties. As people spent more and more time on Facebook, advertisers followed.

Google's response? To launch a competing social network based on real identities called Google+. It was just as successful as Bing — which is to say, not successful at all.

Facebook may still win. After all, Microsoft used this playbook very effectively in the 1990s to eliminate the threat posed by Netscape Navigator — it built a better browser, then shipped it with Windows. It dominated web browsing for almost a decade (until Google came along with Chrome and Apple's iPhone introduced the concept of effective mobile web browsing).

But Microsoft in the 1990s had an effective monopoly on personal computing platforms with Windows. If you wanted to go online, you had to go out of your way not to use Windows. The same is not true for Facebook — there are many ways to communicate and share information in real time with friends, including text messaging platforms like SMS and Apple's iMessage, and competing social networks like Twitter and — yes — Snapchat.

Facebook will have to do more to regain teens' attention than simply duplicating every feature that made Snapchat popular.

Article Link To CNBC:

DeVos Undoes Obama Student Loan Protections

Trump’s education secretary wants to limit costs at a time when more than 1 million Americans are annually defaulting.

By Shahien Nasiripour
April 12, 2017

Education Secretary Betsy DeVos on Tuesday rolled back an Obama administration attempt to reform how student loan servicers collect debt.

Obama issued a pair (PDF) of memorandums (PDF) last year requiring that the government’s Federal Student Aid office, which services $1.1 trillion in government-owned student loans, do more to help borrowers manage, or even discharge, their debt. But in a memorandum (PDF) to the department’s student aid office, DeVos formally withdrew the Obama memos.

The previous administration’s approach, DeVos said, was inconsistent and full of shortcomings. She didn’t detail how the moves fell short, and her spokesmen, Jim Bradshaw and Matthew Frendewey, didn’t respond to requests for comment.

DeVos’s move comes a week after one of the student loan industry’s main lobbies asked for Congress’s help in delaying or substantially changing the Education Department’s loan servicing plans. In a pair of April 4 letters to leaders of the House and Senate appropriations committees, the National Council of Higher Education Resources said there were too many unanswered questions, including whether the Obama administration’s approach would be unnecessarily expensive.

A recent epidemic of student loan defaults and what authorities describe as systematic mistreatment of borrowers prompted the Obama administration, in its waning days, to force the FSA office to emphasize how debtors are treated, rather than maximize the amount of cash they can stump up to meet their obligations.

Obama’s team also sought to reduce the possibility that new contracts would be given to companies that mislead or otherwise harm debtors. The current round of contracts will terminate in 2019, and among three finalists for a new contract is Navient Corp. In January, state attorneys general in Illinois and Washington, along with the U.S. Consumer Financial Protection Bureau, or CFPB, sued Navient over allegations the company abused borrowers by taking shortcuts to boost its own bottom line. Navient has denied the allegations.

The withdrawal of the Obama administration guidelines could make Navient a more likely contender for that contract, government officials said. Navient shares moved higher after the government released DeVos’s decision around 11:30 a.m. New York time. Navient stock ended up almost 2 percent.

The Obama administration vision for how federal loans would be serviced almost certainly meant the feds would have to increase how much they pay loan contractors to collect monthly payments from borrowers and counsel them on repayment options. Already, the government annually spends around $800 million to collect on almost $1.1 trillion of debt. DeVos, however, made clear that her department would focus on curbing costs.

“We must create a student loan servicing environment that provides the highest quality customer service and increases accountability and transparency for all borrowers, while also limiting the cost to taxpayers,” DeVos said.

With her memo, DeVos has taken control of the complex and widely derided system in which the federal government collects monthly payments from tens of millions of Americans with government-owned student loans. The CFPB said in 2015 that the manner in which student loans are collected has been marred by “widespread failures.”

DeVos’s move “will certainly increase the likelihood of default,” said David Bergeron, a senior fellow at the Center for American Progress, a Washington think tank with close ties to Democrats. Bergeron worked under Democratic and Republican administrations over more than 30 years at the Education Department. He retired as the head of postsecondary education.

During Obama’s eight years in office, some 8.7 million Americans defaulted on their student loans, for a rate of one default roughly every 29 seconds.

Former Deputy Treasury Secretary Sarah Bloom Raskin worked on student loan policy during the latter years of the Obama administration, in part over concern that borrowers’ struggles were affecting the management of U.S. debt. DeVos’s decision to reverse some of her work “with no coherent explanation or substitute” effectively means that the Trump administration is placing the welfare of loan contractors above those of student debtors, she said.

