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Markets crave a ‘booster’ of good news on a US-China trade deal

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President Donald Trump and China’s President Xi Jinping chat as they walk along the front patio of the Mar-a-Lago estate after a bilateral meeting in Palm Beach, Florida, U.S., April 7, 2017.

Carlos Barria | Reuters

Ever since President Donald Trump said he and President Xi Jinping would meet to sign a trade deal, Wall Street has been hanging on every speculative word about where and when that signing might take place.

So it was not surprising when stocks sold off late Wednesday morning on a Reuters headline that quoted Trump administration sources who said the phase one trade deal could be delayed until December and that Europe is a likely venue. CNBC would later confirm the report.

A November deal was expected, and there were reports that a U.S. location was under consideration, like Iowa, as suggested by the administration, or Alaska and Hawaii, as proposed by China. An absolute deadline for a deal would be Dec. 15, the day a new round of tariffs on Chinese goods is set to go into effect.

Stocks have run up on optimism about trade progress, but have been languishing in the past two sessions, as the market digests recent gains to new highs, and no new information has materialized on the trade front. Trump and Xi had been expected to sign the agreement in Chile on the sidelines of the APEC meeting, but Chile announced last week that it could not host the Nov. 16 meeting due to protests in the country.

‘Booster shot’

“We basically used up the good news and we’re in this time where we need a booster shot. We need some news to keep us going,” said Art Cashin, director of floor operations at UBS.

Art Hogan, chief market strategist at National Securities, said investors are anxious for details on the signing. “Once you find the location, you slap a date on it. Things get signed, and we move on. This would remove a lot of the headwinds,” said Hogan.

Hogan said investors want to see a phase 1 deal that stops the escalation of tariffs and possible rollback of others. “If you stop the escalation, it puts certainty back into the economy and you might even get some cap ex spending which has been missing for the past 18 months,” he said.

Cashin said the market was not concerned about where the meeting will be held, but the report on the timing was key since the longer talks go on, the more chances there are they get derailed. Cashin said he did not believe Xi would come to the U.S. for a meeting because of it could look like he was giving ground to Trump.

No ‘state’ visit

Evercore analysts, in a note Wednesday, also said Xi won’t come to the U.S., and they hypothesized a list of possible trade outcomes.

“President Xi won’t come to the US —not Iowa, Hawaii, Alaska, DC or elsewhere. No ‘state’ visit. The ‘unpredictable’ (Trump) risk precludes this. Mistrust dominates,” the Evercore strategists noted. “The interim ‘Phase 1’ deal is insufficient to command presidential signatures. We expect ministerial-level signing at the ministerial level.”

As of now, Evercore sees only three points of agreement, and the Chinese request for a roll back of existing tariffs was not one of them. They see a delay in the Dec. 15 tariffs, agricultural sales to China and Chinese financial markets open further.

Other policy strategists believe a deal will be reached, including agricultural sales to China and U.S. relief on the blacklisting of Chinese telecom firm Huawei. Dan Clifton, head of policy research at Strategas, said U.S. exports of liquified natural gas have again become part of the discussion, and a source close to the discussions told CNBC energy was part of phase 1 talks.

‘Catastrophic for both sides’

“We’re at the end, and there’s volatility at the end of the discussions,” said Clifton. “But the cost of a blowup here would be catastrophic for both sides. I think you have a 15% chance of a blowup. We’re really trying to move the Rubic’s cube so both sides can walk away and be able to declare victory.”

Tom Block, Washington strategist at Fundstrat, said a deal will get done, and Trump may not need a signing ceremony as much as the opportunity to make a speech about the success of the deal.

“Whether it’s done with a phone call and sending their ministers to sign it, or they can figure out some signing ceremony. I don’t think that’s as important as that they seem to be closing in on a deal,” Block said.

Clifton said the Trump administration is eager to get a deal done because of a softening economy, but China is as well, since it has been concerned about rising food costs and a loss of exports. He said a deal will get done, regardless of whether Trump and Xi meet.

“I think everybody is giving each other an exit ramp. I can feel both sides preparing their part to sell their domestic audiences a deal. That’s why I think there’s going to be a deal,” he said.

Clifton said Trump’s re-election efforts are a factor. He noted that Commerce Secretary Wilbur Ross made the surprise announcement last weekend that he did not expect the U.S. to put tariffs on European autos. Europe was expected to be the next front int he administration’s trade wars.

“This is a major change in policy. Nobody in the administration gets in front of auto tariffs,” he said. “What you’re seeing is the president doesn’t want to put more tariffs in place ahead of the election. That should give you guidance on China.”

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EU grants conditional clearance to Covid-19 antiviral remdesivir

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An employee of Egyptian pharmaceutical company Eva Pharma works on the production line of Remdesivir, a broad-spectrum antiviral medication which has been approved as a specific treatment for Covid-19.

Fadel Dawood | picture alliance via Getty Images

The European Commission said on Friday it had given conditional approval for the use of COVID-19 antiviral remdesivir following an accelerated review process.

The EU executive said the drug, produced by Gilead Sciences Inc, was the first medicine authorized in the European Union for treating COVID-19 following a “rolling review” begun by the European Medicines Agency at the end of April.

The agency reviews data as they become available on a rolling basis, while development is still ongoing.

The Commission said on Wednesday it was in negotiations with Gilead to obtain doses of remdesivir for the 27 European Union countries.

However, that may prove difficult after the U.S. Department of Health and Human Services announced it had secured all of Gilead’s projected production for July and 90% of that for August and September.

Remdesivir is in high demand after the intravenously-administered medicine helped to shorten hospital recovery times in a clinical trial. It is believed to be most effective in treating COVID-19 patients earlier in the course of disease than other therapies like the steroid dexamethasone.

