› News for February 19.

News for February 19.

German Banks seek mitigation of newest anti-Russian sanctions.

German banks seek mitigation of possible new US sanctions against Russia, Reuters reported. Credit entities of the largest European economy want to save current operations with Russian clients. That conclusion was made on a document prepared by German Banks Association with the total number of 180 banks including Deutsche Bank, Commerzbank and foreign creditors with branches in Germany, for example, Italian Unicredit.

The banks had enlarged efforts influencing American lawmakers and government officials, threatening that the implementation of new sanctions against large Russian creditors would have so scalable character that it could undermine stability in the global financial markets. "The current form of law projects offered would make a target not only Russian President and oligarchs having a tight relationship with Putin but would actually lead to imposing an embargo against Russia", the document says.

According to association members' opinion, international financial institutions having already a business in Russia would face new obstructions to businesses related to compliance with established requirements and rules. The organization calls upon making exclusions, allowing "German banks and companies to finish current operations which cannot be cut down immediately".

The risk of new limitations to businesses in Russia had grown up after the Democrats had got the majority in the House of Representatives in the United States. New measures against Russia might put under threat the funding of a new gas pipeline between Germany and Russia through the Baltic Sea with the total cost of several billion dollars. The Northern Stream project was not mentioned in the document, however, its future depends on the association's efforts. "The Northern Stream is an obvious problem", - an informative source underlined.

German companies had already faced the call upon distancing themselves from the project. According to US President Donald Trump, the gas pipeline would make Germany a Russian hostage, while US Ambassador in Germany sent a letter to German companies involved in the project last month, warning that they could also appear under sanctions if they continued taking part in it.

Anti-Russian sanctions had already undermined the relationship between Berlin and Moscow. So, the trade volume between the two countries was 57 billion euros for 11 months of 2018, which is more than the trade volume between Germany and Japan and Canada together but significantly less than the record-high volume of 71 billion euros for the same period of 2013 before the sanctions.

According to expectations, the newest US Congress consist would not slow down the sanctions tightening against Moscow. Republican Senator Lindsey Graham had presented a law project last Summer focused on implementing new sanctions against large Russian banks and the country's energy sector. Senator Chris Van Hollen stated that he's planning to repeatedly present the law project about new sanctions against Russia in the nearest months or even earlier. He also noticed that the sanctions have to be developed in a way to limit "an opposite effect for European banks and other counterparties as much as possible". Senator warned that European banks would struggle from certain consequences.

Silver and Palladium prospects in 2019.

German company Heraeus, which sells precious metals, published an optimistic forecast for silver and palladium. Gold would play an important role throughout the current year as well.

Heraeus Group

According to the company's analysts, the commodity markets situation would form a favourable environment for precious metals, even though higher volatility might be noticed. But special attention of the document was focused on two precious metals which could overperform the overall market.

According to experts, silver should become the main leader among precious metals this year. In contrast to gold, this metal is in large demand from the industrial and manufacturing side which is a key supportive factor. Silver is mainly used in solar batteries production but it also could be seen in other areas such as automotive, smartphones and tablets manufacturing. It's worth noticing that the investment silver savings has been decreased dramatically last year. For example, the silver outflow reached a level of 280 metric tons in ETFs.

Experts think that silver is mainly an undervalued metal. They forecast price fluctuations in a range of $14.5/20.0 per ounce this year. That means that silver has the potential to rise by 26% in the upcoming months.

Palladium was one of the most demanded metals for the latest several months. The key demand for palladium comes from the automotive sector, the share of which is 81% in global consumption. That precious metal is used in catalysts for gasoline engines. According to experts, the palladium demand could overcome the supply in 2019, reaching a deficit of 17 metric tons. Therefore, the metal would be trading in the range of $1130/1650 per ounce. As a result, price growth might reach a level of 18%.

The German company's analysts are quite optimistic about gold as well. The prediction is based on assumption that the US Federal Reserve would make a long-term pause in interest rates hiking cycle. the US dollar's weakness might also lead to gold's strength. In case if emerging markets' currencies plunged, gold would be in demand for hedging purposes, protecting those countries' savings. As long as Central Banks continue buying gold for their reserves, the precious metal's cost would fluctuate in a range of $1250/1450 per ounce this year. The best-case scenario suggests gold's profitability at a level of 10% in 2019.

The U.S.-China trade deal is getting closer.

The two largest world’s economies are getting closer to arrange a trade deal, ease tensions and stop trade wars. Financial markets players will focus on U.S.-China negotiations this week in order to clarify the situation with mutual import tariffs. December's agreement had a deadline of March 1, after which new tariffs worth 250 billion dollars could have been imposed by the United States. The latest update of the story was based on US President Donald Trump's twits that he had huge progress in talks with his Chinese colleague Xi regarding the 'largest deal ever'. A new round of negotiations is scheduled for this Tuesday. If both counterparts were able to arrange the deal, the tariffs would be cancelled and global stock indices would soar. Otherwise, another crash would hurt global financial markets including the US and Asian equities.

The new round of negotiations is focused on "achieving needed structural changes in China that affect trade between the United States and China. The two sides will also discuss China's pledge to purchase a substantial amount of goods and services from the United States," the White House officials stated. The United States was interested in China to enlarge the total volume of US imports significantly and lower the disbalance between the two largest global economies. At the same time, China is trying to protect local manufacturers and exporters from tight competition overseas, weakening its currency and imposing stimulative measures.

The negotiations process will continue this Thursday at a higher level as US Trade Representative Robert Lighthizer will join the talks. He's a well-known hawk in the U.S.-Sino trade relations and it's hard to expect any significant steps back from his side. However, the US President seemed to be extremely encouraged with the negotiations process, and it's in his best interest to solve the issue as soon as possible. Trump expressed his discontent with the depth of October's market crash, blaming US Federal Reserve in general and Jerome Powell in particular in too tight monetary policy. However, he also realised that one of the main reasons for investors to sell-off US equities was exactly the U.S.-China trade war. As a result, Trump had made several steps ahead in order to ease tensions. With only two weeks left until the deadline, the negotiations' result is getting extremely important for the financial markets across the globe.

Read also

You have successfully registered

You can choose the needed type of account at any time!