In a statement Tuesday, Illinois Attorney General Lisa Madigan, who is suing Navient, agreed: “The Department of Education has decided it does not need to protect student loan borrowers.”

Article Link To Bloomberg:

It's All About Location For The ECB's Reflation Campaign

Slovakia's core inflation correlates almost 100% with ECB QE. Italy's going the other way.

By Giovanni Salzano and Lorenzo Totaro
April 12, 2017

In the 19-country patchwork that is the euro area, how well the European Central Bank's quantitative easing program has gone since it started in March 2015 depends a lot on which country you're looking at.

One of the four markers of a healthy inflation outlook that ECB President Mario Draghi set down in January is that price gains should be broad-based across the whole region.

So while the ECB targets a euro-area average rate of inflation over the medium term of just under 2 percent, a look at the country breakdown can help show if that requirement is looking likely in the near term.

Bloomberg calculations show the impact of the 2.28 trillion-euro ($2.42 trillion) quantitative easing program, as reflected in the correlation between cumulative asset purchases and inflation adjusted for food, fuel, alcohol and tobacco.

The correlation coefficient is a measure that determines the degree to which two variables' movements are associated. A positive correlation means the price index is rising in step with the stock of bonds owned by the ECB. A negative correlation means that as bond buying progressed, prices didn't go up.

In Lithuania and Slovakia, small eastern European economies, the correlation is almost perfect. In Cyprus and Malta, where bond purchases either started late or have fallen short of the nominal target, the correlation is negative.

What's more striking though is the difference between Germany and Italy. Europe's largest economy displayed the fourth-highest positive correlation; the euro area's third-largest economy is slightly negative.

For Italy alone, the total of net public-sector securities purchased under QE between March 2015 and March this year was 246 billion euros. Still, the Italian economy ended 2016 in deflation for the first time since 1959, as consumer prices posted a 0.1 percent decline on annual basis.

That underlines the mountain still to climb in the parts of the euro area with a lot of economic slack, high unemployment and structural reform still outstanding. It also gives weight to the ECB's constant argument that no matter how much money it prints, it can't substitute for upgrades to a country's economic fabric.

“Although quantitative easing can be an effective way to help the central bank achieve its inflation objective in the medium term, it is not equally effective across countries and may actually prove ineffective in countries that are undergoing significant corporate-sector restructuring, as was the case of Italy,” said Raffaella Tenconi, a senior economist at Wood & Co. brokerage in London. Still, that is not “sufficient to prove that QE was counterproductive,” she added.

The ECB hasn't published research on national inflation performance since QE, though an initial assessment from September last year argued that the asset-purchase program “contributes to stabilize the economy and push up the inflation rate.” As the chart shows, for some countries that's more true than for others.

One of the main conclusions from the ECB's own analyses of the impact of QE is against the counterfactual – how bad things would have been had the program not been there. The ECB's estimate is that both economic growth and inflation over the past three years were 1.7 percentage point higher than would have been the case without QE.

Article Link To Bloomberg:

Oil Prices Rise On Potential Extension Of Output Cuts

By Henning Gloystein
April 12, 2017

Oil prices rose on Wednesday, putting crude futures on track for their longest streak of gains since August 2016, as Saudi Arabia was reported to be lobbying OPEC and other producers to extend a production cut beyond the first half of 2017.

Brent crude futures were up 20 cents, or 0.36 percent, at their highest since early March at $56.43 per barrel.

If Wednesday's rise holds, it would mark the seventh straight daily increase. That would beat a six-day bull-run from August 2016, although the price jump then was 17.5 percent versus a 6-percent rise in the current rally.

U.S. West Texas Intermediate (WTI) crude futures were up 18 cents, or 0.34 percent, at $53.58 a barrel, also their highest since early March.

Saudi Arabia, the de-facto leader of the Organization of the Petroleum Exporting Countries (OPEC), has told other producers that it wants to extend a coordinated production cut beyond the first half of the year, the Wall Street Journal reported.

OPEC and other producers, including Russia, have pledged to cut output by around 1.8 million barrels per day (bpd) during the first half of 2017 in an effort to rein in oversupply and prop up prices.

While compliance from some participants has been patchy, Saudi Arabia has made significant cuts, with production down 4.5 percent since late 2016, despite a slight increase in March to 9.98 million bpd.

"(The) Saudi Arabian production reduction appears to be ahead of forecast and gave oil a boost," said Jeffrey Halley of futures brokerage OANDA in Singapore.

Despite this, there are still concerns that oil markets remain bloated and oversupplied.

