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Shares bounce after worst week of year, Brexit stresses sterling

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LONDON (Reuters) – Talk of more stimulus from China helped world share markets regain some ground on Monday after a slew of concerning economic data and growth warnings from central banks triggered their worst weekly performance so far this year.

A pedestrian holding an umbrella walks past an electronic board showing the graphs of the recent fluctuations of Japan’s Nikkei average outside a brokerage in Tokyo, Japan, January 18, 2016. REUTERS/Yuya Shino

China’s main bourses made back almost half the 4 percent they lost in Friday’s mauling as the country’s central bank chief pledged more support, but not everywhere was so spritely.

The pan-European STOXX 600 barely managed a 0.2 percent gain in early trade as an unexpected drop in German industrial data also kept the euro near a 20-month low and nudged Bund yields back toward zero.

London’s FTSE made a more impressive 0.8 percent but that was partly the flip side of a near three-week low for the pound as the chances of Prime Minister Theresa securing support for her Brexit deal at home this week looked increasingly dim.

Britain is due to leave the EU in 18 days.

Kallum Pickering, an economist at Berenberg, said a delay to Brexit would be modestly positive for sterling as it would cut the near-term risk of the UK leaving without a transition period in place to minimize economic disruption.

“However, it would not completely eliminate the hard Brexit risk which could still come at the end of a delay or as a result of a second referendum,” he added.

The day’s European FX gainer was Norway’s crown, after strong inflation data there raised expectations among economists that its central bank will increase interest rates again soon.

With markets trading in a period of low volatility, investors have rushed to buy currencies where central banks are still raising rates or economic data has exceeded expectations, indicating a brighter economic outlook.

“This makes (a) March rate hike from Norges Bank a complete done deal, which is a positive for the currency,” Nordea strategists said.

The optimism over Norway’s economic outlook was in contrast to the general caution over the broader European economy after the European Central Bank last week slashed its growth forecasts for 2019 and postponed its expectations of a first rate hike.

Short euro bets, already near a 2-1/2 year high, according to latest futures positioning data for the week ending March 5, is likely to receive a further boost in the coming days, investors said.

The single currency shuffled sideways at $1.1247 after falling 1.2 percent last week, its biggest weekly loss in more than six months.

WALL STREET

Wall Street futures were pointing to a fractionally higher restart for U.S. markets later after their worst week of the year last week.

Overnight, MSCI’s broadest Asia-Pacific index had climbed 0.4 percent, paring a quarter of Friday’s 1.6 percent fall. Japan’s Nikkei gained 0.5 percent too after four consecutive sessions in the red last week.

China’s blue-chip CSI300 index jumped 1.9 percent after Friday’s 4.0 percent fall, which followed poor trade data and a major local bank issuing a rare “sell” rating on a major insurer.

China’s central bank on Sunday pledged further support by spurring loans and lowering borrowing costs.

It came as data showed new bank loans in China fell a bit more than expected in February, while money supply growth also missed forecasts.

Bond markets were still digesting Friday’s news that the U.S. economy created only 20,000 jobs in February, the weakest reading since September 2017.

As a result, bond yields dropped, with the 10-year Treasury hitting a two-month low of 2.607 percent. It last stood at 2.638 percent.

The two-year yield also hit a two-month low of 2.438 percent, nearing the current Fed funds rate around 2.40 percent. Fed funds futures are now pricing in a more than 20 percent chance of a rate cut this year.

“The headline reading was so weak that the market could have reacted more aggressively. I would say markets reacted relatively calmly because there were elements that suggest weakness is temporary,” said Tomoaki Shishido, fixed income strategist at Nomura Securities.

While job growth was weak, average hourly earnings rose 11 cents, or 0.4 percent, raising the annual increase to 3.4 percent, the biggest gain since April 2009.

Retail sales figures for January due at 1230 GMT will be a key focus given December’s surprisingly weak reading.

Oil was the main focus for commodity markets after Saudi oil minister Khalid al-Falih indicated that an end to OPEC-led supply cuts was unlikely before June.

U.S. West Texas Intermediate (WTI) crude futures rose 0.5 percent to $56.35 per barrel. Brent futures went up 0.4 percent to $62.98 a barrel.

Gold eased about 0.1 percent to $1,296.62 per ounce, after briefly breaching $1,300 for the first time since March 1 in the previous session.

Reporting by Marc Jones; Editing by Catherine Evans

Our Standards:The Thomson Reuters Trust Principles.

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U.S. whiskey exports dry up as tariffs bite

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(Reuters) – American whiskey exports slumped in the second half of 2018, taking a blow from higher duties by the country’s trading partners following President Donald Trump’s tariffs on steel and aluminum imports, an industry group said on Thursday.

A man drinks American whiskey at a bar in Shanghai, China, April 6, 2018. Picture taken April 6, 2018. REUTERS/Aly Song

Canada, China, Mexico and the European Union slapped import duties ranging from 10 percent to 25 percent on U.S whiskey and bourbon last year, resulting in a 11 percent drop in U.S. whiskey exports in the second half, according to a report from the Distilled Spirits Council.

For the first six months of 2018, whiskey exports grew 28 percent compared to the same period in 2017, partly helped by companies like Jack Daniels maker Brown-Forman Corp, fast-tracking shipments overseas, especially to Europe, before the tariffs kicked in.

Overall for the full-year 2018, whiskey exports rose 5.1 percent to $1.18 billion, a significant drop from the 16 percent rise seen in 2017.