Still, because remdesivir is given intravenously over at least a five-day period it is generally being used on patients sick enough to require hospitalization.

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A factory is challenging perceptions

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From cars to tables and computers to radios, factories manufacture a host of products integral to modern life. In many cases these facilities can be energy intensive and, if we’re being honest, not very pleasing to look at.  

As concerns about sustainability and the environment mount, however, a number of firms are attempting to reduce the impact of their operations with factories and offices using clever design, interesting materials and renewable sources of energy.

Earlier this week, designs for a new furniture factory in Norway were released, with the firms involved in its development hoping it will be sustainable, aesthetically pleasing and technologically advanced.

Known as The Plus, the 6,500-meter-squared building will be located in Magnor, Norway and surrounded by trees, with the site also functioning as a 300-acre park.

The architecture practice involved with the project’s design is the Bjarke Ingels Group (BIG) and their client is Vestre, a Norwegian furniture manufacturer established in 1947.

Construction work is due to start in August and when finished, the facility will be home to a range of sustainable features. According to BIG — which has offices in Copenhagen, New York, Barcelona and London — the building’s façade will be formed of local timber, recycled reinforcement steel and low-carbon concrete, while 1,200 solar panels will be installed on its roof. Overall, it’s hoped that greenhouse gas emissions from The Plus will be 50% less compared to a conventional factory.

A dedicated website outlining the plans for the building states that more than 90% of water used in production will be recycled. It adds that the factory will use “self-learning industrial robots” and driverless electric trucks. The robots will, according to the site, be able to apply color coatings to products using artificial intelligence and “object recognition” technology.

The Plus is one of many sustainability-focused buildings currently in development. Drinks giant Diageo recently announced plans for a carbon-neutral whiskey distillery in Kentucky.

In a statement issued Monday, Diageo, which produces drinks including Johnnie Walker, Smirnoff and Guinness, listed a number of features that it hopes will boost the sustainability of the distillery and its operations.

These include: the facility running on 100% renewable electricity; the use of LED bulbs indoors to boost energy efficiency; and all vehicles operated there being electric.

Meanwhile, last week, Australian tech firm Atlassian unveiled plans to construct what it described as “the world’s tallest hybrid timber building.”

The design will incorporate timber and a façade of glass and steel that will also use solar panels and have “self-shade capabilities.” Plans are also in place for a staggered outdoor garden to be integrated into the structure.

 

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Trump in trouble over coronavirus, Black Lives Matter: Expert

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President Donald Trump’s response to the coronavirus crisis and widespread protests over racial injustice have landed him “in big trouble” ahead of November’s election, according to one politics expert.

Speaking to CNBC’s “Street Signs Europe” on Friday, Inderjeet Parmar, professor of International Politics at City University, said Trump had been given two political gifts — but had squandered both.

“The pandemic, deadly as it has turned out to be, was a chance for him to unite the country, to rise above the political factionalism, and effectively act as the president of the United States in a period of emergency,” Parmar said.

“He didn’t do it, and he’s in big trouble because of that … President Trump has made his bed, and I think in the end he’s going to pay a terrible price, and that price is already being paid by a very large number of American people, both in terms of their health, and also in terms of the economy.”

A spokesperson for the White House was not immediately available to comment when contacted by CNBC.

There have been more than 2.7 million confirmed cases of Covid-19 and 128,740 fatalities from the virus in the U.S., according to data compiled by Johns Hopkins University. The U.S. has recorded the highest number of infections and the most deaths due to the coronavirus in the world.

The nationwide protests sparked by the police killing of George Floyd had also seen Trump fail to offer “anything in regard to any kind of significant sympathy,” Parmar added.

“I think what he’s shown is when it comes to real emergencies, when you need real leadership, he actually doesn’t have any of that kind of quality,” he said. “He talks about the people but he doesn’t appear to know the people’s interests lie in their economic wellbeing and their physical and personal safety.”

Parmar claimed that Trump’s response to both crises would weigh heavily on his chances of reelection in November.

“Trump has done a great deal for candidate Biden, so Biden can almost sit in his armchair in his basement and reap the rewards of President Trump’s total indifference to such a large set of problems in the United States,” he said.

Meanwhile, Parmar noted that Biden had been reaching out across the Democratic party and to opponents he had in the primaries.

“He is actually building bridges or moving a bit further to the left, and he’s opened a space for the likes of Bernie Sanders and Elizabeth Warren and Cortez and others, and I think their voices are going to be stronger in that administration,” he predicted.

Because of this, however, Parmar acknowledged that financial markets could well have something to worry about, as a Biden presidency was likely to lead to a greater focus on social programs.

“The broad neo-liberal market-oriented consensus has been shaken by the responses of government to the pandemic,” he told CNBC. “But I think the underlying philosophy of the market, I don’t think that’s been defeated, I think it’s going to carry on. So I suspect a lot of people are still going to be very unhappy.”

CNBC’s latest Change Research survey showed that Trump had slumped against Biden in polls, with support for Biden surging in several key battleground states.

Analysts at the Economist Intelligence Unit said in a report last month that while the presidential election would be closely fought, “the odds have now shifted firmly in Mr. Biden’s favour.” The EIU cited several reasons for the shift in support, but researchers emphasized the importance of how Trump had handled the Covid-19 outbreak and Black Lives Matter protests.

In June, Eurasia Group’s Jonathan Lieber told CNBC’s “Street Signs Asia” that Trump was “on the wrong side” of public opinion polls when it came to the Black Lives Matter movement, which was starting to seriously hurt the president’s approval ratings in the run up to the elections.

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