Fearing a loss of market share, Saudi Arabia is shielding its most important customers in Asia from the cuts, continuing to supply them with all contractual volumes.

And in the United States, both production and inventories are surging.

The Energy Information Administration (EIA) said on Wednesday that U.S. 2018 crude oil output would rise to 9.9 million barrels per day in 2018, from 9.22 million bpd this year.

With demand expected to rise by 340,000 bpd in 2018, that will leave increasing amounts of U.S. oil for exports or to be put into storage.

U.S. commercial crude inventories hit a record 535.5 million barrels this month, although a report on Tuesday by the American Petroleum Institute suggested a dip.

Official U.S. production and inventory data will be published later on Wednesday by the EIA.

Article Link To Reuters:

China March Producer Inflation Cools For First Time In Seven Months On Steel Glut Fears

By Yawen Chen and Nicholas Heath
April 12, 2017

China's producer price inflation cooled for the first time in seven months in March as iron ore and coal prices tumbled, pressured by fears that Chinese steel production is outweighing demand and threatening a glut of the metal later this year.

A renaissance in China's steel industry has been a major driver of the world's second-largest economy in recent quarters, helping generate the strongest profit growth in years and adding to a reflationary pulse across the global manufacturing sector.

But after cranking out as much metal as possible in recent months, Chinese steel mills are now starting to cut prices, threatening to snuff out a bull market that had pushed prices of some steel construction products to their highest since 2014.

China's steel sector has been under particular scrutiny by its major trading partners, with the Trump administration saying Beijing's support for such industries has led to over-production and a flood of exports that have distorted global markets.

Still, while China's producer price inflation has likely passed its peak, it is likely to remain high for a bit longer, keeping profits at a reasonable level, ANZ said in a note.

That should give China's central bank confidence to continue with gradual monetary policy tightening as it tries to coax companies to reduce high levels of debt, ANZ economists said, predicting further hikes in short-term interest rates this year.

China's producer price index (PPI) rose 7.6 percent in March from a year earlier, still elevated but in line with expectations and easing from 7.8 percent in February, a 9-year high, the National Bureau of Statistics said on Wednesday.

Economists polled by Reuters had forecast a softer reading as a torrid rally in China's commodity markets showed signs of correcting, and on expectations that measures to cool the country's overheated housing market would eventually slow demand for steel and other building materials.

On a month-on-month basis, the PPI rose just 0.3 percent, the smallest increase since September 2016 and half the pace seen in February.

China's factory gate prices had only turned positive on year-on-year basis last September, after falling for nearly five years, leaving many industrial firms saddled with idle capacity and less cash flow to service their debts.

Consumer Inflation Remains Benign 

China's consumer inflation rate has been far milder, edging up to 0.9 percent in March, from 0.8 percent in February.

Food prices, the biggest component of the consumer price index (CPI), fell by 4.4 percent.

Non-food inflation inched up to 2.3 percent, with costs for health care, housing, transportation and communication all rising, suggesting stronger demand from an increasingly wealthy and rapidly aging population.

Analysts polled by Reuters had predicted March consumer inflation would edge up to 1.0 percent, but remain well within the central bank's comfort zone.

Still-modest consumer inflation and moderating producer prices will give policymakers room to continue with their campaign to reduce risks in the financial system after years of debt-fueled stimulus.

The People's Bank of China (PBOC) last month completed its most rigorous quarterly inspection of the nation's banks to date to get a better idea of the problems it is facing.

The China Banking Regulatory Commision (CBRC) has told banks to conduct "self inspections" so it can understand the amount of leverage in the banking system and prevent lenders from hiding the true extent of sour loans, three sources told Reuters on Monday.

The PBOC has raised interest rates on money market and special short- and medium-term loans several times already this year to encourage companies to reduce debt.

ANZ expects another two 10-basis point hikes in the 7-day reserve repo rate and other medium-term rate hikes for the rest of the year, though analysts expect the PBOC to tread cautiously to avoid crimping economic growth.

Commodity Prices Losing Steam

Similar to previous months, much of the annual surge in producer inflation in March was largely driven by higher prices of raw materials for steelmaking products such as iron ore and coking coal, which are benefiting from a construction boom.

But China's months-long commodities rally is showing signs of crumbling. Steel futures fell 5 percent on Friday, their steepest single-day drop in two months.

Top listed steelmaker Baoshan Iron & Steel (600019.SS) (Baosteel) said on Monday it has cut prices for May delivery, ending a long streak of price hikes. Baosteel usually sets the tone for the industry.

Adding to easing producer inflation is a deceleration in global oil price growth, according to estimates by ING's chief Asia economist Tim Condon. China cut gasoline and diesel retail prices late last month by the most so far this year.