Exports to the European Union fell 13.4 percent in the second half of the year, after rising 33 percent during the first six months.

The European Union, which imposed a 25 tariff on American whiskey, is the largest market for the liquor, accounting for nearly 60 percent of total exports, according to the Council.

Earlier in March, Brown-Forman said absorbing the costs of tariffs in key European markets was the primary reason for the decline in its third-quarter gross profit margin.

The company also said its sales would take a hit in 2019 if the tariffs were to remain in place.

“The damage to American whiskey exports is now accelerating, and this is collateral damage from ongoing global trade disputes,” Distilled Spirits Council Chief Executive Officer Chris Swonger said.

Total U.S. spirits exports rose 9.5 percent to $1.8 billion in 2018, but also slowed from 2017, the report showed.

Reporting by Uday Sampath in Bengaluru; Editing by Shailesh Kuber

Our Standards:The Thomson Reuters Trust Principles.

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Exclusive: Ethiopian crash captain untrained on 737 MAX simulator

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ADDIS ABABA (Reuters) – The captain of a doomed Ethiopian Airlines flight was unable to practice on a new simulator for the Boeing 737 MAX 8 before he died in a crash with 157 others, a pilot colleague said.

Yared Getachew, 29, was due for refresher training at the end of March, his colleague told Reuters, two months after Ethiopian Airlines had received the simulator.

The March 10 disaster, following another MAX 8 crash in Indonesia in October, has set off one of the biggest inquiries in aviation history, focused on whether pilots were sufficiently versed on a new automated system.

In both cases, the pilots lost control soon after take-off and fought a losing battle to stop their jets plunging down.

In the Ethiopian crash, it was not clear if Yared’s colleague – First Officer Ahmednur Mohammed, 25, who also died in the crash – had practiced on the new MAX simulator.

Globally, most commercial airline pilots refresh training in simulators every six months. It was not clear if Yared or Ahmednur would have been trained on the new simulator or an older one for 737s that their airline also owned.

The MAX, which came into service two years ago, has a new automated system called MCAS (Maneuvering Characteristics Augmentation System). It is meant to prevent a loss of lift which can cause an aerodynamic stall sending the plane downwards in an uncontrolled way.

“Boeing did not send manuals on MCAS,” the Ethiopian Airlines pilot told Reuters in a hotel lobby, declining to give his name as staff have been told not to speak in public.

“Actually we know more about the MCAS system from the media than from Boeing.”

Under unprecedented scrutiny and with its MAX fleet grounded worldwide, the world’s largest planemaker has said airlines were given guidance on how to respond to the activation of MCAS software. It is also promising a swift update to the system.

Ethiopian Airlines declined to comment on the remarks of its pilot to Reuters about the simulator and MCAS system.

Additional reporting by Allison Lampert in Montreal and Tracy Rucinski in Chicago; Writing by Jamie Freed and Katharine Houreld; Editing by Andrew Cawthorne

Our Standards:The Thomson Reuters Trust Principles.

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U.S.-backed fighters say operation at last Islamic State enclave not over

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DEIR AL-ZOR, Syria (Reuters) – U.S.-backed Syrian fighters said they were still searching territory captured from Islamic State at its final enclave in eastern Syria on Thursday and denied a report the jihadists had been finally defeated.

FILE PHOTO: Smoke rises from the last besieged neighborhood in the village of Baghouz, Deir Al Zor province, Syria, March 18, 2019. REUTERS/Stringer/File Photo

The final capture of the Baghouz enclave at the Iraqi border will mark the end of Islamic State territorial rule that once spanned a third of Syria and Iraq after years of military campaigns by a range of international and local forces.

After weeks of fighting, the U.S.-backed Syrian Democratic Forces (SDF) took a big step towards capturing the besieged area on Tuesday when they seized an encampment where the jihadists had been mounting a last defense of the area.

“Combing continues in the Baghouz camp,” an SDF media official said, citing commanders of the operation on Thursday, after the Syrian Kurdish news outlet Hawar reported that the entire enclave had been captured and IS defeated.

“There is no truth (to the report of) the complete liberation of the village,” the official said.

The report on Hawar News, which is close to the Kurdish-led administration that runs much of northern Syria, was later removed from its website.

U.S. President Donald Trump said on Wednesday that a “tiny spot” of remaining IS territory would be “gone by tonight”.

French Foreign Minister Jean-Yves Le Drian, whose country has participated in the campaign, said on Wednesday he expected the announcement of the “final territorial defeat” to be made in the “next few days”.

Though the defeat of IS at Baghouz ends its grip over territory, it remains a threat, with fighters operating in remote territory elsewhere and capable of mounting insurgent attacks.

The U.S. military has warned that Islamic State may still count tens of thousands of fighters, dispersed throughout Iraq and Syria, with enough leaders and resources to present a menacing insurgency.

The Pentagon’s internal watchdog released a report last month saying Islamic State remained an active insurgent group and was regenerating functions and capabilities more quickly in Iraq than in Syria.

It warned the group could resurge in Syria within six to 12 months and regain limited territory without sustained pressure.

The United States believes Iraq is the location of its leader Abu Bakr al-Baghdadi, who stood at the pulpit of the great medieval mosque in Mosul in 2014 to declare himself caliph, sovereign over all Muslims.

GRAPHIC – How Islamic State lost Syria: tmsnrt.rs/2O7l4mN

Additional reporting by Rodi Said in Qamishli, Syria; Writing by Tom Perry in Beirut; Editing by Raissa Kasolowsky

Our Standards:The Thomson Reuters Trust Principles.

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