The inflation readings will be followed by March trade data on Thursday, bank lending in coming days, and industrial output, retail sales and investment on April 17.

China's first-quarter gross domestic product (GDP) will also be released on the 17th, and is expected to show resilient growth at the start of 2017.

Article Link To Reuters:

What Not To Do After Your Customer Is Battered

By Kara Alaimo
The Bloomberg View
April 12, 2018

On Monday, one of the top stories on Twitter (and nearly everywhere else) was about a doctor who was violently removed from an overbooked United Airlines flight to make room for a company staffer. Other passengers filmed the screaming man, who was bloodied and later removed from the plane on a stretcher, as he was dragged off the flight on Sunday evening. Before long, their videos racked up hundreds of thousands of views online.

According to another passenger, the doctor refused to give up his seat on the Chicago-to-Louisville flight because he needed to see patients the next morning.

In response, the Washington D.C. chapter of the American College of Emergency Physicians tweeted: “When you injure a doctor on a plane, @United, do you still ask ‘Is there a doctor on the plane?’” The Twitter hashtag #NeverFlyUnited appeared thousands of times on Sunday and Monday, according to the social-media research firm Texifter. One typical post read: “You had a paying passenger beaten up on your plane. I hope he sues you for millions of dollars. #neverflyunited.” Another: “Well, choosing an airline just got a hell of a lot easier. #neverflyunited.”

Here’s the statement United posted on Twitter on behalf of chief executive officer Oscar Munoz:

This is an upsetting event to all of us here at United. I apologize for having to re-accommodate these customers. Our team is moving with a sense of urgency to work with the authorities and conduct our own detailed review of what happened. We are also reaching out to this passenger to talk directly to him and further address and resolve this situation.

Here’s the statement the airline should have posted:

All of us at United were horrified by what happened on Flight 3411 last night. We have reached out to the passenger to apologize, offer assistance and make amends. Nothing is more important to United than the safety of our passengers. This incident doesn’t reflect our values and we’re going to make sure it never happens again.

The company’s actual response -- which doesn’t include a direct apology to the injured passenger -- was probably influenced by lawyers worried about admitting liability. That’s incredibly short-sighted. It’s clear to any reasonable person watching the videos that what happened to this passenger was very, very wrong. By not fully apologizing, United suggests that it might believe otherwise. For anyone considering flying with the airline, that’s a scary possibility.

United may think it doesn’t need to worry about good consumer public relations because Americans tend to book flights on the basis of price. But plenty of travelers with expense accounts can choose to splurge on higher fares with airlines they prefer, and many more still try to pick a single airline to fly with in order to rack up their upgrades and miles in the same place.

So, what should a company do in a situation where it’s obvious they’ve screwed up royally? The answer is simple. First, apologize immediately. And second, overreact to demonstrate that what happened doesn’t reflect the company’s values and how it conducts its business. In the case of this passenger, for example, United should offer full coverage of his medical expenses and free first-class flights for life for his entire family.

In my crisis communication courses, I teach my students that in such situations, they should think of an appropriate response and then “add a zero.” It’s a phrase I picked up from former Treasury Secretary Tim Geithner when I was a spokesperson for the department. Counseling his European counterparts on how to fix their sovereign debt crisis in 2010, he told them to add a zero to the 50 billion euro rescue fund they originally proposed. That’s because the way to stem a financial crisis is by restoring confidence.

The same is true for companies. By immediately going overboard to make reparations to the passenger who was battered on their flight, United would have signaled to the people now using the #NeverFlyUnited hashtag that they know it’s not okay to treat passengers this way.

Instead, United committed two cardinal sins of crisis management.

First, it chose not to take complete responsibility for the incident. True, it was a Chicago Department of Aviation police officer -- not a United employee -- who removed the passenger so forcefully. That officer has been placed on leave. But the passenger booked the flight with United, and instead of safely transporting him to his destination, the airline called the police to remove him from their plane. Most ordinary people will think that United was responsible for the incident, and they’ll judge the airline accordingly.

Second, the company responded in doublespeak. The chief executive apologized for “re-accommodating” the man who was beaten up. What really happened is just the opposite: United was trying to re-book him on a different flight instead of accommodating his request to fly on the one he reserved. Munoz’s statement reads as heartless legalese instead of a passionate denunciation of the incident and a promise to never let it happen again. That would help restore the confidence of United’s customers.

Instead of adding a zero, United’s team deserves one. This crisis response wouldn’t pass muster in any of my classes.

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